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 period ended: December 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(D) OF THE
EXCHANGE ACT
For the transition period from _______________ to __________________
Commission file number 0-28879
COOL ENTERTAINMENT INC.
(Exact name of small business issuer as specified in its charter)
COLORADO APPLIED FOR
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10900 N.E. 8TH STREET, SUITE 900, BELLEVUE, WASHINGTON 98004
(Address of principal executive offices)
(888) 603-8833
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the last practicable date:
38,340,636 SHARES OF COMMON STOCK, NO PAR VALUE, AS OF
DECEMBER 31, 2000
Transitional Small Business Disclosure Format (check one); Yes No X
----- -----
Interim Consolidated Financial Statements
(Expressed in U.S. dollars)
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Six months ended December 31, 2000 (Unaudited)
Period from inception on November 3, 1998 to December 31, 2000 (Unaudited)
2
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Interim Consolidated Balance Sheet
(Expressed in U.S. dollars)
=============================================================================================================================
December 31, June 30,
2000 2000
- -----------------------------------------------------------------------------------------------------------------------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 205 $ -
Accounts receivable 90 84
------------------------------------------------------------------------------------------------------------------------
295 84
Equipment, net (note 4) 10,940 24,300
- -----------------------------------------------------------------------------------------------------------------------------
$ 11,235 $ 24,384
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Bank indebtedness $ - $ 157
Accounts payable and accrued liabilities 72,646 44,005
Payable to related party (note 3) 93,789 2,836
------------------------------------------------------------------------------------------------------------------------
Total current liabilities 166,435 46,998
Stockholders' deficiency:
Common stock, no par value, authorized 100,000,000 shares;
issued 38,340,636 (unaudited) shares at December 31, 2000
and 37,619,401 at June 30, 2000 13,488,710 13,320,355
Additional paid-in capital 11,166 79,521
Deficit accumulated during the development stage (13,655,076) (13,422,490)
- -----------------------------------------------------------------------------------------------------------------------------
Total stockholders' deficiency (155,200) (22,614)
- -----------------------------------------------------------------------------------------------------------------------------
$ 11,235 $ 24,384
=============================================================================================================================
Commitment (note 8)
See accompanying notes to interim consolidated financial statements.
3
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Operations
(Expressed in U.S. dollars)
================================================================================================================================
Period from
inception on
Six months Six months Three months Three months November 3,
ended ended ended ended 1998 to
December 31, December 31, December 31, December 31, December 31,
2000 1999 2000 1999 2000
- --------------------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Operating income:
Sales $ 340 $ - $ - $ - $ 3,518
Cost of goods sold 327 - - - 3,092
- --------------------------------------------------------------------------------------------------------------------------------
Gross profit 13 - - - 426
Other income 152 - 73 - 152
- --------------------------------------------------------------------------------------------------------------------------------
Total income 165 - 73 - 578
Operating expenses:
Site development and
maintenance (note 6) 42,121 190,788 14,947 168,004 12,684,460
Management fees 126,460 114,869 41,341 65,876 415,094
Professional fees 45,836 42,503 8,458 14,318 367,858
Travel, advertising and promotion 7,538 29,901 (373) 2,232 119,486
Office and administrative 3,385 22,997 5,728 11,030 47,079
Depreciation 7,411 3,276 3,706 1,001 20,458
Organization costs - - - - 1,218
---------------------------------------------------------------------------------------------------------------------------
232,751 404,334 73,807 262,461 13,655,653
- --------------------------------------------------------------------------------------------------------------------------------
Loss for the period $ (232,586) $ (404,334) $ (73,734) $ (262,461) $ (13,655,075)
================================================================================================================================
Loss per common share, basic and diluted $ (0.006) $ (0.011) $ (0.002) $ (0.007) $ (0.542)
================================================================================================================================
Weighted average common shares
outstanding, basic and diluted 37,811,751 36,072,983 37,950,611 36,218,863 25,187,667
================================================================================================================================
See accompanying notes to interim consolidated financial statements.
4
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Interim Consolidated Statement of Stockholders' Equity (Deficiency)
(Expressed in U.S. dollars)
Six months ended December 31, 2000 (Unaudited)
Period from inception on November 3, 1998 to December 31, 2000 (Unaudited)
===============================================================================================================================
Deficit
accumulated Total
COMMON STOCK Additional during stockholders'
------------------------ paid-in Subscriptions development equity
Shares Amount capital receivable stage (deficiency)
- -------------------------------------------------------------------------------------------------------------------------------
Balance, November 3, 1998
(Minas Novas Gold Corp.
common stock) 12,483,533 $ 180,958 $ - $ - $ - $ 180,958
Adjustment to comply with
reverse takeover accounting:
o elimination of Minas
Novas common stock - (180,958) - - - (180,958)
o Cool Washington
common stock - 400 - - - 400
Common stock issued to
purchase all issued and
outstanding shares of
Cool Washington, March 1,
1999 (note 2(a)) 23,184,044 11,192 - - - 11,192
Common stock issued for cash,
April 12, 1999 at $0.75 per
share, net of issuance costs
of $2,849 40,000 27,151 - - - 27,151
Common stock issued for cash,
April 23, 1999 at $0.90 per
share, net of issuance costs
of $2,736 121,111 106,264 - - - 106,264
Fully paid stock subscriptions
April 23, 1999, at $0.90 per
share, net of issuance costs
of $113 - - 4,387 - - 4,387
Common stock issued for cash,
May 28, 1999 at $0.75 per
share, net of issuance costs
of $2,849 100,000 72,151 - - - 72,151
Loss for the period - - - - (117,297) (117,297)
- -------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1999 35,928,688 $ 217,158 $ 4,387 $ - $ (117,297) $ 104,248
===============================================================================================================================
5
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Interim Consolidated Statement of Stockholders' Equity (Deficiency) (continued)
(Expressed in U.S. dollars)
Six months ended December 31, 2000 (Unaudited)
Period from inception on November 3, 1998 to December 31, 2000 (Unaudited)
=================================================================================================================================
Deficit
accumulated Total
Common Stock Additional during stockholders'
------------------------ paid-in Subscriptions development equity
Shares Amount capital receivable stage (deficiency)
- ---------------------------------------------------------------------------------------------------------------------------------
Fully paid stock subscriptions
July 20, 1999, at $0.65 per
share, net of issuance
costs of nil - $ - $ 75,000 $ - $ - $ 75,000
Fully paid stock subscriptions
August 6, 1999, at $0.53 per
share, net of issuance
costs of nil - - 55,985 - - 55,985
Unpaid stock subscriptions
August 6, 1999, at $0.53 per
share, net of issuance costs
of nil - - 19,015 - - 19,015
Fully paid stock subscriptions
September 10, 1999, at $0.53
per share, net of issuance
costs of nil - - 70,087 - - 70,087
Unpaid stock subscriptions
September 10, 1999, at $0.53 per
share, net of issuance costs
of nil - - 5,079 - - 5,079
Common stock issued October 1,
1999 for fully paid stock
subscriptions at $0.53
per share, net of issuance costs
of nil 105,625 55,985 (55,985) - - -
Common stock issued October 1,
1999 for fully paid stock
subscriptions at $0.53
per share, net of issuance costs
of nil 35,875 19,015 (19,015) - - -
Common stock issued October 1,
1999 to satisfy loan at $0.53
per share 28,300 15,000 - - - 15,000
Common stock issued October 1,
1999 for fully paid stock
subscriptions at $0.65
per share, net of issuance costs
of nil 115,375 75,000 (75,000) - - -
Common stock issued October 1,
1999 for fully paid stock
subscriptions at $0.90 per
share, net of issuance costs
of nil 5,000 4,387 (4,387) - - -
6
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Interim Consolidated Statement of Stockholders' Equity (Deficiency) (continued)
(Expressed in U.S. dollars)
Period ended December 31, 2000 (Unaudited)
Period from inception on November 3, 1998 to December 31, 2000 (Unaudited)
=================================================================================================================================
Deficit
accumulated Total
Common Stock Additional during stockholders'
------------------------ paid-in Subscriptions development equity
Shares Amount capital receivable stage (deficiency)
- ---------------------------------------------------------------------------------------------------------------------------------
Fully paid stock subscriptions
December 15, 1999, at $0.25 per
share, net of issuance
costs of nil - $ - $ 123,000 $ - $ - $ 123,000
Unpaid stock subscriptions
December 15, 1999, at $0.25
per share, net of issuance
costs of nil - - 8,000 (8,000) - -
Common stock issued January 3,
2000 for fully paid stock
subscriptions at $0.53 per
share, net of issuance costs
of nil 141,500 75,000 (75,000) - - -
Common stock issued for cash,
January 13, 2000, at $0.61
per share, net of issuance
costs of nil 46,722 28,500 - - - 28,500
Common stock issued January 3,
2000 for fully paid stock
subscriptions at $0.25, net
of issuance costs of nil 524,000 131,000 (131,000) 7,000 - 7,000
Common stock issued for cash,
January 27, 2000 at $0.80
per share, net of issuance
costs of nil 72,500 58,000 - - - 58,000
Common stock issued for cash,
February 1, 2000, at $0.80
per share, net of issuance
costs of $14,440 477,816 209,560 - - - 209,560
Warrants issued for services
(note 5) - - 12,000 - - 12,000
Site development (note 6) - 12,345,500 - - - 12,345,500
Common stock issued for
services March 3, 2000 138,000 86,250 - - - 86,250
Write-off of stock subscription
receivable - - (1,000) 1,000 - -
Common stock issued for services - - 68,355 - - 68,355
Loss for the period - - - - (13,305,193) (13,305,193)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2000 37,619,401 13,320,355 79,521 - (13,422,490) (22,614)
Units issued (note 5) - - 100,000 - - 100,000
Common stock issued for
services 133,000 68,355 (68,355) - - -
Common stock issued
December 1, 2000 (note 5) 588,235 100,000 (100,000) - - -
Loss for the period - - - - (232,586) (232,586)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000
(unaudited) 38,340,636 $ 13,488,710 $ 11,166 $ - $(13,655,075) $ (155,200)
=================================================================================================================================
See accompanying notes to interim consolidated financial statements.
7
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Interim Consolidated Statement of Cash Flows
(Expressed in U.S. dollars)
==============================================================================================================
Period from
inception on
Six months Six months November 3,
ended ended 1998 to
December 31, December 31, December 31,
2000 1999 2000
- --------------------------------------------------------------------------------------------------------------
(unaudited)
Cash flows from operating activities:
Operations:
Loss for the period $ (232,586) $ (404,334) $ (13,655,075)
Items not involving cash:
Depreciation 7,411 3,276 20,458
Amortization of organization costs - - 1,218
Common stock issued for services - - 154,605
Warrants issued for financial services - - 12,000
Site development and maintenance - 190,788 12,345,500
Changes in operating assets and liabilities:
Subscriptions receivable - (8,000) -
Accounts receivable (6) (5,814) (90)
Payable to related party 90,953 - 93,789
Receivable from related party - 21,929 23,367
Accounts payable and accrued liabilities 28,641 (11,873) 71,293
----------------------------------------------------------------------------------------------------------
Net cash used in operating activities (105,587) (214,028) (932,935)
Cash flows from investing activities:
Purchase of property and equipment (722) (21,012) (38,071)
Disposition of property and equipment 6,671 - 6,672
Cash acquired on acquisition - - 2,960
----------------------------------------------------------------------------------------------------------
Net cash used in investing activities 5,949 (21,012) (28,439)
Cash flows from financing activities:
Net proceeds from issuances of and
subscriptions for common stock and warrants 100,000 183,631 961,579
Subscriptons receivable - (8,000) -
----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 100,000 183,631 961,579
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents
during the period 362 (51,409) 205
Cash and cash equivalents (bank indebtedness)
at beginning of period (157) 89,058 -
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 205 $ 37,649 $ 205
===============================================================================================================
Supplementary disclosure:
Non-cash transactions:
Stock issued to acquire Cool
Entertainment Inc. (note 2(a)) $ - $ - $ 8,232
Stock issued to satisfy loan payable - - 15,000
Interest paid - - -
Taxes paid - - -
===============================================================================================================
See accompanying notes to interim consolidated financial statements.
8
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. dollars)
Six months ended December 31, 2000 (Unaudited)
Period from inception on November 3, 1998 to December 31, 2000 (Unaudited)
================================================================================
1. GENERAL AND FUTURE OPERATIONS:
These interim consolidated financial statements have been prepared on a
going concern basis in accordance with United States generally accepted
accounting principles. The going concern basis of presentation assumes the
Company will continue in operation for the foreseeable future and will be
able to realize its assets and discharge its liabilities and commitments in
the normal course of business. Certain conditions, as discussed below,
currently exist which raise substantial doubt upon the validity of this
assumption. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Cool Entertainment, Inc. (the "Company") was incorporated under the laws of
the State of Colorado on June 17, 1996, under the name of Minas Novas Gold
Corp. On February 15, 1999, the Company changed its name to Cool
Entertainment, Inc. Prior to its acquisition of Cool Washington (note
2(a)), the Company was a holding company with no substantive operations.
The Company is currently in the business of retailing entertainment related
products such as CDs, DVDs and videos through its website.
The Company's future operations are dependent upon the market's acceptance
of its services and the Company's ability to secure strategic partnerships
There can be no assurance that the Company will be able to secure market
acceptance or strategic partnerships. As of December 31, 2000, the Company
is considered to be in the development stage as the Company has not
generated any significant revenues and is continuing to develop its
business, and has experienced negative cash flows from operations.
Operations have primarily been financed through the issuance of common
stock. The Company does not have sufficient working capital to sustain
operations until the end of the current fiscal year ended June 30, 2001.
Additional debt or equity financing will be required and may not be
available or may not be available on reasonable terms. During the six month
period ended December 31, 2000, units for common shares and warrants were
subscribed for cash proceeds to finance the operations of the Company (note
5). If sufficient financing cannot be obtained, the Company may be required
to reduce operating activities.
On November 3, 2000, the Company and its shareholders entered into an
agreement with E-Trend Networks, Inc. ("E-Trend") whereby all of the
shareholders will exchange their shares for shares of E-Trend (note 8).
Completion of this transaction is subject to a number of conditions. If
completed in accordance with the share purchase agreement, the Company will
become a wholly-owned subsidiary of E-Trend and its future operations and
viability will be subject to E-Trend's management and direction.
9
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. dollars)
Six months ended December 31, 2000 (Unaudited)
Period from inception on November 3, 1998 to December 31, 2000 (Unaudited)
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
On March 1, 1999, the Company issued 23,184,044 common shares for all
of the issued and outstanding shares of Cool Entertainment, Inc. ("Cool
Washington"), a company incorporated in the State of Washington on
November 3, 1998. The acquisition was accounted for as a
recapitalization of Cool Washington effectively representing an issue
of shares by Cool Washington for the net assets of the Company.
The net assets acquired as follows:
=======================================================================
Cash $ 2,960
Other working capital, net 22,015
Organizational costs 1,217
Loan payable (15,000)
-----------------------------------------------------------------------
$ 11,192
=======================================================================
Acquisition related costs of $23,367 were incurred on this
recapitalization and have been recorded in professional fees.
The historical financial statements reflect the financial position of
Cool Washington from the date of its incorporation on November 3, 1998,
consolidated with those of the Company from March 1, 1999.
The financial information as at December 31, 2000 and for the three and
six month periods ended December 31, 2000 and 1999 is unaudited;
however, such financial information reflects all adjustments,
consisting solely of normal recurring adjustments, necessary for a fair
presentation of the results for the periods presented.
(b) Basis of consolidation:
These consolidated financial statements have been prepared using
generally accepted accounting principles in the United States. The
financial statements include the accounts of the Company and its
wholly-owned subsidiary, Cool Washington. All significant intercompany
balances and transactions have been eliminated in the consolidated
financial statements.
10
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. dollars)
Six months ended December 31, 2000 (Unaudited)
Period from inception on November 3, 1998 to December 31, 2000 (Unaudited)
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(c) Use of estimates:
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the recorded amounts of assets
and liabilities and the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and reported
revenues and expenses for the reporting period. Actual results may
significantly differ from those estimates.
(d) Net loss per share:
Basic loss per share is computed using the weighted average number of
common shares outstanding during the period. Diluted loss per share is
computed using the weighted average number of common and potentially
dilutive common stock outstanding during the period. As the Company has
a net loss in the period presented, basic and diluted net loss per
share are the same.
Excluded from the computation of diluted loss per share for the period
ended December 31, 1999 are 17,388,033 shares of common stock held in
escrow. The release of these escrowed shares was contingent upon the
Company's achievement of contractually specified financing and website
development milestones. These escrowed shares were released in 2000.
See note 6.
3. RELATED PARTY BALANCES AND TRANSACTIONS:
In March, 1999, the Company entered into a contract with a company,
Fictional Media Inc. (formerly known as Cool Management Inc.), which is
controlled by the stockholders of the Company, to provide management
services, site development and other professional services to the Company
at cost plus 10%.
The Company incurred cash compensation expense of nil during the period
ended December 31, 2000 (1999 - nil).
The payable to related party is non-interest bearing, unsecured and due on
demand. The balance relates to services rendered by Fictional Media Inc. to
the Company under the contract discussed above.
11
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. dollars)
Six months ended December 31, 2000 (Unaudited)
Period from inception on November 3, 1998 to December 31, 2000 (Unaudited)
================================================================================
4. EQUIPMENT:
Equipment consists of the following:
===========================================================================
December 31, June 30,
2000 2000
---------------------------------------------------------------------------
(unaudited)
Computer equipment $ 19,145 $ 27,577
Computer software 10,493 9,772
---------------------------------------------------------------------------
29,638 37,349
Less accumulated depreciation (18,698) (13,049)
---------------------------------------------------------------------------
$ 10,940 $ 24,300
===========================================================================
5. UNITS:
On July 24, 2000, the Company entered into a subscription agreement which
granted the issue of 588,235 units of securities for cash consideration of
$0.17 per unit. Each unit consisted of one share of common stock and one
common stock purchase warrant. Each warrant entitles the holder to purchase
one share of common stock at a price of $0.187 for a period of three years
from the date of issuance. During the three months ended December 31, 2000,
the common stock for these units was issued.
6. SITE DEVELOPMENT AND MAINTENANCE:
Effective February 25, 2000, the Company reached certain performance
milestones relating to the development of the Company's website. As a
result, 17,388,033 common shares previously held in escrow were released.
Site development and maintenance expense of $12,345,500 has been
recognized, representing the difference between the market value of the
common shares on the date of their release and the original cost of these
common shares.
12
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. dollars)
Six months ended December 31, 2000 (Unaudited)
Period from inception on November 3, 1998 to December 31, 2000 (Unaudited)
================================================================================
7. FINANCIAL INSTRUMENTS:
Fair value:
The carrying values of cash and cash equivalents, accounts receivable, bank
indebtedness and accounts payable and accrued liabilities approximate fair
value due to the short-term maturities of these instruments.
It is not practicable to determine the fair value of the payable to related
party due to its related party nature and the absence of a secondary market
for such instruments.
8. COMMITMENT:
On November 3, 2000, the Company entered into a letter of intent to acquire
all of the issued and outstanding shares of E-Trend Networks, Inc.
("E-Trend"), a private company based in Fort Lauderdale, Florida, with
offices in Marina Del Rey, California, and Calgary, Alberta. E-Trend is
engaged in a business similar to that of the Company's. The letter of
intent contemplates that the Company would acquire E-Trend as a
wholly-owned subsidiary in exchange for the issuance of 4,441,867 shares of
the Company's common stock (after the Company effects a 1 for 100 reverse
split). The shareholders of E-Trend as a group would acquire control over
the Company. Completion of the transaction is subject to a number of
conditions, including the execution of a formal share exchange agreement
and approval of the directors and shareholders of both companies.
On January 26, 2001, the shareholders of the Company approved the
transaction.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The acquisition of Cool Entertainment Inc., a Washington corporation
("Cool Washington") on March 1, 1999 has been accounted for as a
recapitalization of Cool Washington. The transaction has been accounted for as a
capital transaction effectively representing the issuance of shares by Cool
Washington for the net assets of the Company.
RESULTS OF OPERATIONS
The Company is considered to be in the development stage since it has
not generated any significant revenues and is continuing to develop its
business. Revenues of only $3,518 have been generated since the Company's
inception. No revenues were generated during the quarter ended December 31,
2000.
The Company experienced a loss of $232,584 for the six months ended
December 31, 2000. For the six-month period, operating expenses consisted
primarily of the following: management fees of $126,460, professional fees of
$45,836, and site development and maintenance expenses of $42,121. In
comparison, the Company incurred a loss of $404,334 for the comparable period in
1999. No revenues were generated, since the Company's website was not launched
until January 2000. However, the Company incurred expenses of $404,334 in
anticipation of launching the website. These expenses were primarily for site
development and maintenance expenses of $190,788, management fees of $114,869,
professional fees of $42,503, and travel, advertising and promotion of $29,901.
For the three months ended December 31, 2000, the Company incurred a
loss of $73,732 as compared to a loss of $262,461 for the comparable period in
1999. The greater loss in 1999 resulted from the Company's efforts to launch its
website in January 2000. Site development and maintenance expenses were $168,004
for the 1999 period as compared to $14,947 for the 2000 period.
For the period from inception (November 3, 1998) through December 31,
2000, the Company has incurred a net loss of $13,655,075. Site development and
maintenance expense of $12,345,500 was recognized during the quarter ended March
31, 2000, as a result of the release of 17,388,033 common shares from escrow.
Such shares had been held in escrow to insure the achievement of certain
performance milestones relating to the development of the Company's website. The
milestones were achieved in February 2000, and the Company recognized the
difference between the market value of the 17,388,033 common shares on the date
of their release and their original cost as site development and maintenance
expense.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2000 and June 30, 2000, the Company had working capital
deficiencies of $166,140 and $46,914, respectively. Virtually all of the
Company's liquidity has been provided through the sale of its Common Stock. For
the period from November 3, 1998 to December 31, 2000, the Company has received
$961,579 in net proceeds from the issuance of its Common Stock.
14
PLAN OF OPERATION
Management believes that it did not have adequate capital to conduct
the type of marketing campaign needed to launch an Internet retail website.
Accordingly, management began to explore business combination opportunities for
the Company in the fall of 2000. In November 2000, it entered into a letter of
intent with E-Trend Networks, Inc. to combine E-Trend with the Company. On
December 22, 2000, the Company entered into a Share Exchange Agreement, by and
among E-Trend Networks, Inc., the Company, and E-Trend Networks, Inc. (a
wholly-owned subsidiary of the Company domiciled in the State of Delaware)
("Cool Delaware"), providing for the acquisition of all of the issued and
outstanding shares of E-Trend Networks, Inc. by the Company (the "Acquisition").
As part of the terms of the Acquisition, the Company will be changing its
domicile to Delaware, changing its name to E-Trend Networks, Inc., and effecting
a 1-for-100 reverse stock split on its outstanding shares of common stock (the
"Reorganization"). Shareholders of the Company approved the Acquisition and the
Reorganization.
The Acquisition and Reorganization are expected to close on or around
February 21, 2001. After giving effect to the Acquisition and Reorganization,
the Company's shareholders will own approximately 8% of the then outstanding
shares of the Company's common stock and new management will be put into place.
Thereafter, the Company's future operations and viability will be subject to
E-Trend Networks, Inc.'s management and direction.
15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
In December 2000, the Company issued 588,235 shares and 588,235 common
stock purchase warrants to Merrow International. The shares and
warrants had been purchased in July 2000 for $100,000. The Company
relied upon the exemption from registration contained in Section 4(2)
of the Securities Act of 1933. No underwriters were used and no
underwriting commissions were paid.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
- --------------------------------------------------------------------------------------------------------------------
REGULATION CONSECUTIVE
S-B NUMBER EXHIBIT PAGE NUMBER
- --------------------------------------------------------------------------------------------------------------------
2.1 Share Exchange Agreement, dated as of December 22, 2000, by and among N/A
E-Trend Networks, Inc., Cool Entertainment, Inc., and E-Trend Networks, Inc.
(a Delaware corporation) (1)<F1>
- --------------------------------------------------------------------------------------------------------------------
2.2 Agreement and Plan of Reincorporation and Merger between Cool Entertainment, N/A
Inc. and E-Trend Networks, Inc., a Delaware corporation (1))<F1>
- --------------------------------------------------------------------------------------------------------------------
2.3 Certificate of Ownership Merging Cool Entertainment, Inc. into E-Trend
Networks, Inc. Pursuant to Section 253 of the Delaware General Corporation 18
Law and Articles of Merger Pursuant to Section 7-111-105 of the Colorado
Business Corporation Act
- --------------------------------------------------------------------------------------------------------------------
- ----------------------------
<FN>
(1)<F1> Incorporated by reference to the exhibits filed with the registrant's
definitive information statement filed January 2, 2001 for the meeting
held January 26, 2001.
</FN>
16
B) REPORTS ON FORM 8-K:
None.
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.
COOL ENTERTAINMENT INC.
(Registrant)
Date: February 20, 2001 By: /S/ WILLIAM J. HADCOCK
------------------------------------------
William J. Hadcock, President (Principal
financial and accounting officer
17