SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB
QUARTERLY REPORT UNDER REGULATION SB OF THE
SECURITIES EXCHANGE ACTS OF 1934
For the Quarter Ended Commission File Number:
March 31, 2000 0-24449
J-BIRD MUSIC GROUP LTD.
(Exact Name of Registrant as specified in its charter)
Pennsylvania 06-1411727
(State or other jurisdiction) (IRS Employer
of incorporation or organization) Identification Number)
396 Danbury Road Wilton, Connecticut 06897
(Address and zip code of principal executive officers)
(203) 761-9393
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reported
required by Regulation SB of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to the filing requirements for
at least the past 90 days. YES ( ) NO ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date:
Number of Shares Outstanding Class Date
24,818,395 Common Stock March 31, 2000
$.001 par value
J-BIRD MUSIC GROUP LTD.
Index
PART I FINANCIAL INFORMATION
Balance Sheet March 31, 2000 3
Statements of Operations
Three Months Ended March 31, 2000 and 1999 4
Statements of Cash Flow
Three Months Ended March 31, 2000 and 1999 5
Notes to Unaudited Financial Statements
March 31, 2000 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II
Other Information 11
Signatures 11
2
J-BIRD MUSIC GROUP LTD.
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
ASSETS
Cash $ 5,983
Accounts Receivable 552,772
Inventory 211,542
Loans Receivable, Shareholder 13,092
Loans Receivable I.M.M. 13,102
Recording Advances 111,500
----------
Total Current Assets 907,991
Fixed Assets, Net 107,941
Other Assets 979
----------
Total Assets $1,016,911
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Account Payable and Accrued Expenses $ 269,949
Accrued Royalties 75,000
Notes Payable 74,684
----------
Total Current Liabilities 419,633
Due to Officers 14,000
----------
Total Liabilities 433,633
----------
Stockholders' Equity
Common Stock $.001 Par Value 50,000,000 Shares
Authorized, 24,818,395 Issued and Outstanding 24,818
Paid in Capital 9,443,037
Subscription Receivable (250,000)
(Deficit) (8,634,577)
----------
Total Stockholders' Equity 583,278
----------
Total Liabilities and Stockholders' Equity $1,016,911
==========
3
J-BIRD MUSIC GROUP LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
---- ----
Net Sales $ 272,793 $ 297,139
Cost of Sales 291,163 161,262
Operating Expenses:
Advertising and Promotion 40,417 66,397
Professional Fees 20,192 27,313
Amortization and Depreciation 8,407 9,132
Salaries 57,958 67,780
Administrative Expenses 295,603 63,148
----------- -----------
Net (Loss) Before Other Income (Expenses) (440,947) (97,893)
Other Income (Expense) 0 0
Net Loss $ (440,947) $ (97,893)
=========== ===========
Net Loss per Common Share $ (0.02) $ (0.01)
Weighted Average Common Shares Outstanding 23,818,395 14,325,395
4
J-BIRD MUSIC GROUP LTD.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
---- ----
Cash Flows from (Used In) Operating Activities
Adjustments to Reconcile Net (Loss) to Net Cash
From (Used In) Operating Activities:
Net (Loss) $(440,947) $(97,893)
Amortization and Depreciation 8,406 9,132
(Increase) in Accounts Receivable (1,493) (60,824)
(Increase) in Inventory (139,262) (2,950)
(Decrease) Increase in Accrued Royalties (27,575) 53,655
(Decrease) Increase in Accounts Payable 81,734 (228,277)
(Increase) in Recording Advances (21,736) 0
--------- --------
Net Cash (Used In) Operating Activities (540,873) (327,157)
Cash Flows from (Used In) Investing Activities
Purchase of Fixed Assets 0 (8,900)
--------- --------
Net Cash (Used In) Investing Activities 0 (8,900)
Cash Flows from (Used In) Financing Activities
Stock Issued for Cash 581,250 250,000
Net (Decrease) Increase in Bank Overdraft (8,801) 48,452
Net Increase in Officer and Shareholder Loans 36,222 (8,500)
Net (Decrease) in Loan Due I.M.M. (55,250) (55,900)
Increase (Decrease) in Note Payable (6,565) 100,000
--------- -------
Net Cash from Financing Activities 546,856 334,052
Net (Decrease) Increase in Cash 5,983 (2,005)
Cash, Beginning of Period 0 2,005
--------- --------
Cash, End of Period $ 5,983 $ 0
========= ========
5
J-BIRD MUSIC GROUP LTD.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2000
Note 1. Organization
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the provisions of Regulation SB. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included.
J-Bird Records, Inc. is the first WorldWide Wed Recording Label (TM). The
Company was officially launched on November 1, 1996 to market, distribute and
sell music via a new medium - the Internet. At its Website, located at
http://www.j-birdrecords.com, the Company attracts and signs recording artists
through its on-line office and promotes, markets and sells their recordings
through its on-line record store. J-Bird Records is a wholly owned subsidiary of
J-Bird Music Group LTD.
The Company has experienced operating losses since its inception and has
experienced significant cash flow problems. The Company is in the process of
raising capital through various sources to fund its operations and has
implemented certain operating strategies to obtain profitably.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, J-Bird Records, Inc. Material intercompany balances
and transactions have been eliminated in consolidation.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. The accompanying
financial statements should be read in conjunction with the Company's Form 10-SB
filed for the year ended December 31, 1999.
Earnings (loss) per share are based on the weighted average number of shares
outstanding. Common stock equivalents have not been considered as their effect
would be anti-dilutive.
6
Note 2. Related Party Transactions
In October 1998, the Company entered into a credit agreement with I.M.M.
International, Inc., a shareholder of the company, whereby I.M.M. will provide
up to $500,000 in financing to the Company for working capital purposes. The
agreement expired on March 31, 1999. Amounts outstanding under this agreement
bear interest at 8% and are due on June 30, 2000. At March 31, 2000, the Company
had advanced $63,102 to I.M.M.
Note 3. Common Stock
At March 31, 2000, warrants to purchase 87,140 shares of common stock
exercisable through March 2002 at $.25 per share were outstanding.
7
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of J-Bird Music Group
LTD's, consolidated results of operations and financial condition for the three
months ended March 31, 2000. The discussion should be read in conjunction with
the Company's consolidated financial statements and accompanying notes.
J-Bird derives its revenues from three principle sources: (i) sales of compact
disks ("CDs") directly to the artists for resale to consumers, (ii) CD sales on
the J-Bird Website; and (iii) retail CD sales.
J-Bird's strategy to develop products and services for the music entertainment
business was primarily responsible for its net loss for the three months ended
March 31, 2000 and the years ended December 31, 1999 and 1998. The Company has
only a limited operating history in its operations upon which an evaluation of
J-Bird and its prospects can be based. Accordingly, J-Bird believes that the
results of its operations in the past during which time the company had minimal
revenues, are not meaningful indications of future performance. J-Bird incurred
losses from continuing operations of $440,947 in the three months ended March
31, 2000, $2,147,065 for the year ended December 31, 1999 and $3,764,724 for the
year ended December 31, 1998.
In 1998 the Company signed a distribution agreement with Navarre Corporation
which provides the Company with a national presence in approximately 52,000
traditional retail establishments. This agreement also provides the Company with
a national sales force that has existing relationships with the major retail
outlets in the country. As a start-up entity in 1997 the Company sold directly
to retail markets with minimal results. In the second half of 1997 the Company
was able to obtain two distribution agreements with regional distributors. This
enabled the Company to establish a regional presence and provided credentials
that assisted in signing the distribution agreement with Navarre Corporation.
8
The Company currently intends to increase substantially its operating expenses
to (a) fund increased sales and marketing, enhance its existing website and to
complete strategic relationships important to the success of the Company. To the
extent that such expenses precede or are not subsequently followed by increased
revenues, the Company's business, results of operations and financial condition
will be materially adversely affected. There can be no assurance that the
Company will be able to generate sufficient revenues from the sale of music
recordings, related merchandise, advertising and sponsorship programs to achieve
or maintain profitability on a quarterly or annual basis in the future. The
Company expects negative cash flow from operations to continue for the
foreseeable future as it continues to develop and market its business.
Liquidity and Capital Resources
The Company has financed its operations and capital expenditures primarily from
equity financing and loans from shareholders and a bank. The Company borrowed
$100,000 under its line of credit agreement with a bank. As of March 31, 2000,
the principle balance owed is $74,684. The Company expects negative cash flow
from operations to continue for the foreseeable future, as it continues to
develop and market its operations. Inflation has not had any material impact on
the Company's operations. In addition to the bank loan, the Company is presently
funding its operating deficit through a credit agreement with I.M.M.
International, Inc., a shareholder of the company. The Company has advanced
$13,102 to I.M.M as of March 31, 2000.
The Company is currently pursuing long term financing for its operating
activities and a potential acquisition. No source of financing has occurred to
date and there can be no assurance that financing will be available, or if
available, that it will be on acceptable terms. The ability to finance existing
and future operations will be dependent upon external sources.
Results of Operations - Three months ended March 31, 2000 compared to three
months ended March 31, 1999
2000 1999
---- ----
Net Sales $272,793 $297,139
---------
Cost of Sales $291,163 $161,262
-------------
9
In addition to obtaining the distribution agreement with Navarre, 2000 sales
decreased due to the increasing number of returns even though the Company has
signed on more artists, including three nationally recognized performers. The
Company has 262 artists under agreements at March 31, 2000 compared to 252 at
March 31, 1999.
2000 1999
---- ----
Advertising and Promotion Expenses $ 40,417 $ 66,397
----------------------------------
The decrease in advertising and promotion is due to the level of operations of
the Company.
Professional Fees $ 20,192 $ 27,313
-----------------
The decrease in professional fees is due to the lower level of legal and
consulting fees of the Company.
Salaries $ 57,958 $ 67,780
--------
The decrease in salaries expense is due to the decreased number of employees.
Administrative Expenses $ 295,603 $ 63,148
-----------------------
The increase in administrative expenses is due to the increased of operations of
the Company. Investment adviser fees, stock financing fees, printing and
stationary, registration fees, insurance, postage and general office expenses
increased by approximately $126,000. Additionally, in this quarter the Company
had incurred an employee signing bonus of $35,000 and a consulting expense of
$71,250. This expense was an exchange of services for common stock and did not
affect the cash flow of the Company.
10
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Default 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
Not applicable
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 by the
undersigned thereunto duly authorized.
J-Bird Music Group LTD.
(Registrant)
Dated: By: John J. Barbieri
President
11