UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-30661
MILLENNIUM DIRECT, INC.
(Exact name of Small Business Issuer as specified in its charter)
Delaware 13-3786306
------------------------------- -----------------------
(State or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
NCR 30-A, North Blenheim, New York 12131
(Address of principal executive offices)
(607) 588-8882
(Issuer's telephone number, including area code)
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 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 CORPORATE ISSUERS
The number of shares of common stock outstanding as of March 31, 2001 was
22,079,710.
PART I
Item 1. Financial Statements. Attached.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 COMPARED
WITH THE THREE MONTHS ENDED MARCH 31, 2000
Results of Operations
Millennium recorded $8,629 in sales for the three months ended March 31,
2001, as compared with no sales for the three months ended March 31,
2000. Millennium's gross profit for these three months was $2,863 and
$0, respectively. Operating expenses for the three months ended March
31, 2001 were $283,794 and $829,230 for the three months ended March 31,
2000. The significant items included in operating expenses for the three
months ended March 31, 2001 and 2000 are as follows:
EXPENSE DESCRIPTION MARCH 31, 2001 MARCH 31, 2000
Advertising $31,388 $211,135
Depreciation and amortization 68,062 32,733
Consulting fees 83,442 394,353
Professional fees 18,000 36,565
Travel and trade shows 24,479 60,825
As a result, the net loss was $280,931 for the three months ended March
31, 2001 compared with a net loss of $829,230 for the three months ended
March 31, 2000. As of March 31, 2001 Millennium had stockholders' equity
of $921,541 and $792,601 for March 31, 2000. The changes in the
stockholders equity was the result of additional investments made by
shareholders via the sale of common stock and the issuance of stock to
certain directors and consultants and reduced by the net loss.
================================================================================
LIQUIDITY AND CAPITAL RESOURCES
Millennium has financed its operations and met its capital requirements
primarily through funds raised in private placements. The principal uses
of operating cash are to further develop and produce Millennium's
children's videos, as well as its skin care products marketed under the
Theracel brand. In the event that the Company is unable to raise funds
through private placements or from operations, Millennium's ability to
conduct its operations as planned may become uncertain. The Company has
entered into employment agreements with George Balis and Ardis Balis
as of January 1, 2001 and are for a period of three years. These
employment agreements include base salaries, expense allowances, bonuses
and a portion of the pre-tax profit of Millennium as compensation for
their services to Millennium, in addition to the opportunity to acquire
additional shares of common stock. These employment agreements include
non-competition and confidentiality provisions. These agreements will
result in additional charges to the results of operations and will be
funded through the general operations of the Company. During the next
twelve months, Millennium expects to continue development of the new
infomercial for the TheraCel products, as well as continue to develop
new marketing channels for its line of video products. Millennium may
raise additional funds from the issuance of new long- term debt, as
well as through the sale of its securities. These sources of funds, as
well as Millennium's existing cash reserves, are projected by management
to be sufficient to fund its operations during the next twelve months.
Millennium does not intend to incur any substantial research and
development costs, acquisitions of assets or the employment of
additional persons during the next twelve month period.
PART II
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. There are no reportable events relating to this
item.
In January 2001, Millennium issued 375,000 shares to officers and
directors at par value ($.0001 per share), 450,334 shares to certain consultants
valued at $.10 per share in consideration for marketing and computer internet
and web-site consulting services rendered, and 4,935,334 shares of common stock
to Ardis Balis at par value ($.0001 per share) to be in compliance with the
terms of a prior acquisition agreement. All of these transactions were exempt
from registration pursuant to Section 4(2) of the Securities Act.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. There are no
reportable events relating to this item.
Item 5. Other Information.
Pursuant to an Agreement and Plan of Reorganization (the "Acquisition
Agreement") effective April 3, 2001, the Millennium Direct, Inc.("Millennium" or
the "Company"), a Delaware corporation, acquired all the outstanding shares of
common stock of Blue Capital Associates ("Blue Capital"), a Delaware
corporation, from the shareholders thereof in an exchange for an aggregate of
1,162,090 shares of common stock of Millennium (the "Acquisition"). In
connection therewith, Millennium agreed to advance up to $200,000 to a
shareholder of Blue Capital. As of March 31, 2001, $100,000 had been advanced.
The Acquisition was approved by the unanimous consent of the Board of
Directors of Millennium on March 15, 2001. The Acquisition is intended to
qualify as a reorganization within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended.
Prior to the Acquisition, Millennium had 22,079,710 shares of common stock
issued and outstanding and 23,241,800 shares issued and outstanding following
the Acquisition.
Upon effectiveness of the Acquisition, pursuant to Rule 12g-3(a) of the
General Rules and Regulations of the Securities and Exchange Commission,
Millennium elected to become the successor issuer to Blue Capital for reporting
purposes under the Securities Exchange Act of 1934 and elects to report under
the Act effective April 3, 2001. Millennium filed a report on Form 8-K with the
Commission on April 18, 2001.
Item 6. Exhibits and Reports on Form 8-K.
(A) No Reports on Form 8-K were filed during the quarter ending March 31,
2001.
(B) None.
MILLENNIUM DIRECT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
March 31, December 31,
2001 2000
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash $ 135,511 $ 371,144
Accounts receivable 8,629 -
Notes receivable 100,000 -
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TOTAL CURRENT ASSETS 244,140 371,144
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Property and equipment, net of accumulated
depreciation of $14,496 in 2001 and $10,739 in 2000 4,384 5,004
---------- ----------
OTHER ASSETS:
Intangible assets, net of accumulated amortization
of $898,252 in 2001 and $830,850 in 2000 318,458 385,900
Video costs 262,583 262,583
Officer loan receivable 361,455 352,114
---------- ----------
TOTAL OTHER ASSETS 942,496 1,000,597
---------- ----------
TOTAL ASSETS $1,191,020 $1,376,795
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 92,019 $ 79,800
Note payable, current portion of long-term debt 515,000 515,000
---------- ----------
TOTAL CURRENT LIABILITIES 607,019 594,800
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 584,001 781,945
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,191,020 $1,376,745
========== ==========
================================================================================
MILLENNIUM DIRECT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
================================================================================
THREE MONTHS ENDED MARCH 31,
2001 2000
SALES $ 8,629 $ -
COST OF GOODS SOLD 5,766 -
--------- ---------
GROSS PROFIT 2,863 -
--------- ---------
COSTS AND EXPENSES:
Selling and marketing expenses 31,388 270,181
General and administrative expenses 252,406 559,049
--------- ---------
TOTAL COSTS AND EXPENSES 283,794 829,230
--------- ---------
NET LOSS $(280,931) $(829,230)
========= =========
BASIC LOSS PER SHARE $(.04) $(0.14)
========= =========
DILUTED LOSS PER SHARE $(.04) $(0.14)
========= =========
================================================================================
MILLENNIUM DIRECT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2001
(Unaudited)
================================================================================
OPERATING ACTIVITIES:
Net loss $(280,931)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 68,062
Changes in operating assets and liabilities:
Accounts receivable (8,629)
Accrued expenses 12,219
---------
NET CASH USED IN OPERATING ACTIVITIES (209,279)
---------
FINANCING ACTIVITIES:
Proceeds from sale of common stock 82,986
Increase in notes receivable (100,000)
Increase in notes receivable - stockholder (9,340)
---------
NET CASH USED IN FINANCING ACTIVITIES (26,354)
---------
DECREASE IN CASH (235,633)
CASH - BEGINNING OF PERIOD 371,144
---------
CASH - END OF PERIOD $ 135,511
=========
===============================================================================
MILLENNIUM DIRECT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(Unaudited)
===============================================================================
1 CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet at the end of the preceding year was
derived from the audited consolidated balance sheet contained in the
Company's prior year-end financial statements and is presented for
comparative purposes. All other financial statements are unaudited. All
unaudited amounts are subject to year-end adjustments and audit, but
the Company believes all adjustments, consisting only of normal and
recurring adjustments necessary to present fairly the financial
condition, results of operations and changes in cash flows for the
interim periods, have been made. The results of operations for interim
periods are not necessarily indicative of the operating results for the
full year.
Footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
omitted in accordance with published rules and regulations of the
Securities and Exchange Commission. These consolidated financial
statements should be read in conjunction with the audited financial
statements and notes thereto included in the annual audited financial
statements for the most recent fiscal year.
The consolidated financial statements of Millennium Direct, Inc. and
Subsidiaries Millennium (the "Company") are unaudited and reflect all
adjustments, which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results for
the interim period.
2 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001
COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 2000
Results of Operations
Millennium recorded $8,629 in sales for the three months ended March
31, 2001, as compared with no sales for the three months ended March
31, 2000. Millennium's gross profit for these three months was $2,863
and $0, respectively. Operating expenses for the three months ended
March 31, 2001 were $283,794 and $829,230 for the three months ended
March 31, 2000. The significant items included in operating expenses
for the three months ended March 31, 2001 and 2000 are as follows:
EXPENSE DESCRIPTION MARCH 31, 2001 MARCH 31, 2000
Advertising $31,388 $211,135
Depreciation and amortization 68,062 32,733
Consulting fees 83,442 394,353
Professional fees 18,000 36,565
Travel and trade shows 24,479 60,825
As a result, the net loss was $280,931 for the three months ended March
31, 2001 compared with a net loss of $829,230 for the three months
ended March 31, 2000. As of March 31, 2001 Millennium had stockholders'
equity of $921,541 and $792,601 for March 31, 2000. The changes in the
stockholders equity was the result of additional investments made by
shareholders via the sale of common stock and the issuance of stock to
certain directors and consultants and reduced by the net loss.
================================================================================
3 LIQUIDITY AND CAPITAL RESOURCES
Millennium has financed its operations and met its capital requirements
primarily through funds raised in private placements conducted since
1996. Beginning in 1998 with its acquisition of UDL, Millennium has
been able to finance, in part, operations from income. The principal
uses of operating cash are to further develop and produce Millennium's
children's videos, as well as its skin care products marketed under the
Theracel brand. Millennium expects to be able to continue to raise
funds through additional private placements. The Company also expects
substantial profitability and cash flow from operations in the upcoming
three months due to the new Marketer's programs. In the event that the
Company is unable to raise funds through private placements or from
operations, Millennium's ability to conduct its operations as planned
may become uncertain. None of the Company's key employees have been
subject to employment contracts to date. It is intended, that George
Balis, Ardis Balis and John Rissi will execute employment agreements
with Millennium in form and substance to be negotiated and agreed
between Millennium and each such individual. These employment
agreements are expected to be for terms of three months and to include
base salaries, expense allowances, bonuses and a portion of the pre-tax
profit of Millennium as compensation for their services to Millennium,
in addition to the opportunity to acquire additional shares of common
stock. These employment agreements are expected to include
non-competition, confidentiality and non-raid provisions to be
negotiated. It is not anticipated that these agreements will be drafted
or negotiated prior to the first quarter of 2001. Among the factors
which will be taken into consideration in determining the compensation
package to be included in any such agreements, will be Millennium's
revenues, gross profits and net income at the time such agreements are
negotiated and as anticipated over the immediate future. These
agreements will result in additional charges to the results of
operations and will be funded through the general operations of the
Company. During the next twelve months, Millennium expects to continue
development of the new infomercial for the TheraCel products, as well
as continue to develop new marketing channels for its line of video
products. Millennium may raise additional funds from the issuance of
new long- term debt, as well as through the sale of its securities.
These sources of funds, as well as Millennium's existing cash reserves,
are projected by management to be sufficient to fund its operations
during the next twelve months. Millennium does not intend to incur any
substantial research and development costs, acquisitions of assets or
the employment of additional persons during the next twelve month
period.
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 hereunto duly authorized.
MILLENNIUM DIRECT, INC.
Date: May 21, 2001 /s/ George Balis
---------------------
George Balis, CEO