UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|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
For the transition period from _________ to _________
Commission File No. 000-26799
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UBRANDIT.COM
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(Exact name of registrant as specified in its charter)
Nevada 88-0381646
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
6405 Mira Mesa Blvd. Ste 100 San Diego, CA
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(Address of principal executive offices)
92121
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(Zip Code)
(858) 350-9566
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(Registrant's telephone number,
including area code)
Former Address
2053 San Elijo Ave. Cardiff by the Sea, CA 92007
Indicate by check mark whether the registrant (1) has 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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days.
YES |X| NO |_|
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 31, 2001
----- -----------------------------
Common Stock $0.001 par value 12,417,333
UBRANDIT.COM
INDEX
PART I - FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1. Financial Statements (unaudited) 3
Condensed Consolidated Balance Sheets at March 31, 2001
and September 30, 2000 3
Condensed Consolidated Statements of Operations for the three and
six months ended March 31, 2001 and March 31, 2000 4
Condensed Consolidated Statements of Cash Flows for the six
months ended March 31, 2001 and March 31, 2000 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Item 3. Quantitative and Qualitative Disclosure About Market Risk 10
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit Index 13
CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS
This Quarterly Report contains certain forward-looking statements that
involve risks and uncertainties. These forward-looking statements are not
historical facts but rather are based on current expectations, estimates and
projections about our industry, our beliefs and assumptions. We use words such
as "anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates" and variations of these words and similar expressions to identify
forward-looking statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and other factors,
some of which are beyond our control, are difficult to predict and could cause
actual results to differ materially from those expressed or forecasted in the
forward-looking statements. You should not place undue reliance on these
forward-looking statements included or otherwise incorporated in this Quarterly
Report, which reflect our management's view only on the date of filing of this
report. We undertake no obligation to update these statements to reflect events
or circumstances that occur after the filing date of this Quarterly Report or to
reflect the occurrence of unanticipated events.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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Ubrandit.com
Condensed Consolidated Balance Sheets
(unaudited)
March 31, September 30,
2001 2000
--------------- ---------------
ASSETS
Current Assets
Cash $ 1,799,545 $ 3,700,864
Accounts receivable 8,280 14,969
Prepaid expenses 117,215 86,190
Deposits 9,074 50,374
Inventory 23,982 27,493
--------------- ---------------
Total current assets 1,958,096 3,879,890
Other Assets
Property and equipment, net 354,019 403,337
Notes receivable and advances to
Mindtronics Corporation 791,459 -
Core technology, net 314,290 361,790
Goodwill, net 1,191,438 1,320,310
Deposits 17,153 -
Deferred acquisition costs 240,000 -
--------------- ---------------
$ 4,866,455 $ 5,965,327
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 336,067 $ 177,814
Accrued expenses 173,354 110,897
Related party loan 38,535 30,590
Current portion of lease payable 36,943 35,243
Customer deposits - 39,434
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Total current liabilities 584,899 393,978
Other Liabilities
Leases payable, net of current portion 28,017 30,544
Stockholders' equity
Common stock, $0.001 par value, 25,000,000
shares authorized; 12,417,333 (2001) and
12,167,333 (2000) shares issued and outstanding 12,417 12,167
Additional paid in capital 9,142,195 8,980,333
Accumulated deficit (4,901,073) (3,451,695)
--------------- ---------------
Total stockholders' equity 4,253,539 5,540,805
--------------- ---------------
$ 4,866,455 $ 5,965,327
=============== ===============
See accompanying notes to condensed consolidated financial statements
-3-
Ubrandit.com
Condensed Consolidated Statements of Operations
(unaudited)
Three months Three months Six months Six months
ended ended ended ended
March 31, March 31, March 31, March 31,
2001 2000 2001 2000
-------------- -------------- -------------- --------------
Revenues $ 398,297 $ 84,600 $ 870,974 $ 117,311
Cost of sales 355,514 241,774 791,901 409,699
-------------- -------------- -------------- --------------
Gross margin 42,783 (157,174) 79,073 (292,388)
Selling, general and administrative 615,345 463,351 1,356,435 724,819
Depreciation and amortization 124,988 74,914 248,453 143,527
-------------- -------------- -------------- --------------
Loss from operations (697,550) (695,439) (1,535,815) (1,160,734)
Interest income 42,819 61,018 83,096 127,641
Interest expense (3,449) (347) (6,659) (730)
-------------- -------------- -------------- --------------
Net loss $ (658,180) $ (634,768) $ (1,449,378) $ (1,033,823)
============== ============== ============== ==============
Net loss per common share,
basic and diluted $ (0.05) $ (0.05) $ (0.12) $ (0.09)
============== ============== ============== ==============
Weighted average number of
shares, basic and diluted 12,331,222 11,738,333 12,248,377 11,738,333
============== ============== ============== ==============
See accompanying notes to condensed consolidated financial statements
-4-
Ubrandit.com
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six months Six months
ended ended
March 31, March 31,
2001 2000
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Cash flows from operating activities:
Net loss $ (1,449,378) $ (1,033,823)
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation & Amortization 248,453 143,527
Compensation for stock options 37,112 -
Changes in operating assets and liabilities,
net of effects of acquisition:
Accounts receivable (5,298) (910)
Subscription receivable - 51,000
Prepaid expenses (31,025) 20,750
Deposits 24,147 (150)
Inventory 3,511 -
Accounts payable (81,747) 64,852
Accrued liabilites 23,023 (1,953)
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Net cash used in operating activities (1,231,202) (756,707)
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Cash flow from investing activities:
Purchases of property and equipment (6,413) (119,590)
Amounts advanced for notes receivable (779,472) -
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Net cash used in investing activities (785,885) (119,590)
-------------- --------------
Cash flow from financing activities:
Repayments of capital lease obligations (17,177) (2,494)
Proceeds from related party debt 46,145 -
Repayment of related party debt (38,200) -
Issuance of common stock 125,000 -
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Net cash provided by (used in) financing activities 115,768 (2,494)
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Decrease in cash (1,901,319) (878,791)
Cash, beginning 3,700,864 5,613,922
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Cash, ending 1,799,545 4,735,131
============== ==============
See accompanying notes to condensed consolidated financial statements
-5-
Notes to Condensed Consolidated Financial Statements
March 31, 2001
NOTE 1. BASIS OF PRESENTATION
The accompanying condensed consolidated balance sheet at March 31, 2001, and the
condensed consolidated statements of operations and cash flows for the three and
six months ended March 31, 2001 and 2000 are unaudited and have been prepared by
Ubrandit.com (the "Company"), pursuant to the rules and regulations of the
Security and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures
included herein are adequate to make the information presented not misleading.
The unaudited condensed consolidated financial statements reflect all
adjustments, consisting of normal recurring adjustments, which are, in the
opinion of management, necessary to fairly state the consolidated financial
position as of March 31, 2001, and the results of operations and cash flows for
the related interim periods ended March 31, 2001 and 2000. The results of
operations for the three and six months ended March 31, 2001 are not necessarily
indicative of the results that may be expected for the year ending September 30,
2001 or any other period.
The accounting policies followed by the Company and other relevant information
are contained in the notes to the Company's consolidated financial statements
filed on January 3, 2001 as part of the Company's Annual Report on Form 10-K for
the year ended September 30, 2000. This quarterly report should be read in
conjunction with such annual report.
Note 2. GOING CONCERN
The Company has suffered substantial recurring losses from operations, expects
to incur additional losses and, effective April 30, 2001, has acquired a
development stage company, Mindtronics Corporation, which the Company has
advanced $779,472. These factors, among others, raise substantial doubt as to
the Company's ability to continue as a going concern.
Note 3. EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per share are computed by dividing earnings available to
common shareholders by the weighted average number of common shares outstanding
during the periods. Diluted earnings per share reflect per share amounts that
would have resulted from the dilutive potential effect of common stock
instruments.
Note 4. OPTIONS TO PURCHASE COMMON STOCK
During the six months ended March 31, 2001, the Company granted options to
employees to purchase 27,500 shares of common stock, pursuant to the 2000 Stock
Option and Incentive Plan. The exercise prices equal the closing stock price of
the Company's common stock at the date of grant, which range from $0.50 to
$0.875 per share.
The Company also granted options to a former employee/consultant to purchase
7,500 shares of common stock at a price of $3.00 per share, which vest in June
2001. In June 2000, pursuant to the terms of an employment agreement with Peter
Huemiller, the Company committed to grant options to purchase 100,000 shares of
common stock under the 2000 Stock Option Plan after obtaining shareholder
approval. Said options were granted during the six month period ended March 31,
2001 and priced at a fair market value of $2.06 per share at the time of
shareholder approval of said plan and vest on June 1, 2002.
The Company accounts for stock-based compensation for employees under the
"intrinsic value" method. Under this method, no compensation expense is recorded
for these plans and arrangements for current employees whose grants provide for
exercise prices at or above the market price on the date of grant. Compensation
expense for employees is recorded based on intrinsic value (excess of market
price over exercise price on the measurement date). Unearned employee
compensation is amortized over the vesting period and the expense recognized
amounted to $1,887 during the six months ended March 31, 2001.
-6-
The Company accounts for stock-based compensation for non-employees using the
fair value of the option award on the measurement date. Compensation for
non-employee stock options are recorded in the period earned. The fair value of
non-employee stock options earned and recorded during the six months ended March
31, 2001 was $35,225.
In January 2001, a former principle of the Company exercised options to purchase
250,000 shares of the Company's common stock at an exercise price of $0.50.
Note 5. ACQUISITION OF MINDTRONICS CORPORATION
On April 24, 2001, the shareholders of Ubrandit.com approved the proposed merger
of Mindtronics Corporation at the annual meeting of shareholders. On April 30,
2001, the Company completed the closing of the merger transaction contemplated
by that certain Agreement and Plan of Merger dated as of December 4, 2000, as
amended effective as of January 12, 2001, by and among the Company, Ubrandit
Acquisition Corporation and Mindtronics Corporation, pursuant to which
Mindtronics became a wholly-owned subsidiary of the Company, and each
outstanding share of common stock of Mindtronics was converted into the right to
receive approximately 1.1942 shares of the Company's Common Stock.
In connection with the Merger Agreement, the parties executed and delivered a
Loan and Security Agreement and a series of Promissory notes. The Company has
agreed to advance Mindtronics $750,000, secured by a pledge of shares of the
Mindtronics capital stock. The loan bears interest at 8% per annum and is due on
demand. Through March 31, 2001, the Company advanced $779,472 to Mindtronics. In
addition, $11,987 of interest has been accrued as of March 31 2001 with respect
to these notes.
-7-
Item 2. Management's Discussion and Analysis or Plan of Operations.
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Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000
REVENUES. The Company's revenues for the three months ended March 31,
2001 were $398,297 as compared to $84,600 for the quarter ended March 31, 2000,
an increase of $313,697 or 371%. This increase was primarily due to the
contribution of 74% of the second quarter revenues by Clicksmart.com. Inc. that
was acquired in May 2000 and 9% from the ISP division formed in the spring of
2000.
GROSS PROFIT (LOSS). The Company recorded a gross profit of $42,783 for
the quarter ended March 31, 2001 as compared to a gross loss of $157,174 for the
same period in 2000. The increase in gross profit was primarily due to
significant revenues from newly acquired Clicksmart.com, Inc. and
UbranditISP.com, Inc. that carry higher gross margins that offset the losses of
Ubrandit.com.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses increased by 33% to $615,345 for the three months ended
March 31, 2001 from $463,351 for the same period in 2000. The increase was
primarily due to the Company's continued growth and expansion, increased
administrative payroll costs, accounting and legal fees in connection with the
acquisition of Mindtronics Corporation and other public company expenses, and
expenses associated with running the newly formed ISP division.
DEPRECIATION AND AMORTIZATION EXPENSE. For the three months ended March
31, 2001, depreciation and amortization costs were $124,988, as compared to
$74,914 for the same period in 2000. The increase was due to the amortization of
core technology and goodwill recorded from the acquisition of Clicksmart.com,
Inc. and increased depreciation expense from additional property and equipment.
INTEREST INCOME. For the three months ended March 31, 2001, interest
income decreased to $42,819 as compared to the interest income of $61,018 for
the same period in 2001. The decrease in interest income was due to decreased
cash balances in interest earning accounts.
NET LOSS. Net loss for the three months ended March 31, 2001 was
$658,180 or 165% of revenues as compared to $634,768 or approximately 750% for
the same period in 2000. Net loss as a percentage of revenues decreased by 585%
primarily due to significant revenues from Clicksmart.com, Inc. and
UbranditISP.com, Inc. which carry higher gross margins.
Six Months Ended March 31, 2001 Compared to Six Months Ended March 31, 2000
REVENUES. The Company's revenues for the six months ended March 31,
2001 were $870,974 as compared to $117,311 for the quarter ended March 31, 2000,
an increase of $753,663 or 642%. This increase was primarily due to the
contribution of 77% of the six month revenues by Clicksmart.com. Inc. that was
acquired in May 2000 and 9% from the ISP division formed in the spring of 2000.
GROSS PROFIT (LOSS). The Company recorded a gross profit of $79,073 for
the six months ended March 31, 2001 as compared to a gross loss of $292,388 for
the same period in 2000. The increase in gross profit was primarily due to
significant revenues from newly acquired Clicksmart.com, Inc. and
UbranditISP.com, Inc. that carry higher gross margins that offset the losses of
Ubrandit.com.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses increased by 87% to $1,356,435 for the six months ended
March 31, 2001 from $724,819 for the same period in 2000. The increase was
primarily due to the Company's continued growth and expansion, increased
administrative payroll costs, compensation expenses from the issuance of stock
options, accounting and legal fees in connection with the acquisition of
Mindtronics Corporation and other public company expenses, and expenses
associated with running the newly formed ISP division.
-8-
DEPRECIATION AND AMORTIZATION EXPENSE. For the six months ended March
31, 2001, depreciation and amortization costs were $248,453, as compared to
$143,527 for the same period in 2000. The increase was due to the amortization
of core technology and goodwill recorded from the acquisition of Clicksmart.com,
Inc. and increased depreciation expense from additional property and equipment.
INTEREST INCOME. For the six months ended March 31, 2001, interest
income decreased to $83,096 as compared to the interest income of $127,641 for
the same period in 2001. The decrease in interest income was due to decreased
cash balances in interest earning accounts.
NET LOSS. Net loss for the six months ended March 31, 2001 was
$1,449,378 or 166% of revenues as compared to $1,033,823 or approximately 881%
for the same period in 2000. Net loss as a percentage of revenues decreased by
715% primarily due to significant revenues from Clicksmart.com, Inc. and
UbranditISP.com, Inc. which carry higher gross margins.
LIQUIDITY AND CAPITAL RESOURCES AND HISTORICAL RESULTS OF CASH FLOW
HISTORICAL RESULTS OF CASH FLOWS
At March 31, 2001, our cash balance was $1,799,545, compared to
$3,700,864 at September 30, 2000. The $1,901,319 decrease in cash is discussed
below.
Net cash used in operating activities amounted to $1,231,202 for the
six months ended March 31, 2001. This was primarily attributable to the net loss
of $1,449,378, partially offset by non-cash charges related to depreciation and
amortization totaling $248,453 and $37,122 of compensation expense primarily for
prior stock option issuances. Cash decreased by $67,389 as a result of changes
in operating assets and liabilities. Cash used by changes in operating assets
and liabilities is primarily a function of a decrease in accounts payable and a
decrease in prepaid expenses.
Net cash used in investing activities amounted to $785,885 for the six
months ended March 31, 2001. This was primarily attributable to cash advanced
for notes receivable amounting to $779,472 and property and equipment purchases
of $6,413.
Net cash provided by financing activities amounted to $115,768 for the
six months ended March 31, 2001. This was primarily attributable to the proceeds
from the exercise of options for common stock totaling $125,000 and related
party debt totaling $46,145, which was partially offset by repayments of $38,200
and the payments on capital leases totaling $17,177.
GOING CONCERN
The Company has suffered substantial recurring losses from operations,
expects to incur additional losses and, effective April 30, 2001, has acquired a
development stage company, Mindtronics Corporation, which the Company has
advanced $779,472. These factors, among others, raise substantial doubt as to
the Company's ability to continue as a going concern.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2001, our sole source of liquidity consisted of
$1,799,545 of cash. We currently do not have access to any other sources of
funding, including debt and equity financing facilities. As of March 31, 2001,
our principal commitments consisted of our operating obligations and our amount
outstanding under operating and capital leases.
-9-
We believe that current cash will not be sufficient to meet our
anticipated operating cash needs for the next 12 months commencing April 1,
2001. The Company has limited operating capital and no current access to credit
facilities. We estimate that we currently have sufficient funds to continue
operations through August 31, 2001 at currently projected levels of operational
expense. However, we expect that additional funds may be necessary for the
Company to implement its business plan. The Company's continued operations
therefore may depend on its ability to raise additional funds through bank
borrowings or equity or debt financing. There is no assurance that the Company
will be able to obtain the additional funding when needed, or that such funding,
if available, can be obtained on terms acceptable to the Company. If the Company
cannot obtain needed funds, it may be forced to curtail or cease its activities.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
----------------------------------------------------------
The Company does not own financial instruments that are subject to
market risk.
-10-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
None.
Item 2. Changes in Securities and Use of Proceeds.
------------------------------------------
During the three months ended March 31, 2001, a former principle of the
Company exercised options to purchase 250,000 shares of the Company's common
stock at an exercise price of $0.50.
Item 3. Defaults upon Senior Securities.
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
The Company held its annual meeting of stockholders on April 24, 2001.
At the annual meeting, the stockholders approved, among other things, the
election of directors, the ratification of the appointment of the Company's
independent auditors and the acquisition of Mindtronics Corporation.
Item 5. Other Information.
-----------------
Rider.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(1) Exhibits:
Reference is made to the Exhibit Index.
(2) Reports on Form 8-K:
The Company filed a report on Form 8-K on February 16, 2001 to
amend the Agreement and Plan of Merger by and among the
Company, Ubrandit Acquisition Corporation and Mindtronics
Corporation.
The Company filed a report on Form 8-K on March 21, 2001 to
announce the rescheduling of its Annual Meeting of
Stockholders.
-11-
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.
Registrant:
UBRANDIT.COM
Dated: May 14, 2001 By /s/ Roger C. Royce
-------------------------
Roger C. Royce
CEO, Chairman
Dated: May 14, 2001 By /s/ Jeff Phillips
-------------------------
Jeff Phillips
President
-12-
EXHIBIT INDEX
Exhibit No. Description of Exhibits
- ----------- -----------------------
2.1 Agreement and Plan of Reorganization for the Acquisition of all of the
Outstanding Shares of Common Stock of Global Investors Guide by
Ubrandit.com (1)
2.1.1 Agreement and Plan of Merger by and among Ubrandit.com, Inc., Ubrandit
Acquisition Corp. and Mindtronics Corporation dated December 4, 2000.
(7)
3.1 Ubrandit.com Articles of Incorporation and amendments (1)
3.2 Ubrandit.com By-laws (1)
3.3 Registrant's Restated Bylaws (4)
4.1 Specimen of Common Stock Certificate (4)
10.1 1999 Stock Option and Incentive Plan (1)
10.2 Form of Incentive Stock Option Agreement (3)
10.3 Form of Non-Statutory Stock Option Agreement (3)
10.4 Information Distribution Agreement with S&P Comstock dated as of
January 16, 1998 (1)
10.5 Database License Agreement with Baker & Taylor, Inc. dated as of
January 1, 1999 (2)
10.6 Computer Software License Agreement with Townsend Analytics, dated
April 21, 1998 (1)
10.7 License Agreement with Muze Inc. [undated] (1)
10.8 Agreement with Communications Corporations of America, dated April 3,
2000 (5)
10.9 Agreement with White Knight broadcasting, dated April 20, 2000 (5)
10.10 Agreement with Clicksmart.com, Inc., dated effective May 4, 2000 (6)
10.11 Agreement with Citadel Broadcasting Company, dated July 1, 2000 (6)
11.1 Statement of Computation of per share earnings (reference is made to
the Statement of Operations included in the Financial Statements filed
herewith).
21.1 Subsidiary of Registrant Global Investment Guide, Inc. Articles of
Incorporation (1)
21.2 Subsidiary of Registrant Global Investment Guide, Inc. Bylaws (1)
- ------------------
-13-
(1) Previously filed with the Securities and Exchange Commission on the
Company's Registration Statement on Form 10 filed on July 22, 1999.
(2) Previously filed with the Securities and Exchange Commission on
Amendment No. 1 to the Company's Registration Statement on Form 10
filed on October 5, 1999.
(3) Previously filed with the Securities and Exchange Commission on
Amendment No. 4 to the Company's Registration Statement on Form 10
filed on January 5, 2000.
(4) Previously filed with the Securities and Exchange Commission on the
Company's Registration Statement on Form 8-A on February 10, 2000.
(5) Previously filed with the Securities and Exchange Commission on the
Company's Registration Statement on Form 10-Q/A on March 31, 2000.
(6) Previously filed with the Securities and Exchange Commission on the
Company's Registration Statement on Form 10-Q/A filed June 30, 2000.
(7) Previously filed with the Securities and Exchange Commission on the
Company's Current Report on Form 8-K, which was filed on December 5,
2000.
(8) Previously filed with the Securities and Exchange Commission on the
Company's Current Report on Form 8-K, which was filed on February 16,
2001.
(9) Previously filed with the Securities and Exchange Commission on the
Company's Current Report on Form 8-K, which was filed on March 5, 2001.
-14-