SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2001
Commission file number 1-12850
XDOGS, INC.
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Formerly known as XDOGS.COM, INC.
(Exact name of small business issuer as specified in its charter)
126 North Third Street, Suite 407
MINNEAPOLIS, MINNESOTA 55401
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(Address of principal executive offices)
Incorporated under the laws of 84-1168832
the State of Nevada I.R.S. Identification Number
(612) 359-9020
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(Small business issuer's telephone number including area code)
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Indicate by check mark whether the issuer (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 issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No ___
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
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: 5,589,242 shares of Common
Stock, $.01 par value per share, outstanding as of June 30, 2001.
XDOGS, INC.
FORM 10-QSB QUARTERLY REPORT FOR THE QUARTER ENDED
June 30, 2001
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 2001 (unaudited)
Condensed Statements of Operations for the Three Months ended June 30,
2001 and 2000 (unaudited)
Condensed Statements of Shareholder's deficit for the three months
ended June 30, 2001 (unaudited)
Condensed Statements of Cash Flows for the Three Months ended June 30,
2001 and 2000 (unaudited)
Notes to Condensed Financial Statements - June 30, 2001 (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II - Other Information
XDOGS, INC.
INDEX TO CONDENSED FINANCIAL STATEMENTS
Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed balance sheet, June 30, 2001 (unaudited)........................ 3
Condensed statements of operations for the three months
ended June 30, 2001 and 2000 (unaudited)............................ 4
Condensed statement of shareholders' deficit for the three months
ended June 30, 2001 (unaudited)..................................... 5
Condensed statements of cash flows for the three months
ended June 30, 2001 and 2000 (unaudited)............................ 6
Notes to condensed financial statements (unaudited)....................... 7
2
PART I. Item 1. FINANCIAL INFORMATION
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XDOGS, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
June 30, 2001
Assets
Current assets:
Cash...................................................... $ --
Accounts receivable, net of allowance..................... 3,500
Inventory, net of allowance............................... 13,849
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Total current assets 17,349
Property and equipment, net..................................... 50,621
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$ 67,970
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Liabilities and Shareholder's Deficit
Current liabilities:
Accounts payable and accrued liabilities.................. $ 738,471
Note Payable.............................................. 200,000
Notes payable, related party.............................. 691,796
Litigation Liability...................................... 77,355
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Total current liabilities 1,707,622
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Shareholder's deficit:
Preferred stock........................................... --
Common stock.............................................. 55,843
Additional paidin capital................................. 10,027,374
Accrued compensation...................................... 2,400,327
Common stock subscribed................................... 102,302
Accumulated deficit....................................... (14,225,498)
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Total shareholder's deficit (1,639,652)
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$ 67,970
============
See accompanying notes to condensed financial statements
3
XDOGS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,
--------------------------
2001 2000
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Sales and revenues, net........................... $ 11,729 $ 96,511
Cost of sales and revenues ....................... (4,718) (106,162)
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Gross profit 7,011 (9,651)
Operating expenses:
General and administrative ................. 339,519 604,771
Stock based compensation ................... 200,682 --
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Total operating expenses 540,201 604,771
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Loss from operations (533,190) (614,422)
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Interest expense ................................. (33,027) --
Interest income .................................. -- 4,208
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Loss before income taxes (566,217) (610,214)
Provision for income taxes ....................... -- --
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Loss before extraordinary items (566,217) (610,214)
Extraordinary loss on debt retirement ............ (10,000) --
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Net loss $ (576,217) $ (610,214)
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Basic and diluted loss per common share .......... $ (0.12) $ (0.31)
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Basic and diluted weighted average
common shares outstanding .................. 4,860,492 1,962,615
=========== ===========
See accompanying notes to condensed financial statements
4
XDOGS, INC.
CONDENSED STATEMENT OF SHAREHOLDERS' DEFICIT
(unaudited)
April 1, 2001 through June 30, 2001
Preferred Stock Common Stock Additional
----------------------- ---------------------------- Paid-in
Shares Amount Shares Par Value Capital
---------- ---------- ------------ ------------ ------------
Balance, April 1, 2001 ................. $ -- $ -- 4,131,742 $ 41,318 $ 9,442,478
Sale of common stock ($.10 per share) .. -- -- 565,000 5,650 164,350
Common stock subscription .............. -- -- -- -- --
Common stock issued for subscription ... -- -- 200,000 2,000 98,000
Common stock issued for debt ........... -- -- 325,000 3,250 140,046
Common stock issued for services ....... -- -- 372,500 3,725 192,400
Common stock retired ................... -- -- (10,000) (100) (9,900)
Net loss for the three months ended
June 30, 2001 ....................... -- -- -- -- --
---------- ---------- ------------ ------------ ------------
Balance, June 30, 2001 -- $ -- 5,584,242 $ 55,843 $ 10,027,374
========== ========== ============ ============ ============
See accompanying notes to condensed financial statements
5
XDOGS, INC.
CONDENSED STATEMENT OF SHAREHOLDERS' DEFICIT
(unaudited)
April 1, 2001 through June 30, 2001 (Con'T)
Common Stock
Deferred Paid For, But Accumulated
Compensation Not Issued Deficit Total
------------ ------------ ------------ ------------
Balance, April 1, 2001 ................. $ 2,400,327 $ 159,839 $(13,649,281) $ (1,605,319)
Sale of common stock ($.10 per share) .. -- -- -- 170,000
Common stock subscription .............. -- 42,463 -- 42,463
Common stock issued for subscription ... -- (100,000) -- --
Common stock issued for debt ........... -- -- -- 143,296
Common stock issued for services ....... -- -- -- 196,125
Common stock retired ................... -- -- -- (10,000)
Net loss for the three months ended
June 30, 2001 ....................... -- -- (576,217) (576,217)
------------ ------------ ------------ ------------
Balance, June 30, 2001 $ 2,400,327 $ 102,302 $ 14,225,498 $ (1,639,652)
============ ============ ============ ============
See accompanying notes to condensed financial statements
5(Con't)
XDOGS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
June 30,
----------------------
2001 2000
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Cash flows from operating activities:
Net cash used in investing activities (212,463) (550,157)
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Cash flows from investing activities:
Equipment purchases ............................................. -- (12,305)
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Net cash used in investing activities -- (12,305)
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Cash flows from financing activities:
Advance from officer/shareholder ................................ -- 290,000
Proceeds from sale of common stock .............................. 212,463 147,683
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Net cash provided by financing activities 212,463 437,683
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Net change in cash .................................................... -- (124,779)
Cash, beginning of period ............................................. -- 282,795
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Cash, end of period $ -- $ 158,016
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ..................................................... $ -- $ --
========= =========
Income taxes ................................................. $ -- $ --
========= =========
See accompanying notes to condensed financial statements
6
XDOGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
For The Three Month Period Ended June 30, 2001
(Unaudited)
Note 1: Unaudited Financial Information
The unaudited condensed financial statements presented herein have been prepared
by the Company in accordance with the accounting policies in its annual Form
10-KSB report dated March 31, 2001, as amended, and should be read in
conjunction with the notes thereto.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim periods presented have been made. The results
of operations for the three months period ended June 30, 2001 are not
necessarily indicative of the results to be expected for the fiscal year ending
March 31, 2002.
Note 2. Related Party Transactions
During the three months ended June 30, 2001, the Company issued 105,000 shares
of its common stock to two officers and three directors of the Company for
compensation for services provided valued at $72,900.
In addition, the Company issued 240,000 shares to Rock Cliff Development, an
affiliate controlled by a director of the Company, to retire $24,000 of a
$100,000 outstanding note payable. The Company values the stock at $.10 per
share, the private placement price. The Company recorded a loss on retirement of
debt in the amount of $10,000 as a result of the transaction.
Note 3: Financial Statements
Management has elected to omit substantially all footnotes relating to the
condensed financial statements of the Company included in the report. For a
complete set of footnotes, reference is made to the Company's report on Form
10-KSB for the year ended March 31, 2001, as amended, as filed with the
Securities and Exchange Commission and the audited financial statements included
therein.
7
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
References in this document to "us," "we," or "the Company" refer to XDOGS,
Inc., its predecessor, and its subsidiary.
The following information should be read in conjunction with the consolidated
condensed financial statements and the notes thereto included in Item 1 of this
Quarterly Report, and our other filings made with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
As of June 30, 2001, we had limited operations with minimal revenues. Due to
general economic conditions and the ensuing downturn in e-commerce and
internet-based businesses generally, we abandoned our prior business plan to
exploit our exclusive distribution rights via the internet and re-focused our
strategy and adopted a traditional wholesale to retail sales distribution model
which we have been implementing since August, 2000.
We currently have no significant orders pending.
As of June 30, 2001, we had current assets of $17,349 and total assets of
$67,970. As of June 30, 2001, we had current liabilities of $1,707,622.
For the three months ended June 30, 2001, we had $11,729 in revenues and $4,718
in cost of goods sold. We had a total net loss of $576,217, which was a net loss
of $0.12 per share. This compares with $96,511 in revenues and $106,162 in cost
of goods sold for the three months ended June 30, 2000 and a total net loss of
$610,214, or a net loss of $0.06 per share.
Our plan for the fiscal year ended March 31, 2002 is to continue our development
into a traditional wholesale to retail seller of specialty action sports hard
goods and related apparel. While we anticipate generating some minimal revenues
during the fiscal year ended March 31, 2002, we do not expect to be profitable
during this period. We are also looking for a significant partner to either
enter into a joint venture, merge into us or to acquire us. No material
discussions have occurred to date.
LIQUIDITY AND CAPITAL RESOURCES
Our cash and cash equivalents were $-0- on June 30, 2001, compared to $158,016
on June 30, 2000. For the three months ended June 30, 2001, there was no net
change to our cash.
During the three months ended June 30, 2001, we used $212,463 for general
working capital. During the three months ended June 30, 2000, we used $12,305 in
investing activities, which consisted of the purchase of equipment
Financing activities generated $212,463 from advances by shareholders and from
the sale of common stock for the fiscal quarter ended June 30, 2001, as compared
generating $437,683 from similar sources in the same period in 2000.
8
Since August 2000, we had been developing our business plan to reflect the
changing environment of retail and wholesale sales. We intended to raise
additional capital during fiscal year 2001, but were unable to locate additional
funding. Our ability to continue operations is highly dependent upon our ability
to obtain immediate additional financing, generate revenues from operations, and
align ourself with a third party through a joint venture, merger or other
extraordinary transaction, none of which can be guaranteed. Our current cash and
cash equivalents are not sufficient to meet our business plan objectives. Unless
additional funding is located, it is highly unlikely that we can continue to
operate. Ultimately, our success is dependent upon our ability to generate
revenues from operations and to achieve profitability which is dependent upon a
number of factors including acceptance in the U.S. of European products and an
increase in consumer spending for non-essential goods. There is no assurance
that even with adequate financing, we will generate revenues and be profitable.
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FORM 10-QSB ARE MADE PURSUANT TO
THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. CERTAIN
IMPORTANT FACTORS COULD CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE
ANTICIPATED BY SOME STATEMENTS MADE IN THIS FORM 10-QSB. AMONG THE FACTORS THAT
COULD CAUSE RESULTS TO DIFFER MATERIALLY ARE THE FOLLOWING: LACK OF AVAILABILITY
OF FINANCING; INABILITY TO CONTROL COSTS OR EXPENSES; AND LACK OF MARKET
ACCEPTANCE OF THE COMPANY'S PRODUCTS; A SLOWING ECONOMY; INABILITY TO GENERATE
REVENUES.
PART II - OTHER INFORMATION
ITEM 1.- LEGAL PROCEEDINGS
Mr. Henry Furst filed a complaint against us in the U.S. District Court for the
District of Minnesota, alleging that the Company breached its contractual
obligations to him and seeking $144,000 in damages. The parties subsequently
negotiated a settlement whereby the Company agreed to pay Mr. Furst $94,000 in
installments and executed a confession of judgment in favor of Mr. Furst for
that amount. The Company has failed to pay Mr. Furst in accordance with the
settlement agreement.
Millennium Holdings Group, Inc. filed a complaint against us in the State Court
of Palm Beach County, Florida alleging breach of contract, slander and lost
opportunity damages arising out of a contract dispute. The Company has filed a
motion to dismiss the action for lack of jurisdiction, which is currently
pending. The Company intends to vigorously defend against this matter.
On or about March 14, 2000, the Company's former adviser consultant, Stephen
Carlson, loaned the Company $100,000. We executed a note in favor of Mr.Carlson
which required payment in full on December 31, 2000. We are in default and Mr.
Carlson on March 9, 2001, initiated a legal action against us in the District
Court of Hennepin County to collect the loan. We also granted to Mr. Carlson
options to purchase 60,000 shares of Common Stock, all of which are not-in-the
money.
On November 29, 2000, Berghaus Ltd., informed the Company it would continue its
distribution upon payment of $120,000 in three installments with the first
installment due March 1, 2001. The Company has not made the first payment and we
no longer sell Berghaus products.
9
Otherwise as of March 31, 2001, neither we, nor any of our officers or
directors, in their capacities as such were the subject of any material, pending
or threatened legal proceeding, and Management is not aware of any contemplated
action against us or such officers or directors.
ITEM 2.- CHANGES IN SECURITIES.
a. None
b. None
c. None
d. None
ITEM 3.- DEFAULTS ON 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.
Exhibits - See attached Exhibit List.
No reports on Form 8-K were filed during the fiscal quarter ended June 30,
2001.
SIGNATURE
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.
XDOGS, INC.
Dated: November 13, 2001
/s/ Kent Rodriguez
----------------------------------------------------
Kent Rodriguez, President and Chief Executive Officer
(Principal Executive Officer)
10
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
XDOGS, INC.
EXHIBIT INDEX TO FORM 10-QSB
For the fiscal quarter ended June 30, 2001
Commission File Number 1-12850
Exhibit Description Page Number
- ------- ----------- -----------
3.1 Restated Articles of Incorporation (Incorporated by *
reference to Exhibit 3.1 to Registration Statement on
Form SB-2, Registration No. 33-74240C).
3.2 Restated Bylaws (Incorporated by reference to Exhibit 3.2 *
to Registration Statement on Form SB-2, Registration No.
33-74240C).
3.3 Articles of Incorporation for the State of Nevada. *
(Incorporated by reference to Exhibit 2.2 to Form 10-KSB
filed February 2000)
3.4 Articles of Merger for the Colorado Corporation and the *
Nevada Corporation (Incorporated by reference to Exhibit
3.4 to Exhibit 3.4 to Form 10-KSB filed February 2000)
3.5 Bylaws of the Nevada Corporation (Incorporated by *
reference to Exhibit 3.5 to Form 10-KSB filed February
2000)
4.1 Specimen of Common Stock (Incorporated by reference to *
Exhibit 4.1 to Registration Statement on Form SB-2,
Registration No. 33-74240C).
10.1 Contract of Sale between Hannes Jacob and Allrounder Idea *
Realization, S.A. and Snow Runner (Properties) Inc. dated
September 3, 1993 (Incorporated by reference to Exhibit
10.1 to Registration Statement on Form SB-2, Registration
No. 33-74240C).
10.2 License Agreement between Snow Runner (Properties) Inc. *
and Snow Runner (USA) Inc. effective September 3, 1993
(Incorporated by reference to Exhibit 10.10 to
Registration Statement on Form SB-2, Registration No.
33-74240C).
10.3 License Agreement between Hannes Jacob and Allrounder *
Realization SA and Snow Runner (USA) Inc. dated June 26,
1992 (Incorporated by reference to Exhibit 10.11 to
Registration Statement on Form SB-2, Registration No.
33-74240C).
10.4 Amended and Restated Distribution Agreement between Snow *
Runner (USA) Inc. and DalBello Sport S.R.L. dated June
26, 1992 (Incorporated by reference to Exhibit 10.12 to
Registration Statement on Form SB-2, Registration No.
33-74240C). Registration No. 33-74240C).
10.5 Reorganization Agreement by and among Snow Runner (USA) *
Ltd., Snow Runner Holdings, Inc., Nigel Alexander,
Steven Clarke and Harbour Settlement dated July 23, 1992
(Incorporated by reference to Exhibit 10.19 to
Registration Statement on Form SB-2, Registration No.
33-74240C).
10.6 Credit and Security Agreement dated June 30,1995 between *
the Company and Norwest Credit, Inc.
10.7 Revolving Note for $2,000,000 dated June 30, 1995 between *
the Company and Norwest Credit, Inc.
10.8 Patent and Trademark Security Agreement dated June 30, *
1995 between the Company and Norwest Credit, Inc.
10.9 Agreement with Berghaus Limited dated (Incorporated by *
reference to Exhibit 10.42 to Form 10-KSB filed February
2000)
10.10 Agreement with Oxbow, S.A. dated January 24, 2000 *
(Incorporated by reference to Exhibit 10.43 to Form 10-KSB
filed July 13, 2000).
10.11 Agreement with Gaastra International Sportswear, B.V. *
(Incorporated by reference to Exhibit 10.43 to Form 10KSB
filed July 13, 2000).
10.12 Incentive Compensation and Employment Agreement for Kent *
A. Rodriguez (Incorporated by reference to Exhibit 10.12 to
Form 10-KSB/A filed August 20, 2001).
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* Incorporated by reference to a previously filed exhibit or report.