SHOWSTAR ONLINE.COM INC.
Filing Type: 10QSB
Description: Quarterly Report
Filing Date: March 26, 2001
Period End: January 31, 2001
Primary Exchange: Over the Counter Includes OTC and OTCBB
Ticker: ABID
Table of Contents
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10QSB
PART I
Item 1
Balance Sheet
Income Statement
Cash Flow Statement
ITEM 2
PART II
Item 6
EX-27
Exhibit 27 Table
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 31 January, 2001
[ ] Transition report under Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the transition period from to
----------------- ----------------------
Commission file number: 000-28915
SHOWSTAR ONLINE.COM INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Washington 13-4093341
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5407 108 Ave. NE, Kirkland, Washington, 98033
(Address of Principal Executive Offices)
(888) 616-9333
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year
if Changed Since Last Report)
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
------ ------
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Number of Shares Outstanding
----- ----------------------------
Common Stock, par value $0.0 46,876,913
Transitional Small Business Disclosure Format (check one):
Yes No X
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SHOWSTAR ONLINE.COM INC.
QUARTERLY REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE QUARTER ENDED
January 31, 2001
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheet as of January 31, 2001
Unaudited Condensed Consolidated Statement of Operations for the nine months
ended January 31, 2001 and 2000 and the three months ended January 31, 2001
and 2000
Unaudited Condensed Consolidated Statement of Cash Flows for the nine months
ended January 31, 2001 and 2000 and the three months ended January 31, 2001
and 2000
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE PAGE
EXHIBIT INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SHOWSTAR ONLINE.COM INC.
------------------------
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
January 31, 2001
ASSETS
CURRENT ASSETS
Cash $ -
Accounts receivable 128,927
GST receivable 28,167
Inventory 26,838
Prepaid expenses 28,599
Prepaid royalties 50,000
------------
TOTAL CURRENT ASSETS 262,531
INVESTMENTS, AT COST 304,230
PROPERTY & EQUIPMENT, less $265,011
accumulated depreciation 436,865
WEBSITE & SOFTWARE less $483,758
accumulated amortization 931,122
INTANGIBLE ASSETS, less $47,953
accumulated amortization 262,922
------------
$ 2,197,670
============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable, trade $ 677,482
Accrued expenses 155,988
Accrued stock compensation 470,275
Loan payable 977,300
Accrued interest payable 19,125
Due to related party 48,384
Advances payable 100,000
------------
TOTAL CURRENT LIABILTIES 2,448,554
============
COMMITMENTS -
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, no par value, 25,000,000 shares
authorized, -0- issued and outstanding -
Common stock, no par value, 75,000,000 shares
authorized, 46,876,913 issued and outstanding 12,356,388
Contributed capital 74,000
Outstanding common stock warrants 354,576
Outstanding common stock options 349,535
Deferred stock compensation (18,667)
Cumulative translation adjustments (49,880)
Deficit accumulated during the development stage (13,316,836)
============
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (250,884)
------------
$ 2,197,670
============
SHOWSTAR ONLINE.COM INC.
------------------------
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
July 14, 1995
Nine Months Ended Three Months Ended (inception)
January 31, January 31, through
2001 2000 2001 2000 January 21, 2001
------------------------------------------------------------------------
REVENUE
Sales $ 459,557 $ 5,950 $ 198,180 $ 5,950 $ 464,907
Commissions 10,335 10,778 5,153 10,778 36,878
------------------------------------------------------------------------
TOTAL REVENUE 469,892 16,728 203,333 16,728 501,785
COST AND EXPENSES
Cost of sales 310,203 3,520 148,274 3,520 313,723
Stock based compensation 287,601 1,820,633 84,000 197,500 3,565,476
Consulting 387,573 634,651 70,413 316,309 1,638,311
Investor relations, related party - - - - 107,067
Investor relations 23,559 100,624 1,078 52,937 249,790
Web-site set up 63,410 80,520 14,754 45,285 298,591
Professional fees 90,969 194,297 33,280 140,321 477,830
Consulting fees paid by shareholders - - - - 466,500
Travel and entertainment 68,060 171,159 9,223 52,095 385,044
Depreciation and amortization 520,955 166,347 178,201 97,963 866,062
General and administration 955,198 955,326 168,493 297,362 2,103,655
Advertising, marketing and selling 330,709 1,236,470 51,549 988,832 1,792,936
Technical development - 134,341 - 51 31,021
------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES (3,038,237) (5,497,888) (759,265) (2,192,175) (12,296,006)
INTEREST EXPENSE (59,393) (4,000) (2,751) - (119,676)
------------------------------------------------------------------------
LOSS FROM CONTINUING OPERATIONS
BEFORE TAXES (2,627,738) (5,485,160) (558,683) (2,175,447) (11,913,897)
INCOME TAXES
Current 980,146 2,045,965 208,389 791,442 4,419,889
Deferred (980,146) (2,045,965) (208,389) (791,442) (4,419,889)
------------------------------------------------------------------------
NET LOSS FROM CONTINUING OPERATIONS (2,627,738) (5,485,160) (558,683) (2,175,447) (11,913,897)
DISCONTINUED OPERATIONS
Net loss from entertainment division
operations, net of $-0-, and $-0-
in income taxes - (66,091) - (15,323) (425,639)
Loss on disposal of entertainment division,
net of $-0-, $-0-, and $-0- in income taxes - - - - (977,300)
------------------------------------------------------------------------
NET LOSS $(2,627,738) $(5,551,251) $ (558,683) $(2,190,770) $(13,316,836)
========================================================================
NET LOSS PER COMMON SHARE:
Basic - continuing operations $ (0.06) $ (0.22) $ (0.01) $ (0.09) $ (0.25)
Diluted - continuing operations $ (0.06) $ (0.22) $ (0.01) $ (0.09) $ (0.25)
Basic - discontinued operations $ * * $ * $ * $ *
Diluted - discontinued operations $ * * $ * $ * $ *
NUMBER OF SHARES USED FOR COMPUTING NET LOSS PER SHARE:
Basic 46,876,913 25,442,258 46,876,913 25,442,258 46,876,913
Diluted 46,876,913 25,442,258 46,876,913 25,442,258 46,876,913
*Less than $.01 per share
SHOWSTAR ONLINE.COM INC.
------------------------
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
July 14, 1995
Nine Months Ended Three Months Ended (inception)
January 31, January 31, through
2001 2000 2001 2000 January 21, 2001
------------------------------------------------------------------------
NET CASH (USED IN) OPERATING ACTIVITIES (1,755,100) (3,509,257) (237,162) (1,847,106) (6,926,610)
---------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sale of equipment - - - - 10,000
Investment in joint venture and savings plus (37,680) (25,000) - (25,000) (303,776)
Cash acquired with acquisition on Showstar/
Nucom - - - - 20,815
Purchases of property and equipment and
domain name (823,004) (1,207,979) (94,277) (351,153) (2,468,380)
--------------------------------------------------------- ------------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (860,684) (1,232,979) (94,277) (376,153) (2,741,341)
--------------------------------------------------------- ------------
FINANCING ACTIVITIES
Proceeds from advances, related parties (466,500) - - - (104,900)
Proceeds from advances 727,300 335,300 250,000 335,300 1,079,800
Repayments of advances, related parties - - - - (5,000)
Cash paid for stock offering costs (308,665) (97,000) - (50,000) (517,665)
Proceeds from issuance of preferred stock - - - - 3,500
Proceeds from issuance of common stock 2,672,508 5,061,500 84,468 1,500,000 9,209,596
Proceeds from issuance of convertible
debenture - - - - 52,500
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NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,624,643 5,299,800 334,468 1,785,300 9,717,831
--------------------------------------------------------- ------------
CUMULATIVE TRANSLATION ADJUSTMENT (8,859) (700) (3,029) (700) (49,880)
--------------------------------------------------------- ------------
NET CHANGE IN CASH - 556,864 - (438,659) -
========================================================= ============
Cash, beginning of period - 15,737 - 1,011,260 -
--------------------------------------------------------- ------------
CASH END OF PERIOD $ - $ 572,601 $ - $ 572,601 -
========================================================= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ - $ - $ - $ - $ 5,000
========================================================= ============
Cash paid for income taxes $ - $ - $ - $ - $ -
========================================================= ============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
3,367,000 shares of common stock issued
for acquisition of subsidiary $ - $ - $ - $ - $ 3,367
========================================================= ============
999,066 shares of common stock issued
for acquisition of subsidiary $ - $ - $ - $ - $ 749,300
========================================================= ============
517,143 shares of common stock issued for
payment of advances and accrued
liabilities $ - $ 265,000 $ - $ 158,000 $ 265,000
========================================================= ============
2,890,000 shares of common stock issued for
compensation $ - $ 1,427,300 $ - $ 62,500 $ 1,427,300
========================================================= ============
1,050,000 shares of commons stock issued for
payment of accrued stock compensation $ - $ 517,500 $ - $ - $ 517,500
========================================================= ============
350,000 shares of common stock issued for
acquisition of ALS $ 328,125 $ - $ - $ - $ 328,125
========================================================= ============
SHOWSTAR ONLINE.COM, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
January 31, 2001
NOTE A: The accompanying unaudited consolidated financial statements of
Showstar Online.com Inc. as of and for the nine months ended January 31, 2001
and January 31, 2000 have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission and 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 considered necessary for a fair
presentation of the results of the interim period have been included. Operating
results for any interim period are not necessarily indicative of the results
that may be expected for the entire fiscal year. These statements should be read
in conjunction with the financial statements and notes thereto for the year
ended April 30, 2000 included in the Company's report in Form 10KSB as filed
with the Securities and Exchange Commission.
NOTE B On May 1, 2000 the Company acquired the assets and current liabilities
of ALS Sportswear for the purchase price of 350,000 shares of common stock. The
shares have been valued at the market price on May 1, 2000 of $0.93 per share
for a value of $328,125. The excess of the purchase price over the fair market
value of the items received was $305,275 and has been recorded as Goodwill on
the financial statements of the Company. Management plans to amortize the
goodwill on a straight line basis over sixty months.
NOTE C: During the quarter, the company issued the following shares:
Date: Number Consideration
----- ------ -------------
August 4, 2000 542,829 $84,468
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
This report contains forward-looking statements within the meaning of Section21E
of the Securities Exchange Act of 1934, as amended and Section 27A of the
Securities Act of 1933, as amended. For this purpose, any statements contained
herein that are not statements of historical fact may be deemed forward-looking
statements. Without limiting the foregoing, the words "believes", "anticipates",
"plans", "expects" and similar expressions are intended to identify
forward-looking statements. Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. These forward-looking statements should be read in
conjunction with the Company's disclosures included in their Form 10-KSB for the
fiscal year ended April 30, 2000.
Overview
Showstar Online.com, Inc. (the "Company", "Showstar" and sometimes "we,"
"us," "our" and derivatives of such words), formerly named Showstar
Entertainment Corporation, was incorporated on July 14, 1995 in the State of
Colorado as Cerotex Holdings, Inc. The Company commenced business as a developer
of computer-based management systems and continued operations on a limited basis
until March 18, 1998.
On March 19, 1998, Barry Forward and Gino Punzo gained control of the
Company through a cash purchase of Common Stock from founding stockholders. On
April 23, 1998, the Company effected an agreement with all the stockholders of
Showstar Entertainment Corporation (formerly Nucom Productions, Inc.), a Nevada
Corporation ("Showstar/Nucom"), whereby the Company issued 3,367,000 shares of
its no par Common Stock in exchange for 77% of the outstanding common stock of
Showstar/Nucom.
In May 1998 the Company changed its name to Showstar Entertainment
Corporation, assuming the name of its majority-owned subsidiary. Effective
August 25, 1998, the remaining 23% of Showstar/Nucom was acquired through
issuance of 999,066 shares of the Company's Common Stock.
On June 18, 1999, the stockholders of the Company approved a change in
corporate name to Showstar Online.com, Inc., which became effective on June 25,
1999.
From April 1998 to February 1999, Showstar engaged in merchandising and
event promotion in secondary markets in the Western United States and Canada.
These operations were discontinued in February 1999.
In April, 1999 Showstar Online.com, Inc. became a developer of Internet
websites and e-commerce solutions. One of Showstar's e-commerce solutions is the
integration of ORACLE iStore 3.0 to offer an e-commerce solution for Artstar.com
customers.
Showstar established a unique and scalable e-commerce infrastructure by
developing and integrating several leading edge technologies, including the
incorporation of ORACLE database tools, Cold Fusion, Macromedia Flash and
LIVEPICTURE into Artstar.com. This also included the customized development of
Artstar.com's art search engine accessing the ORACLE database.
Showstar's development of its website property "Artstar.com" commenced in
May 1999. Showstar launched e-commerce and retail activities on the website in
December 1999.
Through the website, Showstar offered a variety of products and services
under the domain name "Artstar.com." These are designed to attract viewer
traffic to the site and to generate revenue for Showstar. The products and
services offered included auctions, authentication and appraisal consulting,
buyer (corporate and individual) representation, and education in art,
collectibles and restoration.
Via the Internet, Showstar provided a variety of entertainment and
education products and services to those interested in art and collectibles.
Showstar's revenues were to be derived from a variety of sources, including
online auctions, appraisals and authentication, commissions, advertising,
content licensing, various consulting services, and merchandising. Showstar
does not buy and sell art work or collectibles for its own account.
In March 2000 Showstar introduced its first portal development product
Showstar Webmail. Showstar WebMail was designed as a software solution for web
portals and isused in a customized form on the company's website Artstar.com.
Showstar then began marketing its webmail product to third-party websites.
GENERAL
During the first quarter the Company continued to develop the Artstar Web-site
through increasing functionality and finding saleable content. We actively
pursued affiliate relationships with other sites and were pleased with the
increasing traffic and sales resulting from visitors from those sites. In
addition, we extended e-commerce capability to offshore markets and have
received and processed orders from Indonesia, England and Europe. The webmail
group continued to refine and enhance the capabilities of their product.
In May of 2000 Showstar acquired the assets of ALS Sportswear and began
operating this division with the previous owners in place. This division
supplies products to a variety of corporate clients and sports teams as well as
being able to service galleries and museums with product for their gift shops.
During the second quarter the Company held it's annual general meeting on Sept.
15, 2000 with the ratification of all items put forward to the shareholders.
The details of all the items can be obtained from the proxy statement filed with
the SEC. The Company also began a major facelift of the Artstar website to
create a true art portal. The project was completed mid November and the
channel concept was launched in November creating three distinct channels to
service the public, artists and their needs, and the business community with B2B
solutions. Management felt the concept would increase and speed up the site's
revenue generation capability as raising funds in the equity markets was
becoming .increasingly more difficult.
During the third quarter the Company began to experience a severe lack of
support and interest from the equity markets due to "dot com" companies.
Management had to make a number of decisions and take action to reduce operating
costs. These actions included discontinuing the operation of the New York head
office and moving the functions back to Kirkland, Washington and Vancouver, B.C.
In addition, Showstar ended merger discussions with Deerbrook Publishing Group,
Inc. The Company then proceeded to assess the operation of the Artstar website
and the decision was made to stop any new development on the Artstar website
resulting in the layoff of the majority of technical staff and site operation
staff. For the time being the site remains active with B2C service only while
management looks for a merger or acquisitionWith the reduced staff and looking
for other reductions in operating costs, the company moved the administration
and technical development office from Richmond, B.C. to more modest facilities
in Vancouver, B.C.
We are continuing development and enhancement of Showstar WebMail adding
functionality that does not exist in other e-mail products. The Webmail product
has now been sold to four outside portal sites and a marketing plan is being
developed to increase sales of the product. Our Linux based software
development team is always looking for opportunities to develop additional
products for third party customers.
With equity markets demanding revenue and earnings, Management started to focus
on finding opportunities to strengthen the company through acquisition such as
the ALS purchase and partnering with brick and mortar businesses.
In February, the Company was able to announce that it had signed a binding
letter of agreement with Redmond Capital Corp to acquire 100 % of two of
Redmond's divisions, namely Redcell Batteries Inc. and Sirius Animation Inc.
Redcell Batteries Inc is marketing a new line of alkaline batteries in the US
and has marketing ties to NASCAR. Sirius Animation Inc. has developed an
animated children series for TV and is presently marketing the product to the
various networks. The acquisition, projected to be completed by our fiscal year
end, will bring immediate additional revenues and earnings to Showstar's
operations.
As part of the transaction, Showstar will do a reverse split of it's stock on an
8 old for 1 new basis binging the outstanding shares of ABID to approximately 7
million shares. Showstar and Redmond will then enter into a share exchange
transaction in which 100 % of the shares of Redmond's two divisions will be
exchanged for approximately 17 million shares of Showstar.
The above described acquisition and share structure are subject to Showstar
shareholder approval.
Upon completion of the acquisition, the Company may consider changing it's name
and symbol to reflect the make-up and character of the new entity. In addition,
the merged company will have a new management group and Board of Directors to be
decided on as part of the transition process.
Results of Operations
Sales and Cost of sales
Sales at $469,892 for the nine months ending January 31,2001 and sales of
$203,333 for the quarter ending January 31, 2001 are higher than last year as
the company during most of 1999 was developing the web site and had no other
active business happening at that time. The website was officially launched
with e-commerce capability in December of 1999. Cost of sales at $310,203 and
$3,520 respectively are higher for the same reasons already mentioned for sales.
The results reflect the continuing e-commerce development on the Artstar site
and the ramp up of the ALS operation.
Selling, General and Administrative Costs
Selling, General and Administrative Costs ("SGA") of $1,285,907 and $220,042
were recorded for the respective periods ending January 31, 2001 compared to
$2,191,796 and $1,85684 for the periods ending in 2000 reflecting the company
being in the start-up stages of the web development last year with a large
expenditure in advertising for the launchThe lower third quarter expense in 2001
reflects cost cutting measures as discussed in the above comments. SGA include
salaries and benefits for corporate management, administrative and sales
personnel, as well as rent expense for the Company's office premises.
Other Costs
Other costs are lower by $1,498,369 and $364,007 reflecting the change in the
operations year over year especially in terms of stock based compensation not
required to the same level this year as last year during the building of the
infrastructure needed to develop the web-site and operate the company.
Net Loss
As a result of the foregoing, the Company experienced net losses for the periods
ending January 31, 2001 of $2,627,738 and $558,683, as compared to net losses of
$5,551,251 and $2,190,772 for the comparable period in 2000. The company is
still effectively in it's development stage and will rely on outside funding
during at least the current year and possibly beyond to cover operating losses.
Liquidity and Capital Resources
The principal source of funds to the Company since it's formation has been
derived from the net proceeds of certain private offerings of securities which
have been used to fund continued development, selling, general and
administrative costs. The Company believes that additional financing for the
next twelve months will continue to be required to continue development of the
Artstar web-site, linux based software and the expansion of the ALS operation.
The company has been successful in raising funds in the past and expects to be
able to do so in the future until such time as revenues and earnings provide
adequate cash flows.
FOREIGN CURRENCY EXPOSURE
Showstar is exposed to fluctuations in foreign currencies relative to the
U.S. dollar because it collects revenues in U.S. dollars and incurs certain
costs in foreign currencies, primarily the Canadian dollar. As Showstar expands
its operations, it may begin to collect revenues from customers in currencies
other than the U.S. dollar. Showstar does not currently engage in any hedging
activities.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company has been named as a defendant in a lawsuit filed against
Savingsplus Internet Inc. by a director of Savingsplus for failure to
repay a $35,000 loan to the director's company. Showstar has retained
counsel, filed a reply to the suit and are waiting for further action
by the plaintiff.
No further action was taken by either side during this quarter.
Item 6. Exhibit and Reports on Form 8-K
(a) See Exhibit Index
(b) Reports on Form 8-K
Current Report on Form 8-K dated October 11, 2000
Item 5. Other Events
Announcement of the completion of a private placement of restricted
Common Stock, no par value , at $0.12 per share pursuant to Rule 506 of
regulation D under the U. S. Securities Act of 1933, as amended (the
"Securities Act").
No financial statements were filed with the Form 8-K.
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.
SHOWSTAR ONLINE.COM INC.
Dated: March 25, 2001 By: /s/ J. Punzo
-------------------------------
J. Punzo
President, and Chief Executive Officer
EXHIBIT INDEX
Exhibit No. Description
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27.1 Financial Data Schedule