UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 June 30, 2000
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ____ to ____ .
FREESOFTWARECLUB.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 88-0414076
(State or Other Jurisdiction of (Employer Identification Incorporation or
Organization) Number)
600 Bancroft Way
Berkeley, CA 94710
(Address of Principal Executive Offices and Zip Code)
(510) 649-4922
(Registrants telephone number)
Former name, former address and former fiscal year, if changed since last
report: No changes.
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.001 per share
Indicate by mark (X) 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 the past 90 days YES |X| NO |_|
Number of shares outstanding of each of the registrant's classes of common
stock as of August 18, 2000: Common Stock: 16,947,500.
FREESOFTWARECLUB.COM, INC.
Table of Contents
PART I
ITEM 1. Financial Statements
Condensed Balance Sheet as of June 30, 2000
Condensed Statements of Operations for the
Three Months Ended June 30, 2000 and April 15, 1999
(inception) to June 30, 1999 and from April 15, 1999
(inception) to June 30, 2000
Condensed Statements of Cash Flows for the Three Months
Ended June 30, 2000, and from April 15, 1999 (inception)
To June 30, 1999 and from April 15, 1999 (inception)
To June 30, 2000
Notes to Condensed Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial Condition and Plan
of Operations
PART II
ITEM 6. Exhibits and Reports on Form 8-K
Signatures
PART I
ITEM 1: FINANCIAL STATEMENTS
FreeSoftwareClub.com, Inc.
(a development stage company)
BALANCE SHEET
ASSETS
June 30,
2000
(unaudited)
----------
CURRENT ASSETS
Cash $ 280,907
Accounts receivable 6,690
Inventory 18,901
Prepaid expenses 16,770
---------
Total current assets 323,268
-----------
$ 323,268
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 208,208
----------
Total current liabilities 208,208
==========
COMMITMENTS AND CONTIGENCIES
STOCKHOLDERS' EQUITY
Common stock,$001 par value
authorized 100,000,000 shares;
16,947,500 issued and outstanding 16,948
Additional paid-in-capital 826,058
Deficit accumulated during
development stage <727,946>
--------
Total stockholders' equity 115,060
-------
$ 323,268
==========
FreeSoftwareClub.com, Inc.
(a development stage company)
STATEMENTS OF OPERATIONS
(unaudited)
April 15, 1999 April 15, 1999
Three months (date of inception) (date of inception)
ended June 30, to June 30, to June 30,
2000 1999 2000
----------- ------------ ------------
Operating expenses
Website development $ 64,000 $ 27,500 $ 295,000
General &
administrative 381,865 6,558 432,146
Total Operating
expenses 445,865 34,058 727,146
--------- -------- ---------
Loss from
operations <445,865> <34,058> <727,146>
Provision for
income taxes -- -- 800
NET LOSS $<445,865> $<34,058> $<727,946>
========= ========= =========
Net loss per
basic and
diluted share $ <0.03> $ <0.00> $ <0.04>
========= ========= =========
Weighted Average
basic and diluted
shares outstanding 16,947,500 16,447,500 16,558,360
========== ========== ==========
FreeSoftwareClub.com, Inc.
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
April 15, 1999 April 15, 1999
Three months (date of inception) (date of inception)
ended June 30, to June 30, to June 30,
2000 1999 2000
----------- ------------ ------------
Net cash used in
Operating
activities $ <249,395> $ <33,518> $ <556,351>
Cash flows financing
activities:
Proceeds from issuance
of common stock -- 124,758 737,258
Proceeds from issuance
of note payable -- -- 100,000
-------- -------- --------
Net cash provided by
financing activities -- 124,758 837,258
-------- -------- --------
NET INCREASE (DECREASE)
IN CASH <249,395> 91,240 280,907
Cash at beginning
of period 530,302 -- --
-------- -------- --------
Cash at end of period $ 280,907 $ 91,240 $ 280,907
========== ======== =========
NonCash Financing Activities: In March 2000, a note payable in the amount of
$100,000 was converted into 66,667 shares of common stock.
Freesoftwareclub.com, Inc.
Notes to Condensed Financial Statements
June 30, 2000
(Unaudited)
Basis of Presentation
The accompanying condensed financial statements of Freesoftwareclub.com, Inc.
(the "Company") as of June 30, 2000, for the three months June 30, 2000,and
from April 15, 1999 (date of inception) to June 30, 1999 and for the period
from April 15, 1999 (date of inception) to June 30, 2000, have been prepared
on the same basis as the annual audited financial statements. In the opinion
of management, such unaudited information includes all necessary adjustments
for a fair presentation of this interim information. Operating results and
cash flows for interim periods are not necessarily indicative of results for
the entire year. The information included in this report should be read in
conjunction with our audited financial statements and notes thereto included
in our Annual Report on Form 10-KSB for the year ended March 31, 2000.
Net Loss Per Share
Net loss per share is calculated by dividing net loss for the period by the
average numbers of common shares outstanding for the period. The Company
does not have any potentially dilutive securities outstanding which might be
considered dilutive for the purpose of calculating diluted loss per share.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN
OF OPERATIONS
Overview
Quarter ended June 30, 2000 focused primarily on continuing activities to
develop and expand Company product offerings. There have been no operating
revenues since inception.
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES SUCH AS THE DEPENDENCE OF THE COMPANY ON AND THE ADEQUACY OF
CASH FLOWS. THESE FORWARD-LOOKING STATEMENTS AND OTHER STATEMENTS MADE
ELSEWHERE IN THIS REPORT ARE MADE IN RELIANCE ON THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995.
Plan of Operations
The Company's continued plan of operation will revolve around a large
Affiliate Program and related opt-ins, buy-ins, contests, giveaways,
quizzes, surveys etc. There are several models in use for Affiliate
marketing. The Company plans on utilizing three of them: "The
Storefront", "Two-Tier" and "Viral Marketing".
The Storefront: For all of the merits of the original affiliate model,
there were drawbacks for the affiliates - the web site visitor would
leave the affiliate site to complete the transaction. The storefront
model changed all of that, because the model keeps the site visitor on
the site.
Two-Tier: Affiliate marketing has the potential to be even more
effective when the two-tier model is applied to a program. This model
allows affiliates to sign up additional affiliates below themselves, so
that when the second tier affiliates earn a commission, the affiliate
above them also receives a commission.
Viral Marketing: Every time a company sends out e-mail, it could be
tallying up an ad impression. This is the premise of the viral
marketing affiliate programs. Essentially, the footer of the e-mail is
fertile ground for recommending purchases to your friends and
associates.
It is the Company's intention to parlay all of these ideas into a super
affiliate program, which will translate into a revenue stream.
Co-Marketing Relationships
The Company Management staff has developed a network of companies ready
to assist in cross promotion and co-marketing relationships. This kind
of relationship reduces the overall capital outlay because we can
exchange like promotional opportunities. In other words, they'll
promote the Company on their site, if the Company promotes their
products on the Freesoftwareclub.com web site.
Companies that Freesoftwareclub.com has negotiated these arrangements
include:
Online Direct - Community Sites with vertically oriented product
catalogs on each site
Visiosonic - Top MP3 site promoting music and MP3 Software
EMJ DataSystems - Canadian Distributor of Computer Products
Web3000 - Sponsored software provider
L90 - Internet advertising network
Iboost - Internet advertising network
Direct Net Advertising - Internet advertising network
The Company needs to capitalize on its existing momentum and expand the
registration campaign, and convert registrants to membership. In
addition the Company will continue to grow the commercial catalog to
acquire better titles that will in turn attract more members. In
addition, more capital will allow the Company to broaden the marketing
mix with both on-line and off-line direct response campaigns to
specific demographic segments.
Results of Operations
As the Company was not operating during the full fiscal quarter ended June
30, 1999 a comparable analysis of the two periods is not meaningful.
Total operating expenses of $445,865 for the three months ended June 30, 2000
resulted primarily from web site development of $64,000 and General and
Administrative expenses related to salaries and wages of approximately
$42,800, web banner advertising and email promotion of approximately
$215,500, legal and accounting of approximately $30,000 and office overhead
expense. Other operations and office expenses totaled approximately $27,300.
Net cash usage for the three months ended June 30, 2000 of approximately
$250,000 resulted primarily from operating expenses.
Liquidity and Capital Resources
The Company continues to negotiate the next round of financing and management
believes the next infusion of equity capital of approximately $500,000 could
close during the next quarter. There are no assurances at this time that the
needed funds to continue operations will be available. Management will
continue to manage cash flow to conserve cash resources for an extended
period sufficient to generate the required cash to maintain operations.
Management believes the current cash requirements will be sufficient for the
next three to four months. The inability to raise the above-described capital
($500,000) within the next three to four months will have a material negative
impact on the continued operations of the Company's business.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON 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
(a) Exhibits
(27.1) Financial Data Schedule.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FREESOFTWARECLUB.COM, INC.
(Registrant)
/s/ John Collins 8/21/00
-----------------------------
John Collins
Chief Executive Officer,
and Director
/s/ Richard Miles 8/21/00
------------------------------
Richard Miles
Secretary/Treasurer and
Chairmen of the Board