SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d) of
Securities Exchange Act of 1934
For Period ended December 31, 2000
FREESOFTWARECLUB.COM, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 88-0414076
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(State of Incorporation) (I.R.S. Employer Identification No.)
600 Bancroft Way
Berkeley, CA 94710
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(Address of Principal Executive Offices) (Zip Code)
(510) 649-4922
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(Registrant's telephone number, including area code)
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 the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock at the latest practicable date.
As of February 16, 2001, the registrant had 17,807,500 shares of its common
stock issued and outstanding.
FREESOFTWARECLUB.COM, INC.
Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Balance Sheet as of December 31, 2000
Condensed Statements of Operations for the
Nine Months Ended December 31, 2000 and April 15, 1999
(inception) to December 31, 1999
Condensed Statements of Cash Flows for the Nine Months
Ended December 31, 2000, and from April 15, 1999 (inception)
To December 31, 1999
Notes to Condensed Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial Condition and Plan
of Operations
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
Signatures
PART I
ITEM 1: FINANCIAL STATEMENTS
FreeSoftwareClub.com, Inc.
BALANCE SHEET
ASSETS
December 31,
2000
(unaudited)
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CURRENT ASSETS
Cash $ 6,224
Accounts receivable 30,526
Inventory 24,005
Prepaid expenses 41,700
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Total current assets 102,455
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$ 102,455
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 175,413
Other 2,738
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Total current liabilities 178,151
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COMMITMENTS AND CONTIGENCIES
STOCKHOLDERS' DEFICIT
Common stock,$.001 par value
authorized 100,000,000 shares;
17,407,500 issued and outstanding 17,408
Additional paid-in-capita1 941,528
Deficit Accumulated (1,034,632)
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Total stockholders' Deficit (75,696)
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$ 102,455
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FreeSoftwareClub.com, Inc.
STATEMENTS OF OPERATIONS
(unaudited)
Nine
Months April 15, Oct 1, Oct 1,
Ended 1999 to 1999 to 2000 to
Dec 31, Dec 31, Dec 31, Dec 31,
2000 1999 1999 2000
------- -------- ------- -------
Revenues Earned $30,042 -- -- $25,262
Cost of Revenues 7,067 -- -- (4,645)
Gross Margin 22,975 -- -- 29,907
Operating expenses
Website development 136,750 $ 165,000 $ 60,000 18,500
General &
administrative 638,465 35,914 3,927 132,814
Total Operating
expenses 775,215 200,914 63,927 151,314
------- -------- ------- -------
Loss from
operations (752,150) (200,914) (63,927) (121,407)
NET LOSS (752,150) (200,914) (63,927) (121,407)
======= ======= ====== =======
Net loss per
basic and $ (0.04) (0.01) 0 (0.01)
diluted share
======= ======= ======= =======
Weighted Average
Basic/diluted shares
outstanding 16,871,610 16,447,500 16,447,500 17,100,833
========== ========== ========== ==========
FreeSoftwareClub.com, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Nine
Months April 15,
Ended 1999 to
Dec 31, Dec 31,
2000 1999
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Net cash used in
Operating
activities (547,078) $(75,642)
Cash flows financing
activities:
Proceeds from issuance
of common stock --
Proceeds from issuance
of note payable 23,000 100,000
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Net cash provided by
financing activities 23,000 100,000
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NET INCREASE (DECREASE)
IN CASH (524,078) 24,358
Cash at beginning
of period 530,302 --
------- -------
Cash at end of period $ 6,224 $ 24,358
======= =======
NonCash Financing Activities: In December 2000, the Company entered into an
agreement with Network Commerce, Inc. (Nasdaq: NWKC). Network Commerce
manages a network of high traffic websites including Speedyclick.com,
PrizeCrazy.com, Planetofmusic.com, and others, and offers advertisers the
ability to have NWKC site visitors co-register when they register with any of
the NWKC websites. This agreement calls for the Company to issue 1,200,000
shares of Restricted 144 stock in exchange for 3,000,000 co-registrations,
over the term of the agreement.
The term of the agreement is from December 1, 2000 through February 28, 2001
or whenever the target of 3,000,000 names is reached. The anticipation is
that approx. 1,000,000 names per month will be generated in exchange for
400,000 shares monthly. As of 12/31/2000 approx. 500,000 names were
generated.
The Company has issued 400,000 shares in December 2000 and took a charge for
$75,000 based on the current price of the common stock at the date of
issuance.
In December 2000, the Company also issued 60,000 shares to, Altres Group,
LLC, for legal services. The Company took a charge of $10,800 which
represented the amount of the legal fees.
FreeSoftwareClub.com, Inc.
Notes to Condensed Financial Statements
December 31, 2000
(Unaudited)
Basis of Presentation
The accompanying condensed financial statements of FreeSoftwareClub.com, Inc.
(the "Company") as of December 31, 2000, and for the nine months ended
December 31, 2000, and from April 15, 1999 (date of inception) to December
31, 1999 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, consisting only of normal recurring
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.
The financial statements have been prepared on a basis that contemplates
FreeSoftwareClub.com's continuing as a going concern and the realization of
assets and liquidation of liabilities in the ordinary course of business. The
Company has an accumulated deficit of $1,034,632 and a negative working
capital at December 31, 2000 of $75,756.
Prior to the quarter ended December 31, 2000, the Company was considered to
be in a development stage. During the Quarter, membership increased and
revenue was generated by the activities of the Company and results from
December 2000 were close to break even on a cash-flow basis.
Net Loss Per Share
Net loss per share is calculated by dividing net loss for the period by the
weighted average numbers of common shares outstanding for the period. As of
December 31, 2000, the Company has 173,044 potentially dilutive securities
outstanding which are considered anti-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
During the quarter ended December 31, 2000, management focused implementing
the plan to generate increased site traffic, subscriptions, and revenues.
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
During the quarter, the Company focused on building its revenue-generating
web property. The Company enjoyed a constant stream of potential active
members due to its co-registration agreement with Network Commerce, Inc.
These co-registered members were mailed a subsequent solicitation to confirm
their membership and become active members. During the period ending December
31, 2000, the Company had a total of 861,000 co-registered members generated
from the association, and was able to convert 40,000 of these to active
members (approximately 4.6%).
Based on operations through the end of January, 2001, the new model continues
to be well received by the public, and over 50,000 new members registered in
the month ending January 31, 2001. The number of active members was over
100,000 by the end of January, 2001, and the total company registration
database is over 1.2 million.
As a result of the increased site traffic, the Company's website was listed
on PC Data Online's Top Websites for December, reaching a ranking as the
#4,163 most visited website for the month. In January, the Company reached
#3,372 on the list of most visited websites.
During November, the Company was able to generate $8,919 in revenues, and in
December, $16,343.
1. The Company earns money by allowing FreeSoftwareClub.com members (and non-
members) to choose (opt-in) to newsletters provided by third parties, and is
paid by these third parties for each new subscriber they acquire in this
fashion.
2. The Company also allows members to select from a large catalog of offers,
including free downloadable software, online services, and traditional
services like phone services and credit services. The Company is paid by the
company providing the services for each new customer they acquire in this
fashion.
The Company entered into an agreement with 21st Century Marketing, of
Farmingdale, NY, to promote the entire Company database of email and postal
addresses to advertisers. This agreement began on the first of December, 2000
and continues for one year.
Marketing Strategies
The major thrust of the Company's marketing plan continues to be to acquire
new users by the use of opt-in email promotions, and will concentrate on low
cost promotions to drive site traffic and generate memberships.
The Company's plan is to continue to promote the new member offer to
subscribers and convert a high percentage of these customers to active
members, and to continue offering a weekly newsletter containing special
offers to members and non-members alike.
These offers have proven to be successful at generating site traffic and
revenues, and help maintain customer loyalty.
Results of Operations
The Company generated revenue of $25,262 in the quarter ending December 31,
2000. These revenues came from opt-in registrations, advertising, and
commissions earned from affiliated product promotions.
Total operating expenses of $151,314 for the three months ended December 31,
2000 resulted primarily from $79,500 in advertising expense. The balance of
$71,814 is made up of $24,966 for Legal, Accounting, and Insurance fees,
General and Administrative expenses of $9,689 related to salaries and wages,
web site development of $11,000, and other operations and office expenses
totaled approximately $26,159.
During the Quarter, the CEO took steps to reduce the cost of operations, and
the Company's bottom line results have improved. Operational costs were
reduced by negotiating lower fees from service providers, reduction in force,
and reduced marketing expenses. As a result, December's income and expenses
were close to breakeven.
Liquidity and Capital Resources
The Company did not work to secure an additional round of funding in the
period. Rather, the company concentrated its efforts on building a profitable
and self-sustaining model. The Company signed a 6-month convertible note
securing $23,000 in operating funds, which were sufficient to carry
operations through the period.
Management continues to take every step to manage cash flow to conserve cash
resources.
The Company prepared a Private Placement Offering Memorandum on January 2,
2001 to raise an additional $600,000, and expects that to close during the
next quarter. These funds will enable the Company to reduce debt incurred
from past operations, and to expand the staff to increase sales.
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
(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/ Richard Miles 2/20/01
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Richard Miles
Chief Executive Officer,
and Director