UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
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Commission File Number: 000-28675
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Tribeworks, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 94-3370795
- --------------------------------------------- --------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) No.)
988 Market Street, San Francisco, CA
94102
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(Address of principal executive offices) (Zip Code)
(415) 674-5555
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(Issuer's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if changed since
last report)
Check 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 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. X Yes No
--- ---
The number of shares outstanding of registrant's $0.0001 par value common
stock, as of the close of business on May 14, 2004: 18,834,628 shares.
Transitional Small Business Disclosure Format: Yes X No
--- ---
TRIBEWORKS, INC.
FIRST QUARTER 2004 REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheet
March 31, 2004 3
Unaudited Consolidated Statements of Income (Loss)
Three Months Months Ended March 31, 2004 and 2003 4
Unaudited Consolidated Statements of Cash Flows
Three Months Ended March 31, 2004 and 2003 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 10
Item 3. Controls and Procedures 12
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibits 15
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TRIBEWORKS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
MARCH 31, 2004
Current Assets
Cash $ 60,410
Accounts receivable, net of allowance for doubtful accounts of
approximately $4,000 61,145
Costs and estimated earnings in excess of billings
on uncompleted contracts 21,220
Prepaid expenses 50,735
-----------
TOTAL CURRENT ASSETS 193,510
Other Assets
Equipment, net of accumulated depreciation of $49,677 2,615
-----------
TOTAL ASSETS $ 196,125
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 244,405
Accrued expenses 32,639
Due to shareholders 6,232
Billings in excess of costs and estimated earnings
on uncompleted contracts 56,294
Note payable 83,701
Deferred revenue 99,830
-----------
TOTAL CURRENT LIABILITIES 523,101
-----------
Stockholders' Deficit
Preferred stock: 10,000,000 shares authorized, none issued -
Common stock: $.0001 par value, 200,000,000 shares authorized,
18,834,628 shares issued and outstanding 1,883
Additional paid-in capital 3,035,725
Unearned compensation (1,925)
Accumulated deficit (3,362,659)
-----------
TOTAL STOCKHOLDERS' DEFICIT (326,976)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 196,125
===========
The accompanying notes are an integral part of these consolidated financial
statements
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TRIBEWORKS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Three Months Ended March 31,
2004 2003
---- ----
REVENUES $ 287,805 $ 364,442
COST OF SALES 116,000 134,936
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GROSS PROFIT 171,805 229,506
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OPERATING EXPENSES
Product support 9,134 11,601
Product development 35,641 27,945
Sales and marketing 49,213 57,874
General and administrative 117,953 103,105
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211,941 200,525
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INCOME (LOSS) FROM OPERATIONS (40,136) 28,981
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OTHER INCOME (EXPENSE)
Interest expense (539) (2,688)
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INCOME (LOSS) BEFORE INCOME TAXES (40,675) 26,293
INCOME TAXES - -
----------- -----------
NET INCOME (LOSS) $ (40,675) $ 26,293
============ ===========
EARNINGS PER COMMON SHARE
Basic $ - $ -
============ ===========
Diluted $ - $ -
============ ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 18,834,628 18,634,628
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements
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TRIBEWORKS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
2004 2003
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (40,675) $ 26,293
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Adjustments:
Depreciation 308 3,860
Amortization of unearned compensation 1,444 2,895
Changes in:
Accounts receivable 105,273 (4,178)
Costs and estimated earnings in excess of billings on
uncompleted contracts 2,423 (120,439)
Prepaid expenses 7,139 (979)
Accounts payable (4,465) 6,674
Accrued expenses 14,286 38,012
Deferred revenue and billings in excess of costs
and estimated earnings on uncompleted contracts (65,095) (37,411)
------------ -----------
Total adjustments
61,313 (111,566)
------------ -----------
Net cash provided (used) by operating activities 20,638 (85,273)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment - (2,197)
------------ -----------
NET INCREASE (DECREASE) IN CASH 20,638 (87,470)
CASH, BEGINNING OF PERIOD 39,772 143,153
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CASH, END OF PERIOD $ 60,410 $ 55,683
============ ===========
The accompanying notes are an integral part of these consolidated financial
statements
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TRIBEWORKS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
NOTE A - PRINCIPLES OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements, although the Company
believes that the disclosures are adequate to make the information presented not
misleading. In the opinion of management, all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the Company's financial
position as of March 31, 2004, and its results of operations and cash flows for
the three months ended March 31, 2004 and 2003 have been included. However,
operating results for the interim periods noted are not necessarily indicative
of the results that may be expected for the year ending December 31, 2004. This
report should be read in conjunction with the Company's financial statements and
notes thereto contained in the Company's annual report on Form 10-KSB for the
year ended December 31, 2003.
NOTE B - NATURE OF BUSINESS AND ORGANIZATION
On August 20, 1998, the Company began its business activities. The
Company's business activity results from a technology that provides tools for
creating and delivering multimedia applications. Internet media developers use
the technology for creation and deployment of electronic content that utilizes
interactive features combining graphics, video, and audio content. The Company
exploits its software primarily through the licensing of its software tools to
multimedia and software developers and through building customized licensed
versions that include professional engineering to meet contract requirements.
NOTE C - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
BASIS OF CONSOLIDATION
The financial statements of the Company are presented on a consolidated
basis and include the Company and its wholly-owned subsidiaries, Tribeworks
Development Corporation and Tribeworks Japan Limited. All material intercompany
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Estimates and assumptions are
reviewed periodically and the effects of revisions are reflected in the
consolidated financial statements in the period they are determined.
Significant estimates used in preparing these financial statements
include those used in computing profit percentages under the
percentage-of-completion revenue recognition method. It is at least reasonably
possible that these significant estimates used will change within the next year.
ACCOUNTS RECEIVABLE
Accounts receivable are reported at the amount management expects to
collect on balances outstanding at period-end. The amount of the accounting loss
that the Company is at risk for these unsecured accounts receivable is limited
to their carrying value, which is $61,145 at March 31, 2004. The Company
provides an allowance for doubtful accounts and records bad debts based on a
periodic review of accounts receivable and the collectibility of each account.
EQUIPMENT
Equipment is stated at cost and is depreciated using the straight-line
method over the estimated useful lives of the assets.
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TRIBEWORKS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
NOTE C - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
TECHNOLOGY LICENSE
The Company's principal business activity focuses on the
commercialization of iShell, which was developed by an officer and director of
the Company and an affiliate of the Company. In November 1999 the Company
purchased all rights, title and interest in iShell in exchange for $100,000 and
warrants to purchase 303,030 shares of common stock at an exercise price of
$0.33 per share, valued at $30,000. The $130,000 cost was fully amortized at
December 31, 2002.
REVENUE RECOGNITION
Revenue is generally recognized when all contractual or transfer
obligations have been satisfied and collection of the resulting receivable is
probable.
Revenues from membership subscriptions are recognized proportionally
over the membership period, usually one year. Revenues and estimated profits on
custom development services are generally recognized under the
percentage-of-completion method of accounting using a cost-to-cost measurement
methodology; profit estimates are revised periodically based on changes in
facts; any losses on contracts are recognized immediately. Revenue from the sale
of licenses are recognized when all the following criteria are met: persuasive
evidence of an agreement exists, delivery has occurred, the fee is fixed or
determinable and collectability is probable. If all aspects but the last have
been met or if post contract customer support could be material, revenue is
recognized as payments from customers are received.
COMPENSATED ABSENCES
The Company accrues vacation pay for all full-time employees.
SOFTWARE DEVELOPMENT COSTS
The Company expenses all software development costs in the period the
costs are incurred.
STOCK-BASED AWARDS
The Company accounts for stock based awards to employees under its
"Equity Incentive Plan" as compensatory in accordance with Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"). The
Company also issues stock based awards for services performed by consultants and
other non-employees and accounts for them in accordance with Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
("SFAS 123").
Financial Accounting Standards Board Statement No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure ("SFAS 148"), requires the
Company to provide pro forma information regarding net income (loss) and
earnings (loss) per share as if compensation cost for all awards had been
determined in accordance with the fair value based method prescribed in SFAS 123
as follows:
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TRIBEWORKS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
NOTE C - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Three Months Ended March 31
2004 2003
---- ----
Net income (loss), as reported $ (40,675) $ 26,293
Add: Stock-based compensation expense included in
net income or loss, no tax effect 1,444 1,451
Deduct: Total stock-based compensation expense
determined under fair value method for all awards, no
tax effect (1,444) (5,067)
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Pro forma net income (loss) $ (40,675) $ 22,677
========== ===========
Net income (loss) per share, basic and diluted:
As reported $ (0.00) $ 0.00
========== ===========
Pro forma $ (0.00) $ 0.00
========== ===========
The Company estimates the fair value of each stock option at the grant
date by using the Black-Scholes option-pricing model with the following
weighted-average assumptions: no dividend yield; expected volatility of 25%;
weighted-average risk-free interest rate of 3.40%; and weighted-average expected
option life of three years. No options were granted during the first quarter of
2004.
FOREIGN CURRENCY TRANSLATION
Tribeworks Japan prepares its financial statements in a currency other
than U.S. dollars. Results of operations and cash flows are translated at
average exchange rates during the period, and assets and liabilities are
translated at end-of-period exchange rates. To date, the foreign currency
translation effect was immaterial and, therefore, translation adjustments were
not included as a separate component of accumulated other comprehensive income
(loss) in stockholders' equity (deficit).
NET EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per share ("EPS") is computed based on net income
(loss) divided by the weighted average number of common shares outstanding.
Diluted EPS is computed based on net income (loss) divided by the weighted
average number of common shares and potential common share equivalents
outstanding. Potential common share equivalents are those related to stock
options and warrants and the note payable. However, such potential common share
equivalents would have no effect on diluted earnings per share for the three
months ended March 31, 2004 and 2003. Therefore, basic and diluted earnings per
share are the same for the three months ended March 31, 2004 and 2003.
RECLASSIFICATIONS
Certain reclassifications have been made to the 2003 financial
statements in order to conform to the 2004 financial statement presentation.
-8-
TRIBEWORKS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
NOTE D - COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED
CONTRACTS
At March 31, 2004, costs and estimated earnings in excess of billings
on uncompleted contracts, which was comprised of one job in progress, consisted
of $40,487 of costs and $59,985 of estimated earnings, less billings of $79,252.
At March 31, 2004, billings in excess of costs and estimated earnings on
uncompleted contracts, which was comprised of three jobs in progress, consisted
of $166,859 of billings, less $59,546 of costs and $51,019 of estimated
earnings.
NOTE E - NOTE PAYABLE
On January 21, 2001, the Company borrowed $100,000 under a Private
Placement Agreement. Under the terms of the agreement the lender, upon the
closing of a "Qualified Financing" (as that term is defined in the agreement),
could convert the loan to common stock of the Company. Such conversion never
took place, and on June 12, 2003, the Company and the creditor restructured this
note. The original terms for the $100,000 note accrued simple interest at 10%,
with all principal and accrued interest due on demand. The restructured note
accrues interest at 4% and was increased by $20,000 for previously accrued
interest. The new note is nonconvertible, and calls for an initial payment of
$30,000, which was made during June 2003, and then monthly payments of $3,500
through February 2005, with a final payment of $24,201 in March 2005. If the
Company makes all note payments timely in accordance with the note agreement,
the creditor will forgive $20,000 of the final payment. In accordance with
Statement of Financial Accounting Standards No. 15, ACCOUNTING BY DEBTORS AND
CREDITORS FOR TROUBLED DEBT RESTRUCTURINGS ("SFAS 15"), the carrying value of
the debt, including accrued interest, is equal to the total amount of future
payments under the new note. Consequently, all future debt payments will reduce
the principal balance and no interest expense will be recorded for this note.
The Company failed to make the scheduled note payments after September
2003 and has received notification of default from the lender. As such, the note
was due in full on March 31, 2004 and is accruing default interest at a rate of
4% on the outstanding balance of the note.
NOTE F - GOING CONCERN
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplate
the continuation of the Company as a going concern. However, although the
Company reported net income during 2003 and 2002, the Company reported a net
loss for the three months ended March 31, 2004 and had a working capital
deficiency of $329,591 and an equity deficiency of $326,976 at March 31, 2004.
The Company is also in default on its note payable and has deferred payment of
certain accounts payable and accrued expenses. Given these results, additional
capital or improved operations will be needed to sustain the Company's
operations.
Management's plans in this regard include additional marketing of its
product line with special emphasis on custom development services and technology
licensing opportunities in the U.S. and Japan. The Company also plans to seek
equity financing during 2004.
In view of the matters described, there is substantial doubt about the
Company's ability to continue as a going concern. The recoverability of the
recorded assets and satisfaction of the liabilities reflected in the
accompanying balance sheet is dependent upon continued operation of the Company,
which is in turn dependent upon the Company's ability to meet its cash flow
requirements on a continuing basis and to succeed in its future operations.
There can be no assurance that management will be successful in implementing its
plans. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD LOOKING STATEMENTS
The following discussion contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 that are subject to risks and uncertainties.
These forward-looking statements are based on our management's beliefs as well
as assumptions and information currently available to us. When used in this
report, the words "believe," "expect," "anticipate," "estimate" and similar
expressions are intended to identify forward-looking statements. There are
several important factors that could cause actual results to differ materially
from historical results and percentages and results anticipated by the
forward-looking statements, such as, but not limited to:
o whether or not our products are accepted by the marketplace and
the pace of any such acceptance,
o our ability to continue to grow our Tools and Enterprise
businesses,
o improvements in the technologies of our competitors,
o changing economic conditions, and
o other factors, some of which will be outside of our control.
We have sought to identify most risks to our business but cannot
predict whether or to what extent any of such risks may be realized. There can
be no assurance that we have identified all possible risks that might arise.
Investors should carefully consider all such risks before making an investment
decision with respect to our common stock. We caution you not to place undue
reliance on any forward-looking statements, all of which speak only as of the
date of this report. You should refer to and carefully review the information in
future documents we file with the Securities and Exchange Commission.
FINANCIAL CONDITION
We experienced a net loss of $40,675 for the quarter ended March 31,
2004. This loss is primarily attributable to a decrease in revenues from our
ongoing Pioneer contract. One consequence of this quarterly loss is that we plan
to reduce our costs, possibly including an action to close our Tribeworks Japan
subsidiary. We do not believe that these cost reductions will negatively impact
our continuing efforts to market and sell our products and services, and believe
that they will help us to move back to profitability. We also plan to raise
funds through equity financing, and have taken measures to achieve this goal,
including proposing a reverse stock split of one for four of our common stock
for our May 17, 2004 Annual Meeting. The funds from this financing will
primarily be used to market our Tools products, in an effort to increase overall
software licensing revenues.
Our financial success continues to rely on key contracts, the future
existence of which is not assured. For instance, our business with a single
customer accounted for 43% of our total revenues for this quarter. Regardless of
the uncertainties, we feel that we have a robust pipeline of business
opportunities, and we remain optimistic about the future financial success of
our business. This is based on our recent introduction of new product offerings
and the continued improvement in economic conditions.
We sell our software and generate revenues through two main
distribution channels: the graphics software tools business and the enterprise
application development business. Tools customers, usually graphics industry
professionals, license our iShell(R) branded multimedia application authoring
tools, iShell 4 or iShell Mobile, by purchasing the software via our online
store or via telephone with one of our sales representatives. Tools customers
either buy our software with a permanent license or pay an annual membership fee
that includes a license to use our software and customer support services.
We first introduced our multimedia authoring tool iShell(R) in January
1999, as a cross-platform software product to allow developers to create
multimedia applications in a variety of categories, including sales and business
presentations, informational/catalog titles, training courses and modules for
corporations and/or educational institutions, games, learning aids, enhanced CDs
(audio CDs that also contain videos and other visual digital content), video
yearbooks, recruitment presentations and more. We market the latest release,
iShell 4, as the fastest way to build secure, interactive CD-ROM's.
-10-
Beginning in 2003, we partnered with Kinoma, Inc. ("Kinoma") to create
new products for the mobile software market, specifically targeting Palm OS
devices. Kinoma makes Kinoma Player 2, which is a high-resolution, interactive
movie player for handhelds running the Palm OS. To date we have developed two
products in partnership with Kinoma that create Kinoma Player 2 content, iShell
Mobile, an iShell-based application development tool, launched in October 2003,
and Kinoma Media Album, a consumer multimedia management tool, to be launched
during 2004. Kinoma receives a per unit royalty on sales of iShell Mobile and
Kinoma Media Album. In addition to building these two products together, we have
utilized Kinoma as a subcontractor on Enterprise projects.
In our Enterprise business, most of our customers are large
corporations that require development of custom multimedia tools or complex
multimedia applications. Enterprise customers usually pay for professional
engineering services performed by Tribeworks' employees and consultants. Certain
Enterprise customers also license our software, usually for a fixed fee or on a
per unit basis. As evidenced by results for this quarter, we generally
anticipate Enterprise business growth, particularly Enterprise professional
services revenue, to be less predictable and "bumpier" than our Tools business
revenue in the foreseeable future, and this could impact whether or not we
continue to be profitable on a quarter-to-quarter basis. The primary reason is
that our Enterprise business has a smaller number of customers. We expect to
continue to underwrite the cost of software research and development with money
received from Enterprise customers.
While we strive to operate our business efficiently and profitability,
we cannot make assurances that every quarter will be profitable, and we may
sacrifice near-term results for long-term results. We plan to pursue equity
financing during 2004.
RESULTS OF OPERATIONS
REVENUES
Total revenues were $287,805 for the quarter ended March 31, 2004, a
decrease of 21% compared to total revenues of $364,442 for the quarter ended
March 31, 2003. The Tools Business, which primarily includes sales of commercial
or educational use of our iShell 3 and iShell Mobile software, and sales of
books and third party plug-ins, decreased by 2% to $96,758 for the first quarter
of 2004, compared to $98,760 for the first quarter of 2003. The Enterprise
business decreased in the first quarter of 2004 by 28% to $191,047, compared
with $265,682 for the first quarter of 2003. Enterprise revenues for the first
quarter of 2004 consisted of $191,047 in professional services revenues and $0
in licensing revenues, compared with $261,738 in professional services revenues
and $3,944 in licensing revenues for the first quarter of 2003. The decrease in
Enterprise professional services revenues is primarily attributable to a
decrease in revenue associated with our ongoing contract with Pioneer
Corporation for development of software products that allow users to create and
manage content for digital signs. International revenues, which consist of sales
to foreign customers, represented 53% of revenues for the first quarter of 2004,
compared to 76% of revenues for the first quarter of 2003. Revenues from
Japanese customers decreased to 44% of total revenues for the first quarter of
2004, from 66% for the first quarter of 2003.
COST OF SALES
Cost of sales includes royalties paid to third parties for licensed
technology, costs associated with order fulfillment, credit card fees, web
hosting fees, and costs associated with professional services, including
salaries, consulting fees, and out-of-pocket expenses. Cost of sales was
$116,000 for the quarter ended March 31, 2004, down from $134,936 for the
quarter ended March 31, 2003. Gross margins decreased on a percentage basis to
60% for the first quarter of 2004 from 63% for the first quarter of 2003.
OPERATING EXPENSES
Product support expenses consist mainly of compensation, benefits and
consulting fees paid to product support personnel. Product support expenses were
$9,134 and $11,601 for the quarters ended March 31, 2004 and 2003, respectively.
As a percentage of Tools sales, product support expenses were 9% and 12% for the
first quarters of 2004 and 2003, respectively. This decrease is primarily
attributable to the assignment of certain product support personnel to other
activities, including sales activities like documentation and creation of
product samples.
Product development expenses consist primarily of compensation and
benefits to support product development. Product development expenses were
$35,641 and $27,945 for the quarters ended March 31, 2004 and 2003,
respectively. This decrease is primarily attributable to the assignment of
certain product development personnel to other activities, including billable
professional services. We continue to strive to operate our product development
-11-
efficiently, and in spite of this decrease in costs, we have three products
ready for market at March 31, 2004, as compared to one product at March 31,
2003.
Sales and marketing expenses consist primarily of compensation and
benefits, advertising, mail order costs, trade show expenses, and other public
relations and marketing costs. Sales and marketing expenses were $49,213 and
$57,874 for the quarters ended March 31, 2004 and 2003, respectively. Most of
this decrease is based on less expense for developing our website, which we
substantially redesigned during the first and second quarters of 2003, and less
expense for Enterprise sales activities, which were lessened due to a focus on
Tools sales activities. These decreases were partially offset by an increase in
expense for Tools sales activities, based on the introduction of our new
products.
General and administrative expenses consist primarily of compensation
and benefits, fees for professional services, and overhead. General and
administrative expenses were $117,953 and $103,105 for the quarters ended March
31, 2004 and 2003, respectively. This increase is primarily due to the increased
cost of doing business as a public company as a result of new securities
regulations, including increased accounting and legal fees, and also due to
costs incurred for the creation of materials for our annual meeting.
OTHER INCOME (EXPENSE)
Other expense was $539 for the quarter ended March 31, 2004, consisting
of $539 of interest expense, compared to other expense of $2,688 for the quarter
ended March 31, 2003, consisting $2,688 of interest expense.
PROVISION FOR INCOME TAXES
We recorded no income taxes for the quarters ended March 31, 2004 and
2003.
NET INCOME (LOSS)
Net loss was $40,675 for the quarter ended March 31, 2004, compared to
net income of $26,293 for the quarter ended March 31, 2003.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2004, we had cash of $60,410 compared to $55,683 at March
31, 2003.
Our capital requirements have been reduced significantly from previous
quarters based on cost reductions. Since inception, the Company has financed its
operations through issuance of stock and through revenues from the Tools and
Enterprise businesses. Through March 31, 2004, the Company had raised $2,672,656
from the sale of stock. At March 31, 2004, the principal source of liquidity for
the Company was $60,410 of cash.
Cash provided by operating activities was $20,638 for the quarter ended
March 31, 2004 and cash used in operating activities was $85,273 for the quarter
ended March 31, 2003.
Cash used in investing activities for the quarters ended March 31, 2004
and 2003 was $0 and $2,197, respectively.
We cannot make assurances that we will be profitable and that should we
seek investment funds, that such funds will be available to us or available on
commercially reasonable terms. We do not expect to devote substantial capital
resources to additional hiring of personnel if more funds do not become
available to us. In addition, the inability to obtain sufficient funds from
operations and external sources would have a material adverse effect on our
business, results of operations, and financial condition.
ITEM 3. CONTROLS AND PROCEDURES
The Chief Executive Officer and the Chief Financial Officer of the
Registrant have concluded based on their evaluation as of the end of the period
covered by this Report, that the Registrant's disclosure controls and procedures
are effective to ensure that information required to be disclosed by the
Registrant in the reports filed or submitted by it under the Securities Act of
1934, as amended, is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms, and include controls and procedures designed to ensure that information
required to be disclosed by the Registrant in such reports is accumulated and
communicated to the Registrant's management, including the Chief Executive
Officer, as appropriate to allow timely decisions regarding required disclosure.
-12-
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of such evaluation.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
We made no sales of the Company's common stock during the quarter ended
March 31, 2004.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are included in this report or incorporated
by reference into this report:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
2.1 Agreement of Merger between Tribeworks, Inc., a California
corporation, and Tribeworks Acquisition Corporation, dated
November 2, 1999 (Incorporated by reference to Exhibit 2.1 to
the Registrant's Form 10-SB/A filed July 10, 2000).
3.1 Certificate of Incorporation of Tribeworks, Inc., a Delaware
corporation (Incorporated by reference to Exhibit 3.1 to the
Registrant's Form 10-SB/A filed July 10, 2000).
3.2 Bylaws of Tribeworks, Inc., a Delaware corporation (Incorporated
by reference to Exhibit 3.2 to the Registrant's Form 10-SB/A
filed July 10, 2000).
10.5 Tribeworks, Inc. 2004 Employee Stock Incentive Plan
(Incorporated by reference to Exhibit B to the Registrant's
Proxy Statement on Schedule 14A filed April 14, 2004).
31.1 Certification of Chief Executive Officer Pursuant to Rule
13a-14(a) and 15d-14(a)
31.2 Certification of Chief Financial Officer Pursuant to Rule
13a-14(a) and 15d-14(a)
32.1 Certification of Chief Executive Officer Pursuant to Section
1350 of Title 18 of the United States Code
32.2 Certification of Chief Financial Officer Pursuant to Section
1350 of Title 18 of the United States Code
(b) The following reports on Form 8-K were filed during the quarter ended March
31, 2004:
None.
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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.
Tribeworks, Inc.,
a Delaware corporation
Date: May 14, 2004 /s/ DUNCAN J. KENNEDY
-------------------------
Duncan J. Kennedy,
President and Chief Executive Officer
/s/ ROBERT C. DAVIDORF
--------------------------
Robert C. Davidorf,
Chief Financial Officer
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