FORM 10-QSB
U.S. Securities and Exchange Commission
Washington D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: MARCH 31, 2004
Commission file number: 333-58720
ANAGRAM PLUS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 65-1045323
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
2700 N. MILITARY TRAIL, SUITE 100
BOCA RATON, FL 33431
(Address of principal executive offices)
(Zip Code)
(561) 241-3621
(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 [_]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of May 10, 2004: 6,539,370 shares of common
stock, par value $.001 per share.
INDEX
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at March 31, 2004 (Unaudited).............1
Condensed Consolidated Statements of Operations for the Three Months
And Nine Months Ended March 31, 2004 and 2003 (Unaudited)....................2
Condensed Consolidated Statement of Stockholders' Deficit for the
Three Months Ended March 31, 2004 (Unaudited)................................3
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended March 31, 2004 and 2003 (Unaudited)....................................4
Notes to Condensed Consolidated Financial Statements (Unaudited).............5-6
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations......................................7-10
Item 3. Controls and Procedures.............................................11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................12
Item 2. Changes in Securities ..............................................12
Item 3. Defaults upon Senior Securities ....................................12
Item 4. Submission of Matters to a Vote of Security Holders.................12
Item 5. Other Information...................................................12
Item 6. Exhibits and Reports on Form 8-K....................................12
Signatures....................................................................14
ANAGRAM PLUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2004
(UNAUDITED)
ASSETS
2004
------------
Current assets:
Cash $ 44,861
Accounts receivable 32,233
Inventory 104,179
------------
Total current assets 181,273
Property and equipment, net 13,987
Intangible assets, net 11,205
------------
Total assets $ 206,465
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 35,498
Due to related parties 198,760
Accrued interest 78,489
Note payable - related party 482,737
------------
Total current liabilities 795,484
Commitments and Contingencies --
Stockholders' deficit:
Preferred stock, $0.01 par value; 2,000,000
shares authorized --
Common stock, $.001 par value; 20,000,000 shares
authorized, 6,539,370 shares issued and outstanding 6,539
Additional paid-in-capital 225,554
Subscription receivable (19,000)
Foreign currency adjustment (65,543)
Accumulated deficit (736,569)
------------
Total stockholders' deficit (589,019)
------------
Total liabilities and stockholders' deficit $ 206,465
============
See accompanying notes to condensed consolidated financial statements.
-1-
ANAGRAM PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------------- -----------------------------
2004 2003 2004 2003
---------------- --------------- ------------- -------------
Sales $ 44,405 $ 80,209 $159,418 $ 164,290
Cost of sales 28,808 32,193 117,091 84,551
----------- ----------- ----------- -----------
Gross profit 15,597 48,016 42,327 79,739
Expenses
General and administrative expenses 55,556 50,929 92,434 130,959
Sales and marketing 5,239 8,678 22,764 21,000
Amortization 954 866 2,830 2,413
Depreciation 1,112 1,128 2,776 3,144
----------- ----------- ----------- -----------
Total expenses 62,861 61,601 120,804 157,516
----------- ----------- ----------- -----------
Loss from operations (47,264) (13,585) (78,477) (77,777)
Foreign currency exchange gain (loss) 408 (5,943) 25,040 (440)
Interest expense (8,352) (6,833) (26,136) (24,025)
----------- ----------- ----------- -----------
Loss before income taxes (55,208) (26,361) (79,573) (102,242)
Provision (benefit) for income taxes - - - -
----------- ----------- ----------- -----------
Net loss $ (55,208) $ (26,361) $ (79,573) $(102,242)
=========== =========== =========== ===========
Net loss per share (basic and diluted) $ (0.01) $ (0.00) $ (0.01) $ (0.02)
=========== =========== =========== ===========
Weighted average shares outstanding
(basic and diluted) 6,461,784 6,394,000 6,416,430 6,366,105
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements.
-2-
ANAGRAM PLUS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED)
Accumulated
Common Stock Additional Other
----------------------- Paid-In Subscription Comprehensive Accumulated
Shares Amount Capital Receivable Income Deficit Total
--------- --------- --------- --------- --------- --------- ---------
Balance at December 31, 2003 6,394,000 6,394 153,014 (19,000) (64,348) (681,361) (605,301)
Stock issuance for cash 115,120 115 57,445 -- -- -- 57,560
Stock issued for partial
reduction of note payable 30,250 30 15,095 -- -- -- 15,125
Foreign currency adjustment -- -- -- -- (1,195) -- (1,195)
Net loss for the period ended
March 31, 2004 -- -- -- -- -- (55,208) (55,208)
--------- --------- --------- --------- --------- --------- ---------
Balance at March 31, 2004 6,539,370 $ 6,539 $ 225,554 $ (19,000) $ (65,543) $(736,569) $(589,019)
========= ========= ========= ========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
-3-
ANAGRAM PLUS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2004 AND 2003
Nine Months Ended
March 31,
--------------------------
2004 2003
----------- -----------
Cash flows from operating activities:
Net loss $ (79,573) $ (102,242)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation and amortization 5,606 5,557
(Increase) decrease in:
Accounts receivable (11,007) (70,192)
Inventory (34,160) 6,034
Increase (decrease) in:
Accounts payable 2,668 16,806
Accrued expenses 23,502 27,090
Due to related parties -- (21,795)
----------- -----------
Net cash used in operating activities (92,964) (138,742)
----------- -----------
Cash flows from investing activities:
Purchase of equipment (5,333) --
----------- -----------
Net cash used in investing activities $ (5,333) $ --
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 57,560 33,000
Proceeds from loan from related parties 162,963 59,501
Repayment of loan from related party (27,090) (8,000)
----------- -----------
Net cash provided by financing activities 193,433 84,501
----------- -----------
Effect of exchange rate changes on cash (52,864) 2,673
Net increase (decrease) in cash 42,272 (51,568)
----------- -----------
Cash at beginning of period 2,589 51,781
----------- -----------
Cash at end of period $ 44,861 $ 213
=========== ===========
Supplementary Information:
Cash paid for:
Interest paid $ -- $ 2,190
=========== ===========
Non-cash disclosures of investing and
financing activities:
Purchase of additional interest in
subsidiary in exchange for
advance from related party $ -- $ 2,020
=========== ===========
Issuance of stock to related party
for partial reduction of note
payable balance $ 15,125 $ 106,000
=========== ===========
See accompanying notes to condensed consolidated financial statements.
-4-
ANAGRAM PLUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Anagram Plus, Inc. (the Company), a subsidiary of ADC Development Corp., is a
51% owner of the Canadian company Prodijeux, Inc. (subsidiary). The accompanying
consolidated financial statements represent those of the Company and its
subsidiary.
The Company specializes in the creation and development of interactive
education/entertainment products in the form of traditional family board games.
The first game in this line of "edutainment" products is "WordXchange" which is
available in adult and junior editions, as well as being available in the French
and English languages. The games will be distributed through department stores,
toy specialty stores, bookstores and the internet.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of the Company have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Regulation S-B. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the management of the Company, the
accompanying unaudited financial statements contain all the adjustments (which
are of a normal recurring nature) necessary for a fair presentation. Operating
results for the nine months ended March 31, 2004 are not necessarily indicative
of the results that may be expected for the year ending June 30, 2004. For
further information, refer to the financial statements and the footnotes thereto
contained in the Company's Annual Report on Form 10-KSB for the year ended June
30, 2003, as filed with the Securities and Exchange Commission.
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 disclosure of
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.
NOTE 3 - GOING CONCERN
The accompanying condensed consolidated financial statements were prepared
assuming that the Company will continue as a going concern. This basis of
accounting contemplates the recovery of the Company's assets and the
satisfaction of its liabilities in the normal course of operations. The
Company's ultimate ability to attain profitable operations is dependent upon
obtaining additional financing or to achieve a level of sales adequate to
support its cost structure.
Accordingly, there are no assurances that the Company will be successful in
achieving the above plans, or that such plans, if consummated, will enable the
Company to obtain profitable operations or continue as a going concern.
NOTE 4 - RELATED PARTY TRANSACTIONS
During the period ended March 31, 2004, the Company executed non-interest
bearing demand notes with an affiliate and a shareholder. The Company borrowed
$98,994 from an affiliate and $23,994 from a shareholder, respectively. The
repayments will be made as the receivables are collected. As of March 31, 2004,
repayments of $7,242 were made on these loans.
Under the terms of an unsecured promissory note executed between the Company and
its parent, the parent loaned the Company $39,975 during the period ended March
31, 2004. The Company repaid
$27,090 in loan payments to its parent during the same period. In addition, the
Company issued 30,250 shares of its common stock at $0.50 per share to its
parent in exchange for a $15,125 reduction of its principal outstanding balance
of the unsecured promissory note to it parent.
The interest rate of this note is 6% per year and the interest began to accrue
on the unpaid balance beginning as of February 28, 2001. The unpaid principal
and interest balance are due on June 30, 2004. At March 31, 2004, the Company
had an outstanding principal balance of $482,737 and $78,489 in accrued
interest.
-5-
NOTE 5 - COMMON STOCK
During the period ended March 31, 2004, the Company sold 115,120 shares of its
common stock to related parties for cash of $57, 560. Additionally, 30,250
common shares were exchanged for a partial reduction of its notes payable to its
parent company, which is discussed in Note 4 - Related Party Transactions above.
NOTE 6 - CURRENCY RATES
For the purpose of conversion from Canadian Dollars to U.S. Dollars, the end of
the month and three and nine month average exchange rates were used, where
applicable. The rate, as quoted in the Wall Street Journal, was $0.7648 Canadian
Dollars to 1 U.S. Dollars at March 31, 2004 and $0.6797 at March 31, 2003.
The average for the three months ended March 31, 2004 and 2003 were $0.7594 and
$0.6621, respectively. The average rates for the nine months ended March 31,
2004 and 2003 were $0.7484 and $0.6465, respectively.
NOTE 7 - EARNINGS PER SHARE
Basic net earnings (loss) per common share is computed by dividing net earnings
(loss) applicable to common shareholders by the weighted-average number of
common shares outstanding during the period. Diluted net earnings (loss) per
common share is determined using the weighted-average number of common shares
outstanding during the period, adjusted for the dilutive effect of common stock
equivalents, consisting of shares that might be issued upon exercise of common
stock options. In periods when losses are reported, the weighted-average number
of common shares outstanding excludes common stock equivalents, because their
inclusion would be anti-dilutive.
-6-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Quarterly Report on Form 10-QSB contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements,
other than statements of historical facts, included in or incorporated by
reference in to this Form 10-QSB, are forward-looking statements. In addition,
when used in this document, the words "anticipate," "estimate," "project" and
similar expressions are intended to identify forward-looking statements. These
forward-looking statements are subject to certain risks, uncertainties and
assumptions including risks relating to our limited operating history and
operations losses; significant capital requirements; development of markets
required for successful performance by the Company as well as other risks
described in our registration statement on Form SB-2, as well as in this report
on Form 10-QSB. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or projected. Although we believe
that the expectations we include in such forward-looking statements are
reasonable, we cannot assure you that these expectations will prove to be
correct. The following discussion and analysis should be read in conjunction
with the unaudited financial statements contained in Part I, Item 1, and the
related notes.
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
The preparation of our condensed consolidated financial statements requires us
to make estimates and assumptions that affect the reported amounts. The
estimates and assumptions are evaluated on an on-going basis and are based on
historical experience and on various other factors that are believed to be
reasonable. Estimates and assumptions include, but are not limited to, fixed
asset lives, intangible assets, income taxes, and contingencies. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. The Company believes
the following critical accounting policies affect its more significant judgments
and estimates used in the preparation of the condensed consolidated financial
statements. The Company estimated its valuation allowance for its accounts
receivable and the value of intangible assets requires Anagram to continually
assess whether such assets are impaired. The Company has evaluated its
disclosure controls and procedures within 90 days (the "Evaluation Date") prior
to this report and concluded that there were no material weaknesses in those
controls and procedures as of that date. To the best of Management's knowledge
and belief, there have been no significant changes in internal controls and
other factors subsequent to the Evaluation Date that could materially affect
internal controls and procedures.
MINORITY INTEREST
Under generally accepted accounting principles when losses applicable to the
minority interest in a subsidiary exceed the minority interest in the equity
capital of the subsidiary, the excess is charged to the majority interest since
there is no obligation of the minority interest to make good on such losses. We
have, therefore, included losses applicable to the minority interest against our
interest since the minority owners have no obligation to make good on the
losses. If future earnings do materialize, we shall be credited to the extent of
such losses previously absorbed.
REVENUE RECOGNITION
Revenue is recognized on sales of products when the customer receives title to
goods and collectibility is reasonably assured, generally upon delivery.
-7-
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED MARCH 31, 2004 AND MARCH 31, 2003
REVENUES
During the nine months ended March 31, 2004, the Company had sales of $159,418
as compared to $164,290 of sales for the nine months ended March 31, 2003. This
represents a slight decrease of $4,872 or 3% over the same period in the prior
year. The Company sold approximately 9,712 units of WordXchange, 2,010 units of
WordXchange Junior, 1,362 units of Anagram Plus, and 1,335 units of Anagram Plus
Junior during the nine months ended March 31, 2004. Anagram sold approximately
5,823 units of WordXchange, 4,220 units of WordXchange Junior and 5,724 units of
AnagramPlus for the comparable period in prior year. The decrease in revenues is
mainly attributable to the lower number of units sold. The majority of the
products sold were shipped to the United States and Canada, with the remainder
being shipped to Europe, Australia and Hong Kong. Sales were made to several toy
and game retailers and distributors. The Company is continuing to negotiate with
different retailers and distributors in order to increase sales space.
Management believes that the Company is increasing its effectiveness with
respect to its efforts as we are continuing to take orders for the games.
COST OF GOODS SOLD
The Company's cost of goods sold for the period ended March 31, 2004 was
$117,091 as compared to $84,551 for the period ended March 31, 2003. The
increase in costs is attributable to units sold during the nine months ended
March 31, 2004 having a higher cost per unit, and higher freight charges. Hence,
the gross profit for the period ended March 31, 2004 was $42,327 as compared to
a gross profit of $79,739 for the period ended March 31, 2003. The reduction in
gross profit is due to the following factors: (1) a reduction in unit price of
WordXchange of approximately 16% from prior year; (2) a higher unit cost of
earlier version of the products; and (3) large sales at slightly above cost to
promote new businesses.
OPERATING EXPENSES
The Company's salary expense decreased $12,822 or 45% to $15,715 for the nine
months ended March 31, 2004 from $28,537 for the nine months ended March 31,
2003. The decrease in salaries can be attributed to the fact that our Creative
Vice President is no longer receiving a salary and his services are being used
on an as needed basis. Management anticipates that if sales begin to increase at
a faster level the Company will need to hire a sales force and an administrative
staff as well as a production design staff. Those functions are currently being
performed by the President of Prodijeux and by independent sales
representatives.
Consulting expense for the period decreased by $9,897 or 83% to $2,095 for the
nine months ended March 31, 2004 from $11,992 for nine months ended March31,
2003. This decrease is a direct result of management's decision to use a
consultant who assisted with the marketing and distribution of WordXchange on as
needed basis. Management has not made a decision as to the feasibility of
obtaining the services of another consultant. We believe the consulting fees
will remain at the same level for the foreseeable future.
The Company's expense for professional fees for the period ended March 31, 2004
decreased $31,408 or 59% to $22,182 as compared to $53,590 for the period ended
March 31, 2003. This decrease can be directly attributed to the legal, auditing
fees and other related fees incurred for the audit of the year ended June 30,
2002 as part of becoming a public company in the first part of 2002. This line
item also includes legal and accounting expenses, and transfer agent fees
incurred as part of being a public company in the normal course of business.
The Company incurred additional expenses during this period as compared to the
prior year of approximately $8,000 in product samples purchases for distribution
to prospective customers and exhibition and convention expenses as part of
marketing efforts conducted by the Company. As a result, travel related expenses
were higher in this period than those of previous period.
FOREIGN EXCHANGE
Foreign exchange gain increased $25,480 to $25,040 for the period ended March
31, 2004 from a loss of $440 for the comparable period ended March 31, 2003.
This is due primarily to the fact more than 90% of Prodijeux sales, its Canadian
subsidiary, were to the United States customers, who paid in US dollars and the
US dollar has suffered devaluation against the Canandian dollar during the
previous nine months.
INTEREST EXPENSE
Interest expense increased $2,111 or 9% to $26,136 for the period ended March
31, 2004 from $24,025 for the period ended March 31, 2003. This slight increase
can be attributed to the larger average outstanding note payable balance during
the nine months period.
NET LOSS
The Company reported a net loss of $79,573 or $ (0.01) per share for the nine
months ended March 31, 2004 as compared to $102,242 or $ (0.02) per share for
the period ended March 31, 2003. This was a result of a number of cost control
measurements implemented and a benefit of a favorable foreign exchange rate
realized at its Canadian subsidiary.
-8-
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2004 AND 2003
REVENUES
During the three months ended March 31, 2004, the Company had sales of $44,405
as compared to $80,209 of sales for the three months ended March 31, 2003. This
represents a decrease of $35,804 or 45% over the same period in the prior year.
The Company sold approximately 1,414 units of WordXchange, 132 units of
WordXchange Junior, 1,021 units of Anagram Plus, and 143 units of AnagramPlus
Junior during the three months ended March 31, 2004. Anagram sold approximately
3,493 units of WordXchange, and 2,599 units of WordXchange , and 204 units of
AnagramPlus for the comparable period in prior year. The decrease in revenues is
mainly attributable to a large order of 4,700 units by a customer during the
three months period ended March 31, 2003 for WordXChange and WordXChange Junior,
which was shipped and delivered in the quarter. The majority of the products
sold were shipped to the United States and Canada, with the remainder being
shipped to Europe, Australia and Hong Kong. Sales were made to several toy and
game retailers and distributors. The Company is continuing to negotiate with
different retailers and distributors in order to increase sales space.
Management believes that the Company is increasing its effectiveness with
respect to its efforts at obtaining orders for the games.
COST OF GOODS SOLD
The Company's cost of goods sold for the three months period ended March 31,
2004 was $28,808 as compared to $32,193 for the same period ended March 31,
2003. Though the total cost of goods sold decreased in 2004 as compared to 2003
due to lower number of units sold during the three months ended March 31, 2004,
the cost of goods sold as a percentage of sales was higher in 2004 in comparison
to that of 2003 due to a higher cost per unit of certain versions of the
products as sold in 2004, and higher freight charges. Hence, the gross profit
for the three months period ended March 31, 2004 was $15,597 as compared to a
gross profit of $48,016 for the same period ended March 31, 2003. The reduction
in gross profit is attributable to the following factors: (1) a reduction in
unit price of WordXchange of approximately 16% from prior year; (2) a higher
unit cost of certain versions of the products; and (3) large sales at slightly
above cost to promote new businesses.
OPERATING EXPENSES
Consulting expense for the period decreased by $4,187 or 67% to $2,095 for the
three months ended March 31, 2004 from $6,282 for three months ended March 31,
2003. This decrease is a direct result of management's decision to use a
consultant who assisted with the marketing and distribution of WordXchange on as
needed basis. Management has not made a decision as to the feasibility of
obtaining the services of another consultant. We believe the consulting fees
will remain at the same level for the foreseeable future.
The Company's salary expense decreased $3,840 or 36% to $6,801 for the three
months ended March 31, 2004 from $10,641 for the three months ended March 31,
2003 as part of the cost containment measure in this quarter.
The Company's expense for professional fees for the three months ended December
31, 2003 increased $2,086 or 13% to $17,682 as compared to $15,598 for the three
months ended March 31, 2003. This increase is attributed to the legal fees and
other related fees incurred for the patent related work and filings.
Travel expense for the three months ended March 31, 2004 increased $2,377 to
$3,026 as compared to $649 for the three months ended March 31, 2003. These
travel expenses are related to the Company's plan to promote its business
through exhibitions and trade conventions.
The Company incurred additional expenses during this period as compared to the
prior year of approximately $8,000 in product samples purchases for distribution
to prospective customers and exhibition and convention expenses as part of
marketing efforts conducted by the Company.
Advertising expenses decreased $3,439 or 40% from $8,678 in the three months
period ended March 31, 2004 to $5,239 for the same period in 2003. The decrease
reflected the Company's cost containment program.
Sales commission expenses decrease $7,620 or 93% in the three months period
ended March 31, 2004 to $603 for the comparable period in 2003. The decrease was
resulted from a 45% lower sales during the period in 2004 and an utilization of
more in house sales efforts.
FOREIGN EXCHANGE
Foreign exchange gain increased $6,351 or 107% to $408 for the period ended
March 31, 2004 from a foreign exchange loss of $5,943 for the comparable period
ended March 31, 2003. This is primarily due to the fact more than 90% of
Prodijeux sales during the three months period ended March 31, 2004, its
Canadian subsidiary, were to the United States customers, who paid in US dollars
and the US dollars have been weaker against the Canadian dollars in the last
nine months.
-9-
INTEREST EXPENSE
Interest expense for the three months ended March 31, 2004 increased $1,519 or
22% to $8,352 from $6,833 for the same period in prior year as a result a larger
average outstanding loan balance during the period.
NET LOSS
The Company reported a net loss of $55,208 or $ (0.01) per share for the three
months ended March 31, 2004 as compared to a net loss of $26,361 or $ -0- per
share for the three months ended March 31, 2003. This was mainly attributable to
lower sales, lower prices, and higher unit costs of older version offset by
better cost containment measures, and additional cost incurred couple with a
favorable foreign currency exchange rate on more than 90% sales from its
Canadian subsidiary.
-10-
LIQUIDITY AND CAPITAL RESOURCES OF ANAGRAM AND PRODIJEUX COMBINED
GOING CONCERN QUALIFICATION
The Company's condensed financial statements have been prepared assuming that
the Company will continue as a going concern. During the nine months ended March
31, 2004, the Company sustained a net loss of $79,573 and has a working capital
deficit of $524,619. These matters raise substantial doubt about the Company's
ability to continue as a going concern. The Company's continuation is dependent
upon its ability to control costs and attain a satisfactory level of
profitability with sufficient financing capabilities or equity investment. The
financial statements do not include any adjustments to reflect the possible
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
The Company has incurred losses since our inception and have negative cash flows
from operations. Until Prodijeux can produce cash flow from its continuing
operations the Company's main sources of cash will continue to be its loan from
its parent corporation, ADC Development Corp. and any additional investment
capital raised through our public offering. The Company has raised $57,560 for
the nine months ended March 31, 2004, $33,000 for the year ended June 30, 2003,
and $12,000 through a public offering through September 25, 2002.
The Company intends to satisfy Prodijeux's working capital requirements
principally through issuance of debt and equity securities. As of March 31,
2004, the Company had a negative working capital of $524,619.
With respect to Prodijeux's liquidity requirements for the next 12 months,
Anagram Plus believes that the cash flow generated from Prodijeux's future
operations and sales of WordXchange(R) and WordXchange(R) Junior Edition will
complement its current cash position, as supplemented by Anagram, and Anagram
further believes that it will be able to satisfy any liquidity needs that may
arise by short term financing. If the need arises, Anagram currently
contemplates seeking additional financing or conducting a public offering in
order to satisfy Prodijeux's additional cash requirements and any obligations it
may have.
Anagram has committed to loan Prodijeux up to approximately $790,000 (CDN
$1,023,000) for continuing operations. Through March 31, 2004, Anagram has
loaned Prodijeux approximately $596,569 (CDN $780,033). Anagram may increase the
amount loaned Prodijeux, if approved by the board of directors of Anagram.
During the nine months ended March 31, 2004, Prodijeux executed non-interest
bearing demand notes with an affiliate and a shareholder for approximately
$99,000 and $24,000, respectively. The notes are being repaid as the receivables
are collected. As of March 31, 2004, $7,242 repayments were made on these loans.
Currently Anagram receives its funding primarily from its parent, ADC
Development Corp. ADC Development Corp. has committed to loan Anagram up to
$750,000 pursuant to the terms of a promissory note. As of March 31, 2004 ADC
Development Corp. has loaned Anagram $482,737, which included the $39,975
additional loan made during the nine months ended March 31, 2004, and a
repayment of $27,090 in cash during the same period. Depending upon the amount
of money raised through the on-going public offering, Anagram may need
additional financing for funding Prodijeux's operations during the next twelve
months.
NOTES PAYABLE
Anagram and Prodijeux borrowed money under different repayment terms from a
variety of sources as discussed in the notes to the respective financial
statements. Other than the bank loan and the loan owed to Anagram that are
secured by all the assets of Prodijeux, all other debt owed by Prodijeux
consists of unsecured debt with varying repayment schedules. The unsecured loan
that is owed by Anagram is payable to its parent, ADC Development Corp. The
principal and outstanding interest on this note is due on June 30, 2004. If
Anagram is not in a position to repay this note by the due date Anagram is
confident that the terms of the note can be renegotiated and an extension of
time to make any repayments will be granted.
If, for any reason, other parties demand repayment as agreed upon in the notes
payable, Prodijeux will seek additional financing from Anagram if it cannot meet
the obligations based on its cash position at the time of the demand. Prodijeux
would request financing from Anagram and, if its own funds are not available,
Anagram would request the additional funds from ADC Development Corp.
Due to the nature of the relationships between Prodijeux and its creditors,
Anagram does not anticipate a creditor will demand repayment within the next
twelve months. Although, if Prodijeux's cash position allows Prodijeux will pay
off these debts earlier than scheduled to eliminate the payment of additional
interest charges. If Prodijeux cannot make timely repayments it would request
financing from Anagram who, if it cannot meet the request from its own funds,
would seek financing from its parent
ITEM 3. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures within the 90 days preceding the filing date of this quarterly
report. Based upon this evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in ensuring that material information required to be
disclosed is included in the reports that it files with the Securities and
Exchange Commission.
-11-
There were no significant changes in the Company's internal control over
financial reporting, the management of the Company, or in other factors that
have materially affected or are reasonably likely to materially affect, these
internal controls over financial reporting subsequent to the evaluation date.
Changes in internal controls
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect those controls since the most recent
evaluation of such controls.
-12-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
During the period ended March 31, 2004, the Company sold 145,370 shares of its
common shares to related parties, of which 115,120 common shares were in
exchange for cash. The 30,250 common shares were in exchange for a partial
reduction of its note payable to its parent company. In addition, the 115,120
shares were issued to an affiliate, whose officer is also the President of this
Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our stockholders as of the date hereof.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS
(a) The following list sets forth the applicable exhibits (numbered in
accordance with Item 601 of Regulation S-K) required to be filed with this
Quarterly Report on Form 10-QSB:
(b) None
Exhibit 31.1 Certification required by Rule 13a-14 (a) (17 CFR 240.13a-14(a)) or
Rule 15d-14 (a) (17 CFR 240.15d-14(a)).
Exhibit 32.1 Certification required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or
Rule 15d-14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18
of the United States Code (18 U.S.C. 1350).
-13-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
ExchangeAct of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on May 12, 2004.
Anagram Plus, Inc.
By: /s/ Paul Michelin
-------------------------
Paul Michelin,President, CEO
& CFO/Principal Accounting
Officer
-14-