U.S. 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 September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to________________
Commission File Number 0-27390
JUNGLE STREET, INC.
(Exact name of small business issuer as specified in its charter)
Utah 87-0368236
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
215 Yakima St., Wenatchee, Washington 98801
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (509) 664-9004
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of November 14, 1997,
3,718,698 shares of the Company's Common Stock, par value $.001 per share,
were outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
JUNGLE STREET, INC
including the accounts of its wholly-owned subsidiary
Televar Northwest, Inc.
Form 10QSB
For the Quarterly Period Ended September 30, 1997
TABLE OF CONTENTS
Page
------
Part I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheet - September 30, 1997
and September 30, 1996 3
Condensed Consolidated Statements of Operations - Three
Months Ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows - Three Months
Ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or
Plan of Operation 7
Part II. OTHER INFORMATION 8
Item 1. Legal Proceedings 8
Signatures 9
<PAGE>
JUNGLE STREET, INC
including the accounts of its wholly-owned subsidiary
Televar, Inc.
Item 1. Financial Statements
Condensed Balance Sheet
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1996
------------------
<S> <C>
ASSETS
Cash and cash equivalents $ 34,675
Accounts receivable, net 228,475
Notes receivable 377,623
Deferred expenses 61,366
--------------
Total current assets 702,139
--------------
Net property and equipment $ 833,848
Notes receivable, less current portion of $110,800 144,951
Deposits 72,246
Goodwill, net 113,904
--------------
Total assets $ 1,867,088
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 1,111,269
Accrued liabilities 606,243
Deferred revenue 309,832
Short term notes 3,344,000
Current portion of long term debt 96,300
--------------
Total current liabilities $ 5,467,644
--------------
Long term debt, less current portion of $96,300 $ 172,014
Stockholders' deficit (3,772,570)
--------------
Total liabilities and stockholders' deficit $ 1,867,088
==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
JUNGLE STREET, INC
including the accounts of its wholly-owned subsidiary
Televar, Inc.
Condensed Consolidated Statements of Operations
For the Three Month Period ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
1997 1996
-------------- --------------
<S> <C> <C>
Revenues $ 562,598 $ 715,687
Cost of sales 438,755 386,880
-------------- --------------
Gross profit 123,843 328,807
Selling, general and administrative expenses 852,772 526,306
-------------- --------------
Net loss from operations $ (728,929) $ (197,662)
-------------- --------------
Other income 9,514 19,662
-------------- --------------
Net loss $ (719,415) $ (197,004)
============== ==============
Net loss per share $ (0.19) $ (0.03)
Weighted average number of shares outstanding 3,712,135 6,215,098
</TABLE>
See accompanying notes to financial statements.
<PAGE>
JUNGLE STREET, INC
including the accounts of its wholly-owned subsidiary
Televar, Inc.
Consolidated Statements of Cash Flows
For the Three Month Periods ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
Three months ended
September 30,
1997 1996
(Unaudited) (Unaudited)
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ (719,415) $ (197,004)
Adjustments to reconcile net loss to net cash used:
Depreciation 49,800 40,098
Amortization 2,950 -
(Increase) decrease in operating assets (280,821) (116,268)
Increase (decrease) in operating payables (334,022) 201,889
------------- -------------
Net cash provided by (used for) operating activities (1,281,508) (71,285)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (57,235) (201,921)
Purchase of leasehold improvements - (358)
Advances made on short-term notes receivable (85,251) (3,707)
Payments received on short-term notes receivable - 1,500
New long term loans receivable - (96,500)
Payments received on long-term notes receivable - 961
------------- -------------
Net cash provided (used for) investing activities (142,486) (300,025)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments made on short-term notes (11,904) (309,229)
Borrowings on short-term notes 1,505,000 846,066
Payments on long-term debt & capital lease obligations (34,427) (32,547)
Borrowings on long-term debt & capital lease obligations - 105,484
------------- -------------
Net cash provided by (used for) financing activities 1,458,669 609,774
------------- -------------
Net Change in Cash 34,675 238,464
Cash Balance - Beginning of Quarter - 9,435
------------- -------------
Cash Balance - End of Quarter 34,675 247,899
============= =============
</TABLE>
<PAGE>
JUNGLE STREET, INC
including the accounts of its wholly-owned subsidiary
Televar, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information in accordance with instructions to Form
10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all normal adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included. Although a Statement of
Stockholders' Equity is not required for interim reporting, it has been
included herewith to show the effect of the merger described in note 2.
The financial statements should be read in conjunction with the audited
financial statements and notes thereto for the years ended June 30 1997, which
have been provided in their entirety in the Company's Form 10-KSB for the
fiscal year ended June 30, 1997. The results of operations for the three-month
periods ended September 30, 1997 and 1996 are not necessarily indicative of
the results to be expected for the full year.
2. MERGER WITH TELEVAR, INC.
On August 30, 1996, Jungle Street effected a merger between a wholly
owned subsidiary formed for the purpose of the merger and Televar (the
"Merger"). The shareholders of Televar received 11,593,325 shares of common
stock of Jungle Street in the Merger, resulting in shareholders of Televar
owning an aggregate of 83% of the 13,968,625 shares of Jungle Street common
stock outstanding on the effective date of the Merger. As a result of the
Merger, Televar became a wholly owned subsidiary of Jungle Street. The
Televar capital stock that was converted into Jungle Street common stock was
converted based on a five-for-one conversion ratio, which was determined
pursuant to arms-length negotiations between Jungle Street and the management
of Televar. In connection with the Merger, Jungle Street also issued an
aggregate of 1,125,000 shares of common stock (approximately 8% of the
outstanding common stock on a post-merger basis) to certain consultants as
compensation for services rendered to Jungle Street prior to the merger.
Prior to the Merger, Jungle Street was inactive and had only nominal
assets and liabilities. The financial statements included in this report
include the activity of both Televar and Jungle Street retroactively restated
to the beginning of the periods covered by the financial statements.
3.REVERSE STOCK SPLIT
On April 12, 1997, Jungle Street, Inc. executed a one-for-four reverse
stock split of its outstanding common shares. Before the split, Jungle
Street, Inc. had 14,640,745 shares outstanding; after the completion effected
of the stock split, it had 3,660,186 shares outstanding. At the time of the
stock split, Jungle Street, Inc.'s trading symbol changed from "JUNS" to JNGS"
on the electronic bulletin board exchange.
Item 2. Management's Discussion and Analysis or Plan of Operation
This Quarterly Report on Form 10-QSB for the quarter ended September 30,
1997, 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. Such statements may include, but are not limited to,
projection of revenues, income, or loss, capital expenditures, plans for
product development and cooperative arrangements, future operations, financing
needs or plans of the Company as well as assumptions relating to the
foregoing. The words "believe," "expect," "anticipate," "estimate,"
"project," and similar expressions identify forward-looking statements, which
speak only as of the date the statement was made. Such statements are
inherently subject to risks and uncertainties as further described herein and
in the "Considerations Related to the Company's Business" section of the
Company's current report on Form 10-KSB for the year ended June 30, 1996. The
Company's actual results may differ materially from the results projected in
the forward-looking statements.
REVENUES.
Revenues for the three months ended September 30, 1997 were approximately
$562,600. Of these revenues, approximately 98% represented Internet access
fees and approximately 2% represented other goods and services.
Comparatively, revenues for the three months ended September 30, 1996 were
approximately $715,700. Of these revenues, approximately 67% represented
Internet access and VAR fee revenues and approximately 33% represented
revenues derived from long distance service. In the current period, Internet
access revenues increased due to the Company's increased marketing efforts.
Management adopted the accounting policy in 1997 of deferring VAR revenues
until certainty of collection has been historically demonstrated. Thus, no
VAR revenues have been reported for the current period. Long distance
revenues are significantly lower in 1997 because the Company discontinued its
relationship with its former long distance provider. The Company is currently
reviewing its vendor options to reenter the market as a long distance
reseller.
Cost of sales for the three months ended September 30, 1997 were
approximately $439,000 compared to cost of sales for the three months ended
September 30, 1996 of $386,900. Cost of sales consists primarily of software
license fees, commissions and network operating cost, including leased line
and local access charges. Cost of sales increased as a percentage of revenues
from approximately 54% in 1996 to 77% in 1997. Management attributes this
increase in cost of sales to expanding the Company network, including the
installation of additional lines in advance of anticipated growth in the
Company's subscription base and the Company's continuing investment in
programs to support future growth. Thus, the Company is subject to the
continuing risk that operating expenses will increase at a faster rate than
revenues.
Sales, general and administrative expenses consist primarily of
personnel, marketing and interest expenses. Sales, general and administrative
expenses were $852,800 for the three months ended September 30, 1997 compared
to $526,300 for the three months ended September 30, 1996. The increase in
expenses is primarily attributed to growing personnel, marketing and
administrative costs and interest expense.
Interest expense for the three months ended September 30, 1997 was
$103,700 compared to $28,800 for the three months ended September 30, 1996.
The increase in interest expense is due to the increased level of borrowings.
The Company continues to borrow in order to fund operations. Management's
current objective is to secure additional equity capital to fund operating
cash flow shortfalls. There can be no assurance, however, that the Company
will be able to identify investors willing to purchase its equity securities
at prices and on terms satisfactory to the Company, in which event the Company
will be required to continue borrowings at current or increased levels.
LIQUIDITY
At September 30, 1997, the Company's total current assets were $702,100
and its total current liabilities were $5,647,600 for a net working capital
deficit of $4,945,500.
The Company has met some of its cash requirements through a combination
of cash flow from operations and borrowings from third parties. During the
three months ended September 30, 1997, the Company borrowed $1,505,000 from
third parties at 12% interest rates. The Company made principal payments
during the period of approximately $12,000.
The Company has a $1,300,000 line of credit in place with a commercial
lender that was executed in July 1997. The line of credit is guaranteed by
Pacific Aerospace & Electronics, Inc. The line of credit has been fully
utilized and additional sums are not available for borrowing by the Company.
The proceeds from borrowings, together with cash from operations, are
insufficient to fund budgeted operations for the near term. The Company will
require additional external financing in order to fund its operating plan and
budget and is in discussion with several potential equity financing sources.
There is no assurance, however, that these discussions will result in
additional equity capital on terms that are favorable to the Company or that
additional financing will be available to the Company from other sources. If
the Company is unable to raise additional capital, the Company's ability to
continue operations may be adversely affected.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
On or about October 27, 1997, Gregory K. Martin and Strategic Resources
Group, Inc. ("SRG") filed an action against Televar, Inc., a wholly owned subsid
iary of the Company ("Televar") in the Chelan County Superior court for the
State of Washington. In their complaint, the plaintiffs claim that Televar
breached various employment and other agreements with Martin and failed to
consummate a merger with SRG resulting in damages in excess of $275,000.
Management has not yet filed an answer or other responsive pleading to the
complaint, but intends to do so and vigorously dispute the claims of the
plaintiffs and assert various counterclaims against them. Management believes
that the claims of SRG are wholly without merit.
<PAGE>
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.
JUNGLE STREET, INC.
Date: November 17, 1997 /s/ Casey Seremek
----------------------------
Casey Seremek, Chief Financial Officer
(Principal accounting officer and
Authorized Officer)
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Sequential Page
- ------------------- -------------------------- ---------------
27 Financial Data Schedule 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
statements for the three months ended September 30, 1997 and as of September 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 34,675
<SECURITIES> 0
<RECEIVABLES> 912,098
<ALLOWANCES> 306,000
<INVENTORY> 0
<CURRENT-ASSETS> 702,139
<PP&E> 1,151,808
<DEPRECIATION> 317,960
<TOTAL-ASSETS> 1,867,088
<CURRENT-LIABILITIES> 5,467,644
<BONDS> 268,314
0
0
<COMMON> 3,705
<OTHER-SE> 419,048
<TOTAL-LIABILITY-AND-EQUITY> 1,867,088
<SALES> 0
<TOTAL-REVENUES> 562,598
<CGS> 0
<TOTAL-COSTS> 438,755
<OTHER-EXPENSES> 852,772
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103,700
<INCOME-PRETAX> (719,415)
<INCOME-TAX> 0
<INCOME-CONTINUING> (719,415)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (719,415)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
