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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one):
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
or
[ ] 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 0-27946
SIMPLAYER.COM LTD.
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(Exact name of registrant as specified in its charter)
ISRAEL N/A
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2 MOHALIVER STREET, YEHOOD, ISRAEL 56207
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (781) 743-2100
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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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The number of shares outstanding of the registrant's Ordinary Shares, NIS 0.01
Par Value, as of November 13, 2000, was 9,079,505 shares.
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SIMPLAYER.COM LTD.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements..........................3
Consolidated Balance Sheets as of September 30, 2000
(unaudited) and December 31, 1999......................3-4
Consolidated Statements of Operations (unaudited)
for the three and nine months ended
September 30, 2000 and 1999..............................5
Consolidated Statements of Cash Flows (unaudited)
for the nine months ended
September 30, 2000 and 1999............................6-7
Notes to Consolidated Financial Statements (unaudited)...8-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................10-12
Item 3. Quantitative and Qualitative Disclosures
about Market Risk.......................................12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.......13
Item 5. Other Information.........................................13
Item 6. Exhibits and Reports on Form 8-K..........................13
Signatures.......................................................... 14
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PART I.
ITEM 1. FINANCIAL STATEMENTS
SIMPLAYER.COM LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
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U.S. dollars in thousands
December 31, September 30,
1999 2000
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Unaudited
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,199 $ 4,189
Other receivables 99 288
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Total current assets 4,298 4,477
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SEVERANCE PAY FUND 99 85
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FIXED ASSETS, NET 67 528
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LONG TERM ASSETS:
Related Party - 467
Long-term Deposit - 359
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Total Long-term assets - 826
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Total assets $ 4,464 $ 5,916
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
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SIMPLAYER.COM LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
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U.S. DOLLARS IN THOUSANDS
DECEMBER 31, SEPTEMBER 30,
1999 2000
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UNAUDITED
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 172 $ 791
Deferred income - 198
Accrued expenses and other liabilities 671 1,034
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Total current liabilities 843 2,023
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LONG-TERM LIABILITIES:
Accrued severance pay 133 104
Accrued other liabilities 37 -
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Total long-term liabilities 170 104
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SHAREHOLDERS' EQUITY
Share capital 21 29
Additional paid-in capital 18,580 24,991
Deferred compensation on issuance of
stock options to employees - (126)
Accumulated deficit (15,150) (21,105)
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Total shareholders' equity 3,451 3,789
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$ 4,464 $ 5,916
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
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SIMPLAYER.COM LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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U.S. DOLLARS IN THOUSANDS (EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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1999 2000 1999 2000
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UNAUDITED
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Revenues $ - $ 52 $ - $ 52
Cost of revenues - - - -
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Gross profit - 52 - 52
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Operating expenses:
Research and development
costs, net 250 1,723 579 3,703
Marketing and Selling expenses 269 562 334 1,347
General and administrative
expenses 217 523 310 1,269
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Operating loss 736 (2,756) 1,223 (6,267)
Financial income, net 40 82 94 288
Other income 2 15 15 25
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Loss from continuing operations $ (694) $(2,659) $(1,114) $(5,954)
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Discontinued operations:
Loss from Discontinued operations - -
of segment (151) (2,316)
Income on disposal of segment 4,092 - 4,092 -
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Net Income (loss) $ 3,247 $(2,659) $ 662 $(5,954)
======= ======= ======= =======
Basic and diluted loss per share:
From continuing operations $ (0.12) $ (0.29) $ (0.19) $ (0.70)
From continuing operations $ 0.67 $ - $ 0.30 $ -
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Basic and diluted income (loss) per
share: $ 0.55 $ (0.29) $ 0.11 $ (0.70)
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Weighted average number of
shares outstanding 5,845 9,079 5,833 8,559
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
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SIMPLAYER.COM LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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U.S. DOLLARS IN THOUSANDS
NINE MONTHS ENDED
SEPTEMBER 30,
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1999 2000
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UNAUDITED
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Cash flows from operating activities:
Net income (loss) $ 662 $(5,954)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 130 84
Amortization of deferred compensation 18 101
Loss (gain) on sale of fixed assets - (26)
Gain from disposal of segment (4,092) -
Write-off of fixed assets 23 -
Decrease in trade receivable 421 -
Decrease (increase) in other receivable (161) (189)
Decrease in inventory 68 -
Decrease (increase) in related party - (467)
Decrease (increase) in long-term deposits - (359)
Increase (decrease) in trade payables (301) 619
Increase in deferred income - 198
Increase (decrease) in accrued expenses and other
liabilities (305) 326
Increase (decrease) in accrued severance pay, net 46 (15)
Loss on marketable securities 4 -
Interest accrued on short-term deposit (7) -
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Net cash used in operating activities (3,494) (5,682)
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Cash flows used in investing activities:
Realization of a segment (net of related expanses) (a) 4,212 -
Purchase of fixed assets (52) (545)
Proceeds from sale of fixed assets 9 25
Proceeds from sale of marketable securities 770 -
Proceeds from sale of short-term deposit 1,143 -
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Net cash used in investing activities 6,082 (520)
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
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SIMPLAYER.COM LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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U.S. DOLLARS IN THOUSANDS
NINE MONTHS ENDED
SEPTEMBER 30,
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1999 2000
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UNAUDITED
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Cash flows from financing activities:
Proceeds from issuance of shares, net - 5,511
Proceeds from exercise of employee share options 1 681
Short-term bank credit, net (26) -
Principal payment of long-term loans 1 -
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Net cash provided by financing activities (24) 6,192
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Increase (decrease) in cash and cash equivalents 2,564 (10)
Cash and cash equivalents at the beginning of the period 1,438 4,199
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Cash and cash equivalents at the end of the period $ 4,002 $ 4,189
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(1) Realization of operation:
Working capital $ (66)
Fixed assets, net 186
Capital gain from discontinued operations 4,092
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$ 4,212
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 1: BASIS OF PRESENTATION
The condensed consolidated financial statements have been prepared
by SimPlayer.com Ltd., pursuant to the rules and regulations of
the Securities and Exchange Commission and include the accounts of
SimPlayer.com Ltd. and its wholly-owned subsidiary collectively
the "Company"). Certain information and footnote disclosures,
normally included in financial statements prepared in accordance
with generally accepted accounting principles, have been condensed
or omitted pursuant to such rules and regulations. While in the
opinion of the Company, the unaudited financial statements reflect
all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial position at
September 30, 2000 and the operating results and cash flows for
the three and nine months ended September 30, 2000 and 1999, these
financial statements and notes should be read in conjunction with
the Company's audited consolidated financial statements and notes
thereto, included in the Company's Annual report of form 20-F for
the fiscal year ended December 31, 1999, filed with the Securities
and Exchange Commission.
The results of operations for the three months and nine months
ended September 30, 2000 are not necessarily indicative of results
that may be expected for any other interim period or for the full
fiscal year ending December 31, 2000.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Cash, cash equivalents and short-term deposits:
The Company considers all highly liquid investment
securities with maturities from date of purchase of three
months or less to be cash equivalents.
b. Basic and diluted net loss per share:
Basic net loss per share is computed based on the weighted
average number of Ordinary shares outstanding during each
year. Diluted net loss per share is computed based on the
weighted average number of Ordinary shares outstanding
during each year, plus dilutive potential Ordinary shares
considered outstanding during the year, in accordance with
FASB Statement No. 128, "Earnings per Share".
All outstanding stock options, and warrants have been
excluded from the calculation of the diluted net loss per
share as their inclusion would be anti-dilutive for all
periods presented.
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c. Major customer:
The Company's consolidated revenues for the nine months
ended September 30, 2000 and for the year ended December
31, 1999 represents revenues from one major customer.
d. Impact of recently issued accounting standards:
In June 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which will be effective for fiscal
years beginning after June 15, 2000. This Statement
establishes accounting and reporting standards requiring
that every derivative instrument, including certain
derivative instruments embedded in other contracts, be
recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement also
requires that changes in the derivative's fair value be
recognized in earnings unless specific hedge accounting
criteria are met. The Company does not expect the impact of
this new Statement on the Company's consolidated balance
sheet or results of operations to be material.
In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101 - Revenue
Recognition in Financial Statements ("SAB 101"), which
among other things clarifies certain conditions to be met
in order to recognize revenue. The Company is currently in
the process of assessing the impact of SAB 101 and expects
to complete its assessment prior to December 31, 2000.
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PART I.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. SIMPLAYER MAKES SUCH FORWARD LOOKING STATEMENTS
UNDER THE PROVISIONS OF THE "SAFE HARBOR" SECTION OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. IN THIS QUARTERLY REPORT ON FORM 10-Q, THE WORDS
"ANTICIPATES," "BELIEVES," "EXPECTS," "FUTURE," "INTENDS," "MAY," AND SIMILAR
WORDS OR EXPRESSIONS (AS WELL AS OTHER WORDS OR EXPRESSIONS REFERENCING FUTURE
EVENTS, CONDITIONS OR CIRCUMSTANCES) IDENTIFY FORWARD LOOKING STATEMENTS. THE
COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE,
BUT ARE NOT LIMITED TO, AVAILABILITY OF FUNDS FOR THE CONTINUED FINANCING OF THE
COMPANY'S OPERATIONS AND DEVELOPMENT ACTIVITIES; UNFORESEEN DIFFICULTIES WITH
TECHNOLOGY AND PRODUCT OPERATION AND DEVELOPMENT; THE COMPANY'S ABILITY TO
GENERATE REVENUES FROM ITS TECHNOLOGY AND APPLICATIONS; DEMAND FOR AND MARKET
ACCEPTANCE OF THE COMPANY'S APPLICATIONS AND TECHNOLOGY; THE HIGHLY COMPETITIVE
NATURE OF THE COMPANY'S MARKETS; AND FLUCTUATIONS IN QUARTERLY RESULTS. FURTHER
INFORMATION ON POTENTIAL FACTORS THAT COULD AFFECT THE COMPANY'S FINANCIAL
RESULTS ARE INCLUDED IN THE COMPANY'S FILINGS MADE FROM TIME TO TIME WITH THE
SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE SECTION ENTITLED "CERTAIN
FACTORS THAT MAY AFFECT FUTURE RESULTS" CONTAINED IN SIMPLAYER'S ANNUAL REPORT
ON FORM 20-F FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 (FILE NO. 0-27946).
OVERVIEW
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SimPlayer.com Ltd. (the "Company") uses its proprietary, enabling technology -
SimPlayer(TM) - to create visual interactive applications for the sports media
market. SimPlayer is a leading-edge technology that can dynamically synchronize
content from various sources to create robust experiences for sports fans. It
further allows advertising, sponsorship and e-commerce to be woven into the
content, providing partners with significant new monetizing opportunities that
are far greater than banner advertising. Currently, the Company's applications
are delivered on the Internet, and the Company has ongoing development projects
to create real-time interactive TV and wireless platforms.
For its Internet partners, the Company provides a series of sticky, interactive
applications that keep users engaged for long periods of time and generate
frequent return visits. The Company's products for baseball, football and
basketball include 3-D visual web casts of live games, statistics-driven
applications to follow live and historical games and analyze team and player
statistics, and tools for fantasy sport participants. Through the Company's
applications, Internet sports sites can deliver in-context, event-driven
promotional and buying opportunities that can be woven into the content
applications. Users will be able to respond to the promotions and purchase
merchandise and services "on impulse" without leaving the sports application.
The Company delivers its applications to sports fans through a distribution
network of sports and media sites. The Company provides its network with unique,
"best in class" content channels
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integrated into their sites' other programming, and the Company works with them
to monetize the new channel. During the second quarter, the Company entered into
agreements to provide its applications to a number of new partners, including
USA Today.com, Lycos and Today's Sports. Under these agreements, the Company and
its partners share revenues from advertising, sponsorship and e-commerce. The
Company is changing its business model from one relying on revenue sharing
arrangements to a model that provides for the payment of license fees or the
provision of minimum revenue guarantees, in addition to a revenue share. The
Company's negotiations with potential new partners are being conducted in
accordance with this revised business model. The Company also is engaged in
discussions with a number of potential strategic partners with which the Company
could develop branded applications or provide fee-based development services,
although no agreements have yet been reached and there can be no assurances as
to the completion or timing of any such agreements.
SimTV(TM), the Company's interactive television platform, is being developed to
bring the power of the Internet to TV. SimTV is designed to interweave the live
data feeds used for web casting sporting events and other web content with the
live television broadcast feeds. The Company has developed a working SimTV
prototype, and is in discussions with potential strategic partners to bring this
product to market, although no agreements have yet been reached and there can be
no assurances as to the completion or timing of any such agreements.
On November 10, 2000, the Company announced that Paula Butler had resigned as
Chief Financial Officer. Yoel Givol, the Company's President and Chief Executive
Officer, has assumed the responsibilities of Chief Financial Officer on an
interim basis.
RESULTS OF OPERATIONS
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For the three months ended September 30, 2000, the Company reported revenue of
$52,000. This represents a portion of the $250,000 license fee paid to the
Company for a one year license of the SimPlayer technology in a non-sports
field. The balance of the fee will be recognized through July 2001.
Research and development costs increased by nearly $1.5 million in the third
quarter of 2000 compared to the same period in 1999, and increased by
approximately $3.1 million for the nine months ended September 30, 2000 compared
to the same period in 1999. These increased costs, which comprise the majority
of the Company's operating expenses, were primarily due to the hiring of
additional staff and the increasing use of outside vendors. The Company has
taken steps to reduce operating expenses in the fourth quarter of 2000,
primarily through reduction in the use of outside vendors.
Marketing and selling expenses more than doubled in the third quarter of 2000
compared to the same period in 1999, and increased by more than $1 million for
the nine months ended September 30, 2000 compared to the same period in 1999.
The increase in expenditures was primarily due to data and content acquisition
costs beginning in the second quarter of 2000, and
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increases in personnel-related expenditures in sales and marketing and business
development throughout the period.
General and administrative expenses increased by $306,000 in the third quarter
of 2000 compared to the third quarter of 1999, and increased by $959,000 for the
nine months ended September 30, 2000 compared to the same period in 1999.
General and administrative expenses increased primarily due to the hiring of
additional staff, including the payment of recruiting fees and expenses.
Interest income of $82,000 in the third quarter of 2000 was slightly higher than
the $40,000 earned during the third quarter of 1999, due to a higher average
cash balance.
LIQUIDITY AND CAPITAL RESOURCES
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As of September 30, 2000, the Company had $4.2 million in cash and cash
equivalents. The Company has not utilized borrowings to finance operations.
Financing requirements have been met primarily from the sale of assets of the
Company's educational software business to Riverdeep Interactive Learning in
July 1999, and from a private placement financing in February 2000, in which the
Company received gross proceeds of $6 million, and issued 1.2 million Ordinary
Shares. With respect to cash flows, net cash used in operating activities was
$5.7 million for the nine months ended September 30, 2000 compared to $3.5
million in the same period in 1999. Net cash used in operating activities during
the nine months ended September 30, 2000 primarily reflects the net loss
adjusted for depreciation and amortization as well as increases in trade
payables and accrued expenses.
In order to continue its current rate of development and operations, the Company
will need to raise additional funds during the first quarter 2001. The Company
currently is in discussions with potential strategic and financial investors
regarding such funding, although no agreements have yet been reached and there
can be no assurances as to the timing or completion of any financing. If the
Company is unable to raise additional funds or otherwise fund its operations on
an ongoing basis, it would have a materially adverse effect on the Company's
development and operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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PART II.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company believes it meets the qualifications of a foreign private issuer as
such term is defined under Rule 3b-4 of the U.S. Securities Exchange Act of
1934, as amended. The Company has voluntarily elected to file this Quarterly
Report on Form 10-Q. During the quarterly period ended September 30, 2000, the
Company filed no reports on Form 8-K.
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SIGNATURES
Pursuant to the requirements 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.
SIMPLAYER.COM LTD.
November 14, 2000 /s/ Yoel Givol
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Date Yoel Givol
President, Chief Executive Officer and
Acting Chief Financial Officer
(Principal Financial and Accounting Officer)
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EXHIBIT INDEX
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Exhibit
Number Description
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27 Financial Data Schedule
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