<PAGE>
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 fiscal quarter ended: June 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: 0-21037
SoloPoint.com, Inc.
(Exact name of registrant as specified in its charter)
California 77-0337580
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
130B Knowles Drive
Los Gatos, CA 95032
(address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (408) 364-8850
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 issuer's class of
common ("Common Stock"), as of the latest practicable date.
Class Outstanding at June 30, 2000
Common Stock - no par value 4,985,236
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SoloPoint.com, Inc.
INDEX
<TABLE>
<CAPTION>
Page No
-------
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1 Financial Statements (unaudited)
Condensed Statements of Operations 3
three and six months ended June 30, 2000 and 1999
and the period March 26, 1993 (inception) through June 30, 2000
Condensed Balance Sheet 4
June 30, 2000
Condensed Statements of Cash Flows 5
six months ended June 30, 2000 and 1999
and the period March 26, 1993 (inception) through June 30, 2000
Notes to Condensed Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 6 Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
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PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
SoloPoint.com, Inc.
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Period from
March 26, 1993
(inception)
Three months ended Six months ended through
June 30, June 30, June 30,
2000 1999 2000 1999 2000
----------------------- -------------------------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 107,169 $ 380,904 $ 296,931 $ 557,454 $ 3,362,717
Cost of sales 51,484 354,136 229,629 521,884 3,903,795
---------- ---------- ------------ ------------ -------------
Gross margin 55,685 26,768 67,302 35,570 (541,078)
Costs and expenses:
Research and development 590,610 167,068 891,302 347,421 7,256,095
Sales and marketing 144,372 102,586 235,457 260,980 4,652,937
General and administrative 238,764 197,798 512,003 433,005 6,537,500
---------- ---------- ------------ ------------ -------------
973,746 467,452 1,638,762 1,041,406 18,446,532
---------- ---------- ------------ ------------ -------------
Loss from operations (918,061) (440,684) (1,571,460) (1,005,836) (18,987,610)
Interest income (expense), net 8,445 (1,860) 29,062 (1,740) 227,091
---------- ---------- ------------ ------------ -------------
Net loss $ (909,616) $ (442,544) $ (1,542,398) $ (1,007,576) $ (18,760,519)
========== ========== ============ ============ =============
Basic and diluted net loss per share $ (.18) $ (.21) $ (.31) $ (.49)
========== ========== ============ ============
Shares used in computing
basic and diluted net loss per share 4,989,105 2,076,455 4,985,236 2,076,455
========== ========== ============ ============
</TABLE>
See accompanying notes.
3
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SoloPoint.com, Inc.
(a development stage company)
CONDENSED BALANCE SHEET
ASSETS
(Unaudited)
June 30, 2000
-------------
Current assets:
Cash and cash equivalents $ 346,609
Short-term investments 199,094
Accounts receivable, net 30,549
Inventories 4,030
Other current assets 16,722
------------
Total current assets 597,004
Furniture and equipment, at cost:
Computers and software 308,457
Furniture and fixtures 288,563
Accumulated depreciation and amortization (554,575)
------------
Total furniture and equipment, net 42,445
Other assets:
Note receivable from related party 25,524
Long-term deposits 37,997
------------
Total other assets 63,521
------------
Total assets $ 702,970
============
Current liabilities:
Accounts payable $ 273,452
Accrued compensation 36,201
Notes payable, current portion 8,840
Deferred revenue 40,087
Other accrued liabilities 8,835
------------
Total current liabilities 367,415
Shareholders' equity:
Common stock 19,129,190
Deficit accumulated during the development stage (18,793,635)
------------
Total shareholders' equity 335,555
------------
Total liabilities and shareholders' equity $ 702,970
============
See accompanying notes
4
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SoloPoint, Inc.
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Period from
March 26, 1993
(inception)
Six months ended through
June 30 June 30,
2000 1999 2000
-------------------------- --------------
<S> <C> <C> <C>
Operating activities
Net loss $(1,542,398) $(1,007,576) $(18,760,519)
Adjustments to reconcile net loss to net cash used in
operating activities:
Common stock, preferred stock, and options
issued for services 113,622 - 204,322
Preferred stock issued for interest payable - - 49,832
Interest income on note receivable from related
party 524 - 524
Provision for inventory - - 823,754
Depreciation and amortization 12,249 46,578 554,575
Changes in operating assets and liabilities (82,082) 402,813 (547,601)
----------- ----------- ------------
Net cash provided by (used in) operating activities (1,498,085) (558,185) (17,675,113)
Investing activities
Acquisitions of furniture and equipment (23,468) (11,746) (582,623)
Notes receivable from related parties (25,000) - (60,000)
Payment received from shareholder - - 1,500
Proceeds (purchase) of short-term investments (net) 1,264,806 - (199,094)
Deposits and other assets - - (37,997)
----------- ----------- ------------
Net cash provided by (used in) investing activities 1,216,338 (11,746) (878,214)
Financing activities
Proceeds from convertible notes payable to shareholders - - 1,120,000
Proceeds from convertible notes payable - - 1,813,000
Proceeds from notes payable - - 191,496
Principal payment on bank line of credit, net - (100,000) -
Principal payments on capital lease obligations - (25,758) (166,976)
Proceeds from notes receivable from shareholders - - 157,500
Proceeds from sale of preferred stock, net of issuance costs - - 3,951,622
Issuance of common stock, net of repurchases and
issuance costs 5,994 - 11,833,294
----------- ----------- ------------
Net cash provided by (used in) financing activities 5,994 (125,758) 18,899,936
Net increase (decrease) in cash (275,753) (695,689) 346,609
Cash at beginning of period 622,362 1,005,845 -
----------- ----------- ------------
Cash at end of period $ 346,609 $ 310,156 $ 346,609
</TABLE>
See accompanying notes.
5
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SoloPoint.com, Inc.
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. General: The condensed financial statements for the three and six month
periods ended June 30, 2000 and 1999 are unaudited but reflect all
adjustments (consisting only of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods. The
condensed financial statements should be read in conjunction with the
financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's Form 10-KSB for the year ended December 31,
1999. The results of operations for the three and six month periods ended
June 30, 2000 are not necessarily indicative of the results to be expected
for the entire fiscal year.
2. Earnings per share: The Company computes net loss per share in conformity
with the Statement of Financial Accounting Standards No. 128 "Earnings per
Share," ("SFAS 128"). In accordance with SFAS 128, basic net loss per share
excludes dilutive common stock equivalents and is calculated as net income
(loss) divided by the weighted average number of common shares outstanding.
Diluted net income (loss) per share is computed using the weighted average
number of common shares outstanding and dilutive common stock equivalents
outstanding during the period. Common equivalent shares from stock options
and warrants (using the treasury stock method) are excluded from the
calculation of net loss per share as their effect is anti-dilutive.
3. Comprehensive Income: Comprehensive income includes changes in the balances
of items that are reported directly in a separate component of
shareholders'equity on the balance sheet. The Company does not have any
items reported directly in a separate component of shareholders' equity and
therefore, the Company's comprehensive loss for the three and six month
periods ended June 30, 2000 and 1999 and for the period from March 26, 1993
(inception) through June 30, 2000 is equal to its reported net loss.
4. Segment Reporting: The Company has determined that it operates in only one
segment. The Company identified its operating committee as the chief
decision-makers for the period ended June 30, 2000. The Company's operating
committee evaluated revenue performance based on the one segment. Within
the operating committee, employee headcount and operating costs are managed
by functional area (i.e., general and administrative, research and
development, and sales and marketing) and only reviewed these metrics on a
company-wide basis. Thus, FAS 131 does not require any additional
disclosures for either revenues or costs.
5. Recently Issued Pronouncements: In December 1999, the Securities and
Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101
"Revenue Recognition" ("SAB 101"), which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. SAB 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosures related to revenue
recognition policies. The Company will be required to comply with the
guidance in SAB 101 in the fourth quarter of 2000. Management does not
currently believe that the adoption of SAB 101 will have a material affect
on the financial position or results of operations of the Company.
6. Major Customers: During the six month period ended June 30, 2000, two
customers accounted for 89% of net revenue. Two customers during the six
month period ended June 30, 1999 accounted for 77% of net revenue.
7. Related Party Transaction: In April 2000, the Company provided to Arthur
Chang, President and CEO of the Company, a $25,000 loan which bears
interest at 9% per annum. The note plus accrued interest is due April 6,
2004.
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ITEM 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following section contains forward-looking statements that involve risks and
uncertainties, including those referring to the period of time the Company's
existing capital resources will meet the Company's future capital needs, the
Company's future operating results, the market acceptance of the products of the
Company, the Company's efforts to establish and maintain distribution partners,
the development of new products, and the Company's planned investment in the
marketing and distribution of its current products and research and development
with regard to future products. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including: the ability of the Company to obtain
additional funding, dependence on market acceptance of multifunction personal
communications management products; dependence on a limited number of customers;
lack of significant sales and distribution channels; the Company's ability to
timely develop new products; business conditions and growth in the personal
communications management industry and general economy; competitive factors,
such as rival providers of personal communications management products and
services and price pressures; compatibility with a wide variety of switching
configurations; reliance on sole source contract manufacturers and component
suppliers; dependence on a limited number of key personnel; rapid technological
changes; as well as other factors set forth elsewhere in this Form 10-QSB.
To date, SoloPoint.com's working capital requirements have been met through the
sale of equity and debt securities and relatively minimal revenues from product
sales. The Company has sustained significant operating losses in every fiscal
period since inception and expects to incur substantial quarterly losses at
least through the end of calendar year 2000 and possibly longer. The Company
has insufficient cash to continue its operations beyond September 30, 2000 at
its projected level of operations. SoloPoint.com's ability to continue as a
going concern is dependent upon it successfully raising additional equity or
debt financing and, ultimately, upon achieving profitable operations. However,
we cannot assure you that additional funding will be available to us on
acceptable terms, if at all, or that we will achieve profitable operations.
Results of Operations
Net Revenues
Since inception, the Company's focus has been on the design and development of
personal communications management solutions for communications-dependent
individuals. The Company introduced its first product at the end of March 1996.
The Company's products currently have a 30-day, unconditional, money-back
guarantee. We recognize revenue when our products are shipped, the 30-day money-
back guarantee period has lapsed, and the ability to collect is reasonably
assured. One major customer does not have this 30 day money back guarantee and
therefore revenues on sales to this customer are recognized upon shipment.
Allowances are provided for product returns based on estimated future product
returns, the timing of expected new product introductions and other factors.
These allowances are recorded as direct reductions of revenue and accounts
receivable.
Net revenue for the three months ended June 30, 2000, was $107,169 compared to
$380,904 for the three months ended June 30, 1999. Net revenue for the six
month period ended June 30, 2000, was $296,931 compared to $557,454 for the six
month period ended June 30, 1999. The decrease in net revenues is mainly
attributable to the planned phase out of the Company's current telecom product
line.
Cost of Sales
Cost of sales for the three months ended June 30, 2000 was $51,484, which was
48% of revenue as compared to $354,136 for the three months ended June 30, 1999,
which was 93% of revenue for that period. Cost of sales for the six months
ended June 30, 2000 was $229,629, which was 77% of revenue as compared to
$521,884 for the six months ended June 30, 1999, which was 94% of revenue for
that period.
Operating Expenses:
Research and Development Expenses
Research and development expenses increased 254% in the three months ended June
30, 2000 to $590,610 as
7
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compared with expenses of $167,068 for the three months ended June 30, 1999.
Research and development expenses increased 157% in the six months ended June
30, 2000 to $891,302 as compared with expenses of $347,421 for the six months
ended June 30, 1999. The increase in research and development expenses in both
the three month and six month periods ended June 30, 2000 as compared to the
same periods a year ago is primarily due to increased headcount, consulting, and
development material spending associated with the development and prototype
build of our planned future products. The Company anticipates that research and
development expenses will increase each quarter from the level experienced in
the first two quarters of 2000 for the balance of 2000.
Sales and Marketing Expenses
Sales and marketing expenses increased in the three months ended June 30, 2000
to $144,372 as compared to expenses of $102,586 for the three months ended June
30, 1999 as a result of increased selling and promotion activity associated with
the Company's anticipated future product line. Sales and marketing expenses
decreased in the six months ended June 30, 2000 to $235,457 as compared to
expenses of $260,980 for the six months ended June 30, 1999 as a result of
decreased selling and promotion activity associated with the Company's existing
product line. We anticipate that sales and marketing expenses will grow in
future quarters from the level experienced in the first two quarters of 2000 as
we increase marketing activities and efforts to expand distribution of our
anticipated future products.
General and Administrative Expenses
General and administrative expenses increased 21% in the three months ended June
30, 2000 to $238,764 from $197,798 in the three months ended June 30, 1999.
General and administrative expenses increased 18% in the six months ended June
30, 2000 to $512,003 from $433,005 in the six months ended June 30, 1999. The
increase in general and administrative expenses in both the three month and six
month periods ended June 30, 2000 as compared to the same periods a year ago is
primarily due to an increase in our operating lease expense as well as personnel
expenses. We expect that general and administrative expenses may grow modestly
in absolute dollars as we add the infrastructure necessary to accommodate
expanded operations in support of our anticipated future products.
Other Income (Expense)
Other income is comprised primarily of interest on cash and short-term
investment balances. Interest income (net) for the three months ended June 30,
2000 primarily reflects interest on short-term investment balances from the
completion of the private placement of our common stock in September of 1999, as
compared to interest income (net) for the three months ended June 30, 1999,
which was near zero. The net proceeds from the private offering earned interest
through investment in high quality short-term investments. For the three months
ended June 30, 2000 the Company recognized interest income of $9,347 offset by
interest expense of $902 as compared with interest income of $2,094 offset by
interest expense of $3,954 for the same period of the prior year. For the six
months ended June 30, 2000 the Company recognized interest income of $31,093
offset by interest expense of $2,031 as compared with interest income of $7,148
offset by interest expense of $8,888 for the same period of the prior year.
Provision for Income Taxes
There was no provision for federal or state income taxes for the three and six
month periods ending June 30, 2000, as the Company incurred net operating losses
in both periods. The Company expects to incur a net operating loss for the year
ending December 31, 2000. As a result, the net operating loss carry forwards
will increase. At December 31, 1999, SoloPoint.com had federal and state net
operating loss carry forwards of approximately $9,800,000 and $9,300,000
respectively. The Company also had federal and state research and development
tax credit carry forwards of approximately $150,000 each. The net operating
loss carry forwards will expire at various dates beginning in 2000 through 2019,
if not utilized. The utilization of the net operating losses and credits may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986 (the "Code") and
similar state provisions. The annual limitation may result in the expiration of
net operating loss and tax credit carry forwards before utilization.
Liquidity and Capital Resources
8
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As of June 30, 2000, the Company had cash, cash equivalents, and short-term
investments of $545,703 and working capital of $229,589 as compared to cash,
cash equivalents, and short-term investments of $310,156 and working capital of
($55,800) at June 30, 1999. We used cash of $1,498,085 in our operating
activities for the six months ended June 30, 2000. The Company's principal uses
of cash during that period were to fund the Company's working capital
requirements and net loss.
The Company expects to incur additional substantial losses at least through the
end of calendar year 2000. The Company will need to seek additional funding
during calendar 2000 in order to complete the Connectivity For Living product
development and enter the Internet broadband services market. There can be no
assurance that the Company will be able to raise such additional funding. In
the absence of receiving additional funding, the Company anticipates that its
existing capital resources and cash generated from operations, if any, will be
adequate to meet the Company's cash requirements through September 30, 2000 at
its anticipated level of operations. Failure to obtain funding would have a
material adverse effect on the Company's business, financial condition and
results of operations and could force management to curtail operations, abandon
planned development activities, lay off personnel, seek an acquisition partner
or even cease operations. As of June 30, 2000 the Company did not have any
significant commitments for capital or other expenditures.
SoloPoint,com's capital requirements depend on many factors including market
acceptance of its products, the amount of money it invests in research and
development of new and enhanced products, the amount of money it invests in
increased marketing and sales activities, the amount of inventory it carries as
well as other factors. The Company received a report from its independent
auditors on their audit of our financial statements as of December 31, 1999
containing an explanatory paragraph that describes the uncertainty as to the
Company's ability to continue as a going concern due to its lack of sufficient
cash to meet its projected operating expenditures for the next twelve months.
As noted above, the Company will need to seek additional equity or debt
financing in 2000. The sale of additional equity or convertible debt securities
could result in additional dilution to the Company's shareholders. We cannot
assure you that financing will be available in amounts or on terms acceptable to
the Company, if at all.
Future Operating Results
Since its inception in 1993, the Company has incurred significant losses, has
had substantial negative cash flow, and has realized limited revenues. At June
30, 2000, the Company had an accumulated deficit of $18,793,635 and incurred an
operating loss of $1,571,460 for the six months ended June 30, 2000. The Company
expects to continue to incur substantial operating losses at least through its
fiscal year ending December 31, 2000.
Potential Fluctuations in Quarterly Results
The Company has experienced and expects to continue to experience fluctuations
in operating results. Fluctuations in operating results may result in volatility
in the price of the Company's common stock. Operating results may fluctuate as a
result of many factors, including:
. the volume and timing of orders received or product returns, if any,
during the period;
. the timing of commercial introduction of future products and
enhancements;
. competitive products and the impact of price competition on the
Company's average selling prices;
. product announcements by the Company and its competition;
. the Company's level of research and development and sales and
marketing activities;
Many of these factors are beyond the Company's control. In addition, due to the
short product life cycles that characterize the personal communications
management market, the Company's failure to introduce competitive new and
enhanced products in a timely manner would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company's operating and other expenses are relatively fixed in the short
term. As a result, variations in timing of revenues, if any, will cause
significant variations in quarterly results of operations. Notwithstanding the
difficulty in forecasting future sales, the Company generally must undertake its
sales and marketing and research and development activities and other
commitments months or years in advance. Accordingly, any shortfall in product
revenues, if any, in a given quarter may materially adversely affect the
Company's business, financial condition and results of operations due to the
inability to adjust expenses during the quarter to match the level of product
revenues, if any, for the quarter. In addition, the Company's sales expectations
are based entirely on its internal estimates of
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future demand. Due to these and other factors, the Company believes that quarter
to quarter comparisons of its results of operations are not necessarily
meaningful, and should not be relied upon as indications of future performance.
Risk Factors
Going Concern Assumptions; Future Capital Needs Uncertain; No Assurance of
Future Financing
The Company has incurred cumulative net losses of $18,760,519 as of June 30,
2000 and has never achieved profitability. We expect to incur substantial
losses for the foreseeable future and may never become profitable. We also
expect to continue to incur significant capital expenditures and anticipate that
our expenses will increase substantially in the foreseeable future as we
increase our sales and marketing activities, acquire or develop new technology,
and develop and market our Connectivity For Living potential future product
line, implement additional internal systems and infrastructure, and hire
additional personnel. We also expect to experience negative operating cash flow
for the foreseeable future as we fund our operating losses and capital
expenditures. We will need to generate significant revenues to achieve and
maintain profitability. We cannot be certain that we will achieve profitability
in the future. Our failure to achieve or maintain profitability could negatively
impact the market price of our common stock.
The Company will require additional funding in 2000 in order to continue
operations. In the absence of receiving additional funding, the Company
anticipates that its existing capital resources and cash generated from
operations, if any, will be adequate to meet the Company's cash requirements
until September 30, 2000 at its anticipated level of operations. The Company's
future capital requirements will depend upon numerous factors, including the
amount of revenues generated from operations and the Company's level of
operating expenses, none of which can be predicted with any certainty. The
Company intends to seek additional funding during the next three months and will
possibly seek additional funding after that time. There can be no assurance
that any additional financing will be available on acceptable terms, if at all,
when such financing is required. Moreover, if additional financing is
unavailable, the Company could be required to reduce or suspend its operations,
seek an acquisition partner or sell securities on terms that may be highly
dilutive or otherwise disadvantageous to investors.
Change in Product Direction; Emerging Market; Dependence on Market Acceptance of
Products; Lack of Adequate Marketing Resources
To date, the market for personal communications management products has
developed at a significantly slower rate than the Company had originally
anticipated. As a result, the Company is changing its product development
direction to develop products for the Internet broadband services market. If
the Internet broadband services market fails to grow or grows at a slower rate
than the Company currently anticipates, or if the Company fails to achieve
sufficient market penetration, the Company's business, financial condition and
results of operations will be materially adversely affected. Even if the market
for Internet broadband services does grow, there can be no assurance that the
Company's current products or any future Internet broadband services products,
including but not limited to its Connectivity For Living product line, which may
be introduced by the Company will achieve commercial acceptance within such a
market. Marketing newly introduced products such as those of the Company in a
developing market requires extensive financial resources and marketing efforts.
To date, the Company has not had sufficient financial resources to adequately
market its products and there can be no assurance that the Company will be able
to secure sufficient funds to enable the Company to adequately market its
products.
Discontinuation of Product Development in Personal Communications Management
Products; Future Revenue Dependent on New Product Development
The Company will fulfill all existing agreements for shipment and support of
existing personal communications management products; however, it does not
intend to continue to actively market and sell its existing product line.
Future revenue, if any, will be comprised of sales of the remaining inventory of
existing personal communications management products, as well as sales of the
Connectivity For Living product line currently under development. Any factors
adversely affecting the pricing of, demand for or market acceptance of these
products, including competition or technological change, could negatively affect
our results of operations. Factors that may affect the market acceptance of our
products, some of which are beyond our control, include the adoption of Internet
broadband services over competing technologies, the growth and changing
requirements of the market for Internet broadband services, the successful
development of our relationships with Internet service providers and Internet
10
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content providers, the performance, quality, price and total cost of ownership
of our products and services, and the performance, quality, price, total cost of
ownership and availability of competing products and services. If we are not
successful in developing and marketing new and enhanced Internet broadband
services products that keep pace with technology and our customer's needs, our
operating results will suffer. The market for our products is new and emerging,
and is characterized by rapid technological advances, changing customer needs
and evolving industry standards. Accordingly, to realize our expectations
regarding our operating results, we depend on our ability to develop, in a
timely manner, new products that keep pace with developments in technology, meet
evolving customer requirements, and enhance our current product offerings and
deliver those products through appropriate distribution channels. Developing
new products and product enhancements requires significant additional
expenditures in research and development. We may not be successful in developing
and marketing, on a timely and cost-effective basis, either enhancements to our
products or new products that respond to technological advances and satisfy
increasingly sophisticated customer needs. If we fail to introduce new products,
or enhancements to existing products, our operating results will suffer. In
addition, if new industry standards emerge that we do not anticipate or adapt
to, our products could be rendered obsolete and our business could be harmed.
Risks Associated with Strategic Relationships
The Company believes that its future success, if any, will be largely dependent
on its ability to either sell its products to or enter into joint marketing
arrangements with Internet Service Providers (ISPs) and Internet Content
Providers in the United States. A failure by the Company to develop significant
relationships with Internet Service Providers or Internet Content Providers
would have a materially adverse effect on the Company's business and operating
results. Even if the Company is successful in establishing alliances or
relationships with ISPs, Internet Content Providers or other strategic partners,
there can be no assurance that such alliances or relationships will result in an
increase in the Company's distribution channels or product revenues or otherwise
provide any benefit to the Company. In addition, the strategic partners may be
in direct or indirect competition with the Company or among each other. The
presence of potential or actual conflicts of interest could materially adversely
affect the Company's relationships with potential strategic partners, which in
turn could have a material adverse effect on the Company's business, financial
condition and results of operations.
Assessing future viability of the business; limited ability to forecast revenues
The Company is entering the new emerging market for Internet broadband services
which consequently may make it difficult for you to assess its future viability.
We cannot be certain that our business strategy will be successful. In
addition, because we have not yet begun commercial shipment of our Connectivity
For Living product line currently under development, and are planning on phasing
out the marketing and distribution of our existing personal communications
management product line, we may have limited insight into trends that may emerge
and affect our business. If we fail to respond to such trends and execute our
business strategy, our operating results will suffer. Because of our limited
operating history in the Internet Broadband Services market and because the
market for Internet Broadband Services is new and rapidly evolving, we may not
be able to forecast our quarterly revenues. A significant percentage of our
expenses, particularly salaries and rent, do not vary with our revenues. If we
experience a shortfall in revenues in relation to our expenses, we may be unable
to reduce our expenses quickly enough to avoid lower than anticipated quarterly
operating results. In addition, our expenses have increased, and will continue
to increase, with the anticipated growth in our business. We do not know whether
our revenues will grow rapidly enough to absorb these costs. As a result, our
quarterly operating results could fluctuate, and such fluctuation could cause
the market price of our common stock to decline. We do not believe that period-
to-period comparisons of our revenues and operating results are necessarily
meaningful. You should not rely on the results of any one quarter as an
indication of future performance.
Dependence on Limited Number of Customers
The Company expects that sales to relatively few customers will continue to
account for a significant percentage of the Company's revenues at least through
calendar year 2000. Substantially all of the Company's sales are made on a
purchase order basis, and none of the Company's customers has entered into an
agreement requiring them to purchase the Company's products. The loss of, or any
reduction in orders or returns of product from a current customer could have a
material adverse effect on the Company's business, financial condition and
results of operations in the near term.
The Company's ability to increase its sales will depend upon its ability to
develop and bring to market its Connectivity for Living potential future
products. The Company intends to continue marketing its current products
11
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as long as there is existing demand, but does not intend to dedicate substantial
resources to the expansion of sales to existing or new customers for current
products. In the event that the Company is unsuccessful in developing and
marketing its Connectivity for Living product line, the Company's business,
financial condition and results of operations would be materially adversely
affected.
Forward-looking Statements
This Form 10-QSB 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. Such forward-looking statements may be deemed to include
the Company's plans to enter the Internet broadband services market, establish
strategic alliances and business relationships, implement a multi-channel
distribution strategy, expend resources to create end-user demand and brand name
recognition and file additional patent applications. Such forward-looking
statements may also be deemed to include the Company's expectations concerning
factors affecting the market for its current products and any future personal
communications management products it may develop, including growth in the
personal communications management product marketplace, the dependence of mobile
individuals on the ability to manage business communications effectively in a
mobile environment and the shortcomings of commercially available personal
communications management products. Actual results could differ from those
projected in any forward-looking statements for the reasons detailed in the
other sections of this Form 10-QSB. The forward-looking statements are made as
of the date of this Form 10-QSB and the Company assumes no obligation to update
the forward-looking statements, or to update the reasons why actual results
could differ from those projected in the forward-looking statements.
Year 2000 Compliance
The Company experienced no disruptions in mission critical information
technology and non-information technology systems and thus believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from the Year 2000 issues, either with
its products, its internal systems, or the products and services of third
parties upon who we are dependent. The Company intends to continue monitoring
its mission critical computer applications and those of its suppliers and
vendors throughout the year 2000 to ensure that any Year 2000 matters that may
arise are addressed promptly.
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PART II. OTHER INFORMATION
--------------------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
An annual meeting of shareholders was held on June 20, 2000 to vote on the
following:
1. To elect Edward M. Esber, Jr., Kenneth Tai, Murali Narayanan and Arthur G.
Chang as directors to serve for the following year and until their
successors are elected.
2. To increase the number of shares of Common Stock reserved for issuance
under the Company's 1993 Incentive Stock Plan from 1,549,250 to 4,549,250
shares and to increase the limit on the number of stock options the Company
can grant to an individual employee under the Incentive Stock Plan from
75,000 to 4,500,000 shares.
3. To ratify the appointment of Ernst & Young LLP as independent public
accountants of the corporation for the year ending December 31, 2000.
Results of the Shareholder Vote:
1. Election of Directors:
The election of directors was approved as follows:
<TABLE>
<CAPTION>
In Favor Against Abstain Not Voted
-------- ------- ------- ---------
<S> <C> <C> <C> <C>
4,544,365 7,299 0 437,693
Edward M. Esber, Jr.
4,544,365 7,299 0 437,693
Kenneth Tai
Murali Narayanan 4,544,365 7,299 0 437,693
Arthur G. Chang 4,544,365 7,299 0 437,693
In Favor Against Abstain Not Voted
-------- ------- ------- ---------
3,174,741 68,591 2,500 1,743,525
2. Approval of Amendment of
1993 Incentive Stock Plan:
In Favor Against Abstain Not Voted
-------- ------- ------- ---------
3. Approval of Ratification of
Ernst & Young LLP as 4,541,089 6,200 4,375 437,693
independent public accountants
of the corporation for the year
ending December 31, 2000:
</TABLE>
13
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
27 - Financial Data Schedule
b) Reports on Form 8-K
- None
14
<PAGE>
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.
Date: August 14, 2000 SOLOPOINT.COM, INC.
by: /s/ Arthur G. Chang by:/s/ Thomas J. Muise
----------------------- ----------------------
Arthur G. Chang Thomas J. Muise
President and CEO Chief Financial Officer
(Duly Authorized Officer) (Principal Accounting Officer)
15
