<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: 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: 0-21037
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 September 30, 2000
Common Stock - no par value 4,989,357
<PAGE>
SoloPoint.com, Inc.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited)
Condensed Statements of Operations 3
three and nine months ended September 30, 2000 and 1999
and the period March 26, 1993 (inception) through September 30, 2000
Condensed Balance Sheet 4
September 30, 2000
Condensed Statements of Cash Flows 5
nine months ended September 30, 2000 and 1999
and the period March 26, 1993 (inception) through September 30, 2000
Notes to Condensed Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 14
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 Nine months ended through
September 30 September 30 September 30,
2000 1999 2000 1999 2000
---------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 67,043 $ 684,065 $ 363,974 $ 1,241,519 $ 3,429,760
Cost of sales 13,289 691,535 242,918 1,213,419 3,917,084
---------- ---------- ----------- ----------- ------------
Gross margin 53,754 (7,470) 121,056 28,100 (487,324)
Costs and expenses:
Research and development 306,611 179,481 1,197,913 526,902 7,562,706
Sales and marketing 51,004 91,289 286,461 352,269 4,703,941
General and administrative 212,601 306,880 724,604 739,885 6,750,101
---------- ---------- ----------- ----------- ------------
570,216 577,650 2,208,978 1,619,056 19,016,748
---------- ---------- ----------- ----------- ------------
Loss from operations (516,462) (585,120) (2,087,922) (1,590,956) (19,504,072)
Interest income (expense), net 2,678 (1,538) 31,740 (3,278) 229,769
---------- ---------- ----------- ----------- ------------
Net loss $ (513,784) $ (586,658) $(2,056,182) $(1,594,234) $(19,274,303)
========== ========== =========== =========== ============
Basic and diluted net loss per share $ (.10) $ (.23) $ (.41) $ (.71)
========== ========== =========== ===========
Shares used in computing
basic and diluted net loss per share 4,989,357 2,550,068 4,986,610 2,236,061
========== ========== =========== ===========
</TABLE>
See accompanying notes.
3
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SoloPoint.com, Inc.
(a development stage company)
CONDENSED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30, 2000
------------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 90,307
Other current assets 15,541
------------
Total current assets 105,848
Furniture and equipment, at cost:
Computers and software 311,336
Furniture and fixtures 288,562
Accumulated depreciation and amortization (558,034)
------------
Total furniture and equipment, net 41,864
Other assets:
Note receivable from related party 26,086
Long-term deposits 37,997
------------
Total other assets 64,083
------------
Total assets $ 211,795
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 283,510
Accrued compensation 39,045
Notes payable, current portion 6,056
Deferred revenue 47,630
Other accrued liabilities 8,835
------------
Total current liabilities 385,076
Shareholders' equity (deficit):
Common stock 19,134,138
Deficit accumulated during the development stage (19,307,419)
------------
Total shareholders' equity (deficit) (173,281)
------------
Total liabilities and shareholders' equity (deficit) $ 211,795
============
</TABLE>
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)
Nine months ended through
September 30 September 30,
2000 1999 2000
--------------------------- ------------
<S> <C> <C> <C>
Operating activities
Net loss $(2,056,182) $(1,594,234) $(19,274,303)
Adjustments to reconcile net loss to net cash used in operating activities:
Common stock, preferred stock, and options issued for services 118,570 - 209,270
Preferred stock issued for interest payable - - 49,832
Interest income on note receivable from related party 1,087 - 1,087
Provision for inventory - - 823,754
Depreciation and amortization 15,708 69,865 558,034
Changes in operating assets and liabilities 3,072 311,794 (462,447)
----------- ----------- ------------
Net cash provided by (used in) operating activities (1,917,745) (1,212,575) (18,094,773)
Investing activities
Acquisitions of furniture and equipment (26,346) (11,746) (585,501)
Notes receivable from related parties (25,000) - (60,000)
Payment received from shareholder - - 1,500
Proceeds from sale of short-term investments 1,463,900 - -
Deposits and other assets - - (37,997)
----------- ----------- ------------
Net cash provided by (used in) investing activities 1,412,554 (11,746) (681,998)
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 (32,858) (39,362) (199,834)
Proceeds from notes receivable from shareholders - 59,770 157,500
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 3,053,125 11,833,294
----------- ----------- ------------
Net cash provided by (used in) financing activities (26,864) 2,973,533 18,867,078
Net increase (decrease) in cash (532,055) 1,749,212 90,307
Cash at beginning of period 622,362 1,005,845 -
----------- ----------- ------------
Cash at end of period $ 90,307 $ 2,755,057 $ 90,307
=========== =========== ============
</TABLE>
See accompanying notes.
5
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. General: The condensed financial statements for the three and nine month
periods ended September 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 nine month periods ended
September 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 (deficit) on the balance sheet. The Company does not have any items
reported directly in a separate component of shareholders' equity (deficit)
and therefore, the Company's comprehensive loss for the three and nine month
periods ended September 30, 2000 and 1999 and for the period from March 26,
1993 (inception) through September 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 September 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 effect
on the financial position or results of operations of the Company.
6. Major Customers: During the nine month period ended September 30, 2000, two
customers accounted for 88% of net revenue. During the nine month period
ended September 30, 1999 two customers accounted for 88% 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.
8. Subsequent Events: On October 11, 2000, the Company obtained bridge
financing totaling $250,000 in the form of secured convertible promissory
notes from four existing shareholders. Each note bears interest at a rate of
8% and is due on December 31, 2000. In addition, a total of 75,000 fully
vested and immediately exercisable common stock warrants were issued with an
exercise price of $3.00, expiring in March, 2002. A general security
interest in all of the assets of the Company was provided as security. Upon
the closing of the
6
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Company's next equity financing, if any, the outstanding aggregate principal
amount of the notes plus all accrued but unpaid interest to date shall
automatically convert into that number of common shares of the next equity
financing determined by dividing the notes plus accrued interest by the
price per share of the next equity financing.
7
<PAGE>
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 November 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, the
Company cannot assure that additional funding will be available on acceptable
terms, if at all, or that the Company will achieve profitable operations.
The Company has scheduled a senior management meeting on Thursday, November 16,
2000 to review the status of the Company's efforts to raise additional equity or
debt financing, as well as to decide the future direction of the Company. Senior
management has conducted an extensive search for an outside investor to lead the
round of financing required to allow the Company to continue as an ongoing
concern; however, as of the date of this filing, no such lead investor has been
identified. If the Company fails to identify a lead investor by the time of the
senior management meeting scheduled on Thursday, November 16, 2000, the Company
may be forced to curtail operations, abandon planned development activities, lay
off personnel, seek an acquisition partner or cease 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 September 30, 2000, was $67,043 compared
to $684,065 for the three months ended September 30, 1999. Net revenue for the
nine month period ended September 30, 2000, was $363,974 compared to $1,241,519
for the nine month period ended September 30, 1999. The decrease in net revenues
is attributable to the planned discontinuation of the Company's telecom product
line.
Cost of Sales
Cost of sales for the three months ended September 30, 2000 was $13,289, which
was 20% of revenue as compared to $691,535 for the three months ended September
30, 1999, which was 101% of revenue for that period. Cost of sales for the nine
months ended September 30, 2000 was $242,918, which was 67% of revenue as
compared to $1,213,419 for the nine months ended September 30, 1999, which was
98% of revenue for that period. The improvement in cost of sales as a percent of
net revenue is attributable to an increase in repair service revenue as well as
the sale of inventory parts that had previously been fully reserved.
Operating Expenses:
8
<PAGE>
Research and Development Expenses
Research and development expenses increased 71% in the three months ended
September 30, 2000 to $306,611 as compared with expenses of $179,481 for the
three months ended September 30, 1999. Research and development expenses
increased 127% in the nine months ended September 30, 2000 to $1,197,913 as
compared with expenses of $526,902 for the nine months ended September 30, 1999.
The increase in research and development expenses in both the three month and
nine month periods ended September 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. We anticipate that research and development expenses
will grow in future quarters from the level experienced in the first three
quarters of 2000 as we increase activities and efforts to complete the
development of our anticipated future products.
Sales and Marketing Expenses
Sales and marketing expenses decreased 44% in the three months ended September
30, 2000 to $51,004 as compared to expenses of $91,289 for the three months
ended September 30, 1999. Sales and marketing expenses decreased 19% in the nine
months ended September 30, 2000 to $286,461 as compared to expenses of $352,269
for the nine months ended September 30, 1999. The decrease in sales and
marketing expenses in both the three month and nine month periods ended
September 30, 2000 as compared to the same periods a year ago is primarily due
to decreased selling and promotion activity associated with the Company's
discontinued telecom product line. We anticipate that sales and marketing
expenses will grow in future quarters from the level experienced in the first
three 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 decreased 31% in the three months ended
September 30, 2000 to $212,601 from $306,880 in the three months ended September
30, 1999. General and administrative expenses decreased 2% in the nine months
ended September 30, 2000 to $724,604 from $739,885 in the nine months ended
September 30, 1999. The decrease in general and administrative expenses in both
the three month and nine month periods ended September 30, 2000 as compared to
the same periods a year ago is primarily due to a decrease in 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.
Interest Income (Expense). net
Interest income (expense). net is comprised primarily of interest on cash and
short-term investment balances. Interest income (net) for the three months ended
September 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 September
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 September 30, 2000 the Company recognized interest income of
$2,895 offset by interest expense of $217 as compared with interest income of
$1,659 offset by interest expense of $3,197 for the same period of the prior
year. For the nine months ended September 30, 2000 the Company recognized
interest income of $33,988 offset by interest expense of $2,248 as compared with
interest income of $8,808 offset by interest expense of $12,085 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 nine
month periods ending September 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
9
<PAGE>
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
As of September 30, 2000, the Company had cash, cash equivalents, and short-term
investments of $90,307 and a working capital deficiency of $279,228 as compared
to cash, cash equivalents, and short-term investments of $2,755,057 and working
capital of $2,531,184 at September 30, 1999. We used cash of $1,917,745 in our
operating activities for the nine months ended September 30, 2000. The Company's
principal use of cash during that period was to fund the net loss. On October
11, 2000, the Company obtained bridge financing totaling $250,000 in the form of
secured convertible promissory notes from four existing shareholders. Each note
bears interest at a rate of 8% and is due on December 31, 2000. In addition, a
total of 75,000 fully vested and immediately exercisable common stock warrants
were issued with an exercise price of $3.00, expiring in March, 2002. A general
security interest in all of the assets of the Company was provided as security.
Upon the closing of the Company's next equity financing, if any, the outstanding
aggregate principal amount of the notes plus all accrued but unpaid interest to
date shall automatically convert into that number of common shares of the next
equity financing determined by dividing the notes plus accrued interest by the
price per share of the next equity financing.
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.
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. The
Company has insufficient cash to continue its operations beyond November 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, the Company cannot assure that additional funding will be available on
acceptable terms, if at all, or that the Company will achieve profitable
operations.
The Company has scheduled a senior management meeting on Thursday, November 16,
2000 to review the status of the Company's efforts to raise additional equity or
debt financing, as well as to decide the future direction of the Company. Senior
management has conducted an extensive search for an outside investor to lead the
round of financing required to allow the Company to continue as an ongoing
concern; however, as of the date of this filing, no such lead investor has been
identified. If the Company fails to identify a lead investor by the time of the
senior management meeting scheduled on Thursday, November 16, 2000, the Company
may be forced to curtail operations, abandon planned development activities,
lay off personnel, seek an acquisition partner or cease operations.
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
September 30, 2000, the Company had an accumulated deficit of $19,307,419 and
incurred an operating loss of $2,087,922 for the nine months ended September 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;
10
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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 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 $19,274,303 as of September
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.
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 November 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, the
Company cannot assure that additional funding will be available on acceptable
terms, if at all or that the Company will achieve profitable operations.
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.
11
<PAGE>
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 telecom 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 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, as well as its ability to sell advertising on
its Connectivity For Living solution platform. A failure by the Company to
develop significant relationships with Internet Service Providers, Internet
Content Providers, or advertisers 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,
advertisers 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
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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 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 1. LEGAL PROCEEDINGS
On August 8, 2000, CT Continental, Inc. filed a legal action against the Company
for non-payment of outstanding invoices. On October 10, 2000, the Company and CT
Continental signed a Settlement and Release Agreement that calls for the Company
to pay CT Continental, Inc. $15,000 on October 11, 2000, and $110,274.58 on
November 30, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
27 - Financial Data Schedule
b) Reports on Form 8-K
- None
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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.
Date: November 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)
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