U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2000
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission File Number 0-26325
ALOTTAFUN!, INC.
---------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 39-1765590
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
141 N. Main Street, Suite 207, West Bend, Wisconsin 53095
---------------------------------------------------------
(Address of Principal Executive Offices)
(262) 334-4500
--------------
(Issuer's Telephone Number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such a
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
--- ---
The number of shares outstanding of the Issuer's Common Stock, $.01 Par
Value, as of June 30, 2000 was 12,141,887.
Transitional Small Business Disclosure Format:
Yes No X
--- ---
<PAGE>
ALOTTAFUN!, INC.
Index
Page
----
Part I - Financial Information
Item 1. Financial Statements
Balance Sheet -
June 30, 2000..................................................... 1
Statements of Operations -
Three and six months ended June 30, 2000 and 1999................. 2
Statements of Changes in Stockholders' Deficit -
Six months ended June 30, 2000.................................... 3
Statements of Cash Flows -
Six months ended June 30, 2000 and 1999........................... 4
Notes to Financial Statements....................................5 - 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................7 - 10
Part II - Other Information
Item 1. Legal Proceedings................................................. 11
Signatures....................................................... 11
i
<PAGE>
Alottafun!, Inc.
Balance Sheet
June 30, 2000
(unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Current assets:
Cash $ 16,617
Prepaids 10,000
---------------------
26,617
Property and equipment, net of accumulated depreciation 163,981
---------------------
Other assets:
Acquisition deposits 62,500
Other assets, trademark, net of accumulated amortization 4,009
---------------------
66,509
---------------------
$ 257,107
=====================
Liabilities and Stockholders' Deficit
Current liabilities:
Bank overdraft 17,640
Current maturities of long-term debt 129,294
Accounts payable 210,343
Accrued expenses 137,842
---------------------
Total current liabilities 495,119
---------------------
Stockholders' deficit:
Preferred stock; par value of $.0001; 5,000,000 shares
authorized; 2,000,000 shares issued and outstanding. 200
Common stock; par value of $.01 per share; 50,000,000 shares
authorized; 12,141,887 shares issued and outstanding. 121,412
Additional paid-in capital 5,541,942
Accumulated deficit (5,211,841)
---------------------
451,713
Prepaid consulting (110,825)
Deferred offering costs (455,400)
Stock subscription receivable (123,500)
---------------------
Total stockholders' deficit (238,012)
---------------------
$ 257,107
=====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
Alottafun!, Inc.
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------- ------------------------------
2000 1999 2000 1999
-------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Sales, net of allowance and discounts $ 454 $ 471 $ 410 $ 19,931
Cost of sales (594) 348 2,941 15,795
--------------------------------- -----------------------------
Gross profit 1,048 123 (2,531) 4,136
--------------------------------- -----------------------------
Operating expenses:
Selling 8,650 24,234 21,842 72,199
General and administrative 279,104 149,475 501,093 293,607
Depreciation and amortization 8,660 3,793 17,320 39,297
--------------------------------- -----------------------------
296,414 177,502 540,255 405,103
--------------------------------- -----------------------------
Loss from operations (295,366) (177,379) (542,786) (400,967)
--------------------------------- -----------------------------
Other expenses:
Net realized gain (loss) on sale
of securities, trading - (133,091) 5,344 (139,437)
Unrealized (loss) on securities, trading - 44,175 - (34,440)
Interest expense (12,098) (5,880) (23,318) (201,532)
--------------------------------- -----------------------------
Total other expenses (12,098) (94,796) (17,974) (375,409)
--------------------------------- -----------------------------
Net loss before extraordinary gain (307,464) (272,175) (560,760) (776,376)
Extraordinary gain on forgiveness of debt 2,292 - 64,316 -
--------------------------------- -----------------------------
--------------------------------- -----------------------------
Net loss $ (305,172) $ (272,175) $ (496,444) $ (776,376)
================================= =============================
--------------------------------- -----------------------------
Net loss per common share $ (0.03) $ (0.03) $ (0.05) $ (0.11)
================================= =============================
--------------------------------- -----------------------------
Weighted average shares outstanding 11,509,193 8,044,513 10,774,918 7,039,387
================================= =============================
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Alottafun!, Inc.
Statements of Changes in Stockholders' Deficit
(unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------- -------------------- Additional
Shares $.0001 Par Shares $.01 Par Paid-in Accumulated
Issued Value Issued Value Capital Deficit
--------- --------- --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 2,000,000 $ 200 9,034,104 $90,341 $ 4,750,988 $(4,715,397)
Issuance of common stock for cash
net of offering costs of $1,001,440 - - 2,652,083 26,521 543,979 -
Issuance of common stock for consulting
services - - 355,000 3,550 151,975 -
Issuance of stock option for consulting
services - - - - 33,500 -
Issuance of stock for deposit on
acquisition - - 100,000 1,000 61,500 -
Net loss for the six months ended June 30, 2000 - - - - - (496,444)
--------- -------- --------- -------- --------- -----------
Balance, June 30, 2000 2,000,000 $ 200 12,141,187 $121,412 $ 5,541,942 $(5,211,841)
========= ======== ========= ======== ========= ===========
</TABLE>
Prepaid Stock
Deferred Consulting Subscription
Offering Costs Services Receivable Total
-------------- ----------- ------------ -----
$ (455,400) $ - $(123,500) $(452,768)
- - - 570,500
- (80,117) - 75,408
- (30,708) - 2,792
- - - 62,500
- - - (496,444)
------------- -------- -------- ---------
$ (455,400) $(110,825) $(123,500) $(238,012)
============= ======== ======= =========
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Alottafun!, Inc.
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------
2000 1999
-------------------------------------
<S> <C> <C>
Operating activities
Net loss $ (496,444) $ (776,376)
-------------------------------------
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 17,320 32,804
Loss (gain) on marketable securities (5,344) 173,877
Interest on conversion of convertible debentures 191,745
Common stock issued for services 78,200 110,000
(Increase) decrease in:
Accounts receivable 2,685 -
Inventory - (16,103)
Other assets (10,966) 6,207
Deposits - 9,700
Increase (decrease) in:
Accounts payable (114,785) 68,006
Accrued expenses 29,458 (76,541)
-------------------------------------
Total adjustments (3,432) 499,695
-------------------------------------
Net cash used by operating activities (499,876) (276,681)
-------------------------------------
Investing activities
Acquisition of equipment and intangible assets (78,904) (87,339)
Proceeds from sale of marketable securities 5,344 -
Purchase of marketable securities - (829,856)
-------------------------------------
Net cash provided (used) by investing activities (73,560) (917,195)
-------------------------------------
Financing activities
Bank overdraft 17,640 16,236
Proceeds from issuance of note payable 15,000 445,015
Proceeds from sale of common stock 570,500 321,511
Net proceeds/payments on credit line (18,397) -
-------------------------------------
Net cash provided by financing activities 584,743 782,762
-------------------------------------
Net increase in cash 11,307 (411,114)
Cash at beginning of period 5,310 411,114
-------------------------------------
Cash at end of period $ 16,617 $ -
=====================================
Supplemental disclosures of cash flow information
and noncash financing activities
Cash paid during the period for interest $ 12,587 $ 2,628
</TABLE>
In February, 2000 the Company issued 100,000 shares of restricted common stock
to Faction, Inc. as an acquisition deposit. These shares were valued at the fair
market value at the date of issuance which totaled $62,500. This transaction is
accounted for as a non cash transaction in the statement of cash flows.
During the six month period ended June 30, 2000, the Company issued 2,652,083
shares of restricted common stock. The Company raised $570,500 which was net of
$1,001,440 of offering costs. These offering costs include $87,000 of cash and
1,203,750 shares of Alottafun! Restricted stock, which are included in the
number of total shares issued, valued at a total fair market value of $914,440.
The issuance of these shares were treated as offering costs and are recorded as
non cash transactions in the statement of cash flows.
During the six month period ended June 30, 2000, the Company issued 355,000
shares of restricted common stock and options to purchase 100,000 shares of
common stock for consulting services, investor relations services, and legal
fees. These shares were valued at the fair market value at the date of issuance
which totaled $155,525 for the common stock and $33,500 for the stock options.
Some of the stock issued is for services to be provided over the next twelve
months. Therefore, the Company has recorded $110,825 as prepaid consulting
expense. The issuance of these shares is recorded as no cash transactions in the
statement of cash flows.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ALOTTAFUN!, INC.
Notes to Financial Statements
Note 1 - Basis of presentation
The accompanying unaudited financial statements, which are for interim periods,
do not include all disclosures provided in the annual financial statements.
These unaudited financial statements should be read in conjunction with the
financial statements and the footnotes thereto contained in the Audited
Financial Statements for the year ended December 31, 1999 and 1998 of
Alottafun!, Inc. (the "Company").
In the opinion of the Company, the accompanying unaudited financial statements
contain all adjustments (which are of a normal and recurring nature) necessary
for a fair presentation of the financial statements. The results of operations
for the three and six month periods ended June 30, 2000 and 1999 are not
necessarily indicative of the results to be expected for the full year.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, the Company has sustained
substantial losses since inception that total approximately $5,200,000 and has
used cash in operations of approximately $500,000 and $277,000 for the six month
periods ended June 30, 2000 and 1999, respectively. The Company has a negative
working capital of $468,502 at June 30, 2000 and has negative tangible net worth
of approximately $242,000 at June 30, 2000. In addition, the Company is
currently in default on approximately $81,000 of notes payable. Additionally,
the Company has not had significant revenues over the past two years. These
issues indicate that the Company may be unable to continue as a going concern.
Realization of the Company's assets is dependent upon the Company's ability to
raise additional capital, as well as generate revenues sufficient to result in
future profitable operations. The accompanying financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue as a going concern.
Note 2 - Per share calculations
Per share data was computed by dividing net loss by the weighted average number
of shares outstanding during the three and six month periods ended June 30, 2000
and 1999. The weighted average shares outstanding for the three month period
ended June 30, 2000 was 11,509,193 as compared to 8,044,513 for the three months
ended June 30, 1999. The weighted average shares outstanding for the six month
period ended June 30, 2000 was 10,774,918 as compared to 7,039,387 for the six
months ended June 30, 1999.
Note 3 - Equity Transactions
Please refer to Audited Financial Statements consisting of the Company's balance
sheet as of December 31, 1999, and related statements of operations, changes in
stockholders' equity, and cash flows ended December 31, 1999, as audited by
Pender, Newkirk & Company, Certified Public Accountant.
During the six month period ended June 30, 2000, the Company issued an aggregate
of 2,652,083 shares of restricted common stock. The Company raised $570,500 that
was net of $1,001,440 of offering costs. These offering costs included $87,000
of cash and 1,203,750 shares of Alottafun! Restricted stock valued at a total
fair market value of $914,440. The issuance of these shares was treated as
offering costs. The Company relied upon Section 4(2) of the Securities Act of
1933 for the issuance of these securities.
In February 2000, the Company issued 100,000 shares of restricted common stock
as a deposit on the acquisition of Faction, Inc. Faction, Inc. is an Internet
software development company located in New York, NY. This acquisition is
expected to be completed in August 2000 pending the resolution of specific terms
in the stock purchase agreement. The shares issued for the deposit were valued
at the fair market value at the date of issuance that totaled $62,500. The
Company relied upon Section 4(2) of the Securities Act of 1933 for the issuance
of these securities.
During the six month period ended June 30, 2000, the Company issued 355,000
shares of restricted common stock and options to purchase 100,000 shares of
common stock or consulting services, investor relations services, and legal
fees. These shares were valued at the fair market value at the date of issuance
which totaled $155,525 for the common stock and $33,500 for the stock options.
Some of the stock issued is for services to be provided over the next twelve
months. Therefore, the Company has recorded $110,825 as prepaid consulting
expense.
5
<PAGE>
ALOTTAFUN!, INC.
Notes to Financial Statements
(Continued)
Note 4 - Contingencies
The Company's past website host and e-commerce provider has terminated the
Company's website and refused to provide additional e-commerce support services.
This dispute involves a claim that the Company has failed to timely pay for past
services rendered. However, there is no executed written contract between the
parties. Also, the website provider is refusing to turn over the HTML web pages
that comprise the Company's website and has asserted certain copyright
infringement and trade secret misappropriation claims. No lawsuit has been
filed. If necessary, and litigation is instituted, the Company plans to
vigorously defend and assert substantial counterclaims.
Management of the Company and its legal counsel indicate that the likelihood of
an unfavorable outcome, as well as the maximum potential loss, if any, is
remote. Therefore, the Company has written off approximately $60,000 payable to
the past Web site provider as an extraordinary gain.
6
<PAGE>
ALOTTAFUN, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The statements contained in this Report on Form 10-QSB, that are not purely
historical, are forward-looking information and statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These include statements regarding the Company's
expectations, intentions, or strategies regarding future matters. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof. It is important to note that the
Company's actual results could differ materially from those projected in such
forward-looking statements contained in this Form 10-QSB. The forward-looking
statements contained here-in are based on current expectations that involve
numerous risks and uncertainties. Assumptions relating to the foregoing involve
judgments regarding, among other things, the Company's ability to secure
financing or investment for capital expenditures, future economic and
competitive market conditions, and future business decisions. All these matters
are difficult or impossible to predict accurately and many of which may be
beyond the control of the Company. Although the Company believes that the
assumptions underlying its forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this form 10-QSB will prove to be
accurate.
GENERAL
We were originally established on August 15, 1993 as a distributor, and marketer
of collectible toys and candy products for children between the ages of three
and twelve years old. We have marketed products that include tea sets, games,
puzzles, books, plush toys, purses, ride-on cars, and unique surprise boxes that
contain gum and candy, collectible toys, trading cards, milk caps (pogs), comic
strips, tattoos, stickers, and various promotional inserts. Alottafun! has not
generated sufficient revenues in the last two years to fund its ongoing
operations and has sustained substantial losses since its inception and we do
not expect to become profitable until 2001. Accumulated losses to date are
approximately $5,200,000 and there is substantial doubt about our ability to
continue as a going concern.
In May 1999, Alottafun! joint ventured with E-Commerce Fulfillment, LLC. which
contracted with M.W Kasch, an independent U.S. toy distributor, to launch an
e-commerce Internet portal called TOYPOP.COM. The Joint venture was owned 33.3%
by E-Commerce Fulfillment and 67.7% by Alottafun!, Inc. E-Commerce Fulfillment
(ECF) was a wholly owned by Jeffrey C. Kasch, President of M.W. Kasch Company.
ECF's responsibilities and obligations included selling toy products to the
joint venture, at prices that did not exceed prices charged to ECF's typical
customers. ECF provided its products based on regular availability. ECF also
merchandised toys on the Web site and made decisions as to which toys to
highlight as special buys, to promote, or present as a `hot' toy. M.W. Kasch
Company warehoused and provided fulfillment to ECF. The relationship between
M.W. Kasch Company and ECF was exclusive as far as ECF was concerned, but not
exclusive with regard to M.W. Kasch. M.W. Kasch was free to sell any and all
other retailers, electronic or otherwise. Our role was to manage marketing
strategies, and to provide the electronic mediums for the sale, customer
support, and fulfillment of products that the joint venture purchases.
On February 28, 2000, M. W. Kasch and us agreed to terminate our relationship
and thereupon, M.W. Kasch Co. gave notice that effective March 28, 2000 our
agreement with them was terminated.
In October 1999, we commenced negotiations with a software developer, MHA, to
jointly develop a business-to-business site that would allow toy manufacturers
to sell direct to retailers as a further expansion of its TOYPOP site. We chose
not to partner with MHA, and instead decided to pursue a business-to-business
strategy ourselves. At Toy Fair 2000, we announced our strategy and began
signing up both manufacturers and retailers. We announced our
business-to-business Internet strategy on February 22, 2000.
On February 10, 2000 as a result of our independent pursuit of a
business-to-business strategy without MHA, who hosted the TOYPOP Internet site,
MHA shut down our TOYPOP site. We intend to remake the site into a channel in
the new MRABA Internet initiative. Sales of toy products through the TOYPOP site
amounted to $16,506 during the recent Holiday selling season, primarily due to
the lack of marketing and the limited availability of the better selling toy
products through M. W. Kasch. We are optimistic that TOYPOP can be made a viable
Internet retail portal through a reorganization and restructuring within our
MRABA internet opportunity.
7
<PAGE>
According to Toy Manufacturers of America, the leading toy industry trade group,
total annual retail toy sales were estimated at $27.2 billion in 1998. This
represents traditional retail toy sales of $21 billion and video games of $6.2
billion. These figures represent the retail sales of toys through all major
retail outlets such as national toy stores, discount stores, department, drug,
food and variety stores; gift and novelty shops; price clubs; bookstores; home
supply stores, mail order catalogs and online toy stores.
Toy sales through the Internet represented the fastest growing segment of toy
retail sales during the last quarter of 1998. According to Jupiter
Communications, Inc., a New York research firm, retail sales through online toy
stores is expected to generate $52 million in 1999, $555 million in 2002, and
$1.5 billion by 2003 excluding software, books and other children's categories.
Without the joint venture with E-Commerce Fulfillment, we have revised the
expectation of our ability to sell toy products over the Internet. As we develop
relationships with the toy manufacturers through our MRABA initiative, and
providing that we can arrange the necessary capital, we now expect to capture
$20 million of this $1.5 billion toy electronic segment of the toy industry by
2003. There is no assurance that we will be successful in marketing and
distributing toys through electronic commerce. If we experience any difficulties
regarding the development of our Internet site, our future business prospects
will be adversely affected.
Our e-commerce site was originally launched on September 21, 1999. The Web-site
e-commerce development program cost about $235,144 through December 31, 1999. In
comparison with other retailers of toys, our expenditures were relatively small.
Our expected marketing program was not funded for the recent holiday selling
season. Our lack of marketing resources has had a negative impact on our sales
and our ability to meet our sales projections. Our Toypop.com site was operating
through February 10, 2000 when it was closed.
Our operating results may hinder our ability to raise additional capital to fund
our on-going operations. To date, we have funded our Web-site e-commerce
development with working capital provided by the sales of our securities and
borrowings. However, there is no assurance that these working capital reserves
will be sufficient to complete, launch, and market our e-commerce site.
Furthermore, there is no assurance that we will be able to raise additional
funds through securities sales and borrowings in the future.
RESULTS OF OPERATIONS
Three months ended June 30, 2000 compared to three months ended June 30, 1999
Total consolidated revenue for the three months ended June 30, 2000 was $454
compared to $471 for the same period of 1999, which represents a decrease of
$17. During the three month period ended June 30, 2000 and 1999, revenues
reflected sales of our Hearthside product line.
Gross profit was $1,048 and $123, respectively, for the three month period ended
June 30, 2000, as compared to the prior period ended June 30, 1999.
For the three months ended June 30, 2000, total selling expenses were $8,650 as
compared to $24,234 for the same period of the previous year, a decrease of
$15,584, or 65%. This decrease is the result of lower marketing expenses because
of limited sales. Total general and administrative expense for the three months
ended June 30, 2000, was $279,104 as compared to $149,475 for the same period of
the previous year, an increase of $129,629, or 87%. Management has continued its
Internet presence despite the closing of its TOYPOP portal and has developed and
launched its MRABA initiative. Expenses were primarily related to these
activities as well as the development of its collectible line of toys that will
were introduced at the February ToyFair 2000 and will be sold this selling
season.
8
<PAGE>
We had a loss from operations of $295,366 for the period ended June 30, 2000 as
compared to a loss of $177,379 for the same prior year period. This increase in
the operating loss over that of the preceding year period primarily reflects
higher general and administrative, together with a higher depreciation expense
despite lower selling expenses. Management anticipates that as sales are
generated it will result in an improvement in future operating performance and
eventually profitable operations.
We obtained the benefit of an extraordinary gain on the forgiveness of debt
during the period ended June 30, 2000 in the amount of $2,292. This resulted
from settlement of accounts payable balances
The loss and loss per share were $305,172 and $0.03 per share respectively, for
the three months ended June 30, 2000 as compared to a loss and loss per share of
$272,175 and $0.03 respectively, for the same period in 1999. This loss
represents a 12% increase over the loss experienced in the year ago quarter. The
weighted average shares outstanding for the quarter ended June 30, 2000 was
11,509,193 as compared 8,044,513 for the preceding year quarter ended June 30,
1999.
During the quarter ended June 30, 1999, we had realized and realized losses of
$133,091 and an unrealized gain of $44,175 on securities trading. All securities
trading activities with our cash balance has ceased. Management has utilized
money market funds for its cash prior to its use in our operations. Interest
expense was $12,098 in the three month period ended June 30, 2000 as compared to
$5,880 in the same prior year period. This represents a $6,218 increase in
interest expense, or 106%.
Six months ended June 30, 2000 compared to six months ended June 30, 1999
Total consolidated revenue for the six months ended June 30, 2000 was $410
compared to $19,931 for the same period of 1999, which represents a decrease of
$19,521. Sales in the 1999 period reflected sales of our Hearthside product
line. This decrease is the result of our lack of marketing resources and
emphasis on our Hearthside product line.
Gross profit was ($2,531) and $4,136, respectively, for the six month period
ended June 30, 2000, as compared to the prior period ended June 30, 1999. This
decrease is the result of sales of products at below cost prices during the six
month period ended June 30, 2000.
For the six months ended June 30, 2000, total selling expenses were $21,842 as
compared to $72,199 for the same period of the previous year, a decrease of
$50,357, or 70%. This decrease is the result of lower marketing expenses because
of no sales. Total general and administrative expense for the six months ended
June 30, 2000, was $501,093 as compared to $293,607 for the same period of the
previous year, an increase of $207,486, or 71%. Management has continued its
Internet presence despite the closing of its TOYPOP portal and has developed and
launched its MRABA initiative. Expenses were primarily related to these
activities as well as the development of its collectible line of toys that will
were introduced at the February ToyFair 2000 and will be sold this selling
season.
We had a loss from operations of $542,786 for the period ended June 30, 2000 as
compared to a loss of $400,967 for the same prior year period. This decrease in
the operating loss over that of the preceding year period primarily reflects
lower general and administrative and lower selling expenses. Management
anticipates that as sales are generated it will result in an improvement in
future operating performance and eventually profitable operations.
We obtained the benefit of an extraordinary gain on the forgiveness of debt
during the period ended June 30, 2000 in the amount of $64,316. This resulted
from settlement of accounts payable balances
The loss and loss per share were $496,444 and $0.05 per share respectively, for
the six months ended June 30, 2000 as compared to a loss and loss per share of
$776,376 and $0.11 respectively, for the same period in 1999. This loss
represents a $279,932 or 36% decrease over the loss experienced in the year ago
period. The weighted average shares outstanding for the six month period ended
June 30, 2000 were 10,774,918 as compared 7,039,387 for the preceding year six
month period ended June 30, 1999.
9
<PAGE>
During the six month period ended June 30, 2000 we closed out our security
position that resulted in a gain of $5,344. During the year ago period, we had
realized and unrealized losses of $173,877. All securities trading activities
with our cash balance has ceased. Management has utilized money market funds for
its cash prior to its use in our operations. Interest expense was $23,318 in the
six month period ended June 30, 2000 as compared to $201,532 in the same prior
year period. This represents a $178,214 decrease in interest expense, or 89%.
The prior year included convertible debt that was subsequently retired with the
issuance of our common stock.
The Company has focused, in the recent six month period ended June 30, 2000, on
redeploying its internet presence within the MRABA portal that is a B2B
e-commerce business site within the toy industry. MRABA was launched in May 2000
and is currently operating. It is expected that the site will begin to provide
income to us, however, there is no assurance that it will generate significant
revenues. It is anticipated that the collectible toys will begin generating
revenues within the third quarter of this calendar year. Management is
optimistic about the benefits of its business strategies.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has largely funded its operations and its product
development activities with funds provided by issuing securities and from
borrowings. During the six months ended, the Company received $570,500 as an
equity investment for the issuance of 2,652,083 shares of common stock. These
funds were used for working capital purposes. In addition the company borrowed
$15,000 during the six month period ended June 30, 2000.
Net cash used in operating activities for the six months ended June 30, 2000 was
$499,876 compared to net cash used of $276,681 for the six months ended June 30,
1999. This increase in cash used by operating activities is primarily due to an
operating loss and a decrease in accounts payable that was not offset as in the
prior year by interest on warrants and the unrealized loss of marketable
securities that reduced the net loss.
Cash used in investing activities for the six months ended June 30, 2000 and
1999 was $73,560 and $917,195, respectively. We acquired equipment and
intangible assets of $78,904 during the six months ended June 30, 2000 as
compared to $87,339 in the prior year ago period. The major use of cash in the
year ago period was the purchase of marketable securities. We discontinued such
practices during the latter part of 1999.
Cash provided by financing activities for the six months ended June 30, 2000 was
$568,126 as compared to cash provided by financing activities of $782,762 for
the six months ended June 30, 1999. During the recent period, the Company issued
common stock that generated proceeds of $570,500 and notes payable of $15,000 to
provide working capital and to support its' expenditures. In the year ago
period, we received note proceeds of $445,015 and equity investment of $321,511.
As of June 30, 2000, the Company had a net working capital deficit of $468,502.
The Company is not presently profitable and continues to fund itself from the
proceeds of securities placements. Only when the Company achieves profitability,
will then be in a position to fund itself on an operating basis.
Management believes that additional capital will be needed to fund its working
capital needs within this fiscal year. Funding is needed for the continuing
development of its MRABA Internet portal and to market and promote its toy
collectibles. The Company is optimistic that such funds will be available from
investment or financing sources to provide for its plan. Should funds not be
readily available, management intends to defer one or more of its business
activities to a later time when appropriate funding can be arranged. The Company
is in need of additional funding to provide for its working capital requirements
over the next six months. Should such funding not be available, the Company
would have to significant curtail its planned operations to achieve breakeven
operations.
10
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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None
Item 2. Change in Securities and Use of Proceeds.
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During the six month period ended June 30, 2000, the Company issued an aggregate
of 2,652,083 shares of restricted common stock. The Company raised $570,500 that
was net of $1,001,440 of offering costs. These offering costs included $87,000
of cash and 1,203,750 shares of Alottafun! Restricted stock, which are included
in the number of total shares issued, valued at a total fair market value of
$914,440. The issuance of these shares was treated as offering costs. The
Company relied upon Section 4(2) of the Securities Act of 1933 for the issuance
of these securities.
In February 2000, the Company issued 100,000 shares of restricted common stock
as a deposit on the acquisition of Faction, Inc. Faction, Inc. is an Internet
software development company located in New York, NY. This acquisition is
expected to be completed in August 2000 pending the resolution of specific terms
in the stock purchase agreement. The shares issued for the deposit were valued
at the fair market value at the date of issuance that totaled $62,500. The
Company relied upon Section 4(2) of the Securities Act of 1933 for the issuance
of these securities.
During the six month period ended June 30, 2000, the Company issued 355,000
shares of restricted common stock and options to purchase 100,000 shares of
common stock or consulting services, investor relations services, and legal
fees. These shares were valued at the fair market value at the date of issuance
which totaled $155,525 for the common stock and $33,500 for the stock options.
Some of the stock issued is for services to be provided over the next twelve
months. Therefore, the Company has recorded $110,825 as prepaid consulting
expense.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant had
duly caused the report to be signed on its behalf by the undersigned thereunto
duly authorized.
Alottafun!, Inc.
Dated 8/21/2000
/s/ Michael Porter
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Michael Porter, President
