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 September 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 September 30, 2000 was 14,032,937.
Transitional Small Business Disclosure Format:
Yes No X
--- ---
<PAGE>
ALOTTAFUN!, INC.
Index
Page
----
Part I - Financial Information
------------------------------
Item 1. Financial Statements
Balance Sheet -
September 30, 2000................................................ 1
Statements of Operations -
Three and nine months ended September 30, 2000 and 1999........... 2
Statements of Changes in Stockholders' Deficit -
Nine months ended September 30, 2000.............................. 3
Statements of Cash Flows -
Nine months ended September 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
September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Current assets:
Cash $ 594
Accounts receivable 88,006
Inventory 592
---------------------
89,192
Property and equipment, net of accumulated depreciation 159,176
---------------------
Other assets:
Acquisition deposits 62,500
Other assets, trademark, net of accumulated amortization 3,618
---------------------
66,118
---------------------
$ 314,486
=====================
Liabilities and Stockholders' Deficit
Current liabilities:
Bank overdraft $ 9,675
Current maturities of long-term debt 120,078
Accounts payable 325,784
Accrued expenses 147,219
---------------------
Total current liabilities 602,756
---------------------
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; 14,032,937 shares issued and outstanding. 140,329
Additional paid-in capital 6,063,661
Accumulated deficit (5,832,960)
---------------------
371,230
Prepaid consulting (80,600)
Deferred offering costs (455,400)
Stock subscription receivable (123,500)
---------------------
Total stockholders' deficit (288,270)
---------------------
$ 314,486
=====================
</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 September 30, Nine Months Ended September 30,
------------------------------------- --------------------------------------
2000 1999 2000 1999
------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
Sales, net of allowance and discounts $ 92,031 $ 90,092 $ 92,441 $ 110,024
Cost of sales 49,428 63,673 52,369 79,468
------------------------------------- --------------------------------------
Gross profit 42,603 26,419 40,072 30,556
------------------------------------- --------------------------------------
Operating expenses:
Selling 13,958 64,866 35,800 137,065
General and administrative 628,648 225,935 1,129,741 510,220
Depreciation and amortization 8,660 2,812 25,980 42,109
------------------------------------- --------------------------------------
651,266 293,613 1,191,521 689,394
------------------------------------- --------------------------------------
Loss from operations (608,663) (267,194) (1,151,449) (658,838)
------------------------------------- --------------------------------------
Other expenses:
Net realized gain (loss) on
sale of securities, trading - (86,640) 5,344 (226,077)
Unrealized (loss) on securities, trading - (48,141) - (82,582)
Interest expense (12,455) (8,056) (35,774) (209,586)
------------------------------------- --------------------------------------
Total other expenses (12,455) (142,837) (30,430) (518,245)
------------------------------------- --------------------------------------
Net loss before extraordinary gain (621,118) (410,031) (1,181,879) (1,177,083)
Extraordinary gain on forgiveness of debt - - 64,316 -
------------------------------------- --------------------------------------
------------------------------------- --------------------------------------
Net loss $ (621,118) $ (410,031) $ (1,117,563) $ (1,177,083)
===================================== ======================================
------------------------------------- --------------------------------------
Net loss per common share $ (0.05) $ (0.05) $ (0.10) $ (0.16)
===================================== ======================================
------------------------------------- --------------------------------------
Weighted average shares outstanding 12,932,163 8,161,779 11,499,248 7,502,476
===================================== ======================================
</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
Issued Value Issued Value Capital
------------------------------------------------------------ --------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 2,000,000 $ 200 9,034,104 $ 90,341 $ 4,750,988
Issuance of common stock for cash
net of offering costs of $1,110,279 - - 3,400,333 34,004 642,895
Issuance of common stock for consulting services - - 1,498,500 14,984 574,778
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 nine months ended September 30, 2000 - - - - -
============ ============ ============= ============ ==============
Balance, September 30, 2000 2,000,000 $ 200 14,032,937 $ 140,329 $ 6,063,661
============ ============ ============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Prepaid Stock
Accumulated Deferred Consulting Subscription
Deficit Offering Costs Services Receivable Total
--------------- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ (4,715,397) $ (455,400) $ - $ (123,500) $ (452,768)
-
- - - - 676,899
- - (58,267) - 531,495
- - (22,333) - 11,167
- - - - 62,500
(1,117,563) - - - (1,117,563)
=============== ================= ============ ============ ==============
$ (5,832,960) $ (455,400) $ (80,600) $ (123,500) $ (288,270)
=============== ================= ============ ============ ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Alottafun!, Inc.
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------------------
2000 1999
-----------------------------------
<S> <C> <C>
Operating activities
Net loss $ (1,117,563) $ (1,177,083)
-----------------------------------
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 25,980 42,109
Loss on marketable securities 308,659
Interest on conversion of convertible debentures 190,818
Common stock issued for services 542,662 149,365
Purchase of marketable securities - (603,962)
(Increase) decrease in:
Accounts receivable (85,321) (2,946)
Inventory (593) 4,914
Other assets (575) 6,743
Deposits - 19,450
Increase (decrease) in:
Accounts payable 658 96,206
Accrued expenses 38,836 (43,647)
-----------------------------------
Total adjustments 521,647 167,709
-----------------------------------
Net cash used by operating activities (595,916) (1,009,374)
-----------------------------------
Investing activities
Acquisition of equipment and intangible assets (82,759) (126,155)
-----------------------------------
Net cash used by investing activities (82,759) (126,155)
-----------------------------------
Financing activities
Bank overdraft 9,675 -
Proceeds from issuance of note payable 15,000 445,015
Proceeds from sale of common stock 676,897 365,021
Reduction in note payable - (81,333)
Net payments on credit line (27,613) -
-----------------------------------
Net cash provided by financing activities 673,959 728,703
-----------------------------------
Net decrease in cash (4,716) (406,826)
Cash at beginning of period 5,310 411,114
-----------------------------------
Cash at end of period $ 594 $ 4,288
===================================
Supplemental disclosures of cash flow information
and noncash financing activities
Cash paid during the period for interest $ 7,566 $ -
===================================
</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 nine month period ended September 30, 2000, the Company issued
3,400,333 shares of restricted common stock. The Company raised $679,339 which
was net of $1,110,279 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
$1,023,279. 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 nine month period ended September 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 non 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 nine month periods ended September 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 $5,800,000 and has
used cash in operations of approximately $600,000 and $1,000,000 for the nine
month periods ended September 30, 2000 and 1999, respectively. The Company has a
negative working capital of $513,564 at September 30, 2000 and has negative
tangible net worth of approximately $288,000 at September 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 nine month periods ended September
30, 2000 and 1999. The weighted average shares outstanding for the three month
period ended September 30, 2000 was 12,932,163 as compared to 8,161,779 for the
three months ended September 30, 1999. The weighted average shares outstanding
for the nine month period ended September 30, 2000 was 11,499,248 as compared to
7,502,476 for the nine months ended September 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 nine month period ended September 30, 2000, the Company issued an
aggregate of 3,400,333 shares of restricted common stock. The Company raised
$676,899 that was net of $1,110,279 of offering costs. These offering costs
included $87,000 of cash and 1,448,750 shares of Alottafun! Restricted stock
valued at a total fair market value of $1,023,279. 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
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 nine month period ended September 30, 2000, the Company issued
1,498,500 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 $589,763 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 $80,600 (net of amortization
of $40,300) 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 $5,800,000 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 1999 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 re-organization 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 $29.9 billion in 1999. This
represents traditional retail toy sales of $23 billion and video games of $6.9
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.
According to Jupiter Communications, Inc., a New York research firm, retail
sales through online toy stores is expected to generate $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 toy, confectionary, and other related product 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. In addition, we are seeking to
obtain market share in the confectionary industry utilizing our MRABA
initiative. There is no assurance that we will be successful in marketing and
distributing toys and confectionary products 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 1999 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 September 30, 2000 compared to three months ended September
30, 1999
Total consolidated revenue for the three months ended September 30, 2000 was
$92,031 compared to $90,092 for the same period of 1999, which represents an
increase of $1,939. During the three month period ended September 30, 2000,
revenues reflected fulfillment and sales of confectionary products as part of
our MRABA.com business-to-business e-commerce focus. During the same period
ended September 30, 1999, revenues reflected sales of our Hearthside product
line.
Gross profit was $42,603 and $26,419, respectively, for the three month period
ended September 30, 2000, as compared to the prior period ended September 30,
1999, an increase of $16,184 or 61%. This increase is primarily attributable to
the sale of $22,500 of confectionary products assumed by us at little or no cost
and higher margins associated with our streamlined order processing and
inventory management.
For the three months ended September 30, 2000, total selling expenses were
$13,958 as compared to $64,866 for the same period of the previous year, a
decrease of $50,908, or 79%. This decrease is the result of lower marketing
expenses associated with our automated order processing systems. Total general
and administrative expense for the three months ended September 30, 2000, was
$628,648 as compared to $225,935 for the same period of the previous year, an
increase of $402,713, or 178%. 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.
8
<PAGE>
We had a loss from operations of $621,118 for the period ended September 30,
2000 as compared to a loss of $410,031 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. General and administrative costs
included an investor relations expense of approximately $434,000 in the three
month period ended September 30, 2000. Management anticipates that as more sales
are generated it will result in an improvement in future operating performance
and eventually profitable operations.
The loss and loss per share were $621,118 and $0.05 per share respectively, for
the three months ended September 30, 2000 as compared to a loss and loss per
share of $410,031 and $0.05 respectively, for the same period in 1999. This loss
represents a 51% increase over the loss experienced in the year ago quarter. The
weighted average shares outstanding for the quarter ended September 30, 2000 was
12,932,163 as compared 8,161,779 for the preceding year quarter ended September
30, 1999.
Nine months ended September 30, 2000 compared to nine months ended September 30,
1999
Total consolidated revenue for the nine months ended September 30, 2000 was
$92,441 compared to $110,024 for the same period of 1999, which represents a
decrease of $17,583 or 16%. Sales in the 1999 period reflected sales of our
Hearthside product line. During the nine month period ended September 30, 2000,
revenues reflected fulfillment of confectionary products as part of our
MRABA.com business-to-business e-commerce focus.
Gross profit was $40,072 and $30,556, respectively, for the nine month period
ended September 30, 2000, as compared to the prior period ended September 30,
1999. This increase is the result higher margins associated with our streamlined
order processing and inventory management. This increase is primarily
attributable to the sale of $22,500 of confectionary products assumed by us at
little or no cost and higher margins associated with our streamlined order
processing and inventory management.
For the nine months ended September 30, 2000, total selling expenses were
$35,800 as compared to $137,065 for the same period of the previous year, a
decrease of $101,265, or 74%. This decrease is the result of lower marketing
expenses associated with our automated order processing systems. Total general
and administrative expense for the nine months ended September 30, 2000, was
$1,129,741 as compared to $510,220 for the same period of the previous year, an
increase of $619,521, or 121%. 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.
We had a loss from operations of $1,151,449 for the period ended September 30,
2000 as compared to a loss of $658,838 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 expenses. General and administrative
costs included an investor relations expense of approximately $590,000 in the
nine month period ended September 30, 2000. Management anticipates that as more
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 September 30, 2000 in the amount of $64,316. This
resulted from settlement of accounts payable balances
The loss and loss per share were $1,117,562 and $0.10 per share respectively,
for the nine months ended September 30, 2000 as compared to a loss and loss per
share of $1,177,083 and $0.16 respectively, for the same period in 1999. This
loss represents a $59,521 or 5% decrease over the loss experienced in the year
ago period. The weighted average shares outstanding for the nine month period
ended September 30, 2000 were 11,499,248 as compared 7,502,476 for the preceding
year nine month period ended September 30, 1999.
9
<PAGE>
During the nine month period ended September 30, 2000 we closed out our security
position that resulted in a gain of $5,345. During the year ago period, we had
realized and unrealized losses of $308,659. 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 $35,774 in the
nine month period ended September 30, 2000 as compared to $209,586 in the same
prior year period. This represents a $173,812 decrease in interest expense, or
83%. The prior year included convertible debt that was subsequently retired with
the issuance of our common stock.
The Company has focused, in the recent nine month period ended September 30,
2000, on redeploying its Internet presence within the MRABA portal that is a B2B
e-commerce business site within the toy, confectionary, and other related
industries. MRABA was launched in May 2000 and is currently operating. The site
has begun 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 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 nine months ended, the Company received $676,899 as
equity investments for the issuance of 4,998,833 shares of common stock. These
funds were used for working capital purposes. In addition the company borrowed
$15,000 during the nine month period ended September 30, 2000.
Net cash used in operating activities for the nine months ended September 30,
2000 was $595,916 compared to net cash used of $1,009,374 for the nine months
ended September 30, 1999. This decrease in cash used by operating activities is
primarily due to a reduction in the purchase of marketable securities for the
nine month period ended September 30, 2000 as compared to the prior year period.
Cash used in investing activities for the nine months ended September 30, 2000
and 1999 was $82,759 and $126,155, respectively. We acquired equipment and
intangible assets of $82,759 during the nine months ended September 30, 2000 as
compared to $126,155 in the prior year ago period.
Cash provided by financing activities for the nine months ended September 30,
2000 was $673,959 as compared to cash provided by financing activities of
$782,703 for the nine months ended September 30, 1999. During the recent period,
the Company issued common stock that generated proceeds of $676,899 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 $365,021.
As of September 30, 2000, the Company had a net working capital deficit of
$513,564. 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 nine months. Should such funding not be available, the Company
would have to significant curtail its planned operations to achieve breakeven
operations.
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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 nine month period ended September 30, 2000, the Company issued an
aggregate of 3,400,333 shares of restricted common stock. The Company raised
$676,899 that was net of $1,110,279 of offering costs. These offering costs
included $87,000 of cash and 1,448,750 shares of Alottafun! Restricted stock,
which are included in the number of total shares issued, valued at a total fair
market value of $1,023,279. 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 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 nine month period ended September 30, 2000, the Company issued
1,498,500 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 $589,763 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 $80,600 (net of amortization
of 40,300) 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: 11/20/2000
/s/ Michael Porter
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Michael Porter, President
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