<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1999
Commission file number: 000-26047
EMAILTHATPAYS.COM, INC.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 65-0609891
------------------------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
428 West Sixth Avenue
Vancouver, British Columbia V5Y1L2
----------------------------------------
(Address of Principal Executive Offices)
(604) 801-5566
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
tvtravel.com, Inc.
Realm Production and Entertainment, Inc.
---------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
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 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.
x Yes No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: January 11, 2000: 8,428,092 shares
of common stock, $.005 par value per share.
<PAGE>
EMAILTHATPAYS.COM, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
<S> <C>
Consolidated Balance Sheets
as of September 30, 1999 (Unaudited) and December 31, 1998..........................................3
Consolidated Statements of Operations (Unaudited)
For the Nine Months and Three Months Ended September 30, 1999 and 1998 .............................4
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 1999 and 1998...............................................5
Notes to Consolidated Financial Statements ...............................................................6-10
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................................................11
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings ................................................................................13
Item 2 - Changes in Securities and Use of Proceeds..........................................................13
Item 3 - Defaults Upon Senior Securities....................................................................13
Item 4 - Submission of Matters to a Vote of Security Holders ...............................................13
Item 5 - Other Transactions.................................................................................13
Item 6 - Exhibits and Reports on Form 8-K ..................................................................13
Signatures .................................................................................................13
</TABLE>
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EMAILTHATPAYS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
1999 1998
----------- ------------
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 587 $ 68,261
Accounts Receivable (Net of Allowance for Doubtful Accounts of $58,500 for 62,933 155,182
Septmeber 30, 1999 and $41,000 for December 31, 1998)
Prepaid Expenses and Other 6,078 11,165
Note Receivable 500,000 --
----------- ------------
Total Current Assets 569,598 234,608
----------- ------------
Property and Equipment, at Cost (Net of Accumulated Depreciation of $267,251 for June 30, 1,083,399 1,216,629
1999 and $73,752 for December 31, 1998)
OTHER ASSETS:
Security Deposits 26,680 26,680
Goodwill 21,871 --
Capitalized Production Costs 1,106,250 1,161,605
----------- ------------
1,154,801 1,188,285
----------- ------------
Total Assets $ 2,762,798 $ 2,639,522
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Portion of Loans Payable $ -- $ 877,496
Notes Payable - Related Parties 138,792 145,431
Notes Payable 26,150 --
Current Portion of Capital Lease Obligations 119,028 120,931
Film Costs Payable 100,000 100,000
Accounts Payable and Accrued Expenses 427,354 456,034
Accrued Salaries 40,574 50,000
----------- ------------
Total Current Liabilities 851,898 1,749,892
CAPITAL LEASE OBLIGATIONS -- 62,556
LOANS PAYABLE 17,280 14,801
----------- ------------
Total Liabilities 869,178 1,827,249
----------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock ($.01 Par Value; 2,000,000 Shares Authorized)
Convertible Preferred Stock - Series A ($.01 Par Value; 375,000 Shares
Authorized; No Shares Issued and Outstanding) 0 0
Convertible Preferred Stock - Series B ($.01 Par Value; 375,000 Shares
Authorized; No Shares Issued and Outstanding) 0 0
Common Stock ($.005 Par Value; 10,000,000 Shares Authorized;
988,016 Shares Issued and Outstanding on September 30, 1999 and
2,936,267 Shares Issued and Outstanding on December 31, 1998) 4,990 14,681
Additional Paid-in Capital 3,291,596 2,190,403
Accumulated Deficit (1,402,966) (1,392,811)
----------- ------------
Total Stockholders' Equity 1,893,620 812,273
----------- ------------
Total Liabilities and Stockholders' Equity $ 2,762,798 $ 2,639,522
=========== ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-3-
<PAGE>
EMAILTHATPAYS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
----------------------------------- ----------------------------------
1999 1998 1999 1998
---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES $ 194,373 $ 76,826 $ 879,891 $ 76,826
COST OF SALES 21,276 40,702 67,773 40,702
---------------- -------------- -------------- --------------
GROSS PROFIT 173,097 36,124 812,118 36,124
---------------- -------------- -------------- --------------
OPERATING EXPENSES
Amortization of Production Costs - - 100,000 48,384
Depreciation and Amortization 64,500 750 193,500 2,250
Salaries and Fringe Benefits 147,356 20,245 523,603 113,525
Legal and Accounting 29,422 6,498 68,289 15,072
Consulting Fees 27,484 30,000 112,925 48,750
Phones and Utilities 11,385 4,218 34,153 9,620
Rent 36,315 6,997 125,560 12,326
Other Selling, General and Administrative 69,542 14,057 259,656 31,657
---------------- -------------- -------------- --------------
Total Operating Expenses 386,004 82,765 1,417,686 281,584
---------------- -------------- -------------- --------------
LOSS FROM OPERATIONS (212,907) (46,641) (605,568) (245,460)
---------------- -------------- -------------- --------------
OTHER INCOME (EXPENSES):
Interest Income - 103 64 106
Interest Expense (21,960) - (91,491) -
---------------- -------------- -------------- --------------
(21,960) 103 (91,427) 106
---------------- -------------- -------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (234,867) (46,538) (696,995) (245,354)
BENEFIT FROM INCOME TAXES 261,000 - 261,000 -
---------------- -------------- -------------- --------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 26,133 (46,538) (435,995) (245,354)
EXTRAORDINARY ITEM:
Settlement of Debt (Net of Income
Taxes of $261,000) 425,840 - 425,840 -
---------------- -------------- -------------- --------------
NET INCOME (LOSS) $ 451,973 $ (46,538) $ (10,155) $ (245,354)
================ ============== ============== ==============
BASIC AND DILUTED:
Net Income (Loss) Per Common Share:
Income (Loss) Before Extraordinary Item $ 0.04 $ (0.16) $ (1.06) $ (0.98)
Extraordinary Gain from Settlement of Debt 0.67 - 1.04 -
---------------- -------------- -------------- --------------
$ 0.71 $ (0.16) $ (0.02) $ (0.98)
================ ============== ============== ==============
Weighted Common Shares Outstanding 636,442 284,866 411,146 250,123
================ ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-4-
<PAGE>
EMAILTHATPAYS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
----------------------------------------------
1999 1998
------------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (10,155) $ (245,354)
Adjustments to Reconcile Net Loss to Net Cash Flows
Used in Operating Activities:
Depreciation 193,500 2,250
Amortization of Film Costs 100,000 89,086
Stock Issued for Services 87,212 612,000
Settlement of Debt (686,840) 0
(Increase) Decrease in:
Accounts Receivable 92,249 (73,817)
Prepaid Expenses and Other 5,087 0
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 125,486 24,916
Accrued Salaries and Fringe Benefits (9,426) (7,000)
Due to Officer 0 (1,167)
------------------- -----------------
Net Cash Flows (Used In) Provided by Operating Activities (102,887) 400,914
------------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment (15,269) (6,000)
Increase in Capitalized Production Costs (44,645) (835,819)
------------------- -----------------
Net Cash Flows Used in Investing Activities (59,914) (841,819)
------------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock 0 469,000
Principal Repayments of Notes Payable - Related Parties (6,639) (102,500)
Principal from Issuance of Notes Payable - Related Parties 0 136,185
Principal Repayments of Capital Lease Obligations (64,459) 0
Proceeds from Issuance of Notes Payable 165,638 0
------------------- -----------------
Net Cash Flows Provided by Financing Activities 94,540 502,685
------------------- -----------------
Net Decrease in Cash (68,261) 61,780
Cash - Beginning of Period 68,261 5,786
------------------- -----------------
Cash - End of Year $ 0 $ 67,566
=================== =================
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash Paid During Year for:
Interest $ 0 $ 0
------------------- -----------------
Income Taxes $ 0 $ 0
------------------- -----------------
Conversion of preferred stock to common $ 0 $ 200,000
------------------- -----------------
Issuance of common stock in exchange for reduction in accrued salary $ 52,814 $ 0
------------------- -----------------
Common stock issued in connection with acquisition $ 21,971 $ 0
------------------- -----------------
Common stock issued in exchange for note receivable $ 500,000 $ 0
------------------- -----------------
Common stock issued in exchange for debt $ 429,505 $ 0
------------------- -----------------
Distribution related to Spin-off of Net assets of VidKid Distribution, Inc. $ 1,393,620 $ 0
------------------- -----------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-5-
<PAGE>
EMAILTHATPAYS.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). The accompanying consolidated
financial statements for the interim periods are unaudited and 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 periods presented. These financial
statements should be read in conjunction with the financial statements for the
year ended December 31, 1998 and notes thereto contained in the Report on Form
10-SB, as amended, of emailthatpays.com, Inc. (the "Company") as filed with the
Securities and Exchange Commission. The results of operations for the nine
months ended September 30, 1999 are not necessarily indicative of the results
for the full fiscal year ending December 31, 1999.
NOTE 2 - INCOME (LOSS) PER SHARE
Basic earnings per share is computed by dividing net loss, after adding back
preferred stock dividends accumulated during the period, by weighted average
number of shares of common stock outstanding during each period. Diluted loss
per share is computed by dividing net loss by the weighted average number of
shares of common stock, common stock equivalents and potentially dilutive
securities outstanding during each period. Diluted loss per common share is not
presented because it is anti-dilutive. The Company declared a one-for-ten
reverse stock split effective as of September 27, 1999. Accordingly, all
historical weighted average shares and per share amounts have been restated to
reflect the reverse stock split.
-6-
<PAGE>
EMAILTHATPAYS.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(UNAUDITED)
NOTE 3 - SHAREHOLDERS' EQUITY
Common Stock
- ------------
During the nine months period ended September 30, 1999, the Company converted
accrued salaries amounting to $85,500 into 6,951 shares of common stock at per
share prices ranging from $9.50 to $21.25 per share.
During March 1999, the Company issued 500 shares of common stock in exchange for
professional services rendered. These shares were valued at $33.75 per share,
the fair value, and charged to operations.
During March 1999, the Company agreed to exchange 585 shares of its common stock
for 7.5% of BRT Video, Inc. See Note 6.
During April 1999, the Company issued 100 shares of common stock in exchange for
professional services rendered. These shares were valued at $30.00 per share,
the fair value, and charged to operations.
During May 1999, the Company issued 3,235 shares of common stock in exchange for
professional services rendered. These shares were valued at approximately $9.60
to $11.25 per share, the fair values, and charged to operations.
During September 1999, the Company issued 393,016 shares of its common stock in
full satisfaction of certain indebtedness amounting to $432,318. These shares
were valued at approximately $1.10 per share, the fair values.
During September 1999, the Company issued 300,000 shares of common stock to a
third party in exchange for the assignment to the Company of a $500,000
obligation owed to this third party. These shares were valued at approximately
$1.67 per share, the fair values.
In connection with the signing of a merger agreement (see note 7), the Company
declared a one-for-ten reverse stock split whereby each share of common stock
issued and outstanding on of September 27, 1999 was reclassified and changed to
one-tenth of one share of common stock, rounded down to the nearest whole share.
All common shares and per share data have been retroactively adjusted to reflect
this stock split. Par value remains unchanged at $.005 per share. Accordingly,
common stock was reduced by $44,894 to reflect par value with a corresponding
increase to additional paid-in capital.
-7-
<PAGE>
EMAILTHATPAYS.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(UNAUDITED)
NOTE 3 - SHAREHOLDERS' EQUITY (Continued)
Stock Warrants
- --------------
The following table summarizes information about the stock purchase warrants
outstanding September 30, 1999. All the warrants are exercisable at September
30, 1999.
Outstanding at
Exercise September 30, Expiration
Price 1999 Date
- -------- -------------- -----------------
$12.50 30,000 December 31, 2005
$20.00 15,000 December 31, 2005
$23.00 15,000 December 31, 2005
$50.00 5,190 December 31, 2001
NOTE 4 - COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income." This pronouncement sets forth requirements for
disclosure of the Company's comprehensive income and accumulated other
comprehensive items. In general, comprehensive income combines net income and
"other comprehensive items," which represent certain amounts that are reported
as components of stockholders' equity in the accompanying balance sheet,
including foreign currency translation adjustments. For the nine months ending
September 30, 1999, the Company had no comprehensive income.
NOTE 5 - FUTURE EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" was issued in June 1997. This statement changes the way public
companies report information about segments of their business in their annual
financial statements. This statement is effective for the Company's fiscal year
ending December 31, 1999. However, information is not to be presented for
interim financial statements in the first year of implementation. Adoption of
SFAS No. 131 is not expected to have a material effect on the Company's
financial statement disclosure.
-8-
<PAGE>
EMAILTHATPAYS.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(UNAUDITED)
NOTE 6 - ACQUISITION
The Company entered into a stock purchase agreement with BRT Video Inc. On
October 1, 1998, the Company exchanged 5,000 shares of its common stock for
3,760 shares (72.5%) of BRT Video, Inc. During March 1999, the Company exchanged
585 shares of its common stock for an additional 7.5% of BRT Video, Inc. The
Company is accounting for this additional acquisition of 7.5% using the purchase
method of accounting. The purchase price exceeded the fair value of net
liabilities assumed by approximately $21,942. The excess has been applied to
goodwill and is being amortized on a straight-line basis over five years.
The following unaudited pro forma consolidated results of operations of the
Company assume the acquisition had occurred January 1, 1998.
Three Months Nine Months
Ended September 30 Ended September 30
1998 1998
----------------------- ---------------------
Net Sales $ 372,355 $ 914,055
Net Loss $ (57,140) $ (369,140)
Net Loss per Common Share $ (.20) $ (1.48)
Pro forma data does not purport to be indicative of the results that would have
been obtained had these events actually occurred at the beginning of the periods
presented and is not intended to be a projection of future results.
NOTE 7 - SUBSEQUENT EVENTS
On October 22, 1999, pursuant to the terms of that certain Agreement and Plan of
Merger and Reorganization, (the "Merger Agreement"), dated as of September 17,
1999, by and among Realm Production and Entertainment, Inc., Realm Acquisition
Corp., a wholly-owned subsidiary of the Company ("Merger Sub") and
emailthatpays.com ("email"), Merger Sub was merged (the "Merger") with and into
email. Pursuant to the Merger, the shareholders of email received one share of
the Company's common stock in exchange for each share of email's common stock,
or an aggregate of 6,572,000 shares of the Company's common stock.
In connection with the Merger, the Company issued 393,016 shares of its common
stock in full satisfaction of certain indebtedness amounting to $432,318 and
issued 300,000 shares of common stock to a third party in exchange for the
assignment to the Company of a $500,000 obligation owed to this third party.
Also in connection with the Merger, the Company issued an aggregate of 525,000
shares of its common stock as an investment banking fee.
On October 27, 1999 the Company changed its name from Realm Production and
Entertainment, Inc. to tvtravel.com, Inc. On December 21, 1999 the Company
changed its name from tvtravel.com, Inc. to emailthatpays.com, Inc.
NOTE 8 - SETTLEMENT OF DEBT
In September 1997, BRT and an investor entered into an informal agreement
whereby the investor would advance $1,500,000 for expansion and renovation of a
new facility in exchange for a 49% ownership interest in BRT. The parties to the
agreement intended to engage an independent appraiser to determine the value of
the stock and thus the portion of the $1,500,000 that would be attributable to
equity financing. The balance of the advanced funds would be evidenced by a note
payable bearing interest at prime plus 1%. Between October 1997 and early 1998,
the investor advanced $585,000. In addition to advances totaling $585,000, BRT
has recorded accrued interest amounting to $101,840 as of September 30, 1999. On
August 6, 1999, the investor dismissed all causes of action and claims against
BRT. Accordingly, BRT recorded an extraordinary gain amounting to $686,840 on
the accompanying statement of operations.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
This report on Form 10-QSB contains forward-looking statements which are made
pursuant to the safe harbor provisions of the Securities Litigation Reform Act
of 1995 and which are subject to risks and uncertainties which could cause
actual results to differ materially from those discussed in the forward-looking
statements and from historical results of operations. Among the risks and
uncertainties which could cause such a difference are those relating to the
Company's dependence upon certain key personnel, its ability to manage its
growth, the Company's success in implementing its business strategy, the
Company's success in arranging financing where required, and the risk of
economic and market factors affecting the Company or its customers. Many of such
risk factors are beyond the control of the Company and its management.
In anticipation of the Merger (see Note 7 to the Notes to Consolidated Financial
Statements, above) management determined that it was in the best interest of the
Company and its shareholders to separate the Company's entertainment assets and
therefore, transferred its remaining entertainment properties to its wholly
owned subsidiary, VidKid Distribution, Inc. ("VidKid"). On September 29, 1999,
the Company's Board of Directors approved the distribution to its shareholders
as of September 29, 1999 of 100% of the stock of VidKid. For each share of
common stock of the Company held on the record date the holder will receive one
share of common stock of VidKid. The transaction is expected to be completed
during the first quarter of 2000 and is pending relevant agreements and
approvals.
Nine and three months ended September 30, 1999 compared to nine and three months
ended September 30, 1998, respectively.
Net sales for the nine and three months ended September 30, 1999 were $879,891
and $194,373, respectively, as compared to sales for the nine and three months
ended September 30, 1998 of $76,826. This increase is attributable to the fact
that on October 1, 1998, the Company purchased 72.5% of BRT Video, Inc. (See
Note 6).
Cost of sales is attributable to BRT Video, Inc. and was $67,773 or 7.7% of
sales for the nine months ended September 30, 1999. Cost of sales for the nine
and three months ended September 30, 1998 was attributable to the Company's sale
of Howdy Doody videos.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Amortization of production costs for the nine months ended September 30, 1999
was $100,000 as compared to $48,384 for the nine months ended September 30,
1998. This increase is due to management's continuing assessment and write-off
of intellectual properties in various stages of development.
Salaries and fringe benefits were $523,603 and $147,356 for the nine and three
months ended September 30, 1999 as compared to $113,525 and $20,245 for the nine
and three months ended September 30, 1998, respectively. The increase was
directly attributable to the acquisition of BRT Video, Inc.
Legal and accounting fees were $68,289 and $29,422 for the nine and three months
ended September 30, 1999 as compared to $15,072 and $6,498 for the nine and
three months ended September 30, 1998, respectively. The increase is
attributable to an increase in accounting and auditing fees, primarily
attributable to the acquisition of BRT Video, Inc.
Consulting fees were $112,925 and $27,484 for the nine and three months ended
September 30, 1999 as compared to $48,750 and $30,000 for the nine and three
months ended September 30, 1998. The increase is primarily attributable to the
acquisition of BRT Video, Inc. and investment banking fees.
Rent expense was $125,560 and $36,315 for the nine and three months ended
September 30, 1999 as compared to $12,326 and $6,997 for the nine and three
months ended September 30, 1998, respectively. The increase was directly
attributable to the acquisition of BRT Video, Inc. and the fact that the Company
and BRT relocated into their new production facility in Fort Lauderdale,
Florida.
General and administrative expenses, which includes contract labor, travel and
entertainment, insurance and other expenses, were $259,656 and $69,542 for the
nine and three months ended September 30, 1999 as compared to $31,657 and
$14,057 for the nine and three months ended September 30, 1998, respectively.
The increase is primarily attributable to the acquisition of BRT Video, Inc.
As a result of the foregoing factors, the Company incurred losses of
approximately $10,155 or ($.02) per share for the nine months ended September
30, 1999 as compared to a loss of approximately $245,354 or ($.98) per share for
the nine month period ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had stockholders' equity of approximately
$500,000. Since its inception, it has incurred losses of approximately
$1,400,000. The Company's operations and growth have been funded by loans from
third parties, the sale of common stock with gross proceeds of approximately
$1,000,000 and the issuance of preferred stock which resulted in net proceeds to
the Company of approximately $375,000. These funds have been used for working
capital, capital expenditures, and the acquisition of the "Howdy Doody" library
consisting of 130 episodes.
The Company has no other material commitments for capital expenditures. The
Company believes that it has sufficient liquidity to meet all of its cash
requirements for the next twelve months and that subsequent cost reductions and
increased marketing efforts will provide sufficient cash flows to meet their
operating needs and grow its regional market share. The Company believes,
however, that additional funding will be necessary to expand the production
business.
-11-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
SUBSEQUENT EVENTS
On October 22, 1999, pursuant to the terms of that certain Agreement and Plan of
Merger and Reorganization, (the "Merger Agreement"), dated as of September 17,
1999, by and among Realm Production and Entertainment, Inc., Realm Acquisition
Corp., a wholly-owned subsidiary of the Company ("Merger Sub") and
emailthatpays.com ("email"), Merger Sub was merged (the "Merger") with and into
email. Pursuant to the Merger, the shareholders of email received one share of
the Company's common stock in exchange for each share of email's common stock,
or an aggregate of 6,572,000 shares of the Company's common stock.
In connection with the Merger, the Company issued 393,016 shares of its common
stock in full satisfaction of certain indebtedness amounting to $432,318 and
issued 300,000 shares of common stock to a third party in exchange for the
assignment to the Company of a $500,000 obligation owed to this third party.
Also in connection with the Merger, the Company issued an aggregate of 525,000
shares of its common stock as an investment banking fee.
On October 27, 1999 the Company changed its name from Realm Production and
Entertainment, Inc. to tvtravel.com, Inc. On December 21, 1999 the Company
changed its name from tvtravel.com, Inc. to emailthatpays.com, Inc.
RISK OF YEAR 2000 ISSUES
The Company believes it does not utilize software within its business processes
that may be impacted by the year 2000 issue. The year 2000 issue exists because
many computer systems and applications currently use two digit date fields to
designate a year. Data sensitive systems may recognize the year 2000 as 1900, or
not at all. This inability to properly treat the year 2000 could cause systems
to process critical financial and operational information incorrectly.
-12-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not involved in any material litigation.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Furnish the exhibits required by Item 601 Regulation S-B
27 - Financial Data Schedule
(b) Reports on Form 8-K
There were no current reports on Form 8-K filed by the Company
during the nine months ended September 30, 1999.
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
EMAILTHATPAYS.COM, INC.
Dated: January 12, 2000
By: /s/ Daniel Hunter
-----------------------
Daniel Hunter
Chief Executive Officer
-13-
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------- ----------- --------
27 Financial Data Schedule *1
- -----------
*1 Filed electronically pursuant to Item 401 of Regulation S-T.
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
EMAILTHATPAYS.COM, INC. AND SUBSIDIARIES FORM 10-QSB FINANCIAL STATEMENTS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1999
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 587
<SECURITIES> 0
<RECEIVABLES> 121,433
<ALLOWANCES> (58,500)
<INVENTORY> 0
<CURRENT-ASSETS> 569,598
<PP&E> 1,305,650
<DEPRECIATION> 2,762,798
<TOTAL-ASSETS> 851,898
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 4,990
<OTHER-SE> 1,888,630
<TOTAL-LIABILITY-AND-EQUITY> 2,762,798
<SALES> 879,891
<TOTAL-REVENUES> 879,891
<CGS> 67,773
<TOTAL-COSTS> 67,773
<OTHER-EXPENSES> 1,417,666
<LOSS-PROVISION> (605,568)
<INTEREST-EXPENSE> 91,491
<INCOME-PRETAX> (696,955)
<INCOME-TAX> (261,000)
<INCOME-CONTINUING> (435,995)
<DISCONTINUED> 0
<EXTRAORDINARY> (425,840)
<CHANGES> 0
<NET-INCOME> (10,155)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
