FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NUMBER 0-23901
GSV, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3979226
-------------------------------- ------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
116 NEWARK AVENUE, JERSEY CITY, NJ 07302
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (201) 395-0700
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that 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 of the Registrant's common stock, par value $.001 per
share, outstanding on November 14, 2000 was 1,866,036 shares.
<PAGE>
GSV, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 2000
(unaudited) and December 31, 1999 2
Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 2000 and 1999 (unaudited) 3
Consolidated Statements of Cash Flows for the
Nine Months ended September 30, 2000 and 1999 (unaudited) 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. - Financial Statements
GSV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited)
--------------- ----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,632,000 $ 8,471,000
Accounts receivable, net of allowance for doubtful accounts
of $99,000 and $106,000, respectively 352,000 1,119,000
Inventories 0 282,000
Prepaid expenses and other current assets 208,000 937,000
--------------- ----------------
Total current assets 3,192,000 10,809,000
Investments 2,778,000 --
Property and equipment, net 723,000 1,032,000
Goodwill, net -- 13,137,000
Other assets 719,000 705,000
--------------- ----------------
Total assets $ 7,412,000 $25,683,000
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,182,000 $ 4,383,000
Accrued liabilities 304,000 860,000
Current portion of capital lease obligation 71,000 74,000
--------------- ----------------
Total current liabilities 1,557,000 5,317,000
Deferred rent 77,000 84,000
--------------- ----------------
Total liabilities 1,634,000 5,401,000
--------------- ----------------
Stockholders' equity:
Common stock, $.001 par value; 75,000,000 shares
authorized; 1,958,186 and 2,006,792 shares issued
and outstanding, respectively 2,000 2,000
Additional paid-in capital 38,009,000 37,886,000
Treasury Stock (336,000)
Accumulated deficit (31,897,000) (17,606,000)
--------------- ----------------
--------------- ----------------
Total stockholders' equity 5,778,000 20,282,000
--------------- ----------------
Total liabilities and stockholders' equity $ 7,412,000 $25,683,000
=============== ================
</TABLE>
The accompanying notes to the unaudited consolidated financial statements
are an integral part of these balance sheets.
ALL STATEMENTS OF SHARES AND EARNINGS PER SHARE CALCULATIONS
REFLECT THE 1 FOR 5 REVERSE STOCK SPLIT OF AUGUST 2000.
2
<PAGE>
GSV, INC. AND SUBSIDIARIES
CONSOLIDATED 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>
General and administrative $ 559,000 $ 1,584,000 $ 1,786,000 $ 4,804,000
------------ ------------ ------------ ------------
Total operating expenses 559,000 1,584,000 1,786,000 4,804,000
Loss on Investments Held for sale (150,000) 0 (150,000) 0
Loss from continuing operations before (709,000) (1,584,000) (1,936,000) (4,804,000)
Interest income
Interest income, net 58,000 15,000 211,000 230,000
------------ ------------ ------------ ------------
Loss from continuing operations (651,000) (1,569,000) (1,725,000) (4,574,000)
Discontinued operations:
Gain/(Loss) from operations (14,000) (593,000) (1,813,000) (1,299,000)
Estimated loss on disposal 690,000 -- (10,751,000) --
------------ ------------ ------------ ------------
Total discontinued operations 676,000 (593,000) (12,564,000) (1,299,000)
------------ ------------ ------------ ------------
Net loss $ 25,000 $ (2,162,000) $(14,289,000) $ (5,873,000)
============ ============ ============ ============
Basic and diluted net loss per common share:
Loss per common share from continuing operations $ (.33) $ (.92) $ (0.84) ($ 2.86)
Effect of adjustable common stock warrants -- -- (1.54) --
------------ ------------ ------------ ------------
Loss per common share from continuing
operations including effect of adjustable
common stock warrants (.33) (.92) (2.38) (2.86)
Gain/(Loss) per common share from
discontinued operations (.01) (.34) (.88) (0.81)
Loss per common share from estimated Loss
on disposal of discontinued operations .35 (5.24) --
------------ ------------ ------------ ------------
Net loss per common share including
effect of adjustable common stock warrants
$ .01 $ (1.26) $ (8.50) $ (3.67)
============ ============ ============ ============
Weighted average common shares
outstanding, basic and diluted 1,958,000 1,720,000 2,052000 1,600,000
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes to the unaudited consolidated financial statements
are an integral part of these consolidated statements.
Reflects the divestiture of Tools for Living completed August 14, 2000.
3
<PAGE>
GSV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(14,289,000) $ (5,873,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 253,000 508,000
Amortization 990,000
Non-cash compensation expense 32,000 36,000
Minority interest -- (253,000)
Estimated loss on disposal of discontinued
Operations & Discontinued Operations 12,564,000 --
Increase (decrease) in cash from changes in:
Accounts receivable, net 737,000 (613,000)
Inventories 282,000 (517,000)
Prepaid expenses and other 723,000 (80,000)
Other assets (14,000) 97,000
Accounts payable (3,281,000) 1,844,000
Accrued liabilities (598,000) (1,027,000)
Deferred revenues -- (23,000)
Deferred rent (7,000) (23,000)
------------ ------------
Net cash used in operating activities (3,598,000) (4,934,000)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment 0 (438,000)
Acquisition of businesses, net of cash acquired (1,878,000) (6,658,000)
------------ ------------
Net cash used in investing activities (1,878,000) (7,096,000)
Cash flows from financing activities:
Purchase of Treasury Stock (450,000) --
Proceeds from exercise of stock options 87,000 5,459,000
------------ ------------
Net cash (used in)provided by financing activities (363,000) 5,459,000
------------ ------------
Net decrease in cash (5,839,000) (6,571,000)
Cash and cash equivalents, beginning of period 8,471,000 12,285,000
------------ ------------
Cash and cash equivalents, end of period $ 2,632,000 $ 5,714,000
============ ============
Supplemental cash flow information:
Common stock issued in connection with acquisition $ -- $ 8,125,000
</TABLE>
The accompanying notes to the unaudited consolidated financial statements
are an integral part of these consolidated statements.
Reflects the Divestiture of Tools for Living completed August 14, 2000.
4
<PAGE>
GSV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
Through its Internet incubator and investment operations, the Company
aims to identify and develop attractive early stage Internet companies, and to
provide these companies, as needed, with management, marketing, financing
(including early stage seed capital), human resources, accounting resources, use
of its facilities and its extensive expertise in business development. In
exchange for these services the Company will seek equity positions in these
companies commensurate with the level and nature of services and investments
provided and the stage of their development.
Prior to February 2000 the Company was an online consumer and direct
response retailer. In early February 2000, it announced a change in its core
strategy to Internet incubator and investment company. Since that time the
Company has closed two operating divisions, Cybershop.com and electronics.net,
and on August 14, 2000 sold its remaining retailing subsidiary, Tools for
Living, to the former owners of Tools for Living. Tools for Living had been
purchased by the Company in June 1999.
The information presented as of September 30, 2000, and for the
nine-month periods ending September 30, 2000 and 1999, is unaudited, but, in the
opinion of management of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) which the Company considers necessary for the fair
presentation of the Company's financial position as of September 30, 2000, the
results of its operations for the nine -month periods ended September 30, 2000
and 1999 and its cash flows for the nine-month periods ended September 30, 2000
and 1999. The consolidated financial statements included herein have been
prepared in accordance with generally accepted accounting principles and the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial statements and
accompanying notes for the year ended December 31, 1999, included in the
Company's Annual Report on Form 10-K as filed with the Securities and Exchange
Commission. Certain prior period amounts have been reclassified to conform to
the current period presentation.
2. DISCONTINUED OPERATIONS
Consistent with the change to its Internet incubator and investment
strategy, in February 2000, the Company began the process of discontinuing its
two online retailing divisions, Cybershop.com and electronics.net. The
operations of the Cybershop.com division were discontinued in February 2000. In
the same month the Company entered into a letter of intent to sell
electronics.net to two former executives of the Company. The letter of intent
was subsequently terminated, and in May 2000, electronics.net was also
discontinued. In August 2000, the Company sold its remaining retailing
subsidiary, Tools for Living (purchased by the Company in June 1999). Tools for
Living was acquired by the former owners of Tools for Living, for consideration
including: (i) approximately 179,000 shares of common stock of GSV, Inc., (ii)
the purchasers' assumption of the liabilities of Tools for Living, and (iii) the
release of all obligations owing by the Company to the former owners, including
the obligations under their respective employment agreements. This sale
substantially completes the Company's divestiture of its retailing assets.
5
<PAGE>
As a result, the consolidated financial statements and accompanying
notes reflect Cybershop.com and electronics.net as discontinued operations.
Further, the Company disposed of Tools for Living on August 14, 2000 and no
longer accounts for its operations. The measurement date for the closing of
Cybershop.com was December 31, 1999. An estimated loss on disposal relating to
Cybershop.com of $435,000 was reflected in the Company's consolidated statement
of operations for the year ended December 31, 1999. Actual results for the nine
months ended September 30, 2000 for GSV, Inc. included operating losses of
$1,725,000, a loss from discontinued operations of $1,813,000 and a loss of
$10,751,000 on disposal of assets. This was due mainly to the write down of
goodwill related to the sale of Tools for Living completed August 14, 2000.
During the nine months ended September 30, 2000 the provision was reduced by
$684,000 reflecting lower than anticipated losses for Cybershop.com, and is
reflected within Loss on disposal of discontinued operations in the accompanying
unaudited consolidated statements of operations.
The Company, during the quarter ending September 30, 2000, lost
$651,000 on continuing operations. The Company lost $14,000 on discontinued
operations. During the quarter ended September 30, 2000 the Company recognized a
gain of $690,000 on disposal of assets related to the extinguishing of a loan to
Tools for Living. The consolidated net provision for discontinued operations as
of September 30, 2000 is $178, 000.
The carrying value of the remaining assets and liabilities of electronics.net as
of September 30, 2000 are as follows:
Accounts receivable, Topps Appliances $ 622,000
Property plant and equipment, net 22,000
Other assets 14,000
Current liabilities (153,000)
Accounts Payable, Topps Appliances (584,000)
-----------
Net assets $ 79,000
===========
The carrying value of the assets and liabilities of Tools for Living as of
September 30, 2000 is zero due to the disposal of assets on August 14, 2000.
6
<PAGE>
3. INVESTMENT
In conjunction with the sale of the operating assets of the
discontinued Cybershop.com operating division, in March of 2000, the Company
completed the sale of its cybershop.com domain name and customer lists. In
exchange, the Company received (i) $100,000 in cash and (ii) equity in a
privately owned company valued at approximately $900,000. The investment is
treated as available for sale and is valued on the market basis in the
accompanying consolidated balance sheet as of September 30, 2000. Additionally,
management has reviewed its private investment of $900,000 and has written down
the market value by $150,000 to $750,000 as of September 30, 2000. During the
quarter ended September 30, 2000 , GSV, Inc. actively sought out and made
significant investments in the following:
<TABLE>
<CAPTION>
DATE AMOUNT COMPANY
<S> <C> <C>
7/13/00 $1,500,000 Telephone.com, convertible preferred stock, convertible to 9% ownership
7/13/00 $ 200,000 Meet China.com, common stock
7/13/00 $ 200,000 Fasturn.com Series D Preferred
8/24/00 $ 125,000 WEEMA Technologies, Inc.
</TABLE>
5. SHAREHOLDERS' EQUITY
Pursuant to the terms of a private placement of equity securities of
the Company, completed on December 8, 1999, the Company issued approximately
123,000 shares of common stock in February 2000 upon the exercise of common
stock warrants ("adjustable commons stock warrants"), at an effective exercise
price of $.001 per share.
6. STOCK OPTION PLAN
During the nine months ended September 30, 2000, options to purchase
approximately 180,000 shares of the Company's Common Stock were granted, as
adjusted for the August 2000 reverse stock split at market value on date of
grant, to employees under the 1998 Stock Option Plan.
7. NET LOSS PER COMMON SHARE
Basic and diluted net loss per common share is calculated by dividing
net loss per common share after effect of adjustable common stock warrants, and
adjusted for a 1 for 5 reverse split affected August 31, 2000 as explained
below, by the weighted average number of shares of common stock outstanding
during the period as follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------
2000 1999
-------------------------------------- --------------------------------------
PER PER
LOSS SHARES SHARE LOSS SHARES SHARE
------------ ------------ ------ ------------ ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Loss from continuing operations $ (1,725,000) 2,063,000 $(0.84) $ (4,574,000) 1,600,000 $(2.86)
Effect of adjustable
common stock warrants (3,163,000) (1.54) -- --
------------ ------------ ------ ------------ ------------ ------
Loss from continuing
operations including effect
of adjustable common stock
warrants (4,888,000) 2,063,000 (2.38) (4,574,000) 1,600,000 (2.86)
Gain/(Loss) from
discontinued operations (1,813,000) (0.88) (1,299,000) (0.81)
Estimated loss on disposal
of discontinued operations (10,751,000) (5.24) -- --
------------ ------------ ------ ------------ ------------ ------
Net loss including effect of
adjustable common stock
warrants $(17,452,000) 2,052,000 $(8.50) $ (5,873,000) 1,600,000 $(3.67)
============ ============ ====== ============ ============ ======
</TABLE>
In calculating the effect on the basic and diluted net loss per common
share calculation, of the common stock issued as a result of the adjustable
common stock warrants exercised by the parties to the December 8, 1999 private
placement, the market value of the Company's common stock on the day before the
stock was issued, $5.16 pre-split basis, was multiplied by the number of common
shares issued upon exercise of these warrants, resulting in a valuation for loss
per common share purposes of $3,163,000.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
From time to time, the Company may publish statements which are not
historical fact, but are forward-looking statements relating to such matters as
anticipated financial performance, business prospects, technological
developments, new products, investments in other companies, research and
development activities and similar matters. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for forward-looking statements. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical and anticipated
results or other expectations expressed in the Company's forward-looking
statements. Such forward-looking statements may be identified by the use of
certain forward-looking terminology, such as "may," "will," "expect,"
"anticipate," "intend," "estimate," "believe," "goal," or "continue," or
comparable terminology that involves risks or uncertainties. Actual future
results and trends may differ materially from historical results or those
anticipated depending on a variety of factors, including, but not limited to,
those set forth under "Overview" and "Liquidity and Capital Resources" included
in this Management's Discussion and Analysis of Financial Condition and Results
of Operations. Particular attention should be paid to the cautionary statements
involving the Company's limited operating history, the unpredictability of its
future revenues, the unpredictable and evolving nature of its key markets,
competition from other internet incubator and investment companies, the
Company's dependence on its strategic alliances and systems development, the
management of growth, the inherent risks and uncertainties of litigation, the
risks of new business areas, as well as such risks (or others) that exist to any
portfolio company in which the Company invests. Except as required by law, the
Company undertakes no obligation to update any forward-looking statement,
whether as a result of new information, future events or otherwise. Readers,
however, should carefully review the facts set forth in other reports or
documents that the Company has filed or files from time to time with the SEC.
OVERVIEW
Through its Internet incubator and investment operations, the Company
aims to identify and develop attractive early stage Internet companies, and to
provide these companies, as needed, with management, marketing, financing
(including early stage seed capital), human resources, accounting resources, use
of its facilities and its extensive expertise in business development. In
exchange for these services the Company will seek equity positions in these
companies commensurate with the level and nature of services provided and the
stage of their development.
Prior to February 2000 the Company was an online consumer and direct
response retailer, when in early February 2000 it announced a change in its core
strategy to Internet incubator and investment Company. Since that time the
Company has closed two operating divisions, Cybershop.com and electronics.net,
and on August 14, 2000 sold its remaining retailing subsidiary, Tools for
Living, to the former owners of that Company. Tools for Living had been
purchased by the Company in June 1999.
8
<PAGE>
RESULTS OF OPERATIONS
Three Months Ended September 30, 2000 compared to Three Months Ended September
30, 1999.
General and administrative: General and administrative expenses consist
primarily of payroll and payroll related expenses for administrative,
information technology, accounting, and management personnel, recruiting, legal
fees, and general corporate expenses. General and administrative expenses
decreased by 65%, or $1,025,000 to $559,000 in the third quarter of 2000 from
$1,584,000 in the third quarter of 1999. The decrease in the current period is
the result of an increased emphasis on overhead reduction and capital
preservation.
Interest income, net: Interest income increased $43,000 to $58,000 in the third
quarter of 2000 from $15,000 in the third quarter of 1999. The increase is
primarily the result of a increase in average cash and cash equivalents and by
slightly higher interest rates.
Net Losses: Loss from continuing operations decreased by $918,000 from
$1,569,000 in the third quarter of 1999, or ($0.92) per basic and diluted common
share, to $651,000 in the third quarter of 2000, or ($0.33) per basic and
diluted common share. Net Gain in the third quarter of 2000 was $25,000 or $.01
per basic and diluted common share, as compared to $2,162,000 or ($1.26) in the
third quarter of 1999. The gain in the third quarter 2000 was mainly
attributable to the extinguishing of the loan made to Tools for Living.
Nine Months Ended September 30, 2000 compared to Nine Months Ended September 30,
1999.
General and administrative: General and administrative expenses consist
primarily of payroll and payroll related expenses for administrative,
information technology, accounting, and management personnel, recruiting, legal
fees, and general corporate expenses. General and administrative expenses
decreased by 63%, or $3,018,000 to $1,786,000 in first nine months of 2000 from
$4,804,000 in the same period of 1999. The decrease in the current period is the
result of an increased emphasis on overhead reduction and capital preservation.
Interest income, net: Interest income decreased $19,000 to $211,000 in the first
nine months of 2000 from $230,000 in the same period of 1999. The decrease is
primarily the result of a decrease in average cash and cash equivalents offset
by slightly higher interest rates.
Net Losses: Loss from continuing operations decreased by $2,849,000 from
$4,574,000 in the first nine months of 1999, or ($2.86) per basic and diluted
common share, to $1,725,000 in the same period of 2000, or ($0.84) per share,
basic and diluted common share. After the effect of adjustable common stock
warrants, loss per common share from continuing operations was ($1.54) in 2000.
Net loss in the first nine months of 2000 was $14,289,000 or ($6.96) per basic
and diluted common share, as compared to $5,873,000 or ($3.67) in the same
period of 1999. After the effect of adjustable common stock warrants net loss
per common share was ($8.50) for the first nine months of 2000. The increase in
net loss in the first nine months of 2000 included a $11,883,000 net loss on
disposal of discontinued operations, primarily attributable to the write down of
good will in Tools for Living as discussed more fully below.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations decreased $1,336,000, from $4,934,000 in
the first nine months of 1999 to $3,598,000 in the first nine months of 2000.
This reflects the Company's ability to reduce operating expenses going forward.
Net cash used in investing activities during the first nine months of
2000 was $1,878,000 as compared to $7,096,000 in the same period of the prior
year. The current periods use of cash related primarily to GSV's investment in
early stage internet companies, whereas the use of cash in the same period of
the prior year represented $6,281,000 related to acquisitions, primarily of
Tools for Living, as well as purchases of property and equipment of $438,000.
Net cash used in financing activities during the first nine months of
2000 was $363,000 as compared to net cash provided of $5,459,000 in the same
period of the prior year. Sources of cash during both periods were the result of
proceeds on the exercise of employee stock options and a securities placement
during 1999.
The Company believes that its existing capital resources will enable it
to maintain its operations at existing levels for at least the next twelve
months. The Company is, however, currently considering the funding requirements
associated with its Internet incubator and investment operations, including the
need for additional debt and/or equity financing. The sufficiency of the
Company's capital resources is substantially dependent upon the number of
investments the Company funds. Accordingly it is difficult to project the
Company's capital needs. However, the Company will evaluate potential
investments in terms of its then existing capital resources and the availability
of additional debt or equity financing and will ultimately decide on an
investment according to the sufficiency of those resources to fund the potential
investment as well as continuing operating requirements. There can be no
assurance that any additional financing or other sources of capital will be
available to the Company upon acceptable terms, if at all. The inability to
obtain additional financing, when needed, would have a material adverse effect
on the Company's business, financial condition and operating results, and could
significantly slow the pace of development of its Internet incubator and
investment operations.
DISCONTINUED OPERATIONS
As discussed above, in February of 2000 the Company began the process
of discontinuing its two online retailing divisions, Cybershop.com and
electronics.net. The operations of the Cybershop.com division were discontinued
in February of 2000 and in the same month the Company entered into a letter of
intent to sell electronics.net to two former executives of the Company. The
letter of intent was subsequently terminated, and in May of 2000 electronics.net
was also discontinued. On August 14, 2000, the Company sold its remaining
retailing subsidiary, Tools for Living (purchased by the Company in June 1999).
The sale of Tools for Living was made to the former owners of the division. The
sale included the following consideration: (i) approximately 179,000 shares of
common stock of GSV, Inc., (ii) the purchasers assumption of the liabilities of
Tools for Living, and (iii) the release of all obligations owing by the Company
to the former owners, including the obligations under their respective
employment agreements. This sale substantially completes the Company's
divestiture of its retailing assets.
10
<PAGE>
As a result, the consolidated financial statements and accompanying
notes reflect Cybershop.com, electronics.net and Tools for Living as
discontinued operations. The measurement date for the closing of Cybershop.com
was December 31, 1999. An estimated loss on disposal relating to Cybershop.com
of $435,000 was reflected in the Company's consolidated statement of operations
for the year ended December 31, 1999. Actual results for the nine months ended
September 30, 2000 for Cybershop.com included operating losses of $1,575,000, a
loss from discontinued operations of $1,813,000 and a loss on disposal of
assets. This was due mainly to the write down of goodwill related to the sale of
Tools for Living completed on August 14, 2000. During the nine months ended
September 30, 2000 the provision was reduced by $684,000 reflecting lower than
anticipated losses for Cybershop.com, and is reflected within Loss on disposal
of discontinued operations in the accompanying unaudited consolidated statements
of operations.
The Company, during the quarter ending September 30, 2000 lost $651,000
on continuing operations. The Company lost $14,000 on discontinued operations.
During the quarter ending September 30, 2000 the company recognized a gain of
$690,000 on disposal of assets related to the extinguishing of a loan to Tools
for Living.. The consolidated net provision for discontinued operations as of
September 30, 2000 is $178,000. Net revenues applicable to electronics.net for
the nine months ended September 30, 2000, during only four of which
electronics.net was in operation, were $334,000, and net revenues applicable to
electronics.net for the same period of the prior year were $1,116,000, for which
electronics.net was in operation for the full period.
CONTINUED LISTING ON NASDAQ NATIONAL MARKET
The Company's common stock is now listed on Nasdaq Small Cap Market
under the symbol GSVI as of November 1, 2000. Previously, the common stock had
been listed on the Nasdaq National Markets.
11
<PAGE>
INVESTMENT DESCRIPTIONS:
Telephone.com
In July 2000, the Company closed a $1.5 million investment in
Telephone.com, Inc., an online business exchange and vertical marketplace
targeting the telecommunications industry. The investment is GSV's largest
investment since its adoption of an Internet incubator and investment strategy.
Under the terms of the transaction, GSV received $1.5 million in
convertible preferred stock along with warrants to purchase an additional stake
in Telephone.com.
MeetChina.com
In July 2000, the Company invested $200,000 in a joint venture with
Total Film Group, Inc. to invest in MeetChina.com, a leading Chinese B2B
e-commerce-trading website portal.
Fasturn.com
In July 2000, the Company invested $200,000 in Fasturn.com, a B2B
e-commerce solution website that brokers manufacturing capacity to large and
mid-sized retailers purchase orders worldwide.
WEEMA Technologies, Inc.
In August 2000, the Company invested $125,000 in a venture led by
Marketvision Direct, Inc. to invest in WEEMA Technologies, a company that has
developed streaming media technology in a peer to peer architecture.
BOARD OF DIRECTORS
On September 26, 2000, the Company accepted the resignation of Warren Struhl as
a member of the Company's board of directors. Mr. Struhl resigned to pursue
other business ventures. Subsequently, on October 11, 2000, Harvey Doliner, CPA,
was elected to the Company's board of directors. Mr. Doliner is currently
president of Action Leasing and during his career served as a member of the
accounting and audit division of Arthur Andersen & Co., LLP. Additionally, on
October 18, 2000, the Company elected Walter Epstein, a partner of Davis &
Gilbert, LLP, a New York law firm as a member of the board of directors. Mr.
Epstein has been serving as the Company's general counsel for more than three
years.
STOCK REPURCHASE
On September 25, 2000, the board of directors approved a plan for the Company to
acquire up to $250,000 worth of stock in the open market. Through November 10,
2000, the Company had acquired 92,150 shares at prices varying from $1.03 per
share to a high of $1.91. The Company at its discretion may continue to
repurchase shares from time to time in the open market.
LITIGATION
In March and April 2000, twelve purported class actions entitled Ames
v. Cybershop, Ezeir v. Cybershop, Fuechtman v. Cybershop, Kaufman v. Cybershop,
Goldenberg v. Cybershop, Marino v. Cybershop, Waldarman v. Cybershop, Page v.
Cybershop, Young v. Cybershop, Johnson v. Cybershop, Hitzing v. Cybershop, and
Gerber v. Cybershop were filed in the United States District Court for the
District of New Jersey against the Company and certain of its current and former
officers and directors. The complaints in those actions allege that defendants
violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by
making or causing the Company to make materially false and misleading statements
about the Company's business and operations during the period October 26, 1999
to February 24, 2000. The Company intends to vigorously defend these actions.
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Item 6. Exhibits and Reports on Form 8-K
Item
No. Item Title
--- ----------
3. Articles of Incorporation:
3.1 Certificate of Incorporation, as amended (Incorporated by
reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1. File No. 333-42707).
3.2 Certificate of Amendment of the Certificate of Incorporation
of Cybershop International, Inc. (Incorporated by reference to
Exhibit 3.2 of the Registrant's Report on Form 10Q for the
fiscal quarter ended June 30, 1999. File No. 000-23901)
3.5 Certificate of Merger of GSV, Inc into Cybershop.com, Inc.
(Incorporated by reference to Exhibit 3.5 of the Registrant's
Form 10K for the year ended December 31, 1999. File No.
000-23901)
3.4 By-Laws as currently in effect (Incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on Form
S-1 (File No. 333-42707).
10.7 Agreement and Plan of Merger by and among Cybershop
International, Inc., MG Acquisition Corp., The Magellan Group,
Inc., Ian S. Phillips and Howard J. Kuntz III dated as of June
1, 1999 (incorporated by reference to Exhibit 2.1 of the
Registrant's Current Report on Form 8-K. File No. 0-23901)
10.8 Employment Agreement dated June 1, 1999, by and between Ian S.
Phillips and MG Acquisition Corp which is a wholly owned
subsidiary of Cybershop International, Inc. (Incorporated by
reference to Exhibit 10.2 of the Registrant's Report on Form
10Q for the fiscal quarter ended June 30, 1999. File No.
000-23901)
10.9 Warrant Agreement dated as of March 1998 between the Company
and C.E. Unterberg, Towbin and Fahnstock & Co., Inc.,
including Warrant Certificate of the Company (Filed as exhibit
10.9 to the Company's Registration Statement on Form S-1,
effective March 20, 1998. File No. 333-42707)
10.10 Employment Agreement dated June 1, 1999, by and between Howard
J. Kuntz III and MG Acquisition Corp which is a wholly owned
subsidiary of Cybershop International, Inc. (Incorporated by
reference to Exhibit 10.3 of the Registrant's Report on Form
10Q for the fiscal quarter ended June 30, 1999. File No.
000-23901)
10.11 Securities Purchase Agreement dated September 30, 1999 among
Cybershop.com, Inc., Strong River Investments, Inc. and
Montrose Investments, L.P. (Incorporated by reference to
Exhibit 10.4 of the Registrant's Report on Form 10Q for the
fiscal quarter ended September 30, 1999. File No. 000-23901)
10.12 Registration Rights Agreement dated September 30, 1999 among
Cybershop.com, Inc., Strong River Investments, Inc. and
Montrose Investments, L.P. (Incorporated by reference to
Exhibit 10.4 of the Registrant's Report on Form 10Q for the
fiscal quarter ended September 30, 1999. File No. 000-23901)
10.13 Securities Purchase Agreement dated December 8, 1999 among
Cybershop.com, Inc., Strong River Investments, Inc. and
Montrose Investments, L.P. (Incorporated by reference to
Exhibit 10.13 of the Registrant's Form 10K for the year ended
December 31, 1999. File No. 000-23901.)
10.14 Registration Rights Agreement dated December 8, 1999 among
Cybershop.com, Inc., Strong River Investments, Inc. and
Montrose Investments, L.P. (Incorporated by reference to
Exhibit 10.14 of the Registrant's report on Form 10K for the
year ended December 31, 1999. File No. 000-23901.)
10.15 General release dated February 14, 2000, by and between
Jeffrey Leist and Cybershop.com, Inc. (Incorporated by
reference to Exhibit 10.15 of the Registrant's report on Form
10K for the year ended December 31, 1999. File No. 000-23901.)
10.16 Modification to Employment Agreement dated February 7, 1999,
by and between Jeffrey Leist and Cybershop.com, Inc., dated
March 29, 2000 (Incorporated by reference to Exhibit 10.16 of
the Registrant's report on Form 10K for the year ended
December 31, 1999. File No. 000-23901.)
10.17 Severance Agreement and General release dated January 20,
2000, by and between Edward Mufson and Cybershop.com, Inc.
(Incorporated by reference to Exhibit 10.17 of the
Registrant's report on Form 10K for the year ended December
31, 1999. File No, 000-23901.)
10.18 Employment Agreement dated February 7, 2000, by and between
Kevin S. Miller and Cybershop.com, Inc.(Incorporated by
reference to Exhibit 10.18 of the Registrants report on Form
10K for the year ended December 31, 1999. File No 000-23901.)
10.19 Agreement dated January 12th, 2000, by and between Tops
Appliance City, Inc. and Cybershop Holding Corp, which is a
wholly owned subsidiary of Cybershop.com, Inc. (Incorporated
by Reference to Exhibit 10.19 of the Registrant's report on
Form 10K for the year ended December 31, 1999. File No
000-23901.)
11. Statement re computation of per share earnings: Statement
regarding computation of per share earnings is not required
because the computation can be readily determined from the
material contained in the financial statements included
herein.
27. Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only
(Filed herewith).
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 14, 2000 By: /s/ Jeffrey S. Tauber
-----------------------------------------
Jeffrey S. Tauber
Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
Date: November 14, 2000 By: /s/Lawrence Morgenstein
-----------------------------------------
Lawrence Morgenstein
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
14
