Form 10-QSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
[X] Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2000.
[ ] Transition report pursuant Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______________ to _______________
Commission file number: 0-23687
Stockgroup.com Holdings, Inc.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1379282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SUITE 500 - 750 W PENDER STREET
VANCOUVER BRITISH COLUMBIA CANADA V6C 2T7 A2
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (604) 331-0995
Former address: Suite 1000 789 W Pender Street, Vancouver,
British Columbia, Canada V6C 1H2
(Former name or address, 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.
Yes: X No:
--- ---
Applicable only to issuers involved in bankruptcy
proceedings during the preceding five years
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes No
--- ---
Applicable only to corporate issuers
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 8,411,935
Transitional Small Business Disclosure Format (check one); Yes: No: X
--- ---
<PAGE>
Stockgroup.com Holdings, Inc.
FORM 10-QSB
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Consolidated Balance Sheets 3
Consolidated Statement of Loss and Deficit 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 16
Item 6. Exhibits and Reports on Form 8K 16
SIGNATURE PAGE 16
FINANCIAL DATA SCHEDULE 17
2
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Item 1. FINANCIAL STATEMENTS
Stockgroup.com Holdings, Inc.
CONSOLIDATED BALANCE SHEET
(UNAUDITED - Expressed in U.S. Dollars)
Unaudited Unaudited
September 30, December 31,
2000 1999
----------- -----------
ASSETS
CURRENT
Cash and cash equivalents $ 740,710 $ 1,658,822
Accounts receivable, net 534,237 855,170
Due from shareholder 3,153 31,973
Prepaid expenses 232,680 887,223
----------- -----------
TOTAL CURRENT ASSETS $ 1,510,870 $ 3,433,188
Property and equipment, net $ 605,790 $ 440,368
Investments and advances 499,934 --
----------- -----------
$ 2,616,594 $ 3,873,556
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT
Bank indebtedness $ 15,737 $ 21,004
Accounts payable 252,803 732,392
Accrued payroll liabilities 98,027 126,566
Deferred revenue 295,812 230,545
Notes payable 2,155,855 --
----------- -----------
TOTAL CURRENT LIABILITIES $ 2,818,234 $ 1,110,507
----------- -----------
TOTAL LIABILITIES $ 2,818,234 $ 1,110,507
----------- -----------
SHAREHOLDERS' EQUITY (DEFICIENCY)
COMMON STOCK, No Par Value
Authorized shares - 50,000,000
Issued and Outstanding shares - 8,411,935 $ 7,286,983 6,761,483
PREFERRED STOCK, non-voting, no par value
Authorized shares - 5,000,000
Issued and outstanding - nil -- --
ADDITIONAL PAID-IN CAPITAL 914,444 261,277
ACCUMULATED DEFICIT $(8,403,067) $(4,259,711)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY) $ (201,640) $ 2,763,049
----------- -----------
$ 2,616,594 $ 3,873,556
=========== ===========
The Accompanying Notes Are An Integral Part
Of These Unaudited Financial Statements.
3
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Stockgroup.com Holdings, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED - Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Unaudited Unaudited Unaudited Unaudited
Three Months Three Months Nine Months Nine Months
Ended Sept Ended Sept Ended Sept Ended Sept
30, 2000 30, 1999 30, 2000 30, 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE
Revenues $ 795,148 $ 284,431 $ 3,342,306 $ 1,444,549
Cost of revenues 508,801 195,417 1,371,516 1,028,537
----------- ----------- ----------- -----------
Gross profit $ 286,347 $ 89,014 $ 1,970,790 $ 416,012
EXPENSES
Sales and marketing $ 724,097 $ 407,275 $ 2,306,862 $ 661,696
Product development 20,604 138,464 643,983 208,398
General and administrative 1,047,867 431,073 2,993,270 1,647,850
----------- ----------- ----------- -----------
$ 1,792,568 $ 976,812 $ 5,944,115 $ 2,517,944
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS $ (1,506,221) $ (887,798) $(3,973,325) $(2,101,932)
Interest income 27,694 53,409 77,410 80,100
Other income (expense) 1,538 -- 2,322 2,654
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS $(1,476,989) $ (834,389) $(3,893,593) $(2,019,178)
Income tax provision (recovery) -- -- -- --
----------- ----------- ----------- -----------
NET LOSS BEFORE EXTRAORD. LOSS $(1,476,989) $ (834,389) $(3,893,593) $(2,019,178)
Extraordinary loss on
Redemption of debt, net of tax 249,764 -- 249,764 --
----------- ----------- ----------- -----------
NET LOSS $(1,726,753) $ (834,389) $(4,143,357) $(2,019,178)
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS PER SHARE
Net loss before extraordinary loss (0.18) (0.10) (0.47) (0.31)
Net loss (0.21) (0.10) (0.50) (0.31)
=========== =========== =========== ===========
Weighted average shares
Outstanding for the period 8,291,143 8,023,261 8,227,282 6,536,667
=========== =========== =========== ===========
</TABLE>
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Stockgroup.com Holdings, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED - Expressed in U.S. Dollars)
Unaudited Unaudited
Nine Months Nine Months
Ended Sept Ended Sept
30, 2000 30, 1999
----------- -----------
OPERATING ACTIVITIES
Net Income (Loss) $(4,143,357) $(2,019,178)
Add (deduct) non-cash items
Depreciation and amortization 103,094 40,443
Amortization of deferred debt costs 62,465 --
Extraordinary loss on debt redemption 249,764 --
Provision for doubtful accounts 52,890 --
Investment in AEIS and equivalents (500,000) --
Common stock issued for services 257,600 1,126,000
Compensation expense on
stock options 102,521 220,790
----------- -----------
(3,815,023) (631,945)
Net changes in non-cash working capital
Accounts receivable 195,953 (729,778)
Due from shareholder 28,820 (947)
Prepaid expenses 815,168 (1,251,096)
Accounts payable (479,589) (735,096)
Interest on note payable 131,058 --
Accrued payroll liabilities (28,539) (15,837)
Deferred revenue 65,266 61,288
----------- -----------
CASH FROM (FOR) OPERATIONS $(3,086,886) $(1,833,219)
----------- -----------
FINANCING ACTIVITIES
Issuance of common stock (net) 435,000 5,634,714
Issuance of convertible debt and
Warrants (net) 2,869,990 --
Convertible debt redemption (862,500) --
Bank indebtedness (net) (5,267) (77,302)
Long-term debt (net) -- (8,260)
Shareholder debt (net) -- (12,069)
----------- -----------
CASH FROM (FOR) FINANCING $ 2,437,223 $ 5,537,083
----------- -----------
INVESTING ACTIVITIES
Property and equipment (net) (268,516) (337,697)
Investments 65 --
Net cash from reverse acquisition -- 3,272
----------- -----------
CASH FROM (FOR) INVESTING $ (268,449) $ (334,425)
----------- -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (918,112) 3,369,438
Cash and cash equivalents,
beginning of period 1,658,822 --
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 740,710 $ 3,369,438
=========== ===========
5
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Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2000
(UNAUDITED)
1. NATURE OF BUSINESS
Stockgroup.com Holdings, Inc. is an Internet based media and technology company
that provides business to business corporate services (including advertising and
media services), application service solutions (ASP), enterprise website
development services, and financial news and information services.
Stockgroup.com is incorporated under the laws of Colorado and is publicly traded
on the NASD OTC Bulletin Board.
2. BASIS OF PRESENTATION AND COMPARATIVE AMOUNTS
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, the Company believes that no
disclosures have been omitted that would make the information presented
misleading. These condensed consolidated financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1999.
The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments) which
are, in the opinion of management, necessary to state fairly the results for the
nine month period ended September 30, 2000. The results for the nine-month
period ended September 30, 2000 are not necessarily indicative of the results
expected for the full fiscal year.
These consolidated financial statements are presented in U.S. dollars and are
prepared in accordance with accounting principles generally accepted in the
United States ("U.S. GAAP"). Prior to year-end 1999, the Company reported its
financial results using Canadian GAAP and Canadian Dollars. In this report
comparative figures have been retroactively restated to conform to the U.S. GAAP
presentation and have been recast into U.S. dollars in accordance with FASB
Statement No. 52, Foreign Currency Translation.
3. REVENUE RECOGNITION
Revenues generated by the Company are recognized when all or substantially all
of the effort required to generate the revenue has been completed and the
collection of any remaining payments is relatively certain. For revenues
generated from longer term website design and development arrangements requiring
significant production, modification and customization, the Company follows the
percentage of completion method of contract accounting in accordance with SOP
81-1, Accounting for Performance of Construction-Type and Certain
Production-Type Contracts.
6
<PAGE>
4. NOTES PAYABLE AND WARRANTS
On April 3, 2000, Stockgroup.com entered into a Convertible Note Purchase
Agreement pursuant to which it obtained $3 million in a financing led by
Deephaven Capital Management LLC, a subsidiary of Knight/Trimark. Amro
International S.A., managed by Rhino Advisors was an additional lender in the
funding. Jesup and Lamont Securities Corporation served as the placement agent
for the transaction.
The funding included $3 million of 8% Convertible Notes (the "Notes"), and
5-year Callable Warrants (the "Warrants"). The Notes mature on March 31, 2002
and are convertible into Stockgroup.com common shares only after July 31, 2000.
The Notes may only be converted if Stockgroup.com does not make payment on a
Noteholder's prepayment request, or if Stockgroup.com seeks to prepay the Notes.
The initial conversion price (the "Initial Conversion Price") for the Notes is
$3.72, and the exercise price (the "Exercise Price") of the Warrants is $3.30.
The Initial Conversion Price and the Exercise Price are subject to adjustment
upon the happening of certain events, such as the payment of a stock dividend,
or the issuance of warrants at a below market price or at a price below the
conversion price. Prepayments on the Notes are subject to a tiered prepayment
schedule that increases as the number of days between the closing date and the
prepayment date increases, being 105%, 110%, and 115% of principal from days
1-60, 61-120, and after 120 days, respectively. Interest accrues on the Notes at
the rate of 8% per annum, and is payable on each conversion date and at
maturity. Interest may be paid in the form of cash or registered stock, at
Stockgroup.com's option. The lenders have the right to put back to
Stockgroup.com up to 25% of the unconverted amount of the Notes during any
30-day period after July 31, 2000. Upon the lenders' exercise of such right,
Stockgroup.com has the option of prepaying the portion of the Notes sought to be
converted, such prepayment to be in accordance with the tiered prepayment
schedule set forth above. If Stockgroup.com does not make such a prepayment
within 10 days after its receipt of a "put" notice, the conversion rate of the
Notes changes to the lesser of (a) the Initial Conversion Price, and (b) 88% of
the average of the 5 lowest closing prices of Stockgroup.com's common shares
during the 30 trading days prior to the date of conversion.
The Warrants permit the holders to acquire up to 181,818 common shares.
Stockgroup.com has filed a registration statement covering these shares, and the
shares underlying the Notes. The Warrants may be called by Stockgroup.com, at a
purchase price of $.01 per underlying share, if Stockgroup.com's common shares
trade at the level of 175% of the Warrant exercise price of $3.30 for any 20
consecutive trading days after the effective date of the registration statement,
provided that the holders have the right to exercise the warrants within 30 days
after their receipt of such a call.
The convertible notes and callable warrants have been accounted for in
accordance with APB 14, Accounting for Convertible Debt and Debt Issued with
Stock Purchase Warrants and EITF 98-5, Accounting for Convertible Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion
Ratios. APB 14 requires that the gross proceeds be allocated to the notes and
warrants based on the relative fair value of each security at the time of
issuance. Accordingly, $2.7 million of the gross proceeds was allocated to the
notes and $300,000 was allocated to the 181,818 warrants. The financing costs,
consisting of $130,000 in cash and the fair value of additional warrants to
purchase 90,909 common shares granted to the placement agent on the same terms
as the warrants issued to the lenders, were allocated to the notes and 181,818
warrants in the same relative fair value manner.
In August 2000, the note holders exercised their right to put 25% of the notes,
or $750,000. The Company paid this put in cash in August 2000, with the total
amount paid equal to $750,000 plus the 15% prepayment penalty of $112,500 and
accrued interest of $22,339, for a total of $884,839.
7
<PAGE>
On September 25, 2000, Amro International, S.A. exercised their right to put an
additional 25% of their portion, or $250,000. On October 5, 2000, the Company
served Amro International, S.A., with a Notice of Intention Not to Pay Put
Notice according to the terms of the agreement. Under the agreement, Amro
International, S.A. now has the right to convert $250,000 plus accumulated
interest into shares of the Company. As of the date of this filing, no such
conversion has occurred, and no Conversion Notice has been received by the
Company from Amro International, S.A.
5. SHAREHOLDERS' EQUITY
The Company is authorized to issue up to 50,000,000 shares of common stock and
5,000,000 shares of preferred stock. On April 3, 2000, the Company issued
warrants to purchase 272,727 common shares as described in Note 4. The fair
value of the warrants issued, net of financing costs, amounted to $455,546 and
was recorded as an increase to additional paid-in capital. On August 17, a
private placement of 116,935 restricted shares was issued at $3.72 per share for
proceeds of $435,000. On August 24, 100,000 restricted shares and 100,000
options were issued in exchange for services with the aggregate amounts of
$162,500 and $81,000 representing the fair market value of the shares and
options, respectively. The total cost of $243,500 has been accounted for as an
increase to additional paid-in capital and an increase to third quarter general
and administrative expense. During the third quarter, 12,000 shares have been
repurchased and returned to treasury at a value of $6.00 per share. The shares
will be cancelled in the fourth quarter.
6. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed based on the weighted average number
of common shares outstanding during each year. Diluted earnings (loss) per share
is computed based on the weighted average number of common shares outstanding
during each year, plus the dilutive potential of convertible securities during
the year, in accordance with FASB Statement No. 128, Earnings Per Share.
For the nine months ended September 30, 2000, all of the Company's common shares
issuable upon the exercise of stock options, convertible debentures, or warrants
were excluded from the determination of diluted earnings (loss) per share as
their effect would be anti-dilutive.
7. COMPREHENSIVE INCOME
The Company follows FASB Statement No. 130, Reporting Comprehensive Income,
which establishes standards for reporting and displaying comprehensive income
and its components in the consolidated financial statements. For the nine months
ended September 30, 2000 and September 30, 1999, the Company did not have any
components of comprehensive income.
8. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Investments
and Hedging Activities" ("SFAS No. 133") as amended by SFAS No. 137 and SFAS
No.138, which establish accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statements also require that changes
in the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. SFAS No. 133, as amended by SFAS No.
137 and SFAS No. 138, is effective for fiscal years beginning after June 15,
2000. Management has not determined the impact, if any, that the adoption of the
new statement will have on the consolidated results of operations or financial
position of the Company
8
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On December 3, 1999, the SEC staff released Staff Accounting Bulletin (SAB) No.
101 - Revenue Recognition in Financial Statements, which provides guidance on
the recognition, presentation, and disclosure of revenue in financial
statements. The SAB required adoption for the first fiscal quarter of fiscal
years beginning after December 15, 1999, however, based on requests for
additional time to consider the implications, the SEC has issued SAB 101A and
SAB 101B that further delays the effective date of SAB 101 until no later than
the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The
Company is presently evaluating the impact, if any, that SAB No. 101 will have
on the company's financial position or results of operations.
9. SEGMENTED INFORMATION
SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information, requires a public business enterprise to report financial and
descriptive information about its reportable operating segments. The Company has
concluded that its business activities fall into one identifiable industry
segment with the following sources of revenue:
<TABLE>
<CAPTION>
For the nine months ended
Sept 30, 2000 Sept 30, 1999
<S> <C> <C>
Business to Business (B2B)/Advertising $1,733,049 $1,444,549
ASP Financial tools/Enterprise financial Development 1,609,257 --
---------- ----------
$3,342,306 $1,444,549
========== ==========
</TABLE>
During the first nine months 2000, the Company had two customers from whom
revenue received by the Company represented approximately 50% of total revenue.
No other customers represented greater than 10% of revenue.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2000
During the three months ended September 30, 2000, the Company generated revenues
of $795,148 that represent a 180% increase over the $284,431 generated in the
three months ended September 30, 1999. The growth in revenues was primarily due
to Enterprise financial Website development, and higher sales of Business to
Business (B2B) corporate services. The Company also significantly increased its
sales force from 5 in quarter three 1999 to 14 at the end of quarter three 2000.
Growth in sales staff was spread across all offices, and a new sales office was
opened in Dallas Texas.
The Company incurred a net loss of $(1,726,753) for the three months ended
September 30, 2000. This compared with a net loss of $(834,389) for the same
three months of 1999. The ordinary losses are a function of implementation of
the Company's strategic plans and had been anticipated. The $249,764
extra-ordinary loss was recorded due to the early redemption of outstanding
notes.
Sales and marketing expenses increased from $407,275 in the three months ended
September 30, 1999 to $724,097 in the same period in 2000. The factors that
contributed to this increase are increases in sales staff and expenses relating
to sales plans and initiatives.
9
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General and administrative expenses increased from $431,073 in the three months
ended September 30, 1999 to $1,047,867 over the same three months of 2000.
During the third quarter management took a one time charge to reduce the number
of employees from 98 to 77 and streamline the company. In addition the company
incurred investor relations expenses of $243,500 which were paid in common stock
of the company. Without these one time expenses, management reduced the
operating expenses of the business by over 25% from the second quarter of 2000.
Management expects that the streamlining of operating expenses will be reflected
through decreased operating costs in the fourth quarter and in the first quarter
of 2001. Other costs related to expansion are not expected to grow as rapidly in
the future, as the Company believes sales growth can now be achieved without a
further significant investment in infrastructure.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2000
During the nine months ended September 30, 2000, the Company generated revenues
of $3,342,306 that represents a 131% increase over the $1,444,549 generated in
the nine months ended September 30, 1999. The growth in revenues was primarily
due to major Website development projects in Singapore, Texas, and Canada, and
higher sales of core Business to Business products to publicly traded companies.
The Company also significantly increased its sales force from 5 in quarter three
1999 to 14 in quarter three 2000. Growth in sales staff was spread across all
offices, as well as the new sales office in Dallas.
The Company incurred a net loss of $(4,143,357) for the nine months ended
September 30, 2000. This compared with a net loss of $(2,019,178) for the first
nine months of 1999. The $249,764 extra-ordinary loss was recorded due to the
early redemption of outstanding notes. The ordinary losses are a function of
implementation of the Company's strategic plans and had been anticipated. The
Company expects that quarterly losses will be lower going forward, as the major
expenditures of the current strategic plans have been incurred.
Sales and marketing expenses increased from $661,696 in the first nine months of
1999 to $2,306,862 in the same period in 2000. The factors that contributed to
this increase are increased advertising purchases and an increase in sales
staff. Advertising purchases were for the purpose of establishing brand in the
marketplace and are expected to have long-term residual effects. The size of the
staff, particularly in sales, increased significantly quarter over quarter in
line with our strategic plans to position the company for future growth. The
additional cost of this staff is reflected in the increased expense numbers.
General and administrative expenses increased from $1,647,850 in the first nine
months of 1999 to $2,993,270 over the first nine months of 2000. Items
accounting for a majority of the increases in general and administrative
included higher office rent expenses due to an expansion of our branch network,
increased staffing costs, costs related to temporary data entry staff used for
site development, increased public relations and increased investor relations.
Investor relations costs due to equity awards were expensed fully in the
quarter. The Company also experienced significant costs in the year due to an
infrastructure expansion into Europe that was started early in the year and put
on hold during the third quarter. Other costs related to expansion are not
expected to grow as rapidly in the future, as the Company believes sales growth
can now be achieved without a further significant investment in infrastructure.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash used in operations for the third quarter of 2000 was
$1,001,861, compared to $605,243 in the second quarter 2000, $1,479,781 in the
first quarter 2000, and $1,577,294 in the fourth quarter 1999. The lower cash
usage in the second quarter resulted from higher revenues during the quarter
received from enterprise projects. The cash usage in the third quarter is higher
partly due to non-recurring charges taken when the Company took steps to
streamline operating expenditures and accelerate the Company's profitability.
This indicates that the Company has been consistently reducing quarterly cash
usage over the last four quarters. As a result of expense reductions made during
the third quarter of 2000, and ongoing expense controls, the Company has
significantly reduced its monthly cash usage, and expects cash usage in the
fourth quarter to continue this trend. When combined with growing revenues, the
Company is anticipating that positive cash flow will be achieved during the
first quarter of 2001. However, there can be no guarantee that this will happen.
The company may be required to raise additional financing through equity or debt
issues.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These forward-looking statements can be identified
by the use of predictive, future-tense or forward-looking terminology, such as
"believes," "anticipates," "expects," "estimates," "plans," "may," "intends,"
"will," or similar terms. These statements appear in a number of places in this
report and include statements regarding the intent, belief or current
expectations of the Company, its directors or its officers with respect to,
among other things: (i) trends affecting the Company's financial condition or
results of operations, (ii) the Company's business and growth strategies, (iii)
the Internet and Internet commerce and (iv) the Company's financing plans.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve significant risks and
uncertainties, and that actual results may differ materially from those
projected in the forward-looking statements. The preceding discussion of the
financial condition and results of operations of the Company should be read in
conjunction with the financial statements and notes related thereto included
elsewhere in this report.
CORPORATE DEVELOPMENTS DURING THE PERIOD
Completion of AsiaXIS enterprise site in Asia
On January 18th, 2000, Stockgroup.com began its global expansion by entering
into an arrangement with two Singapore publicly listed companies to build an
enterprise financial site for Asia Exchange Information Service Pte Ltd., called
www.asiaXIS.com. This site was launched on June 28, 2000, and all significant
work on the site was completed in the third quarter.
Streamlining of expenses
Management reduced staff from 98 to 72 during the third quarter beginning the
execution of its strategy of streamlining expenses and achieving cash flow
positive by the end of the first quarter 2001. The company took a one-time
expense charge and has seen its operational expenses lowered on a monthly basis
beginning late in the third quarter.
11
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Strategic direction
During the quarter the company redefined components of its strategic direction
to include greater emphasis on its Business to Business and Asp and Enterprise
site development segments. In its Business to Business segment new disclosure
and investor information plug-in tools for public companies were developed and
tested. The resulting sales and research obtained have subsequently caused the
company to emphasize and accelerate the development and marketing infrastructure
for this product.
In its Enterprise Site Development / ASP segment the company was awarded
development agreements for preliminary design and development of product in the
financial leasing industry. Subsequent to the end of the quarter this resulted
in the company being awarded one of the largest enterprise site development
contracts in its history. The company also began licensing its ASP financial
tools and applications. These proprietary tools and applications developed by
the company are hosted and maintained on Stockgroup's servers and are served on
other companies' sites. The products are marketed both by Stockgroup's own sales
force and through syndication channels.
Investor relations and Public relations team hired
Stockgroup hired Rubinstein Public Relations, New York to implement a strategy
of communicating information about the company's business and products through
the media. This includes raising the profile of the company and helping to build
a greater recognition for the company's core competencies. In addition, the
company hired Continental Capital, Orlando and Pinnacle Group, NY to begin
raising the awareness of the company with the financial community.
Syndication strategy launched
During the first half of the year, Stockgroup.com began the implementation of
its syndication strategy, signing agreements with web content distributors.
Major syndication agreements established include I-Syndicate, (which reaches
over 600,000 web users) audiobasket.com, which disseminates Stockgroup.com audio
content; Cybersurf, an Internet Service Provider (ISP) which features content
from the smallcapcenter web site and data feeds from Stockgroup to its extensive
base of subscribers; Screaming Media, a content syndicator; and AvantGo and
ThunderWAP, wireless application providers.
New sales office opened in Dallas
A sales office was opened in Dallas and staffed with two sales people.
CORPORATE OVERVIEW AND BACKGROUND
Stockgroup.com has offices in New York, San Francisco, Toronto, Calgary, and
Dallas and maintains its corporate headquarters in Vancouver. Stockgroup.com is
a provider of Business-to-Business corporate services, Application Service
Provider solutions, enterprise financial website development and develops
unbiased, comprehensive financial information on small cap and micro cap stocks
on the Internet. Revenues from these segments comprise of development and
customization fees, ongoing licensing fees for the Company's technology,
maintenance fees, advertising fees.
There are thousands of financial services companies that require enterprise
solutions to interact and display information over the Internet for their
customers. Stockgroup.com provides a full ASP solution and licenses its
proprietary enterprise financial web sites. There are an estimated 28 million
small cap investors in North America and another 22 million worldwide who
receive their smallcap financial information from a variety of news sources. The
market place is highly fragmented, consisting of newsletters, specialty
publications, brokerage research reports, and limited coverage by the large
media companies. Stockgroup.com offers these investors the ability to receive
real time, unbiased, detailed information on thousands of small cap and micro
cap companies.
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The Company also provides online Business to Business services to hundreds of
publicly traded companies, from New York Stock Exchange companies to Bulletin
Board companies, that enable them to provide current, detailed financial
information and effectively reach current and prospective shareholders
efficiently.
In addition, smallcapcenter.com provides unbiased original financial news
content on small cap companies and markets. These news features are produced
throughout the trading day by Stockgroup.com's staff of professional financial
journalists and editors and this News Service is a significant draw for the
investor viewers who use smallcapcenter.com. Smallcapcenter.com also
disseminates information about Stockgroup.com's corporate clients but does not
make any recommendations or provide special news coverage related to these
clients.
The company is also a provider of website design, Internet financial products
and marketing services for Small Cap companies, a market segment that
traditionally has not had the same market profile as larger public companies.
Some of the specialty products we produce include private label quotes and
charts, database tools for building relationships with shareholders, traffic
reports that allow a company's management to assess the impact of website use by
its viewers, design services and maintenance contracts.
Rapid technological change, new product development and evolving industry
standards characterize our industry. Inherent in our business are various risks
and uncertainties, including a limited operating history, a new and unproven
business model and the limited history of commerce on the Internet. Our success
may depend in part upon the emergence of the Internet as a communications
medium, prospective product development efforts and the acceptance of our
products and services by the marketplace. As part of our strategic development
plans, we invest significant resources in research and development of new
products and services.
As of September 30, 2000 the company had 72 employees, all of which were full
time.
DESCRIPTION OF BUSINESS MODEL
Business to Business Services to Corporations
Stockgroup.com provides publicly traded companies with a suite of financial
information and marketing products. The company provides a software solution
which automates the updating of a public company's important financial
information on its web site, including stock quotes, charts, and news releases.
Customers license this application from Stockgroup.com. Stockgroup.com also
provides Internet marketing services to these customers. Stockgroup.com does not
act as a public relations or investor relations firm but rather provides a suite
of advertising products and services.
Stockgroup.com offers to link clients' sites to Stockgroup.com's proprietary
information Community and offer access to Stockgroup.com's proprietary Email
listing of smallcap investors.
Stockgroup.com also derives revenue from corporate advertisers who see benefit
in presenting their products and services to smallcapcenter.com's Internet
audience. Many advertisers seek and are willing to pay premium rates to
advertise on smallcapcenter.com due to its highly specific demographics. The
investor demographic profile, which consists of well-educated, technically
savvy, mid to high-income level earners and higher risk investors, is very
attractive to numerous advertisers. In addition, as a part of Stockgroup.com's
Business to Business product offering, Stockgroup.com provides advertising
management services, essentially acting as an on-line advertising agency
providing advertisement design and placement services for its clients.
Stockgroup.com also places ads, as a function of client budgets, on other web
sites it believes will provide the client with the greatest exposure to the
investment community.
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Application Service Provider Solutions and Syndication
Stockgroup has developed a wide array of quality financial tools and
applications that provide its customers the ability to provide financial news,
data, information and tools on a private labeled basis on their web sites. Tools
and applications include interactive charting, portfolio management, real time
quotes, news releases, analyst reports, technical analysis, fundamental screens
and others. In addition Stockgroup has developed databases that include news
releases, financials, analyst reports, analyst consensus, regulatory filings,
and other financial information.
The ASP market generates an initial fee and ongoing monthly fees to stream
current data and content to customer's tools that they license from Stockgroup.
Stockgroup began selling these tools and applications in the third quarter.
Enterprise Financial Website Development
Stockgroup.com develops, sells, and maintains private label news and financial
web sites. Target companies include brokerage firms, financial services
companies, media companies, and entrepreneurial firms. Stockgroup.com is
expanding through sales of its expertise in the development of enterprise
financial website platforms. The company's ongoing effort in designing and
maintaining smallcapcenter.com and our many corporate client websites has built
a strong expertise in website design, programming, and project management. To
date, projects have been completed in Asia (AsiaXIS.com and eDepositCenter.com)
and Texas (eStockAnalyst.com), and are in progress with a fourth project in
Eastern Canada.
Editorial News Products
Stockgroup.com is a proprietary developer and distributor of professional,
unbiased, on-line news and information focused on small cap and micro-cap
stocks. Investors have historically had difficulty obtaining timely, accurate
investment information on Small Cap companies due to a lack of objective news
sources. Most other media organizations, investment firms and brokerage houses
tend to focus a significant majority of their attention on larger public
companies. As a result, Small Cap investors have not had access to the level of
non-biased third party information or traditional sources of company research
reports they desire. This lack of information is coupled with the increasing
shift of investors from traditional retail brokerages to discount and on-line
alternatives. This shift has created an increased interest in personal
investment research on the part of individual investors. However, investor
interest in the Small Cap sectors has not been accompanied by an increased
coverage of the small and micro cap sectors by traditional media, traditional
brokerage firms or alternative on-line and discount investment service
providers. As a result, investors have turned to other resources on the Internet
as a method of obtaining the timely financial information needed to make small
cap investment decisions. The Company licenses and sells content to other
financial sites.
CORPORATE GROWTH STRATEGY
Focusing on its core competencies of building technology and solutions to
deliver financial information and tools, Stockgroup.com intends to grow revenues
through internal growth of its existing businesses, including B2B corporate
services, application service provider solutions (ASP), and enterprise financial
website development. The company intends to expand it sales team and establish
additional reseller channels for its products, technology and services.
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THE SMALLCAPCENTER.COM INTERNET INVESTMENT INFORMATION COMMUNITY
Stockgroup.com has created and continually maintains and improves
www.smallcapcenter.com, an Internet information Community that provides a wide
range of services to investors interested in Small Cap companies and markets. In
addition to our quality tools and content for investors, a significant feature
that differentiates smallcapcenter.com from other financial Websites is its
on-line news reporting. Stockgroup.com employs a staff of professional
journalists who produce breaking stories throughout the trading day on topics of
interest to Small Cap investors. A goal of our Internet business model is to
license this news service to media and financial services firms.
SHARE PRICE AND VOLUME DATA
The Company's Common Stock has been quoted for trading on the OTC Bulletin Board
since March 17, 1999. The following table sets forth high and low bid prices for
the Common Stock for the three-month periods ending March 31, 2000, June 30,
2000, and September 30, 2000. These prices represent quotations between dealers
without adjustment for retail markup, markdown or commission and may not
represent actual transactions.
Quarter Ending: High Low Volume
March 31, 2000 $ 5.031 $ 1.562 2,623,600
June 30, 2000 $ 4.000 $ 0.719 1,737,100
September 30, 2000 $ 2.813 $ 0.875 4,983,800
On March 31, 2000, the Company had 29 registered shareholders owning 8,195,000
shares. On June 30, 2000, the Company had 34 registered shareholders owning
8,195,000 shares. On September 30, 2000, the Company had 32 registered
shareholders owning 8,411,935 shares.
DIVIDENDS
The Company has not declared any dividends since inception, and has no intention
of paying any cash dividends on its Common Stock in the foreseeable future. The
payment by the Company of dividends, if any, in the future, rests with the
discretion of its Board of Directors and will depend, among other things, upon
the Company's earnings, its capital requirements and its financial condition, as
well as other relevant factors.
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Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On April 3, 2000, Stockgroup.com entered into a Convertible Note Purchase
Agreement pursuant to which it obtained $3 million in a financing led by
Deephaven Capital Management LLC, a subsidiary of Knight/Trimark. This
transaction is fully described in Note 4 to the financial statements, included
herein. Other equity transactions for the period are fully described in Note 5
to the financial statements, included herein.
Item 6. Exhibits and Reports on Form 8K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No Reports were filed on Form 8-K during the quarter ended September
30, 2000
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.
STOCKGROUP.COM HOLDINGS, INC.
(Registrant)
Date: November 13, 2000 By: /s/ Lindsay Moyle, CGA
---------------------------------------------
Chief Financial Officer, Secretary & Treasurer
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