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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB
QUARTERLY REPORT UNDER REGULATION SB OF THE
SECURITIES EXCHANGE ACTS OF 1934
For the Quarter Ended Commission File Number:
September 30, 2000 0-24449
J-BIRD MUSIC GROUP LTD.
(Exact Name of Registrant as specified in its charter)
Pennsylvania 06-1411727
(State or other jurisdiction) (IRS Employer
of incorporation or organization) Identification Number)
396 Danbury Road Wilton, Connecticut 06897
(Address and zip code of principal executive officers)
(203) 761-9393
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required by Regulation SB of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to the filing requirements for
at least the past 90 days. YES /X/ NO / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date:
Number of Shares Outstanding Class Date
32,678,295 Common Stock September 30, 2000
$.001 par value
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J-BIRD MUSIC GROUP LTD.
Index
PART I FINANCIAL INFORMATION
Balance Sheet September 30, 2000 3
Statements of Operations
Nine Months Ended September 30, 2000 and 1999 4
Statements of Cash Flow
Nine Months Ended September 30, 2000 and 1999 5
Notes to Unaudited Financial Statements
September 30, 2000 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II
Other Information 11
Signatures 11
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J-BIRD MUSIC GROUP LTD.
CONSOLIDATED BALANCE SHEET
September 30, 2000
ASSETS:
Cash $ 11,886
Accounts Receivable 519,943
Inventory 195,691
Loans Receivable, Shareholder 68,128
Loans Receivable I.M.M 8,858
Recording Advances 185,980
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Total Current Assets 990,486
Fixed Assets, Net 91,129
Other Assets 979
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Total Assets $ 1,082,594
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LIABILITIES AND STOCKHOLDERS' EQUITY
Account Payable and Accrued Expenses $ 412,813
Accrued Royalties 33,000
Notes Payable 59,463
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Total Current Liabilities 505,276
Total Liabilities $ 505,276
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Stockholders' Equity
Common Stock $.001 Par Value 50,000,000 Shares
Authorized, 32,678,295 Issued and Outstanding 32,779
Paid in Capital 10,794,452
Subscription Receivable (250,000)
(Deficit) (9,999,913)
Total Stockholders' Equity 577,418
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Total Liabilities and Stockholders' Equity $ 1,082,594
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J-BIRD MUSIC GROUP LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
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Net Sales $ 538,988 $ 389,101
Cost of Sales 742,480 301,845
Operating Expenses:
Advertising and Promotion 84,877 108,908
Professional Fees 56,211 248,490
Amortization and Depreciation 25,219 27,411
Salaries 108,155 112,667
Administrative Expenses 1,161,958 276,338
Interest Expense 5,944 3,832
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Net (Loss) Before Other Income (Expenses) (1,645,855) (690,390)
Other Income (Expense) 0
Financing fee-sale of discounted Common stock (647,800)
Investment Advisory Fees (159,500) (380,000)
Taxes (927) 0
Net Loss $ (1,806,282) $ (1,718,190)
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Net Loss per Common Share $ (0.07) $ (0.10)
Weighted Average Common Shares Outstanding 28,533,395 16,680,395
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J-BIRD MUSIC GROUP LTD.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
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Cash Flows from (Used In) Operating Activities
Adjustments to Reconcile Net (Loss) to Net Cash
From (Used In) Operating Activities:
Net (Loss) $(1,806,282) $(1,718,190)
Amortization and Depreciation 25,219 27,411
Finance fee-sale of common stock
At discount 0 647,800
(Increase) in Accounts Receivable 31,257 (10,027)
(Increase) in Inventory (123,491) 72,776
Stock Issued For Services 852,500 775,500
(Decrease) Increase in Accrued Royalties 83,480 66,701
(Decrease) Increase in Accounts Payable 312,093 (91,562)
(Increase) in Recording Advances 96,280 0
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Net Cash (Used In) Operating Activities (528,944) (229,591)
Cash Flows from (Used In) Investing Activities
Purchase of Fixed Assets 0 (36,785)
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Net Cash (Used In) Investing Activities 0 (36,785)
Cash Flows from (Used In) Financing Activities
Stock Issued for Cash 743,231 525,000
Collection of Stock Subscriptions 250,000
Net (Decrease) Increase in Bank Overdraft 0 0
Net Increase in Due from Officer 12,828 (530)
Net (Decrease) in Loan Due I.M.M (50,958) 29,303
Increase (Decrease) in Note Payable (21,737) 78,539
Investment Advisory Fees (159,500) (380,000)
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Net Cash from Financing Activities 523,864 502,312
Net (Decrease) Increase in Cash (5,080) 235,936
Cash, Beginning of Period 16,966 2,005
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Cash, End of Period $ 11,886 $ 237,941
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J-BIRD MUSIC GROUP LTD.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
Note 1. Organization
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the provisions of Regulation SB. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included.
J-Bird Records, Inc. is the first WorldWide Web Recording Label ((TM)). The
Company was officially launched on November 1, 1996 to market, distribute and
sell music via a new medium - the Internet. At its Website, located at
http://www.j-birdrecords.com, the Company attracts and signs recording artists
through its on-line office and promotes, markets and sells their recordings
through its on-line record store. J-Bird Records is a wholly owned subsidiary of
J-Bird Music Group LTD.
The Company has experienced operating losses since its inception and has
experienced significant cash flow problems. The Company is in the process of
raising capital through various sources to fund its operations and has
implemented certain operating strategies to obtain profitably.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, J-Bird Records, Inc. Material intercompany balances
and transactions have been eliminated in consolidation.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. The accompanying
financial statements should be read in conjunction with the Company's Form 10-SB
filed for the year ended December 31, 1999.
Earnings (loss) per share are based on the weighted average number of shares
outstanding. Common stock equivalents have not been considered as their effect
would be anti-dilutive.
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Note 2. Related Party Transactions
In October 1998, the Company entered into a credit agreement with I.M.M.
International, Inc., a shareholder of the company, whereby I.M.M. will provide
up to $500,000 in financing to the Company for working capital purposes. The
agreement expired on March 31, 1999. Amounts outstanding under this agreement
bear interest at 8% and are due on June 30, 2000. At September 30, 2000, the
Company had advanced $8,858 to I.M.M.
Note 3. Common Stock
At September 30, 2000, warrants to purchase 87,140 shares of common stock
exercisable through March 2002 at $.25 per share were outstanding.
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Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of J-Bird Music Group
LTD's, consolidated results of operations and financial condition for the nine
months ended September 30, 2000. The discussion should be read in conjunction
with the Company's consolidated financial statements and accompanying notes.
J-Bird derives its revenues from three principle sources: (i) sales of compact
discs ("CDs") directly to the artists for resale to consumers, (ii) CD sales on
the J-Bird Website; and (iii) retail CD sales.
J-Bird's strategy to develop products and services for the music entertainment
business was primarily responsible for its net loss for the nine months ended
September 30, 2000 and the years ended December 31, 1999 and 1998. The Company
has only a limited operating history in its operations upon which an evaluation
of J-Bird and its prospects can be based. Accordingly, J-Bird believes that the
results of its operations in the past during which time the company had minimal
revenues, are not meaningful indications of future performance. J-Bird incurred
losses from continuing operations of $1,806,282 in the nine months ended
September 30, 2000, $2,147,065 for the year ended December 31, 1999 and
$3,764,724 for the year ended December 31, 1998.
In 1998 the Company signed a distribution agreement with Navarre Corporation
which provides the Company with a national presence in approximately 52,000
traditional retail establishments. This agreement also provides the Company with
a national sales force that has existing relationships with the major retail
outlets in the country. As a start-up entity in 1997 the Company sold directly
to retail markets with minimal results. In the second half of 1997 the Company
was able to obtain two distribution agreements with regional distributors. This
enabled the Company to establish a regional presence and provided credentials
that assisted in signing the distribution agreement with Navarre Corporation.
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The Company currently intends to increase substantially its operating expenses
to (a) fund increased sales and marketing, enhance its existing website and to
complete strategic relationships important to the success of the Company. To the
extent that such expenses precede or are not subsequently followed by increased
revenues, the Company's business, results of operations and financial condition
will be materially adversely affected. There can be no assurance that the
Company will be able to generate sufficient revenues from the sale of music
recordings, related merchandise, advertising and sponsorship programs to achieve
or maintain profitability on a quarterly or annual basis in the future. The
Company expects negative cash flow from operations to continue for the
foreseeable future as it continues to develop and market its business.
Liquidity and Capital Resources
The Company has financed its operations and capital expenditures primarily from
equity financing and loans from shareholders and a bank. The Company borrowed
$100,000 under its line of credit agreement with a bank. As of September 30,
2000, the principle balance owed is $59,463. The Company expects negative cash
flow from operations to continue for the foreseeable future, as it continues to
develop and market its operations. Inflation has not had any material impact on
the Company's operations. In addition to the bank loan, the Company is presently
funding its operating deficit through a credit agreement with I.M.M.
International, Inc., a shareholder of the company. The Company has advanced
$8,858 to I.M.M as of September 30, 2000.
The Company is currently pursuing long term financing for its operating
activities and a potential acquisition. No source of financing has occurred to
date and there can be no assurance that financing will be available, or if
available, that it will be on acceptable terms. The ability to finance existing
and future operations will be dependent upon external sources.
Results of Operations - Nine months ended September 30, 2000 compared to nine
months ended September 30, 1999
2000 1999
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Net Sales $538,988 $389,101
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Cost of Sales $742,479 $301,845
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In addition to obtaining the distribution agreement with Navarre, 2000 sales
decreased due to the increasing number of returns even though the Company has
signed on more artists, including three nationally recognized performers. The
Company has 338 artists under agreements at September 30, 2000 compared to 250
at September 30, 1999.
2000 1999
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Advertising and Promotion Expenses $ 84,877 $108,908
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The decrease in advertising and promotion is due to the level of operations of
the Company.
Professional Fees $ 56,211 $248,490
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The decrease in professional fees is due to the lower level of legal and
consulting fees of the Company.
Salaries $108,155 $112,667
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The decrease in salaries expense is due to the decreased number of employees.
Administrative Expenses $1,161,958 $276,338
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The increase in administrative expenses is due to the increased of operations of
the Company. Investment adviser fees, stock financing fees, printing and
stationary, registration fees, insurance, postage and general office expenses
increased by approximately $154,000. Additionally, in the first quarter the
Company had incurred an employee signing bonus of $35,000 and a consulting
expense of $71,250. For the second quarter the Company incurred an additional
$700,000 in consulting expenses. Additionally, in the third quarter the Company
incurred another $81,250 for consulting. This expense was an exchange of
services for common stock and did not affect the cash flow of the Company.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Default upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Not applicable
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J-Bird Music Group LTD.
(Registrant)
/s/ John J. Barbieri
Dated: November 14, 2000 By: John J. Barbieri
President
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