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U.S. SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
/ / TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended: Commission File Number:
March 31, 2000 000-24459
SHOPSS.COM, INC.
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(Exact name of Registrant as specified in its charter)
UTAH 59-2159271
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
115 NEWTOWN ROAD, PLAINVIEW, NY 11803
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(Address of Principal Executive Offices) (Zip Code)
516 - 454 - 1577
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(Registrant's telephone number, including area code)
Indicate by check mark whether the 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 the registrant was
required to file such reports) and (2) has been subject to filing requirements
for the past 90 days.
Yes /X/ No / /
The number of shares of Common Stock, par value $ .01 per share, outstanding as
of March 31, 2000 is 19,997,160.
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SHOPSS. COM, INC.
INDEX TO FORM 10-QSB
March 31, 2000
<TABLE>
<CAPTION>
Page #
<S> <C>
PART I. Financial Information
Item 1. Financial Statements -
Balance Sheet
March 31, 2000
December 31, 1999 3
Statements of Operations
Three months ended March 31, 2000
Three months ended March 31, 1999 4
Statements of Cash Flows
Three months ended March 31, 2000
Three months ended March 31, 1999 6
Notes to Financial Statements
Management's Discussion and Analysis or
Item 2. Plan of Operation 7
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
</TABLE>
2
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SHOPSS.COM, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,132 $ 891
Cash escrow 165,768 -
Accounts receivable 45,058 93,102
Inventory 321,022 121,081
Prepaid expenses 2,157 2,398
---------- ----------
TOTAL CURRENT ASSETS 539,137 217,472
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $66,452 and $58,063 86,937 96,872
ADVANCES RECEIVABLE - OSCM - PARENT COMPANY 938,153 526,583
GOODWILL, net of accumulated amortization of $48,840 and $32,560 602,357 618,637
OTHER ASSETS 11,762 12,781
---------- ----------
$2,178,346 $1,472,3455
========== ==========
LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
Accounts payable and accrued expenses $2,087,180 $ 979,659
Taxes payable 24,758 22,791
Customer deposits 344,659 8,691
Leases payable - current portion 20,992 20,992
Bank payable 159,229 585,763
Notes payable - related party 75,907 59,303
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TOTAL CURRENT LIABILITIES 2,712,725 1,677,199
LEASES PAYABLE 55,367 57,862
DEFICIENCY IN ASSETS
Common Stock $.001 par value, 50,000,000 shares
authorized, 19,997,160 shares issued and outstanding 19,997 19,997
Additional paid-in capital 622,321 622,321
Accumulated deficit (1,232,064) (905,034)
---------- ----------
TOTAL DEFICIENCY IN ASSETS (589,746) (262,716)
$2,178,346 $1,472,345
========== ==========
</TABLE>
See notes to financial statements
3
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SHOPSS.COM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------
2000 1999
---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUES $1,689,024 $ 445,058
COST OF REVENUES (1,506,214) (373,099)
---------- ----------
GROSS PROFIT 182,810 71,959
GENERAL AND ADMINISTRATIVE EXPENSES 504,435 30,651
---------- ----------
INCOME (LOSS) FROM OPERATIONS (321,625) 41,308
INTEREST EXPENSE 5,405 -
INCOME BEFORE PROVISION FOR INCOME TAXES (327,030) 41,308
PROVISION FOR INCOME TAXES (8,675)
---------- ----------
NET INCOME (LOSS) $ (327,030) $ 32,633
========== ==========
EARNINGS (LOSS) PER SHARE $ (0.02) $ 0.00
========== ==========
WEIGHTED AVERAGE SHARES USED IN 19,997,160 12,000,000
COMPUTATION ========== ==========
</TABLE>
See notes to financial statements
4
<PAGE>
SHOPSS.COM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------
2000 1999
---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (327,030) $ 32,633
Adjustments to reconcile net income (loss) to net cash
provided by (used in) continuing operations:
Depreciation 9,936 2,486
Amortization 16,280 -
Gain on sale of equipment 9,935 -
Changes in assets and liabilities:
Cash escrow (165,768) -
Accounts receivable 48,044 (45,089)
Inventory (199,941) 12,723
Prepaid expenses 241 -
Accounts payable 1,107,521 (286)
Taxes payable 1,967 9,766
Customer deposits 335,968 -
Other assets 1,019 -
---------- ----------
1,165,202 (20,400)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 838,172 12,233
---------- ----------
INVESTING ACTIVITIES
NET CASH FLOWS USED IN INVESTING ACTIVITIES - -
---------- ----------
FINANCING ACTIVITIES
Advances from OSCM (411,570)
Advances from factors - (1,144)
Loans receivable from stockholders - 18,179
Bank payable (426,534) -
Notes payable - related party 4,173 (16,556)
Contribution to capital -
---------- ----------
NET CASH FLOWS USED IN FINANCING ACTIVITIES (833,931) 479
INCREASE (DECREASE) IN CASH 4,241 12,712
CASH AT BEGINNING OF THE PERIOD 891 490
---------- ----------
CASH AT END OF THE PERIOD $ 5,132 $ 13,202
========== ==========
SUPPLEMENTAL DATA:
Interest paid $ 5,405 $ -
Taxes paid 155 455
</TABLE>
See notes to financial statements
5
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SHOPSS.COM
CONSOLIDATED STATEMENT OF DEFICIENCY IN ASSETS
<TABLE>
<CAPTION>
Common Stock Total
Amount Stockholders'
Par Value Additional Accumulated Equity
Shares $.001 Paid-in Capital (Deficit) (Deficit)
------ --------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1999 19,997,160 $ 19,997 $ 622,321 $ (905,034) $ (262,716)
NET LOSS (327,030) (327,030)
---------- -------- --------- ----------- ----------
BALANCE, MARCH 31, 2000 19,997,160 $ 19,997 $ 622,321 $(1,232,064) $ (589,746)
(Unaudited) ========== ======== ========= =========== ==========
</TABLE>
See notes to financial statements
6
<PAGE>
SHOPSS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of SHOPSS.COM, INC.
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Regulation S-B. 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 considered necessary for a fair presentation (consisting of normal
recurring accruals) have been included. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Operating results for expected for the three months period ended March 31, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999. Per share data for the periods are
based upon the weighted average number of shares of common stock outstanding
during such periods, plus net additional shares issued upon exercise of options
and warrants.
NOTE 2. SUBSEQUENT EVENTS
On April 30, 2000, the Company has determined to refocus their business efforts
to further develop the voice over internet telephone business. As a result of
the refocused business direction of the Company, the goodwill of the Company may
have become impaired and may be written off in the second quarter of the year
2000.
On May 12, 2000, the Company signed an agreement with OSCM to cancel $900,000 of
indebtedness owed by OSCM to the Company for the return and cancellation of
11,000,000 shares of common stock and the issuance of a warrant to purchase up
to 3,000,000 shares of common stock of the Company for $5.00 per share for a
period of two years. This new agreement also made clarifications as to certain
terms of the original Asset Purchase Agreement between OSCM and the Company.
7
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following is a discussion and analysis of the Company's for the first
quarter of 2000 ended March 31, 2000. It includes the past and present condition
of the Company as well as future expectations. Any statements regarding the
future of the Company are projections and not based on any guarantees of
performance. Accordingly, actual results may differ materially from those
anticipated or expressed in these statements.
Statements in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and elsewhere in this document as well as statements
made in press releases and or statements that may be made by the Company or by
officers, directors, or employees of the Company acting on the Company's behalf
that are not statements of historical or current fact constitute "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties, and other unknown factors that could cause the actual
results of the Company to be materially different from the historical results or
from any future results expressed or implied by such forward-looking statements.
In addition to statements which explicitly describe such risks and
uncertainties, readers are urged to consider statements labeled with the terms
"believes", "belief", "expects", "intends", "anticipates", or "plans" to be
uncertain forward-looking statements. The forward looking statements contained
herein are also subject generally to other risk and uncertainties that are
described from time to time in the Company's reports and registration statements
filed with the Securities and Exchange Commission.
OVERVIEW
Immediately prior to October 27, 1999, the Company was an inactive public
company. Effective October 27, 1999 (the "Closing Date"), pursuant to an Asset
Purchase Agreement, the Company purchased from OSCM the following assets: (a) an
80% ownership interest in CCM; (b) all rights to the option to purchase the
remaining 20% ownership interest in CCM; and (c) all assets relating to the
Shopss.com virtual shopping mall owned by OSCM, including, all software,
websites and related technology, customers and customer lists, patents,
trademarks and trade names. In exchange for the Acquired Assets, the Company
issued to OSCM 12,000,000 shares (representing approximately 60% of its
outstanding shares after giving effect to the transaction) of its Common Stock.
The Company also agreed to assume the liabilities relating to the Shopss.com
business as recorded on the financial statements of OSCM and the liabilities
relating to the option of the stockholders of CCM to require OSCM to purchase
the remaining 20% interest in CCM. Pursuant to a subsequent agreement in
principle (which has not yet been signed) between the Company and OSCM (a) a
clarification was made to the effect that none of the assets relating to the
Shopss.com virtual shopping mall would include any of the assets or liabilities
relating to the virtual shopping mall operated by a subsidiary of OSCM in
Israel; (b) any obligation of the Company to pay cash for the Acquired Assets
was extinguished; and (c) the holdings of OSCM in the Company were adjusted by
reducing the number of shares of Common Stock owned by OSCM from 12,000,000
shares to 1,000,000 shares with a warrant in favor of OSCM to purchase up to
3,000,000 additional shares of the Company's Common Stock and (d) the Company
agreed to extinguish all liabilities owed by OSCM to the Company (approximately
$1.6 million). Immediately after the closing of the purchase of the Acquired
Assets, the Company effected a forward split of 5.435034 for one.
After the closing of the purchase of the Acquired Assets, the Company relied on
OSCM for a substantial portion of its working capital and provided OSCM with
computers and other equipment. In view of certain financial difficulties
experienced by OSCM, OSCM was unable to provide working capital and also was
unable to pay the Company for such equipment which had been delivered by OSCM to
the Company. Accordingly, as of the date of this Form 10Q, the Company is
insolvent and its ability to continue in business will depend on the raising of
additional capital, either in the form of debt or equity, or a combination
thereof. However, no assurance can be given that the Company will be successful
in raising additional capital or remaining in business. Management of the
Company believes that its ability to raise any capital will be dependent upon
the acquisition of complimentary businesses, particularly in the internet
telephony business. While the Company has identified several targets, it has
been unsuccessful to date in reaching any binding agreement. The description of
the business set forth below is a description of the business previously
conducted by the Company after the Closing Date. However, in view of the current
financial condition of the Company, the Company has ceased operations pending
resolution of its financial difficulties.
8
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The Company currently presently derives the majority of its revenues from the
Web site sales and the Phone-Ominal telephone services. Assuming the Company
obtains adequate working capital, the Company intends to maintain these sources
of revenues as well as revenue derived from expanding the products and services
offered in the VoIP telephony services and on the Shopss Internet website.
Depending on the availability of working capital, the Company is also focusing
on other profitable services such as designing and hosting other business web
sites as it has done it the past and offering its eCommerce development and
hosting expertise which it has acquired from the development of its own website.
RESULTS OF OPERATIONS
Results of prior periods are not necessarily indicative of the results of
operations that can be expected for any future period and do not reflect the
current mix of the Company's operations. Because the Company, was not engaged in
the Website eCommerce business comparisons of historical results of operations
may not be meaningful.
JANUARY 2000 TO PRESENT
The Company was financed by sales on its websites, sales of its telephony
service and financing from Shopss Israel. When Shopss Israel collapsed, the
sources of money became unavailable. This has put shopss.com, Inc in jeopardy of
survival. As of May 1, 2000 the Company was past due on payroll. It has no
operating funds available. It is past due on its payables and a skeleton staff
is working with no salary to maintain the operations of the Company. The Company
had a meeting on May 10th to meet with its largest creditors to convert the debt
to equity. There is no assurance at this time that this will be successful. The
Company is presently looking for possibly strategies to survive. These include,
but are not limited to, possible acquisitions with other companies in the
telephony and technology markets, bridge loans, and long term financing. The
Company has reduced the operating expenses by closing the 45 Cain Drive
warehouse and by reducing the staff to 12 employees from a previous 45
employees. At this time, the Company is unable to purchase and ship merchandise
for the ecommerce site. The telephony service is presently down until funds are
available for a deposit for additional service from the carrier.
Sales for the e-commerce website and the phone-ominal service second quarter are
expected to be significantly less than in the past quarters as well as the
related cost of sales due to the lower volume.
COMPARISON OF THE PERIOD ENDING MARCH 31, 1999 AND 2000.
Three Months Ended March 31, 2000 vs. Three Months Ended March 31, 1999.
Shopss.com, Inc
Sales for the three months ended March 31, 2000 were approximately 1,689,024 or
an increase of 379.51% from the 445,058 in sales for the period ended March 31,
1999. The increase in sales is due to several factors including a significant
rise in membership.
Cost of sales as a percentage of sales increased 403.7% for 84% to 89% for the
period ended March 31, 2000. This is primarily a result of the increase in
memberships that included a free pc. Gross profit as a percentage of revenue has
decrease from 16% to 11% for the same reason as stated above.
Selling, general and administrative (SG&A) expenses increased by 1,663.37% from
30,651 during the period ending March 31, 1999 to $509,840 during the same
period in 2000.
The loss from operations for the quarter ending March 31, 2000 was $327,030
which represents a difference of $368,338 from the income from operations of
$41,308 for the quarter ending March 31, 1999 for the reasons as stated above.
Net income was ($327,030) for the period ended March 31, 2000 compared to
$41,308 for the three months ended March 31, 1999.
9
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At March 31, 2000 the Company had working capital of $539,137 as compared to
working capital of $217,472 at March 30, 1999. The increase in working capital
was primarily due to the increase in membership sales and product fulfillment
for the website.
LIQUIDITY AND CAPITAL RESOURCES
The Company has suffered a loss from operations of approximately $327,030 for
the quarter ended March 31, 2000 and had a working capital of $539,137.
Subsequent to October 26, 1999, the Company had depended in substantial part on
assistance from OSCM in terms of working capital and had provided OSCM with
computers and other properties. Because of OSCM's financial difficulty, OSCM has
been unable to provide the Company with working capital or to pay for a
substantial amount of computers and other products provided. In addition,
because of issues pertaining to OSCM's shopping mall in Israel, the Company
incurred a substantial amount of chargebacks from its credit card issuer. As of
the date of this Report, the Company is insolvent and has essentially ceased
operations. The Company is actively seeking financing in the form of equity
and/or debt and business opportunities to be placed into the corporate umbrella
of the Company. However, there can be no assurance that such financing for
completion of business opportunities will be successful.
PART II. OTHER INFORMATION
Item 3. Exhibits and Reports on Form 8-K
(a) Exhibits:
Financial Data Schedule
(b) Reports on Form 8-K:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 30, 2000
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SHOPSS.COM, INC.
By: /s/ Gerard M. Conca
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Gerard M. Conca, Chairman of the
Board and Chief Executive Officer
By: /s/ Michelle C. Miller
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Michelle C. Miller, Executive Vice
President, Chief Financial Officer
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