UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-24459
SHOPSS.COM, INC.
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(Exact name of small business issuer as specified in its charter)
Utah 59-2159271
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
115 Newtown Road, Plainview, New York 11803
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(Address of principal executive offices)
Issuer's telephone number: (516) 454-1577
Not applicable
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(Former name, former address and former fiscal year,
if changed since last report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of October 31, 2000, the Company had 8,997,160 shares of common stock
issued and outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
Documents incorporated by reference: None.
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SHOPSS.COM, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1999
and September 30, 2000 (Unaudited)
Consolidated Statements of Operations (Unaudited) -
Three Months and Nine Months Ended September 30, 2000 and
1999
Consolidated Statements of Cash Flows (Unaudited)
- Nine Months Ended September 30, 2000 and 1999
Notes to Consolidated Financial Statements
(Unaudited) - Three Months and Nine Months Ended
September 30, 2000 and 1999
Item 2. Management's Discussion and Analysis or Plan of
Operation
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
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Shopss.com, Inc. and Subsidiary
Consolidated Balance Sheets
September 30, December 31,
2000 1999
--------- ---------
(Unaudited)
ASSETS
Current assets:
Cash $ 3,117 $ 891
Accounts receivable 93,102
Inventory 121,081
Prepaid expenses 2,397
--------- ---------
Total current assets 3,117 217,472
--------- ---------
Property and equipment 154,935
Less: Accumulated depreciation (58,063)
--------- ---------
96,872
--------- ---------
Advances receivable - OSCM 526,583
Goodwill, net of accumulated
amortization 618,637
Other assets 12,781
--------- ---------
Total assets $ 3,117 $1,472,345
========= =========
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(continued)
Shopss.com, Inc. and Subsidiary
Consolidated Balance Sheets (continued)
September 30, December 31,
2000 1999
--------- ---------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued
expenses $1,954,565 $ 979,659
Taxes payable 48,104 22,791
Customer deposits 235,277 8,691
Leases payable - current portion 31,938 20,992
Bank payable 585,763
Note payable - related party 88,868 59,303
--------- ---------
Total current liabilities 2,358,752 1,677,199
--------- ---------
Leases payable - non-current
portion 57,862
--------- ---------
Stockholders' deficiency:
Common stock, $.001 par value -
Authorized - 50,000,000 shares
Issued and Outstanding -
8,997,160 shares and 19,997,160
shares at September 30, 2000
and December 31, 1999,
respectively 8,997 19,997
Additional paid-in capital 622,321
Accumulated deficit (2,364,632) (905,034)
--------- ---------
Total stockholders' deficiency (2,355,635) (262,716)
--------- ---------
Total liabilities and
stockholders' deficiency $ 3,117 $1,472,345
========= =========
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See accompanying notes to consolidated financial statements.
Shopss.com, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
Three Months Ended
September 30,
--------------------------
2000 1999
--------- ---------
Net sales $ (51,661) $ 733,717
Cost of goods sold 741,398
------- -------
Gross profit (loss) (51,661) (7,681)
------- -------
Operating expenses:
Sales and marketing 243,417
General and administrative
expenses 41,937 124,924
Depreciation and amortization 8,634
------- -------
Total operating expenses 41,937 376,975
------- -------
Loss from operations (93,598) (384,656)
------- -------
Other income (expense):
Interest expense, net (1,520) (332)
Other income (expense), net (20,657) 1,341
------- -------
Total other income (expense) (22,177) 1,009
------- -------
Net loss $(115,775) $(383,647)
======= =======
Basic and diluted net loss
per common share $(0.01) $(0.03)
==== ====
Weighted average common
shares outstanding -
basic and diluted 8,997,160 12,000,000
========= ==========
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See accompanying notes to consolidated financial statements.
Shopss.com, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
Nine Months Ended
September 30,
--------------------------
2000 1999
--------- ---------
Net sales $ 1,699,232 $1,448,477
Cost of goods sold 1,616,078 1,342,144
--------- ---------
Gross profit 83,154 106,333
--------- ---------
Operating expenses:
Sales and marketing 156,681 253,783
General and administrative
expenses 428,902 200,231
Depreciation and amortization 52,431 13,606
--------- ---------
Total operating expenses 638,014 467,620
--------- ---------
Loss from operations (554,860) (361,287)
--------- ---------
Other income (expense):
Write-off of goodwill (586,077)
Interest expense, net (7,621) (1,032)
Other income (expense), net (20,812) 6,213
--------- ---------
Total other income (expense) (614,510) 5,181
--------- ---------
Net loss $(1,169,370) $ (356,106)
========= =========
Basic and diluted net loss
per common share $(0.08) $(0.03)
==== ====
Weighted average common
shares outstanding -
basic and diluted 14,497,160 12,000,000
========== ==========
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See accompanying notes to consolidated financial statements.
Shopss.com, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30,
--------------------------
2000 1999
--------- ---------
Cash flows from operating
activities:
Net loss $(1,169,370) $(356,106)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 52,431 13,606
Loss on disposal of
fixed assets 26,107
Write-off of goodwill 586,077
Changes in operating
assets and liabilities:
(Increase) decrease in:
Accounts receivable 93,102 104,958
Inventory 121,081 (36,329)
Prepaid expenses 240
Other assets 12,781 (2,869)
Increase (decrease) in:
Accounts payable and
accrued expenses 974,906 158,472
Taxes payable 25,313 (115,418)
Customer deposits 226,586
--------- -------
Net cash provided by (used in)
operating activities 949,254 (233,686)
--------- -------
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(continued)
Shopss.com, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited) (continued)
Nine Months Ended
September 30,
--------------------------
2000 1999
--------- ---------
Cash flows from investing
activities:
Purchase of property and
Equipment $ $ (47,534)
Proceeds from sales of
fixed assets 10,800
--------- -------
Net cash provided by (used in)
investing activities 10,800 (47,534)
--------- -------
Cash flows from financing
activities:
Proceeds from issuance of
common stock 139,838
Advances from (payments to)
OSCM (396,966) 177,826
Repayments to factor (34,311)
Increase in loans receivable
from stockholder 18,179
Increase in bank payable (585,763)
Principal payments on leases
payable (4,664)
Increase (decrease) in notes
payable - related parties 29,565 (19,662)
--------- -------
Net cash provided by (used in)
financing activities (957,828) 281,870
--------- -------
Cash and cash equivalents:
Net increase 2,226 650
At beginning of period 891 490
--------- -------
At end of period $ 3,117 $ 1,140
========= =======
See accompanying notes to consolidated financial statements.
Shopss.com, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Three Months and Nine Months Ended September 30, 2000 and 1999
1. Organization and Basis of Presentation
Basis of Presentation - The accompanying consolidated financial statements
include the operations of Shopss.com, Inc. and its wholly-owned subsidiary
(the "Company"). All significant intercompany transactions and balances
have been eliminated in consolidation.
Comments - The accompanying interim consolidated financial statements are
unaudited, but in the opinion of management of the Company, contain all
adjustments, which include normal recurring adjustments, necessary to
present fairly the financial position at September 30, 2000, the results of
operations for the three months and nine months ended September 30, 2000
and 1999, and the cash flows for the nine months ended September 30, 2000
and 1999. The consolidated balance sheet as of December 31, 1999 is derived
from the Company's audited financial statements.
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Certain information and footnote disclosures normally included in financial
statements that have been presented in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission with respect to
interim financial statements, although management of the Company believes
that the disclosures contained in these financial statements are adequate
to make the information presented therein not misleading. For further
information, refer to the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1999, as filed with the Securities and
Exchange Commission.
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,
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.
The results of operations for the three months and nine months ended
September 30, 2000 are not necessarily indicative of the results of
operations to be expected for the full fiscal year ending December 31,
2000.
Going Concern - The accompanying consolidated financial statements have
been prepared assuming that the Company will continue as a going concern.
The Company has suffered recurring losses from operations and had a
deficiency in working capital and shareholders' equity at December 31, 1999
and September 30, 2000. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The Company will need to
raise additional debt or equity capital to be able to conduct operations.
The Company's independent certified public accountants have included a
modification paragraph in their report on the Company's consolidated
financial statements for the year ended December 31, 1999 with respect to
this matter.
Earnings Per Share - Basic earnings per share is calculated by dividing net
loss by the weighted average number of common shares outstanding during the
period. Diluted earnings per share reflects the potential dilution that
would occur if dilutive stock options and warrants were exercised. These
potentially dilutive securities were anti-dilutive for all periods
presented, and accordingly, basic and diluted earnings per share are the
same for all periods presented.
2. Termination of Operations and Write-off of Goodwill
After the closing of the Asset Purchase Agreement with OSCM - OneStop.com,
a Florida corporation ("OSCM"), on October 27, 1999, the Company relied on
OSCM for a substantial portion of its working capital and provided OSCM
with computers and other equipment. As a result of certain financial
difficulties experienced by OSCM, OSCM was unable to provide working
capital to the Company and was also unable to pay the Company for the
equipment which the Company had delivered to OSCM and its affiliated
entities. As a result of these financial difficulties, the Company ceased
operations, sold or wrote-off its operating assets, and terminated all of
its employees during the three months ended June 30, 2000. In July 2000,
the Company liquidated most of its remaining assets and recorded a related
loss of approximately $26,000. The Company was insolvent at September 30,
2000.
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As a result of the foregoing, the Company determined that its decision to
refocus its business efforts to develop voice-over-internet protocol and
broadband wireless technology had impaired goodwill. Accordingly, the
Company wrote-off unamortized goodwill of $586,077 at June 30, 2000,
resulting in a charge to operations for the nine months ended September 30,
2000.
3. Stockholders' Deficiency
On May 12, 2000, the Company signed an agreement with OSCM to cancel
$923,549 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 OSCM to purchase 3,000,000 shares of common stock of the
Company. This new agreement also made clarifications as to certain terms
of the original Asset Purchase Agreement between OSCM and the Company. The
Company accounted for this agreement by increasing shareholders' deficiency
by $923,549.
The warrant to purchase 3,000,000 shares is exercisable for a period of two
years at $5.00 per share. As a result of the fact that the fair market
value of the Company's common stock on May 12, 2000 was $0.375 per share,
as well as certain other factors, the Company has determined that this
warrant had no intrinsic value.
4. Acquisition of AccessTel, Inc.
On June 9, 2000, the Company signed a letter of intent to acquire all of
the outstanding common shares of AccessTel, Inc. from its shareholders.
AccessTel, Inc. is a telecommunications company specializing in voice-over-
internet protocol (VOIP) and broadband wireless technology. The number of
shares issuable is based upon the shareholders of AccessTel, Inc. receiving
80% of the issued and outstanding stock of the Company on a fully diluted
basis after taking into account certain adjustments. To the extent that
the Company issues shares in a private placement and/or for the conversion
of debt into equity, the Company will be required to issue additional
shares to the shareholders of AccessTel, Inc.
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On November 21, 2000, a definitive agreement was entered into between the
Company and AccessTel, Inc. (subject to the execution by the shareholders
Of AccessTel, Inc.) pursuant to which the Company expects to issue or reserve
For issuance 36,100,540 shares of its common stock to the shareholders of
Accesstel, Inc. at closing in exchange for all of the outstanding common
stock of AccessTel, Inc. The transaction will be accounted for as a reverse
acquisition for accounting purposes, with AccessTel, Inc. being deemed as the
accounting acquiror.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:
This Quarterly Report on Form 10-QSB for the quarterly period ended
September 30, 2000 contains "forward-looking" statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, including
statements that include the words "believes", "expects", "anticipates", or
similar expressions. These forward-looking statements include, among
others, statements concerning the Company's expectations regarding its
working capital requirements, its business, growth prospects, competition
and results of operations, and other statements of expectations, beliefs,
future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical facts. The forward-
looking statements in this Quarterly Report on Form 10-QSB for the
quarterly period ended September 30, 2000 involve known and unknown risks,
uncertainties and other factors that could cause the actual results,
performance or achievements of the Company to differ materially from those
expressed in or implied by the forward-looking statements contained herein.
11
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Overview:
Immediately prior to October 27, 1999, the Company was an inactive public
company. Effective October 27, 1999, pursuant to an Asset Purchase
Agreement, the Company purchased from OSCM - OneStop.com, a Florida
corporation ("OSCM"), an 80% ownership interest in CCM, all rights to an
option to purchase the remaining 20% ownership interest in CCM, and all
assets relating to the Shopss.com virtual shopping mall owned by OSCM,
including all software, web-sites, 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 of its common
stock, which represented approximately 60% of its outstanding shares of
common stock after giving effect to the transaction. 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 between the Company and OSCM, clarifications were 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, any obligation of
the Company to pay cash for the assets acquired from OSCM was cancelled,
the holdings of OSCM in the Company were decreased by canceling 11,000,000
shares of common stock owned by OSCM, the Company issued a warrant to OSCM
to purchase 3,000,000 shares of common stock at $5.00 per share for a
period of two years, and the Company agreed to cancel all amounts due from
OSCM to the Company aggregating approximately $1,600,000. Immediately
after the closing of the Asset Purchase Agreement, the Company effected a
5.435034 forward split of its common stock.
After the closing of the Asset Purchase Agreement, the Company relied on
OSCM for a substantial portion of its working capital and provided OSCM
with computers and other equipment. As a result of certain financial
difficulties experienced by OSCM, OSCM was unable to provide working
capital to the Company and was also unable to pay the Company for the
equipment which the Company had delivered to OSCM and its affiliated
entities. As a result of these financial difficulties, the Company ceased
operations, sold or wrote-off its operating assets, and terminated all of
its employees during the three months ended June 30, 2000. The Company was
insolvent at September 30, 2000.
On June 9, 2000, the Company signed a letter of intent to acquire all of
the outstanding common shares of AccessTel, Inc. from its shareholders.
The number of shares issuable is based upon the shareholders of AccessTel,
Inc. receiving 80% of the issued and outstanding stock of the Company on a
fully diluted basis after taking into account certain adjustments. To the
extent that the Company issues shares in a private placement and/or for the
conversion of debt into equity, the Company will be required to issue
additional shares to the shareholders of AccessTel, Inc.
12
<PAGE>
On November 21, 2000, a definitive agreement was entered into between the
Company and AccessTel, Inc. (subject to the execution by the shareholders
Of AccessTel, Inc.) pursuant to which the Company expects to issue or reserve
For issuance 36,100,540 shares of its common stock to the shareholders of
Accesstel, Inc. at closing in exchange for all of the outstanding common
stock of AccessTel, Inc. The transaction will be accounted for as a reverse
acquisition for accounting purposes, with AccessTel, Inc. being deemed as the
accounting acquiror..
AccessTel, Inc. is a telecommunications company specializing in voice-over-
internet protocol (VOIP) and broadband wireless technology. The Company
will be required to raise capital to fund the operations of AccessTel, Inc.
The Company estimates that AccessTel, Inc. will require additional
operating capital to fund its operations during the remainder of 2000 and
2001. However, there can be no assurances that the Company will be
successful in raising the required capital on a timely basis and/or under
acceptable terms and conditions. Furthermore, the Company has substantial
liabilities at September 30, 2000 that it is attempting to settle through
the issuance of common stock, but there can be no assurances that it will
be successful in this regard.
As a result of all of the aforementioned factors, the Company may be forced
to file for bankruptcy, and there can be no assurances that the Company
will be able to continue in existence.
The information set forth below relates to the business previously
conducted by the Company after October 27, 1999 pursuant to the Asset
Purchase Agreement. However, as a result of the financial difficulties
described above, the Company ceased operations and terminated all of its
employees during the three months ended June 30, 2000.
Results of Operations:
Three Months Ended September 30, 2000 and 1999 -
Sales. The Company had negative net sales of $51,661 for the three months
ended September 30, 2000 due to sales returns and allowances. Net sales
were $733,717 for the three months ended September 30, 1999.
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Gross Profit. The Company had no cost of goods sold for the three months
ended September 30, 2000. As a result, gross profit was $(51,661) for the
three months ended September 30, 2000. Gross profit was $(7,681) for the
three months ended September 30, 1999.
Sales and Marketing Expenses. The Company did not have any sales and
marketing expenses for the three months ended September 30, 2000. Sales
and marketing expenses were $243,417 for the three months ended September
30, 1999.
General and Administrative Expenses. General and administrative expenses
were $41,937 for the three months ended September 30, 2000, as compared to
$124,924 for the three months ended September 30, 1999, a decrease of
$82,987 or 66.4%.
Net Loss. Net loss was $115,775 for the three months ended September 30,
2000, as compared to a net loss of $383,647 for the three months ended
September 30, 1999.
Nine Months Ended September 30, 2000 and 1999 -
Sales. The Company had net sales of $1,699,232 for the nine months ended
September 30, 2000, as compared to net sales of $1,448,477 for the nine
months ended September 30, 1999, an increase of $250,755 or 17.3%.
Gross Profit. Gross profit was $83,154 (4.9% of sales) for the nine months
ended September 30, 2000, as compared to gross profit of $106,333 (7.3% of
sales) for the nine months ended September 30, 1999.
Sales and Marketing Expenses. Sales and marketing expenses were $156,681
for the nine months ended September 30, 2000, as compared to sales and
marketing expenses of $253,783 for the nine months ended September 30,
1999, a decrease of $97,102 or 38.3%.
General and Administrative Expenses. General and administrative expenses
were $428,902 for the nine months ended September 30, 2000, as compared to
$200,231 for the nine months ended September 30, 1999, an increase of
$228,671 or 114.2%.
Write-off of Goodwill. The Company determined that its decision to refocus
its business efforts to develop voice-over-internet protocol and broadband
wireless technology had impaired goodwill. Accordingly, the Company wrote-
off unamortized goodwill of $586,077 at June 30, 2000, resulting in a
charge to operations for the nine months ended September 30, 2000.
Net Loss. Net loss was $1,169,370 for the nine months ended September 30,
2000, as compared to a net loss of $356,106 for the nine months ended
September 30, 1999.
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Liquidity and Capital Resources - September 30, 2000:
Operating Activities. Company had delivered to OSCM and its affiliated
entities. During the three months ended June 30, 2000, the Company ceased
operations, sold or wrote-off its operating assets, and terminated all of
its employees.
At September 30, 2000, the Company had nominal cash resources of $3,117 and
a working capital deficit of $2,355,635, as a result of which the Company
was insolvent.
Financing Activities. OSCM, through its subsidiary Shopss.com in Israel
("Shopss.com - Israel"), was providing services similar to the Company in
Israel. Shopss.com - Israel collected monies through credit cards in 1999,
which were cleared through the Company. In January 2000, as a result of
customer dissatisfaction issues, the Company began getting chargebacks from
the bank for sales by Shopss.com - Israel. The Company received
chargebacks of $585,763 against its bank account through April 30, 2000,
which was recorded as a liability due the bank. In addition, a receivable
from OSCM for advances of $526,583 was established at December 31, 1999.
During the nine months ended September 30, 2000, the Company paid the bank
$585,763 and made net payments to OSCM of $396,966.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. Exhibits:
1. Financial Data Schedule (electronic filing only)
1. Reports on Form 8-K:
Three Months Ended September 30, 2000 - None
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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.
Shopss.com, Inc.
----------------
(Registrant)
/s/ GERARD M. CONCA
Date: November 27, 2000 By: _________________________
Gerard M. Conca
Chairman and Chief
Executive Officer
(Duly Authorized Officer)
Date: November 27, 2000 By: /s/ MICHELLE C. MILLER
_________________________
Michelle C. Miller
Executive Vice President
and Chief Financial
Officer
(Chief Financial and
Accounting Officer)
