UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-26093
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SITE2SHOP.COM, INC.
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(Exact name of registrant as specified in its charter)
Nevada 88-0382813
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2001 West Sample Road, Suite 101, Pompano Beach, Florida 33064
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(Address of principal executive offices) (Zip Code)
(954) 969-1199
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(Registrant's telephone number, including area code)
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 registrant 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 30, 2000, the registrant had a total of 12,514,702 common
shares outstanding.
<PAGE>
SITE2SHOP.COM, INC.
Index to Form 10-QSB
September 30, 2000
PART I. FINANCIAL INFORMATION
Page
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Balance Sheets at December 31, 1999 and September 30, 2000.........3
Condensed Consolidated Statements of Operations for the Three and
Nine months ended September 30, 2000.........................................4
Condensed Consolidated Statements of Cash Flows for the Nine months
Months ended September 30, 2000..............................................5
.
Notes to Condensed Consolidated Financial Statements ........................6
Item 2.Management's Discussion and Analysis Operations or
Plan of Operations...........................................................7
PART II. OTHER INFORMATION
Item 2. Changes in Securities...............................................10
Item 5. Other Matters.......................................................10
Item 6. Exhibits and Reports on Form 8-K....................................10
<PAGE>
<TABLE>
<CAPTION>
SITE2SHOP.COM, INC.
Condensed Consolidated
Balance Sheets
December 31, 1999 September 30, 2000
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(Audited) (Unaudited)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents... $ 450,157 $ 909,400
Accounts receivable, net of allowance for doubtful
accounts of $0 and $282,902 1,589,438 1,888,909
Inventory 22,030 358,958
Marketable securities available for sale -- 90,000
Prepaid and other current assets 62,755 183,790
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Total current assets...... 2,124,380 3,431,057
Equipment and leasehold improvements, net... 935,959 939,482
Other assets... 113,553 69,426
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Total assets... $ 3,173,892 $ 4,439,965
=======================================================
Liabilities and stockholders' deficit Current liabilities:
Accounts payable and accrued expenses... $ 937,120 $ 857,858
Deferred income taxes payable...... 1,089,000 1,346,789
Capital lease obligations-current portion... 23,498 8,173
Capital lease obligations-related party-
current portion 167,182 --
Deferred revenue...... 2,403,241 3,246,636
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Total current liabilities... 4,620,041 5,459,456
Stockholders' deficit:
Common stock, $.001 par value:
Authorized 150,000,000 shares; issued and
outstanding, 12,479,702 and 12,514,702 shares,
respectively... 12,480 12,515
Additional paid-in capital...... 1,515,488 1,581,665
Deferred compensation....... (107,639) (107,866)
Other accumulated comprehensive loss-unrealized
loss from marketable securities ---- (60,000)
Accumulated deficit......... (2,866,478) (2,445,805)
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Total stockholders' deficit... (1,446,149) (1,019,491)
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Total liabilities and stockholders' deficit... $ 3,173,892 $ 4,439,965
======================================================
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
SITE2SHOP.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended Nine Months Ended Three Months Ended Three Months Ended
September 30, 1999 September 30, 2000 September 30, 1999 September 30, 2000
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<S> <C> <C> <C> <C>
Total revenues $ 7,375,220 $ 10,242,806 $ 2,534,292 $5,332,746
Cost and expenses:
Cost of revenues 1,680,076 3,202,069 615,394 1,827,798
Selling, marketing and
administrative 5,209,205 6,368,023 2,266,408 2,493,728
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Total operating cost and 6,889,281 9,570,092 2,881,802 4,321,526
expenses
Operating profit (loss) 485,939 672,714 (347,510) 1,011,220
Taxes (218,000) (252,268) (114,000) (372,268)
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Net income (loss) $ 267,939 $ 420,446 $(233,510) $ 638,952
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Earnings Per Share-Outstanding $0.02 $0.03 ($0.02) $0.05
Earning Per Share-Fully Diluted $0.02 $0.03 ($0.02) $0.05
Weighted Avg. Shares Outstanding 12,130,681 12,512,776 12,479,702 12,514,702
Weighted Avg. Shares Outstanding-Fully
Diluted 12,283,611 12,512,776 12,479,702 12,514,702
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
SITE2SHOP.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months ended September 30,
1999 2000
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Operating activities
<S> <C> <C> <C> <C> <C> <C>
Net income $ 267,939 $ 420,446
Adjustments to reconcile net income to net cash provided by
operating activities:........................
Depreciation and amortization.................... 95,660 140,863
Provision for deferred income taxes.................... 218,000 257,789
Amortization of deferred compensation........................ 68,750 68,172
Amortization of deferred compensation
Provision for bad debts 87,231 282,902
Changes in operating assets and liabilities:
Accounts receivable....................................... (837,514) (582,373)
Inventory................................................... (40,265) (336,928)
Prepaid expenses and other current assets............... (7,642) (121,035)
Other assets............................................................ (41,777) 42,167
Accounts payable and accrued expenses........................... 454,094 (139,262)
Deferred revenue...................................................... 291,469 843,395
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Net cash provided by operating activities............................... 555,945 876,136
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Investing activities
Investments acquired as partial consideration for infomercial
production fee ---- (150,000)
Reduction of investment for writedown of lower cost or market ---- 60,000
Capital expenditures.................................................... (244,124) (144,386)
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Cash used in investing activities.................................... (244,124) (234,386)
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Financing activities
Proceeds from sale of common stock.............................. 1,000,000 --
Note to related parties.................................................... (10,000) --
Repayment of capital lease obligations- related parties............ -- (167,182)
Repayment of capital lease obligations............................... (68,698) (15,325)
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Net cash provided by (used in) financing activities.................. 921,302 (182,507)
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Net increase (decrease) in cash and cash equivalents.................. 1,233,123 459,243
Cash and cash equivalents, beginning of period........................ 41,802 450,157
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Cash and cash equivalents, end of period.......................... $ 1,274,925 $ 909,400
============ =========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest............................................................... $ 5,675 $ 925
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Interest- related party.............................................. $ -- $ 8,095
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Taxes............................................................... $ 1,531 $ 1,077
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Non-cash financing activities:
Capitalized equipment lease- related party........................ $ 233,850 $ --
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Common stock issued for future services........................... $ 243,844 $ 68,399
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Reacquisition of common stock...................................... $ 26,875 $ --
========== =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
SITE2SHOP.COM, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2000
1. BASIS OF PRESENTATION AND OPERATIONS
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-QSB and
Items 303 and 310(b) of 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, the
accompanying unaudited consolidated financial statements contain all normal and
recurring adjustments which are necessary for a fair presentation of the
Company's financial position, results of operations and cash flows as of the
dates and for the periods presented. The consolidated results of operations for
the nine months ended September 30, 2000 are not necessarily indicative of the
results to be expected for the full year. For further information, refer to the
financial statements and footnotes thereto included in the Site2Shop.Com, Inc.
("Site2Shop.Com" or the "Company") audited financial statements for the year
ended December 31, 1999.
On February 9, 1999, the Company entered into an agreement to merge with
Tricom Productions, Inc.("Tricom"), a privately held Florida corporation engaged
in the marketing, production and distribution of television programming, into a
wholly owned subsidiary. The stockholders of Tricom, Nine of whom are the
Executive Officers of the Company and owned 71% collectively of the common stock
of the Company (85% of Tricom) and five (remaining) stockholders collectively
owned 5.6% of the common stock of the Company (15% of Tricom). Under the terms
of the agreement, the Tricom stockholders exchanged their shares at a ratio of
100,000 to 1 for a total of 10 million shares. As a result of the merger, the
Executive Officers of the Company and the remaining five Tricom stockholders
collectively owned 83.1% and 13.7% respectively, of the common stock of the
Company. As both companies were under common control, the combination of the two
companies is deemed to be a purchase and accounted for "as if" a pooling of
interests, whereby the combined assets and liabilities are recorded on an
historical basis. Accordingly, the audited Balance Sheet as of December 31, 1999
represents the financial condition of the Company as if the merger occurred as
of December 31, 1998. The unaudited Statements of Operations for the Nine month
period ended September 30, 2000 and the unaudited Statement of Cash Flows for
the Nine month period ended September 30, 2000 reflect the combined operations
and cash flows for the period then ended.
2. SIGNIFICANT EVENTS
On March 16, 2000, the Company, at its option, prepaid the entire unpaid
balance $109,500 of the capital master lease payable to a related party which is
100% owned by two Executive Officers of the Company and who own 67% of the
Company. The lease covered production, transportation and office equipment and
was payable in monthly installments of $21,910 (inclusive of interest at 13.5%
per annum and sales tax); the last payment due in August 2000. No gain or loss
was recorded upon payment.
On April 3, 2000, the Company's Board of Directors, subject to approval by
shareholders at the annual meeting increased the number of shares of common
stock available for option under the 1998 Employee Stock Option Plan from
3,000,000 million shares to 5,000,000 shares. In addition, the Company
registered the 5,000,000 shares of common stock with United States Securities
and Exchange Commission on May 1, 2000.
3. REVENUE RECOGNITION
The company recognizes its production revenue on a percentage of
completion basis. The company receives payments upfront for its services and
records it as deferred revenue. As each phase of the project is completed the
revenue is booked accordingly.
<PAGE>
SITE2SHOP.COM, INC.
PART I. ITEM 2- MANAGEMENT'S DISCUSSION OR PLAN OF OPERATIONS
September 30, 2000
(UNAUDITED)
The following discussion of the results of the operations and financial
condition of Site2Shop.Com, Inc. ("Site2Shop.Com" and the "Company") should
be read in conjunction with Site2Shop.Com's Unaudited Condensed
Consolidated Financial Statements and Notes thereto included elsewhere in
this report and the Company's Audited Consolidated Financial Statements and
Notes thereto for the year ended December 31, 1999.
Overview
The Company is engaged in the marketing, production and
distribution of television programs, direct response commercials and sale
of consumer products associated with these programs. The Company operates
three divisions: site2shop.com, which handles retail marketing and product
sales activities, Tricom Pictures which handles television production
activities and the marketing of educational television programming, and
Mirage Productions, a full-service multi-media production facility. All
programs are distributed to national audiences through a combination of any
and all of the following: ABC affiliates, NBC affiliates, CBS affiliates,
FOX affiliates, UPN affiliates and WB affiliates (collectively "network
affiliates"), independent television stations and targeted cable networks.
Products and services featured on the Site2Shop.com TV program are sold
through its telephone call centers, the Company's websites, other
e-commerce websites and the Company's retail store at a local mall in South
Florida.
Part of the Company's strategy is to grow through the opening of new
offices domestically and the expansion of the number of distribution
opportunities for the participants on the Company's television programs.
The Company's expansion and growth plans will depend on its ability to
identify appropriate targets and markets and obtain the necessary financing
to bring these plans to fruition. Further, the success of the Company's
efforts will depend on its ability to identify these opportunities, attract
highly qualified personnel and manage geographically dispersed operations.
There can be no assurances that the Company will be successful in its plans
of operational expansion nor the management of such growth.
Results of Operations
COMPARISION of the NINE MONTHS ENDED SEPTEMBER 30, 2000 TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1999.
Total revenues for the nine months ended September 30, 2000 were
$10,242,806, an increase of $2,867,586 over $7,375,220 for the prior
comparable period in 1999. The increase is attributable to the increase in
revenues from the TV shopping division of approximately $2,418,000 and an
increase in the education division of approximately $450,000. The increase
in revenue is attributable to production efficiencies whereby the company
was able to produce, edit and air more completed phases than in prior
comparable periods. These projects were a result of an increase in
contracts signed and booked in the first half of 2000 mainly as a result of
four new sales offices opened in 1999 and early 2000. Projects contracted
in one quarter are usually booked as revenue over the next two quarters.
Cost of Revenues increased to $3,202,069, or 31.3% of revenues versus
$1,680,076 or 22.7% for the prior comparable period. The increase in
expenses is attributable to an increase in revenue and the associated
production and airing costs with this revenue. On a percentage basis the
increase is a result of a reduced pricing structure of the education
division which has resulted in more sales and gross margins however at a
lower rate on a percentage basis. Contracts year to date have increase by
68% as a result of this new pricing.
Selling marketing and administrative expenses were $6,368,023 during
the nine months ended September 30, 2000, an increase of $1,158,818 from
the prior comparable period in 1999. Selling expenses in 2000 were 62.2% of
net revenues as compared to 70.6% in 1999. The increases are a result of
fixed operating costs associated with the hiring of additional marketing
and sales personnel in the second half of1999 and early 2000 and
establishing a sales infrastructure necessary to develop and generate sales
at this personnel.
COMPARISION of the THREE MONTHS ENDED SEPTEMBER 30, 2000 TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1999.
Total revenues for the three months ended September 30, 2000 were
$5,332,746, an increase of $2,798,454over $2,534,292 for the prior
comparable period in 1999. The increase is attributable to the increase in
revenues from the TV shopping division of approximately $2,443,000 and an
increase in the education division of approximately $264,000. The increase
in revenue is attributable to production efficiencies whereby the company
was able to produce, edit and air more completed phases than in the
comparable quarter last year. These projects were a result of an increase
in contracts signed and booked in the first half of 2000 mainly as a result
of new sales offices opened in 1999 and early 2000.
Cost of Revenues increased to $1,827,798, or 34.3% of revenues versus
$615,394 or 24.3% for the prior comparable period. The increase in expenses
is attributable to an increase in revenue and the associated production and
airing costs with this revenue. On a percentage basis the increase is a
result of a reduced pricing structure of the education division which has
resulted in more sales and gross margins however at a lower rate on a
percentage basis.
Selling marketing and administrative expenses were $2,493,728 during
the three months ended September 30, 2000, an increase of $227,320 from the
prior comparable period in 1999. Selling expenses in 2000 were 46.7% of net
revenues as compared to 89.4% in 1999. Other increases include associated
with the hiring of additional sales and marketing personnel in 2000 and
establishing a sales infrastructure necessary to develop and generate sales
for these new hires.
Liquidity and Capital Resources
The nine months ended September 30, 1999 reflect the consolidated cash
flows of the Company inclusive of the operations and cash flows of Tricom
since January 1, 1999 as a result of the merger of the two common
controlled entities in February 1999.
The Company generated $876,136 from operating activities in 2000 as
opposed to $555,945 during the same period in 1999. The increase in 2000 is
attributable to a net income of $420,446 that is approximately $152,000
above the prior comparable period, an increase of depreciation and
amortization of $45,000 and increase in bad debt reserve of $283,000. The
increase and decreases in operating assets and liabilities resulted in a
net increase to cash flow of less than $112,000 as compared to the same
nine months last year. Cash used in investing activities totaled $234,386
in 2000 primarily as a result of capital expenditures relating to the
upgrade of computer hardware and software in order to promote and upgrade
the company's website and MIS infrastructure. Cash used in financing
activities in 2000 totaled $182,507 mainly as a result of paying of leases
owed by the company. At September 30, 2000, the Company's backlog for
contracts signed and work has not begun or contracts partially completed
and work to be done totaled $3,246,636 as compared to $2,931,847 at
September 30, 1999.
The Company believes that cash and cash equivalents and cash generated from
its current level of operations to be sufficient to meet its working
capital requirements over the balance of the current year. The Company
continues to seek opportunities for growth either through the opening of
new offices, enhancing and increasing production capacity, acquisitions,
additional distribution channels of its shows' participants products and
services and any and all combinations thereof, and in connection therewith,
may seek to raise cash in the form of equity, bank debt or other debt
financing, or may seek to issue stock as consideration for acquisition
targets or expansion capital.
The Company currently has no outstanding material commitments for capital
expenditures. The Company's primary requirements for capital will be the
cost of revenue, strategic acquisitions, marketing and sales costs
associated with the Company's national and international expansion into new
target markets, and general and administrative expenses associated with the
Company's business plan. The Company anticipates, based on currently
proposed plans and assumptions relating to operations (including the
anticipated costs associated with, and timetable for, its proposed
expansion), that cash flows from operations will be sufficient to satisfy
the Company's contemplated cash requirements for at least 12 months. In the
event that the Company's plans change, its assumptions to change or prove
to be inaccurate or if its existing capital and cash flow otherwise prove
to be insufficient (due to unanticipated expenses, delays, problems,
difficulties or otherwise), the Company could be required to seek
additional financing or may be required to curtail its expansion or other
activities. In the event that the Company requires additional financing,
the Company may seek to raise capital through the sale of its equity
securities, including at prices which may represent significant discounts
from the market price of the Common Stock.
CAUTIONARY STATEMENT RELATING TO FORWARD-LOOKING STATEMENTS
The foregoing Management's Discussion and Analysis or Plan of Operation
contains various "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which represent the Company's
expectations and beliefs concerning future events. The Company cautions
that these statements are further qualified by important factors that could
cause actual results to differ materially from those in the forward-looking
statements, including, without limitation, the following: the Company's
ability to manage growth, acceptance of the Internet as a means for
commerce, market demand for e-commerce, decline in demand for the Company's
services; increases in expenses and costs of sales and the effect of
general economic conditions and factors affecting the industries the
company markets its service to and the ability of the Company to recruit
and retain qualified management and employees. These statements by their
nature involve substantial risks and uncertainties and actual events or
results may differ as a result of these and other factors.
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities
None
Item 5. Other Information
The company follows a policy of allowing senior members of its management
to become investors and principal shareholders of separate entities, which
could potentially become competitors of the company. Non-affiliated
persons, who may be former employees of the Company, possibly could
separately manage these entities and members of Site2shop management are
not actively involved in their management while in the employ of the
Company.
This policy was implemented in recognition that the company may not have
sufficient resources or have desire to commit resources to pursue the
opportunity or the activities (weather competitive or not) of the entity or
the activities of the entity may not have been developed at that time. The
Company also recognizes that some of the organizers of those entities do
not want a corporate shareholder for tax purposes, may not want corporate
oversight or may want a larger percentage of ownership in the entity for
themselves or their employees, or higher salaries then is acceptable to the
Company. In addition, the organizers may want to develop show concepts not
consistent with the Company's image or growth strategy, or may want to use
other outside production companies to produce their product.
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the
undersigned, thereunto duly authorized.
Site2Shop.Com, Inc.
(Registrant)
/s/ Mark Alfieri /s/ Brad Hacker
-------------------------------- -------------------------------------
Mark Alfieri Brad Hacker
President Chief Financial Officer
Dated: November 9, 2000
