UNITED STATES
SECURITIES AND 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.
FOR THE QUARTER PERIOD ENDED JUNE 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
COMMISSION FILE NUMBER 0-26943
AMERICAN INFLATABLES, INC.
--------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4702570
-------- ----------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
947 NEWHALL STREET, COSTA MESA, CA 92627
---------------------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 949-515-1776
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR
VALUE $.01 PER SHARE
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 such filing requirements for the past 90 days.
Yes [X] No[ ]
As of August 21, 2000, there were 5,959,421 shares of the Registrant's common
stock, $.01 par value per share, issued and outstanding.
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<PAGE>
PAGE
PART I FINANCIAL INFORMATION................................. 2
Item 1. Financial Statements.................................. 3
Balance Sheet......................................... 3
Statement of Operations for the Three Months
Ended June 30, 2000 and 1999 (Proforma) ............ 4
Statement of Operations for the Six Months
Ended June 30, 2000 and 1999 (Proforma) ............ 5
Statement of Cash Flows For the Six Months
Ended June 30, 2000 and 1999 (Proforma) ............ 6
Notes to Condensed Financial Statements
as of June 30, 2000 ................................ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 9
PART II OTHER INFORMATION..................................... 11
Item 1: Legal Proceedings..................................... 11
Item 2: Changes in Securities................................. 11
Item 3: Defaults Upon Senior Securities....................... 11
Item 4: Submission of Matters to a Vote of Security Holders... 11
Item 5: Other Information..................................... 11
Item 6(a): Exhibits.............................................. 11
Item 6(b): Reports on Form 8.K................................... 11
SIGNATURES....................................................... 12
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<PAGE>
PART I - FINANCIAL INFORMATION
NOTE REGARDING FORWARD-LOOKING STATEMENTS.
This Form 10-QSB contains forward-looking statements within the meaning of the
"safe harbor" provisions under Section 21E of the Securities Exchange Act of
1934 and the Private Securities Litigation Reform Act of 1995. We use
forward-looking statements in our description of our plans and objectives for
future operations and assumptions underlying these plans and objectives.
Forward-looking terminology includes the words "may," "expects," "believes,"
"anticipates," "intends," "projects," or similar terms, variations of such
terms or the negative of such terms. These forward-looking statements are based
on management's current expectations and are subject to factors and
uncertainties, which could cause actual results to differ materially from
those, described in such forward-looking statements. We expressly disclaim any
obligation or undertaking to release publicly any updates or revisions to any
forward-looking statements contained in this Form 10-QSB to reflect any change
in our expectations or any changes in events, conditions or circumstances on
which any forward-looking statement is based. Factors, which could cause such
results to differ materially from those described in the forward-looking
statements, and elsewhere in, or incorporated by reference into this
Form 10-QSB.
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<PAGE>
ITEM 1 Financial Statements
<TABLE>
AMERICAN INFLATABLES, INC.
BALANCE SHEET
<CAPTION>
JUNE 30, December 31,
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash ............................................$ 25,200 $ 900
Inventory........................................ 87,600 59,600
Prepaid expenses and other current assets........ 162,000 53,300
--------- ---------
Total current assets....................... 274,800 113,800
Fixed assets, net ... . ........................... 99,100 107,900
Other assets:
Deposits......................................... 7,000 7,000
Goodwill, net.................................... 776,900 818,400
--------- ---------
Total other assets......................... 783,900 825,400
--------- ---------
Total assets...............................$1,157,800 $1,047,100
========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Notes payable....................................$ 310,000 $ 323,000
Accounts payable................................. 92,900 113,300
Accrued payroll liabilities...................... 373,200 289,500
Accrued liabilities.............................. 887,800 48,700
--------- ---------
Total current liabilities.................. 1,663,900 774,500
Long term liabilities
Stockholders' equity
Common stock..................................... 54,600 45,400
Additional paid in capital....................... 1,683,100 254,600
Accumulated deficit..............................(2,243,800) (27,400)
--------- ---------
Total stockholders' (deficit) equity....... (506,100) 272,600
--------- ---------
Total liabilities and
stockholders' (deficit) equity $1,157,800 $1,047,100
========= =========
<FN>
See accompanying notes to financial statements
</TABLE>
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<PAGE>
<TABLE>
AMERICAN INFLATABLES, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS
<CAPTION>
PROFORMA
JUNE 30, 2000 JUNE 30, 1999
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues.........................................$ 402,100 $ 378,000
Cost of goods sold.......................... 268,400 201,000
---------- ----------
Gross profit..................................... 133,700 177,000
---------- ----------
Administrative expenses
Depreciation and amortization............... 36,500 10,800
Professional fees .......................... 1,868,600 19,800
Other administrative expenses............... 86,800 56,500
Salaries and payroll expenses............... 215,500 77,400
Marketing................................... 1,600 3,200
Trade show.................................. 85,400 24,900
Travel & entertainment...................... 47,700 8,400
---------- ----------
Total.................................. 2,342,100 201,000
---------- ----------
Net loss from operations........... (2,208,400) (24,000)
Income tax (benefit)
Income tax expense (benefit)................ (900,000) (9,600)
Valuation allowance (benefit)............... 900,000 9,600
---------- ----------
Total.................................. 0 0
---------- ----------
Net loss $(2,208,400) $ (24,000)
========== ==========
Loss per share..............................$ (0.41) $ (0.01)
========== ==========
Weighted average shares..................... 5,350,000 4,540,000
========== ==========
<FN>
See accompanying notes to financial statements
</TABLE>
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<PAGE>
<TABLE>
AMERICAN INFLATABLES, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
<CAPTION>
PROFORMA
JUNE 30, 2000 JUNE 30, 1999
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues.........................................$ 853,200 $ 595,000
Cost of goods sold.......................... 467,000 301,400
---------- ----------
Gross profit..................................... 386,200 293,600
---------- ----------
Administrative expenses
Depreciation and amortization............... 55,100 16,000
Professional fees .......................... 1,882,500 36,800
Other administrative expenses............... 152,400 84,900
Salaries and payroll expenses............... 283,300 118,200
Marketing................................... 12,900 10,800
Trade show.................................. 147,700 45,400
Travel & entertainment...................... 68,700 11,800
---------- ----------
Total.................................. 2,602,600 323,900
---------- ----------
Net loss from operations........... (2,216,400) (30,300)
Income tax (benefit)
Income tax expense (benefit)................ (900,000) (12,100)
Valuation allowance (benefit)............... 900,000 12,100
---------- ----------
Total.................................. 0 0
---------- ----------
Net loss $(2,216,400) $ (30,300)
========== ==========
Loss per share.............................. (0.43) (0.01)
========== ==========
Weighted average shares...................... 5,200,000 4,540,000
========== ==========
<FN>
See accompanying notes to financial statements
</TABLE>
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<PAGE>
<TABLE>
AMERICAN INFLATABLES, INC.
STATEMENTS of CASH FLOWS
QUARTER ENDED JUNE 30, 2000
<CAPTION>
PROFORMA
JUNE 30, 2000 JUNE 30, 1999
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)............................... $(2,216,400) $ (30,300)
Adjustments to Reconcile
Net Income (Loss) to Net Cash Provided
By (Used In) Operating Activities
Stock issued for services .. ................... 1,122,700 0
Depreciation and amortization................... 55,100 16,000
(Increase) Decrease in:
Prepaid expense and other assets................ (104,700) (17,200)
Inventory....................................... (28,000) (6,100)
Increase (Decrease) in:
Accounts payable............................... (20,400) 24,700
Accrued expenses............................... 922,800 37,600
----------- -----------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES........... (268,900) 24,700
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment/leaseholds................ (4,800) (32,100)
Advances to officer............................. (4,000) (42,000)
----------- -----------
NET CASH USED IN INVESTMENT ACTIVITIES.......... (8,800) (74,100)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of common stock........................ 315,000 0
Increase (decrease) in long term debt, net...... (13,000) 100,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES....... 302,000 100,000
----------- -----------
NET INCREASE (DECREASE) IN CASH................. 24,300 50,600
CASH AT BEGINNING OF PERIOD..................... 900 5,700
----------- -----------
CASH AT END OF PERIOD........................... $ 25,200 $ 56,300
=========== ===========
<FN>
See accompanying notes to financial statements
</TABLE>
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<PAGE>
Notes to Financial Statements
1. ORGANIZATION AND BASIS OF PRESENTATION
American Inflatables, Inc.,(the "Company")(a Delaware Corporation) which
provides, manufactures and markets alternative advertising products such as,
inflatables, blimps and other custom inflatable products.
Effective December 27, 1999 (the Acquisition Date) the Company acquired the
alternative advertising medium business from Can/Am Marketing Group, LLC in an
exchange of common stock of the Company for the assets of Can/Am Marketing
Group, LLC. The merger transaction occurred December 27, 1999. The acquisition
was accounted for under the purchase method of accounting. Accordingly, the
acquired assets and liabilities were recorded at fair market value, deemed to
be the net book value carried by Can/Am. The difference between fair market
value and purchase price was charged to Goodwill.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING: The Company uses the accrual method of accounting and
prepares and presents financial statements that conform to generally accepted
accounting principles. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affects the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
BASIS OF PRESENTATION: The accompanying unaudited condensed financial
statements and related notes have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission for Form 10-QSB.
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 a normal recurring
nature and considered necessary for a fair presentation, have been included. It
is suggested that these financial statements are read in conjunction with the
financial statements and notes thereto included in the Company's annual report
on Form 10-KSB for the year ended December 31, 1999. The results of operations
for the three month and six month periods ended June 30, 2000 are not
necessarily indicative of the operating results for the year ended
December 31, 2000. For further information, refer to the financial statements
and notes thereto included in the Company's Annual Report on Form 10-KSB for
the fiscal year December 31, 1999.
RECLASSIFICATIONS: Certain June 30, 1999 balances have been reclassified to
conform to the June 30, 2000 financial statement presentation.
INVENTORY: Finished goods and raw materials are valued at the lower of cost
(first in first out) or market. Work-in-process, consisting of labor,
materials, and overhead on partially completed projects, are recorded at cost
but not in excess of net realizable value.
PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment are stated at
cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, which generally range from three years
for computer software to seven years for equipment. Leasehold improvements and
Goodwill are amortized on a straight-line method over ten years.
REVENUE AND EXPENSE RECOGNITION: Revenue from product sales are generated
primarily from the manufacturing and selling of advertising products, which
consist of inflatable blimps and other custom inflatables. The period of time
from initial order to final shipment of the product typically ranges from seven
to ten days. Revenue is recognized when the Company ships the product to the
client. Expenses are recorded when incurred.
ADVERTISING: The Company follows the policy of charging the costs of
advertising to expense as incurred. The Company's significant advertising
expenses are trade show costs. The Company depreciates the tradeshow blimps
over 60 months.
INCOME TAXES: The newly merged Company accounts for income taxes under the
provisions of Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes."
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<PAGE>
3. INVENTORY
Inventories as of June 30, 2000 by major classification, were as follows:
Finished Goods.......................... $ 24,200
Work-in-Process......................... 23,900
Raw Materials........................... 39,500
--------
$ 87,600
========
Inventory is valued using the first in first out (FIFO) method.
4. NOTES PAYABLE
Notes payable as of June 30, 2000 consisted of:
Short Term Note......................... $ 10,000
Convertible Notes....................... 300,000
--------
$310,000
========
Convertible notes in the amount of $300,000 provide for a term loan and include
interest payable at 12%. Shares owned by an officer of the Company secure these
loans. The Company is required to either make payment for principal and
interest or make payment in the form of common stock of the Company once the
Company becomes a publicly traded company. The lenders have the option to
convert the debt to common shares at $1.00 per share. No conversions have been
made as of June 30, 2000.
5. GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. Prior to the merger, the Company sustained significant losses and has
a negative working capital. Without the realization of additional capital, it
may be unlikely for the Company to continue as a going concern.
6. LEASES
The Company leases a combination of offices and production facility in
Costa Mesa, California totaling 10,000 square feet. The lease is accounted for
as an operating lease, under the terms of a one-year lease with ten one-year
consecutive renewal options.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including some derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for other hedging activities. The Company will adopt SFAS 133
in Fiscal 2001, in accordance with SFAS 137, which deferred the effective date
of SFAS 133. The adoption of this standard in Fiscal 2001 is not expected to
have a material impact on the Company's consolidated financial statements.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation--an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of APB No. 25 to certain issues including: the
definition of an employee for purposes of applying APB Opinion No. 25; the
criteria for determining whether a plan qualifies as a noncompensatory plan;
the accounting consequence of various modifications to the terms of previously
fixed stock options or awards; and the accounting for the exchange of stock
compensation awards in a business combination. FIN 44 is effective
July 1, 2000, but certain conclusions in FIN 44 are applicable retroactively to
specific events occurring after either December 15, 1998 or January 12, 2000.
The Company does not expect the application of FIN 44 to have a material impact
on the Company's financial position or results of operations.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS
The Company has authorized 20,000,000 shares of $0.01 par value common stock.
As of August 15, 2000 there were 5,959,421 shares issued and outstanding.
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
RESULTS OF OPERATIONS. Net sales were $402,100 for the three months ended
June 30, 2000, an increase of $24,100 or 6.4% compared to net sales of
$378,000 for the three months ended June 30, 1999. The increase in sales is
due to the Company increasing its customer base. Sales for the Company
continues to grow at an increasing rate not just from repeat customers but from
new customers. The Company continues to increase its presence and exposure in
the advertising markets through increased attendance at trade shows and other
advertising mediums that provide greater exposure. The Company is currently
on aggressive growth strategy that may include entering new lines and products,
and through the acquisition of complimentary businesses. The Company has
identified various businesses that would compliment the Company's core
business.
Gross margin for the three months ended June 30, 2000 was 35.7%, compared to
46.8% for the three months ended June 30, 1999. The Company earned $143,700 in
gross profit for the three months ended June 30, 2000 compared to $177,600 for
the three months ended June 30, 1999. The increase in net sales and production
efficiencies, still contribute to the gross margin as a percentage of sales.
The Company through its use of higher quality materials for production,
which it believes decreases replacements and warranty coverage and provide a
stronger and more durable product for sale to the customer and consumer.
During fiscal 1999 and the first quarter of fiscal 2000 the Company ramped up
and increased production and manufacturing staff, in order to increase sales,
enabling the Company to fully utilize its production staff to increase
gross margins. This is evident by the Company's continuing ability to
increase its sales and maintain a production facility that keeps up with this
growth. The Company has begun to allocate a larger portion of its staffing to
the production and has incurred a positive learning curve on the productiveness
of staff utilization.
The Company's selling expense (which consists of sales expense, marketing costs
and tradeshow expense) totaled $87,000 for the three months ended June 30, 2000
compared to $28,100 for the three months ended June 30, 1999, an increase of
$58,900 or 209.6%. The Company during fiscal 1999 increased its trade show
presence 700% fold from fiscal 1998 and continues to increase its trade show
presence into 2000. Management believes that the additional tradeshow costs
associated with this presence will be realized in increased sales over the next
year as evidenced by the Company's six months of sales for fiscal 2000.
The Company's total general and administrative expenses (less selling expense)
increased by over $2,000,000, for the three months ended June 30, 2000. These
costs were primarily due to the Company entering into various consulting
agreements to pursue merger and acquisition candidates and other representative
functions. The Company believes these expenses of this size and magnitude to be
one time occurrences and charges to net income. The Company entered into
various consulting agreements as evidenced the Form S-8's filed during the
second quarter of fiscal year 2000. The Company continues to add management to
its staff.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
RESULTS OF OPERATIONS. Net sales were $853,200 for the six months ended
June 30, 2000, an increase of $258,200 or 43.4% compared to net sales of
$595,000 for the six months ended June 30, 1999. The increase in sales is
due to the Company increasing its customer base and new products. Sales for
the Company still continues to grow at an increasing rate not just from repeat
customers but from new customers. The Company continues to increase its
presence and exposure in the advertising markets through increased attendance
at trade shows and other advertising mediums that provide greater exposure. The
Company is currently pursuing an aggressive growth strategy that may include
entering new lines and products, and through the acquisition of complimentary
businesses. The Company has identified various businesses that would compliment
the Company's core business.
Gross margin for the six months ended June 30, 2000 was 45.3%, compared to
49.3% for the six months ended June 30, 1999. The Company earned $386,200 in
gross profit for the six months ended June 30, 2000 compared to $293,600 for
the six months ended June 30, 1999. The increase in net sales and production
efficiencies, still contribute to the gross margin as a percentage of sales.
The Company through its use of higher quality materials for production,
which it believes decreases replacements and warranty coverage and provide a
stronger and more durable product for sale to the customer and consumer.
During fiscal 1999 and the first quarter of fiscal 2000 the Company ramped up
and increased production and manufacturing staff, in order to increase sales,
enabling the Company to fully utilize its production staff to increase
gross margins. This is evident by the Company's continuing ability to
increase its sales and maintain a production facility that keeps up with this
growth. The Company has begun to allocate a larger portion of its staffing to
the production and has incurred a positive learning curve on the productiveness
of staff utilization.
The Company's selling expense (which consists of sales expense, marketing costs
and tradeshow expense) totaled $160,600 for the six months ended June 30, 2000
compared to $56,200 for the six months ended June 30, 1999, an increase of
$104,400 or 185.8%. The Company during fiscal 1999 increased its trade show
presence 700% fold from fiscal 1998 and continues to increase its trade show
presence into 2000. Management believes that the additional tradeshow costs
associated with this presence will be realized in increased sales over the next
year as evidenced by the Company's six months of sales for fiscal 2000.
The Company's total general and administrative expenses (less selling expense)
increased by over $2,000,000, for the six months ended June 30, 2000. These
costs were primarily due to the Company entering into various consulting
agreements to pursue merger and acquisition candidates and other representative
functions. The Company believes these expenses of this size and magnitude to be
one time occurrences and charges to net income. The Company entered into
various consulting agreements as evidenced the Form S-8's filed during the
second quarter of fiscal year 2000. The Company continues to add management to
its staff.
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LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had cash and cash equivalents of $25,000, a
increase of $24,300 from $900 at December 31, 1999.
Cash used in operating activities was $268,900 during the six-month period
ended June 30, 2000. Use of cash in operating activities consisted mainly of
the net loss for the six-month period of $2,276,700, the offsetting effects of
depreciation and amortization of $55,100, a non-cash issuance of stock for
services of $1,122,700, and fluctuations in certain assets and liabilities.
The Company used $8,800 in investing activities during the first six months
of Fiscal 2000, principally for the purchase of property and equipment of
$4,800 (primarily computer equipment), and the loaning of monies to an officer
of the Company of $4,000.
Net cash provided by financing activities for the six-month period ended
June 30, 2000 was $302,000 consisting principally of the proceeds from the
issuance of common stock of $300,000 and the offsetting effects of payments on
notes payable of $13,000.
To date, the Company has not invested in derivative securities or any other
financial instruments that involve a high level of complexity or risk. Cash has
been, and the Company contemplates that it will continue to be, used for
general operating purposes.
From time to time, the Company may evaluate potential acquisitions of
products, businesses and technologies that may complement or expand the
Company's business. Any such transactions consummated may use a portion of the
Company's working capital and/or require the issuance of equity or debt.
The Company believes that its current cash and cash equivalent balance along
with the additional financing is insufficient to meet its working capital
expenditures through the near term and will require the Company in seeking
additional capital and or equity. The Company is currently exploring various
financing and credit facilities and continues to conduct a private placement of
its securities.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including some derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for other hedging activities. The Company will adopt SFAS 133
in Fiscal 2001, in accordance with SFAS 137, which deferred the effective date
of SFAS 133. The adoption of this standard in Fiscal 2001 is not expected to
have a material impact on the Company's consolidated financial statements.
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<PAGE>
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation--an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of APB No. 25 to certain issues including: the
definition of an employee for purposes of applying APB Opinion No. 25; the
criteria for determining whether a plan qualifies as a noncompensatory plan;
the accounting consequence of various modifications to the terms of previously
fixed stock options or awards; and the accounting for the exchange of stock
compensation awards in a business combination. FIN 44 is effective July 1,
2000, but certain conclusions in FIN 44 are applicable retroactively to
specific events occurring after either December 15, 1998 or January 12, 2000.
The Company does not expect the application of FIN 44 to have a material impact
on the Company's financial position or results of operations.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
During December 1999, FedEx Corporation filed an action, which was later
settled for approximately $19,500. The Company has been notified of a refiling
in the amount of $25,000.
There are no other material legal proceedings to which the Company is currently
a party or to which the property of the Company is subject.
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<PAGE>
Item 2. CHANGES IN SECURITIES
On June 30, 2000, the Registrant completed a private placement of 312,500
shares of common stock pursuant to exemptions from prospectus requirements of
applicable securities laws in the United States, at a price of $1.00 per share
of common stock, resulting in gross proceeds to the Registrant of $312,500 from
a total of nine investors.
The offering in United States was made under the exemption from the
registration requirements under the exemption under Rule 506 of Regulation D.
These offerings were made only to sophisticated investors; that is, the
investor either alone or with his purchaser representative(s) has such
knowledge and experience in financial and business matters that he is capable
of evaluating the merits and risks of the prospective investment, or the issuer
reasonably believes immediately prior to making any sale that such purchaser
comes within this description
During the period ended June 30, 2000, the Registrant issued a total of 418,000
shares, of which (a) 400,000 shares registered pursuant to a Form S-8 were
issued to an outside third party for services for a total value of $950,000,
net proceeds to the Company of $0, and (b) 15,000 shares registered pursuant to
a Form S-8 were issued to a consultant for services to the Company for a total
value of $18,750, net proceeds of $0. All proceeds were used for working
capital purposes.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBIT AND REPORTS ON FORM 8-K
a) Financial Statements filed as part of this Form 10-QSB
b) Current Report on Form 8-K/A dated April 10, 2000.
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<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 21, 2000 By: /s/ Gregg Mulholland
---------------------------
Gregg Mulholland
Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date: August 21, 2000 By: /s/ Gregg Mulholland
---------------------------
Gregg Mulholland
Chairman of the Board
Chief Executive Officer
Date: August 21, 2000 By: /s/ Jeffrey Jacobsen
---------------------------
Jeffrey Jacobsen
Chief Operating Officer
Director
Date: August 21, 2000 By: /s/ David Ariss
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David Ariss
Director
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