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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
FIRST AMENDMENT
TO
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 2000
000-28331
(Commission File Number)
PLUS SOLUTIONS, INC.
(Exact Name of Registrant as Specified in Charter)
NEVADA 88-0412455
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
14677 MIDWAY ROAD, SUITE 206, ADDISON, TEXAS, U.S.A.
(Address of principal executive offices)
75001
(Zip Code)
972-687-0090
(Registrant's telephone number, including area code)
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PLUS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
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ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 152,023 $ 121,629
Prepaid expenses 100 1,208
Total current assets 152,123 122,837
PROPERTY AND EQUIPMENT- Net 97,272 51,297
PRODUCT DEVELOPMENT COSTS 178,891 97,440
OTHER ASSETS 50,000
TOTAL $ 478,286 $ 271,574
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 154,349 $ 166,442
Notes payable 88,317 68,317
Total current liabilities 242,666 234,759
Notes payable - long-term, net of discount 309,000 0
STOCKHOLDERS' EQUITY:
Convertible voting preferred stock, 8,000,000
shares authorized; no shares issued and outstanding 75,000 0
Common stock, $.001 par value; 100,000,000 shares authorized;
39,240,000 and 23,340,000 shares issued and outstanding,
respectively 39,240 23,340
Common stock warrants 262,000
Additional paid-in capital 8,612,894 8,081,377
Deficit accumulated during the development stage (9,062,514) (8,067,902)
Total stockholders' equity (deficit) (73,380) 36,815
TOTAL $ 478,286 $ 271,574
</TABLE>
See notes to condensed financial statements.
2
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PLUS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, CUMULATIVE
---------------------------- ---------------------------- FROM
2000 1999 2000 1999 INCEPTION
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES $ -- $ -- $ -- $ -- $ --
OPERATING EXPENSES:
Salaries and benefits 112,743 110,946 445,619 279,192 1,670,031
General and administrative 286,057 779,867 399,195 797,607 7,209,389
Depreciation expense 10,207 4,844 24,798 14,532 50,220
Total operating expenses 409,007 895,657 869,612 1,091,331 8,929,640
OPERATING LOSS (409,007) (895,657) (869,612) (1,091,331) (8,929,640)
INTEREST AND OTHER EXPENSE - Net (125,000) 0 (125,000) 0 (132,874)
NET LOSS $ (534,007) $ (895,657) $ (994,612) $ (1,091,331) $ (9,062,514)
Earnings per share:
Basic $ (0.01) $ (0.04) $ (0.03) $ (0.06)
Weighted average common and common
equivalent shares outstanding:
Basic 39,444,605 22,357,468 39,108,202 19,652,054
</TABLE>
See notes to condensed financial statements.
3
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PLUS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, CUMULATIVE
------------------------------ FROM
2000 1999 INCEPTION
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (994,612) $ (1,091,331) $ (9,062,514)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on disposal of property and equipment 5,501
Depreciation of property and equipment 24,798 14,532 50,220
Issuance of common and preferred stock for services 761,959 6,659,486
Noncash expense related to options and warrants 236,000 996,000
Net changes in operating assets and liabilities:
Prepaid expenses 1,108 (2,100) (100)
Accounts payable and accrued expenses (12,093) 91,455 154,349
Net cash used in operating activities (744,799) (225,485) (1,197,058)
INVESTING ACTIVITIES:
Additions to property and equipment (70,773) (76,576)
Capitalized product development costs (81,451) (1,000) (178,891)
Cash acquired in reverse merger 107,431 107,431
Change in other assets (50,000) (50,000)
Net cash used in investing activities (94,793) (1,000) (198,036)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 349,986 190,250 1,015,217
Proceeds from issuance of preferred stock 75,000 75,000
Proceeds from issuance of current debt 45,000 45,000
Proceeds from issuance of convertible long-term debt 425,000 425,000
Payments on notes payable (25,000) (33,100)
Collection of due from stockholder 20,000 20,000
Net cash provided by financing activities 869,986 210,250 1,547,117
NET INCREASE (DECREASE) IN CASH 30,394 (16,235) 152,023
CASH, BEGINNING OF PERIOD 121,629 46,198 0
CASH, END OF PERIOD $ 152,023 $ 29,963 $ 152,023
</TABLE>
See notes to condensed financial statements.
4
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PLUS SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. GOING CONCERN
The condensed financial statements have been prepared assuming that Plus
Solutions, Inc. (the "Company") will continue as a going concern. The Company
has experienced cumulative operating losses, has an accumulated deficit, and its
operations are subject to certain risks and uncertainties, including, among
others, risks associated with technology and regulatory trends, growth
competition by entities with greater financial and other resources, and the need
for additional capital. There can be no assurances that the Company will be
successful in becoming profitable or generating positive cash flow in the
future. The Company is considered to be a development stage company. The Company
is currently exploring various short-term and long-term financing alternatives,
but does not know if these alternatives will be successful. The success of these
financing alternatives will have a significant impact on the Company's ability
to continue as a going concern. The condensed financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
2. FINANCIAL STATEMENT POLICIES
BASIS OF PRESENTATION. The condensed financial statements include the
accounts of the Company. The condensed financial statements reflect all
adjustments that are, in the opinion of management, necessary to present a fair
statement of the Company's financial position as of September 30, 2000, and the
results of operations for the three and nine month periods ended September 30,
2000 and September 30, 1999. All adjustments are of a normal, recurring nature.
These interim financial statements should be read in conjunction with the
audited financial statements and the notes thereto prepared by the Company.
Operating results for the nine month period ended September 30, 2000, are not
necessarily indicative of the results to be achieved for the full year.
As discussed in Note 3, on March 10, 2000, the Company merged with Sound
Designs, Inc. ("Sound Designs"), and the stockholders of the Company received
approximately 1.69 shares of Sound Designs common stock for each share of the
Company's common stock they owned. At the time of the merger, the Company had
13,876,193 common shares issued and outstanding, and in the merger, 23,340,000
shares of Sound Designs common stock were received. Retroactive effect has been
given to the merger in stockholders' equity accounts beginning as of the year
ended December 31, 1999, and in all share and per share data in the accompanying
condensed financial statements.
BUSINESS. The Company, organized in October 1998, is a provider of
Internet-based, business-to-business, e-commerce solutions and services that
enable buyers and suppliers to automate business transactions on the Internet.
The Company is headquartered in Addison, Texas.
3. ACQUISITION
On March 10, 2000, the Company closed the Agreement and Plan of Merger
entered into with Sound Designs, a Nevada corporation. As consideration for the
merger, the stockholders of the Company, the accounting acquirer, received
approximately 1.69 shares of Sound Designs, the legal acquirer, common stock for
each share of the Company's common stock they owned. In addition, the Company
received cash of $107,431 from Sound Designs. As a result, the former
stockholders of the Company currently own 60% of the outstanding shares of
common stock of Sound Designs. In addition, the merger agreement required all
existing directors and officers of Sound Designs to resign and name the
directors of the Company as the directors of the surviving company which has
taken the name of Plus Solutions, Inc.
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4. FINANCING ARRANGEMENTS
On September 27, 2000, the Company entered into a Subscription Agreement
with four investors, The Keshet Fund L.P., Keshet L.P., Nesher Ltd., and Talbiya
B. Investments Ltd., which provided for an $8.5 million long-term financing
commitment. The financing was arranged by KCM Ltd., a New York, New York
investment firm. Upon the execution of the Subscription Agreement, the Company
initially sold to the investors a total of $500,000 of 8% Convertible Notes for
a purchase price equal to the principal amount of each note. Each investor
purchased an 8% Convertible Note in the amount set forth below:
<TABLE>
<S> <C>
The Keshet Fund L.P. ........................... $ 110,000
Keshet L.P. .................................... 215,000
Nesher Ltd. .................................... 85,000
Talbiya B. Investments Ltd. .................... 90,000
------------
TOTAL .......................................... $ 500,000
</TABLE>
The full principal amounts of the Convertible Notes must be paid on
September 27, 2003. The Convertible Notes incur interest at the rate of 8% per
year, which interest is paid quarterly. The Convertible Notes are a general
obligation of Plus Solutions and payment of principal and interest under the
notes is not secured by any specific assets.
The Convertible Notes may be converted into shares of our common stock at
the option of the holder or each note. Each Convertible Note may be partially or
fully converted into common stock. The number of shares into which each note may
be converted is calculated by dividing the principal amount of the note, plus
any accrued but unpaid interest on the note, by a conversion price calculated on
the date the Convertible Note is issued. The conversion price of the Convertible
Notes issued on September 27, 2000 is the lesser of (1) $.10 or (2) the average
of the three lowest bid prices for the Company's common stock during the 90
trading days preceding the conversion date. The conversion price of all
Convertible Notes issued after September 27, 2000 is 84% of the lowest closing
price for the Company's common stock on the principal stock market on which the
Company's common stock is traded during the 10 trading days immediately
preceding the date of conversion. Once the conversion price is established upon
issuance of the Convertible Note, the conversion price may be adjusted upon the
occurrence of certain events, including any division or combination of shares of
the Company's common stock, any recapitalization or restructuring, or any
issuance of the Company's common stock for a purchase price less than the
current conversion price. The conversion feature of the Convertible Notes was
recorded as an interest expense with an estimated value of $125,000.
5. STOCKHOLDERS' EQUITY
Related to the above financing arrangement, there were 2,000,000 warrants
issued to Alon Enterprises Ltd., with the warrants being exercisable for a
period of five years for common shares, with an exercise price of $0.1365 per
share. As of the date of issuance, the warrants were determined to have an
estimated fair value of $191,000.
The Company has also issued 800,000 warrants to a service provider, with
the warrants being exercisable for a period of five years for common shares,
with an exercise price of $0.20 per share. As of the date of issuance, the
warrants were determined to have an estimated fair value of $71,000.
During the third quarter of 2000, the Company has issued 300,000 shares of
common stock at $0.25 per share, and the Company also has issued 100,000 shares
of preferred stock at $0.75 per share.
6. NOTES PAYABLE
During the third quarter of 2000, the Company received $20,000 in the form
of a note payable to a stockholder, David Ballard.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the three and nine month periods ended September
30, 2000 (the "Third Quarter 2000" and "YTD 2000", respectively), as compared to
the three and nine month periods ended September 30, 1999 (the "Third Quarter
1999" and "YTD 1999", respectively). This discussion should be read in
conjunction with the Condensed Financial Statements and the related Notes
attached hereto.
GENERAL
The Company is a provider of Internet-based, business-to-business,
e-commerce solutions and services that enable buyers and suppliers to automate
business transactions on the Internet. The Company is headquartered in Addison,
Texas.
The Company has experienced cumulative operating losses, and its operations
are subject to certain risks and uncertainties, including, among others, risks
associated with technology and regulatory trends, growth competition by entities
with greater financial and other resources, and the need for additional capital.
There can be no assurances that the Company will be successful in becoming
profitable or generating positive cash flow in the future. The Company is
considered to be a development stage company.
On March 10, 2000, the Company closed the Agreement and Plan of Merger
entered into with Sound Designs, Inc. ("Sound Designs"), a Nevada corporation.
As consideration for the merger, the stockholders of the Company, the accounting
acquirer, received approximately 1.69 shares of Sound Designs, the legal
acquirer, common stock for each share of the Company's common stock they owned.
In addition, the Company received cash of $107,431 from Sound Designs. As a
result, the former stockholders of the Company currently own 60% of the
outstanding shares of common stock of Sound Designs. In addition, the merger
agreement required all existing directors and officers of Sound Designs to
resign and name the directors of the Company as the directors of the surviving
company which has taken the name of Plus Solutions, Inc.
OPERATIONS
There was no revenue in the Third Quarter 1999 or in the Third Quarter
2000. Total operating expenses, including general and administrative costs were
$895,657 for the Third Quarter 1999 versus $409,007 for the Third Quarter 2000.
Contributing significantly to this decrease in operating costs was the issuance
of Common Stock for services in Third Quarter 1999 versus Third Quarter 2000
where none was issued. Net operating losses decreased when comparing Third
Quarter 1999 of $895,657 to Third Quarter 2000 of $409,007.
For the nine month period ended September 30, there was no revenue in 1999
or 2000. Total operating expenses, including general and administrative, were
$1,091,331 YTD 1999 and $869,612 for YTD 2000. Contributing significantly to
this decrease was the issuance of Common Stock for services in Third Quarter
1999. This issuance of Common Stock resulted in a decrease in operating expenses
for the YTD even though there were increases in professional fees related to the
merger with Sound Designs, and legal costs associated with a corporate financing
for the nine months ended September 30, 2000. Net operating losses for YTD 1999
totaled $1,091,331 versus YTD 2000 of $994,612.
LIQUIDITY AND CAPITAL RESOURCES
As a result of our current financing arrangements, we believe we will have
sufficient resources to continue our operations for approximately 12 to 18
months. However, while management believes that these arrangements will continue
to provide additional funds to the Company, there can be no assurance
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that these additional funds will be made available. If such additional funds are
not made available, we may have to delay the full implementation of our business
plan or cease operations if replacement funding is not available.
The availability of funds in excess of $1,000,000 under the current
financing arrangements is dependent on the ownership level of each of the four
investors supporting the financing. These investors do not have any obligation
to provide financing in excess of $1,000,000 ($500,000 of which as already been
provided to us) if such additional financing would result in the investor owning
convertible notes that may be converted into more than 9.9% of our outstanding
common stock. Since the amount of common stock into which the convertible notes
may be converted is dependent on the market price of our common stock upon the
date of issuance of the convertible note and the date of conversion, we may be
unable to require the funds that are parties to the current financing
arrangements to provide funding in excess of $1,000,000 if our stock price
remains low or loses value. In that case, we may need to secure additional
financing in 12 to 18 months to continue implementation of our business plan. If
we fail to acquire such additional financing, we may be forced to delay the full
implementation of our business plan or we may be unable to continue our business
at all.
FORWARD-LOOKING STATEMENTS
Management's discussion of the Company's 2000 quarterly period in
comparison to 1999, contains forward-looking statements regarding current
expectations, risks and uncertainties for future periods. The actual results
could differ materially from those discussed here. As well as those factors
discussed in this report, other factors that could cause or contribute to such
differences include, among other items, cancellation of product development,
lack of substantial additional financing, or an inability of management to
successfully reduce operating expenses. Therefore, the condensed financial data
for the periods presented may not be indicative of the Company's future
financial condition or results of operations.
8
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
Current Report on Form 8-K dated October 12, 2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 13, 2000 PLUS SOLUTIONS, INC.
By: /s/ MAX L. GOLDEN
-------------------------------------
Max L. Golden
Chairman of the Board of Directors and
Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
27 Financial Data Schedule.
</TABLE>
