<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
- --------------------------------------------------------------------------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2000
000-28331
(Commission File Number)
SOUND DESIGNS, 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)
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SOUND DESIGNS, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 218,499 $ 121,629
Prepaid expenses 100 1,208
Total current assets 218,599 122,837
PROPERTY AND EQUIPMENT- Net 69,489 51,297
PRODUCT DEVELOPMENT COSTS 140,675 97,440
TOTAL $ 428,763 $ 271,574
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 133,297 $ 166,442
Notes payable 68,317 68,317
Total current liabilities 201,614 234,759
STOCKHOLDERS' EQUITY:
Convertible voting preferred stock, 8,000,000
shares authorized; no shares issued and outstanding 0 0
Common stock, $.001 par value; 100,000,000 shares authorized;
38,940,000 and 23,340,000 shares issued and outstanding, respectively 38,940 23,340
Additional paid-in capital 8,448,194 8,081,377
Deficit accumulated during the development stage (8,259,985) (8,067,902)
Total stockholders' equity 227,149 36,815
TOTAL $ 428,763 $ 271,574
</TABLE>
See notes to condensed financial statements.
1
<PAGE> 3
SOUND DESIGNS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, March 31,
2000 1999
<S> <C> <C>
REVENUES $ -- $ --
OPERATING EXPENSES:
Salaries and benefits 147,869 95,185
General and administrative 37,902 5,742
Depreciation expense 6,312 4,844
Total operating expenses 192,083 105,771
OPERATING LOSS (192,083) (105,771)
OTHER EXPENSE - Net 0 0
NET LOSS $ (192,083) $ (105,771)
Earnings per share:
Basic $ (0.00) $ (0.01)
Weighted average common and common
equivalent shares outstanding:
Basic 38,940,000 18,277,682
</TABLE>
See notes to condensed financial statements.
2
<PAGE> 4
SOUND DESIGNS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, March 31,
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(192,083) $(105,771)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation of property and equipment 6,312 4,844
Net changes in operating assets and liabilities
Prepaid expenses 1,108
Accounts payable and accrued expenses (33,145) 15,712
Net cash used in operating activities (217,808) (85,215)
INVESTING ACTIVITIES:
Additions to property and equipment (24,504)
Capitalized product development costs (43,235) (1,000)
Cash acquired in reverse merger 107,431
Net cash provided by (used in) investing activities 39,692 (1,000)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 50,000
Capital contributions 274,986
Net cash provided by financing activities 274,986 50,000
NET INCREASE (DECREASE) IN CASH 96,870 (36,215)
CASH, BEGINNING OF PERIOD 121,629 46,198
CASH, END OF PERIOD $ 218,499 $ 9,983
</TABLE>
See notes to condensed financial statements.
3
<PAGE> 5
SOUND DESIGNS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. FINANCIAL STATEMENT POLICIES
BASIS OF PRESENTATION. The condensed financial statements include the accounts
of Sound Designs, Inc. ("Sound Designs"), successor by merger of Plus Solutions,
Inc. ("Plus Solutions"), a Texas corporation. The condensed financial statements
reflect all adjustments that are, in the opinion of management, necessary to
present a fair statement of Sound Designs' financial position as of March 31,
2000, and the results of operations for the three month periods ended March 31,
2000 and March 31, 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 Sound Designs.
Operating results for the three month period ended March 31, 2000, are not
necessarily indicative of the results to be achieved for the full year.
As discussed in Note 2, on March 10, 2000, Plus Solutions merged with Sound
Designs, and the stockholders of Plus Solutions received approximately 1.69
shares of Sound Designs common stock for each share of Plus Solutions' common
stock they owned. At the time of the merger, Plus Solutions 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. Sound Designs is to be 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. Sound Designs is
headquartered in Addison, Texas.
Sound Designs 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 Sound Designs will be successful in becoming
profitable or generating positive cash flow in the future. Sound Designs is
considered to be a development stage company.
2. ACQUISITION
On March 10, 2000, Plus Solutions closed the Agreement and Plan of Merger
entered into with Sound Designs. As consideration for the merger, the
stockholders of Plus Solutions, the accounting acquirer, received approximately
1.69 shares of Sound Designs, the legal acquirer, common stock for each share of
Plus Solutions' common stock they owned. In addition, Plus Solutions received
cash of $107,431 from Sound Designs. As a result, the former stockholders of
Plus Solutions 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 Plus Solutions
as the directors of the surviving company, which will take the name of Plus
Solutions, Inc.
3. STOCKHOLDERS' EQUITY
During the First Quarter of 2000, Sound Designs received additional capital
contributions of $274,986.
-4-
<PAGE> 6
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 Sound Designs, Inc. for the three month period ended March 31,
2000 (the "First Quarter"), as compared to the three month period ended March
31, 1999 (the "Prior Year Quarter"). This discussion should be read in
conjunction with the Condensed Financial Statements and the related Notes
attached hereto.
GENERAL
We are 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. We are headquartered in Addison, Texas.
We have experienced cumulative operating losses, and our 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 we will be successful in becoming profitable or
generating positive cash flow in the future. We are considered to be a
development stage company.
On March 10, 2000, an Agreement and Plan of Merger was entered into between Plus
Solutions, Inc.("Plus Solutions"), a Texas corporation, and Sound Designs, Inc.
("Sound Designs"), a Nevada corporation. As consideration for the merger, the
stockholders Plus Solutions, the accounting acquirer, received approximately
1.69 shares of Sound Designs, the legal acquirer, common stock for each share of
Plus Solutions' common stock they owned. In addition, Plus Solutions received
cash of $107,431 from Sound Designs. As a result, the former stockholders of
Plus Solutions 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 Plus Solutions
as the directors of the surviving company, which will take the name of Plus
Solutions, Inc.
OPERATIONS. There were no revenues in the first quarter of 1999 nor the first
quarter of 2000. Total operating expenses, including general and administrative
costs, were $105,771 for the first quarter of 1999 versus $192,083 for the first
quarter of 2000. When comparing first quarter 1999 to first quarter 2000, this
represented an 82% increase. Contributing significantly to these increases were
$15,417 additional insurance costs as we secured officers and directors
liability insurance coverage as well as errors and omissions coverage, increased
payroll and payroll tax expenses of $55,666 due to additional staff being hired
and salary adjustments when comparing the periods, additional postage costs of
$5,933 due primarily to the merger as well as increased marketing efforts, an
increase of $8,177 in legal and accounting fees primarily associated with merger
and regulatory filings, increased rent costs of $3,761 due to lease cost
adjustments for office space, and increase in travel of $19,520 due to merger
activities and increased marketing efforts.
Net operating losses totaled $105,771 for the first quarter 1999 and $192,083
for the first quarter 2000. This was an increase of 82%.
LIQUIDITY AND CAPITAL RESOURCES. Currently, we have sufficient cash to continue
to operate for 60-90 days. In order to continue implementation of our business
plan, we will need to secure substantial additional financing in the near
future. We are currently actively exploring various financing alternatives, but
we currently have no commitments from any person to provide us with financing in
any substantive amount. If we fail to acquire such additional financing, we will
be forced to delay the implementation of our business plan, if we are able to
continue our business at all. We cannot assure you that we will be able to
secure the additional financing we require or, if we do acquire such financing,
that it will be on terms that are commercially reasonable. You should be aware
that our failure to secure substantial additional financing on terms that are
acceptable and commercially reasonable will have a very negative
-5-
<PAGE> 7
impact on our current financial situation and our prospects for continued
success.
FORWARD-LOOKING STATEMENTS
Management's discussion of our 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 our future financial condition or results of
operations.
-6-
<PAGE> 8
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement re computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
Current report on Form 8-K filed March 27, 2000
7
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 26, 2000 SOUND DESIGNS, INC.
By: /s/ MAX L. GOLDEN
-----------------------------------------
Max L. Golden
Chairman of the Board of Directors and
Chief Executive Officer
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
- ------- --------------------
<S> <C>
11 Statement re computation of per share earnings
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 11 - Statement re computation of per share earnings
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, March 31,
2000 1999
<S> <C> <C>
Basic EPS computation:
Numerator:
Loss applicable to common stock $ (192,083) $ (105,771)
Denominator:
Weighted average common shares 38,940,000 18,277,680
Basic EPS $ (0.00) $ (0.01)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 218,499
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 218,599
<PP&E> 101,223
<DEPRECIATION> 31,734
<TOTAL-ASSETS> 428,763
<CURRENT-LIABILITIES> 201,614
<BONDS> 0
0
0
<COMMON> 38,940
<OTHER-SE> 188,209
<TOTAL-LIABILITY-AND-EQUITY> 428,763
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
