U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15 OF THE EXCHANGE ACT
For the transition period from ________________ to __________________
Commission file number 0-28879
COOL ENTERTAINMENT INC.
(Exact name of small business issuer as specified in its charter)
COLORADO APPLIED FOR
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10900 N.E. 8TH STREET, SUITE 900, BELLEVUE, WASHINGTON 98004
(Address of principal executive offices)
(888) 603-8833
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since
last report)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the last practicable date:
37,752,401 SHARES OF COMMON STOCK, NO PAR VALUE, AS OF
SEPTEMBER 30, 2000
Transitional Small Business Disclosure Format (check one); Yes No X
----- -----
<PAGE>
Interim Consolidated Financial Statements of
COOL ENTERTAINMENT, INC.
(A Development stage Enterprise)
(Expressed in U.S. Dollars)
September 30, 2000 (Unaudited)
2
<PAGE>
Cool Entertainment Inc.
(A Development Stage Enterprise)
Interim Consolidated Balance Sheet
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
------------------ -----------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ - $ -
Accounts receivable 90 84
------------------ ---------------
90 84
Property and equipment, net 14,644 24,300
------------------ ---------------
$ 14,734 $ 24,384
================== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank indebtedness $ 1,030 $ 157
Accounts payable and accrued liabilities 43,626 44,005
Payable to related party 51,544 2,836
------------------ ---------------
Total current liabilities 96,200 46,998
Stockholders' equity:
Common stock, no par value, authorized 100,000,000 shares;
issued 37,752,401 (unaudited) shares at September 30, 2000
and 37,619,401 at June 30, 2000 13,388,710 13,320,355
Additional paid-in capital 111,166 79,521
Deficit accumulated during the development stage (13,581,342) (13,422,490)
------------------ ---------------
Total stockholders' deficiency (81,466) (22,614)
------------------ ---------------
Subsequent event (note 8)
$ 14,734 $ 24,384
================== ===============
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE>
Cool Entertainment Inc.
(A Development Stage Enterprise)
Interim Consolidated Statements of Operation
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Three Three Period from
months months November 3,
ended ended 1998 (inception)
September 30, September 30, to September 30,
2000 1999 2000
---------------- -------------- -----------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Operating income:
Sales $ 340 $ - $ 3,518
Cost of goods sold 327 - 3,092
---------------- -------------- -----------------
Gross profit 13 - 426
Other income 79 - 79
---------------- -------------- -----------------
Total income 92 - 505
Operating expenses:
Site development and
maintenance (note 6) 27,174 22,784 12,669,513
Management fees 85,119 48,993 373,753
Professional fees 37,378 28,185 359,399
Travel, advertising and
promotion 7,911 27,669 119,859
Office and administrative (2,343) 11,967 41,351
Depreciation 3,705 2,275 16,754
Organization costs - - 1,218
---------------- -------------- -----------------
158,944 141,873 13,581,847
---------------- -------------- -----------------
Loss for the period (158,852) (141,873) (13,581,342)
================ ============== =================
Net loss per common share,
basic and diluted $ (0.00) $ (0.01) $ (0.58)
================ ============== =================
Weighted average common
shares outstanding,
basic and diluted 37,672,890 18,272,785 23,546,750
================ ============== =================
</TABLE>
See accompanying notes to interim consolidated financial statements.
4
<PAGE>
COOL ENTERTAINMENT INC.
(A Development Stage Enterprise)
Interim Consolidated Statement of Stockholders' Equity (Deficiency)
(Expressed in U.S. Dollars)
Period ended September 30, 2000 (unaudited)
Period from November 3, 1998 (inception) to September 30, 2000 (unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Common stock Additional During stockholders'
--------------------------- Paid-In Subscriptions Development equity
Shares Amount Capital Receivable Stage (deficiency)
---------- ------------ ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, NOVEMBER 3, 1998
(Minas Novas Gold Corp.
Common Stock) 12,483,533 $ 180,958 $ - $ - $ - $ 180,958
Adjustment to comply with
reverse takeover accounting:
o elimination of Minas
Novas common stock - (180,958) - - - (180,958)
o Cool Washington
common stock - 400 - - - 400
Common stock issued to
purchase all issued and
outstanding shares of
Cool Washington, March 1,
1999 (note 2(a)) 23,184,044 11,192 - - - 11,192
Common stock issued for cash,
April 12, 1999 at $0.75 per
share, net of issuance costs
of $2,849 40,000 27,151 - - - 27,151
Common stock issued for cash,
April 23, 1999 at $0.90 per
share, net of issuance costs
of $2,736 121,111 106,264 - - - 106,264
Fully paid stock subscriptions
April 23, 1999, at $0.90 per
share, net of issuance costs
of $113 - - 4,387 - - 4,387
Common stock issued for cash,
May 28, 1999 at $0.75 per
share, net of issuance costs
of $2,849 100,000 72,151 - - - 72,151
Net loss - - - - (117,297) (117,297)
---------- ------------ ---------- -------- ------------- -------------
Balance, June 30, 1999 35,928,688 $ 217,158 $ 4,387 $ - $ (117,297) $ 104,248
========== ============ ========== ======== ============= =============
</TABLE>
5
<PAGE>
COOL ENTERTAINMENT INC.
(A Development Stage Enterprise)
Interim Consolidated Statement of Stockholders' Equity (Deficiency), page 2
(Expressed in U.S. Dollars)
Period ended September 30, 2000 (unaudited)
Period from November 3, 1998 (inception) to September 30, 2000 (unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Common stock Additional During stockholders'
--------------------------- Paid-In Subscriptions Development equity
Shares Amount Capital Receivable Stage (deficiency)
---------- ------------ ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Fully paid stock subscriptions
July 20, 1999 at $0.65 per
share, net of issuance costs
of $nil - $ - $ 75,000 $ - $ - $ 75,000
Fully paid stock subscriptions
August 6, 1999, at $0.53 per
share, net of issuance costs
of $nil - - 55,985 - - 55,985
Unpaid stock subscriptions
August 6, 1999, at $0.53 per
share, net of issuance costs
of $nil - - 19,015 - - 19,015
Fully paid stock subscriptions
September 10, 1999, at $0.53 per
share, net of issuance costs
of $nil - - 70,087 - - 70,087
Unpaid stock subscriptions
September 10, 1999, at $0.53 per
share, net of issuance costs
of $nil - - 5,079 - - 5,079
Common stock issued October 1,
1999 for fully paid stock
subscriptions at
$0.53 per share, net of
issuance costs of $nil 105,625 55,985 (55,985) - - -
Common stock issued October 1,
1999 for fully paid stock
subscriptions at $0.53 per
share, net of
issuance costs of $nil 35,875 19,015 (19,015) - - -
Common stock issued October 1,
1999 to satisfy loan at
$0.53 per share 28,300 15,000 - - - 15,000
Common stock issued October 1,
1999 fully paid stock
subscriptions at $0.65 net
of issuance costs of $nil 115,375 75,000 (75,000) - - -
Common stock issued October 1,
1999 for fully paid stock
subscriptions at $0.90,
net of issuance costs of $nil 5,000 4,387 (4,387) - - -
</TABLE>
6
<PAGE>
COOL ENTERTAINMENT INC.
(A Development Stage Enterprise)
Interim Consolidated Statement of Stockholders' Equity (Deficiency), page 3
(Expressed in U.S. Dollars)
Period ended September 30, 2000 (unaudited)
Period from November 3, 1998 (inception) to September 30, 2000 (unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Common stock Additional During stockholders'
--------------------------- Paid-In Subscriptions Development equity
Shares Amount Capital Receivable Stage (deficiency)
---------- ------------ ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Fully paid stock subscriptions
December 15, 1999, at $0.25
per share, net of issuance
costs of $nil - $ - $ 123,000 $ - $ - $ 123,000
Unpaid stock subscriptions
December 15, 1999, at
$0.25 per share, net of
issuance costs
of $nil - - 8,000 (8,000) - -
Common stock issued January 3,
2000 for fully paid stock
subscriptions at
$0.53 per share, net of
issuance costs of $nil 141,500 75,000 (75,000) - - -
Common stock issued for cash,
January 13, 2000, at $0.61
per share, net of issuance
costs of $nil 46,722 28,500 - - - 28,500
Common stock issued January 3,
2000 for fully paid stock
subscriptions at $0.25, net
of issuance costs of $nil 524,000 131,000 (131,000) 7,000 - 7,000
Common stock issued for cash,
January 27, 2000 at $0.80
per share, net of issuance
costs of $nil 72,500 58,000 - - - 58,000
Common stock issued for cash,
February 1, 2000, at $0.80
per share, net of issuance
costs of $14,440 477,816 209,560 - - - 209,560
Warrants issued for services (note 5) - - 12,000 - - 12,000
Site development (note 6) - 12,345,500 - - - 12,345,500
Common stock issued for
services March 3, 2000 138,000 86,250 - - - 86,250
Write-off of stock subscription
receivable - - (1,000) 1,000 - -
Common stock issued for services - - 68,355 - - 68,355
Net loss - - - - (13,305,193) (13,305,193)
---------- ------------ ---------- -------- ------------- -------------
Balance, June 30, 2000 37,619,401 $ 13,320,355 $ 79,521 $ - $(13,422,490) $ (22,614)
Units issued (note 5) - - 100,000 - - 100,000
Common Stock issued for services 133,000 68,355 (68,355) - - -
Net loss - - - - (158,852) (158,852)
---------- ------------ ---------- -------- ------------- -------------
Balance, September 30, 2000
(unaudited) 37,752,401 $ 13,388,710 $ 111,166 $ - $(13,581,342) $ (81,466)
========== ============ ========== ======== ============= =============
</TABLE>
See accompanying notes to interim consolidated financial statements.
7
<PAGE>
--------------------------------------------------------------------------------
Cool Entertainment Inc.
(A Development Stage Enterprise)
Interim Consolidated Statement of Cash Flows
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Three Period from
Three months months November 3,
ended ended 1998 (inception)
September 30, September 30, to September 30,
2000 1999 2000
--------------- --------------- ----------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Operations:
Loss for the period $ (158,852) $ (141,873) $ (13,581,342)
Items not involving cash:
Depreciation 3,705 2,275 16,754
Amortization of organization costs - - 1,218
Common stock issued for services - - 154,605
Warrants issued for financial services - - 12,000
Site development and maintenance - - 12,345,500
Changes in operating assets and liabilities:
Subscriptions receivable - (24,094) -
Accounts receivable (6) - (90)
Payable to related party 48,708 - 51,544
Receivable from related party - (9,549) 23,367
Accounts payable and accrued liabilities (379) 1,562 42,273
--------------- --------------- ----------------
Net cash used in operating activities (106,824) (171,679) (934,171)
--------------- --------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (722) (18,198) (38,071)
Disposition of property and equipment 6,673 - 6,673
Cash acquired on acquisition - - 2,960
--------------- --------------- ----------------
Net cash used in investing activities 5,951 (18,198) (28,438)
--------------- --------------- ----------------
Cash flows from financing activities:
Net proceeds from issuances of and
subscriptions for common stock and warrants 100,000 225,000 961,579
Bank indebtedness 873 - 1,030
--------------- --------------- ----------------
Net cash provided by financing activities 100,873 225,000 962,609
--------------- --------------- ----------------
Net increase in cash and cash equivalents
during the period - 35,123 -
Cash and cash equivalents at beginning of period - 89,058 -
--------------- --------------- ----------------
Cash and cash equivalents at end of period $ - $ 124,181 $ -
=============== =============== ================
Supplementary disclosure:
Non-cash transactions:
Stock issued to acquire Cool
Entertainment Inc. (note 2(a)) $ - $ - $ 8,232
Stock issued to satisfy loan payable - - 15,000
Interest paid - - -
Taxes paid - - -
=============== =============== ================
</TABLE>
See accompanying notes to interim consolidated financial statements.
8
<PAGE>
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
Three months ended September 30, 2000 (unaudited)
Period from November 3, 1998 (inception) to September 30, 2000 (unaudited)
--------------------------------------------------------------------------------
1. GENERAL AND FUTURE OPERATIONS:
These interim consolidated financial statements have been prepared on a
going concern basis in accordance with United States generally accepted
accounting principles. The going concern basis of presentation assumes the
Company will continue in operation for the foreseeable future and will be
able to realize its assets and discharge its liabilities and commitments in
the normal course of business. Certain conditions, as discussed below,
currently exist which raise substantial doubt upon the validity of this
assumption. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Cool Entertainment, Inc. (the "Company") was incorporated under the laws of
the State of Colorado on June 17, 1996, under the name of Minas Novas Gold
Corp. On February 15, 1999, the Company changed its name to Cool
Entertainment, Inc. Prior to its acquisition of Cool Washington (note
2(a)), the Company was a holding company with no substantive operations.
The Company is currently in the business of retailing entertainment related
products such as CDs, DVDs and videos through its website.
The Company's future operations are dependent upon the market's acceptance
of its services and the Company's ability to secure strategic partnerships
There can be no assurance that the Company will be able to secure market
acceptance or strategic partnerships. As of September 30, 2000, the Company
is considered to be in the development stage as the Company has not
generated any significant revenues and is continuing to develop its
business, and has experienced negative cash flows from operations.
Operations have primarily been financed through the issuance of common
stock. The Company does not have sufficient working capital to sustain
operations until the end of the current fiscal year ended June 30, 2001.
Additional debt or equity financing will be required and may not be
available or may not be available on reasonable terms. During the three
month period ended September 30, 2000, units for common shares and warrants
were subscribed for cash proceeds to finance the operations of the Company
(note 5). If sufficient financing cannot be obtained, the Company may be
required to reduce operating activities.
9
<PAGE>
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 2
(Expressed in U.S. Dollars)
Three months ended September 30, 2000 (unaudited)
Period from November 3, 1998 (inception) to September 30, 2000 (unaudited)
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
On March 1, 1999, the Company issued 23,184,044 common shares for all
of the issued and outstanding shares of Cool Entertainment, Inc. ("Cool
Washington"), a company incorporated in the State of Washington on
November 3, 1998. The acquisition was accounted for as a
recapitalization of Cool Washington effectively representing an issue
of shares by Cool Washington for the net assets of the Company.
The net assets acquired as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash $ 2,960
Other working capital, net 22,015
Organizational costs 1,217
Loan payable (15,000)
-------------
$ 11,192
=============
</TABLE>
Acquisition related costs of $23,367 were incurred on this
recapitalization and have been recorded in professional fees.
The historical financial statements reflect the financial position of
Cool Washington from the date of its incorporation on November 3, 1998,
consolidated with those of the Company from March 1, 1999.
(b) Basis of consolidation:
These consolidated financial statements have been prepared using
generally accepted accounting principles in the United States. The
financial statements include the accounts of the Company and its
wholly-owned subsidiary, Cool Washington. All significant intercompany
balances and transactions have been eliminated in the consolidated
financial statements.
(c) Use of estimates:
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the recorded amounts of assets
and liabilities and the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and reported
revenues and expenses for the reporting period. Actual results may
significantly differ from those estimates.
10
<PAGE>
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 3
(Expressed in U.S. Dollars)
Three months ended September 30, 2000 (unaudited)
Period from November 3, 1998 (inception) to September 30, 2000 (unaudited)
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(d) Net loss per share:
Basic loss per share is computed using the weighted average number of
common shares outstanding during the period. Diluted loss per share is
computed using the weighted average number of common and potentially
dilutive common stock outstanding during the period. As the Company has
a net loss in the period presented, basic and diluted net loss per
share are the same.
Excluded from the computation of diluted loss per share for the period
ended September 30, 1999 are 17,388,033 shares of common stock held in
escrow. The release of these escrowed shares was contingent upon the
Company's achievement of contractually specified financing and website
development milestones. These escrowed shares were released in 2000.
See note 6.
3. RELATED PARTY BALANCES AND TRANSACTIONS:
In March, 1999, the Company entered into a contract with a company,
Fictional Media Inc. (formerly known as Cool Management Inc.), which is
controlled by the stockholders of the Company, to provide management
services, site development and other professional services to the Company
at cost plus 10%.
The Company incurred cash compensation expense of $nil during the period
ended September 30, 2000 (1999 - $nil).
The payable to related party is non-interest bearing, unsecured and due on
demand. The balance relates to services rendered by Fictional Media Inc. to
the Company under the contract discussed above.
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
------------- -------------
<S> <C> <C>
Computer equipment $ 19,145 $ 27,577
Computer software 10,493 9,772
------------- -------------
29,638 37,349
Less accumulated depreciation (14,994) (13,049)
------------- -------------
$ 14,644 $ 24,300
============= =============
</TABLE>
11
<PAGE>
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 4
(Expressed in U.S. Dollars)
Three months ended September 30, 2000 (unaudited)
Period from November 3, 1998 (inception) to September 30, 2000 (unaudited)
--------------------------------------------------------------------------------
5. WARRANTS:
On February 4, 2000 the Company granted warrants to four directors of the
Company to purchase 1,200,000 common shares at $0.625 per share, being the
market price per common share at the date of the grant. These warrants
expire in three years from their grant date. The Company also elected to
grant on February 4, 2000, warrants to certain shareholders to purchase
1,200,000 common shares at $0.625 per share, being the market price per
common share at the date of the grant. These warrants were valued at
$12,000 and were recorded as a direct financing cost related to prior
equity financings in which these shareholders participated. These warrants
expire in three years from their grant date. All of the warrants are
exercisable immediately but are subject to a one year hold period.
In conjunction with the issue of 477,816 common shares in February 2000,
the Company issued 477,816 warrants to purchase 477,816 common shares at
$1.25 per share. These warrants are exercisable immediately and expire five
years from the issue date.
On July 24, 2000, the Company entered into a subscription agreement which
granted the issue of 588,235 units of securities for cash consideration of
$0.17 per unit. Each unit consisted of one share of common stock and one
common stock purchase warrant. Each warrant entitles the holder to purchase
one share of common stock at a price of $0.187 for a period of three years
from the date of issuance. At September 30, 2000, no common stock or
warrants had been issued under this agreement.
6. SITE DEVELOPMENT AND MAINTENANCE:
Effective February 25, 2000, the Company reached certain performance
milestones relating to the development of the Company's website. As a
result, 17,388,033 common shares previously held in escrow were released.
Site development and maintenance expense of $12,345,500 has been
recognized, representing the difference between the market value of the
common shares on the date of their release and the original cost of these
common shares.
7. FINANCIAL INSTRUMENTS:
Fair value:
The carrying values of cash and cash equivalents, accounts receivable, bank
indebtedness and accounts payable and accrued liabilities approximate fair
value due to the short-term maturities of these instruments.
It is not practicable to determine the fair value of the payable to related
party due to its related party nature and the absence of a secondary market
for such instruments.
12
<PAGE>
COOL ENTERTAINMENT, INC.
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 5
(Expressed in U.S. Dollars)
Three months ended September 30, 2000 (unaudited)
Period from November 3, 1998 (inception) to September 30, 2000 (unaudited)
--------------------------------------------------------------------------------
8. SUBSEQUENT EVENTS:
On November 3, 2000, the Company entered into a letter of intent to acquire
E-Trend Networks, Inc., a private company based in Fort Lauderdale,
Florida, with offices in Marina Del Rey, California, and Calgary, Alberta.
E-Trend is engaged in a business similar to that of the Company's. The
letter of intent contemplates that the Company would acquire E-Trend as a
wholly-owned subsidiary in exchange for the issuance of shares of the
Company's common stock. The shareholders of E-Trend as a group would
acquire control over the Company. Completion of the transaction is subject
to a number of conditions, including the execution of a formal share
exchange agreement and approval of the directors and shareholders of both
companies.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The acquisition of Cool Entertainment Inc., a Washington corporation
("Cool Washington") on March 1, 1999 has been accounted for as a
recapitalization of Cool Washington. The transaction has been accounted for as a
capital transaction effectively representing the issuance of shares by Cool
Washington for the net assets of the Company.
RESULTS OF OPERATIONS
The Company is considered to be in the development stage since it has
not generated any significant revenues and is continuing to develop its
business. Revenues of only $3,518 have been generated since the Company's
inception. Revenues of $340 were generated during the quarter ended September
30, 2000.
The Company experienced a loss of $158,852 for the three months ended
September 30, 2000. For the three-month period, operating expenses consisted
primarily of the following: management fees of $85,119, professional fees of
$37,378, and site development and maintenance expenses of $27,174. In
comparison, the Company incurred a loss of $141,873 for the comparable period in
1999. No revenues were generated, since the Company's website was not launched
until January 2000. However, the Company incurred expenses of $141,873 primarily
for management fees of $48,993, professional fees of $28,185, travel,
advertising and promotion of $27,669, and site development and maintenance
expenses of $22,784.
For the period from inception (November 3, 1998) through September 30,
2000, the Company has incurred a net loss of $13,581,342. Site development and
maintenance expense of $12,345,500 was recognized during the quarter ended March
31, 2000, as a result of the release of 17,388,033 common shares from escrow.
Such shares had been held in escrow to insure the achievement of certain
performance milestones relating to the development of the Company's website. The
milestones were achieved in February, 2000, and the Company had to recognize the
difference between the market value of the 17,388,033 common shares on the date
of their release and their original cost.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000 and June 20, 2000, the Company had working
capital deficiencies of $96,110 and $46,914, respectively. Virtually all of the
Company's liquidity has been provided through the sale of its Common Stock. For
the period from November 3, 1998 to September 30, 2000, the Company has received
$961,579 in net proceeds from the issuance of its Common Stock. Additional
funding will be needed from sales of the Company's securities to keep the
Company in operation.
Current sales of product are not sufficient to sustain operations. The
Company needs substantial amounts of cash to fund a marketing program to attract
potential customers to its web site. As of this date, the Company has no sources
of funds for a marketing effort.
14
<PAGE>
PLAN OF OPERATION
As of September 30, 2000, the Company did not have any cash. The
Company is dependent upon external sources of funds and there is no assurance
that any such funding will be available to the Company. The Company does not
anticipate making any expenditures for plant or equipment, or increasing the
number of employees.
Due to the losses generated to date and the fact that operations have
been financed through the issuance of Common Stock, there is substantial doubt
about the Company's ability to continue as a going concern. As stated above, the
Company does not have sufficient working capital to sustain operations until the
end of its current fiscal year, which ends June 30, 2001. Additional debt or
equity financing will be required and may not be available or may not be
available on reasonable terms. The auditors' report on the consolidated
financial statements for the year ended June 30, 2000 contained an explanatory
paragraph that stated that these factors raised substantial doubt about the
Company's ability to continue as a going concern. Those financial statements did
not include any adjustments that might result from the outcome of this
uncertainty.
Management is currently assessing the future viability of the Company.
It is exploring business combination opportunities. On November 3, 2000, the
Company entered into a letter of intent to acquire E-Trend Networks, Inc., a
private company based in Fort Lauderdale, Florida, with offices in Marina Del
Rey, California, and Calgary, Alberta. E-Trend is engaged in a business similar
to that of the Company's. The letter of intent contemplates that the Company
would acquire E-Trend as a wholly-owned subsidiary in exchange for the issuance
of shares of the Company's common stock. The shareholders of E-Trend as a group
would acquire control over the Company. Completion of the transaction is subject
to a number of conditions, including the execution of a formal share exchange
agreement and approval of the directors and shareholders of both companies.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
In August 2000, the Company issued 133,000 shares to Charterbridge
Financial Group, Inc. as compensation for financial public relations
and investment banking services. These shares were valued at $0.51 per
share, the market value of the Common Stock at the time of issuance.
The Company relied upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933. No underwriters were used
and no underwriting commissions were paid.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
<TABLE>
<CAPTION>
REGULATION CONSECUTIVE
S-B NUMBER EXHIBIT PAGE NUMBER
<S> <C> <C>
2.1 Chelsea Pacific Financial Corp. Agreement dated February 25, 1999 (1) N/A
3.1 Articles of Incorporation, as amended (1) N/A
3.2 Bylaws (1) N/A
10.1 Management Agreement between Cool Entertainment, Inc., and Cool N/A
Management Inc. dated March 1, 1999(1)
10.2 Employment Agreement between Cool Management Inc. and Marc G. N/A
Belcourt dated March 1, 1999 (1)
10.3 Consulting Agreement between Cool Management Inc. and Leonard Wayne N/A
Voth dated March 1, 1999 (1)
10.4 Employment Agreement between Cool Management Inc. and William J. N/A
Hadcock dated March 1, 1999 (1)
16
<PAGE>
REGULATION CONSECUTIVE
S-B NUMBER EXHIBIT PAGE NUMBER
10.5 Employment Agreement between Cool Management Inc. and Clement K.M. N/A
Lau dated March 1, 1999 (1)
10.6 Escrow Agreement between Pacific Corporate Trust Company, Cool N/A
Entertainment, Inc. (Washington), Chelsea Pacific Financial Corp., Cool
Entertainment, Inc. (Colorado), Clement Kar Man Lau, William James
Hadcock, Leonard Wayne Voth, and Marc Gregory Belcourt dated March 1,
1999, as amended (1)
10.7 Form of Registration Rights Agreement between Cool Entertainment, Inc. N/A
and each of Clement Kar Man Lau, William James Hadcock, Leonard
Wayne Voth, and Marc Gregory Belcourt dated March 1, 1999 (1)
10.8 Order Fulfillment Agreement with Valley Media, Inc. dated May 4, 1999 (1) N/A
10.9 License Agreement with Muze, Inc. dated May 1999 (1) N/A
27 Financial Data Schedule ___
</TABLE>
----------------------------
(1) Incorporated by reference to the exhibits filed with the Registration
Statement on Form 10-SB, File No. 0-28879
B) REPORTS ON FORM 8-K:
None.
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COOL ENTERTAINMENT INC.
(Registrant)
Date: November 16, 2000 By: /S/ WILLIAM J. HADCOCK
-----------------------------------------
William J. Hadcock, President (Principal
financial and accounting officer)
18
<PAGE>
Exhibit 27
Financial Data Schedule
