UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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 0-26975
StockUp.com, Inc.
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(Exact name of Registrant as specified in its charter)
Nevada 88-0417949
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(State or other jurisdiction of (I.R.S. Employer
incorporated or organization) Identification Number)
333 North Rancho Drive, Ste. 900
Las Vegas, NV 89106
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(Address of principal executive offices)
(702) 648-6400
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(Registrant's telephone number, including area code)
Not applicable
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(Former name, former address and former fiscal year, if changed, since last
report.)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 .
Number of shares of Common Stock outstanding at November 23, 1999:
Common Stock, par value $0.001 per share 12,918,271
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STOCKUP.COM, INC.
INDEX
PART 1. FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements
Balance Sheet as of September 30, 1999 (Unaudited) 2
Statements of Operations for the Three Months Ended September 30, 1999 and
period from February 3, 1999 (inception) to September 30, 1999 (Unaudited) 3
Consolidated Statement of Cash Flow for the Period from February 3, 1999
(inception) to September 30, 1999 (Unaudited) 4
Notes to the Unaudited Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 20
(b) Reports on Form 8-K 20
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
September 30, 1999 (unaudited)
ASSETS
September 30, 1999
(unaudited)
Current assets
Cash and cash equivalents $440,345
Notes receivable - employee 32,800
Prepaid services 56,922
Prepaid expenses 28,564
Total currents assets 558,631
Furniture and Equipment, net 600,886
Other assets 67,756
Total assets $1,227,273
LIABILITIES & STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable and accrued expenses $742,961
Total current liabilities 742,961
Stockholders' equity
Common stock, $0.001 par value
50,000,000 shares authorized
12,862,080 (unaudited) issued
and outstanding 12,862
Additional paid-in capital 6,425,064
Deficit accumulated during
the development stage (5,953,614)
Total stockholder's equity $484,312
Total liabilities and stockholder's equity $1,227,273
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the Period from February 3, 1999 (Inception) to September 30, 1999 and For
the three Months Ended September 30, 1999 (unaudited)
For the
Period from
For the February 3,
Three Months 1999
Ended (Inception) to
September 30, September 30,
1999 1999
(unaudited) (unaudited)
Selling, general, $2,552,652 $4,496,318
and administrative
expenses
Loss from operations (2,552,652) (4,496,318)
Other income (expense)
Interest income 8,292 17,557
Miscellaneous income 660 660
Forgiveness of debt - 81,822
Financing expense - (1,557,335)
Total other income (expense) 8,952 (1,457,296)
Net Loss $ (2,543,700) $(5,953,614)
Basic loss per share $(0.20) $(0.47)
Dilutes loss per share $(0.20) $(0.47)
Weighted-average 12,733,328 12,613,188
shares outstanding
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
For the Period from February 3, 1999 (Inception) to September 30, 1999
(unaudited)
For the Period from February 3, 1999
(Inception) to September 30, 1999
(unaudited)
Cash flows from operating activities
Net loss $(5,953,614)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 126,699
Common stock issued for services 100,000
Financing expense recognized for issuing
below-market warrants 693,000
Financing expense recognized for issuing
below-market stock options 864,335
Compensation expense recognized for issuing
below-market stock options 455,115
(Increase) decrease in
Notes receivable - employee (32,800)
Prepaid expenses (28,564)
Prepaid services (56,922)
Other assets (67,756)
Increase (decrease) in
Accounts payable and accrued expenses 742,961
Net cash used in operating activities (3,157,546)
Cash flows from investing activities
Purchase of furniture and equipment (359,407)
Net cash used in investing activities (359,407)
Cash flows from financing activities
Proceeds from issuance of common stock, net of offering costs 1,057,298
Proceeds from private placement of common stock 3,200,000
Offering costs (300,000)
Net cash provided by financing activities 3,957,298
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (Continued)
For the Period from February 3, 1999 (Inception) to
September 30, 1999 (Unaudited)
For the Period from February 3, 1999
(Inception) to September 30, 1999
(unaudited)
Net increase in cash and cash equivalents $440,345
Cash and cash equivalents, beginning of period -
Cash and cash equivalents, end of period $440,345
Supplement disclosures of cash flow information
During the period from February 3, 1999 (inception) to September 30, 1999 the
Company paid no income taxes or interest.
Supplemental schedule of non-cash investing and financing activities During the
period from February 3, 1999 (inception) to September 30, 1999 the Company
acquired furniture and equipment valued at $368,178 in exchange for 9,000,000
shares of the Company's common stock. The equipment is recorded as furniture and
equipment on the accompanying balance sheet.
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For the Period from February 3, 1999 (Inception) to September 30, 1999 and For
the Three Months Ended September 30, 1999 (unaudited)
NOTE 1 - DESCRIPTION OF BUSINESS
StockUp.com, Inc. (the "Company") was incorporated in Nevada on February 18,
1999 and is developing second-generation Internet technology(tm) products that
will be licensed to other websites and distributed to end users. The company's
products offer the end user increased levels of customization and interactivity
Websites deploying the technology will benefit from increased traffic, enhanced
user retention, and the ability to build targeted aggregate marketing profiles
of users.
Courtleigh Capital, Inc. ("Courtleigh"), a Kansas corporation was first
incorporated under the laws of the State of Colorado as ANCR, Inc. on July 30,
1985. On July 23, 1987, ANCR, Inc. changed its name to CEA Lab, Inc. and on
October 16, 1995 reincorporated in the State of Kansas as CEA Lab, Inc. On
September 12, 1997, it amended its articles to change its name to Courtleigh
Capital, Inc. Courtleigh Capital, Inc. commenced trading during December, 1998
under the symbol CTHL on the Over the Counter/Bulletin Board. On February 2,
1999, Courtleigh Capital, Inc. changed its name to StockUp.com, Inc.
StockUp.com, Inc. a Kansas corporation, formerly Courtleigh Capital, Inc. was
reincorporated in the State of Nevada utilizing the name StockUp.com, Inc. (the
term the "Company" shall refer to the surviving Nevada corporation). The
Company changed its trading symbol to SKUP effective as of February 22, 1999.
On December 30, 1998, Marketing Direct Concepts, Inc. ("MDC"), a Nevada
corporation, entered into an Asset Purchase and Escrow Agreement, whereby it
sold assets and liabilities, valued at $368,178, to the Company in exchange for
9,000,000 shares of Courtleigh's common stock.
Courtleigh had minimal assets and liabilities at the date of the acquisition and
did not have operations prior to the acquisition. Therefore, no pro forma
information is presented.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, during the period from February 3, 1999
(inception) to September 30, 1999 and the three months ended September 30, 1999
the Company incurred net losses of $5,953,614 (unaudited) and $2,543,700
(unaudited), respectively, and it had negative cash flows from operations of
$3,157,546 (unaudited) for the period from February 3, 1999 to September 30,
1999. These factors raise substantial doubt about the Company's ability to 2000.
Continue as a going concern.
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For the Period from February 3, 1999 (Inception) to September 30, 1999 and For
the Three Months Ended September 30, 1999 (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued)
Basis of Presentation (Continuation)
Recovery of the Company's assets is dependent upon future events, the outcome of
which is indeterminable. Successful completion of the Company's development
program and its transition to the attainment of profitable operations is
dependent upon the Company achieving a level of sales adequate to support the
Company's cost structure. In addition, realization of a major portion of the
assets in the accompanying balance sheets is dependent upon the Company's
ability to meet its financing requirements and the success of its plans to sell
products. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
In addition to the capital raised as of September 30, 1999 through private
equity offerings, (See Note 5) the Company is currently negotiating with certain
investors about raising additional capital through private placement offerings.
Unless the Company raises additional funds, either by debt or equity issuances,
management believes that its current cash on hand will be insufficient to cover
its working capital needs until the Company's sales volume reaches a sufficient
level to cover operating expenses.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, the Company considers all
highly-liquid investments purchased with original maturities of three months or
less to be cash equivalents.
Development Stage Enterprise
The Company is a development stage company as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development
Stage Enterprises." The Company is devoting substantially all of its present
efforts to establish a new business, and its planned principal operations have
not yet commenced. All losses accumulated since inception have been considered
as part of the Company's development stage activities.
The accompanying notes are an integral part of these financial statements
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For the Period from February 3, 1999 (Inception) to September 30, 1999 and For
the Three Months Ended September 30, 1999 (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advertising
The Company expenses advertising costs as incurred. Advertising costs for the
three months ended September 30, 1999 were $824,750. Advertising costs for the
period from February 3, 1999 (inception) to September 30, 1999 were $938,771
(unaudited).
Furniture and Equipment
Furniture and equipment are recorded at cost. Depreciation and amortization are
provided using the straight-line method over estimated useful lives as follows:
Furniture and equipment 7 years
Computer hardware and software 3 years
Leasehold Improvements 10 months (lease term)
Maintenance and minor replacements are charged to expense as incurred. Leasehold
improvements are amortized over the lease period or the useful life of the
asset, whichever is shorter.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount exceeds the fair value of the assets. To date, no impairment has
occurred.
Income Taxes
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred income taxes are recognized for the
tax consequences in future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts at each period end based
on enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. The provision for income taxes represents the tax
payable for the period and the change during the period in deferred tax assets
and liabilities.
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For the Period from February 3, 1999 (Inception) to September 30, 1999 and For
the Three Months Ended September 30, 1999 (unaudited) OTE 2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Net Loss per Share
For the period from February 3, 1999 (inception) to September 30, 1999 and for
the three months ended September 30, 1999, the Company adopted SFAS No. 128,
"Earnings per Share." Basic loss per share is computed by dividing loss
available to common stockholders by the weighted-average number of common shares
outstanding. Diluted loss per share is computed similar to basic loss per share
except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential common shares
had been issued and if the additional outstanding common shares were dilutive.
For the period from February 3, 1999 (inception) to September 30, 1999 and the
three months ended September 30, 1999, the Company incurred net losses;
therefore, basic and diluted loss per share are the same.
Stock Split
On February 22, 1999, the Company effected a one-for-13 reverse stock split of
its common stock. All share and per share data have been retroactively restated
to reflect this stock split.
On September 14, 1999, the Company effected a two-for-one stock split of its
common stock. All per share data have been retroactively restated to reflect
this stock split.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance with
generally accepted accounting principles. For certain of the Company's financial
instruments, including cash and cash equivalents, notes receivable employee, and
accounts payable and accrued expenses, the carrying amounts approximate fair
value due to their short maturities.
Concentrations of Credit Risk
The financial instrument which potentially subjects the Company to
concentrations of credit risk is cash. The Company places its cash with high
quality financial institutions, and at times it may exceed the Federal Deposit
Insurance Corporation $100,000 insurance limit. As of September 30, 1999,
uninsured portions held at the financial institutions aggregated to $340,345
(unaudited).
Recent Issued Accounting Pronouncements
In February 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 132,about "Pensions and Other Post-Retirement Benefits." The Company does
not expect adoption of SFAS No. 132 to have a material impact, if any, on its
financial position or results of operations.
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For the Period from February 3, 1999 (Inception) to September 30, 1999 and For
the Three Months Ended September 30, 1999 (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently Issued Accounting Pronouncements (Continued)
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," is
effective for financial statements with fiscal years beginning after June 15,
1999. SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The Company does not expect adoption of
SFAS No. 133 to have a material effect, if any, on its financial position or
results of operations.
SFAS No. 134, "Accounting for Mortgage-Based Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise," is effective for financial statements with the first fiscal quarter
beginning after December 15, 1998. The Company does not expect adoption of SFAS
No. 134 to have a material effect, if any, on its financial position or results
of operations.
SFAS No. 135, "Rescission of FASB Statement No. 75 and Technical Corrections,"
is effective for financial statements with fiscal years beginning February
1999. This statement is not applicable to the Company.
In June 1999, the FASB issued SFAS No. 136, "Transfer of Assets to a Not for
Profit Organization or Charitable Trust that Raises or Holds Contributions for
Others." This statement is not applicable to the Company.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities." The Company does not expect adoption of
SFAS No. 137 to have a material impact, if any, on its financial position or
results of operations.
Comprehensive Income
For the period from February 3, 1999 (inception) to September 30, 1999 and for
the three months ended September 30, 1999, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." This statement established standards for
reporting comprehensive income and its components in a financial statement.
Comprehensive income as defined includes all changes in equity (net assets)
during a period from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include foreign
currency translation adjustments and unrealized gains and losses on available
for sale securities. Comprehensive income is not presented in the Company's
financial statements since the Company did not have any of the items of
comprehensive income in the periods presented.
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For the Period from February 3, 1999 (Inception) to September 30, 1999 and For
the Three Months Ended September 30, 1999 (unaudited)
NOTE 3 - FURNITURE AND EQUIPMENT
Furniture and equipment consisted of the following:
September 30, 1999
(unaudited)
Furniture and equipment $93,327
Computer hardware and software 612,750
Leasehold improvements 21,508
727,585
Less accumulated depreciation and amortization (126,699)
Total $600,886
Depreciation and amortization expense for the period from February 3,
1999 (inception) to September 30, 1999 was $126,699 (unaudited).
NOTE 4 - COMMITMENTS
Leases
The Company leases certain facilities for its corporate and operations
offices under long-term, non-cancelable operating lease agreements that
expire through March 31, 2003.
Future minimum aggregate lease payments under non-cancelable operating
leases with initial terms of one year or more at September 30, 1999 were as
follows:
Years Ending
December 31,
2000 $186,077
2001 $191,591
2002 $197,104
2003 $49,620
Total $624,392
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
for the Period from February 3, 1999 (Inception) to September 30, 1999 and For
the Three Months Ended September 30, 1999 (unaudited)
NOTE 4 - COMMITMENTS (Continued)
Leases (Continued)
Rent expense for the three months ended September 30, 1999 was $91,514
(unaudited); rent expense for the period from February 3, 1999 (inception) to
September 30, 1999 was $170,138 (unaudited).
Employment Agreement
During the period from February 3, 1999 (inception) to September 30, 1999, the
Company entered into three new employment agreements with key officers of the
Company. These officers will receive a combined annual salary of $370,000
(unaudited), a monthly personal allowance of $3,000, and all automobile expenses
paid.
NOTE 5 - STOCKHOLDER'S EQUITY
Common Stock
In December 1998, the Company entered into an agreement with MDC to purchase
certain assets in exchange for 9,000,000 shares of common stock.
In February 1999, the Company entered into an agreement to issue an aggregate of
500,000 shares of common stock for legal services rendered or to be rendered.
The shares were to be issued according to three stages of completion. In
connection with the issuance of the common stock, the Company recorded $43,078
of legal expenses and $56,922 as a prepaid asset in the accompanying balance
sheet.
In August 1999 and September 1999, the Company issued 159,722 shares of common
stock for a total consideration of $1,057,298, net of offering costs.
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For the Period from February 3, 1999 (Inception) to September 30, 1999 and For
the Three Months Ended September 30, 1999 (unaudited)
NOTE 5 - STOCKHOLDERS' EQUITY (Continued)
Private Placement
In February 1999, the Company entered into a subscription agreement to offer up
to $900,000 worth of shares of common stock for 1,333,332 shares and $2,300,000
worth of options to acquire units to accredited investors. Each unit was
comprised of one share of the Company's common stock (or 1,200,000 shares) and
0.5 warrant at an exercise price of $2.50 per share. The warrants are deemed
granted below market value, for which an expense of $693,000 has been recorded.
The warrants may be exercised, commencing upon the date the Company closes a
public offering of its stock pursuant to a Registration Statement registering
the shares underlying the warrants and terminating 30 days thereafter. The
warrant holders have the right to demand registration of the shares if such
shares have not been registered by January 1, 2000. In addition, the warrants
are callable at the option of the Company on and after the date that (i) the
shares underlying the warrants are registered and (ii) the Company's common
stock is traded on any exchange, at a Market Price, as defined below, equal to
or exceeding $10.00 per share for 10 consecutive trading days. The Market Price
shall be the closing bid price of the common stock. A total offering of
$2,900,000, net of offering costs, was completed as of September 30, 1999.
Stock options were granted in connection with the private placement, granting an
aggregate of 290,836 shares at exercise prices of $50,000 and $75,000. The
options were granted below market, for which an expense of $864,336 has been
recorded.
Stock Option Plan
The Company's Board of Directors adopted the Option Agreement and Certificate
(the "Agreement") in order to issue options to purchase common stock of the
Company to certain employees, commencing on April, 9, 1999. These options took
two forms: a Series A option and a Series B option.
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
for the Period from February 3, 1999 (Inception) to September 30, 1999 and For
the Three Months Ended September 30, 1999 (unaudited)
NOTE 5 - STOCKHOLDERS' EQUITY (Continued)
Stock Option Plan (Continued)
The Series A options grant their holders the right to purchase common stock of
the Company at $4.50 per share. Each Series A option is exercisable on the
latter of the following: (i) the option holder has been employed full-time by
the Company for six months or (ii) April 2, 2000. Once the option is
exercisable, one-fifteenth of the share granted by the option becomes
exercisable each month. The option terminates two years after it first becomes
exercisable or within three years from the date of issuance. However, if the
option holder is terminated for violating the Company's employee manual, the
option holder loses all rights in all vested and non-vested option. If the
option holder's employment with the Company is terminated for any other reason,
the holder retains all vested options, but all non-vested options immediately
terminate. In addition, the non-vested options automatically terminate if there
is a change in control of the Company.
In addition, the options are not assignable.
The Series B options are substantially similar to the Series A options with the
following differences: (i) the option holder does not lose all rights in vested
and non-vested options if his or her employment is terminated for violating the
Company's employee manual; (ii) the option holder agrees not to work for any
company developing Internet technology for six months following any termination
of employment with the Company; and (iii) the key officer's options are
assignable for the express purpose of attracting key management personnel to
work for the Company.
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For the Period from February 3, 1999 (Inception) to September 30, 1999 and for
the Three Months Ended September 30, 1999 (unaudited)
NOTE 5 - STOCKHOLDERS' EQUITY (Continued)
Stock Option Plan (Continued)
During the period from February 3, 1999 (inception) to September 30, 1999, the
Company issued stock options to employees when the exercise price was less than
the fair value of the Company's stock at the date of the grant. The Company
incurred compensation expense of $699,067, of which $455,115 is recorded as of
September 30, 1999 (unaudited), and the remainder will be expensed according to
the vesting period of the options.
NOTE 6 - INCOME TAXES
As of September 30, 1999, the Company had approximately $5,953,614 (unaudited)
in net operating loss carryforwards that may be offset against future taxable
income. No provision for income taxes for the period from February 3, 1999
(inception) to September 30, 1999 has been made, except for minimum state taxes,
since the Company incurred a loss during the period. The deferred income tax
benefit of the loss carryforward is the only significant deferred income tax
asset or liability of the Company. It has been offset by a valuation allowance
of the same amount since management does not believe the recoverability of this
deferred tax asset is more likely than not. Accordingly, no deferred income tax
benefit has been recognized in these financial statements.
Note 7 - YEAR 2000 ISSUE
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue.
The issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Company is dependent on computer processing in the conduct of its
business activities.
The accompanying notes are an integral part of these financial statements.
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
For the Period from February 3, 1999 (Inception) to September 30, 1999 and For
the Three Months Ended September 30, 1999 (unaudited)
NOTE 7 - YEAR 2000 ISSUE (Continued)
Based on the comprehensive review of the computer systems, management has
determined that the Company's computer system will not be materially affected
and does not believe the cost of implementation will be material to the
Company's financial position and results of operations.
Externally, the Year 2000 Issue may impact other entities with which the Company
transacts business. The Company cannot predict the effect of the Year 2000 Issue
on such entities, nor their effect on the Company. With regard to those
companies that the Company does business with on a daily basis, the Company
cannot guarantee that they will be vigilant about their Year 2000 Issue plan of
action.
In the event that the Company does experience Year 2000 Issue problems, it could
result in material losses from operations and a reduction of the Company's
working capital. Management is unable at this time to quantify the impact that
the Year 2000 Issue could have on the Company's results of operations and
financial condition.
NOTE 8 - SUBSEQUENT EVENTS (UNAUDITED)
As of November 30, 1999, the Company is offering up to 2,000,000 shares of its
common stock at $6.00 per share only to investors who qualify as "accredited
investors". Single investors who provide $1,000,000 receive a price of $5.00 per
share. Investors who provide at least $18,000 shall also receive a warrant with
a two-year term exercisable at $10.00.
The accompanying notes are an integral part of these financial statements.
PART 1 - FINANCIAL INFORMATION
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND PLAN OF OPERATION
The following is management's discussion and analysis of StockUp's financial
condition and plan of operation. Detailed information is contained in the
financial statements included with this document. This section contains forward
looking statements that involve risks and uncertainties, such as statements of
the Company's plans, objective, expectations and intentions. The cautionary
statements made in this document should be read as being applicable to all
related forward- ooking statements wherever they appear in this document.
The Company
Courtleigh Capital, Inc., a Kansas corporation, was incorporated under the laws
of the State of Colorado as ANCR, Inc. on July 30, 1985. On July 23, 1987, ANCR,
Inc. changed its name to CEA Lab, Inc. and reincorporated on October 16, 1995 in
the State of Kansas as CEA Lab, Inc. On September 12, 1997, it amended its
articles to change its name to Courtleigh Capital, Inc. Courtleigh Capital, Inc,
commenced trading during December, 1998 under the symbol CTLH on the
Over-the-Counter Bulletin Board. On February 2, 1999, Courtleigh Capital, Inc.
changed its name to StockUp.com, Inc. StockUp.com, Inc. a Kansas corporation
formerly Courtleigh Capital, Inc. reincorporated in the State of Nevada using
the name StockUp.com, Inc. (the term the "Company" shall refer to the surviving
Nevada corporation). The Company changed its trading symbol to SKUP effective as
of February 22, 1999. On September 14, 1999, the Company effected a two-for-one
forward stock split. All share amounts set forth in this Form 10QSB reflect this
stock split.
The Company uses Microsoft's operating platform to develop second-generation
Internet technology(, which is located on its servers and accessible from the
Internet. The Company owns, and is developing, a system of modular software
products (i.e.), desktop applications that may be deployed independently or in a
single, integrated system) designed to increase traffic and user retention on
Internet websites deploying the technology.
The company's goal is to offer users software products that provide a
customizable, interactive, and dynamic Internet experience compared to existing
static portal models residing on the World Wide Web. Although the Company is in
the process of developing other second-generation Internet technology( products
including a financial website and interactive agent technology, management has
decided to incorporate various aspects of the financial website into its desktop
portal products and emphasize the development for these technologies. The
Company is a Microsoft Certified Solutions Provider, and has based its
technologies on Microsoft's operating system. The company employs more than
twenty programmers and animators.
Plan of Operation
From its inception to date, the Company has incurred costs associated with the
development and launch of its products, probable markets, and business. The
Company has established relationships with information providers which increase
the quality and marketability of the Company's products. While there is no
assurance, management believes that the Company's products will commence
generating revenues during the first quarter 2000.
The Company has financed its operations to date through the sale of its common
stock. Since inception through August 1, 1999, the company issued 12,702,358
shares. The Company raised $2.9 million from four accredited investors as
follows: (i) February 1999 ("the February Offering") - Issuance of 1,333,332
shares in exchange for $900,000; and (ii) May and June 1999 ("the May/June
Offering") - Issuance of options under Rule 506 of Regulation D, promulgated
under Section 4 (2) of the Securities Act of 1933, to acquire units comprised of
1.2 million shares and 600,000 warrants exercisable at $2.50 per share, and
options to acquire 290,836 shares at an aggregate exercise price of $125,000 in
exchange for $2.0 million cash. The February, 1999 Offering was conducted under
Rule 504. It provided the necessary seed capital to commence implementation of
the Company's business plan. The May/June Offering was primarily an option to
participate in a unit offering of restricted stock and warrants. 1,200,000 of
these shares are currently restricted and subject to a demand registration right
as of January 1, 2000. The 1,200,000 shares and the shares underlying the
600,000 warrants are subject to reasonable underwriter trading restrictions in
the event of a public offering. These investors holding these securities are
also entitled to anti-dilution rights in the event the Company issues stock at
less than $2.50 per share.
The Company is currently conducting a private offering of its securities. From
August 1, 1999 through September 30, 1999, the Company has issued 159,722 shares
of common stock for a total consideration of $1,057,298 net of offering costs.
As of September 30, 1999, the Company has 12,862,080 shares issued and
outstanding.
From inception through September, 1999, the Company's selling, general and
administrative expenses were $4,496,318. In addition the Company incurred
financing expenses of $1,557,335. These expenses are partially offset by income
from investments in the amount of $17,557, miscellaneous income of $660, and
debt forgiveness in the amount of $81,822, resulting in a net loss of
$5,953,614.
For the three months ended September 30, 1999, the Company's selling, general
and administrative expenses were $2,552,652. These expenses are partially offset
by investment income of $8,292 and miscellaneous income of $660 resulting in a
net loss of $2,543,700.
As of September 30, 1999, the Company had current assets of $558,631 and
$668,642 in furniture, equipment, and other assets, resulting in total assets of
$1,227,273. The Company's current liabilities were $742,961.
Liquidity and Capital Resources
The Company has generated minimal revenues and does not anticipate generating
revenue until the first quarter of year 2000. The Company does not anticipate
its financial operations reaching the breakeven point until January, 2001 at the
earliest. As a result, the Company's sole source of capital during 1999 shall be
investment capital provided by third parties. Further, the Company anticipates
it will require additional capital contributions to fund its operations during
the year 2000. On June 21, 1999, the Company commenced a private offering of its
securities to raise up to $12 million.
Year 2000
The Company has begun to address possible remedial efforts in connection with
computer software that could be affected by the Year 2000 ("Y2K") problem.The
Y2K problem is the result of computer programs being written using two digits
rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculation.
The Y2K problem can affect any modern technology used by a business in the
course of its day. Any machine that uses embedded computer technology is
susceptible to this problem, including for example, telephone systems, postage
meters and scales, and of course, computers. The impact on a company is
determined to a large extent by the company's dependence on these technologies
to perform their day to day operations.
Internally, the Company has begun reviewing all such equipment and has
determined that many of its systems are Y2K compliant. The Company anticipated
that all system and software will be fully reviewed and brought into compliance
by November 1999. If certain systems are not brought up to Y2K compliance by the
end of November 1999, then the non-compliant technology will be disabled so as
not to have an impact on the systems that are compliant. Any such events would
not have a serious impact on the Company's day to day operations, nor would any
valuable information be lost. The Company backs up all computer systems daily to
protect against data loss.
The costs of bringing the Company's technology up to Y2K compliance is expected
to be less than $5,000. This is because the majority of the "patches" or
programs designed to make software Y2K compliant can be obtained over the
Internet from manufacturers for little or no cost and the Company does not
expect to rely heavily on outside consultants to upgrade its systems as most of
the work can be performed in-house.
Note
Detailed information is contained in the financial statements accompanying this
document (see Item 1). This section contains forward-looking statements that
involve risks and uncertainties, such as statements of the Company's business
plans, objectives, expectations, and intentions. The cautionary statements made
in this document should be read as being applicable to all related
forward-looking statements wherever they appear. The tables contained in Item 1
set forth, for the period indicated, selected financial information of the
Company. All share data has been adjusted for a 2-for-1 stock split effective
September 14, 1999.
PART 11. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
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. Exhibits and Reports on Form 8-K
(a) Exhibits:
(b) Reports on Form 8-k:
StockUp.com filed a report on Form 8-K, dated October 5, 1999, relating to the
resignation of Registrant's Director, Steven Liebowitz.
This exhibit is being filed electronically in the electronic format specified by
EDGAR.
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.
STOCKUP.COM, INC.
(Registrant)
Date:November 29, 1999
By: /S/ Michael Calderone, President
President/Chief Executive Officer
STOCKUP.COM, INC.
INDEX TO EXHIBITS
EXHIBIT
TITLE
NO.
-------
Financial Data Schedule*......27.1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STOCKUP.COM, INC. FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> FEB-3-1999
<PERIOD-END> SEP-30-1999
<CASH> 440345
<SECURITIES> 0
<RECEIVABLES> 32800
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 558631
<PP&E> 727585
<DEPRECIATION> 126699
<TOTAL-ASSETS> 1227273
<CURRENT-LIABILITIES> 742961
<BONDS> 0
0
0
<COMMON> 6437926
<OTHER-SE> 484312
<TOTAL-LIABILITY-AND-EQUITY> 1227273
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4496318
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17557
<INCOME-PRETAX> 5953614
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5953614
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
