UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to __________________
Commission file number 0-26809
ASPI EUROPE, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 91-1962104
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
Two Union Square
601 Union Street, Suite 4200
Seattle, Washington
98101
(Address of principal executive offices)
(206) 652-3675
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all documents
and 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 __
The number of outstanding shares of common stock, $0.001 par value, of the
registrant at August 1, 2000 was 7,063,116.
<PAGE>
ASPI EUROPE, INC.
INDEX TO THE FORM 10-Q
For the quarterly period ended June 30, 2000
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Page
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS...................................................................1
Consolidated Balance Sheets........................................................1
Consolidated Statements of Operations..............................................2
Consolidated Statements of Shareholders Deficit....................................3
Consolidated Statements of Cash Flows..............................................4
Notes to Consolidated Financial Statements.........................................5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................................................8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................13
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.....................................................................14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.............................................14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.......................................................15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................15
ITEM 5. OTHER INFORMATION.....................................................................13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................................13
SIGNATURES.......................................................................................14
</TABLE>
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASPI EUROPE, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
June 30, December 31,
2000 (unaudited) 1999
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<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 18,746 $ 93,127
Restricted cash 16,739 35,686
Prepaid expenses and deposits 2,366 22,917
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Total Current Assets 37,851 151,730
Net Assets to be Disposed 22,500 86,098
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Total Assets $ 60,351 $ 237,828
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 123,966 $ 74,907
Due to related party 56,148 95,033
Convertible note payable 126,575 150,616
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Total Current Liabilities 306,689 320,556
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Shareholders' Deficit
Common stock, $.001 par value; 50,000,000 shares authorized, 7,063,116 and
9,000,000 issued and outstanding 7,063 9,000
Additional paid-in capital 2,190,578 1,131,579
Deficit accumulated during the development stage (2,443,979) (1,223,307)
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Total Shareholders' Deficit (246,338) (82,728)
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Total Liabilities and Shareholders' Deficit $ 60,351 $ 237,828
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</TABLE>
See accompanying notes to consolidated financial statements.
1
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ASPI EUROPE, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND JUNE 30, 1999
(Unaudited)
<TABLE>
Cumulative Amounts
for the period
from Inception Three Months Ended June 30, Six Months Ended June 30,
(August 17, 1984) --------------------------- -------------------------
through June 30,
2000 2000 1999 2000 1999
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<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES
General and administrative $ 277,838 $ 75,255 $ 10,913 $ 202,285 $ 21,219
Non-cash stock-based compensation 68,334 - - 68,334 -
Financial consulting fee 1,156,000 - - 1,156,000 -
Depreciation and amortization 6,146 - 1,321 - 1,945
Interest expense (income), net 61,832 32,709 (1,122) 33,209 (1,122)
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Total operating expenses 1,570,150 107,964 11,112 1,459,828 22,042
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NET (GAIN) LOSS FROM DISCONTINUED
OPERATIONS 873,829 - 298,717 (239,156) 433,859
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Net loss $ (2,443,979) $ (107,964) $(309,829) $(1,220,672) $(455,901)
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Net gain (loss) per share -
Continuing operations $ (0.02) $ (0.00) $ (0.19) (0.00)
Discontinued operations (0.00) (0.04) 0.03 (0.08)
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Net loss per share - basic and diluted $ (0.02) $ (0.04) $ (0.16) (0.08)
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Weighted average number of shares
of common stock outstanding -
basic and diluted 7,063,116 7,596,416 7,797,925 5,458,922
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</TABLE>
See accompanying notes to consolidated financial statements.
2
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ASPI EUROPE, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
(Unaudited )
<TABLE>
Deficit
Accumulated
Common Stock Additional During the
Shares Amount Paid-in Capital Development Stage Total
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<S> <C> <C> <C> <C> <C>
ASPi Europe, Inc. Activities
(Formerly Shopping Sherlock, Inc.
and AIDA Industries, Inc.):
Issuance of common stock for cash 100,000 $ 100 $ 900 $ - $ 1,000
Net loss - - - (1,000) (1,000)
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Balance, December 31, 1985 100,000 100 900 (1,000) -
Activity January 1986 through
December 31, 1997 - - - - -
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Balance, December 31, 1997 100,000 100 900 (1,000) -
Issuance of common stock for
reinstatement fees - July 20,
1998 900,000 900 1,179 - 2,079
Net loss - - - (2,079) (2,079)
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Balance, December 31, 1998 1,000,000 1,000 2,079 (3,079) -
Sale of common stock for cash
($.05/share) - February 17, 1999 5,000,000 5,000 245,000 - 250,000
Sale of common stock for cash
($1.00/share) - April 16, 1999 1,000,000 1,000 999,000 - 1,000,000
Issuance of common stock for
acquisition of Shopping Sherlock
- Delaware - May 26, 1999 2,000,000 2,000 (2,000) - -
Cash distributed to significant
shareholder - May 26, 1999 - - (150,000) - (150,000)
Beneficial conversion discount of
convertible debt - December 14,
1999 - - 37,500 - 37,500
Net loss - - - (1,220,228) (1,220,228)
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Balance, December 31, 1999 9,000,000 9,000 1,131,579 (1,223,307) (82,728)
Conversion of convertible debt
($2.80/share) - January 21, 2000 63,116 63 151,415 - 151,478
Compensation related to issuance of
stock options - February 7, 2000 68,334 - 68,334
Warrants issued relating to
financial consulting fees -
March 17, 2000 1,156,000 - 1,156,000
Redemption of common stock for
software license - March 27,
2000 (2,000,000) (2,000) (348,000) - (350,000)
Beneficial conversion discount of
convertible debt - May 17, 2000 - - 31,250 - 31,250
Net loss - - - (1,220,672) (1,220,672)
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Balance, June 30, 2000 7,063,116 $ 7,063 $2,190,578 $ (2,443,979) $ (246,338)
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</TABLE>
See accompanying notes to consolidated financial statements.
3
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ASPI EUROPE, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND JUNE 30, 1999
(Unaudited )
<TABLE>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cumulative Amounts
for the period from
Inception
(August 17, 1984), Three Months Ended June 30, Six Months Ended June 30,
through --------------------------- -------------------------
June 30, 2000 2000 1999 2000 1999
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<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $ (2,443,979) $ (107,964) $ (309,829) $ (1,220,672) $ (455,901)
Adjustments to reconcile net loss to net
cash used in operating activities:
Discount amortization on convertible note
payable 68,750 31,250 - 31,250 -
Provision for losses on assets held for
liquidation 130,463 20,335 - 61,598 -
Shares redeemed for sale of software
license (350,000) - - (350,000) -
Non-cash stock-based compensation 68,334 - - 68,334 -
Warrants issued relating to financial
consulting fee 1,156,000 - - 1,156,000 -
Depreciation 32,957 - 6,088 - 7,200
Change in assets and liabilities:
Restricted cash (15,135) 512 22,994 20,551 (20,348)
Prepaid expenses and deposits 26,142 (42,497) (14,276) 49,059 43,296
Accounts payable 93,854 1,134 - 18,947 -
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Net Cash Used in Operating Activities (1,232,614) (97,230) (295,023) (164,933) (425,753)
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Cash Flows From Investing Activities
(Purchase) sale of furniture and equipment (114,189) - (60,277) 2,000 (99,784)
Increase in note receivable (71,731) - - - -
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Net Cash Provided by (Used in) Investing (185,920) - (60,277) 2,000 (99,784)
Activities
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Cash Flows From Financing Activities
Proceeds from issuing common stock 1,253,079 - 67,682 - 1,250,000
Proceeds from convertible note payable 275,000 125,000 - 125,000 -
Accrued interest on convertible note payable 3,053 1,575 - 2,437 -
Advances from (payments to) related party 56,148 (42,315) 11,810 (38,885) 19,310
Distribution to shareholder (150,000) - (150,000) - (150,000)
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Net Cash Provided by Financing Activities 1,437,280 84,260 (70,508) 88,552 1,119,310
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Net Increase (Decrease) in Cash and Cash
Equivalents 18,746 (12,970) (425,808) (74,381) 593,773
Cash and Cash Equivalents, beginning of period - 31,716 1,019,581 93,127 -
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Cash and Cash Equivalents, end of period $ 18,746 $ 18,746 $ 593,773 $ 18,746 $ 593,773
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Non-cash Financing Activity
Conversion of note payable to common stock $ 151,478 $ - $ - $ 151,478 $ -
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</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
ASPI EUROPE, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BUSINESS DESCRIPTION
ASPi Europe, Inc. (formerly Shopping Sherlock, Inc.) ("the Company") was
incorporated in the State of Florida on August 17, 1984, under the name of AIDA
Industries, Inc. From its inception until July 20, 1998, there was no activity
within the Company. On July 20, 1998, the Company amended its Articles of
Incorporation to provide for a thousand to one (1000:1) stock split, and were
quoted on the OTC Bulletin Board. The Company began operations in January of
1999, and on March 24, 1999, the Company changed its name from AIDA Industries,
Inc. to Shopping Sherlock, Inc.
On May 26, 1999, the Company entered into an acquisition agreement with Shopping
Sherlock, Inc. ("SSI"), a corporation organized and incorporated in the State of
Delaware on January 20, 1999, for the purpose of developing and implementing its
website hosting and e-business services as well as developing its own e-commerce
website to sell consumer products over the Internet through discounts and
purchase rebates to its customers. The Company acquired 100% of the common stock
of SSI in exchange for the issuance of a total of 2,000,000 shares of the
Company's common stock to the stockholders of SSI, which primarily consisted of
Premier Lifestyles International Corporation ("PLIC") and Stewart Family
Partners (the "Partnership").
On January 2, 2000, the Company's board of directors decided to cease its
website hosting and e-business services as well as its e-commerce operations due
to a lack of working capital and disappointing financial results. On January 27,
2000, the Company entered into the Stock Redemption and Settlement Agreement
(the "Redemption Agreement") with PLIC, the Partnership, and Richard Stewart
under which the Company agreed to transfer a worldwide, non-exclusive,
perpetual, fully-paid-up license to use, distribute or make derivative works
from the Company's software designed to operate and host websites in
consideration for the redemption of the 2,000,000 shares of the Company's common
stock that PLIC and the Partnership owned or had a right to purchase.
On March 14, 2000, the shareholders of the Company at a special shareholder
meeting approved of the terms of the Redemption Agreement and, as a result, the
2,000,000 shares of common stock that PLIC and the Partnership owned or had a
right to purchase were redeemed by the Company and were deemed authorized but
unissued shares of the Company pursuant to Florida law.
Due to the Company's lack of success in launching its website hosting and
e-business services as well as its e-commerce business, the Company decided to
change its business focus and explore the possibility of acquiring a viable
operating company in a different industry. On March 8, 2000, the Company
announced that it entered into a letter of intent to acquire all of the issued
and outstanding equity securities of it-softdialog AG ("ITAG"), an established
information technology consulting company with its headquarters in Germany. In
anticipation of the closing of the proposed acquisition of ITAG, on May 2, 2000,
the Company received shareholder approval to change its name from Shopping
Sherlock, Inc. to ASPi Europe, Inc., and on May 5, 2000, the Company changed its
name to ASPi Europe, Inc. On May 18, 2000, the Company announced that the
proposed acquisition would likely not proceed according to the terms of the
letter of intent, and soon thereafter both parties agreed to terminate any
further negotiations.
On July 5, 2000, the Company announced that it had entered into separate letters
of intent to acquire all of the issued and outstanding equity securities of Blue
Dragon Technologies GmbH, a web-based software solutions consulting company
located in Germany, and WebTech Ltd., an information technology business located
in Bulgaria (the "Target Companies"), which are owned by the same shareholders.
The tentative terms for these acquisitions involve the Company issuing up to
500,000 shares of its common stock and securing at least $1.0 million in funding
for the Target Companies prior to closing the transactions in
5
<PAGE>
consideration for all of the issued and outstanding shares of the Target
Companies. There can be no assurance, however, that the transaction contemplated
will be completed between the Company and the Target Companies or will be
completed on the terms as set forth above.
NOTE 2. BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Company are unaudited
and include, in the opinion of management, all normal recurring adjustments
necessary to present fairly the consolidated balance sheets as of June 30, 2000,
and the related statements of operations, shareholders deficit and cash flows
for the period presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission (the "Commission"). These
condensed consolidated financial statements should be read in conjunction with
the Company's fiscal 1999 audited consolidated financial statements and the
related notes thereto included in the Company's Form 10-K filed with the
Commission on March 30, 2000.
The Company has been in the development stage since its inception. It has had no
significant operating revenue to date, has accumulated losses of $2,443,979 and
will require additional working capital to complete its proposed acquisition of
the Target Companies. This fact raises substantial doubt as to the Company's
ability to continue as a going concern.
NOTE 3. INCOME TAXES
The Company records its provision for income taxes using the liability method.
Under this method deferred tax assets and liabilities are recognized based on
the anticipated future tax effects arising from the differences between the
financial statement carrying amounts of assets and liabilities and their
respective tax bases.
NOTE 4. NET LOSS PER SHARE
Basic loss per share is computed by dividing net loss by the weighted average
number of common stock outstanding. Per share information for all prior periods
have been adjusted to reflect the 1,000:1 stock split declared on July 20, 1998.
As of June 30, 2000, the Company had outstanding options to purchase 205,000
shares of common stock and outstanding warrants to purchase 50,000 shares of
common stock which were not included in the calculation of loss per share as
their effect was anti-dilutive.
NOTE 5. BUSINESS COMBINATION
On May 26, 1999 the Company entered into an acquisition agreement by which the
Company acquired 100% of SSI in consideration of 2,000,000 shares of the
Company's common stock. At the time of acquisition, the controlling shareholder
of SSI was Richard Stewart and, as a result of the acquisition, Mr. Stewart
became a director and 20% shareholder of the Company. Mr. Stewart is also the
President and Chief Executive Officer of PLIC. Because of the common ownership
between SSI and PLIC, and the fact that the majority shareholder of SSI and PLIC
held a continuing equity position in the Company in excess of 10%, the marketing
agreement acquired was assigned no value in the Company's financial statements.
The $150,000 paid to SSI was recorded as a capital distribution to shareholders
in the consolidated financial statements of the Company.
NOTE 6. ISSUANCE OF SECURITIES
On January 21, 2000, the 10% subordinated convertible note, representing the
principal amount of $150,000 and the related accrued interest, was converted
into 63,116 shares of the Company's common stock. The conversion ratio was 80%
of the last reported sale price of the Company's common stock as reported on the
OTC Bulletin Board on the date of conversion.
6
<PAGE>
On March 15, 2000, the Company entered into an agency agreement with DJ Limited
("DJL") and issued 50,000 warrants to DJL to purchase the Company's common stock
at a purchase price of $14.50 per share. These warrants will expire on March 15,
2005. The agency agreement, which expired on June 16, 2000, called for DJL to
raise capital for the Company, on a best efforts basis, to close the proposed
acquisition of ITAG and provide additional working capital. The warrants were
issued as compensation for undertaking the capital raising efforts of the
Company. The warrants were accounted for under EITF 96-18 "Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Service" such that the relative fair value
ascribed to the warrants will be measured under the Black-Scholes method. The
Company recorded $1,156,000 as a financial consulting fee and additional to
paid-in capital for the first quarter ended March 31, 2000.
NOTE 7. CONVERTIBLE NOTES PAYABLE
On May 17, 2000, the Company received proceeds of $125,000 by entering into a
10% subordinated convertible note with Manhattan Investments Incorporated,
which, along with accrued interest, is due on August 31, 2000. The note is
convertible at the option of the holder at 80% of the last reported sale price
of the Company's common stock as reported on the OTC Bulletin Board on the date
of conversion. The quoted price for the Company's stock on May 17, 2000 was
$9.75, resulting in a deemed beneficial conversion feature and discount of
$31,250, which was recorded as an interest expense and an increase to additional
paid-in capital.
On July 12, 2000, the Company received proceeds of $100,000 by entering into a
10% subordinated convertible note with The Atlantic Trust, which is due on July
31, 2001. The note is convertible at the option of the holder at 80% of the last
reported sale price of the Company's common stock as reported on the OTC
Bulletin Board on the date of conversion. The quoted price for the Company's
stock on July 12, 2000 was $6.82, resulting in a deemed beneficial conversion
feature and discount of $25,000, which will be recorded as an interest expense
and an increase to additional paid-in capital. Interest on the note is due on
January 31, 2001 and July 31, 2001.
NOTE 8. RECLASSIFICATION
The Company has reclassified its prior year financial statements to present the
operating results as a discontinued operation.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Certain statements and information contained in this Report constitute
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company, or developments in the Company, to
differ materially from the anticipated results, performance or achievements
expressed or implied by such forward-looking statements. Such risks and
uncertainties include, but are not limited to: the Company's limited operating
history, history of losses, need for additional financing, uncertainty about its
ability to continue as a going concern, risk related to future acquisitions and
strategic alliances, dependence on key personnel, directors' and officers'
involvement in other projects, and factors related to the Company's proposed
acquisition of the Target Companies. Risks associated with the proposed
acquisition include, but are not limited to: the Target Companies limited
operating history, dependence on key personnel, reliance on key third-party
relationships, risks involving the management of growth, product development
risks and risks of technological change, competition, and the Company's ability
to protect the Target Companies intellectual property rights. Other risks and
uncertainties are described in the Company's 10-K filed with the Commission on
March 30, 2000. "We," "our," "us" and the "Company" refer to ASPi Europe, Inc.,
our subsidiary, and the Company's former corporate names AIDA Industries, Inc.
and Shopping Sherlock, Inc.
Overview
The Company was incorporated in Florida on August 17, 1984, under the name AIDA
Industries, Inc. The Company began operations in January of 1999, and on March
24, 1999 changed its name from AIDA Industries, Inc. to Shopping Sherlock, Inc.
On May 26, 1999, the Company acquired all the issued and outstanding capital
stock of Shopping Sherlock, Inc., a Delaware corporation ("SSI"), for the
purpose of developing and implementing its website hosting and e-commerce
services as well as developing its own e-commerce website to sell consumer
products over the Internet through discounts and purchase rebates to its
customers. The Company acquired 100% of the common stock of SSI in exchange for
the issuance of a total of 2,000,000 shares of the Company's common stock to the
stockholders of SSI, which primarily consisted of Premier Lifestyles
International Corporation ("PLIC") and Stewart Family Partners (the
"Partnership"). At the time of the acquisition, the controlling shareholder of
SSI was Richard Stewart and, as a result of the acquisition, Mr. Stewart became
a director and 20% shareholder of the Company. Mr. Stewart is also the President
and Chief Executive Officer of PLIC.
Due to a lack of working capital and disappointing financial results in fiscal
year 1999, however, the Company's board of directors decided on January 2, 2000
that it would cease its website hosting and e-business services as well as its
e-commerce operations. The Company's operations did not generate material
traffic or revenues in the fiscal year ended December 31, 1999, and its efforts
to raise additional significant sources of capital were unsuccessful. As a
result, the Company decided to conserve its remaining cash reserves and
terminated office leases, reduced staff, terminated all management and
consulting contracts, and significantly reduced resources directed at keeping
its e-commerce site operational.
On January 27, 2000, the Company entered into the Stock Redemption and
Settlement Agreement (the "Redemption Agreement") with PLIC, the Partnership and
Richard Stewart under which the Company agreed to transfer a worldwide,
non-exclusive, perpetual, fully-paid-up license to use, distribute or make
derivative works from the Company's software designed to operate and host
websites in consideration for the redemption of approximately 2,000,000 shares
of common stock by the Company that PLIC and the Partnership owned or had a
right to purchase.
On March 14, 2000, the shareholders of the Company, at a special shareholder
meeting, approved of the terms of the Redemption Agreement and, as a result, the
2,000,000 shares of common stock were deemed authorized but unissued shares of
the Company pursuant to Florida law. The software license had a deemed
8
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value of approximately $350,000 based on the actual expenditures incurred by the
Company to develop the software in 1999.
Due to the Company's lack of success in launching its website hosting and
e-business services and its e-commerce operations, the Company decided to change
its business focus and explore the possibility of acquiring a viable operating
company in a different industry. On March 8, 2000, the Company announced that it
entered into a letter of intent to acquire all of the issued and outstanding
equity securities of ITAG. In anticipation of the closing of the proposed
acquisition of ITAG, the Company received shareholder approval on May 2, 2000,
to change its name from Shopping Sherlock, Inc. to ASPi Europe, Inc., and on May
5, 2000, the Company changed its name to ASPi Europe, Inc. On May 18, 2000, the
Company announced that the proposed acquisition would likely not proceed
according to the terms of the letter of intent, and soon thereafter both parties
agreed to terminate any further negotiations.
On July 5, 2000, the Company announced that it had entered into separate letters
of intent to acquire all of the issued and outstanding equity securities of the
Target Companies. The tentative terms for these acquisitions involve the Company
issuing up to 500,000 shares of its common stock and securing at least $1.0
million in funding for the Target Companies, prior to closing the transactions,
in consideration for all of the issued and outstanding shares of the Target
Companies. There can be no assurance, however, that the transaction contemplated
will be completed between the Company and the Target Companies or will be
completed on the terms set forth above.
Under the terms of the proposed transaction, it is anticipated that some of the
executives of the Target Companies will assume senior executive positions as
well as be invited to join the board of directors of the Company.
The Company anticipates that it will require up to an additional $2 million in
order to both fund the proposed acquisition of the Target Companies as well as
its operations over the next twelve (12) months. The Company currently has
sufficient working capital to support its current minimum operations through
September 2000. The Company is currently exploring additional financing
alternatives, including the possibility of a private equity offering. There can
be no assurance, however, that such financing will be available to the Company
or, if it is, that it will be available on terms acceptable to the Company. If
the Company is unable to obtain the financing necessary to support its
operations, it may be unable to continue as a going concern.
On June 16, 2000, Damon Poole was appointed the President, Chief Executive
Officer and Chairman of the Board of the Company, replacing Philip Garratt who
resigned the same day.
Results of Operations
In January 2000, the Company's wholly owned subsidiary, SSI, became inactive due
to the curtailing of substantially all operations of the Company. All remaining
administration operations of the Company will be performed in the parent
company.
For the Six Months Ended June 30, 2000 Compared to the Six Months Ended June 30,
1999
Net Gain/Loss From Discontinued Operations. The Company ceased substantially all
of its operations on January 3, 2000 and, as a result, has combined all
operating revenues and expenses related to the previous business under
discontinued operations. The Company incurred a net gain from discontinued
operations of $239,156 for the six months ended June 30, 2000, compared with a
net loss of $433,859 for the six months ended June 30, 1999.
These amounts include a gain on the sale of a software license of $350,000 for
the six months ended June 30, 2000, compared with no gain on the sale of a
software licenses for the six months ended June 30, 1999. The Company incurred
$15,812 for the cost of revenue from discontinued operations for the six months
ended June 30, 2000, compared with no costs of revenue from discontinued
operations for the six months
9
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ended June 30, 1999. The Company incurred $10,979 for technical and system
development expenses from discontinued operations for the six months ended June
30, 2000, compared with $137,324 for the six months ended June 30, 1999. The
Company incurred $5,305 for sales and marketing expenses from discontinued
operations for the six months ended June 30, 2000, compared with $54,184 for the
six months ended June 30, 1999. The Company incurred $42,883 for general and
administrative expenses from discontinued operations for the six months ended
June 30, 2000, compared with $242,351 for the six months ended June 30, 1999.
The Company also wrote down the value of a loan by $35,865 to a third-party for
the six months ended June 30, 2000, which represents the amount management
believes is collectable, compared with no such write down of the value of any
loans for the six months ended June 30, 1999.
Technical and system development expenses from discontinued operations consist
primarily of expenses incurred for the development and maintenance of the
software required to support the Company's online stores, including employee
compensation and the cost of developing and improving store content, Internet
connectivity and operations. The significant costs were payroll and consulting
expenses of $7,637 for the six months ended June 30, 2000, compared with $87,664
for the six months ended June 30, 1999.
Sales and marketing expenses from discontinued operations consist of costs
associated with designing and marketing the Company's online stores. Payroll
expenses relating to merchandising, helpdesk, graphic design, advertising and
promotion department employees were $2,970 for the six months ended June 30,
2000, compared with $27,343 for the six months ended June 30, 1999.
General and administrative expenses from discontinued operations consist of
management, compensation, rent for the research and development facilities,
professional services, and travel. Payroll expenses from discontinued operations
relating to management and administrative personnel were $2,257 for the six
months ended June 30, 2000, compared with $93,216 for the six months ended June
30, 1999. Professional fees from discontinued operations were $35,700 for the
six months ended June 30, 2000, compared with $73,096 for the six months ended
June 30, 1999, reflecting the cost of raising funds, signing of agreements, and
completing the Company's regulatory filings. There were no travel and
accommodation expenses for the six months ended June 30, 2000, compared with
$36,971 for the six months ended June 30, 1999.
General and Administrative Expenses. General and administrative expenses consist
of rent, secretarial services, telephone expense and other general corporate
expenses. General and administrative expenses were $202,286 for the six months
ended June 30, 2000, compared with $21,219 for the six months ended June 30,
1999. This increase reflected the substantially increased activity related to
the new direction of the Company's operations through the proposed acquisition
of ITAG. Professional fees were $112,144 for the six months ended June 30, 2000,
compared with no professional fees for the six months ended June 30, 1999. The
professional fees relate to the costs of the Company's regulatory filings and
the costs associated with the proposed acquisition. General office expenses,
including rent, telephone and courier expenses, were $17,650 for the six months
ended June 30, 2000, compared with $21,219 for the six months ended June 30,
1999. Management fees were $18,000 for the six months ended June 30, 2000,
compared with no management fees for the six months ended June 30, 1999. The
Company anticipates it will sell certain fixed assets and recorded an estimated
loss on their disposal of $22,557 for the six months ended June 30, 2000,
compared with no loss for the six months ended June 30, 1999. Travel and
accommodation expenses were $23,440 for the six months ended June 30, 2000,
compared with no travel and accommodation expenses for the six months ended June
30, 1999.
Non-cash stock-based compensation. Non-cash stock-based compensation costs were
$68,334 for the six months ended June 30, 2000, compared with no non-cash
stock-based compensation costs for the six months ended June 30, 1999. The cost
is due to the grant of 20,000 options to management of the Company during the
first quarter of 2000. The charge represents the difference between the reported
sale price of our common stock as reported on the OTC Bulletin Board on the date
of grant and the exercise price of the option. This amount is presented as an
addition to paid-in capital of shareholders' deficit.
Financial consulting fees. A financial consulting fee of $1,156,000 was recorded
for the six months ended June 30, 2000, compared with no financial consulting
fees for the six months ended June 30, 1999. The fee
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is due to the issuance of 50,000 warrants to DJL during the first quarter of
year, pursuant to an agency agreement whereby DJL was to raise capital, on a
best efforts basis, for the Company. The fee represents the valuation of the
warrants based on the Black Scholes method as at issuance. This amount is
presented as an addition to paid-in capital of shareholders' deficit.
Depreciation and amortization. During the six months ended June 30, 2000, the
Company wrote down the value of its fixed assets to their estimated disposal
value resulting in no depreciation or amortization expenses, compared with
$1,945 in depreciation and amortization expenses for the six months ended June
30, 1999.
Interest, net. Net interest costs were $33,209 for the six months ended June 30,
2000, including $31,250 for the beneficial conversion feature on the
subordinated convertible debt issued during the period, and $2,437 in accrued
interest on the notes outstanding. This compares with $1,122 in interest income
for the six months ended June 30, 1999.
Income Taxes. The Company has not generated any taxable income to date and,
therefore, has not paid any federal income taxes since inception. Deferred tax
assets created primarily from net operating loss carryforwards have been fully
reserved as management is unable to conclude that future realization is more
likely than not.
For the Three Months Ended June 30, 2000 Compared to the Three Months Ended June
30, 1999
Net Gain/Loss From Discontinued Operations. The Company ceased substantially all
of its operations on January 3, 2000 and, as a result, has combined all
operating revenues and expenses related to its previous business under
discontinued operations. For the three months ended June 30, 2000, the Company
incurred no expenses relating to its previous business and, as a result,
recorded no losses from discontinued operations. In comparison, the Company
recorded a net loss of $298,717 for the three months ended June 30, 1999 when it
was operating its previous business.
The net loss from discontinued operations for the three months ended June 30,
1999, consisted of expenses in technical and systems development, sales and
marketing, and with general and administrative activities. Technical and system
development expenses from discontinued operations for the three months ended
June 30, 1999 were $111,100 for employee compensation and the cost of developing
and improving store content, Internet connectivity and operations. Sales and
marketing expenses from discontinued operations for the three months ended June
30, 1999 were $41,516 for payroll expenses relating to merchandising, helpdesk,
graphic design, advertising and promotion. General and administrative expenses
from discontinued operations for the three months ended June 30, 1999 were
$146,101 for management compensation, rent for the research and development
facilities, professional services, and travel.
General and Administrative Expenses. General and administrative expenses consist
of rent, secretarial services, telephone expense and other general corporate
expenses. General and administrative expenses were $75,255 for the three months
ended June 30, 2000, compared with $10,913 for the three months ended June 30,
1999. This increase reflected the substantially increased activity related to
the proposed acquisition of ITAG. Professional fees were $55,470 for the three
months ended June 30, 2000, compared with no professional fees for the three
months ended June 30, 1999. The professional fees relate to the costs of the
Company's regulatory filings and the costs associated with the proposed
acquisition. General office expenses, including rent, telephone and courier
expenses, were $1,645 for the three months ended June 30, 2000, compared with
$10,913 for the three months ended June 30, 1999. Management fees were $9,000
for the three months ended June 30, 2000, compared with no management fees for
the three months ended June 30, 1999. The Company anticipates it will sell
certain fixed assets and recorded an estimated loss on their disposal of $20,335
for the three months ended June 30, 2000, compared with no loss for the three
months ended June 30, 1999.
Non-cash stock-based compensation. The Company recorded no non-cash stock-based
compensation costs for the three months ended June 30, 2000 and 1999.
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Financial consulting fees. The Company recorded no financial consulting fees for
the three months ended June 30, 2000 and 1999.
Depreciation and amortization. During the three months ended June 30, 2000, the
Company wrote down the value of its fixed assets to their estimated disposal
value resulting in no depreciation or amortization expenses, compared with
$1,321 in depreciation and amortization expenses for the three months ended June
30, 1999.
Interest, net. Net interest costs were $32,709, including $31,250 for the
beneficial conversion feature on the subordinated convertible debt issued during
the quarter and $1,575 in accrued interest on the note, for the three months
ended June 30, 2000, compared with $1,122 in interest income for the three
months ended June 30, 1999.
Income Taxes. The Company has not generated any taxable income to date and,
therefore, has not paid any federal income taxes since inception. Deferred tax
assets created primarily from net operating loss carryforwards have been fully
reserved as management is unable to conclude that future realization is more
likely than not.
Liquidity and Capital Resources
As at June 30, 2000, the Company's consolidated cash position was $18,746, and
the consolidated working capital deficit was $268,838 compared with a
consolidated cash position of $93,127 and a consolidated working capital deficit
of $168,826 for the year ended December 31, 1999.
Since inception, the Company has financed its operations from capital
contributions from shareholders and the issuance of subordinated convertible
notes. On May 17, 2000 the Company issued a $125,000 subordinated convertible
note due on August 31, 2000 and on July 12, 2000, the Company issued a $100,000
subordinated convertible note due July 31, 2001. On January 21, 2000, the
$150,000 subordinated convertible note, originally issued on December 14, 1999,
was converted into 63,116 shares of the Company's common stock. The Company
currently has sufficient working capital to support its current minimum
operations through September 2000. The Company anticipates that it will require
an additional $2 million in order to both fund the operations of the Company and
the Target Companies over the next twelve (12) months. If the proposed
acquisition of the Target Companies is not completed, the Company anticipates it
would require an additional $180,000 to fund its operations over the next twelve
(12) months. There can be no assurance, however, that such financing will be
available to the Company or, if it is, that it will be available on terms
acceptable to the Company. There is also no assurance that the transaction
contemplated will be completed. If the Company is unable to obtain the financing
necessary to support its operations, it may be unable to continue as a going
concern. The Company currently has no commitments for any credit facilities such
as revolving credit agreements or lines of credit that could provide additional
working capital.
Net cash used in operating activities was $95,655 for the three months ended
June 30, 2000, compared to $295,023 for the three months ended June 30, 1999,
including a net loss of $107,964 and $309,829 respectively. The decrease in net
cash used in operating activities is due to the discontinuation of operations.
The Company's current operating expenditures are approximately $15,000 per month
and the Company plans to increase its operating expenditures significantly upon
closing the proposed acquisition of the Target Companies.
The Company had no capital asset transaction for the three months ended June 30,
2000, compared to capital expenditures of $60,277 for the three months ended
June 30, 1999. The expenditures were primarily for computer equipment, furniture
and fixtures associated with the Company's employee growth, new facilities and
continued systems development during early 1999.
On January 24, 2000, the Company terminated its lease for the office space
located in Bellevue, Washington. On February 24, 2000, the Company entered into
a lease for office space located in Seattle,
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Washington. The future minimum payments on the lease are $4,260 for 2000. This
lease may be terminated upon 60 days written notice.
Non-Qualified Stock Options
As of June 30, 2000, the Company had outstanding non-qualified stock options to
purchase 205,000 shares of the Company's common stock issued to various
employees, consultants and directors pursuant to its stock option plan. These
stock options entitle holders to purchase common stock at a price of $5 or $6
depending on which year the stock options vest. The Company has 795,000 shares
available for future issuance pursuant to its 1999 Stock Option Plan.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company believes that it does not have any material exposure to interest or
commodity risks. The Company does not own any derivative instruments, does not
engage in any hedging transactions and does not have any outstanding long-term
debt. The Company is exposed to economic and political changes in international
markets where the Company competes, such as inflation rates, recession, foreign
ownership restrictions, domestic and foreign government spending, budgetary and
trade policies and other external factors over which the Company has no control.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Section 4(2) Offering to Manhattan Investments Incorporated
-----------------------------------------------------------
On May 17, 2000, the Company entered into a subordinate convertible
note for the principal amount of $125,000 with an interest rate of 10%
with Manhattan Investments Incorporated (the "Manhattan Note"). The
principal and accrued and unpaid interest on the Manhattan Note is
convertible at the option of the noteholder at any time at 80% of the
last reported sale price of the Company's common stock as reported on
the OTC Bulletin Board on the date of notice of conversion. The
Manhattan Note is due on August 31, 2000.
These securities have been issued pursuant to an exemption from
registration under Section 4(2) of the Securities Act. In relying upon
such exemption (i) the Company did not engage in any "general
solicitation," (ii) the purchaser represented and the Company
reasonably believed that it had such knowledge and experience in
financial matters such that it was capable of evaluating the merits
and risks of the prospective investment and was able to bear the
economic risk of such investment, (iii) the purchaser was provided
access to all necessary and adequate information to enable the
purchaser to evaluate the financial risk inherent in making an
investment, (iv) the offer was part of agreement to repay a
subordinate convertible note and as such was made only to the
purchaser, and (v) the purchaser represented that, if the subordinated
convertible note was converted into the Company's common shares, it
would be acquiring the shares for itself and not for distribution.
Section 4(2) Offering to The Atlantic Trust
-------------------------------------------
On July 12, 2000, the Company entered into a subordinate convertible
note for the principal amount of $100,000 with an interest rate of 10%
with Atlantic Trust (the "Atlantic Note"). All principal and accrued
and unpaid interest on the Atlantic Note is convertible at the option
of the noteholder at any time at 80% of the last reported sale price
of the Company's common stock as reported on the OTC Bulletin Board on
the date of notice of conversion. The Atlantic Note is due July 31,
2001 with interest payable on January 31, 2001 and July 31, 2000.
These securities have been issued pursuant to an exemption from
registration under Section 4(2) of the Securities Act. In relying upon
such exemption (i) the Company did not engage in any "general
solicitation," (ii) the purchaser represented and the Company
reasonably believed that it had such knowledge and experience in
financial matters such that it was capable of evaluating the merits
and risks of the prospective investment and was able to bear the
economic risk of such investment, (iii) the purchaser was provided
access to all necessary and adequate information to enable the
purchaser to evaluate the financial risk inherent in making an
investment, (iv) the offer was part of agreement to repay a
subordinate convertible note and as such was made only to the
purchaser, and (v) the purchaser represented that, if the subordinated
convertible note was converted into the Company's common shares, it
would be acquiring the shares for itself and not for distribution.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special shareholders meeting was held on May 2, 2000, where the
shareholders of the Company approved an amendment to the Company's
Amended Articles of Incorporation to change the name of the Company to
ASPi Europe, Inc., with the shareholders voting in the following
manner:
For 4,032,123
Against -
Abstain 3,030,993
Broker Non-vote -
ITEM 5. OTHER INFORMATION
On May 5, 2000, the Company changed its name from Shopping Sherlock,
Inc. to ASPi Europe, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
2.1 Letter of Intent with Kai Stefan Dietrich and Sandro
Schaefer dated July 5, 2000
2.2 Letter of Intent with Kai Stefan Dietrich and Sandro
Schaefer dated July 5, 2000
10.19 Credit Facility Agreement with Manhattan Investments
Incorporated dated May 17, 2000
10.20 Credit Facility Agreement with Atlantic Trust dated
July 12, 2000
27.1 Financial Data Schedule
99.1 Risk Factors
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on its behalf by the undersigned
thereunto duly authorized.
ASPI EUROPE, INC.
August 11, 2000 /s/ Damon Poole
-------------------------------------
Damon Poole, Chief Executive Officer
August 11, 2000 /s/ Patrick McGrath
-------------------------------------
Patrick McGrath, Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
------ -----------
2.1 Letter of Intent with Kai Stefan Dietrich and Sandro
Schaefer dated July 5, 2000
2.2 Letter of Intent with Kai Stefan Dietrich and Sandro
Schaefer dated July 5, 2000
10.19 Credit Facility Agreement with Manhattan Investments
Incorporated dated May 17, 2000
10.20 Credit Facility Agreement with Atlantic Trust dated
July 12, 2000
27.1 Financial Data Schedule
99.1 Risk Factors
