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 September 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 October 31, 2000 was 7,063,116.
<PAGE>
ASPI EUROPE, INC.
(A Development Stage Company)
INDEX TO THE FORM 10-Q
For the quarterly period ended September 30, 2000
<TABLE>
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)....................................................1
Consolidated Condensed Balance Sheets..............................................1
Consolidated Condensed Statements of Operations....................................2
Consolidated Condensed Statements of Shareholders Deficit..........................3
Consolidated Condensed Statements of Cash Flows....................................4
Notes to Consolidated Condensed 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.........................12
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS..................................................................13
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS..........................................13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES....................................................13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................13
ITEM 5. OTHER INFORMATION..................................................................14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................................14
SIGNATURES....................................................................................15
</TABLE>
ii
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASPI EUROPE, INC.
(A Development Stage Company)
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
September 30, December 31,
2000 1999
(unaudited)
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<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 34,247 $ 93,127
Restricted cash - 35,686
Prepaid expenses and deposits 2,130 22,917
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Total Current Assets 36,377 151,730
Net Assets to be Disposed - 86,098
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Total Assets $ 36,377 $ 237,828
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 52,190 $ 74,907
Due to related party 26,072 26,455
Due to former related party 63,215 68,578
Convertible note payable 231,918 150,616
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Total Current Liabilities 373,395 320,556
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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 2,215,578 1,131,579
Deficit accumulated during the development stage (2,559,659) (1,223,307)
---------------------------------------------------------------------------------------------------------
Total Shareholders' Deficit (337,018) (82,728)
---------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Deficit $ 36,377 $ 237,828
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
1
<PAGE>
ASPI EUROPE, INC.
(A Development Stage Company)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000
AND SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
Cumulative Amounts
for the period
from Inception
(August 17, 1984) Three Months Ended September 30, Nine Months Ended September 30,
through September 30,
2000 2000 1999 2000 1999
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<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES
General and administrative $ 363,362 $ 85,524 $ 27,358 $ 287,809 $ 48,577
Non-cash stock-based compensation 68,334 - - 68,334 -
Financial consulting fee 1,156,000 - - 1,156,000 -
Depreciation and amortization 6,146 - 2,028 - 3,973
Interest expense (income), net 91,988 30,156 (7,211) 63,365 (8,333)
------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 1,685,830 115,680 22,175 1,575,508 44,217
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NET (GAIN) LOSS FROM DISCONTINUED
OPERATIONS 873,829 - 287,360 (239,156) 721,219
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Net loss $ (2,559,659) $ (115,680) $ (309,535) $ (1,336,352) $ (765,436)
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Net gain (loss) per share -
Continuing operations $ (0.02) (0.00) (0.21) (0.01)
Discontinued operations (0.00) (0.03) 0.03 (0.11)
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Net loss per share - basic and diluted $ (0.02) $ (0.03) $ (0.18) $ (0.12)
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Weighted average number of shares
of common stock outstanding -
basic and diluted 7,063,116 9,000,000 7,674,853 6,659,123
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE>
ASPI EUROPE, INC.
(A Development Stage Company)
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' DEFICIT
(Unaudited )
<TABLE>
Common Stock Deficit Accumulated
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 100,000 $ 100 $ 900 $ - $ 1,000
(Formerly Shopping Sherlock, Inc.
and AIDA Industries, Inc.):
Issuance of common stock for cash
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
Beneficial conversion discount of
convertible debt - July 12, 2000 - - 25,000 - 25,000
Net loss - - - (1,336,352) (1,336,352)
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Balance, September 30, 2000 7,063,116 $ 7,063 $2,215,578 $(2,559,659) $ (337,018)
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
ASPI EUROPE, INC.
(A Development Stage Company)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000
AND SEPTEMBER 30, 1999
(Unaudited )
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
Cumulative
Amounts for
the period
from
Inception Three Months Ended Nine Months Ended
(August 17, September 30, September 30,
1984), --------------------------------- --------------------------
Through
September 30,
2000 2000 1999 2000 1999
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<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $(2,559,659) $ (115,680) $ (309,535) $ (1,336,352) $ (765,436)
Adjustments to reconcile net loss to net
cash used in operating activities
Discount amortization on convertible note
payable 93,750 25,000 - 56,250 -
Provision for losses on assets held for
liquidation 130,463 - - 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 - 11,268 18,468
Change in assets and liabilities:
Restricted cash - 16,739 - 35,686 -
Prepaid expenses and deposits (2,130) 236 (52,805) 20,787 (73,153)
Accounts payable 52,190 (19,276) (21,385) (22,717) 21,911
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Net Cash Used in Operating Activities (1,378,095) (92,981) (372,457) (310,414) (798,210)
Cash Flows From Investing Activities
Net (purchase) sale of furniture and
equipment (91,689) 22,500 (4,908) 24,500 (104,692)
Increase in note receivable (71,731) - - - -
Net Cash Provided by (Used in) Investing
Activities (163,420) 22,500 (4,908) 24,500 (104,692)
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Cash Flows From Financing Activities
Proceeds from issuing common stock 1,253,079 - - - 1,250,000
Proceeds from convertible notes payable 375,000 100,000 - 225,000 -
Accrued interest on convertible note
payable 8,396 5,343 - 7,780 -
Advances from (payments to) related party 26,072 (19,641) - (383) -
Advances from (payments to) former
related party 63,215 280 19,693 (5,363) 39,003
Distribution to shareholder (150,000) - - - (150,000)
------------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 1,575,762 85,982 19,693 227,034 1,139,003
Net Increase (Decrease) in Cash and Cash
Equivalents 34,247 15,501 (357,672) (58,880) 236,101
Cash and Cash Equivalents, beginning of
period - 18,746 593,773 93,127 -
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Cash and Cash Equivalents, end of period $ 34,247 $ 34,247 $ 236,101 $ 34,247 $ 236,101
------------------------------------------------------------------------------------------------------------------------------------
Non-cash Financing Activity
Conversion of note payable to common stock $ 151,478 $ - $ - $ 151,47 $ -
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
ASPI EUROPE, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED CONDENSED 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 was
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.
On September 1, 2000, the Company announced that it would not proceed with the
acquisition of the Target Companies.
5
<PAGE>
On September 26, 2000, the shareholders of the Company at the annual shareholder
meeting approved of the redomicile of the Company's place of incorporation from
Florida to Delaware. The Company expects this redomicile to occur in the fourth
quarter of this year.
NOTE 2. BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements of the Company are
unaudited and include, in the opinion of management, all normal recurring
adjustments necessary to present fairly the consolidated condensed balance
sheets as of September 30, 2000, and the related statements of operations,
shareholders deficit and cash flows for the periods 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 consolidated condensed 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 $2,559,659 and
will require additional working capital to sustain its minimal operations. These
circumstances raise substantial doubt as to the Company's ability to continue as
a going concern.
NOTE 3. 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 September 30, 2000, the Company had outstanding options to purchase
160,000 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 4. 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.
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 5. 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 (the
"Manhattan Note"), which, along with accrued interest, was 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 October 12, 2000, the Company and
Manhattan Investments Incorporated agreed in writing to extend the maturity date
of the Manhattan Note to July 31, 2001.
6
<PAGE>
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 was 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 6. RECLASSIFICATION
The Company has reclassified amounts presented in prior year financial
statements to properly disclose the operating results of the Company's
discontinued operations.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 difficulty in predicting
future performance, 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 and
directors' and officers' involvement in other projects. 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 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
8
<PAGE>
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. On September 1, 2000, the Company announced that it would not
proceed with the acquisition of the Target Companies.
The Company anticipates that it will require up to an additional $180,000 in
order to fund minimum operations over the next twelve (12) months. The Company
currently has sufficient working capital to support its current minimum
operations through November 2000. The Company is currently seeking additional
financing. 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.
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 Nine Months Ended September 30, 2000 Compared to the Nine Months Ended
September 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 nine months ended September 30, 2000, compared
with a net loss of $721,219 for the nine months ended September 30, 1999.
These amounts include a gain on the sale of a software license of $350,000 for
the nine months ended September 30, 2000, compared with no gain on the sale of
software licenses for the nine months ended September 30, 1999. The Company
generated no revenue from discontinued operations for the nine months ended
September 30, 2000, compared with $33,149 for the nine months ended September
30, 1999. The Company incurred $15,812 for the cost of revenue from discontinued
operations for the nine months ended September 30, 2000, compared with $11,256
for the nine months ended September 30, 1999. The Company incurred $10,979 for
technical and system development expenses from discontinued operations for the
nine months ended September 30, 2000, compared with $239,539 for the nine months
ended September 30, 1999. The Company incurred $5,305 for sales and marketing
expenses from discontinued operations for the nine months ended September 30,
2000, compared with $112,356 for the nine months ended September 30, 1999. The
Company incurred $42,883 for general and administrative expenses from
discontinued operations for the nine months ended September 30, 2000, compared
with $391,217 for the nine months ended September 30, 1999. The Company also
wrote down the value of a loan to a third-party by $35,865 for the nine months
ended September 30, 2000, which represents the amount management believes is
collectable, compared with no such write down for the nine months ended
September 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 nine months ended September 30, 2000, compared with
$165,755 for the nine months ended September 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 nine months ended September
30, 2000, compared with $66,009 for the nine months ended September 30, 1999.
9
<PAGE>
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 nine
months ended September 30, 2000, compared with $133,416 for the nine months
ended September 30, 1999. Professional fees from discontinued operations were
$35,700 for the nine months ended September 30, 2000, compared with $136,402 for
the nine months ended September 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 nine months ended September
30, 2000, compared with $56,106 for the nine months ended September 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 $287,809 for the nine months
ended September 30, 2000, compared with $48,577 for the nine months ended
September 30, 1999. This increase reflected the substantial increase in activity
related to the new direction of the Company and the review of various business
opportunities. Professional fees were $162,904 for the nine months ended
September 30, 2000, compared with no professional fees for the nine months ended
September 30, 1999. The professional fees relate to the costs of the Company's
regulatory filings and the costs associated with the proposed acquisitions.
General office expenses, including rent, telephone and courier expenses, were
$26,452 for the nine months ended September 30, 2000, compared with $48,577 for
the nine months ended September 30, 1999. Management fees were $27,000 for the
nine months ended September 30, 2000, compared with no management fees for the
nine months ended September 30, 1999. The Company wrote down the value of
certain fixed assets and recorded an estimated loss on their disposal of $22,557
for the nine months ended September 30, 2000, compared with no loss for the nine
months ended September 30, 1999. Travel and accommodation expenses were $30,478
for the nine months ended September 30, 2000, compared with no travel and
accommodation expenses for the nine months ended September 30, 1999.
Non-cash stock-based compensation. Non-cash stock-based compensation costs were
$68,334 for the nine months ended September 30, 2000, compared with no non-cash
stock-based compensation costs for the nine months ended September 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 additional paid-in capital.
Financial consulting fees. A financial consulting fee of $1,156,000 was recorded
for the nine months ended September 30, 2000, compared with no financial
consulting fees for the nine months ended September 30, 1999. The fee 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 additional paid-in capital.
Depreciation and amortization. During the nine months ended September 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
$3,973 in depreciation and amortization expenses for the nine months ended
September 30, 1999.
Interest, net. Net interest costs were $63,365 for the nine months ended
September 30, 2000, including $56,250 for the beneficial conversion feature on
the subordinated convertible debt issued during the period, and $7,780 in
accrued interest on the notes outstanding. This compares with $8,333 in interest
income for the nine months ended September 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.
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For the Three Months Ended September 30, 2000 Compared to the Three Months Ended
September 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 September 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 $287,360 for the three months ended September 30, 1999
when it was operating its previous business.
The net loss from discontinued operations for the three months ended September
30, 1999, consisted of revenues, cost of revenues, and expenses in technical and
systems development, sales and marketing, and general and administrative
activities. The Company generated $33,149 in revenue from discontinued
operations for the three months ended September 30, 1999 for website design and
e-business services. The Company incurred $11,256 for the cost of revenue from
discontinued operations for the three months ended September 30, 1999 relating
to the revenue earned in website design. Technical and system development
expenses from discontinued operations for the three months ended September 30,
1999 were $102,215 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
September 30, 1999 were $58,171 for payroll expenses relating to merchandising,
helpdesk, graphic design, advertising and promotion. General and administrative
expenses from discontinued operations for the three months ended September 30,
1999 were $148,867 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 $85,524 for the three months
ended September 30, 2000, compared with $27,358 for the three months ended
September 30, 1999. This increase reflected the substantially increased activity
related to proposed acquisitions. Professional fees were $50,761 for the three
months ended September 30, 2000, compared with no professional fees for the
three months ended September 30, 1999. The professional fees relate to the costs
of the Company's regulatory filings and the costs associated with the proposed
acquisitions. General office expenses, including rent, telephone and courier
expenses, were $8,802 for the three months ended September 30, 2000, compared
with $27,358 for the three months ended September 30, 1999. Management fees were
$9,000 for the three months ended September 30, 2000, compared with no
management fees for the three months ended September 30, 1999.
Non-cash stock-based compensation. The Company recorded no non-cash stock-based
compensation costs for the three months ended September 30, 2000 and 1999.
Financial consulting fees. The Company recorded no financial consulting fees for
the three months ended September 30, 2000 and 1999.
Depreciation and amortization. During the three months ended September 30, 2000,
the Company incurred no depreciation or amortization expenses, compared with
$2,028 in depreciation and amortization expenses for the three months ended
September 30, 1999.
Interest, net. Net interest costs were $30,156, including $25,000 for the
beneficial conversion feature on the subordinated convertible debt issued during
the quarter and $5,343 in accrued interest on the notes, for the three months
ended September 30, 2000, compared with $7,211 in interest income for the three
months ended September 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.
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Liquidity and Capital Resources
As at September 30, 2000, the Company's consolidated cash position was $34,247,
and the consolidated working capital deficit was $337,018 compared with a
consolidated cash position of $93,127 and a consolidated working capital deficit
of $168,826 as at 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. On October 12, 2000, the Company and Manhattan
Investments Incorporated agreed in writing to extend the maturity date of the
Manhattan Note to July 31, 2001. 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 November 2000. The Company anticipates that it will require
an additional $180,000 in order to fund the minimum operations of the Company
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. 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 $92,981 for the three months ended
September 30, 2000, compared to $372,457 for the three months ended September
30, 1999, including a net loss of $115,680 and $309,535 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.
The Company had sales of capital assets of $22,500 for the three months ended
September 30, 2000, compared to capital expenditures of $4,908 for the three
months ended September 30, 1999. The sale of assets represented the remaining
assets the Company held for disposition. The sale was made to a company with a
common director of the Company.
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, 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 September 30, 2000, the Company had outstanding non-qualified stock
options to purchase 160,000 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 840,000
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.
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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 was due on August 31, 2000. On October 12, 2000, the
Company and Manhattan Investments Incorporated agreed in writing to
extend the maturity date of the Manhattan Note to July 31, 2001.
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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders was held on September 26, 2000,
where the shareholders of the Company (i) approved the redomicile of
the Company's place of incorporation from Florida to Delaware, (ii)
elected Jasbir Dhaliwal, Raeanne Steele, and Damon Poole as directors
of the Company and (iii) appointed of BDO Seidman, LLP as the
Company's independent auditors for fiscal year 2000, with the
shareholders voting in the following manner:
PROPOSAL 1: To approve the redomicile of the Company's place of
incorporation from Florida to Delaware.
For 4,351,616
Against 5,450
Abstain 2,706,050
Broker Non-vote -
PROPOSAL 2: To elect Jasbir Dhaliwal, Damon Poole and Raeanne Steele
to the Company's board of directors.
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For Jasbir Dhaliwal 4,357,066
Withhold authority to vote for Jasbir Dhaliwal -
Abstain 2,706,050
Broker Non-vote -
For Damon Poole 4,357,066
Withhold authority to vote for Damon Poole -
Abstain 2,706,050
Broker Non-vote -
For Raeanne Steele 4,357,066
Withhold authority to vote for Raeanne Steele -
Abstain 2,706,050
Broker Non-vote -
PROPOSAL 3: To ratify the selection of BDO Seidman, LLP as independent
auditors for the Company for the fiscal Year 2000.
For 4,357,066
Against -
Abstain 2,706,050
Broker Non-vote -
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
10.21 First Allonge to the Promissory Note dated
May 17, 2000 made by ASPi Europe, Inc. in favor
of Manhattan Investments Incorporated dated
October 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.
November 7, 2000 /s/ Damon Poole
---------------------------------------
Damon Poole, Chief Executive Officer
November 7, 2000 /s/ Patrick McGrath
---------------------------------------
Patrick McGrath, Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10.21 First Allonge to the Promissory Note dated May 17, 2000 made by
ASPi Europe, Inc. in favor of Manhattan Investments Incorporated
dated October 12, 2000
27.1 Financial Data Schedule
99.1 Risk Factors
