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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
(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, 1998
( ) For the transition period from __________ to __________
Commission file number: 0-26813
JUMPMUSIC.COM, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 77-036-3000
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
201 San Antonio Circle, Suite 105
Mountain View, California
(650) 917-7460 - telephone
(Address of principal executive offices)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
--- ---
The issuer had 7,579,000 shares of its $.001 par value Common Stock
issued and outstanding as of November 12, 1999.
Transitional Small Business Disclosure Format (check one)
Yes No X
--- ---
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JUMPMUSIC.COM, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
PAGE NO.
<S> <C>
Item 1. Financial Statements
Comparative Unaudited Balance Sheet as of September 30, 1999 5
and December 31, 1998
Comparative Unaudited Statements of Operations for 7
the Three Months Ended September 30, 1999 and the
Three Months Ended September 30, 1998 and for the
Nine Months Ended September 30, 1999, and the Nine
Months Ended September 30, 1998
Comparative Unaudited Statements of Cash Flows for the 8
Nine Months Ended September 30, 1999, and the Nine Months
Ended September 30, 1998
Notes to the Unaudited Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of 10
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
</TABLE>
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Comparative Unaudited Balance Sheet as of September 30, 1999
and December 31, 1998
Comparative Unaudited Statements of Operations for the Three Months
Ended September 30, 1999 and the Three Months Ended September 30, 1998
and for the Nine Months Ended September 30, 1999, and the Nine Months
Ended September 30, 1998
Comparative Unaudited Statements of Cash Flows for the
Nine Months Ended September 30, 1999, and the Nine Months
Ended September 30, 1998
Notes to the Unaudited Consolidated Financial Statements
3
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INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
JumpMusic.Com, Inc.
Mountain View, California
The accompanying balance sheets as of September 30, 1999 and the related
statements of operations and cash flows for the nine months ended September 30,
1999 and 1998 were not audited by us and, accordingly, we do not express an
opinion on them.
The accompanying balance sheet as of December 31, 1998 was audited by us and we
expressed an unqualified opinion on it in our report dated June 15, 1999.
December 6, 1999
4
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JUMPMUSIC.COM, INC.
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
------------------ ----------------
CURRENT ASSETS (unaudited)
<S> <C> <C>
Cash $ 3,684 $ 5,961
Accounts receivable (net of allowance for doubtful
accounts of $20,000 and $172,579, respectively) 108,258 126,487
Inventory 313,678 359,129
------------------ ----------------
Total Current Assets 425,620 491,577
------------------ ----------------
PROPERTY & EQUIPMENT
Computer and Music equipment 46,294 50,016
Trade show booth - 33,915
Furniture and equipment 36,902 36,902
Leasehold improvements 17,865 17,865
------------------ ----------------
101,061 138,698
Less:
Accumulated depreciation (36,869) (70,785)
------------------ ----------------
Total Property & Equipment 64,192 67,913
------------------ ----------------
OTHER ASSETS
Organization costs 522 522
Deposits 3,474 3,474
------------------ ----------------
Total Other Assets 3,996 3,996
------------------ ----------------
TOTAL ASSETS $ 493,808 $ 563,486
================== ================
</TABLE>
The accompanying notes are an integral part of these financial statements
5
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JUMPMUSIC.COM, INC.
Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
------------------ ----------------
CURRENT LIABILITIES (unaudited)
<S> <C> <C>
Accounts payable $ 567,453 $ 1,169,187
Accrued expenses 68,559 264,824
Deferred salaries 140,208 249,331
Deferred revenue 90,000 70,000
Current portion of long-term liabilities 1,091,518 1,371,856
------------------ ----------------
Total Current Liabilities 1,957,738 3,125,198
------------------ ----------------
LONG TERM LIABILITIES
Notes payable 148,500 150,000
Notes payable-related party 938,000 4,381,000
Capital lease obligations 7,874 7,874
Less current portion (1,091,518) (1,371,856)
------------------ ----------------
Total long term Liabilities 2,856 3,167,018
------------------ ----------------
TOTAL LIABILITIES 1,960,594 6,292,216
------------------ ----------------
REDEEMABLE PREFERRED STOCK
Series C Redeemable convertible Preferred stock,
authorized 2,500,000 shares issued and outstanding
1,482,013 and 0 shares, respectively 4,446,039 -
------------------ ----------------
STOCKHOLDERS' EQUITY
Series A Convertible Preferred stock, authorized
14,000,000 shares issued and outstanding
0 and 4,151,793 shares, respectively
Liquidation value $4,774,562 - 4,152
Series B Convertible Preferred stock, authorized
287,327 shares issued and outstanding
0 and 287,327 shares, respectively
Liquidation value $330,426 - 287
Common stock, authorized 50,000,000 shares
issued and outstanding 7,589,571 and
5,843,858 shares, respectively 7,590 5,843
Additional paid in capital 6,785,296 6,383,208
Retained earnings (12,705,711) (12,122,220)
------------------ ----------------
Total Stockholders' Equity (5,912,825) (5,728,730)
------------------ ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 493,808 $ 563,486
================== ================
</TABLE>
The accompanying notes are an integral part of these financial statements
6
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JUMPMUSIC.COM, INC.
Statements of Operations
<TABLE>
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30 September 30 September 30 September 30
1999 1998 1999 1998
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
SALES $ 169,376 $ 322,652 $ 696,568 $ 1,098,196
COST OF GOODS SOLD 76,120 338,530 295,193 722,143
----------- ------------- ---------- -----------
GROSS PROFIT 93,256 (15,878 ) 401,375 376,053
----------- ------------- ---------- -----------
OPERATING EXPENSES
General And Administrative Expenses 239,870 345,189 680,374 1,610,797
----------- ------------- ---------- -----------
TOTAL OPERATING EXPENSES 239,870 345,189 680,374 1,610,797
----------- ------------- ---------- -----------
OPERATING INCOME (LOSS) (146,614 ) (361,067 ) (278,999) (1,234,744 )
----------- ------------- ---------- -----------
OTHER INCOME AND (EXPENSES)
Interest Expense (8,739 ) (20,792 ) (304,491) (125,899 )
Other Income -- 3,484 -- 13,419
----------- ------------- ---------- -----------
Total Other Income and (Expenses) (8,739 ) (17,308 ) (304,491) (112,480 )
----------- ------------- ---------- -----------
INCOME BEFORE INCOME TAXES (155,353 ) (378,375 ) (583,490) (1,347,224 )
----------- ------------- ---------- -----------
NET INCOME (LOSS) $ (155,353 ) $ (378,375 ) $ (583,490) $(1,347,224 )
=========== ============= ========== ===========
NET INCOME (LOSS) PER SHARE $ (.02 ) $ (.07 ) $ (.08) $ (.23 )
=========== ============= ========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 7,586,049 5,843,858 7,002,971 5,843,858
=========== ============= ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
7
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JUMPMUSIC.COM, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the nine For the nine
months ended months ended
September 30 September 30
1999 1998
------------ ------------
Cash Flows From Operating Activities
<S> <C> <C>
Net income (loss) $ (583,490 ) $(1,347,224 )
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation & Amortization -- 46,231
Bad Debt -- 24,463
Conversion of payables, accruals and deferred
expense to preferred stock 1,056,411 --
Change in Assets and Liabilities
(Increase) Decrease in:
Accounts Receivable 18,229 542,537
Inventory 45,451 358,663
Prepaid Expenses -- (20,491 )
Increase/(decrease) in:
Accounts Payable (601,734 ) 131,703
Accrued Expenses (196,266 ) (129,760 )
Deferred Salaries (109,123 ) 47,158
Deferred Revenue 20,000 --
----------- -----------
Net Cash Provided (Used) by Operating Activities (350,522 ) (346,720 )
----------- -----------
Cash Flows from Investing Activities
Cash paid for deposits -- (306 )
Purchase of property & equipment -- (7,315 )
----------- -----------
Net Cash Provided (Used) by Investing Activities -- (7,621 )
----------- -----------
Cash Flows from Financing Activities
Proceeds from debt financing 210,000 75,000
Net Proceeds from Issuance of Common Stock 4,206 200,000
Cash received from acquisition 115,164 --
Principal payments on debt financing (11,652 ) --
Principal Payments on Capital Lease Obligations -- --
Capital Contributions by Shareholders 30,527 --
----------- -----------
Net Cash Provided (Used) by Financing Activities 348,245 275,000
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (2,277) (79,341 )
----------- -----------
Cash and Cash Equivalents
Beginning 5,961 88,662
----------- -----------
Ending $ 3,684 $ 9,321
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest $ 262,772 $ 122,118
=========== ===========
Cash payments for income taxes $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
8
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NOTES TO FINANCIAL STATEMENTS
JumpMusic.Com, Inc. (the "Company") has elected to omit
substantially all footnotes to the financial statements for the
nine months ended September 30, 1999, since there have been no
material changes (other than indicated in other footnotes) to the
information previously reported by the Company in their Annual
Report filed on Form 10-KSB for the Fiscal year ended December 31,
1998.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and
records of the Company without audit. However, such information
reflects all adjustments which are, in the opinion of management,
necessary to properly reflect the results of the period presented.
The information presented is not necessarily indicative of the
results from operations expected for the full fiscal year.
9
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PART I - FINANCIAL INFORMATION CONTINUED
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE COMPANY
We are an on-line retailer that sells music products to amateur
musicians. The products sold include musical instruments, music accessories,
sound equipment, printed sheet music and music software. Our web site is
WWW.JUMPMUSIC.COM.
JumpMusic.com, Inc. (the "Company") was founded January 26, 1994 as
Jump! Software, Inc., a California corporation. On May 5, 1999, the Company
merged with America's Finest Waters, Inc., a Nevada corporation. America's
Finest Waters, Inc. had not had any significant operations in the two years
prior to the merger, and did not have any significant assets at the time of the
merger. As part of the merger, America's Finest Waters, Inc. changed its name to
JumpMusic.com, Inc. and Jump! Software, Inc., the California corporation, was
dissolved.
The principal offices of the company are located at 201 San Antonio
Circle, Suite 105 in Mountain View, California 94040. Whenever we refer to the
"Company" or use the terms "we," "us" or "our" in this report, we are referring
to JumpMusic.com, Inc. When we discuss the history of our company and give
financial information for the period prior to the merger on May 5, 1999, this
information pertains to Jump! Software, Inc. and not to America's Finest Waters,
Inc.
RESULTS OF OPERATIONS
A. DISCUSSION
We have completely restructured our operations during the last two
years. We have transitioned from operating as a music software development
company to becoming an Internet e-commerce retail business specializing in
consumer music products. For the most part, this transition occurred in 1998.
Last year, we were in the process of transforming our company from a
software development company to an Internet retail business. The software
products we produced were high-ticket items that generated greater revenues than
we are getting this year from the sale of consumer retail products. However, the
high costs of maintaining the facilities and personnel necessary for software
development exceeded the revenues we were getting from the software products.
This prompted our decision to restructure the Company and focus on the marketing
potential of the Internet. Instead of developing our software products further,
we drastically downsized or operations, slashing our costs, and launched our
e-commerce web-site, www.jumpmusic.com. This web-site initially focused on
selling sheet-music.
This year, we have focussed on building our web-site into a one-stop
superstore for music products on the Internet and selling off our remaining
inventory of our proprietary software products. The costs of running an Internet
retail business are much lower than conducting software development and this is
reflected by the lower costs of goods sold and operating expenses in our balance
sheets for this year.
Our losses are lower for both the third quarter and the first three
months of 1999 than for the comparable periods for 1998. Although our revenues
are lower this year than last year, our expenses are much lower also. The
decrease in our revenues over the past year is due primarily to a decrease in
our distribution of our proprietary software
10
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products. Although we are no longer developing these products, we are continuing
to sell our remaining inventory.
However, our e-commerce business selling music products is growing,
and, although there is no guarantee that this will happen, we expect our
revenues to start increasing once we complete our transition away from selling
our proprietary software products.
B. THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AS COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1998.
Our losses are lower for the third quarter than they were for the same
period last year. Although our revenues are down, we are also spending less
money. Our gross income for the third quarter was $169,376 as compared to
$322,652 for the same period last year. Our cost of goods sold decreased from
$388,530 for the third quarter last year to $76,120 for the third quarter of
1999. Likewise, our operating expenses declined from $345,189 to $239,870. Other
expenses (primarily interest) decreased from $20,792 to $8,739. Losses from
operations declined from $378,376 to $155,353.
C. THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AS COMPARED TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1998.
In comparing the first nine months of this year to the same period last
year, we have also decreased our losses. Our gross income for the first three
quarters of this year was $696,568 compared to $1,098,196 for the same period
last year. The cost of goods sold decreased from $722,143 to $295,193. We were
able to decrease our operating expenses very substantially from $1,610,797 to
$680,374. Other expenses (primarily interest) increased from $125,899 to
$304,491. Losses from operations declined from $1,347,224 to $583,490.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, our principal sources of liquidity included
cash and net accounts receivable of $111,942. While we have been generating
revenues, expenses have exceeded revenues generated, resulting in negative cash
flow. As discussed in Results of Operations, our revenues are down, but we are
also spending less money
Cash on hand, along with cash generated from the sale of products, and
collections of accounts receivable, is expected to be sufficient to meet our
requirements through the end of the first quarter of next year. Our ability to
fund continued operations beyond April 1, 1999 depends on raising additional
capital and converting debt to equity. We are currently attempting to raise
additional capital by offering securities to accredited investors only. There is
no guarantee that we will be able to raise this additional capital. In addition,
we have a verbal agreement with one of our creditors to convert an additional
$700,000 of debt to equity, although there is no guarantee that this conversion
will take place. Should we be unable to raise additional capital and convert
most of our debt to equity, we will be required to significantly reduce
operations, and reduce expenses. Such steps would likely have a material adverse
effect on our ability to establish profitable operations in the future. We will
continue to pursue other financing arrangements to increase its cash reserves.
There can be no assurance we will be capable of raising additional capital or
converting debt or that the terms upon which such capital or debt conversion
will be available to us will be acceptable.
11
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To the best knowledge of management, there are no litigation matters
pending or threatened against the Company which are not in the ordinary course
of business.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
(A) EXHIBITS AND REPORTS ON FORM 8-K.
(23.1) Consent of Independent Public Accountants
(27) Financial Data Schedule
(B) REPORTS ON FORM 8-K
None.
12
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
as amended, the Registrant caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
JUMPMUSIC.COM, INC.
/s/ Richard W. Mathews
By: Richard W. Mathews
Its: Chief Executive Officer and Chairman
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report, dated December 6, 1999, in
this quarterly report on Form 10- QSB for JumpMusic.Com, Inc.
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
December 6, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 3,684
<SECURITIES> 0
<RECEIVABLES> 128,258
<ALLOWANCES> (20,000)
<INVENTORY> 313,678
<CURRENT-ASSETS> 425,620
<PP&E> 101,061
<DEPRECIATION> (36,869)
<TOTAL-ASSETS> 493,808
<CURRENT-LIABILITIES> 1,957,738
<BONDS> 0
0
4,446,039
<COMMON> 7,590
<OTHER-SE> (5,920,415)
<TOTAL-LIABILITY-AND-EQUITY> 493,808
<SALES> 696,568
<TOTAL-REVENUES> 696,568
<CGS> 295,193
<TOTAL-COSTS> 680,374
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 304,491
<INCOME-PRETAX> (583,490)
<INCOME-TAX> 0
<INCOME-CONTINUING> (583,490)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (583,490)
<EPS-BASIC> (.08)
<EPS-DILUTED> 0
</TABLE>
