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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 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
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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
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PART I. FINANCIAL INFORMATION
PAGE NO.
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Item 1. Financial Statements
Comparative Unaudited Balance Sheet as of September 30, 1999 2
and September 30, 1998
Comparative Unaudited Statements of Operations for the 3
Three Months Ended September 30, 1999 and the
Three Months Ended September 30, 1998
Comparative Unaudited Statements of Operations for the 3
Nine Months Ended September 30, 1999, and the Nine Months
Ended September 30, 1998
Item 2. Management's Discussion and Analysis of 4
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Comparative Unaudited Balance Sheet as of September 30, 1999 and
September 30, 1998
Comparative Unaudited Statements of Operations for the Three Months
Ended September 30, 1999 and the Three Months Ended September 30, 1998
Comparative Unaudited Statements of Operations for the Nine Months
Ended September 30, 1999, and the Nine Months Ended September 30, 1998
Notes to the Unaudited Consolidated Financial Statements
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JUMPMUSIC.COM, INC.
BALANCE SHEET FOR 9/30/99
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Amount
<S> <C>
Total Cash $ 3,684
Total Receivables $ 108,259
Total Other Current Assets $ 313,678
Total Current Assets $ 425,620
Total Computers & Equipment $ 64,192
Total Other Assets $ 3,996
Total Assets $ 493,808
Total Short Term Payables $ 1,027,469
Total Long Term Debt $ 933.124
Total Shareholder Equity $ (1,466,786)
Total Liability/Shareholder Equity $ 493,808
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JUMPMUSIC.COM, INC.
BALANCE SHEET FOR 9/30/98
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<CAPTION>
Amount
<S> <C>
Total Cash $ 9,321
Total Receivables $ (12,214)
Total Other Current Assets $ 306,466
Total Current Assets $ 303,572
Total Computers & Equipment $ 67,913
Total Other Assets $ 3,996
Total Assets $ 375,481
Total Short Term Payables $ 1,830,280
Total Long Term Debt $ 4,226,019
Total Shareholder Equity $ (5,680,817)
Total Liability/Shareholder Equity $ 375,481
</TABLE>
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JUMPMUSIC.COM, INC.
INCOME STATEMENT FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
AND SEPTEMBER 30, 1999
(UNAUDITED)
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<CAPTION>
7/1/98-9/30/98 7/1/99-9/30/99
Amount Amount
<S> <C> <C>
Gross Income $ 322,651 $ 169,376
Cost of Goods Sold $ 338,530 $ 76,120
Gross Profits $ (15,878) $ 93,256
Total Operating Expenses $ 345,189 $ 239,702
Net Operating Income $ (361,067) $ (146,446)
Total Other Income $ 3484 $ 0
Total Other Expenses $ (20,792) $ (8,739)
Net Income Before Tax $ (378,376) $ (155,353)
Net Income After Tax $ (378,376) $ (155,353)
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JUMPMUSIC.COM, INC.
UNAUDITED INCOME STATEMENT FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999
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<CAPTION>
1/1/98-9/30/98 1/1/99-9/30/99
Amount Amount
<S> <C> <C>
Gross Income $ 1,098,196 $ 696,568
Cost of Goods Sold $ 722,143 $ 295,193
Gross Profits $ 376,053 $ 401,375
Total Operating Expenses $ 1,610,797 $ 680,374
Net Operating Income $ (1,234,744) $ (278,999)
Total Other Income $ 13,419 $ 0
Total Other Expenses $ (125,899) $ (304,491)
Net Income Before Tax $ (1,347,224) $ (583,490)
New Income After Tax $ (1,347,224) $ (583,490)
</TABLE>
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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
4
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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
$322,651 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 $239,702.
Other expenses (primarily interest) increased 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 $111,943. 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.
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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.
(27) Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
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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
Date: November 15, 1999
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,684
<SECURITIES> 0
<RECEIVABLES> 128,259
<ALLOWANCES> (20,000)
<INVENTORY> 313,678
<CURRENT-ASSETS> 425,620
<PP&E> 101,061
<DEPRECIATION> (36,870)
<TOTAL-ASSETS> 493,808
<CURRENT-LIABILITIES> 1,027,469
<BONDS> 0
0
4,446,039
<COMMON> 3,895,216
<OTHER-SE> (9,808,041)
<TOTAL-LIABILITY-AND-EQUITY> 493,808
<SALES> 696,568
<TOTAL-REVENUES> 401,375
<CGS> 295,193
<TOTAL-COSTS> 680,374
<OTHER-EXPENSES> (20,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (301,272)
<INCOME-PRETAX> (583,490)
<INCOME-TAX> 0
<INCOME-CONTINUING> (583,490)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (583,490)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.05)
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