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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 June 30, 2000
( ) 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)
2584 Leghorn Street
Mountain View, CA 94043-1614
(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 7,839,631 shares of its $.001 par value Common Stock
issued and outstanding as of August 9, 2000.
Transitional Small Business Disclosure Format (check one)
Yes No X
----- ----
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JUMPMUSIC.COM, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
Item 1. Financial Statements
Comparative Unaudited Balance Sheet as of June 30, 2000
and December 31, 1999 2
Comparative Unaudited Statements of Operations for
the Three Months Ended June 30, 2000, the Three
Months Ended June 30, 1999, the six months ended June
30, 2000 and the six months ended June 30, 1999 4
Comparative Unaudited Statements of Cash Flows for
the Three Months Ended June 30, 2000, the Three
Months Ended June 30, 1999, the six months ended June
30, 2000 and the six months ended June 30, 1999 5
Notes to the Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities and Use of Proceeds 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Comparative Unaudited Balance Sheet as of June 30, 2000
and December 31, 1999
Comparative Unaudited Statements of Operations for
the Three Months Ended June 30, 2000, the Three
Months Ended June 30, 1999, the six months ended June
30, 2000 and the six months ended June 30, 1999
Comparative Unaudited Statements of Cash Flows for
the Three Months Ended June 30, 2000, the Three
Months Ended June 30, 1999, the six months ended June
30, 2000 and the six months ended June 30, 1999
Notes to the Unaudited Consolidated Financial Statements
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JUMPMUSIC.COM, INC.
Consolidated Financial Statements
June 30, 2000
JUMPMUSIC.COM, INC.
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Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
----------- -----------
CURRENT ASSETS (unaudited)
<S> <C> <C>
Cash and Cash Equivalents $ 16,949 $ 59,874
Accounts receivable, Net of Allowance
$60,638 and $60,638 56,140 71,682
Inventory 291,023 288,304
--------- ---------
Total Current Assets 364,112 419,860
--------- ---------
PROPERTY & EQUIPMENT
Computer and Music Equipment 46,330 46,330
Furniture and Equipment 36,902 36,902
Leasehold Improvements 17,865 17,865
Accumulated Depreciation (80,115) (74,115)
--------- ---------
Net Property & Equipment 20,982 26,982
--------- ---------
OTHER ASSETS
Deposits 13,000 3,474
--------- ---------
Total Other Assets 13,000 3,474
--------- ---------
TOTAL ASSETS $ 398,094 $ 450,316
========= =========
</TABLE>
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JUMPMUSIC.COM, INC.
Consolidated Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30 December 31
CURRENT LIABILITIES 2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
Accounts payable $ 303,859 $ 383,814
Accrued expenses 184,085 167,046
Deferred salaries 252,708 95,208
Deferred revenue 72,000 81,000
Current portion of long-term liabilities 1,418,018 1,268,018
------------ ------------
Total Current Liabilities 2,230,670 1,995,086
------------ ------------
LONG-TERM DEBT
Notes payable 150,000 150,000
Notes payable-related party 1,263,000 1,113,000
Capital lease obligations 7,874 7,874
Less: current portion (1,418,018) (1,268,018)
------------ ------------
Total Long-Term Debt 2,856 2,856
------------ ------------
Total Liabilities 2,233,526 1,997,942
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REDEEMABLE PREFERRED STOCK
Series C Redeemable convertible Preferred stock,
authorized 2,500,000 shares, issued and outstanding
1,472,013 shares 4,494,154 4,494,154
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $.001 Par Value, authorized
50,000,000 shares; issued and outstanding
7,589,661 shares 7,590 7,590
Additional Paid-In Capital 6,785,296 6,785,296
Retained earnings(deficit) (13,122,472) (12,834,666)
------------ ------------
Total Stockholders' Equity (6,329,586) (6,041,780)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 398,094 $ 450,316
============ ============
</TABLE>
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JUMPMUSIC.COM, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30 June 30 June 30 June 30
2000 1999 2000 1999
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
SALES $ 122,549 $ 291,943 $ 336,958 $ 527,192
COST OF GOODS SOLD 37,995 123,042 120,507 219,073
------------- ------------- -------------- -------------
GROSS PROFIT 84,554 168,901 216,451 308,119
------------- ------------- -------------- -------------
OPERATING EXPENSES
General And Administrative Expenses 223,168 216,013 446,056 544,330
Selling Expenses 7,304 4,806 13,501 10,448
------------- --------------- -------------- -------------
TOTAL OPERATING EXPENSES 230,472 220,819 459,557 554,778
------------ ------------- ------------- -----------
OPERATING INCOME (LOSS) (145,918) (51,918 ) (243,106) (246,659)
------------- ------------ ------------- ----------
OTHER INCOME AND (EXPENSES)
Interest Expense (22,350) (302,427) (44,700) (309,415)
Other Income - - - 110,907
------------- ------------- -------------- -------------
Total Other Income and (Expenses) (22,350) (302,427) (44,700) (198,508)
------------- ------------- -------------- -------------
NET INCOME (LOSS) $ (168,268) $ (354,345) $ (287,806) $ (445,167)
=========== ========== ========== ===========
NET INCOME (LOSS) PER SHARE $ (.02) $ (.05) $ (.04) $ (.07)
=========== ========== ========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 7,589,661 7,579,005 7,589,661 6,711,432
=========== ========== ========== ===========
</TABLE>
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JUMPMUSIC.COM, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
June 30 June 30
2000 1999
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ (287,806) $ (445,167)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation & Amortization 6,000 --
Conversion of payables, accruals, and deferred
expense to Preferred Stock -- 1,026,411
Change in Assets and Liabilities
(Increase) Decrease in:
Accounts Receivable 15,542 8,033
Inventory (2,719) 38,669
Increase/(decrease) in:
Accounts Payable (79,955) (575,777)
Accrued Expenses 17,039 (103,124)
Deferred Salaries 157,500 (196,517)
Deferred Revenue (9,000) (70,000)
------------- -------------
Net Cash Provided (Used) by Operating Activities: (183,399) (317,472)
------------- -------------
Cash Flows from Investing Activities
Cash paid for deposits (13,000) --
Cash from for deposits 3,474 --
------------- -------------
Net Cash Provided (Used) by Investing Activities (9,526) --
------------- -------------
Cash Flows from Financing Activities
Proceeds from debt financing 150,000 210,000
Cash received from acquisition -- 115,164
------------- -------------
Net Cash Provided (Used) by Financing Activities 150,000 325,164
------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents (42,925) 7,692
------------- -------------
Cash and Cash Equivalents
Beginning 59,874 5,961
------------- -------------
Ending $ 16,949 $ 13,653
============= =============
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest $ -- $ --
=========== ===========
Cash payments for income taxes $ -- $ --
=========== ===========
Supplemental Schedule of Noncash Investing and Financing Activities
Purchase of Inventory through Issuance of Company Stock $ -- $ --
=========== ===========
</TABLE>
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JUMPMUSIC.COM, INC.
June 30, 2000 and December 31, 1999
NOTES TO FINANCIAL STATEMENTS
JumpMusic.Com, Inc. (the "Company") has elected to omit
substantially all footnotes to the financial statements for the six
months ended June 30, 2000, 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,
1999.
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.
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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 2584 Leghorn Street,
Mountain View, CA 94043-1614.
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.
In 1998, 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.
Following our transition into Internet retail business, we have been
focussing 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.
Decreased expenses have led to a lower losses for the second quarter of
2000 than for the comparable period for 1999. Revenues have continued to
decrease, due in part to the continued decrease in the sales of our remaining
inventory of our discontinued proprietary software products.
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
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proprietary software products.
B. THE THREE MONTHS ENDED JUNE 30, 2000 AS COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1999.
Our gross income for the second quarter of 2000 was $122,549 as
compared to $291,943 for the same period last year. Our cost of goods sold
decreased from $123,042 for the second quarter last year to $37,995 for the
second quarter of 2000. Additionally, our operating expenses increased slightly
from $220,819 to $230,472. Other expenses decreased drastically from $302,427 to
$22,350, primarily due to a reduction in interest expenses. Losses from
operations decreased from $354,345 to $168,268.
C. THE SIX MONTHS ENDED JUNE 30, 2000 AS COMPARED TO THE SIX MONTHS ENDED JUNE
30, 1999.
Our gross income for the first six months of 2000 was $336,958 as
compared to $527,192 for the same period last year. Our cost of goods sold
decreased from $219,073 for the first six months last year to $120,507 for the
first six months of 2000. We were able to significantly reduce our operating
expenses from $554,778 to $459,557. Other expenses decreased drastically from
$309,415 to $44,700, primarily due to a reduction in interest expenses.
Losses from operations decreased from $445,167 to $287,806.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, our principal sources of liquidity included cash
and net accounts receivable of $73,089. 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 this year. Our ability to fund continued
operations beyond December 31, 2000 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.
8
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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
On May 2, 2000, we entered into a Consulting Contract with M. Blaine
Riley. This contract provides for M. Blaine Riley to receive 75,000 shares of
Company Common Stock which we were required to register on Form S-8. Under the
contract, Blaine Riley is providing us for consulting services for one year on
general financial and business matters, including but not limited to (i) due
diligence studies, reorganizations, divestitures; (ii) capital structures,
banking methods and systems; (iii) periodic reporting as to developments
concerning the general financial markets and public securities markets and
industry which may be relevant or of interest or concern to us, and (iv)
guidance and assistance in available alternatives for accounts receivable
financing and other asset financing. Pursuant to this contract, on July 14, 2000
we registered the 75,000 shares of Company Common Stock for M. Blaine Riley on
Form S-8.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
A. CHANGE IN OUR CERTIFYING ACCOUNTANT.
As of June 1, 2000, our former certifying accountant, Crouch, Bierwolf
and Chisholm, dissolved. The former accountant split into two new accounting
firms, Chisholm and Associates and Crouch, Bierwolf and Associates. Our new
accounting firm is Chisholm and Associates, 28 N. Fairway Drive, N. Salt Lake
City, Utah, 84054, Tel.(801) 292-8756. We continue to be serviced by the same
individuals who serviced us while they were working for the former accountant.
B. RELOCATION OF OUR CORPORATE HEADQUARTERS.
On June 24, 2000 we signed a lease agreement for the premises where are
corporate headquarters are now located, 2584 Leghorn Street, Mountain View, CA
94043-1614. Under this lease agreement, we pay $7000 per month for approximately
4000 square feet of space. The term of this lease agreement is three years. A
copy of this lease is filed as Exhibit 10.2 to this Form.
ITEM 6. EXHIBITS
(A) EXHIBITS
23 Consent of Independent Public Accountants, dated July 27, 1999
27 Financial Data Schedule
10.1 Financial Consulting Services Agreement, dated May 2, 2000*
10.2 Standard Industrial/Commercial Multi-Tenant Lease-Modified Net,
dated June 24, 2000
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* Previously filed
(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
Dated August 14, 2000 ---------------------------
By: Richard W. Mathews
Its: Chief Executive Officer and Chairman
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