<PAGE>
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 March 31, 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)
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 7,579,661 shares of its $.001 par value Common Stock
issued and outstanding as of May 10, 2000.
Transitional Small Business Disclosure Format (check one)
Yes No x
--- ---
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JUMPMUSIC.COM, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
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PAGE NO.
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Item 1. Financial Statements
Comparative Unaudited Balance Sheet as of March 31, 2000
and December 31, 1999
Comparative Unaudited Statements of Operations for the
Three Months Ended March 31, 2000 and the
Three Months Ended March 31, 1999
Comparative Unaudited Statements of Cash Flows for the
Three Months Ended March 31, 2000 and the
Three Months Ended March 31, 1999
Notes to the Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
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
</TABLE>
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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 March 31, 2000 and the
Three Months Ended March 31, 1999
Comparative Unaudited Statements of Cash Flows for the
Three Months Ended March 31, 2000 and the
Three Months Ended March 31, 1999
Notes to the Unaudited Consolidated Financial Statements
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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.
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.
Higher interest expenses and operating expenses have led to a higher
loss for the first three months of 2000 than for the comparable period for 1999.
Revenues have decreased somewhat, primarily due to a decrease in our
distribution of our proprietary software products. Although we are no longer
developing these products, we are continuing to sell our remaining inventory.
2
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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 MARCH 31, 2000 AS COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1999.
Our gross income for the third quarter was $214,409 as compared to
$235,259 for the same period last year. Our cost of goods sold decreased from
$96,031 for the first quarter last year to $82,512 for the first quarter of
2000. Additionally, our operating expenses declined from $206,500 to $229,085.
Other expenses (primarily interest) increased from $6,998 to $22,350. Losses
from operations increased from $74,240 to $199,538.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, our principal sources of liquidity included cash
and net accounts receivable of $130,771. 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 second quarter. Our ability to fund
continued operations beyond June 30, 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.
3
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JUMPMUSIC.COM, INC.
Consolidated Financial Statements
March 31, 2000
4
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INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
JumpMusic.Com Inc.
Mountain View, California
We have reviewed the accompanying condensed consolidated balance sheet of
JumpMusic.Com, Inc. as of March 31, 2000 and the related condensed consolidated
statements of income and cash flows for the period then ended. These financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of income, retained earnings, and cash flows for
the year then ended (not presented herein); and in our report dated February 25,
2000, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1999, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
The accompanying statements of operations and cash flows for the period ended
March 31, 1999 were not audited or reviewed by us and, accordingly, we do not
express an opinion on them.
Crouch, Bierwolf & Chisholm
May 5, 2000
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JumpMusic.Com, Inc.
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ---------
CURRENT ASSETS (Unaudited)
<S> <C> <C>
Cash and Cash Equivalents $ 7,943 $ 59,874
Accounts receivable (net of allowance for doubtful
accounts of $60,638 and $60,638, respectively) 122,828 71,682
Inventory 288,035 288,304
--------- ---------
Total Current Assets 418,806 419,860
--------- ---------
PROPERTY & EQUIPMENT
Computer and Music equipment 46,330 46,330
Furniture and equipment 36,902 36,902
Leasehold improvements 17,865 17,865
--------- ---------
101,097 101,097
Less:
Accumulated depreciation (77,115) (74,115)
--------- ---------
Total Property & Equipment 23,982 26,982
--------- ---------
OTHER ASSETS
Deposits 3,474 3,474
--------- ---------
Total Other Assets 3,474 3,474
--------- ---------
TOTAL ASSETS $ 446,262 $ 450,316
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
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JUMPMUSIC.COM, INC.
Consolidated Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
CURRENT LIABILITIES (Unaudited)
<S> <C> <C>
CURRENT
Accounts payable $ 401,091 $ 383,814
Accrued expenses 166,003 167,046
Deferred salaries 173,958 95,208
Deferred revenue 76,500 81,000
Current portion of long-term liabilities 1,293,018 1,268,018
------------ ------------
Total Current Liabilities 2,110,570 1,995,086
------------ ------------
LONG TERM LIABILITIES
Notes payable 150,000 150,000
Notes payable-related party 1,138,000 1,113,000
Capital lease obligations 7,874 7,874
Less current portion (1,293,018) (1,268,018)
------------ ------------
Total long term Liabilities 2,856 2,856
------------ ------------
TOTAL LIABILITIES 2,113,426 1,997,942
------------ ------------
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, 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 deficit (12,954,204) (12,834,666)
------------ ------------
Total Stockholders' Equity (6,161,318) (6,041,780)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 446,262 $ 450,316
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
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JUMPMUSIC.COM, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31 March 31
2000 1999
----------- -----------
<S> <C> <C>
SALES $ 214,409 $ 235,249
COST OF GOODS SOLD 82,512 96,031
----------- -----------
GROSS PROFIT 131,897 139,218
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OPERATING EXPENSES
General And Administrative Expenses 222,888 200,858
Selling Expenses 6,197 5,642
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TOTAL OPERATING EXPENSES 229,085 206,500
----------- -----------
OPERATING INCOME (LOSS) (97,188) (67,282)
----------- -----------
OTHER INCOME AND (EXPENSES)
Interest Expense (22,350) (6,988)
----------- -----------
Total Other Income and (Expenses) (22,350) (6,988)
----------- -----------
NET INCOME (LOSS) $ (119,538) $ (74,270)
=========== ===========
NET INCOME (LOSS) PER SHARE $ (.02) $ (.02)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 7,589,661 3,179,005
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
8
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JUMPMUSIC.COM, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31 March 31
2000 1999
--------- ---------
Cash Flows From Operating Activities
<S> <C> <C>
Net income (loss) $(119,538) $ (74,270)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation & Amortization 3,000 --
Change in Assets and Liabilities
(Increase) Decrease in:
Accounts Receivable (51,146) 102,585
Inventory 269 1,520
Increase/(decrease) in:
Accounts Payable and Accrued Expenses 16,234 (91,277)
Deferred Salaries 78,750 51,001
Deferred Revenue (4,500) 12,500)
--------- ---------
Net Cash Provided (Used) by Operating Activities (76,931 2,059
--------- ---------
Cash Flows from Investing Activities
Net Cash Provided (Used) by Investing Activities -- --
--------- ---------
Cash Flows from Financing Activities
Proceeds from debt financing 25,000 --
--------- ---------
Net Cash Provided (Used) by Financing Activities 25,000 --
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents (51,931 2,059
--------- ---------
Cash and Cash Equivalents
Beginning 59,874 5,961
--------- ---------
Ending $ 7,943 $ 8,020
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest $ -- $ --
========= =========
Cash payments for income taxes $ -- $ --
========= =========
Supplemental Schedule of Noncash Investing and Financing Activities
Common shares issued for services $ -- $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
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JUMPMUSIC.COM, INC.
March 31, 2000
NOTES TO FINANCIAL STATEMENTS
JumpMusic.Com, Inc. (the "Company") has elected to omit substantially all
footnotes to the financial statements for the three months ended March 31,
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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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report, dated May 5, 2000, in this
quarterly report on Form 10-QSB for JumpMusic.Com, Inc.
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
May 5, 2000
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.
(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.
Dated: May 15, 2000 /s/ Richard W. Mathews
By: Richard W. Mathews
Its: Chief Executive Officer and Chairman
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,943
<SECURITIES> 0
<RECEIVABLES> 183,466
<ALLOWANCES> (60,638)
<INVENTORY> 288,035
<CURRENT-ASSETS> 418,806
<PP&E> 101,097
<DEPRECIATION> (77,115)
<TOTAL-ASSETS> 446,262
<CURRENT-LIABILITIES> 2,110,570
<BONDS> 0
4,494,154
0
<COMMON> 7,590
<OTHER-SE> (6,168,908)
<TOTAL-LIABILITY-AND-EQUITY> 446,262
<SALES> 214,409
<TOTAL-REVENUES> 214,409
<CGS> 82,512
<TOTAL-COSTS> 229,085
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,350
<INCOME-PRETAX> (119,538)
<INCOME-TAX> 0
<INCOME-CONTINUING> (119,538)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (119,538)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
