<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 September 30, 2000
( ) For the transition period from __________ to __________
Commission file number: 000-26813
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
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The issuer had 7,839,661 shares of its $.001 par value Common Stock
issued and outstanding as of November 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 September 30, 2000
and December 31, 1999 5-6
Comparative Unaudited Statements of Operations for
the Three Months Ended September 30, 2000, the Three
Months Ended September 30, 1999, the nine months
ended September 30, 2000 and the nine months ended
September 30, 1999 7
Comparative Unaudited Statements of Cash Flows for
the Three Months Ended September 30, 2000, the Three
Months Ended September 30, 1999, the nine months
ended September 30, 2000 and the nine months ended
September 30, 1999 8
Notes to the Unaudited Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
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>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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JUMPMUSIC.COM, INC.
Consolidated Financial Statements
September 30, 2000
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JUMPMUSIC.COM, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
------
September 30 December 31
2000 1999
------------ -----------
CURRENT ASSETS (unaudited)
<S> <C> <C>
Cash and Cash Equivalents $ 4,926 $ 59,874
Accounts receivable, Net of Allowance
$60,638 and $60,638 21,105 71,682
Inventory 298,774 288,304
--------- ---------
Total Current Assets 324,805 419,860
--------- ---------
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 (83,115) (74,115)
--------- ---------
Net Property & Equipment 17,982 26,982
--------- ---------
OTHER ASSETS
Deposits 13,000 3,474
--------- ---------
Total Other Assets 13,000 3,474
--------- ---------
TOTAL ASSETS $ 355,787 $ 450,316
========= =========
</TABLE>
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JUMPMUSIC.COM, INC.
Consolidated Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30 December 31
CURRENT LIABILITIES 2000 1999
------------ -----------
(unaudited)
<S> <C> <C>
Accounts payable $ 297,840 $ 383,814
Accrued expenses 206,487 167,046
Deferred salaries 331,458 95,208
Deferred revenue 67,500 81,000
Current portion of long-term liabilities 1,438,018 1,268,018
------------ ------------
Total Current Liabilities 2,341,303 1,995,086
------------ ------------
LONG-TERM DEBT
Notes payable 150,000 150,000
Notes payable-related party 1,283,000 1,113,000
Capital lease obligations 7,874 7,874
Less: current portion (1,438,018) (1,268,018)
------------ ------------
Total Long-Term Debt 2,856 2,856
------------ ------------
Total Liabilities 2,344,159 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, $.001 Par Value, authorized
50,000,000 shares; issued and outstanding
7,839,661 and 7,589,661 shares, respectively 7,840 7,590
Additional Paid-In Capital 6,810,046 6,785,296
Retained earnings(deficit) (13,300,412) (12,834,666)
------------ ------------
Total Stockholders' Equity (6,482,526) (6,041,780)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 355,787 $ 450,316
============ ============
</TABLE>
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JUMPMUSIC.COM, INC.
Consolidated 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
2000 1999 2000 1999
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
SALES $ 141,542 $ 169,376 $ 478,500 $ 696,568
COST OF GOODS SOLD 51,060 76,120 171,567 295,193
----------- ----------- ----------- -----------
GROSS PROFIT 90,482 93,256 306,933 401,375
----------- ----------- ----------- -----------
OPERATING EXPENSES
General And Administrative Expenses 236,772 235,773 689,467 664,610
Selling Expenses 2,661 4,097 16,162 15,764
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 239,433 239,870 705,629 680,374
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (148,951) (146,614 (398,696) (278,999
----------- ----------- ----------- -----------
OTHER INCOME AND (EXPENSES)
Interest Expense (22,350) (8,739 (67,050) (304,491
----------- ----------- ----------- -----------
Total Other Income and (Expenses) (22,350) (8,739) (67,050) (304,491)
NET INCOME (LOSS) $ (171,301) $ (155,353) $ (465,746) $ (583,490)
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE $ (.02) $ (.02) $ (.06) $ (.08)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 7,589,661 7,586,049 7,589,661 7,002,971
=========== =========== =========== ===========
</TABLE>
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JUMPMUSIC.COM, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the nine For the nine
months ended months ended
September 30 2000 September 30 1999
----------------- -----------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ (465,746) $ (583,490)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Depreciation & Amortization 9,000 --
Shares issued for services 25,000 --
Conversion of payables, accruals, and deferred
expense to Preferred Stock -- 1,056,411
Change in Assets and Liabilities
(Increase) Decrease in:
Accounts Receivable 50,577 18,229
Inventory (10,470) 45,451
Increase/(decrease) in:
Accounts Payable (85,974) (601,734)
Accrued Expenses 39,441 (196,266)
Deferred Salaries 236,250 (109,123)
Deferred Revenue (13,500) 20,000
----------- -----------
Net Cash Provided (Used) by Operating Activities: (215,422) (350,522)
----------- -----------
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 170,000 210,000
Cash received from acquisition -- 115,164
Proceeds from issuance of common stock -- 4,206
Principal payments on debt financing -- (11,652)
Capital contributions by shareholders -- 30,527
----------- -----------
Net Cash Provided (Used) by Financing Activities 170,000 348,245
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (54,948) (2,277)
----------- -----------
Cash and Cash Equivalents
Beginning 59,874 5,961
----------- -----------
Ending $ 4,926 $ 3,684
=========== ===========
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.
SEPTEMBER 2000
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, 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.
ISSUANCE OF COMMON SHARES
During July 2000, the Company issued 250,000 shares of its common
stock for services valued at $.10 per share.
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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 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 three
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 sales have led to higher losses for the second quarter of
2000 than for the comparable period for 1999. Operating Expenses remained about
the same, and although our cost of sales was lower, this was negated by
increased expenses.
B. THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1999.
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Our sales for the third quarter of 2000 were $141,542 as compared to
$169,376 for the same period last year. Our cost of goods sold decreased from
$76,120 for the second third quarter last year to $51,060 for the third quarter
of 2000. Additionally, our operating expenses remained about the same,
decreasing slightly from $239,870 to $230,433. Other expenses increased from
$8,739 to $22,350, primarily due to an increase in interest expenses. Losses
from operations increased from $155,353 to $171,301.
C. THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1999.
Our sales for the first nine months of 2000 was $478,500 as compared to
$696,568 for the same period last year. Our cost of goods sold decreased from
$295,193 for the first nine months last year to $171,561 for the first nine
months of 2000. Our operating expenses from increased from $680,374 to $705,629.
Other expenses decreased drastically from $309,491 to $67,050, primarily due to
a reduction in interest expenses. Losses from operations decreased from $583,490
to $465,746.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, our principal sources of liquidity included
cash and net accounts receivable of $26,031. While we have been generating
revenues, expenses have exceeded revenues generated, resulting in negative cash
flow.
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.
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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 July 20, 2000 we issued 175,000 shares to I-Capital Corporation
pursuant to a Financial Services Consulting Services Agreement dated May 2,
2000. Under the terms of the consulting agreement, I-Capital is providing us for
consulting services for one year on general financial and business matters,
including but not limited to (i) mergers and acquisitions, reorganizations,
reverse mergers, divestitures, and due diligence studies; (ii) capital
structures and sources, and financial transactions; (iii) guidance and
assistance in available alternatives to maximize shareholder value; and (iv)
periodic preparation and distribution of research reports and information to the
broker/dealer and investment banking community.
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
10.1 Financial Consulting Services Agreement, dated May 2, 2000
23 Consent of Independent Public Accountants, dated
November 15, 2000
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.
DATED: NOVEMBER 17, 2000 JUMPMUSIC.COM, INC.
/s/ Richard W. Mathews
-----------------------------
By: Richard W. Mathews
Its: Chief Executive Officer
and Chairman
