UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 333-85011
STRATABASE.COM
(Exact name of registrant as specified in its charter)
Nevada 88-0414964
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
34314 Marshall Road, Suite 203, Abbotsford BC V2S 1L2 Canada
(Address of principal executive offices) (Zip Code)
(604) 504-5811
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has 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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [_] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.001 par value, 6,353,772 shares outstanding as of May 1, 2000.
Traditional Small Business Disclosure Format (elect one) [X] Yes [_] No
<PAGE>
STRATABASE.COM
INDEX
Page
Part I. Financial Information
Item 1.Financial Statements:
Balance Sheets
March 31, 2000 and December 31, 1999 1
Statements of Operations and Comprehensive Loss
For the three months ended March 31, 2000 and 1999 2
Statements of Changes in Shareholders' Equity
For the period December 31, 1998 through March 31, 3
2000
Statements of Cash Flows
For the three months ended March 31, 2000 and 1999 4
Notes to Financial Statements 5-7
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
Part II. Other Information
Item 1.Legal Proceedings 10
Item 2.Changes in Securities 10
Item 3.Defaults upon senior securities 10
Item 4.Submission of matters to a vote of security holders 10
Item 5.Other information 10
Item 6.Exhibits and reports on Form 8-K 10
Signatures 11
<PAGE>
PART I
Financial Information
Item 1. Financial Statements
STRATABASE.COM
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
2000 1999
---------------- ------------------
(unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 458,736 $ 4,696
Accounts receivable 20,251 32,965
Prepaid expenses 670 -
GST receivable 2,898 2,172
---------------- ------------------
Total current assets 482,555 39,833
---------------- ------------------
OFFICE EQUIPMENT, at cost
Computer hardware 32,804 21,228
Computer software 2,634 2,634
Office equipment 1,950 1,950
Office furniture 2,077 2,077
Video production equipment 5,212 5,212
---------------- ------------------
44,677 33,101
Accumulated depreciation and amortization (8,225) (5,425)
---------------- ------------------
---------------- ------------------
36,452 27,676
---------------- ------------------
OTHER ASSETS 6,585 -
Total assets $ 525,592 $ 67,509
================ ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 57,521 $ 16,336
Accrued liabilities 81,612 33,201
---------------- ------------------
Total current liabilities 139,133 49,537
---------------- ------------------
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDERS' EQUITY
Common stock, $.001 par value; 25,000,000 shares authorized,
6,353,772 and 5,543,772 shares issued and outstanding
at March 31, 2000 and December 31, 1999, respectively 6,354 5,544
Additional paid-in capital 632,755 231,065
Accumulated deficit (251,623) (218,108)
Accumulated comprehensive loss (1,027) (529)
---------------- ------------------
Total shareholders' equity 386,459 17,972
---------------- ------------------
Total liabilities and shareholders' equity $ 525,592 $ 67,509
================ ==================
</TABLE>
<PAGE>
STRATABASE.COM
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
<TABLE>
FOR THE THREE MONTHS
ENDED MARCH 31,
2000 1999
(unaudited) (audited)
<S> <C> <C>
REVENUE $ 180,686 $ --
OPERATING EXPENSES
Direct marketing 74,936 --
Internet connectivity 3,619 --
Web related services -- 667
Commissions 46,679 --
Wages and subcontracting costs 26,551 --
--------- ---------
Total operating expenses 151,785 667
--------- ---------
Operating income (loss) 28,901 (667)
--------- ---------
GENERAL AND ADMINISTRATIVE EXPENSES
Management fees 24,000 10,000
Legal fees 12,801 6,215
Accounting 2,458 --
Advertising 5,843 140
Office 5,741 463
Rent 9,980 1,196
Repairs and maintenance 1,258 --
Depreciation and amortization 2,800 --
Licenses and dues 2,469 305
Travel 1,158 25
Telecommunications 935 442
Insurance expense 2,138 1,517
Other expenses 2,547 756
Total general and administrative expenses 74,128 21,059
--------- ---------
OTHER INCOME 11,712 --
--------- ---------
NET LOSS (33,515) (21,726)
--------- ---------
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments (498) --
--------- ---------
COMPREHENSIVE LOSS $ (34,013) $ (21,726)
========= =========
BASIC AND DILUTED LOSS PER SHARE OF
COMMON STOCK $ (0.01) $ --
========= =========
</TABLE>
<PAGE>
STRATABASE.COM
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON STOCK PAID-IN ACCUMULATED COMPREHENSIVE SHAREHOLDERS'
--------------------------
SHARES AMOUNT CAPITAL DEFICIT LOSS EQUITY
------------- ----------- --------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1998
(audited) - $ - $ - $ - $ - $ -
Issuance of common
stock at $.0025 per
share (February 1999) 4,643,772 4,644 6,965 - - 11,609
Issuance of common
stock at $.25 per
share (March 1999) 900,000 900 224,100 - - 225,000
Net loss and comprehen-
sive loss - - - (218,108) (529) (218,637)
------------- ----------- --------------- ------------------ ------------------- ------------------
BALANCE,
December 31, 1999
(audited) 5,543,772 5,544 231,065 (218,108) (529) 17,972
Issuance of common stock
at $.25 per share
(February 2000) 10,000 10 2,490 - - 2,500
Issuance of common stock
at $.50 per share
(February 2000) 800,000 800 399,200 - - 400,000
Net loss and comprehen-
sive loss - - - (33,515) (498) (34,013)
------------- ----------- --------------- ------------------ ------------------- ------------------
BALANCE,
March 31, 2000
(unaudited) 6,353,772 $ 6,354 $ 632,755 $ (251,623)$ (1,027)$ 386,459
============= =========== =============== ================== =================== ==================
</TABLE>
<PAGE>
STRATABASE.COM
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
2000 1999
--------- ---------
(unaudited) (audited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (33,515) $ (21,726)
Depreciation and amortization 2,800 --
Adjustments to reconcile net loss to net cash from
operating activities:
Increase in assets and liabilities:
Accounts receivable 12,714 --
Prepaids, deposits and other assets (750) (572)
GST receivable (726) (146)
Accounts payable 43,685 436
Accrued liabilities 48,411 --
--------- ---------
Net cash from operating activities 72,619 (22,008)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Maturus.com (2,250) --
Acquisition of domain names (4,255)
Acquisition of computer and office equipment (11,576) (205)
--------- ---------
Net cash from investing activities (18,081) (205)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 400,000 236,609
--------- ---------
Net cash from financing activities 400,000 236,609
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (498) --
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 454,040 214,396
CASH AND CASH EQUIVALENTS, beginning of period 4,696 --
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 458,736 $ 214,396
========= =========
</TABLE>
<PAGE>
Notes to Condensed Consolidated Financial Statements
- ----------------------------------------------------
(unaudited)
Note 1--Basis of Presentation
The accompanying unaudited and audited interim financial statements of
Stratabase.com (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial reporting and the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary for fair
presentation have been included. Certain reclassifications have been made to
prior year financial statements to conform to current year financial statement
presentation.
Operating results for the three month periods ended March 31, 2000 and 1999 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000 or any future period. Prior to January 1, 2000, the
Company operated in the development stage.
These financial statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999.
Note 2--Material events
During the first quarter of 2000, the Company realized proceeds of $400,000 from
its initial public offering of 800,000 units of Common Stock and Purchase
Warrants. Such proceeds were released from escrow to the Company upon closing of
the offering on February 7, 2000.
In order to increase the size of the Company's internal consumer profile
database and also to develop our internal marketing infrastructure, on April 30,
2000 the Company purchased a permission-based database of 15,000 individual
profiles, along with the domain names Utarget.com and Investfacts.com. The
database consists of investors who have voluntarily provided their personal
contact information and have requested marketing information be sent to them. In
consideration for this database and the two domain names, the Company agreed to
issue 300,000 shares of the Company's common stock to the owner of the database
and domain names, Neil Davey.
On April 31, 2000, the Company adopted a Stock Incentive Plan, consisting of a
share purchase plan and a share option plan. To date, no options have been
granted.
Note 3--Summary of Significant Accounting Policies
Cash and cash equivalents - The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.
Revenue recognition - Revenues are recognized when there are no further
performance obligations and no right of refund exists.
Software development costs - The Company capitalizes certain software
development and implementation costs. Development and implementation costs are
expensed until the Company determines that the software will result in probable
future economic benefits and management has committed to funding the project.
Thereafter, all direct external implementation costs and purchase software costs
are capitalized and amortized using the straight-line method over the remaining
estimated useful lives, generally not exceeding five years. To date, such costs
are not significant. The Company does not develop software for sale to its
customers.
Office equipment - Office and computer equipment is recorded at cost and
depreciated over its useful life, which ranges from one to five years.
Advertising - Advertising costs are expensed as incurred.
Income taxes - The Company follows the asset and liability method of accounting
for income taxes whereby deferred tax assets and liabilities are recognized for
the future tax consequences of differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.
Foreign exchange accounting - The Company's Canadian transactions are measured
in local currency and then translated into US dollars. All balance sheet
accounts have been translated using the current rate of exchange at the balance
sheet date. Results of operations have been translated using the average rates
prevailing throughout the quarter. Translation gains or losses resulting from
the changes in the exchange rates are accumulated in a separate component of
shareholders' equity. All amounts included in the accompanying financial
statements and footnotes are denominated in US dollars unless otherwise
indicated.
Earnings (loss) per share of common stock - Basic earnings (loss) per share of
common stock is computed by dividing net income (loss) available to common
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the Company.
Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Note 4--Issuance of Securities
During the three months ended March 31, 2000 the Company issued 10,000 shares
for legal services performed in the previous year and described in the Company's
prospectus, and realized proceeds of $400,000 from its initial public offering
of 800,000 units of Common Stock and Purchase Warrants. Such proceeds were
released from escrow to the Company upon closing of the offering on February 7,
2000.
Note 5--Income Taxes
As of March 31, 2000 the Company had available to offset future taxable income,
net operating loss carry-forwards of approximately $240,000. The carry-forwards
will expire in 2016 unless utilized in earlier years.
Deferred income taxes represent the tax effect of differences in timing between
financial income and taxable income. A valuation allowance has been provided for
the net deferred tax benefit, since it is uncertain if the Company will be able
to utilize existing net operating loss carry-forwards in future periods.
Note 6--Commitments and Contingencies
Lease commitments - As of March 31, 2000 the Company leased office space in
Abbotsford and Vancouver, British Columbia, Canada. Future minimum lease
payments associated with office space are $2,100 per month.
Management fees - The Company pays its President a management fee of $5,000 per
month, and its Vice President $3,000 per month. Compensation of $24,000 through
March 31, 2000 has been recorded as management fees in the accompanying
financial statements.
Legal contingencies - The Company may become involved in certain claims and
legal actions arising in the ordinary course of business. Currently, there are
no claims or legal actions against the Company
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Certain statements contained in this report, including statements regarding the
anticipated development and expansion of the Company's business, the intent,
belief or current expectations of the Company, its directors or its officers,
primarily with respect to the future operating performance of the Company and
the products it expects to offer and other statements contained herein regarding
matters that are not historical facts, are "forward-looking" statements within
the meaning of the Private Securities Litigation Reform Act (the "Reform Act").
Future filings with the Securities and Exchange Commission, future press
releases and future oral or written statements made by or with the approval of
the Company, which are not statements of historical fact, may contain
forward-looking statements under the Reform Act. Because such statements include
risks and uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. Factors that could
cause actual results to differ materially from those expressed or implied by
such forward-looking statements follow. For a more detailed listing of some of
the risks and uncertainties facing the company, please see the Form SB-2 and
Form 10-KSB filed by the Company with the Securities and Exchange Commission.
All forward-looking statements speak only as of the date on which they are made.
The Company undertakes no obligation to update such statements to reflect events
that occur or circumstances that exist after the date on which they are made.
Overview
The Company offers online direct marketing services and customer relationship
management solutions to clients seeking to market their goods and services via
the Internet. The campaigns conducted for clients of the Company are primarily
email based, although they generally include a web-based component. The Company
helps its clients conduct large-scale email and internet-based communications
with their existing customers and prospects. The Company also enables its
clients to build new relationships with prospective customers. The Company
provides email campaign development and management, targeting and
personalization, media optimization, full tracking and reporting, and data
hosting and management. The Company was incorporated in November 1998 and
commenced operations in January 1999.
The Company manages its own internal database of consumer profile information,
and also the databases of its clients. These databases consist of email
addresses and profiling information, and in some cases more comprehensive data.
These databases consist of individuals who have given the Company or its
clients' permission to contact them with marketing messages. The Company has, as
of March 31, 2000, over 350,000 email addresses in its databases.
Over the past year as the Company developed its internal infrastructure, the
Company felt there was an opportunity to leverage its existing capabilities on
behalf of other companies with similar infrastructure needs. As a result, the
Company began providing Internet development and networking services to
Maturus.com, Inc., a provider of internet-based information and resources for
individuals in the over-50 age group. In January of 2000 the Company made an
investment in Maturus.com as one of the founding shareholders, and in return
received 900,000 shares of common stock in the company. The Company currently
owns 20% of Maturus.com, Inc.
It is anticipated by management that the Company will provide operations and
infrastructure services to other development-stage companies over the coming
year, in which it may also make investments.
In order to increase the size of our internal consumer profile database and also
to develop our internal marketing infrastructure, on April 30, 2000 the Company
purchased a permission-based database of 15,000 individual profiles, along with
the domain names Utarget.com and Investfacts.com. The database has particular
value because it consists of investors who have voluntarily provided their
personal contact information and have requested marketing information be sent to
them. In consideration for this database and the two domain names, the Company
agreed to issue 300,000 shares of the company's common stock to the owner of the
database and domain names, Neil Davey.
The Company has adopted a Stock Incentive Plan, consisting of a share purchase
plan and a share option plan. To date, no options have been granted.
Results of Operations
Revenues
Revenues for the three months ended March 31, 2000 were $180,686. This
represents the company's first period of meaningful revenues. This increase in
revenues has been primarily attributable to the development of its internal
sales force and the introduction of new products and services. Since this has
been the first quarter in which the Company has realized revenues of any
magnitude, it is too early to attach any predictive significance to them.
Revenues of $174,076 were from online direct marketing campaigns for clients,
where the fees consisted primarily of email distribution, list management, and
campaign development fees. Revenues of $6,610 were from web development and
networking services. These primarily came from one client, Maturus.com.
Cost of Sales
Cost of sales for the three months ended March 31, 2000 were $151,785, of which
$74,936 of such expenses consisted of direct marketing expenses where the
Company paid list vendors for access to their email lists, $46,679 of such
expenses consisted of sales commissions; $3,619 of such expenses consisted of
Internet connectivity costs relating to our fiber optic connection; and $26,551
of the cost of sales consisted of wages and contractor fees for our technical
staff. These programmers and network administrators develop and maintain the
infrastructure for the products and services the Company sells. Each of the
foregoing costs are expected to increase as the Company grows and expands.
Expenses
Expenses for the three months ended March 31, 2000 were $74,128; $24,000 of
expenses consisted of management fees to our President and to our Vice
President; and $12,801 of expenses consisted of legal fees related to
trademarking and SEC filings.
Liquidity and Capital Resources
As of March 31, 2000 we had approximately $458,736 in cash and cash equivalents.
For the three months ended March 31, 2000 we realized proceeds of $400,000 from
our initial public offering of Common Stock and Purchase Warrants. Such proceeds
were released from escrow to the Company upon closing of the offering on
February 7, 2000. However, the Company may need to raise additional capital in
the future in order to fund more rapid expansion, to develop new or enhanced
services, to respond to competitive pressures or to acquire complementary
businesses, technologies or services.
The Company cannot be certain that any required additional financing will be
available on terms favorable to it. If additional funds are raised by the
issuance of its equity securities, such as through the exercise of the warrants,
then existing stockholders will experience dilution of their ownership interest.
If additional funds are raised by the issuance of debt or other equity
instruments, the Company may be subject to certain limitations in its
operations, and issuance of such securities may have rights senior to those of
the then existing holders of common stock.. If adequate funds are not available
or not available on acceptable terms, the Company may be unable to fund its
expansion, take advantage of acquisition opportunities, develop or enhance
services or respond to competitive pressures.
To date, the Company shows negative cash flows. Losses from operations and
negative cash flow are expected to continue for the foreseeable future. If
revenues and spending levels are not adjusted accordingly, the Company may not
generate sufficient revenues to achieve profitability. Even if profitability is
achieved, the Company may not sustain or increase such profitability on a
quarterly or annual basis in the future.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
Management is not currently aware of any legal proceedings or claims
against the Company.
Item 2. Changes in Securities.
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 and reports on Form 8-K.
(a) Exhibits
27.1 Financial Data Schedule - page 12.
(b) Reports on Form 8-K. None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
act of 1934, as amended, the Registrant has duly caused this report to be signed
on behalf by the undersigned, thereunto duly authorized.
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
/s/ Trevor Newton Chairman, President, Chief Dated: May 12, 2000
- ------------------ Executive
Trevor Newton Officer, Secretary and Treasurer
(Principal Executive Officer
and Principal Financial Officer)
/s/ Fred Coombes Vice President of Corporate
- ---------------- Development 1 Dated: May 12, 2000
Fred Coombes
