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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 September 30, 2000
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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
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(Exact name of registrant as specified in its charter)
Nevada 88-0414964
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
34314 Marshall Road, Suite 203, Abbotsford BC V2S 1L2 Canada
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(Address of principal executive offices) (Zip Code)
(604) 504-5811
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(Registrant's telephone number, including area code)
N/A
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(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, 6,653,772 shares outstanding as of November,
2000.
Traditional Small Business Disclosure Format (elect one) _X___ Yes _____ No
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<PAGE>
STRATABASE.COM
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Financial Statements:
Balance Sheets
September 30, 2000 and December 31, 1999 1
Statements of Operations and Comprehensive Loss For the three
and nine month periods ended September 30,
2000 and 1999 2
Statements of Changes in Shareholders' Equity
For the period December 31, 1998 through September 30, 2000 3
Statements of Cash Flows
For the nine months ended September 30, 2000 and 1999 4
Notes to Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
Part II. Other Information
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 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
Item 6. Exhibits and reports on Form 8-K 9
Signatures 10
Exhibit 27.1 - Financial Data Schedule 11
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
STRATABASE.COM
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 350,871 $ 4,696
Accounts receivable 35,150 32,965
Prepaid expenses 1,949 -
GST receivable - 2,172
------------- --------------
Total current assets 387,970 39,833
------------- --------------
OFFICE AND COMPUTER EQUIPMENT, at cost
Computer hardware 63,817 21,228
Computer software 5,129 2,634
Office equipment 2,589 1,950
Office furniture 2,411 2,077
Video production equipment 5,212 5,212
------------- --------------
Total office and computer equipment, net 79,158 33,101
Accumulated depreciation and amortization (14,725) (5,425)
------------- --------------
64,433 27,676
------------- --------------
OTHER ASSETS 158,387 -
------------- --------------
Total assets $ 610,790 $ 67,509
------------- --------------
------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 164,533 $ 16,336
Accrued liabilities 33,320 33,201
------------- --------------
Total current liabilities 197,853 49,537
------------- --------------
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDERS' EQUITY
Common stock, $.001 par value; 25,000,000 shares authorized,
6,653,772 and 5,543,772 shares issued and outstanding
at September 30, 2000 and December 31, 1999, respectively 6,654 5,544
Additional paid in capital 782,455 231,065
Accumulated deficit (375,108) (218,108)
Accumulated comprehensive loss (1,064) (529)
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Total shareholders' equity 412,937 17,972
------------- --------------
Total liabilities and shareholders' equity $ 610,790 $ 67,509
------------- --------------
------------- --------------
</TABLE>
<PAGE>
STRATABASE.COM
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 1999 2000 1999
----------- ----------- ------------ -----------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUE $ 282,939 $ 9,172 $ 645,231 $ 16,530
OPERATING EXPENSES
Commissions 102,110 - 206,148 -
Direct marketing 73,892 - 219,080 -
Wages and subcontracting costs 68,499 930 140,277 930
Internet connectivity 3,895 3,481 11,326 5,370
Web related services - 425 - 4,155
Video production and encoding - 2,622 250 4,946
Network administration - 1,482 - 2,080
Community site development - 22,562 - 35,153
----------- ----------- ------------ -----------
Total operating expenses 248,396 31,502 577,081 52,634
----------- ----------- ------------ -----------
Operating income (loss) 34,543 (22,330) 68,150 (36,104)
----------- ----------- ------------ -----------
GENERAL AND ADMINISTRATIVE EXPENSES
Management fees 24,000 15,000 72,000 40,000
Legal fees 29,347 1,238 47,597 11,814
Office 14,853 5,190 28,565 8,395
Accounting 3,792 5,196 22,746 8,871
Rent 6,229 5,380 22,221 7,670
Other expenses 6,818 16,388 16,675 18,998
Depreciation and amortization 3,700 1,740 9,300 3,480
Telecommunications 2,918 629 8,316 1,373
Computer related 2,597 - 7,567 -
Insurance expense - 130 2,108 1,647
Advertising 598 2,345 1,291 2,345
Travel 59 244 1,260 921
Licenses and dues 415 2,051 941 3,756
Bad debts 844 - 844 -
----------- ----------- ------------ -----------
Total general and
administrative expenses 96,170 55,531 241,431 109,270
----------- ----------- ------------ -----------
OTHER INCOME 2,552 - 16,281 -
----------- ----------- ------------ -----------
NET LOSS (59,075) (77,861) (157,000) (145,374)
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments (103) - (535) -
COMPREHENSIVE LOSS $ (59,178) $ (77,861) $ (157,535) $ (145,374)
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
BASIC AND DILUTED LOSS PER SHARE OF
COMMON STOCK $ (0.01) $ (0.01) $ (0.03) $ (0.03)
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</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
---------- ----------- -------------- --------------- ------------------ ----------------
BALANCE,
<S> <C> <C> <C> <C> <C> <C>
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
Issuance of common stock at
$.50 per share for domain
names and database
(September 2000) 300,000 300 149,700 - - 150,000
Net Loss and comprehen-
sive loss - - - (157,000) (535) (157,535)
---------- ----------- -------------- --------------- ------------------ ----------------
BALANCE,
September 30, 2000
(unaudited) 6,653,772 $ 6,654 $ 782,455 $ (375,108) $ (1,064) $ 412,937
---------- ----------- -------------- --------------- ------------------ ----------------
---------- ----------- -------------- --------------- ------------------ ----------------
</TABLE>
<PAGE>
STRATABASE.COM
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
2000 1999
(unaudited) (unaudited)
--------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (157,000) $ (145,374)
Depreciation and amortization 9,300 3,480
Adjustments to reconcile net loss to net cash from
operating activities:
Change in assets and liabilities:
Accounts receivable (2,185) (1,687)
Prepaids, deposits and other assets (1,949) (2,824)
GST receivable 2,172 (2,578)
Accounts payable 148,197 3,664
Accrued liabilities 119 15,265
--------------- -----------------
Net cash from operating activities (1,346) (130,054)
--------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Maturus.com, Inc. (2,250) -
Acquisition of domain names (6,137) -
Acquisition of office and computer equipment (46,057) (25,149)
--------------- -----------------
Net cash from investing activities (54,444) (25,149)
--------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock 402,500 236,609
--------------- -----------------
Net cash from financing activities 402,500 236,609
--------------- -----------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (535) -
--------------- -----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 346,175 81,406
CASH AND CASH EQUIVALENTS, beginning of period 4,696 -
--------------- -----------------
CASH AND CASH EQUIVALENTS, end of period $ 350,871 $ 81,406
--------------- -----------------
--------------- -----------------
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING TRANSACTION
Issuance of shares for acquisition of domain names
and database $ 150,000 $ -
--------------- -----------------
--------------- -----------------
</TABLE>
<PAGE>
STRATABASE.COM
NOTES TO FINANCIAL STATEMENTS
Note 1--Basis of Presentation
The accompanying financial statements of Stratabase.com (the "Company") have
been prepared in accordance with the instructions to Form 10-QSB. The balance
sheets, statements of operations, changes in shareholders' equity, and cash
flows for the periods ended September 30, 2000, have been reviewed by the
Company's independent accountants in accordance with the professional standards
and procedures as set forth in Statement of Auditing Standards No. 71 (SAS 71).
SAS 71 procedures for conducting a review of interim financial information
generally are limited to inquiries and analytical procedures concerning
significant accounting matters relating to the financial information to be
reported. They do not include all information and footnotes necessary for a fair
presentation of financial position and results of operations and cash flows in
conformity with generally accepted accounting principles. These financial
statements should be read in conjunction with the financial statements and
related notes contained in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1999. In the opinion of management, all adjustments
considered necessary (consisting only of normal recurring adjustments) for a
fair presentation have been included in the interim period. Certain
reclassifications have been made to prior period financial statements to conform
to current period financial statement presentation.
Operating results for the three month periods ended September 30, 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.
Note 2--Material events
On August 31, 2000, a letter was issued to holders of Stratabase.com Class A
Warrants and Class B Warrants advising them that the expiration date of the A
Warrants would be extended to January 7, 2001, and the expiration date of the B
Warrants would be extended to February 7, 2001. Class A Warrants are exercisable
at $1.00 for one share of common stock and Class B Warrants are exercisable at
$3.00 for one share of common stock.
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.
<PAGE>
Office and computer equipment - Office and computer equipment are recorded at
cost and depreciated over their 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 period. 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 during
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. The weighted average
number of common shares outstanding for the 3-month periods ended September 30,
2000 and 1999 were 6,453,772 and 5,543,772, respectively. The weighted average
number of common shares outstanding for the 9-month periods ended September 30,
2000 and 1999 were 6,297,105 and 4,794,797, respectively.
Stock options - The Company applies Accounting Principles Board Opinion 25 and
related interpretations in accounting for its stock option plans. Accordingly,
compensation costs are recognized as the difference between the exercise price
of each option and the market price of the Company's stock at the date of each
grant. Accordingly, no compensation costs have been recognized to date.
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
In order to increase the size of the Company's internal consumer profile
database and also to develop our internal marketing infrastructure, 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 September 29, 2000, the transaction was completed and 300,000 shares
of the Company's common stock were issued. The database and domain names are
reflected in the balance sheet under the caption "OTHER ASSETS" and will be
amortized over two to three years, the expected life of the domain names and
database.
<PAGE>
Note 5--Income Taxes
As of September 30, 2000 the Company had available to offset future taxable
income, net operating loss carryforwards of approximately $400,000. 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 carryforwards in future periods.
Note 6--Commitments and Contingencies
Lease commitments - As of September 30, 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 for the
three month period and $72,000 for the nine month period ending September 30,
2000, respectively, have 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
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. 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 develops open-source Customer Relationship Management (CRM) software
for its own use, that of its clients, and for general distribution. The
Company's open-source CRM software is web-based software designed to carry out,
track, report, and manage large-scale web-based custom communications programs,
and to manage relationships. The source code is open and licensed under the GNU
General Public License, and is freely distributed.
<PAGE>
The Company realizes there is substantial risk in developing open-source
software because the revenue potential is as yet unproven. The revenue which the
Company has realized thus far has been from the provision of online services and
CRM solutions to its clients, which are facilitated by our internally-developed
CRM software. The Company intends to continue to offer additional services to
its clients as that is its only substantial source of revenue.
The Company was incorporated in November 1998 and commenced operations in
January 1999.
Results of Operations
Revenues
Revenues were $282,939 and $645,231 for the three month and nine month periods
ended September 30, 2000. This represents the company's third quarter of
meaningful revenues. This increase in revenues has been primarily attributable
to the efforts of our internal salespeople in the selling of our online
communications services. Since this is only the third quarter in which the
Company has realized revenues of any magnitude, it is too early to attach any
predictive significance to them.
Operating Expenses
Operating expenses were $248,396 and $577,081 for the three month and nine month
periods ended September 30, 2000. Of such expenses for the three month and nine
month periods ended September 30, 2000, $73,892 and $219,080 consisted of direct
marketing expenses where the Company purchased access to opt-in email lists;
$102,110 and $206,148 consisted of sales commissions; $3,895 and $11,326
consisted of Internet connectivity costs relating to our fiber optic connection;
and $68,499 and $140,277 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.
General and Administrative Expenses
General and Administrative expenses were $96,170 and $241,431 for the three
month and nine month periods ended September 30, 2000. Of such expenses for the
three and nine month periods ended September 30, 2000, $24,000 and $72,000
consisted of management fees to our President and to our Vice President; $3,792
and $22,746 consisted of accounting fees; and $29,347 and $47,597 consisted of
legal fees related to securities filings.
Liquidity and Capital Resources
As of September 30, 2000 we had $350,871 in cash and cash equivalents.
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
<PAGE>
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.
On August 31, 2000, a letter was issued to holders of Stratabase.com Class A
Warrants and Class B Warrants advising them that the expiration date of the A
Warrants would be extended to January 7, 2001, and the expiration date of the B
Warrants would be extended to February 7, 2001. Class A Warrants are exercisable
at $1.00 for one share of common stock and Class B Warrants are exercisable at
$3.00 for one share of common stock. Existing shareholders may be diluted upon
the exercise of any class of warrants.
On September 29, 2000, the Company issued 300,000 shares of its common stock to
complete the acquisition of domain names and permission-based database of 15,000
individual profiles. The transaction was recorded as an increase in
shareholders' equity of $150,000 and a corresponding increase to other assets.
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 11.
(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.
STRATABASE.COM
Date: November 13, 2000 By /s/ Trevor Newton
---------------------------
Trevor Newton
Chairman, President, Chief
Executive Officer,
Secretary and Treasurer
Date: November 13, 2000 By /s/ Fred Coombes
---------------------------
Fred Coombes
Vice President of Corporate
Development
