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, 1999
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 Identification No.)
incorporation or organization)
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 17, 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 Sheet
September 30, 1999 1
Statements of Operations and Comprehensive Loss
For the three months ended September 30, 1999
and from inception 2
Statements of Changes in Shareholders' Equity
For the period December 31, 1998 through
September 30, 1999 3
Statements of Cash Flows
For the three months ended September 30, 1999
and from inception 4
Notes to Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
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
<PAGE>
PART I
Financial Information
Item 1. Financial Statements
STRATABASE.COM
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30,
1999
(unaudited)
<S> <C>
CURRENT ASSETS
Cash ....................................................... $ 81,406
Accounts receivable ........................................ 1,687
Prepaid expenses ........................................... 2,824
GST receivable ............................................. 2,578
---------
Total current assets ................................ 88,495
---------
OFFICE EQUIPMENT, at cost
Computer hardware .......................................... 13,935
Computer software .......................................... 2,634
Office equipment ........................................... 1,291
Office furniture ........................................... 2,077
Video production equipment ................................. 5,212
---------
25,149
Accumulated depreciation and amortization .................. (3,480)
---------
21,669
Total assets ........................................ $ 110,164
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ........................................... $ 3,664
Accrued liabilities ........................................ 15,265
---------
Total current liabilities ........................... 18,929
---------
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' EQUITY
Common stock, $.001 par value; 25,000,000 shares authorized,
5,543,772 shares issued and outstanding
at September 30, 1999 .................................. 5,544
---------
Additional paid-in capital ................................. 231,065
---------
Accumulated deficit ........................................ (145,374)
---------
Total shareholders' equity .......................... 91,235
---------
Total liabilities and shareholders' equity .......... $ 110,164
=========
</TABLE>
<PAGE>
STRATABASE.COM
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
PERIOD FROM
3 MONTHS INCEPTION
ENDED (NOVEMBER 18, 1998)
SEPTEMBER 30, 1999 TO SEPTEMBER 30, 1999
(unaudited) (unaudited)
<S> <C> <C>
REVENUE ............................................. $ 9,172 $ 16,530
OPERATING EXPENSES
Internet connectivity .......................... 3,481 5,370
Video Production & Encoding .................... 2,622 4,946
Community Site Development ..................... 22,562 35,152
Web related services ........................... 425 4,155
Network Administration ......................... 1,482 2,080
Wages and subcontracting costs ................. 930 930
Total operating expenses ................ 31,503 52,634
Operating income (loss) ................. (22,331) (36,104)
GENERAL AND ADMINISTRATIVE EXPENSES
Management fees ................................ 15,000 40,000
Legal fees ..................................... 1,238 11,814
Accounting ..................................... 5,196 8,871
Advertising .................................... 2,345 2,345
Office ......................................... 5,190 8,395
Rent ........................................... 5,380 7,670
Depreciation and amortization .................. 1,740 3,480
Consulting Fees ................................ 11,456 11,456
Licenses and dues .............................. 2,051 3,756
Travel ......................................... 244 921
Telecommunications ............................. 629 1,373
Insurance expense .............................. 130 1,647
Organizational Costs ........................... -- 695
Program and Site Design ........................ 4,508 5,865
Other expenses ................................. 424 982
Total general and administrative expenses 55,531 109,270
NET LOSS ............................................ $ (77,862) $(145,374)
BASIC AND DILUTED LOSS PER SHARE OF
COMMON STOCK ................................... $ (0.01) $ (0.03)
</TABLE>
<PAGE>
STRATABASE.COM
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN ACCUMULATED SHAREHOLDERS'
AMOUNT CAPITAL DEFICIT EQUITY
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
BALANCE,
December 31, 1998
(unaudited) ......... $ -- $ -- $ -- $ --
Issuance of common
stock at $.0025 per
share (February 1999) 4,644 6,965 -- 11,609
Issuance of common
stock at $.25 per
share (March 1999) .. 900 224,100 -- 225,000
Net loss and comprehen-
sive loss ........... -- -- (145,374) (145,374)
--------- --------- --------- ---------
BALANCE,
September 30, 1999
(unaudited) ......... 5,544 231,065 (145,374) 91,235
========= ========= ========= =========
</TABLE>
<PAGE>
STRATABASE.COM
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
3 MONTHS INCEPTION
ENDED (NOVEMBER 18, 1998)
SEPTEMBER 30, 1999 TO SEPTEMBER 30, 1999
--------- ---------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ......................................... $ (77,862) $(145,374)
Depreciation and amortization .................... 1,740 3,480
Adjustments to reconcile net loss to net cash from
operating activities:
Changes in assets and liabilities:
Accounts receivable ....................... 5,492 (1,687)
Prepaids, deposits and other assets ....... (2,252) (2,824)
GST receivable ............................ (947) (2,578)
Accounts payable .......................... 695 3,664
Accrued liabilities ....................... 11,437 15,265
--------- ---------
Net cash from operating activities .... (61,697) (130,054)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of computer and office equipment ..... (9,307) (25,149)
--------- ---------
Net cash from investing activities .... (9,307) (25,149)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock ............................. -- 236,609
--------- ---------
Net cash from financing activities .... -- 236,609
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS ............... (71,004) 81,406
CASH AND CASH EQUIVALENTS, beginning of period ........ 152,410 --
--------- ---------
CASH AND CASH EQUIVALENTS, end of period .............. $ 81,406 $ 81,406
========= =========
</TABLE>
<PAGE>
Notes to Condensed Consolidated Financial Statements
- ----------------------------------------------------
(unaudited)
Note 1--Basis of Presentation
The accompanying unaudited 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 period financial
statements to conform to current period financial statement presentation.
Operating results for the three month period ended September 1999 and from the
date of inception are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999 or any future period. The Company
operates 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 prospectus on
Form SB-2 for the period ended June 30, 1999, the Company's Form 10-KSB for the
year ended December 31, 1999 and the Form 10-QSB for the period ended March 31,
2000.
Note 2 - Nature Of Operations And Organization
Stratabase.com (the Company) is a Nevada company specializing in the provision
of online content, information, and services in specific topic areas, with an
emphasis on relationship (name) development and corresponding database
management. The Company operates from its headquarters in Abbotsford, British
Columbia, Canada.
For the period from inception (November 18, 1999) to September 30, 1999, the
Company has been in the development stage. Substantially, all activity during
this period has been devoted to the raising of equity capital and development of
a long-term business plan. The Company has adopted December 31 as the closing of
its fiscal year.
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 will be recognized as website related services,
video production and encoding services, or direct e-mail marketing services are
realized or realizable and when there are no further performance obligations and
no right of refund exist.
Software development costs - The Company capitalizes certain software
development and implementation costs. To date, such costs are not significant.
Development and implementation costs are expensed until the Company has
determined 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. The company does not develop software
for sale to its customers.
Office equipment - Office equipment is recorded at cost and depreciated over its
useful life, which ranges from three to five years. Depreciation expense in the
amount of $3,480 was recognized for the period from inception to September 30,
1999.
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 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 U.S. 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 year. Translations gains or losses resulting from the
changes in the exchange rates are accumulated in a separate component of
shareholders' equity. All amounts in the accompanying financial statement and
footnotes are denominated in U.S. 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
stockholders by the weighed 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 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 3 - Securities Transactions
For the period from inception (November 18, 1998) through September 30, 1999,
the company has been involved in raising equity capital. On November 18, 1998,
the company approved the issuance of 4,643,772 shares of common stock at $.0025
per share to its founding group of shareholders. In January 1999, the Company's
Board of Directors consented to the sale of 900,000 additional shares of common
stock at $.25 per share to New Horizons LLP, a New York venture capital firm.
New Horizons, is affiliated with one of the company's founders, Ms. Mary Martin,
in that its general partner and a minority limited partner is Ms. Martin's
husband, Joe MacDonald. New Horizons LLP is considered to be a related party.
Note 4--Commitments and Contingencies
Lease obligations - The Company leases its office space and certain equipment
under operating lease agreements. The agreements provide for monthly office
rents of $937 (Canadian dollars) for a term of one year and equipment rentals of
$1,100 for a term of three years. For the period from inception to September 30,
1999, rent expense was $7,670.
Management fees - The Company has agreed to pay its President a salary of $5,000
a month commencing February 1999. Compensation of $40,000 through September 30,
1999, has been recorded as management fees in the accompanying financial
statements, although an additional $10,000 is unpaid and has been recorded under
accrued liabilities.
Distribution Agreement - The Company has entered into a Distribution Agreement
to receive and transmit certain electronic information services and content
among its customer base. The Agreement extends for a two-year period with
provisions for additional two-year renewal periods. Under the terms of the
Agreement, the Company is committed to paying fees of $750 in July 1999, $1,500
in August 1999, $2,250 in September 1999 and $3,000 each month thereafter for
the entire term of the Agreement. Further, the Company will pay the Distributor
a royalty equivalent to 25% of net advertising revenues it realizes from
distribution of information and content under the Agreement.
Legal contingencies - The Company may become involved in certain claims and
legal actions arising in the ordinary course of business. In the opinion of
management, there are no current matters expected to have a material adverse
effect on the financial condition of the Company
Year 2000 matter - Because of the unprecedented nature of the Year 2000 issue,
its effects, if any, may not be identified until a future date. Management
cannot assure that the Company has identified all Year 2000 issues, that the
Company's remediation efforts have been successful in whole or in part, or that
parties with whom the Company does business will not be significantly impacted
by Year 2000 issues.
Note 5 - Subsequent Event
On November 18, 1999, the Company commenced an offering for 800,000 investment
units. Each unit had a public offering price of $.50, and consisted of one share
of common stock and one each of Class A, B, and C purchase warrants. The
warrants, Classes A, B, and C, may be exercised at $1, $3, and $5, respectively,
at six-month, 12-month, and 18-month periods, respectively, commencing on the
date of the prospectus. For the three months ended March 31, 2000, the Company
received proceeds of 400,000 from its initial offering.
For additional events subsequent to the quarter ended September 30, 1999, please
see the Form 10-KSB and Form 10-QSB filed by the Company with the Securities and
Exchange Commission.
<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, Form
10-KSB and Form 10-QSB for the quarter ended March 31, 2000, 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
We are a development stage company incorporated on November 18, 1998, focusing
on providing direct marketing information and online advertising for
corporations seeking to market their goods and services through the internet. We
are currently compiling a list from Internet users for whom we provide free
services such as: Internet based news, newsletters and video. In return for the
free services, we will attempt to obtain the consent of Internet users to
receive corporate advertisements. Their personal information (including name and
e-mail address) will become part of our user database. We recently engaged a
leading distributor of news to provide some of the news content and began the
creation of a free news web site for Internet users. Finally, we have begun
development of our direct marketing web site from which advertisers will engage
in on-line advertising.
For the period from inception (November 18, 1998), through the present, our
activities related primarily to the recruitment of independent contractors and
suppliers, and the establishment of our organizational and technical
infrastructure. As our business develops, we expect revenues to come partly from
sales of advertising and direct marketing opportunities on our websites and
partly from the sale of Internet services to small businesses.
Results of Operations
Revenues
Revenues for the three months ended September 30, 2000 were $9,172. As the
Company is still in its early development stages, it has been focusing its
efforts on establishing relationships with contractors, recruiting employees,
and establishing its technical infrastructure. The Company must establish more
fully its operational infrastructure, its product line, and its internal sales
force in order for its revenues to grow, if at all.
Expenses
Expenses for the three months ended September 30, 1999 were $87,034; $31,503 of
expenses consisted of operating expenses; $55,531 consisted of general and
administrative expenses including $11,455 in consulting fees to programmers and
$15,000 in management fees to its President.
Liquidity and Capital Resources
From inception through September 30, 1999, we received $236,609 in net proceeds
from an investor and our founders. As of September 30, 1999, we had
approximately $81,406 in cash and cash equivalents. To date, we show negative
cash flows. We expect losses from operations and negative cash flow to continue
for the foreseeable future. If our revenues and our spending levels are not
adjusted accordingly, we may not generate sufficient revenues to achieve
profitability. Even if we achieve profitability, we may not sustain or increase
such profitability on a quarterly or annual basis in the future. We currently
anticipate the net proceeds from the upcoming offering, together with available
funds, will be sufficient to meet our anticipated needs for at least 12 months.
We may need to raise additional funds 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
need to raise additional funds may arise especially if we only complete the
minimum offering or if significantly less than the maximum offering is
completed. We cannot be certain that any required additional financing will be
available on terms favorable to us. If additional funds are raised by the
issuance of our equity securities, such as through the exercise of the proposed
warrants, then existing stockholders will experience dilution of their ownership
interest. If additional funds are raised by our issuance of debt instruments, we
may be subject to certain limitations on our 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, we may be unable to fund our expansion, take advantage of acquisition
opportunities, develop or enhance services or respond to competitive pressures.
<PAGE>
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.
(b) Reports on Form 8-K. None.
<PAGE>
(a) 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: May 17, 2000 By /s/ Trevor Newton
-------------------------
Trevor Newton
Chairman, President,
Chief Executive Officer,
Secretary and Treasurer
Date: May 17, 2000 By /s/ Fred Coombes
-------------------------
Vice President of
Corporate Development
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.
Chairman, President, Chief Dated: May 17, 2000
------------------- Executive
Trevor Newton Officer, Secretary and Treasurer
(Principal Executive Officer and
Principal Financial Officer)
Vice President of Corporate Dated: May 17, 2000
------------------- Development
Fred Coombes
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 81
<SECURITIES> 0
<RECEIVABLES> 2
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 89
<PP&E> 25
<DEPRECIATION> (4)
<TOTAL-ASSETS> 110
<CURRENT-LIABILITIES> 19
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 231
<TOTAL-LIABILITY-AND-EQUITY> 110
<SALES> 9
<TOTAL-REVENUES> 9
<CGS> 32
<TOTAL-COSTS> 87
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (78)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
