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 June 30, 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 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
August 10, 2000.
Traditional Small Business Disclosure Format (elect one) [X] Yes [_] No
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<PAGE>
STRATABASE.COM
INDEX
Page
Part I. Financial Information
Balance Sheets
June 30, 2000 and December 31, 1999 1
Statements of Operations and Comprehensive Loss
For the three and six month periods ended June 30, 2
Statements of Changes in Shareholders' Equity
For the period December 31, 1998 through June 30, 3
Statements of Cash Flows
For the six months ended June 30, 2000 and 1999 4
Notes to Financial Statements 5-7
Item 2.Management's Discussion and Analysis of Financial
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
<PAGE>
PART I Financial Information
Item 1. Financial Statements
STRATABASE.COM
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
JUNE 30, DECEMBER 31,
2000 1999
---------------- ------------------
(unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 328,015 $ 4,696
Accounts receivable 26,235 32,965
Prepaid expenses 1,949 -
GST receivable - 2,172
---------------- ------------------
------------------
Total current assets 356,199 39,833
---------------- ------------------
OFFICE EQUIPMENT, at cost
Computer hardware 53,064 21,228
Computer software 3,153 2,634
Office equipment 2,589 1,950
Office furniture 2,411 2,077
Video production equipment 5,212 5,212
---------------- ------------------
66,429 33,101
Accumulated depreciation and amortization (11,025) (5,425)
---------------- ------------------
----------------
55,404 27,676
---------------- ------------------
OTHER ASSETS 7,145 -
---------------- ------------------
Total assets $ 418,748 $ 67,509
================ ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 61,840 $ 16,336
Accrued liabilities 34,793 33,201
----------------
------------------
Total current liabilities 96,633 49,537
---------------- ------------------
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDERS' EQUITY
Common stock, $.001 par value; 25,000,000 shares authorized,
6,353,772 & 5,543,772 shares issued and outstanding
at June 30, 2000 and December 31, 1999, respectively 6,354 5,544
Additional Paid in Capital 632,755 231,065
Accumulated deficit (316,033) (218,108)
Accumulated comprehensive income (loss) (961) (529)
---------------- ------------------
------------------
Total shareholders' equity 322,115 17,972
---------------- ------------------
Total liabilities and shareholders' equity $ 418,748 $ 67,509
================ ==================
</TABLE>
<PAGE>
STRATABASE.COM
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
FOR THE 3 MONTHS ENDED FOR THE 6 MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 1999
-------------------------------- --------------------------------
-------------------------------- --------------------------------
(unaudited) (unaudited) (unaudited) (audited)
<S> <C> <C> <C> <C>
REVENUE $ 177,995 $ 6,709 $ 360,164 $ 6,709
OPERATING EXPENSES
Direct marketing 70,253 - 145,189 -
Internet connectivity 3,812 1,889 7,431 1,889
Web related services - 3,063 - 3,730
Video production & encoding 250 2,324 250 2,324
Network administration - 598 - 598
Commissions 57,359 - 104,038 -
Community site development - 12,590 - 12,590
Wages and subcontracting costs 45,349 - 71,900 -
-------------------------------- --------------------------------
-------------------------------- --------------------------------
Total operating expenses 177,023 20,464 328,808 21,131
-------------------------------- --------------------------------
-------------------------------- --------------------------------
Operating income (loss) 972 (13,755) 31,356 (14,422)
-------------------------------- --------------------------------
-------------------------------- --------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
Management fees 24,000 15,000 48,000 25,000
Legal fees 5,449 4,361 18,250 10,576
Accounting 16,496 3,675 18,954 3,675
Advertising 1,090 - 6,933 -
Office 2,968 2,742 8,709 3,205
Rent 6,012 1,094 15,992 2,290
Computer related 3,712 - 4,970 -
Depreciation & ammortization 2,800 1,740 5,600 1,740
Licenses and dues 776 1,400 3,245 1,705
Travel 43 652 1,201 677
Telecommunications 4,462 302 5,397 744
Insurance expense (30) - 2,108 1,517
Other expenses 3,217 1,714 7,246 2,610
-------------------------------- --------------------------------
-------------------------------- --------------------------------
Total general and administrative expenses 70,995 32,680 146,606 53,739
-------------------------------- --------------------------------
-------------------------------- --------------------------------
OTHER INCOME 5,613 649 17,325 649
-------------------------------- --------------------------------
-------------------------------- --------------------------------
NET LOSS (64,410) (45,786) (97,925) (67,512)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments 66 - (432) -
-------------------------------- --------------------------------
-------------------------------- --------------------------------
COMPREHENSIVE LOSS $ (64,344) $ (45,786) $ (98,357) $ (67,512)
================================ ================================
================================ ================================
BASIC AND DILUTED LOSS PER SHARE OF
COMMON STOCK $ (0.01) $ (0.01) $ (0.02) $ (0.02)
================================ ================================
================================ ================================
</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> <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
Net Loss and comprehen-
sive income - - - (64,410) 66 (64,344)
----------- ---------- -------------- ---------------- ----------------- -------------------
BALANCE, June 30, 2000
(unaudited) 6,353,772 $ 6,354 $ 632,755 $ (316,033)$ (961)$ 322,115
=========== ========== ============== ================ ================= ===================
</TABLE>
<PAGE>
STRATABASE.COM
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
------------------------------------
------------------------------------
June 30, 2000 June 30, 1999
-------------- -----------------
-------------- -----------------
(unaudited) (audited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (97,925) $ (67,512)
Depreciation and amortization 5,600 1,740
Adjustments to reconcile net loss to net cash from
operating activities:
Change in assets and liabilities:
Accounts receivable 6,730 (7,179)
Prepaids, deposits and other assets (1,949) (572)
GST receivable 2,172 (1,631)
Accounts payable 45,504 2,969
Accrued liabilities 1,592 -
-------------- -----------------
-------------- -----------------
Net cash from operating activities (38,276) (72,185)
-------------- -----------------
-------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subidiary (2,250) -
Acquisition of domain names (4,895) -
Acquisition of computer and office equipment (33,328) (15,842)
-------------- -----------------
-------------- -----------------
Net cash from investing activities (40,473) (15,842)
-------------- -----------------
-------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Shareholder loans - 3,828
Sale of common stock 402,500 236,609
-------------- -----------------
-------------- -----------------
Net cash from financing activities 402,500 240,437
-------------- -----------------
-------------- -----------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (432) -
-------------- -----------------
-------------- -----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 323,319 152,410
CASH AND CASH EQUIVALENTS, beginning of period 4,696 -
-------------- -----------------
-------------- -----------------
CASH AND CASH EQUIVALENTS, end of period $ 328,015 $ 152,410
============== =================
</TABLE>
<PAGE>
Notes to Financial Statements
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 June 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.
These financial statements should be read in conjunction with the 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
The expiration date of the Company's Class A Warrants was extended to October 7,
2000. Class A Warrants are exercisable at $1.00 for one share of common stock.
On July 15, 2000, the Company allocated 1,250,000 non-qualified common stock
option shares, with vesting provisions ranging from July 15, 2000 to November
15, 2003, at an exercise price of $0.50 to officers, directors and employees and
consultants of the Company. The fair market value of the exercise price of these
options was the market price at June 1, 2000. These options were granted
pursuant to the Stratabase.com 2000 Stock Option Plan adopted by the board. The
Plan covers a total of 1,750,000 shares, leaving 500,000 shares of common stock
available for future awards and grant.
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 and computer 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. The weighted average number of
common shares outstanding for the 3-month periods ended June 30, 2000 and 1999
were 6,353,772 and 5,543,772, respectively. The weighted average number of
common shares outstanding for the 6-month periods ended June 30, 2000 and 1999
were 6,218,772 and 4,420,310, 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 Columbia'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
There were no transactions to report involving the issuance of securities for
the three months ended June 30, 2000. To date, proceeds from the public offering
which was completed in February 2000 have been used for working capital,
acquisition of office and computer equipment, and management fee payments.
Note 5--Income Taxes
As of June 30, 2000 the Company had available to offset future taxable income,
net operating loss carryforwards 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 carryforwards in future periods.
Note 6--Commitments and Contingencies
Lease commitments - As of June 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 ending June 30, 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
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 develops open-source Customer Relationship Management (CRM) software
for its own use, that of its clients, and for general distribution. This
represents a turning point in the Company's development. Previously, the
Company's internally-developed proprietary CRM software was custom-software and
not available to the public. It was meant to support the online direct marketing
campaigns we carried out on behalf of our clients. However, as our internal
programming and networking capabilities developed, we decided to release the
source code of our software and focus our operations on open-source CRM software
development.
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 direct
marketing services and CRM solutions to its clients, which are facilitated by
our internally-developed CRM software. The Company intends to continue to offer
online direct marketing services to its clients as that is its only substantial
source of revenue.
The Company's open-source CRM software is web-based software designed to carry
out, track, report, and manage large-scale custom email communications
campaigns. The source code is open and freely distributed.
[The Company also 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.
Results of Operations
Revenues
Revenues for the three months ended June 30, 2000 were $177,995. This represents
the company's second 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 direct marketing services. Since this is only the
second quarter in which the Company has realized revenues of any magnitude, it
is too early to attach any predictive significance to them. Revenues of $163,403
were from online direct marketing campaigns for clients, where the fees
consisted primarily of email distribution, list management, and campaign
development fees. Revenues of $8,821 were from web development and networking
services, which were provided primarily to one client, which is 20% owned by the
Company and 45% owned by affiliates of the Company.
<PAGE>
Operating Expenses
Cost of sales for the three months ended June 30, 2000 were $177,023, of which
$70,253 of such expenses consisted of direct marketing expenses where the
Company purchased access to opt-in email lists; $57,359 of operating expenses
consisted of sales commissions; $3,812 of such expenses consisted of Internet
connectivity costs relating to our fiber optic connection; and $45,349 of the
operating expenses 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 for the three months ended June 30, 2000
were $70,995; $24,000 consisted of management fees to our President and to our
Vice President; $16,496 consisted of accounting fees; and $5,449 consisted of
legal fees.
Liquidity and Capital Resources
As of June 30, 2000 we had $328,015 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
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
3.1 Articles of Incorporation*
3.2 Amended Articles of Incorporation*
11.1 Computation of per share earnings (loss) - page 6.
27.1 Financial Data Schedule - page 11.
(b) Reports on Form 8-K. None.
*Incorporated by reference to the Issuer's Registration Statement on Form SB-2
dated August 12, 1999.
<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: August 10, 2000 By /s/ Trevor Newton
Trevor Newton
Chairman, President, Chief Executive
Officer, Secretary and Treasurer
Date: August 10, 2000 By /s/ Fred Coombes
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.
/s/ Trevor Newton Chairman, President, Dated: August 10, 2000
-----------------
Trevor Newton Chief Executive Officer,
Secretary and Treasurer
/s/ Fred Coombes Vice President of Dated: August 10, 2000
----------------
