<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] Quarterly Report Pursuant to Section 13 or 15 (D) of the Securities
and Exchange Act of 1934 For the Period Ended November 30, 2000
Or
[ ] Transition Report Pursuant to Section 13 or 15(D) of the Securities
and Exchange Act of 1934 for the transition period from_______ to________ .
Commission file number:
DENMANS.COM, INC.
(Name of Small Business Issuer in its Charter)
Colorado E.I.N. 91-2015608
------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 1620 - 1140 West Pender Street V6E 4G1
Vancouver, British Columbia
------------------------------------------- --------------------------
(Address of Principal Executive Offices) (Zip code)
Registrant's telephone number, including area code (604) 684-7804
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class to be so registered:
COMMON STOCK
------------
Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 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.
Yes [X] No [ ]
As at November 30, 2000, there were 11,002,000 shares of the company's common
stock outstanding.
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
<PAGE>
<TABLE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DENMANS.COM, INC.
(FORMERLY IDS INTERNET DISTRIBUTION SYSTEMS INC.)
CONSOLIDATED BALANCE SHEETS
(IN UNITED STATES DOLLARS)
(UNAUDITED)
<CAPTION>
As at
NOVEMBER 30, FEBRUARY 29,
2000 2000
$ $
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents 61,000 433,850
Accounts and other receivable [NOTE 4] 62,690 28,098
Prepaid expenses and deposits [NOTE 5] 149,080 137,175
-----------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 272,770 599,123
-----------------------------------------------------------------------------------------------------
Capital assets (net) 190,834 210,411
-----------------------------------------------------------------------------------------------------
463,604 809,534
=====================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT
Accounts payable and accrued liabilities 192,924 144,764
Interest payable [NOTE 6] 290,191 55,392
Payroll taxes payable - 61,373
Short-term note payable [NOTE 6] 1,000,000 -
Deferred revenue - 15,725
-----------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,483,115 277,254
-----------------------------------------------------------------------------------------------------
Notes payable [NOTE 6] 2,297,921 2,000,000
-----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 3,781,036 2,277,254
-----------------------------------------------------------------------------------------------------
Commitments [NOTE 8]
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.001 par value; 50,000,000 shares
authorized, none issued and outstanding
Common stock, $0.001 par value; 100,000,000 shares
authorized, 11,002,000 and 11,000,000 issued and
outstanding at November 30, 2000 and February 29,
2000, respectively, at amount paid in 11,002 11,000
Additional paid in capital 1,498 -
Deficit (3,329,932) (1,478,720)
-----------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' DEFICIENCY (3,317,432) (1,467,720)
-----------------------------------------------------------------------------------------------------
463,604 809,534
=====================================================================================================
SEE ACCOMPANYING NOTES
</TABLE>
1
<PAGE>
<TABLE>
DENMANS.COM INC
(formerly IDS Internet Distribution Systems Inc.)
CONSOLIDATED STATEMENT OF
LOSS AND COMPREHENSIVE LOSS
(IN UNITED STATES DOLLARS)
(UNAUDITED)
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
30-NOV-00 30-NOV-99 30-NOV-00 30-NOV-99
$ $ $ $
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES 39,576 780 129,788 780
Cost of sales 28,294 479 97,345 479
--------------------------------------------------------------------------------------------------
Gross profit 11,282 301 32,443 301
--------------------------------------------------------------------------------------------------
EXPENSES
Marketing and media 125,421 85,326 274,557 85,326
Salaries and benefits 207,021 132,948 640,857 188,658
General and administrative [NOTE 9] 148,545 84,545 446,904 120,374
Interest on notes payable [NOTE 6] 95,950 - 234,799 -
Depreciation and amortization 37,089 8,794 106,414 12,535
Accounting and legal 15,592 600 41,266 19,417
Incorporation costs - - - 1,377
Foreign exchange loss 24,076 7,213 23,788 9,329
Website operations 10,412 - 115,972 -
Loss on disposal of capital assets 480 - 3,076 -
Interest income (837) (1,288) (3,978) (1,288)
-------------------------------------------------------------
663,749 318,138 1,883,655 435,728
-------------------------------------------------------------
Loss and comprehensive loss for the
period (652,467) (317,837) (1,851,212) (435,427)
-------------------------------------------------------------
Loss per common share (0.06) (0.03) (0.17) (0.04)
Weighted average number of shares
outstanding for the period 11,001,667 11,000,000 11,000,444 11,000,000
SEE ACCOMPANYING NOTES
</TABLE>
2
<PAGE>
<TABLE>
DENMANS.COM, INC.
(FORMERLY IDS INTERNET DISTRIBUTION SYSTEMS INC.)
CONSOLIDATED STATEMENT OF
SHAREHOLDERS' DEFICIENCY
(IN UNITED STATES DOLLARS)
(UNAUDITED)
<CAPTION>
COMMON STOCK
------------
ADDITIONAL
PAID-IN
SHARES AMOUNT CAPITAL DEFICIT
# $ $ $
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, FEBRUARY 29, 2000 11,000,000 11,000 - (1,478,720)
Stock options exercised 2,000 2 1,498 -
Loss for the period - - - (1,851,212)
-------------------------------------------------------------------------------------------
BALANCE, NOVEMBER 30, 2000 11,002,000 11,002 1,498 (3,329,932)
===========================================================================================
SEE ACCOMPANYING NOTES
</TABLE>
3
<PAGE>
<TABLE>
DENMANS.COM, INC.
(FORMERLY IDS INTERNET DISTRIBUTION SYSTEMS INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN UNITED STATES DOLLARS)
(UNAUDITED)
<CAPTION>
FOR THE FOR THE
NINE MONTHS NINE MONTHS
ENDED ENDED
NOVEMBER 30, NOVEMBER 30,
2000 1999
$ $
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Loss for the period (1,851,212) (435,427)
Adjustment to net cash used in operations
Depreciation and amortization 106,414 12,535
Loss on disposal of capital assets 3,076 -
Accrued interest on notes payable 234,799 -
Changes in operating assets and liabilities
Increase in accounts receivable (34,592) (12,647)
Increase in prepaid expenses and deposits (11,905) (303,096)
Increase in accounts payable and accrued liabilities 43,584 62,203
Decrease in payroll taxes payable (61,373) -
Decrease in deferred revenue (15,725) -
-----------------------------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (1,586,934) (676,432)
-----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to capital assets (88,071) (166,664)
Proceeds from sale of capital assets 2,734 -
-----------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (85,337) (166,664)
-----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Repayment of shareholder loan - (50,000)
Proceeds from exercise of stock options 1,500 -
Issuance of notes payable 1,297,921 1,030,000
-----------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 1,299,421 980,000
-----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH DURING THE PERIOD (372,850) 136,904
Cash and cash equivalents, beginning of period 433,850 29,282
-----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 61,000 166,186
=====================================================================================================
SEE ACCOMPANYING NOTES
</TABLE>
4
<PAGE>
DENMANS.COM, INC.
(FORMERLY IDS INTERNET DISTRIBUTION SYSTEMS INC.)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
1. NATURE OF BUSINESS
DENMANS.com, Inc. (the "Company") was incorporated on January 6, 1999 in the
State of Colorado as IDS Internet Distribution Systems Inc.. On July 23, 1999
the Company changed its name from IDS Internet Distribution Systems Inc. to
DENMANS.com, Inc.
The Company has established itself as an online retailer of jewelry and jewelry
related products. The Company's online store offers a broad selection of
products, informative content, easy-to-use navigation and search capabilities, a
high level of customer service, competitive pricing and personalized
merchandising and recommendations.
DENMANS.com, Inc. has three wholly owned subsidiaries; Denmans Jewelry (USA)
Inc., Denmans Jewelry (Canada) Inc and Denmans Jewelry (Europe) Srl.
Denmans Jewelry (USA) Inc. was incorporated on March 8, 1999 as IDS Jewelry
U.S.A. Inc. On July 28, 1999, IDS Jewelry U.S.A. Inc. changed its name to
Denmans Jewelry (USA) Inc. It was incorporated in the State of Nevada and
functions as the operating company for the United States market.
Denmans Jewelry (Canada) Inc. was incorporated on March 25, 1999 as IDS Jewelry
Canada Inc. On August 1, 1999, IDS Jewelry Canada Inc. changed its name to
Denmans Jewelry (Canada) Inc. It was incorporated in the Province of British
Columbia and functions as the operating company for the Canadian market.
Denmans Jewelry (Europe) Srl. was incorporated in July 2000 in Milan, Italy and
it is intended to function as the operating company for all European operations.
2. GOING CONCERN
These financial statements have been prepared on a going concern basis which
presumes the realization of assets and the settlement of liabilities and
commitments in the normal course of business for the foreseeable future.
The company incurred a loss of $1,851,212 for the nine months ended November 30,
2000, and as of November 30, 2000 had a working capital deficiency of
$1,210,345.
The Company's continuation as a going concern is uncertain and dependant upon
achieving profitable operations, the continued support of its lenders and/or the
Company must obtain additional financial resources by raising capital from
stockholders or other sources. The outcome of these matters cannot be predicted.
If the Company is unable to obtain adequate additional financing, management
will be required to sharply curtail the Company's operating expenses.
Accordingly, the company's continuation as a going concern is in substantial
doubt.
These financial statements do not include any adjustments to the carrying values
and classification of assets and liabilities that may be necessary if the
company is unable to continue its business.
5
<PAGE>
3. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine month period ended November 30,
2000 are not necessarily indicative of the results that may be expected for the
year ended February 28, 2001.
The balance sheet at February 29, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
These unaudited consolidated financial statements should be read in conjunction
with the consolidated financial statements included in the Registrant Company's
annual report on Form 10-KSB for the year ended February 29, 2000.
In prior periods the Company was considered to be in the development stage.
Subsequent to the launch of the Company's website and commencing March 1, 2000,
the Company is no longer in the development stage.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS 133, amended by SFAS
137 and 138, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS
133, as amended, is effective for financial statements for fiscal years
beginning after June 15, 2000. The Company has not determined the impact of SFAS
133, if any, on the consolidated financial statements.
The United States Securities and Exchange Commission has issued Staff Accounting
Bulletin 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS (SAB 101). This
pronouncement is effective for the Company's fourth quarter commencing December
1, 2000. The Company has not determined the impact of SAB 101, if any, on the
consolidated financial statements and its revenue recognition policies.
4. ACCOUNTS RECEIVABLE
Accounts receivable comprise: NOVEMBER 30, FEBRUARY 29,
2000 2000
$ $
-------------------------------------------------------------------------------
Amounts due from the sale of goods 42,788 7,722
GST recoverable 21,233 10,864
Other 1,132 9,512
Allowance for Doubtful Accounts (2,463) -
-------------------------------------------------------------------------------
62,690 28,098
===============================================================================
6
<PAGE>
5. PREPAID EXPENSES AND DEPOSITS
Prepaid expenses and deposits comprise: NOVEMBER 30, FEBRUARY 29,
2000 2000
$ $
-------------------------------------------------------------------------------
Deposits held by merchant banks - 19,361
Deposits for leases for premises 12,634 12,634
Deposits held by suppliers 113,961 89,433
Other prepaid expenses 22,485 15,747
-------------------------------------------------------------------------------
149,080 137,175
===============================================================================
The Company had obtained a merchant account with a bank in the United States for
credit card processing. Under the conditions of the merchant agreement, the
Company was required to provide the banks with a security deposit. The deposit
was revolving, non-interest bearing and the account was held until the merchant
account is cancelled during nine months ended November 30, 2000.
The Company has obtained "just in time" supply accounts with several vendors in
the United States. Under the conditions of the supply agreements, the company is
required to provide the vendors with deposits on account. The deposits are
revolving and are non-interest bearing. The vendors will hold net balances on
deposit until the supply agreements are cancelled.
6. NOTES PAYABLE
Notes payable comprise and are due to:
NOVEMBER 30,
RATE OF 2000
--------------------------------------------------------------------------------
DUE DATE INTEREST $
DGD Wealth Management May 30, 2001 5% 500,000
DGD Wealth Management October 25, 2001 5% 500,000
Eagle Harbour Management December 8, 2001 16% 500,000
Eagle Harbour Management February 15, 2002 16% 500,000
Eagle Harbour Management April 12, 2002 16% 500,000
Eagle Harbour Management August 20, 2002 16% 500,000
Eagle Harbour Management September 1, 2002 16% 50,000
Eagle Harbour Management October 31, 2002 16% 129,921
Eagle Harbour Management November 30, 2002 16% 118,000
--------------------------------------------------------------------------------
3,297,921
================================================================================
The notes payable to DGD Wealth Management and Eagle Harbour Management are
unsecured. During the nine month period ending November 30, 2000, the Company
incurred $234,799 of interest which is due within the next twelve months. As the
notes payable to DGD Wealth Management are due within one year, they have been
classified as current.
7. STOCKHOLDER'S DEFICIENCY
On October 1, 2000, stock options were exercised to purchase 2000 shares of the
Company's stock at an exercise price of $0.75 per share.
7
<PAGE>
8. COMMITMENTS
[i] At February 29, 2000, the Company has entered into commitments for
leases for premises. The future payments for the 12 months ended
February 28 are:
$
------------------------------------------------------
2001 66,672
2002 72,733
------------------------------------------------------
139,405
======================================================
[ii] The Company has entered into an operating lease in respect of its
United States office premises on a month by month basis. The monthly
lease payment is $2,524.
[iii] At February 29, 2000, the Company has entered into an agreement with a
company to receive internet hosting services at a cost of $5,000 per
month.
On December 8, 2000, the Company cancelled the aforementioned agreement
to receive internet hosting services.
[iv] On April 10, 2000, the Company entered into an agreement with Women.com
networks. Under the terms of the agreement, Women.com networks will
provide various marketing and advertising services in exchange for $1
million, which will be payable in twelve equal installments within 60
days of the completion of the services.
On August 11, 2000, the Company cancelled the aforementioned agreement
with Women.com networks.
9. SHIPING AND HANDLING COSTS
The Company does not charge its customers for shipping and handling costs. In
accordance with EITF 00-10, ACCOUNTING FOR SHIPPING AND HANDLING FEES AND Costs,
shipping and handling costs are not included in costs of good sold but are
included in general and administrative expenses. For the nine months ended
November 30, 2000, the Company incurred $5,500 [1999 - $35] of shipping and
handling costs.
ITEM 2.
MANAGEMENT DISCUSSION AND ANALYSIS
The discussion in this Report contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
discussed herein. Such risks and uncertainties are detailed in filings with the
Securities and Exchange Commission, including without limitation those discussed
in this section.
OVERVIEW
--------
The Company launched its principal website during December 1999. The Company
derives its revenues mainly from the sale of jewelry and jewelry related
products via the Internet. Secondary revenues are intended to be generated
through certain business to business opportunities although no steps have been
taken by the Company in these regards.
Since the launch of its principal website, the Company has focused on
establishing strategic alliances with leading online portals, developing and
maintaining supplier relationships and a fulfillment center in the Los Angeles
Jewelry District, building brand awareness, and the execution of its sales
strategy.
During the month of July 2000, the Company announced its expansion into the
European Jewelry Market by opening a European Subsidiary, Denmans Jewelry
(Europe) S.R.L. Strategically positioned at the crossroads of the Italian
Jewelry District, the Company's Milan office is intended to act as a conduit for
sourcing exquisite Italian jewelry products from suppliers for display on the
Company's website.
8
<PAGE>
The market for jewelry and jewelry related products is highly seasonal. The
Company expects to experience significant seasonal fluctuations in sales that
will cause quarterly fluctuations. Specifically, management expects that a
disproportionate amount of sales will occur within the fourth quarter of any
given fiscal year due to the gift giving during the holiday season. Management
expects further that this trend will continue in future periods.
RESULTS OF OPERATIONS
---------------------
The following tables set forth selected information from the statements of
operations for the nine months ended November 30, 2000 and for the nine months
ended November 30, 1999 and the Balance Sheets as at November 30, 2000 and
February 29,2000.
SELECTED STATEMENT OF OPERATIONS INFORMATION
For the nine For the nine
months months
Ended November 30, 2000 Ended November 30, 1999
------------------------- -------------------------
Sales $129,788 $780
Gross Profit $32,443 $479
Operating Expenses $1,883,655 $435,728
Net Loss $1,851,212 $435,427
SELECTED BALANCE SHEET DATA
November 30, February 29,
2000 2000
--------------------- -------------------
Working Capital (Deficiency) $(1,210,345) $321,869
Total Assets $463,604 $809,534
Long Term Debt $2,297,921 $2,000,000
Deficit $3,329,932 $1,478,720
Total Shareholders' Deficiency $3,317,432 $1,467,720
9
<PAGE>
SALES
-----
The Company's revenues consist of sales from jewelry and jewelry related
products net of product returns. The Company's sales increased $38,796 during
the three months ended November 30, 2000 and $129,008 for the nine months ended
November 30, 2000 compared to $780 for the three months ended November 30, 1999
and $780 for the nine months ended November 30, 1999. This increase was driven
by the availability of the Company's website to the public as of December 1999
and the subsequent sales of the Company's products and services. It is
anticipated that the Internet will continue to become more accessible and that
the market opportunities for the Company will continue to expand. The Company's
sales increased from $34,747 for the three months ended August 31, 2000 to
$39,576 for the three months ended November 30, 2000. This increase was due to
higher demand in the third quarter of 2000 resulting from the timely onset of
holiday season consumer spending.
COST OF SALES
-------------
Cost of sales consists primarily of the cost of jewelry and jewelry related
products sold. Gross profit for the three months ended November 30, 2000 was
$11,282 or 28.5% of sales and $32,443 or 25.0% of sales year to date. The gross
profit percentage of 28.5% of sales achieved by the Company for three months
ended November 30, 2000 has increased relative to prior periods due to the mix
of products sold and operational efficiencies incurred as the Company
transitioned out of the start up phase of its operations.
OPERATING EXPENSES
------------------
Operating expenses for the three months ending November 30, 2000 amounted to
$663,749 and $1,883,655 for the nine months ended November 30, 2000 compared to
$318,138 and $435,728 for the respective three and nine month periods ending
November 30, 1999. The significant increase is principally due to increased
marketing and media expenses, headcount related expenses, leased premises
expenses, professional fees and website operations as discussed below. Operating
expenses for the three months ended November 30, 2000 compared to the three
months ended August 31, 2000 rose from $514,876 to $663,749. This increase is
primarily due to an increase in marketing and media expenses and general and
administrative expenses.
MARKETING AND MEDIA: The Company's marketing and media expenses consist
primarily of advertising costs, affiliate program costs, production expenses,
and market research. Our advertising activities are intended to build brand
awareness, generate website traffic, and therby increasing overall sales.
Affiliate and associated program costs relate to referral fees paid to
registered affiliates for maintaining links to the Company's website and for
traffic and sales generated from said links. Marketing and media expenses
increased to $125,421 for the three months ended November 30, 2000 and $274,557
for the nine months ended November 30, 2000 compared to $85,326 for the same
three and nine month periods ended November 30, 1999. This increase is due to
the fact that the company had just launched its website in December 1999 thus
marketing and media expenditures incurred were lower. The major component of
these costs were affiliate program costs which were $79,000 and $123,464 for the
three and nine months ended November 30, 2000 respectively. Marketing and media
expenses increased from $54,945 for the three months ended August 31, 2000 to
$125,421 for the three months ended November 30, 2000 representing the onset of
holiday season marketing campaigns.
SALARIES AND BENEFITS: Salaries and benefits expenses have increased to
$207,021(24.5 full time equivalent employees) for the three months ending
November 30, 2000 and $640,857 for the nine months ended November 30, 2000
compared to $132,948 and $188,658 respectively (11 full time equivalent
employees) for the same period last year due to the increase in headcount
required as a result of the website launch in December 1999. Resulting from
efforts to increase efficiency via technology, additional maintenance to the
Company's website contributed primarily to an increase in headcount and related
salaries and benefits from $176,935 the three months ended August 31, 2000 to
$207,021 for the three months ended November 30, 2000.
10
<PAGE>
GENERAL AND ADMINISTRATIVE: General and administrative expenses include office
supplies and expenses, leased premises related expenses, professional fees and
other expenses. General and administrative expenses have increased $64,000 for
the three month period ended November 30, 2000 and $326,530 for the nine month
period ended November 30, 2000 compared to the same periods last year. The
increase is driven primarily by the growth of staffing levels required in the
operations and fulfillment processes and professional fees associated with
technology based consulting. General and administrative expenses increased from
$119,958 for the three months ended August 31, 2000 to $148,545 for the three
months ended November 30, 2000 due primarily to the aforementioned headcount
increase and additional professional consulting fees related to the Company's
efforts to enhance order fulfillment efficiency.
WEBSITE OPERATIONS: Website operations expenses include website hosting and
maintenance related costs. Website operations expenses amounted to $10,412 for
the three months ending November 30, 2000 and $115,972 for the nine months
ending November 30, 2000 versus nil for the comparative three and nine month
periods ending November 30,1999. This increase is due to the launch of the
Company's website in December 1999 which requires ongoing hosting and related
support costs to maintain. Website operations expenses decreased $29,718 during
the three month period ending November 30, 2000 compared to the three month
period ending August 31, 2000. This decrease reflects the completion of several
projects during the third quarter ending November 30, 2000.
INTEREST INCOME: Interest income is earned on the Company's cash balances.
Interest income earned during the three months ending November 30, 2000 amounted
to $837 and $3,978 year to date.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company has been funded to date through debt financing from private arm's
length lenders. The Company received the sum of $3,297,921 US for the period
from incorporation on January 6, 1999 to November 30, 2000 pursuant to notes
payable to DGD Wealth Management and Eagle Harbour Management.
The Company has secured an additional $2,702,079 US through debt financing,
which combined with revenues from sales, will enable the Company to meet its
operating and capital obligations for the next twelve months.
At November 30, 2000, the Company had $61,000 in cash and cash equivalents
compared to $433,850 at February 29, 2000. The decrease in the cash balance is
due primarily to $1,593,086 cash used in operations offset by an additional
$1,297,921 in debt financing. The company's short-term note payable is expected
to either be renegotiated or to be retired via a private placement.
Working capital at November 30, 2000 has decreased $1,522,214 from $321,869 at
February 29, 2000 to a deficiency of $1,210,345. Accounts receivable increased
to $62,690 compared to $28,098 at February 29, 2000. This increase is due mainly
to the generation of revenues from the sale of jewelry on the Company's website
which launched in December 1999. Prepaid expenses and deposits increased to
$149,080 at November 30, 2000 from $137,175 at February 29, 2000 due principally
to the Company's deposits on account with several vendors in the United States
offset by decreased deposits held by merchant banks. Accounts payable and other
current liabilities increased from $277,254 at February 29, 2000 to $1,483,115
the majority of which is due to short-term notes payable increase of $1,000,000
and related interest payable increase of $234,799 versus nil and $138,849
respectively for the same periods last year as a long-term promissory notes to
DGD Wealth Management are due and payable on May 30, 2001 and October 25, 2001.
11
<PAGE>
Net cash used in operating activities increased $542,587 for the three months
ended November 30, 2000 for total cash used in operating activities of
$1,593,086 for the nine months ended November 30, 2000. This net change in cash
consumed reflects primarily the Company's transition from the development stage
to operating stage in addition to the interest expense on long term borrowings.
Cash used in investing activities for the three months ended November 30, 2000
amounted to $26,866 and to $79,185 for the nine months ended November 30, 2000.
The cash was used mainly to develop the Company's website from which the Company
derives its primary source of revenue.
Cash provided by financing activities increased $299,421 for the three months
ended November 30, 2000 for a total of $1,299,421 year to date November 30,
2000. This increase is the result of unsecured debt financing from private arm's
length lenders.
OUTLOOK
-------
On December 28, 2000, the Company announced that it is actively seeking
strategic merger and acquisition opportunities. The Company is seeking strategic
partners, whether public or private, in the internet and /or jewelry sectors.
Due to the changing environment within the technology sector, the Company feels
that a merger or acquisition may present opportunities to further expand and
develop its business model. The Company believes that combining existing
efficiencies with the efficiencies of another entity could lead to a further
streamlining of operations and sharing of resources ultimately creating
increased stockholder value.
On September 6, 2000, the Company announced that trading in its securities on
the NASD OTC Bulletin Board began. The Company anticipates that its public
status will elevate the Company's current status both in the investment
community and with consumers. It is expected that this raised profile will
assist the company in attracting funding and sales.
The Company anticipates that revenues from sales will not initially meet
expenses and as such, the Company plans to continue to finance operations
through additional debt financing from arm's length private lenders until such
time as revenues from sales meet or exceed expenses.
In addition, the Company intends to raise additional money in 2001 as is deemed
necessary by management through private placements of stock issued out of the
treasury of the Company to individuals or corporations who have expressed
interest in obtaining stock in the Company. Through a combination of revenues
and equity financing, the Company intends to begin repaying the private arm's
length lenders.
12
<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
----------- -----------
None
(b) There are no reports on Form 8-K that were filed for the quarter.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
(Registrant) Denmans.com, Inc.
By: /s/ Kurt S. Dohlen
------------------
President, Chairman of the Board, Chief Operating
Officer, and Director
Date: January 12, 2001
By: /s/ Sheryl E. Scobie
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Vice President, Finance
Date: January 12, 2001
13
