UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to _____________
Commission file number 0-27807
CybeRecord, Inc.
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(Exact name of small business issuer as specified in its charter)
Florida 91-1985843
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
800 Bellevue Way NE, 4th Floor, Bellevue, WA 98004
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(Address of principal executive offices)
(425) 990-5593
---------------------------
(Issuer's telephone number)
As of May 1, 2000, there were 16,746,864 shares of CybeRecord, Inc.'s Common
Stock, par value $.01 per share, outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements................................................1
Item 2. Plan of Operation...................................................5
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.................7
Item 6. Exhibits and Reports on Form 8-K....................................8
SIGNATURES...................................................................8
Note: Items 1, 2, 3, and 5 under Part II - Other Information have been omitted
because they are not applicable.
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
CYBERECORD, INC.
(A Development Stage Company)
BALANCE SHEETS
March 31, 2000 and December 31, 1999
March 31, December 31,
2000 1999
ASSETS (Unaudited) (Audited)
=========== ===========
<S> <C> <C>
Current Assets
Cash .................................................................. $ 1,720,794 $ 111,154
Prepaid expenses and deposits ......................................... 10,257 15,194
=========== ===========
Total current assets ......................................... 1,731,051 126,348
Furniture and Equipment, at cost,
less accumulated depreciation of $10,940 at March 31, 2000
and $3,940 at December 31, 1999 ....................................... 78,690 25,328
Capitalized Development Costs ............................................. 114,020
----------- -----------
$ 1,923,761 $ 151,676
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ...................................................... $ 50,743 $ 21,436
Stockholders' Equity
Common stock, par value $.01 .......................................... 167,469 154,719
Additional paid-in capital ............................................ 6,560,769 4,342,269
Deficit accumulated during the
development stage .................................................. (4,855,220) (4,366,748)
=========== ===========
1,873,018 130,240
=========== ===========
$ 1,923,761 $ 151,676
=========== ===========
</TABLE>
See Notes to Financial Statements
1
<PAGE>
CYBERECORD, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS - Unaudited
For the Three Months Ended March 31, 2000 and 1999, and the Period
From September 27, 1996 to March 31, 2000
<TABLE>
<CAPTION>
Total
Accumulated
During
Development
Stage
(September 27,
1996 to
March 31,
2000 1999 2000)
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues, Interest income $ 7,107 $ - $ 7,107
Expenses
Write-off of acquired research
and development 3,000,000
Research and development 96,699 272,124
General and administrative 398,880 9,199 1,590,203
----------------- ----------------- -----------------
495,579 9,199 4,869,434
----------------- ----------------- -----------------
Net loss $ (488,472) $ (9,199) $ (4,855,220)
================= ================= =================
Basic loss per share of common stock $ (0.03) $ (0.00) $ (0.40)
================= ================= =================
Weighted average number of
common shares outstanding 15,896,864 12,335,864 12,282,697
================= ================= =================
</TABLE>
See Notes to Financial Statements
2
<PAGE>
CYBERECORD, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY - Unaudited
For the Three Months Ended March 31, 2000 and 1999,
and the Period From September 27, 1996 to March 31, 2000
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Common Paid-in Development Receivable for
Shares Stock Capital Stage Shares Sold Total
---------- ---------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, September 27, 1996 335,864 $ 3,359 $ 769 $ - $ - $ 4,128
Issuance of common stock
(October and November 1996) 8,700,000 8,700 49,410 58,110
Net loss (3,192) (3,192)
---------- ---------- ----------- ----------- --------- ------------
Balances, December 31, 1996 9,035,864 12,059 50,179 (3,192) 59,046
Issuance of common stock,
net of effects of exchange
of Chrysalis shares for
Pillar shares (October 1997) 3,300,000 111,300 128,700 240,000
Additional capital contributed
by shareholders 46,700 46,700
Net loss (345,688) (345,688)
---------- ---------- ----------- ----------- --------- ------------
Balances, December 31, 1997 12,335,864 123,359 225,579 (348,880) 58
Additional capital contributed
by shareholders 83,500 83,500
Net loss (82,251) (82,251)
---------- ---------- ----------- ----------- --------- ------------
Balances, December 31, 1998 12,335,864 123,359 309,079 (431,131) 1,307
Issuance of common stock in
exchange for subscriptions
receivable (March 1999) 1,970,000 19,700 965,300 (985,000)
Issuance of common stock in
exchange for services (March 1999) 6,000 60 2,940 3,000
Additional capital contributed
by shareholders 6,300 6,300
Net loss (9,199) (9,199)
---------- ---------- ----------- ----------- --------- ------------
Balances, March 31, 1999 14,311,864 143,119 1,283,619 (440,330) (985,000) 1,408
Contribution of shares back
to the corporation
by shareholders (April 1999) (5,000,000) (50,000) 50,000
Issuance of common stock in
exchange for services (April 1999) 90,000 900 36,100 37,000
Issuance of common stock in exchange for
Kristal Group assets (April 1999) 6,000,000 60,000 2,940,000 3,000,000
Issuance of common stock in exchange
for services (November 1999) 70,000 700 30,800 31,500
Additional capital contributed
by shareholders 1,750 1,750
Collection of subscriptions receivable 985,000 985,000
Net loss (3,926,418) (3,926,418)
---------- ---------- ----------- ----------- --------- ------------
Balances, December 31, 1999 15,471,864 154,719 4,342,269 (4,366,748) - 130,240
Issuance of common stock in
exchange for cash (March 2000) 1,275,000 12,750 2,218,500 2,231,250
Net loss (488,472) (488,472)
---------- ---------- ----------- ----------- --------- ------------
Balances, March 31, 2000 16,746,864 $ 167,469 $ 6,560,769 $(4,855,220) $ - $ 1,873,018
========== ========== =========== =========== ========= ============
</TABLE>
See Notes to Financial Statements
3
<PAGE>
CYBERECORD, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS Unaudited
For the Three Months Ended March 31, 2000 and 1999, and the Period
From September 27, 1996 to March 31, 2000
<TABLE>
<CAPTION>
Total
Accumulated
During
Development
Stage
(September 27,
1996 to
March 31,
2000 1999 2000)
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $ (488,472) $ (9,199) $ (4,855,220)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation 7,000 10,940
Writeoff of purchased inprocess
research and development that had
not reached technological feasibility 3,000,000
Professional fees exchanged for
common stock 3,000 71,500
Changes in operating assets and liabilities
Prepaid expenses and deposits 4,937 (10,257)
Accounts payable 29,307 50,743
----------------- ----------------- -----------------
Cash used in operating activities (447,228) (6,199) (1,732,294)
Cash Flows From Investing Activities
Purchase of equipment (60,362) (89,630)
Capitalized Development Costs (114,020) (114,020)
----------------- ----------------- -----------------
Cash used in investing activities (174,382) (203,650)
Cash Flows From Financing Activities
Issuance of common stock 2,231,250 3,514,360
Capital contribution 6,300 138,250
----------------- ----------------- -----------------
Cash provided by financing activities 2,231,250 6,300 3,652,610
Net increase in cash 1,609,640 101 1,716,666
Cash, beginning of period 111,154 1,307 4,128
----------------- ----------------- -----------------
Cash, end of period $ 1,720,794 $ 1,408 $ 1,720,794
================= ================= =================
</TABLE>
See Notes to Financial Statements
4
<PAGE>
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and therefore do not include all
disclosures necessary for a fair presentation of financial position, results of
operations, changes in stockholders' equity, and cash flows in conformity with
generally accepted accounting principles. The operating results for interim
periods are unaudited and are not necessarily an indication of the results to be
expected for the full fiscal year. In the opinion of management, the results of
operations as reported for the interim period reflect all adjustments which are
necessary for a fair presentation of operating results.
Note 2. Per Share Information
Basic loss per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. Diluted loss per share has not been presented as inclusion of any such
shares would be antidilutive to the loss per share.
Note 3. Capitalized Development Costs
CybeRecord's ScanServer product reached the stage of technological feasibility
as defined by Statements of Financial Accounting Standards ("SFAS") 86 on
February 16, 2000. Accordingly, all product development costs prior to that date
have been charge to expense as research and development and all product
development costs subsequent to that date have been included in capitalized
development costs.
Item 2. Plan of Operation.
Forward-Looking Statements
In describing our plan of operation for the next 12 months as required by Part
I, Item 2 of this report, much of what we say will be "forward-looking
statements." Words such as "expect," "anticipate," "intend," "believe," "plan,"
"objective," "target," "goal," and similar expressions indicate that a statement
is forward-looking. Our forward-looking statements reflect our management's
beliefs and assumptions based on the information we currently have available.
Because our forward-looking statements are based on what we know and expect at
the time we are preparing this report, we cannot be sure that the actual course
of our business activities will correspond to what we say in our forward-looking
statements. There are many risks and uncertainties that could cause the
assumptions we have used to formulate our business plans to turn out to be
wrong. If our assumptions turn out to be wrong, our business's actual
performance could be much worse than we anticipate based on our current
assumptions. If our business does not perform as well as investors expect, or
analysts or investors develop concerns about how well our business will perform,
the trading prices for our stock are likely to decline, perhaps substantially.
5
<PAGE>
Part I, Item 1 of our Annual Report on Form 10-KSB for the fiscal year completed
December 31, 1999 (filed with the Securities and Exchange Commission on April
14, 2000) identifies some of the key risks and uncertainties that we believe
could have a serious negative effect on our business. These risks are described
under the heading "Forward-Looking Statements" in our 1999 Form 10-KSB. We
direct investors' attention to that disclosure and caution that if our business
does encounter unexpected problems because of these or other risks and
uncertainties, investors could lose some or all of their investments in our
business.
Plan of Operation
In February 2000 we produced two prototype ScanServers that have been used for
testing and evaluation. Our current focus is on progressing from a development
stage company to sustained commercial production of the ScanServer. During March
2000, we ordered sufficient hardware components to assemble 30 ScanServers and
sufficient computer and electronic components for 10 ScanServers. (We ordered
hardware for a larger number of ScanServers because these components require
custom manufacturing.)
We previously arranged for a subcontractor in central California to assemble
ScanServers for commercial distribution. In May 2000 we hired a manufacturing
manager to oversee commercial production of ScanServers. Based on our
manufacturing manager's recommendations, we have shifted our initial production
strategy from one of relying on outside contractors to managing the initial
commercial assembly process in-house. This is intended to give us more direct
control over production schedules and quality assurance, as well as the ability
to quickly identify and resolve any problems that may arise during the initial
assembly process.
We still expect to shift the bulk of our assembly requirements to an outside
contractor as soon as possible. At the same time, we plan to maintain at least
limited capacity for in-house assembly. We intend for this capacity to act as a
safety net. It will give us the ability to complete a minimal number of
ScanServers even if we experience problems with outside assembly contractors.
We had initially established a target of completing 10 ScanServers for
commercial distribution by the end of May 2000. Since placing our initial parts
orders in March 2000, however, we have encountered delays in vendors shipping us
the ordered parts. Because of these delays, as of the filing date of this report
we are uncertain about how many ScanServers we will be able to complete by the
end of May 2000. It may be as few as one or two units if the delays are not
resolved soon. Once we have received the delayed components, we expect to be
able to complete another nine units during June 2000. After that, our goal is to
achieve an on-going production rate of approximately 20 units per month.
We have also initiated the steps necessary to apply for Federal Communications
Commission approval and comparable approval for Canada (CSA). We intend to
complete these steps by the end of May 2000 if possible, and to begin commercial
shipping of ScanServers as soon as approvals are pending. We also plan to
initiate, by the end of May 2000, the process for receiving Underwriters'
Laboratory listings. Our initial target geographical market is the United
States, to be followed by Canada, the United Kingdom, Columbia, Brazil, and
Mexico. Based on cash raised from stock sales earlier this year, we believe we
have sufficient cash available to meet our manufacturing and marketing schedule
as described in this report.
If we are able to implement our production plans as we intend, we believe that
we will be able to generate adequate revenues from placing ScanServer units into
service to maintain operations at the modest level described in the preceding
6
<PAGE>
paragraphs. Without raising additional funds through stock sales, we do not
expect to be able to expand the scale of our production and marketing efforts
quickly, but we believe we could sustain our business and grow slowly.
Additional capital investment in our business during the next 12 months would
influence our activities in three key respects: how much advertising we are able
to do, how quickly we can expand the scale of our production operations, and how
quickly we can enter additional geographical markets. If we are able to secure
additional funding through stock sales, we would expect to pursue these areas to
the extent we considered it feasible. We cannot, however, be certain of placing
enough ScanServers into service over the next 12 months to meet our operating
requirements. If we do not place enough units, then we will need to either
obtain adequate commercial credit arrangements or sell additional stock to fund
our continuing operations. We do not currently have commitments in place for
obtaining credit or selling additional stock.
As of May 2000, we do not intend to conduct significant new research and
development efforts relating to the ScanServer during the next 12 months. We
expect to give primary operational focus to manufacturing ScanServers and
placing them into commercial service. As an integral part of moving from product
development to production, we expect to conduct on-going evaluation of possible
ways to improve production and lower costs. We also expect to devote a modest
level of development effort to completion of a roll-film feeder for the
ScanServer. In addition, if sufficient capital is available during the next 12
months, we expect to begin research and development on a machine that will
transfer digital images onto microfilm. As our operations continue, we also
expect to watch for new opportunities to further develop or build on our core
technologies in ways that complement our microfilm scanning business. We do not
currently have any concrete plans in this regard, however.
In May 2000 we leased facilities in Modesto, California to provide space for our
initial in-house assembly activities. As of the filing date of this report, over
the next 12 months we do not intend to acquire significant new plant or
equipment or any other significant new facilities devoted to the production or
assembly of ScanServers.
We do not currently expect to hire a significant number of additional employees
during the next 12 months. We believe that overall, the complement of
management, technical, and sales and marketing personnel we currently employ
should enable us to proceed with production and marketing at our initial target
levels over the next 12 months.
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
We held a special meeting of security holders on February 17, 2000. The sole
purpose of the special meeting was to submit to a vote of our security holders
the question of whether CybeRecord, Inc. (currently a Florida corporation)
should reincorporate as a Nevada corporation. To accomplish the reincorporation,
CybeRecord (Florida) would be merged into a newly-formed Nevada corporation also
named CybeRecord, Inc.
7
<PAGE>
The proposal to reincorporate CybeRecord (Florida) as a Nevada corporation by
merger was approved by our shareholders at the February 17, 2000 special
meeting. The tabulation of the votes cast at the special meeting was as follows:
Votes cast in favor - 8,246,930
Votes cast against - 0
Abstentions and broker non-votes - 0
Although our shareholders approved reincorporating as a Nevada corporation at
the February 17, 2000 special meeting, our Board of Directors has elected not to
proceed with reincorporation at this time.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the quarterly period
covered by this report.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CybeRecord, Inc.
---------------------
(Registrant)
Date: May 10, 2000 By: /s/ JAMES J. LUCAS
----------------------- ---------------------
James J. Lucas, President, CEO, and
Principal Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,720,794
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,731,051
<PP&E> 89,630
<DEPRECIATION> 10,940
<TOTAL-ASSETS> 1,923,761
<CURRENT-LIABILITIES> 50,743
<BONDS> 0
0
0
<COMMON> 167,469
<OTHER-SE> 1,705,549
<TOTAL-LIABILITY-AND-EQUITY> 1,923,761
<SALES> 0
<TOTAL-REVENUES> 7,107
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 495,579
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (488,472)
<INCOME-TAX> 0
<INCOME-CONTINUING> (488,472)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (488,472)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
