<PAGE>
WALL STREET STRATEGIES CORPORATION AND SUBSIDIARY
WASHINGTON, D.C. 20549
FORM 10-QSB - MARCH 31, 2000
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000
[ ] Transition Report Pursuant to Section 13 OR 15(d) of the Exchange Act
For the transition period from to
-------- ---------
COMMISSION FILE NUMBER 000-29499
WALL STREET STRATEGIES CORPORATION
(Exact name of Small Business Issuer as Specified in its Charter)
NEVADA 13-4100704
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
130 WILLIAM STREET, SUITE 401, NEW YORK, NY 10038
(Address of Principal Executive Offices)
(212) 514-9500
Issuer's Telephone Number. Including Area Code
Check WALL STREET STRATEGIES CORPORATION AND SUBSIDIARY
FORM 10-QSB - MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
whether the issuer (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.
Yes No x
-
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of May 11, 2000 the registrant had
17,594,103 shares of Common Stock outstanding.
Transmittal Small Business Disclosure Format (check one)
Yes ______ No x
-------
<PAGE>
WALL STREET STRATEGIES CORPORATION
FORM 10-QSB
For the Quarter Ended March 31, 2000
Index Page
Number
PART I FINANCIAL INFORMATION
Item 1 Condensed Consolidated Balance Sheets at March 31, 3
2000 and December 31, 1999 (unaudited for March 31,
2000 period)
Condensed Consolidated Statements of Operations for 4
the three months ended March 31, 2000 and March 31,
1999 (unaudited)
Condensed Consolidated Statement of Shareholders' 5
Equity for the three months ended March 31, 2000
(unaudited)
Condensed Consolidated Statements of Cash Flows for 6
the three months ended March 31, 2000 and March 31,
1999 (unaudited)
Notes to Condensed Consolidated Financial Statements 7
(unaudited)
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II OTHER INFORMATION
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 16
Item 3 Defaults Upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8 - K 16
2
<PAGE>
PART I - FINANCIAL INFORMATION
This report contains statements that constitute forward looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Those statements appear in a number of places herein and include statements
regarding the intent, belief or current expectations of the Company, primarily
with respect to the future operating performance of the Company or related
developments. Any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and actual results and
developments may differ from those described in the forward-looking statements
as a result of various factors, many of which are beyond the control of the
Company.
ITEM 1 - FINANCIAL STATEMENTS
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
FORM 10-QSB - MARCH 31, 2000
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
------------ ------------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 2,332,560 $ 2,506,505
Accounts receivable 86,205 70,500
Marketable securities, available for sale, at market value 91,110 58,898
Deferred commission expense 566,612 255,577
Other current assets 85,684 96,446
------------ ------------
Total current assets 3,162,171 2,987,926
Property and equipment, net 133,209 17,737
Deferred website development costs, net 174,490 63,584
Restricted cash deposit 272,000 272,000
Security deposits 46,023 46,023
Other assets 231,247 70,640
------------ ------------
$ 4,019,140 $ 3,457,910
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accrued expenses $ 432,143 $ 259,315
Accrued compensation 224,500 264,548
Income taxes payable 85,115 20,457
Deferred subscription income 1,355,442 511,154
Accrued pension expense - 100,000
------------ ------------
Total current liabilities 2,097,200 1,155,474
------------ ------------
Commitments and contingencies
Shareholders' equity
Preferred stock, $.001 par value; 5,000,000 shares authorized;
none issued and outstanding
Common stock, $.001 par value; 50,000,000 shares authorized;
17,594,103 and 17,564,103 shares issued and outstanding 17,594 17,564
Additional paid-in capital 16,371,086 13,081,092
Accumulated deficit (6,560,775) (4,423,270)
Unearned compensation (7,843,612) (6,250,458)
Accumulated other comprehensive loss (62,353) (122,492)
------------ ------------
Total shareholders' equity 1,921,940 2,302,436
------------ ------------
$ 4,019,140 $ 3,457,910
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
FORM 10-QSB - MARCH 31, 2000
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended
March 31,
----------------------------
2000 1999
------------ ------------
Revenue
Subscription income $ 1,430,295 $ 657,155
Consulting income - 118,120
Interest and dividends 14,252 911
Realized gain (loss) on sale of
marketable securities 36,118 (5,185)
------------ ------------
1,480,665 771,001
------------ ------------
Costs and expenses
Salaries and commissions 2,469,652 388,299
Other operating expenses 358,525 112,128
Consulting fees 299,685 14,500
Payroll taxes and employee benefits 136,274 78,717
Professional fees 105,479 -
Website development costs 78,198 -
Depreciation and amortization 40,624 1,597
Rent and occupancy 32,089 15,163
------------ ------------
3,520,526 610,404
------------ ------------
(Loss) income before provision
for income taxes (2,039,861) 160,597
Provision for income taxes 97,644 8,594
------------ ------------
Net (loss) income $ (2,137,505) $ 152,003
============ ============
Basic and diluted net (loss) income per share $ (12.63) $ 0.02
============ ============
Weighted average common shares
outstanding 16,921,737 9,455,898
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
FORM 10 - QSB - MARCH 31, 2000
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Additional
Common stock paid-in Accumulated Unearned
Shares Amount capital deficit compensation
------------ -------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 2000 17,564,103 $ 17,564 $ 13,081,092 $ (4,423,270) $ (6,250,458)
Issuance of common stock and options for services 30,000 30 3,289,994 - (3,290,024)
Amortization of stock compensation - - - - 1,696,870
Marketable securities valuation adjustment - - - - -
Net loss, three months ended March 31, 2000 - - - (2,137,505) -
------------ -------- ------------ ------------ ------------
Total comprehensive loss
Balance, March 31, 2000 17,594,103 $ 17,594 $ 16,371,086 $ (6,560,775) $ (7,843,612)
============ ======== ============ ============ ============
<CAPTION>
Accumulated
other Total
comprehensive shareholders' Comprehensive
income (loss) equity loss
------------- ------------ -------------
<S> <C> <C> <C>
Balance, January 1, 2000 $ (122,492) $ 2,302,436
Issuance of common stock and options for services - -
Amortization of stock compensation - 1,696,870
Marketable securities valuation adjustment 60,139 60,139 $ 60,139
Net loss, three months ended March 31, 2000 - (2,137,505) (2,137,505)
----------- ----------- ------------
Total comprehensive loss $ (2,077,366)
============
Balance, March 31, 2000 $ (62,353) $ 1,921,940
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
WALL STREET STRATEGIES CORPORATION
AND SUBSIDIARY
FORM 10-QSB - MARCH 31, 2000
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities
Net (loss) income $(2,137,505) $ 152,003
Adjustments to reconcile net (loss) income to net
cash provided by operating activities
Depreciation and amortization 40,624 1,597
Realized (gain) loss on sale of marketable securities (36,118) 5,185
Stock compensation 1,696,870 -
Changes in operating assets and liabilities
Accounts receivable (15,705) (16,547)
Deferred commission expense (311,035) (7,572)
Other assets (4,639) (519)
Accrued expenses 172,829 (39,870)
Accrued compensation (40,048) -
Income taxes payable 64,658 -
Deferred subscription income 844,288 210,037
Accrued pension expense (100,000) -
----------- -----------
Net cash provided by operating activities 174,219 304,314
----------- -----------
Cash flows from investing activities
Purchase of property and equipment (125,472) -
Deferred website development costs paid (141,530) -
Cash paid for construction in progress (141,142) -
Proceeds from the sale of marketable securities 64,045 25,964
Payment made for other assets (4,065) -
----------- -----------
Net cash (used in) provided by investing activities (348,164) 25,964
----------- -----------
Cash flows from financing activities
Repayment of loan from shareholder - 28,875
----------- -----------
Net (decrease) increase in cash and cash equivalents (173,945) 359,153
Cash and cash equivalents, beginning of period 2,506,505 96,685
----------- -----------
Cash and cash equivalents, end of period $ 2,332,560 $ 455,838
=========== ===========
Supplemental disclosure of cash flow information
Income taxes paid $ 32,986 $ -
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
WALL STREET STRATEGIES CORPORATION AND SUBSIDIARY
FORM 10-QSB - MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1 Basis of presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles applicable to interim financial statements. Accordingly, they
do not include all of the information and notes required for a complete
set of financial statements. In the opinion of the management, all
adjustments and reclassifications considered necessary for a fair and
comparable presentation have been included and are of a normal recurring
nature. Operating results for the three months ended March 31, 2000, are
not necessarily indicative of the results that may be expected for the
year ending December 31, 2000. These financial statements should be read
in conjunction with the December 31, 1999 financial statements and notes
thereto included in the Company's Form 10SB/A filed with the Securities
and Exchange Commission. The accounting policies used in the preparation
of these condensed consolidated financial statements are consistent with
those described in the December 31, 1999 consolidated financial
statements.
2 The Company
Organization
Wall Street Strategies Corporation (the "Company"), formerly Vacation
Emporium Corporation, was originally formed as a Nevada corporation on
April 2, 1999, and is the surviving entity in a merger with its then
corporate parent, The Vacation Emporium International, Inc., a Colorado
corporation formed under the name Rising Sun Capital Ltd. on May 12, 1988.
Reverse acquisition
Effective September 23, 1999, the Company acquired all of the outstanding
common stock of Wall Street Strategies, Inc. ("WSSI"), a Delaware
corporation, pursuant to an Agreement and Plan of Share Exchange (the
"Exchange Agreement") dated July 30, 1999.
Under the terms of the Exchange Agreement, the Company issued to the sole
shareholder of WSSI, 9,455,898 shares of the Company's common stock in
exchange for all of the issued and outstanding common stock of WSSI. This
issuance represented approximately 53.84% of the post-merger issued and
outstanding common shares of the Company. For accounting purposes, this
transaction has been treated as an acquisition of the Company by WSSI and
as a recapitalization of WSSI. The acquisition of the Company by WSSI has
been recorded based on the fair value of the Company's net tangible
assets, which consisted of cash in the amount of $13,350. The Company,
prior to the acquisition, was an inactive shell company. The historical
financial statements prior to September 23, 1999 are those of WSSI. Since
this transaction is in substance a recapitalization of WSSI and not a
business combination, pro forma information is not presented. All costs
associated with this transaction have been expensed.
7
<PAGE>
WALL STREET STRATEGIES CORPORATION AND SUBSIDIARY
FORM 10-QSB - MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2 The Company (continued)
Reverse acquisition (continued)
In connection with, and in contemplation of this transaction, on July 30,
1999, the Company sold 1,258,205 shares of common stock for $.0025 per
share to certain key employees of WSSI, and to two other individuals who
entered into employment agreements with the Company. These shares were
placed in escrow and are subject to repurchase by the Company over vesting
periods, which range from two to three years, at the same purchase price
of $.0025 if the individuals' employment is terminated other than by
reason of death or disability. Additionally, on September 23, 1999, the
Company completed the sale of 600,000 shares of common stock at $5.00 per
share in a private placement to certain accredited investors.
Business
The Company, through its subsidiary (WSSI), provides investment research
and related information services for individual and institutional
investors and financial professionals. WSSI, which was founded in 1991,
delivers its products and services, including financial and market
information, analysis, advice and commentary, to subscribers through a
variety of media including telephone, facsimile, e-mail, audio recordings,
newsletters, the internal and traditional mail.
3 Marketable securities, available for sale
Marketable securities, available for sale, consists of the following at
March 31, 2000:
Unrealized Market
Cost loss value
--------- --------- ---------
U.S. equity securities $ 153,463 $ (62,353) $ 91,110
========= ========= =========
4 Property and equipment, net
Property and equipment consists of the following at March 31, 2000:
Estimated
useful life
---------------
Computer and office equipment 5 years $ 114,931
Furniture and fixtures 7 years 83,137
----------
198,068
Less accumulated depreciation (64,859)
----------
$ 133,209
==========
8
<PAGE>
WALL STREET STRATEGIES CORPORATION AND SUBSIDIARY
FORM 10-QSB - MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5 Retirement plans
In January 1996, WSSI adopted a Profit Sharing Plan on behalf of its
employees whereby contributions to the plan are made at the discretion of
management and no contributions are made by employees. In January 2000,
the Profit Sharing Plan was amended to add a salary deferral feature under
Section 401(k) of the Internal Revenue Code of 1986, as amended. Under
such feature, an employee may elect to have part of his or her
compensation contributed on a before-tax basis to the Plan. Such
salary-deferred contributions are 100% vested at all times.
Management has not provided for any contributions to the Plan for the
three months ended March 31, 2000.
6 Commitments and contingencies
Leases
In April 2000, the Company negotiated a settlement for the early
termination of its existing lease. The agreement calls for a settlement
payment of $17,500 and the cancellation of the exiting lease and surrender
of the premises no later than June 30, 2000. Prior to the surrender date,
the lease remains in full force and effect. The remaining commitment under
this lease is approximately $46,000 through June 30, 2000, exclusive of
the $17,500 settlement payment.
Employment agreements
In conjunction with, and in contemplation of the Exchange Agreement, the
Company entered into employment agreements with its key executives as
follows:
o A three year agreement with the Company's President and largest
shareholder who was formerly the sole shareholder of WSSI prior to
the acquisition by the Company. The agreement provides for a base
salary of $250,000 per annum with annual bonuses of up to $250,000
dependent upon specified revenue targets. The agreement may be
terminated by mutual consent or by the Company for cause. For the
three months ended March 31, 2000, the Company recorded a bonus
provision of $62,500 in accordance with the terms of this agreement.
o A three year agreement with the Company's Chief Strategy Officer
which provides for a base salary of $175,000 and an annual bonus of up
to 40% of base salary dependent upon specified revenue targets. No
bonus provision has been recorded by the Company at March 31, 2000. The
agreement also provides for the issuance of options under the 1996 Plan
to acquire 526,923 shares of the Company's common stock. This agreement
may be terminated by mutual consent or by the Company for cause.
9
<PAGE>
WALL STREET STRATEGIES CORPORATION AND SUBSIDIARY
FORM 10-QSB - MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6 Commitments and contingencies (continued)
Employment agreements (continued)
o A two year agreement with the Company's Executive Vice President
which provides for a base salary of $125,000 and an annual bonus of up
to 40% of base salary dependent upon specified revenue targets. No
bonus provision has been recorded by the Company at March 31, 2000. The
agreement also provides for the issuance of options under the 1996 Plan
to acquire 351,282 shares of the Company's common stock. This agreement
may be terminated by mutual consent or by the Company for cause.
o On March 20, 2000, the Company's subsidiary, WSSI, entered into an
employment agreement with its Chief Internet Officer, which
provides for a base compensation of $175,000 and an annual
incentive bonus of up to 50% of base salary based upon the
achievement of specified performance goals. In addition, the
executive received options to acquire 200,000 shares of the
Company's common stock at an exercise price of $7.50 per share. The
options vest over a two-year period and are exercisable over five
years. The intrinsic value of these options was measured using the
share price of $17.50 on March 20, 2000 and was accounted for as
compensatory options and gave rise to unearned compensation in the
amount of $2,000,000 at March 20, 2000. The compensation will be
earned and charged to expense ratably over the two-year vesting
period of the options and $30,137 has been charged to operations
for the three months ended March 31, 2000.
Consulting agreements
On February 9, 2000, the Company issued to Continental Capital Equity
Corporation ("CCEC"), a sophisticated investor, 30,000 shares of common
stock as compensation for services to be rendered by CCEC to the Company
pursuant to a Market Access Program Marketing Agreement dated January 26,
2000. The Company also issued to CCEC an option to purchase an additional
100,000 shares of common stock at prices ranging from $10.00 to $16.00 per
share. The common stock issuance and option grant were measured using the
share price of $14.00 on January 26, 2000 and was accounted for as
unearned compensation in the amounts of $420,000 and $870,000,
respectively. The $1,290,000 is being charged to operations ratably over
the twelve-month period of the agreement. Approximately $226,000 has been
charged to operations for the three months ended March 31, 2000.
7 Subsequent events
On April 7, 2000, the Company entered into an employment agreement with
its Chief Operating Officer. The agreement has a term of three years at an
annual base salary of $175,000, subject to annual review by the Board of
Directors for possible increase. The agreement also provides for an annual
incentive bonus of up to 50% of base salary. In addition, in accordance
with the terms of the employment agreement, on April 7, 2000, the Company
granted to the executive a stock option to purchase 500,000 shares of the
Company's common stock at an exercise price of $7.50 per share. The option
is
10
<PAGE>
WALL STREET STRATEGIES CORPORATION AND SUBSIDIARY
FORM 10-QSB - MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7 Subsequent events (continued)
exercisable over five years and vests with respect to 125,000 shares on
December 6, 2000, with respect to an additional 125,000 shares on March 6,
2001, and with respect to the remaining shares in equal quarterly
increments of 62,500 shares each over the following year.
11
<PAGE>
WALL STREET STRATEGIES CORPORATION
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, OF THE COMPANY CONTAINED
ELSEWHERE IN THIS FORM 10-QSB.
Overview
Since its founding in 1991, the Company has engaged in the business of
providing investment research and information services for institutional and
individual investors and financial professionals. The Company has historically
delivered its products, including financial and market information, analysis,
advice and commentary, to paying subscribers through a variety of media
including phone, fax, e-mail, audio recordings, newsletters and traditional
mail. Sales of subscriptions to the Company's products have represented the
Company's sole source of revenue, and the Company's subscribers have
predominantly been composed of institutional investors and financial
professionals.
During 1999, the Company adopted a business strategy designed to increase the
total number of its subscribers, including significant numbers of individual
investors, and to increase and diversify its sources of revenue. To those ends,
the Company has announced a number of initiatives, including the creation,
launch and marketing of its website and the establishment of strategic
distribution relationships through which the Company will reach both
institutional and individual investors. In particular, the Company expects to
use the website to build brand awareness, attract paying subscribers for its
products and generate advertising revenue.
In connection with the execution of its business strategy, in 1999, the
Company engaged various service providers including website designers and
providers of content for its website, purchased computer systems and software,
and hired additional management, sales, operational and administrative
personnel. In addition, in April 2000, the company's subsidiary, Wall Street
Strategies, Inc. ("Wall Street Inc.), filed an application with the Securities
and Exchange Commission (the "SEC") to register as an investment adviser under
the Investment Advisers Act of 1940, as amended, in order to enable it to
provide certain individualized products and services to subscribers for which
registration as an investment adviser is required. By letter dated April 27,
2000, Wall Street Inc. was advised by the SEC that its application had been
accepted for filing but no formal order of registration has yet been issued.
Although registration as an investment adviser and the ability to offer
individualized products and services is a part of the Company's strategy to
diversify its revenues sources, the central focus of the Company's overall
growth strategy is the development and marketing of its website and the
establishment of strategic relationships in order to market its products to
targeted groups of potential subscribers. Nevertheless, the failure of Wall
Street Inc. to obtain registration as an investment adviser could have a
material adverse effect on the Company's growth strategy, and, correspondingly,
on the Company's results of operations.
The Company anticipates that it will continue to develop its website during
2000, and will undertake a significant marketing and advertising program to
promote its brand and products. The Company will also pursue additional
strategic relationships and, as appropriate, hire additional personnel,
including management personnel, and purchase additional computer systems and
software.
As discussed below, the three months ended March 31, 1999 (the "1999 Period")
and March 31, 2000 (the "2000 Period") were characterized by significant sales
increases offset by significant expenses associated with sales commissions on
subscriptions, increased personnel and, in the 2000 Period, website design and
other strategic and operational initiatives. The
12
<PAGE>
Company expects operating losses to continue for the foreseeable future as it
intends to significantly increase its operating expenses to implement its
business strategy.
As of March 31, 1999, the Company had 1550 active subscribers. Subscription
revenue for the 1999 Period totaled $657,155. As of March 31, 2000, the number
of active subscribers increased to 3,050, and subscription revenue for the 2000
Period increased to $1,430,295.
Results of Operations
Revenues increased from $771,001 in the 1999 Period to $1,480,665 in the 2000
Period, an increase of 92%. Income from sales of subscriptions to the Company's
products represented nearly all of the Company's revenues in both periods except
for consulting income of $118,120 in the 1999 Period representing the value of
stock received by the Company in exchange for consulting and advisory services.
The increase in revenue resulted primarily from increased sales and promotional
efforts, the increased visibility of Charles Payne, the Company's chief analyst
and spokesperson, and the continued general growth in U.S. households'
purchasing and ownership of financial assets.
The Company realized a loss of $5,185 on the sale of marketable securities in
the 1999 Period as compared to a gain of $36,118 on the sale of marketable
securities in the 2000 Period.
The Company experienced a substantial increase in operating expenses from the
1999 Period to the 2000 Period, offsetting the increase in revenues over the
same period. A substantial portion of the increase in operating expenses is
attributable to stock compensation earned and charged to expense in connection
with the issuance of shares of Common Stock to certain key employees and new
management personnel recruited by the Company as part of the Company's expansion
strategy. Total operating expenses increased from $610,404 in the 1999 Period to
$3,520,526 in the 2000 Period, an increase of 477%. Of these amounts, $2,469,652
represented salaries and commissions in the 2000 Period, compared to $388,299 in
the 1999 Period, an increase of 536%. The portion of this 2000 Period expense
attributable to stock compensation earned and charged to expense was $1,471,292.
In the absence of these charges, salaries and commissions would have increased
to $998,360, a 157% increase over the 1999 Period. Payroll taxes and employee
benefits increased 73% over the same periods, from $78,717 to $136,274. Apart
from the charge to expense represented by stock compensation, increases in
salaries and commissions continued to represent a substantial portion of the
overall increase in operating expenses. Such increases were attributable to
retention of existing personnel and engagement of additional personnel,
particularly management personnel required to effect the Company's business
strategy of growth and expansion, as well as to increased commissions payable to
sales representatives in connection with increased subscription sales. The
Company anticipates continuing its efforts to retain and recruit personnel and
corresponding increases in expenses attributable to salaries and commissions, as
well as increased commissions payable as subscription sales increase. The
Company further anticipates significant additional charges to expense for earned
stock compensation during 2000 and 2001.
During the 2000 Period, the Company incurred consulting fees of $299,685, of
which amount $225,578 represented stock compensation earned and charged to
expense paid to a public relations firm, and the balance represented consulting
fees paid to various financial and other consultants. Consulting fees of $14,500
were incurred during the 1999 Period.
Rent and occupancy costs increased from $15,163 in the 1999 Period to $32,089
in the 2000 Period, an increase of 112%. The increase was attributable to the
leasing of additional space required to house the increased number of employees
and sales people hired or engaged by the Company. The Company has signed a lease
for new office space and expects to relocate its offices to the new space by
July 1, 2000. The Company's new facility will be significantly larger than its
existing office space, and, accordingly, the Company anticipates substantial
increases in its rent and occupancy costs during 2000 and in subsequent years.
The Company experienced increased costs and expenses in the 2000 Period as
compared to the 1999 Period in a number of other areas attributable to its
expansion and the implementation of
13
<PAGE>
its business strategy to increase the number of its subscribers and to create
its website. Telephone and communications costs increased from $35,944 in the
1999 Period to $82,288 in the 2000 Period, an increase of 129%. Travel and
promotion costs increased from $1,327 in the 1999 Period to $139,974 in the 2000
Period, an increase of 10,500%. Furthermore, the Company incurred website
development costs in the 2000 Period in the amount of $78,198 and depreciation
and amortization increased from $1,597 in the 1999 Period to $40,624 in the 2000
Period. Of such increase, $30,624 represented amortization of the Company's
capitalized website development costs. The Company also incurred professional
fees of $105,479 in the 2000 Period attributable to its expansion and becoming a
reporting issuer. No professional fees were incurred in the 1999 Period.
General and administrative costs increased from $74,857 in the 1999 Period to
$119,588 in the 2000 Period, an increase of 58%.
The Company experienced a net loss for the 2000 Period of ($2,137,505), or
($12.63) per share, as compared to a net profit for the 1999 Period of $152,003,
or $0.02 per share. Management believes that the increase in the Company's net
loss was primarily due to the stock compensation charge described above, as well
as increased salaries and commissions paid to additional personnel and in
respect of increased subscriptions and other increased operating expenses.
Although the Company cannot accurately determine the precise effect of
inflation on its operations, it does not believe that inflation has had a
material effect on sales or results of operations in the 1999 Period or the 2000
Period.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its operations out of revenues from
subscriptions for its products. In September 1999, the Company received net
proceeds of $3,000,000 from the sale of 600,000 shares of its Common Stock at
$5.00 per share to three accredited investors, Bamby Investments Limited, a
private investment company based in the Bahamas, HK Partners LLC, a private
limited liability company engaged in making real estate and securities
investments that is based in Denver, Colorado, and Gerald Turner, one of the
Company's directors (the "Private Placement").
Net cash provided by operating activities in the 2000 Period was $174,219
compared to net cash provided by operating activities of $304,314 in the 1999
Period. This decrease was primarily due to increased operating expenses incurred
in connection with the implementation of the Company's business strategy. Net
cash used in investing activities in the 2000 Period was $348,164, compared to
net cash provided by investing activities of $25,954 in the 1999 Period. The
increased cash used in investing activities was used for purchases of property
and equipment of $125,472, payment of deferred website development costs of
$141,530, construction payments of $141,142 and payments made for other assets
in the amount of $4,065. Additionally, cash provided by proceeds from the sale
of marketable securities was $64,045 in the 2000 Period compared to $25,964 in
the 1999 Period. Net cash from financing activities for the 1999 Period was
$28,875, representing the repayment of a loan from a shareholder. No cash from
financing activities was provided in the 2000 Period. At March 31, 2000, the
Company had cash and cash equivalents on hand of $2,332,560.
The Company anticipates increased cash demands to meet such requirements as
increased salary costs related to retention and attraction of personnel,
continuing costs of development, maintenance and expansion of the Company's
website, costs associated with advertising and marketing campaigns contemplated
for 2000, higher rent and occupancy expenses associated with the Company's move
to new and larger facilities currently planned for approximately July 1, 2000,
costs associated with upgrading internal accounting and other operating systems,
costs associated with becoming and remaining a reporting issuer and other
working capital and general corporate purposes.
14
<PAGE>
The Company committed to spend approximately $350,000 during the period
November 1999 through April 2000, in connection with the acquisition of computer
and other equipment to support its website, of which all but $150,000 has been
paid as of March 31, 2000. The Company is also obligated to spend, on or before
August 1, 2000, approximately $175,000 in connection with its new facilities,
including furniture and other equipment for such facilities. The Company has no
other commitments for capital expenditures.
The Company believes that the cash on hand, together with the cash generated
by its operations, will be sufficient to meet its contractual and other
commitments for the next nine to twelve months, assuming no significant
increases in personnel and advertising, marketing and other promotional
expenditures. Such increases, as well as expansion of the Company's computer,
accounting and other infrastructure systems, will be necessary for the Company
to aggressively implement its business strategy and, therefore, the Company may
require additional funds. The amount of additional funding that may be required
and the timing thereof will depend on many factors that the Company is unable to
predict, such as the amount of revenues generated from operations and the market
acceptance of its website and existing and new products and services. However,
the Company anticipates that over the next six months it may require
approximately $3,000,000 of additional funds and an additional $5,000,000 over
the following 12 months. Management believes that equity financing would most
likely serve as the source of such additional funds. Any such equity financing
would be expected to result in dilution to the holders of the Company's Common
Stock. The Company could also seek to finance such expenses through debt
financing. Any debt financing obtained by the Company would be likely to include
restrictive covenants limiting the Company's ability to obtain additional
capital, whether through additional debt or equity financings, as well as
restrictive covenants limiting the Company with respect to various operational
and financial matters. In any event, there can be no assurance that additional
financing, whether through sales of equity or debt, will be available on terms
and conditions acceptable to the Company, if available at all. If such financing
is required and cannot be obtained, the Company would be required to reduce or
postpone expenditures, particularly with respect to advertising and promotional
campaigns. Any such postponement could have a material adverse effect on the
Company's business and results of operations.
In December 1999, the Company retained Joseph Charles & Associates, Inc.
("Joseph Charles"), to assist the Company with respect to matters relating to
the financing of the Company's business, recapitalizations, mergers and
acquisitions. The Company paid such firm an advance of $50,000 against future
fees and expense allowances that is non-refundable except under certain
circumstances. Joseph Charles is a securities brokerage and investment banking
firm, established in 1991, with corporate offices located in Boca Raton, Florida
and ten additional offices in principal cities throughout the United States.
YEAR 2000 ISSUES
To date, the Company has not experienced, and does not anticipate
experiencing, any problems due to year 2000 related issues.
15
<PAGE>
WALL STREET STRATEGIES CORPORATION
PART II
OTHER INFORMATION
Item 1 Legal Proceedings
None
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
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934 the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized
WALL STREET STRATEGIES CORPORATION
(Registrant)
Date May 18, 2000 By: /s/ Charles V. Payne
------------------------------
Charles V. Payne
President
Date May 18, 2000 By: /s/ David McCallen
------------------------------
David McCallen
Vice President and
Chief Financial Officer
16
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,332,560
<SECURITIES> 91,110
<RECEIVABLES> 86,205
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,162,171
<PP&E> 198,068
<DEPRECIATION> (64,859)
<TOTAL-ASSETS> 4,019,140
<CURRENT-LIABILITIES> 2,097,200
<BONDS> 0
0
0
<COMMON> 17,594
<OTHER-SE> 1,904,346
<TOTAL-LIABILITY-AND-EQUITY> 4,019,140
<SALES> 1,430,295
<TOTAL-REVENUES> 1,480,665
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,520,526
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,039,861)
<INCOME-TAX> 97,644
<INCOME-CONTINUING> (2,137,505)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,137,505)
<EPS-BASIC> (12.63)
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