UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the quarterly period ended September 30, 2000
Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from to
Commission file number 0-31009
VIRTUALMONEY, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Minnesota 41-1961048
(State or Other Jurisdiction of (IRS Employer ID Number)
Incorporation or Organization)
2325 Sheridan Hills Road, Wayzata, Minnesota 55391
(Address of Principal Executive Offices)
952-249-6204
(Issuer's Telephone Number Including Area Code)
15300 - 37th Avenue North, Plymouth, Minnesota 55446-3283
(Former Address)
(Former Name, Former Address and Former Fiscal Year, If Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be
filed by section 13 or 15(d) of the Securities 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
Number of shares outstanding as of November 30, 2000: 4,026,384
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INDEX
VIRTUALMONEY, INC.
PART I, FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited).
Balance sheets as of September 30, 2000 and April
30, 2000 3
Statements of operations for the three months and nine
months ended September 30, 2000 4
Statements of Stockholders' Equity 5
Statements of cash flow for the nine months ended
September 30, 2000 6
Notes to financial statements at September 30, 2000 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES
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Item 1. Financial Statements (Unaudited)
VIRTUALMONEY, INC.
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
September 30, April 30,
2000 2000
ASSETS
Current assets:
Cash $ 89,686 $ 17,394
Notes receivable - related party 6,986 1,018
Employee advances 388 -
Prepaid expenses:
Legal retainer 12,000 4,000
Directors fees 10,208 17,500
Other 200 -
Total current assets 119,468 39,912
Furniture and equipment 53,392 430
Less accumulated depreciation 1,239 22
Net fixed assets 52,153 408
Other assets:
Investment - Advance on RMSI stock 28,500 7,000
License agreement, net 565,000 590,000
Total other assets 593,500 597,000
Total assets $ 765,121 $ 637,320
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,148 $ -
Accrued salaries and related 37,972 -
Total current liabilities 57,120 590,000
Stockholders' equity:
Common stock, no par value; authorized
8,000,000 shares 884,044 690,477
Deficit accumulated during the
development stage (176,043) (53,157)
Total stockholders' equity 708,001 637,320
Total liabilities and stockholders' equity $ 765,121 $ 637,320
See notes to financial statements
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VIRTUALMONEY, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Date of Inception
Ended (January 10, 2000)
Sept. 30, Through
2000 Sept. 30, 2000
Revenues $ - $ -
Expense:
Amortization 15,000 35,000
Depreciation 1,194 1,239
Directors fees 4,375 7,292
Office and administrative 3,940 8,028
Payroll and related 24,490 39,490
Professional and consulting fees 20,963 67,989
Rent 3,982 9,197
Telephone 1,273 1,371
Travel and entertainment 221 1,279
Web design 4,290 5,918
Total expense 79,728 176,803
Net loss before other income (79,728) (176,803)
Other income:
Interest income 600 760
Net loss $ (79,128) $ (176,043)
Basic earnings (loss) per share $ (.02) $ (.05)
Weighted average number of shares outstanding 3,843,602 3,632,669
See notes to financial statements
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VIRTUALMONEY, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS? EQUITY
(Unaudited)
Deficit
Common Stock During
Number of Development
Shares Amount Stage Total
Issuance of founders stock,
January 14, 2000 2,403,000 $ - $ - $ -
Issuance of stock at $1 per share
in January and February 2000,
net of issuance costs of $4,273 42,500 38,227 - 38,227
Issuance of stock for services and
future services, at $.50 per share
January through April 2000 104,500 52,250 - 52,250
Issuance of stock for license
agreement at $.50 per share 1,200,000 600,000 - 600,000
Issuance of stock at $1 per share
in June through September 2000
net of issuance costs of $22,066 211,500 189,434 - 189,434
Issuance of stock for services at
$1.00 per share in July 2000 4,133 4,133 - 4,133
Loss January 10, 2000 to
September 30, 2000 - - (176,043) (176,043)
3,965,633 $ 884,044 $ (176,043) $ 708,001
See notes to financial statements
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VIRTUALMONEY, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
(Unaudited)
Date of Inception
Three (January 10, 2000)
Months Ended Through
Sept. 30, 2000 Sept. 30, 2000
Cash flows from operating activities:
Net loss $ (79,128) $ (176,043)
Adjustments to reconcile net loss to cash
flows from operating activities:
Depreciation 1,194 1,239
Amortization 15,000 35,000
Stock issued for services - 46,175
Notes receivable - related party and
employee advances (2,980) (7,374)
Prepaid expenses (3,825) (12,200)
Accounts payable 6,413 19,148
Accrued expenses 22,971 37,972
Net cash flows from operating activities (40,355) (56,083)
Cash flows from investing activities:
Purchases of furniture and equipment (51,690) (53,392)
Purchase of investment - advance on RMSI stock (15,000) (28,500)
Net cash flows from investing activities (66,690) (81,892)
Cash flows from financing activities:
Proceeds from common stock 99,350 227,661
Increase in cash (7,695) 89,686
Cash - beginning of period 97,381 -
Cash - end of period $ 89,686 $ 89,686
See notes to financial statements
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A. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period
ended September 30, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31,
2000. For further information, refer to the financial
statements and footnotes thereto included in the Company's
summary report for the period ended April 30, 2000.
1. Company
Virtualmoney, Inc. (d/b/a Virtualmoney.com) was formed under
the laws of the State of Minnesota on January 10, 2000. The
Company has obtained an exclusive license to use the Real
Monetization process for the purpose of issuing an asset-
backed real monetary equivalent (the Millennium Dollar) that
is defined in terms of the United States Dollar ($1.00 or
USD). Specifically, the Millennium Dollar will be defined
as equaling the purchasing power of the USD on the base line
date of January 1, 2000, using the Consumer Price Index for
All Urban Consumers (CPI-U) Reference Number for October
1999. As such, the Millennium Dollar will fluctuate with
inflation and deflation over time, as measured by the
percentage change in the CPI-U. The Company will stand ready
to repurchase the Millennium Dollars at a price sufficient
to cover the expense incurred in providing this liquidity.
In addition, the Company will initiate and maintain monetary
transfer services over the Internet, composed of e-mail
transmissions, such that users of the Millennium Dollar will
be able to use it as a virtual currency. The e-mail itself
will be a notification that the Company is holding the
private currency for the recipient as stored value on its
database. In this manner, the private currency is not
actually transmitted over the Internet, but rather is moved
from one account to another on the Company's secured
database.
2. Development Stage Company
From inception to September 30, 2000, the Company is deemed
to be in the development stage. To date the Company has
devoted the majority of its efforts to: raising capital;
entering into the Millennium Dollar license agreement; and
researching and articulating the plan of operations for the
purpose of introducing the Millennium Dollar and thereafter
for providing monetary transfer and conversion services via
the Internet. Planned principal operations have not yet
commenced and the first revenues are not anticipated until
the first quarter of 2001.
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2. Development Stage Company (Continued)
The Company is presently attempting to: create the Company's
Web Site; formalize an income-sharing program involving viral
network marketing for early participants; prepare for the
issuance of Millennium Dollar monetary units in the form of
"promises-to-pay" via secure e-mails over the Internet; and
preparing the databases required for (a) the ownership and
transfer of the Millennium Dollars, (b) the investment of
the USD, received in the distribution and utilized for the
conversion of the Millennium Dollars, and (c)the ownership
and transfer of the Companys common stock, as well as the
ongoing efforts to fund the Company and engage key personnel.
Ultimately, the Company feels that it will be able to gain
acceptance for the Millennium Dollar, and its monetary
transfer services, whereby the Company expects to generate
revenues from (a) the investment income earned upon the USD
assets, primarily U.S. Treasuries, backing the Millennium
Dollar, as well as (b) from the currency spread charged for
the conversion of the Millennium Dollar promises-to-pay back
into USD. It is expected that these combined operations will
generate net revenues (after the inflationary adjustment, but
before operating expenses and income-sharing) of about four
percent (4.0%) per annum on the outstanding Millennium
Dollars in circulation. As such, it is expected that the
Company can achieve profitable operations and thereby realize
assets and settle obligations in the normal course of
operations. No estimate can be made of the range of loss
that is reasonably possible should the Company be
unsuccessful.
3. Related Party Transactions
Millennium Dollar License Agreements
On February 24, 2000, the Company entered into a license
agreement with Real Monetary Systems, Inc. (RMSI) for the
exclusive rights to sponsor the issuance of an asset-backed
real monetary equivalent (the Millennium Dollar) that is
defined in the terms of the United States Dollar ($1.00). As
consideration for this license the Company agreed to:
* Issue RMSI 1,200,000 shares of unregistered common stock in
the Company with a fair value at issuance of $600,000, and
* to pay RMSI a royalty of 7-1/2 basis points (.075%) per
annum on the outstanding Millennium Dollar principal
balance; which may be calculated in either Millennium
Dollars, or the corresponding accrued nominal value in
United States Dollars.
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3. Related Party Transactions (Continued)
Millennium Dollar License Agreements (Continued)
RMSI has applied for patent protection and will use its best
efforts to complete the pending patent application. No
warranty has been made regarding the validity of any pending
patent rights or claims. The acquired licensed trade secrets
are for the use of certain processes, which will be utilized
for the introduction and maintenance of an asset-backed real
monetary equivalent defined in United States Dollars.
Initially, these processes may be carried out by the first
generation of Real Monetary Software, which is composed of
certain spread sheet files; all of which the Company is
authorized to use and amend as needed.
Nonetheless, the future development of the Real Monetary
Software will be exclusively licensed to Real Monetary
Software, Inc. (RMSOFT), subject to a contractual agreement
that the use of the Real Monetary Software must be in
conjunction with an exclusive license issued by RMSI with
respect to a given type of real financial instrument. The
terms and conditions of the Company's use of the stand-alone
version of the Real Monetary Software are still being worked
out with RMSOFT, as are the terms and conditions of the license
by and between RMSI and RMSOFT. Nonetheless, the granting of
the exclusive license by RMSI to develop the Real Monetary
Software, will be contingent upon RMSOFT's granting of a
license for the software to the Company. One purpose of this
licensing structure is to standardize the software, as well as
to minimize the development and maintenance costs, which may
then be shared by various licensed users over time.
Furthermore, the software itself is not material, until such
time as a sufficient volume of real financial instruments have
been issued and outstanding; since the critical function of the
software is to assist in the creation of a liquid market for
the accruing interest that is inherent in real financial
instruments. The Company's license is limited to the use of
the technology for the issuance of the Millennium Dollar as
previously defined. Nonetheless, it is expected to have a
close working relationship with other companies licensed by
RMSI to create: (a) the stand-alone software, (b) the liquid
market for the Treasury Inflation Protection Securities and (c)
for the liquid market for Real Mortgage-Backed Securities. The
Company will begin to generate a market for the products and
services of these other companies, as it begins to succeed in
the distribution and maintenance of the Millennium Dollar in
the marketplace. Any improvements, made by the Company with
respect to the licensed trade secrets and software, shall
remain the sole property of RMSI. Hence, any and all
improvements, created by individual licensees, may then be
distributed to all licensees at the sole discretion of RMSI.
Once again, the goal being to standardize the development of
the software, thereby creating a coherent real monetary system
for the benefit of all Millennium Dollar users.
Prepaid Directors Fees
The Company issued 35,000 shares of its common stock valued at
$17,500 to directors as an advance toward future directors
fees. These shares are subject to prorata recall in the event
that the director's services to the Company are terminated for
any reason.
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3. Related Party Transactions (Continued)
Notes Receivable Related Party
The Company has advanced amounts to Real Monetary Systems,
Inc., the licensor of the Millennium Dollar, under two demand,
open ended, promissory notes. These notes are unsecured and
bear interest at 8% per annum.
Investment - Related Party
The Company's founder and president has granted the Company an
option to acquire up to 45,000 shares of Real Monetary Systems,
Inc. (RMSI) common stock from him at $2 per share. This option
expires February 16, 2001. Through September 30, 2000, the
Company has advanced $28,5000 to this individual towards the
purchase of 14,250 shares of RMSI common stock at a historical
cost of $28,500. RMSI is a privately held company with limited
operations. Although the market value of the investment in
RMSI is not readily determinable, management believes it is
equal to its carrying value.
Subsequent to September 30, 2000, the Company has continued to
advance monies to this individual towards the purchase of RMSI
stock. The Company anticipates transfer of the RMSI stock to
the Company in the fourth quarter 2000.
Item 2. Management?s Discussion and analysis of financial
Condition and Results of Operations
Forward-Looking Statement Notice
When used in this report, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and
similar expressions are intended to identify forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934 regarding events, conditions, and financial trends that may
affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons
reviewing this report are cautioned that any forward-looking
statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may
differ materially from those included within the forward-looking
statements as a result of various factors.
Three Months Ended September 30, 2000 and the Period From Date of
Inception (January 10, 2000) through September 30, 2000.
The Company had no revenue from continuing operations for both
the three-month period that ended September 30, 2000 and the
period from the date of inception (January 10, 2000) through
September 30, 2000.
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The Company had general and administrative expense of $63,534 for
the three-month period that ended September 30, 2000 compared to
$140,564 for the period from the date of inception (January 10,
2000) through September 30, 2000. These general and
administrative expenses consisted of general corporate
administration, web design, payroll, director's fees, legal fees
and professional expenses, and accounting and auditing costs.
The Company had depreciation and amortization expenses of $16,194
for the three-month period that ended September 30, 2000 and
$36,239 for the period from the date of inception (January 10,
2000) through September 30, 2000. The depreciation and
amortization expenses consisted of furniture and equipment,
organizational costs, and the Millennium Dollar licensing
agreement.
As a result of the foregoing factors, the Company realized a net
loss of $79,128 for the three months ended September 30, 2000,
compared to a net loss of $176,043 for the period from the date
of inception (January 10, 2000) through September 30, 2000. This
loss is due to the cost of developing business operations without
the influx of revenue from operations.
Plan of Operation
Business Overview:
The Company was organized on January 10, 2000 to offer a private
currency to the general public, along with the requisite monetary
conversion, accounting and transfer systems; such that the
private currency could be used over the Internet. As such, the
private currency will be represented as stored value on the
Company's database. The private currency will be called the
Millennium Dollar, which may be abbreviated as MR$. The purpose
of this private currency is to offer a monetary unit that
substantially holds its purchasing power over time, as measured
by the Consumer Price Index for All Urban Consumers (CPI-U). The
offering of the private currency over the Internet will entail
the development of the requisite software systems.
The Company has engaged Bluewater Information Convergence, Inc.
(or Bluewater) on a turn-key basis to develop, operate and
maintain the hardware and software systems required to carry out
the Company's offering of the private currency over the Internet.
Originally, Bluewater defined three phases for the initial
development of the Company's web site and related systems. These
systems were originally envisioned to allow the Company to begin
the offering of its private currency in September. Nonetheless,
this would entail that Company operators (i.e. employees) would
have to carry out many functions by hand on terminals. Based
upon Bluewater's recommendation, the Company elected to delay the
offering of the MR$ until such time as additional development is
completed, which would reduce the amount of human intervention
required.
The offering of private currency raises legal issues related to
the distribution, circulation and conversion of such currencies.
As such, the Company engaged a qualified banking attorney to
review the Company's proposed business plan with respect to any
state or federal laws that might be pertinent. On November 9,
2000, the Company was advise of a number of legal issues that
should be reviewed. On November 10, 2000, management decided
that it was only prudent that these legal issues be addressed
prior to the offering of the private currency. As such, the
offering of the private currency was postponed until the first
calendar quarter of the year 2001.
Currently, the Company is reviewing its position with respect to
the laws in its own home state of Minnesota. After evaluating
and then complying with Minnesota laws, the Company will commence
a state by state review of the laws; and, where such laws are not
arduous, the Company will make the appropriate license
applications and/or post the required bonds. Nonetheless, it is
expected that the Company may begin operations on a state by
state basis in those states which have been properly cleared,
until all such regulatory hurdles are overcome. Certainly, this
will result in the Company incurring certain expenses and time
constraints that were not originally envisioned.
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Gross Margin:
Inasmuch as the Company is currently in its development stage,
there are no revenues; and hence no gross margin to report.
Nonetheless, revenues are expected to commence with the offering
of the private currency in the first calendar quarter of the year
2001. Revenues will be generated from interest earned on the
currency float, after reimbursing the users for the inflationary
adjustment on the private currency; and by fees charged for
certain monetary conversions and/or transmissions. There will be
no charge for the conversion of U.S. dollars into Millennium
Dollars, nor with there be any charge for the transmission
(actually notification) of the MR$ via the Internet.
Operating Expenses:
As the Company moves from a development stage company to the
generation of revenues, the operating expenses will increase over
time. The increases are a function of increasing regulatory
expenses, software development, the leasing of hardware and
various business-related expenses including insurance and
personnel. The agreement with Bluewater was a turnkey contract
for $116,000 with $86,000 being paid through September 30, 2000.
The remaining $30,000 balance will be paid in the fourth calendar
quarter of 2000, as the Company accepts the software system
designed by Bluewater.
The Company is currently budgeting another $25,000 for additional
software development, although a formal bid by Bluewater has not
been formulated as yet; which means that the actual cost of this
work could increase. In addition, the Company has entered into a
contract with Bluewater's ICON Center for the ongoing operation
and maintenance of the system, as well as the leasing of the
required third party software and hardware systems. This is a
two-year contract at $7,850 per month. Inasmuch as legal
compliance issues have delayed the offering of the private
currency, Bluewater has agreed to credit 50% of the monthly ICON
Center fee as a credit to the new software development for a
period of up to three months. This credit would terminate upon
the commencement of the offering of the private currency, since
Bluewater would then have to allocate additional resources to
oversee the operation of the web site.
Net Income (Loss):
The Company's net loss through October, 2000, is $198,825, on an
unaudited basis. In November and December the losses will
accelerate as we prepare for the offering of the private
currency, estimated at $148,245; including the final $30,000
payment to Bluewater for the completion of Phase III of the
software development. In total, the projected net loss through
December 31 will be approximately $357,903, barring unforeseen
circumstances. This will include approximately $93,065 in
deferred officer salaries.
Commencing in January 2001, the Company projects an operating
overhead of approximately $64,900 per month. However, certain
officers and directors have elected to defer salaries of
approximately $22,600 per month. This leaves approximately
$42,300 per month, which must be funded on a cash basis. It is
further estimated that the Company's operating overhead will
increase at 3.5% per week, as unforeseen expenses are incurred.
In addition, the relative success of the Company's offering of
the private currency could accelerate the increase in the
overhead, as the Company is forced to upgrade its hardware and
software systems to meet the demand. Nonetheless, the general
assumption is that the current system will be able to cope with
up to 250,000 users, which is the Company's six month marketing
goal. Inasmuch as the Company is currently a development stage
company, funding must be raised via restricted stock sales and/or
loans to the Company from third parties. To date, the Company
has funded all of its activities via stock sales, and/or stock
compensation.
The projected growth rate is largely dependent upon the success
of the Company's viral network marketing program. This program
will include a revenue sharing program, whereby one percent of
the interest earned on the private currency float will be shared
on a network basis with early users who actively sign-up other
users. In addition, the projection is also dependent upon the
amount of average daily funds per user account,
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representing the currency float. At the break-even point, the
Company estimates that the average daily funds will be
approximately $165 per user. Any combination of a slower growth
rate of the user base, and/or a lower amount of average daily
funds per user; would extend the time period during which the
Company would incur net losses. The success of the Company is
dependent upon its ability to fund such losses until the break-
even point is reached. To date, the Company has been able to
fund these losses, such that the Company currently has no
outstanding debt.
Liquidity and Capital Resources:
The Company estimates it will need approximately $500,000 of
additional financing to fund operations through July 31, 2001.
The Company has no commitments for financing at this time. If
the Company is unable to obtain financing, its ability to
implement its business plan will be impaired. As of September
30, 2000, the Company was current with all of its operations, and
had cash on hand totaling $89,686.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
From June 1, 2000 through September 30, 2000, the Company issued
211,500 shares of restricted common stock to investors at $1 per
common share. Proceeds are reflected net of offering costs of
$22,066 in the accompanying financial statements. The shares
were issued in private transactions that did not involve any
public solicitation or sales and without registration in reliance
on the exemption provided under Section 4(2) of the Securities
Act of 1933.
In July of 2000, the Company issued 4,133 shares of restricted
common stock to a director of the Company and to a professional
adviser of the Company in exchange for services performed on
behalf of the Company valued at $4,133. The shares were issued
in private transactions that did not involve any public
solicitation or sales and without registration in reliance on the
exemption provided under Section 4(2) of the Securities Act of
1933.
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K: The Company filed no reports on Form 8-K
during the quarter ended September 30, 2000.
Exhibits: Included only with the electronic filing of this
report is the Financial Data Schedule for the nine-month period
ended September 30, 2000 (Exhibit ref. No. 27).
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.
VIRTUALMONEY, INC.
By: /s/ Thomas W. Tripp
Thomas W. Tripp
President, Director
Dated November 30, 2000
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