UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Amendment No. 1)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 5(d) OF THE SECURITIES ACT OF 1934:
For the Quarterly Period ended September 30, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from __________________ to __________________
Commission File number 1-12023
Level Jump Financial Group, Inc.
(Exact Name of registrant as specified in its charter)
Florida N/A
---------------------------------------- --------------------
(State or other jurisdiction of I.R.S. Employer ID No.
incorporation or organization)
30 Broad Street, 28th Floor
New York, New York 10004
----------------------------------------
(Address of principal executive offices)
(212) 344-5867
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 X NO ______
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES ____ NO. ____
APPLICABLE ONLY TO CORPORATE ISSUERS
As of September 30, 2000, 8,249,500 shares of the Issuer's Common Stock were
outstanding.
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited condensed consolidated financial statements of Level
Jump Financial Group, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. All
adjustments which, in the opinion of management, are necessary for a fair
presentation of the financial condition and results of operations have been
included. Operating results for the three month period and nine month period
ended September 30, 2000 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2000.
These interim condensed consolidated financial statements should be read in
conjunction with the Company's latest Annual Report on Form 10-KSB for the year
ended December 31, 1999 and the Company's Quarterly Reports on Form 10-QSB for
the three months ended June 30, 2000 and March 31, 2000.
Level Jump Financial Group, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
Sept. 30, Dec. 31,
2000 1999
---------- -----------
Assets
Current
Cash and cash equivalents $ 65,000 $ 19,426
Deposits with clearing broker 152,065 --
Investments in marketable securities 1,271,764 2,172,389
Accounts receivable, net of allowances
(2000 - $439,787, 1999 - $210,099) 53,252 290,944
Prepaid expenses and deposits 58,152 45,984
Deferred income taxes 104,139 71,474
Due from related parties -- 218,517
----------- -----------
1,704,372 2,818,734
Investments 187,600 321,032
Fixed assets 231,301 42,556
Deferred income taxes -- 16,179
Goodwill 312,591 --
----------- -----------
$ 2,435,864 $ 3,198,501
=========== ===========
Liabilities and Shareholders' Equity
Current
Payable to clearing broker $ 160,781 --
Accounts payable 75,197 65,657
Accrued liabilities 51,577 16,306
Bank loan -- 500,000
Note payable (Note 2) 803,900 --
Obligations under capital lease 12,545 --
Deferred income taxes 3,589 454,070
Deferred revenues 229,044 130,534
Due to related parties 615 --
Income taxes payable 592,066 628,453
----------- -----------
1,929,314 1,795,020
Deferred lease inducements 3,510 8,443
Obligations under capital lease 64,815 --
----------- -----------
68,325 8,443
----------- -----------
1,997,639 1,803,463
=========== ===========
Shareholders' equity
Share capital
Authorized
4,999,998 Preferred shares, $.0025 par value
1 Preferred share, class A, $.0025 par value
1 Preferred share, class B, $.0025 par value
200,000,000 Common shares, $.0025 par value
Issued
1 Preferred share, class A, $.0025 par value -- --
1 Preferred share, class B, $.0025 par value -- --
8,249,500 Common shares (Note 3)
(1999 - 7,863,500) 20,624 19,659
Par value in excess of capital 708,116 (16,419)
Retained earnings (264,221) 518,351
Accumulated other comprehensive income
(loss) appreciation of investments (26,294) 873,447
--------- -----------
438,225 1,395,038
--------- -----------
$ 2,435,864 $ 3,198,501
========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
Level Jump Financial Group, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
For the For the
Three Three
Months Ended Months Ended
Sep. 30, 2000 Sep. 30, 1999
------------- ------------
Revenue
Commissions $ 58,450 --
Trading (14,823) --
Investment banking 20,000 --
Investor relations 178,733 $ 1,313,470
------------ ------------
242,360 1,313,470
Cost of revenues 130,097 191,708
------------ ------------
Gross profit 112,263 1,121,762
------------ ------------
Operating expenses
Sales and marketing 1,959 20,567
Product development -- --
General and administration 461,895 502,576
Amortization of goodwill 17,366 --
------------ ------------
481,220 523,143
------------ ------------
Income (loss) from operations (368,957) 598,619
Investment income (loss) (165,890) (47,535)
------------ ------------
Income (loss) before income taxes (534,847) 551,084
Provision (recovery) for income taxes (67,357) 277,118
------------ ------------
Net income (loss) for the period (Note 1) (467,490) $ 273,966
============ ============
Basic earnings (loss) per share (Note 4) ($ 0.06) $ 0.07
Diluted earnings (loss) per share (Note 4) ($ 0.06) $ 0.02
Shares used in per share
calculation - basic 8,249,500 3,700,000
Shares used in per share
calculation - diluted 8,249,500 13,509,398
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
Level Jump Financial Group, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
For the For the
Nine Nine
Months Ended Months Ended
Sep. 30, 2000 Sep. 30, 1999
------------- ------------
Revenue
Commissions $ 99,218 --
Trading 120,552 --
Investment banking 118,715 --
Investor relations 229,452 $ 2,277,013
----------- -----------
567,937 2,277,013
Cost of revenues 329,728 435,367
----------- -----------
Gross profit 238,209 1,841,646
----------- -----------
Operating expenses
Sales and marketing 92,725 75,659
Product development -- 10,480
General and administration 1,660,206 883,759
Amortization of goodwill 34,732 --
----------- -----------
1,787,663 969,898
----------- -----------
Income (loss) from operations (1,549,454) 871,748
Investment income 679,574 210,400
----------- -----------
Income (loss) before income taxes (869,880) 1,082,148
Provision (recovery) for income taxes (87,308) 451,541
----------- -----------
Net income (loss) for the period (Note 1) ($ 782,572) $ 630,607
=========== ===========
Basic earnings (loss) per share (Note 4) ($ 0.10) $ 0.17
Diluted earnings (loss) per share (Note 4) ($ 0.10) $ 0.09
Shares used in per share
calculation - basic 8,156,982 3,700,000
Shares used in per share
calculation - diluted 8,156,982 6,829,570
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
Level Jump Financial Group, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the For the
Nine Nine
Months Ended Months Ended
Sep. 30, 2000 Sep. 30, 1999
------------- ------------
Cash flows from operating activities
Net income (loss) ($ 782,572) $ 630,607
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operations
Amortization 69,256 10,023
Bad debts 229,688 149,000
Release from accrued liabilities -- (196,750)
Deferred income taxes (16,519) 16,091
Realized capital gains (664,777) (214,237)
Fees satisfied by securities (365,803) (1,401,392)
Consulting and compensation
expenses satisfied by securities 171,112 275,597
Changes in assets and liabilities, net of
business combination
Deposits with clearing broker (140,192) --
Investments in marketable securities,
trading (887,149) --
Accounts receivable, net 8,004 (441,490)
Prepaid expenses and deposits (12,168) 2,106
Payable to clearing broker 160,781 --
Accounts payable 400 114,198
Accrued liabilities 65,271 (447,820)
Deferred revenues 98,510 48,253
Income taxes (36,387) 465,278
Deferred lease inducements (4,933) --
----------- -----------
(2,107,478) (990,536)
----------- -----------
Cash flows from investing activities
Due from related parties 218,517 910,380
Purchases of fixed assets (136,572) (19,462)
Purchases of marketable securities (3,300) --
Acquisition of Southland Securities
Corporation (350,000) --
Proceeds from sale of marketable securities 1,506,284 563,517
----------- -----------
1,234,929 1,454,435
----------- -----------
Cash flows from financing activities
Due to related parties 615 (58,030)
Repayment of bank loan (500,000) --
Repayment of obligations under capital lease (9,337) --
Proceeds from note payable (Note 2) 803,900 --
Proceeds from issuance of common shares 623,000 3,700
Dividends -- (364,510)
Payment against bank overdraft (55) --
----------- -----------
918,123 (418,840)
----------- -----------
Net increase in cash and cash equivalents
during the period 45,574 45,059
Cash and cash equivalents, beginning of period 19,426 5,658
----------- -----------
Cash and cash equivalents, end of period $ 65,000 $ 50,717
----------- -----------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
Level Jump Financial Group, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the For the
Nine Nine
Months Ended Months Ended
Sep. 30, 2000 Sep. 30, 1999
------------- ------------
Supplementary schedule of non-cash investing and
financing activities:
Marketable securities loaned to two officers
and directors (included in due from
related parties) -- $ 151,875
Marketable securities received for services
not rendered (included in accounts payable) -- 125,000
Marketable securities paid on share exchange
(included in accrued liabilities) 30,000
Deferred taxes on unrealized gains (losses)
of marketable securities (11,134) --
Obligations under capital lease 85,897 --
----------- -----------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
Level Jump Financial Group, Inc.
Summary of Significant Accounting Policies
(Unaudited)
September 30, 2000 and 1999
-------------------------------------------------------------------------------
Nature of Business and
Basis of Presentation
Level Jump Financial Group, Inc. (the "Company") operates in
two business segments: broker-dealer and financial public
relations. The Company's wholly owned subsidiary, Level Jump
Trading, Inc., is a National Association of Securities
Dealers ("NASD") registered broker-dealer that is engaged in
market making, customer brokerage and investment banking
activities. The Company's wholly owned subsidiary,
thestockpage.com, provides financial public relations
services to small- and micro-cap publicly traded or listed
companies.
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. The
Company has not recognized significant revenues from its
financial public relations services or its broker-dealer for
the nine months ended September 30, 2000. As a result, the
Company has incurred operating losses, has a negative
working capital balance, and has negative cash flows from
operations. The Company has been covering losses through the
sale of marketable securities, the issuance of common stock,
and the issuance of a note payable. The Company will not be
able to continue covering losses through the sale of
marketable securities beyond the next two months. These
factors raise substantial doubt about the Company's ability
to operate as a going concern. The financial statements do
not include any adjustments that might result from the
outcome of the uncertainty. The Company's board of directors
is implementing a restructuring plan and has passed a motion
to sell thestockpage.com, is negotiating to sell a
significant controlling interest in the Company to an
outside group, and is winding up Level Jump Financial Group
(Canada), Inc., a dormant subsidiary. If negotiations to
sell a controlling interest in the Company are completed
successfully, it is anticipated that the Company's existing
management and board of directors will be replaced when the
sale closes.
On October 28, 1999, Caldera Corporation ("Caldera")
acquired all of the issued and outstanding common shares of
the Company and agreed to assume certain obligations with
respect to issuing additional common shares under
exchangeable share agreements and a performance equity plan
and issuing preferred shares under a voting agreement. In
exchange for the issued and outstanding common stock of the
Company, the shareholders of the Company were issued common
shares of Caldera in a number that gave the shareholders of
the Company control of Caldera. In addition, at the time of
the transaction, the board of directors of Caldera resigned
and the officers and directors of the Company were appointed
to the board of directors of Caldera. In January, 2000,
Caldera Corporation's name was formally changed to Level
Jump Financial Group, Inc.
6
<PAGE>
Level Jump Financial Group, Inc.
Summary of Significant Accounting Policies
(Unaudited)
September 30, 2000 and 1999
-------------------------------------------------------------------------------
On January 31, 2000, the board of directors of the Company
passed a resolution to merge the Company into Level Jump
Financial Group, Inc. (previously Caldera Corporation). On
February 14, 2000, the state of Colorado accepted the merger
and the Company ceased to exist. All obligations of the
Company were assumed by Level Jump Financial Group, Inc.
(previously Caldera Corporation). Going forward, all
references to the Company in these financial statements are
to Level Jump Financial Group, Inc. (previously Caldera
Corporation).
The accompanying unaudited condensed consolidated interim
financial statements reflect all adjustments, which in the
opinion of management, are necessary for a fair presentation
of the results of operations for the periods shown. The
results of operations for such periods are not necessarily
indicative of the results expected for the full fiscal year
or for any future period.
The accompanying consolidated financial statements include
the accounts of the Company and its wholly owned
subsidiaries, Level Jump Trading, Inc., Level Jump Asset
Management, Inc., Level Jump Financial Group (Canada), Inc.,
and thestockpage.com inc.
These financial statements should be read in conjunction
with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1999 and the Forms
10-QSB for the quarters ended March 31, 2000 and June 30,
2000.
Recent Accounting Standards
In June 1998, the Financial Accounting Standards Board
("FASB") issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 requires
companies to recognize all derivative contracts as either
assets or liabilities in the balance sheet and to measure
them at fair value. If certain conditions are met, a
derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition
of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii)
the earnings' effect of the hedged forecast transaction. For
a derivative not designated as a hedging instrument, the
gain or loss is recognized in income in the period of
change. SFAS 133, as amended, is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. The
Company is evaluating the standard and has not determined
the impact on the financial results or condition of the
Company.
In December 1999, the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin 101 ("SAB 101"),
"Revenue Recognition in Financial Statements." SAB 101
summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in
financial statements. The Company is required to adopt SAB
101 in the fourth quarter of fiscal 2000. The Company does
not expect the adoption of SAB 101 to have a material effect
on its financial position or results of operations.
7
<PAGE>
Level Jump Financial Group, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 2000 and 1999
-------------------------------------------------------------------------------
1. Comprehensive Income (Loss)
The components of comprehensive income (loss), net of tax, are as follows:
Three Months Three Months
Ended Ended
Sep. 30, Sep. 30,
2000 1999
----------- -----------
Comprehensive income
Net income (loss) ($467,490) $ 273,966
Net unrealized gain (loss)
on securities, (net of
reclassification adjustment) (122,583) 297,682
--------- ---------
Total ($344,907) $ 571,648
--------- ---------
Nine Months Nine Months
Ended Ended
Sep. 30, Sep. 30,
2000 1999
----------- -----------
Comprehensive income
Net income (loss) ($ 782,572) $ 630,607
Net unrealized gain (loss)
on securities, (net of
reclassification adjustment) (899,741) 881,727
----------- -----------
Total ($1,682,313) $ 1,512,334
----------- -----------
________________________________________________________________________________
2. Issuance of Note Payable
On September 29, 2000, the Company received $803,900 fair value of freely
tradable common stock of two United States Over-the-Counter Bulletin Board
issuers from two external parties in a non-monetary transaction. In
exchange for the common stock, the Company issued a note payable to the
external parties. The amounts received were used to capitalize the
Company's broker-dealer subsidiary. The note is non-interest bearing and
has a maturity date of February 15, 2001. The Company can sell the common
stock with prior permission from the lenders. Any amounts sold by the
Company are repayable in cash on the maturity date. Any amounts still held
as common stock are repayable in common stock on the maturity date.
$400,000 in cash value of the note payable can be converted at the lenders'
option into a 39.9% equity interest in the Company's broker-dealer
subsidiary.
8
<PAGE>
Level Jump Financial Group, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 2000 and 1999
-------------------------------------------------------------------------------
3. Shareholders' Equity
On January 24, 2000, the Company issued 178,000 common shares at a price
per share of $2.50 for total proceeds of $445,000.
On January 24, 2000, the Company issued 20,000 common shares as
compensation for a consulting agreement for investor relations and
financial advisory services. The contract is for a term of nine months and
the Company is recognizing consulting expenses of $102,500 during the term
of the contract.
On April 13, 2000, the Company issued 186,000 common shares at a price per
share of $1.00 for total proceeds of $186,000. The Company paid a
commission to a finder of $8,000 and 2,000 common shares.
On August 29, 2000, the Company cancelled 1,375,000 management stock
options to reduce the total number of options outstanding to 469,725.
9
<PAGE>
Level Jump Financial Group, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 2000 and 1999
-------------------------------------------------------------------------------
4. Earnings per Share
For the three months and nine months ending September 30, 2000, the number
of shares used for basic and diluted loss per share are the same because
the inclusion of common stock equivalents would be antidilutive.
For the three months and nine months ending September 30, 1999, the
computation of basic and diluted earnings per share were as follows:
Three Months Nine Months
Ended Ended
Sep. 30, Sep. 30,
1999 1999
----------- -----------
Basic:
Net income attributable to common shares $ 273,966 $ 630,607
Weighted average common shares
outstanding 3,700,000 3,700,000
----------- -----------
Basic earnings per share $ 0.07 $ 0.17
----------- -----------
Diluted:
Adjusted income attributable to common
shares $ 273,966 $ 630,607
Weighted average common shares
outstanding 13,000,000 6,800,000
Assumed exercise of stock options, net of
common shares assumed repurchased
with the proceeds 509,398 29,570
----------- -----------
Adjusted weighted average common shares
outstanding 13,509,398 6,829,570
----------- -----------
Diluted earnings per share $ 0.02 $ 0.09
----------- -----------
-------------------------------------------------------------------------------
5. Net Capital Requirements
As a registered broker-dealer, Level Jump Trading is subject to the
requirements of Rule 15c3-1 (the net capital rule) under the Securities
Exchange Act of 1934, as amended. The object of the rule is to require the
broker-dealer to have at all times sufficient liquid assets to cover its
current indebtedness. Specifically, the rule prohibits a broker-dealer from
permitting its "aggregate indebtedness" from exceeding fifteen times its
net capital as those terms are defined.
On September 30, 2000, Level Jump Trading's aggregate indebtedness and net
capital were $89,109 and $561,709, respectively, a ratio of 0.16 to 1.00.
10
<PAGE>
Level Jump Financial Group, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 2000 and 1999
-------------------------------------------------------------------------------
6. Segmented Information
The Company is engaged in two lines of business: Broker-Dealer and
Financial Public Relations. Each line of business is operated in separate
subsidiaries. Level Jump Trading, the Broker-Dealer, is located in New
York, NY and Fort Worth, TX. thestockpage.com, Financial Public Relations,
is located in Toronto, Ontario, Canada. Prior to April 3, 2000, the Company
operated in one line of business, Financial Public Relations, and
comparative data is not included. The following is a summary of the
Company's operations by business segment for the three months and nine
months ending September 30, 2000:
Financial
Broker- Public
Dealer Relations
----------- ------------
For the three months ended September 30, 2000
Revenue $ 63,627 $ 178,733
Cost of revenues 60,780 69,317
Operating expenses 256,750 224,470
Income (loss) from operations ($ 253,903) ($ 115,054)
Investment income 1,949 (167,839)
----------- -----------
Income (loss) before income taxes ($ 251,954) ($ 282,893)
----------- -----------
For the nine months ended September 30, 2000
Revenue $ 338,485 $ 229,452
Cost of revenues 131,125 198,603
Operating expenses 408,359 1,379,304
Income (loss) from operations ($ 200,999) ($1,348,455)
Investment income (69,708) 749,282
----------- -----------
Income (loss) before income taxes ($ 270,707) ($ 599,173)
----------- -----------
September 30, 2000
Assets $ 1,209,426 $ 1,226,438
----------- -----------
11
<PAGE>
6. Commitments and Contingencies
At September 30, 2000, thestockpage.com has current income taxes payable to
the Canadian federal government and Ontario provincial government of
$591,340. This liability is past due and interest is accruing at a rate of
9%. Because of operating losses, the decline in value of securities,
limited cash flow, and intercompany loans that cannot be repaid
immediately, thestockpage.com cannot repay its Federal and Provincial tax
liabilities at this time. The Federal and Provincial governments have a
number of options available to them when attempting to collect unpaid taxes
including: attachment or seizure of assets, garnishment of accounts
receivable, bank accounts or wages, and cancellation of thestockpage.com's
articles of incorporation. To date, thestockpage.com has not entered into
any formal repayment arrangements with the Federal government.
thestockpage.com has agreed to repay approximately $2,700 per month to the
Provincial government over the next 12 months at which time the repayment
schedule will be reexamined. There is significant risk that
thestockpage.com could be shut down by the Canadian Federal and/or Ontario
Provincial governments because of its inability to repay its current income
taxes.
thestockpage.com and its management are involved in a dispute with a third
party regarding failed negotiations between thestockpage.com and its
management to sell an interest in thestockpage.com to the third party.
Claims and counterclaims have been filed by thestockpage.com and the third
party respectively. Management believes the claims are without merit, and
does not believe that the Company's potential exposure related to this
matter would have a material adverse effect on the Company's financial
position.
thestockpage.com has filed a claim against a previous client for failure to
make complete payment for performance under a contract. The previous client
has filed a counterclaim seeking damages for breach of contract and
interference in economic relations. The proceeding is currently at a very
early stage and the Company is unable to predict its ultimate outcome.
Management believes the counterclaim is without merit and intends to defend
against it vigorously.
A previous contractor to Level Jump Trading has made a demand under the
provisions of the Texas Deceptive Trade Practices-Consumer Protection Act.
The demand alleges that Level Jump Trading owes the contractor $117,848 for
past services. The proceeding is currently at a very early stage and the
Company is unable to predict its ultimate outcome. Management believes the
demand is without merit and intends to defend against it vigorously. As
part of the Purchase Agreement between the Company and the previous owner
of Level Jump Trading (previously Southland Securities), the Company is
indemnified for up to $150,000 for past liabilities. The Company has denied
the previous contractor's demand and is waiting for a response from the
previous contractor.
The Company and a director settled a claim that had been brought against
the Company and a director alleging that the Company, the director and a
number of unrelated parties owed up to $90,000 as a finders fee for a
transaction. The Company did not make any payments or provide any other
consideration to settle the claim.
Management is not currently aware of any other legal proceeds or claims
that the Company believes will have, individually or in the aggregate, a
material adverse effect on the Company's financial position or results of
operations.
12
<PAGE>
7. Subsequent Events
On October 30, 2000, the Company approved the sale of thestockpage.com inc.
to Robert Landau and David Roff, two directors, officers and shareholders
of the Company. The motion was approved unanimously by the disinterested
members of the board of directors. On October 31, the Company obtained
shareholder consents from shareholders holding a majority of the issued and
outstanding common shares and filed a preliminary information statement
with the SEC. The sale of thestockpage.com is for consideration of $100;
cancellation of the right to acquire 5,912,500 common shares of the
Company; cancellation of the Class A preferred share and Class B preferred
share of the Company; and cancellation of employment agreements between the
Company, Robert Landau and David Roff. The Company anticipates accounting
for the sale of thestockpage.com as a discontinued operation.
13
<PAGE>
Item 2. Management's Discussion and Analysis
When used in this Form 10-QSB and in future filings by Level Jump with the
Securities and Exchange Commission, the words or phrases "will likely result,"
"management expects," "Level Jump expects," "will continue," "is anticipated" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Readers are
cautioned not to place undue reliance on any such forward-looking statements,
each of which speak only as of the date made. These statements are subject to
risks and uncertainties, some of which are described below. Actual results may
differ materially from historical earnings and those presently anticipated or
projected. Level Jump has no obligation to publicly release the results of any
revisions that may be made to any forward-looking statements to reflect
anticipated events or circumstances occurring after the date of such statements.
Introduction
The Company had a difficult quarter amid increasing competition for the
provision of on-line investor relations services and volatile trading results in
the broker-dealer subsidiary. In light of the negative operating results for the
Company's subsidiaries during the last three quarters, the board of directors
developed a restructuring plan and has begun the process of implementing it.
On October 30, 2000, the Company approved the sale of thestockpage.com inc. to
Robert Landau and David Roff, two directors, officers and shareholders of the
Company. The motion was approved unanimously by the disinterested members of the
board of directors. On October 31, 2000 the Company obtained shareholder
consents from shareholders holding a majority of the issued and outstanding
common shares and filed a preliminary information statement with the SEC. The
sale of thestockpage.com is for consideration of $100; cancellation of the right
to acquire 5,912,500 common shares of the Company; cancellation of the Class A
preferred share and Class B preferred share of the Company; and cancellation of
employment agreements between the Company, Robert Landau and David Roff.
On November 2, 2000, certain shareholders including shareholders who are
directors of the company agreed to sell 5,949,750 shares of issued and
outstanding shares of common stock, or approximately 72 percent, of the Company
to an unaffiliated entity. The purchaser expressed interest in building the
broker-dealer and have already lent the Company $803,900 in market value of
freely tradable common stock to capitalize the broker-dealer. If the sale
closes, the existing board of directors and management of the Company will be
replaced by a new board of directors to be named by the unaffiliated entity.
As part of the restructuring of the Company and its subsidiaries, the board of
directors has filed a final return to dissolve Level Jump Financial Group
14
<PAGE>
(Canada), Inc. and anticipates the completion of this within the next four
months. The Company also intends to wind-up Level Jump Asset Management, Inc., a
dormant subsidiary, within the next six months.
Upon completion of the restructuring, the Company will be able to focus on its
core broker-dealer business, will have eliminated an unprofitable investor
relations business, and should have access to additional capital through the new
shareholders who have experience in raising funds for companies.
Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999
For the three months ended September 30, 2000, revenues decreased by 82% to
$242,360 from $1,313,470 for the prior comparable period. Investor relations'
revenues decreased by 86%. thestockpage.com signed two new clients for
significantly lower prices and for longer service terms than in the prior
comparable period. Level Jump Trading contributed $67,627 in revenues to the
Company. The broker-dealer had mixed trading results during the quarter.
The Company's gross profit as a percentage of revenues decreased to 53% for the
three months ended September 30, 2000 from 85% for the prior comparable period.
Gross profit margin in the broker-dealer was 4%. Cost of revenue consisted of
clearing fees, ECN fees and commissions to traders. The unanticipated decline in
gross profit margin in the broker-dealer was a result of lower than expected
trading revenues. Gross profit margin from financial public relations was 61%.
Cost of revenue consisted of direct salaries and costs for investor relations'
campaigns. The gross profit margin from financial public relations has declined
in 2000 as the price per client has dropped and the term and nature of services
performed has increased.
Operating expenses for the three months ended September 30, 2000 were $481,220,
a decrease from $523,143 in the prior comparable period. Sales and marketing
expenses decreased to $1,959 from $20,567 for the prior comparable period.
General and administration costs decreased to $461,895 from $502,576. This
decrease is attributable to the restructuring program being implemented by the
Company that includes a reduction in staff in thestockpage.com, the foregoing of
management salaries by key management of the Company, and general cost cutting
measures as opportunities arose.
For the three months ended September 30, 2000, investment income decreased to a
loss of $165,890 from a loss of $47,535 in the prior comparable period.
Investment income is primarily comprised of capital gains and losses on the
sales of securities. Realized gains and losses are dependent on market and
company specific conditions and can vary dramatically from quarter to quarter
and year to year. In the three months ended September 30, 2000, Level Jump Asset
Management realized a significant loss from warrants it was holding in one of
its past clients and thestockpage.com realized a loss from stock that had been
restricted for one year and had declined in price.
The Company's effective tax rate differs from the statutory tax rate because of
operating losses in thestockpage.com and tax rate differences on capital gains
between Canada and the United States.
For the three months ended September 30, 2000, the Company's net loss was
$467,490 as compared to net income of $273,966 for the prior comparable period.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999
For the nine months ended September 30, 2000, revenues decreased by 75% to
$567,937 from $2,277,013 for the prior comparable period. Investor relations'
revenues decreased by 90%. thestockpage.com signed two clients for significantly
lower prices and for longer service terms as compared with the five clients
signed in the prior comparable period. Level Jump Trading contributed $338,485
in revenues to the Company. The broker-dealer had mixed trading results during
the entire period with an exceptional decline in September.
The Company's gross profit as a percentage of revenues decreased to 42% for the
nine months ended September 30, 2000 from 81% for the prior comparable period.
Gross profit margin in the broker-dealer was 61%. Cost of revenue consisted of
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clearing fees, ECN fees and commissions to traders. Gross profit margin from
financial public relations was 13%. Cost of revenue consisted of direct salaries
and costs for investor relations' campaigns. The gross profit margin from
financial public relations has declined in 2000 as the price per client has
dropped and the term and nature of services performed has increased.
Operating expenses for the nine months ended September 30, 2000 were $1,787,663,
an increase from $969,898 in the prior comparable period. Sales and marketing
expenses increased to $92,725 from $75,659 for the prior comparable period. This
increase is attributable to financial public relations costs to increase Level
Jump's profile in the investment community. Product development costs decreased
to $0 from $10,480 for the prior comparable period. General and administration
costs increased to $1,660,206 from $883,759. This increase is attributable to an
allowance for doubtful accounts, increases in staff salaries in thestockpage.com
during the first six months of 2000 and Level Jump Trading, rent expense from a
larger office in Toronto, Ontario and offices in New York, NY and Fort Worth,
TX, professional fees and regulatory fees.
For the nine months ended September 30, 2000, investment income increased to
$679,574 from $210,400 in the prior comparable period. Investment income is
primarily comprised of capital gains and losses on the sales of securities.
Realized gains and losses are dependent on market and company specific
conditions and can vary dramatically from quarter to quarter and year to year.
In the nine months ended September 30, 2000, thestockpage.com realized
substantial gains from two clients that experienced increases in stock prices
since thestockpage.com began holding the securities.
The Company's effective tax rate differs from the statutory tax rate because of
operating losses in thestockpage.com and tax rate differences on capital gains
between Canada and the United States.
For the nine months ended September 30, 2000, the Company's net loss was
$782,572 as compared to net income of $630,607 for the prior comparable period.
Liquidity and Capital Resources
At September 30, 2000, the Company had a net working capital deficit of
$224,942. The Company's principal sources of liquidity include cash and cash
equivalents, deposits with clearing broker, and investments in marketable
securities.
At September 30, 2000, thestockpage.com has current income taxes payable to the
Canadian federal government and Ontario provincial government of $591,340. This
liability is past due and interest is accruing at a rate of 9%. Because of
operating losses, the decline in value of securities, limited cash flow, and
intercompany loans that cannot be repaid immediately, thestockpage.com cannot
repay its Federal and Provincial tax liabilities at this time. The Federal and
Provincial governments have a number of options available to them when
attempting to collect unpaid taxes including: attachment or seizure of assets,
garnishment of accounts receivable, bank accounts or wages, and cancellation of
thestockpage.com's articles of incorporation. To date, thestockpage.com has not
entered into any formal repayment arrangements with the Federal government.
thestockpage.com has agreed to repay approximately $2,700 per month to the
Provincial government over the next 12 months at which time the repayment
schedule will be reexamined. There is significant risk that thestockpage.com
could be shut down by the Canadian Federal and/or Ontario Provincial governments
because of its inability to repay its current income taxes.
On August 1, 2000, the Company completed the repayment of its $500,000 bank
loan.
The Company has a $2,107,478 deficit in cash from operating activities for the
nine months ending September 30, 2000 compared to a deficit of $990,536 for the
comparable prior period. The decrease in cash generated from operations during
the nine months ending September 30, 2000 is primarily due to the net loss,
increases in realized capital gains, deposits with clearing broker and
investments in marketable securities - trading, and decreases in additional
income taxes payable. Offsetting these amounts was a decrease in accounts
receivable, accrued liabilities and fees satisfied by securities.
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Net cash of $1,234,929 was generated by investing activities for the nine months
ending September 30, 2000 due to sales of marketable securities of $1,506,284
that significantly exceeded purchases of fixed assets of $136,572 and the
acquisition of Southland for $350,000. In the comparable prior period, net cash
of $1,454,435 was generated by investing activities primarily due to the
proceeds from sales of marketable securities of $563,517 and the decrease in
amounts due from related parties of $910,380.
Net cash of $918,123 was generated by financing activities for the nine months
ending September 30, 2000 due to issuance of common shares of $623,000 and the
issuance of a note payable of $803,900 that was partially offset by repayment of
the bank loan of $500,000. In the comparable prior period, a net deficit of
$418,840 was caused by the payment of dividends and a decrease in amounts due to
related parties.
On January 24, 2000, the Company issued 178,000 common shares to four
individuals at a price per share of $2.50 for total proceeds of $445,000. On
April 13, 2000, the Company issued 186,000 common shares to two individuals at a
price per share of $1.00 for total proceeds of $186,000. The Company paid a
commission of $8,000 and issued 2,000 common shares with a value of $1.00 per
share to a finder for assistance in raising $100,000 of the $186,000. The other
$86,000 of proceeds was raised through a director of the Company and no
commission was paid.
On September 29, 2000, the Company received $803,900 fair value of freely
tradable common stock of two United States Over-the-Counter Bulletin Board
issuers from two external parties in a non-monetary transaction. In exchange for
the common stock, the Company issued a note payable to the external parties. The
amounts received were used to capitalize the Company's broker-dealer subsidiary.
The note is non-interest bearing and has a maturity date of February 15, 2001.
The Company can sell the common stock with prior permission from the lenders.
Any amounts sold by the Company are repayable in cash on the maturity date. Any
amounts still held as common stock are repayable in common stock on the maturity
date. $400,000 in cash value of the note payable can be converted at the
lenders' option into a 39.9% equity interest in the Company's broker-dealer
subsidiary.
For the nine months ended September 30, 2000, the Company's net increase in cash
and cash equivalents was $45,574 as compared to a net increase of $45,059 for
the prior comparable period.
The Company expects to fund short-term operations and other cash expenditures
through the use of available cash, sales of marketable securities, proceeds from
the issuance of the note payable, and new equity sources. The Company has been
covering losses through the sale of marketable securities, the issuance of
common stock and the issuance of the note payable. The Company's investment
position has declined significantly over the past nine months and the Company
will not be able to continue covering losses in thestockpage.com beyond the next
two months through the sale of marketable securities. It is the Company's
intention to close the sale of thestockpage.com prior to December 31, 2000. The
Company intends to use proceeds from the note payable to fund any working
capital deficiencies in the broker-dealer. Management has implemented a
restructuring plan which includes the sale of a controlling interest in the
Company to unaffiliated parties that management believes has the ability to
raise additional equity capital for the Company. There is no assurance that such
equity capital will be raised. Over the long-term, management believes that to
realize its business plan, the Company will need to raise significant external
financing. If these funds are not raised, the Company will have to scale back
the implementation of its broker-dealer strategy.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed.
27.1 Financial Data Schedule.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to the report on From 10QSB to be
signed on its behalf of the undersigned, thereunto duly authorized.
Dated: December 5, 2000 Level Jump Financial Group, Inc.
By: /s/ Brice Scheschuk
-----------------------------
Brice Scheschuk
Secretary
(Principal Financial and
Accounting Officer)
