BEEPER PLUS, INC.
ANNUAL REPORT
Year Ended June 30, 2000
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended June 30, 2000
Commission File Number: 33-5516-LA
Beeper Plus, Inc.
(Exact name of registrant as specified in its charter)
Nevada 88-0219239
(State of Incorporation) (IRS Employer Identification Number)
3900 Paradise Road, Suite 201 Las Vegas, NV 89109
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (702) 737-5560
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (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
As of August 31, 1999, 4,808,134 shares of Common Stock of Beeper Plus, Inc.
were outstanding. The aggregate market value of the common stock held by
persons other than officers and directors of the Registrant and holders of more
than 10% of the Registrant's common stock as of August 31, 2000 was
approximately $221,546. (Based upon the average of the opening bid and low
asked prices of these shares).
<PAGE>
Beeper Plus, Inc.
Form 10-K
June 30, 2000
TABLE OF CONTENTS
Page
PART I
ITEM 1. Business 3
ITEM 2. Properties 7
ITEM 3. Legal Proceedings 7
ITEM 4. Submission of Matters to a Vote of Security Holders 8
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 8
ITEM 6. Selected Financial Data 9
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
ITEM 7A. Risk Factors 14
ITEM 8. Financial Statements and Supplementary Data 18
ITEM 9. Changes In and Disagreements with Accountants
On Accounting and Financial Disclosure 18
PART III
ITEM 10. Directors and Executive Officers of the Registrant 18
ITEM 11. Executive Compensation 19
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 20
ITEM 13. Certain Relationships and Related Transactions 21
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 21
2
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's prospects are subject to certain uncertainties and risks.
This Annual Report on Form 10-K also contains certain forward-looking statements
within the meaning of the Federal Securities Laws. The Company's future results
may differ materially from its current results and actual results could differ
materially from those projected in the forward-looking statements as a result of
certain risk factors. READERS SHOULD PAY PARTICULAR ATTENTION TO THE
CONSIDERATIONS DESCRIBED IN THE SECTION OF THIS REPORT ENTITLED "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
"RISK FACTORS". Readers should also carefully review the risk factors described
in the other documents the Company files from time to time with the Securities
and Exchange Commission.
PART I
ITEM 1. BUSINESS
General
Beeper Plus, Inc. (the "Company") is a Nevada corporation, was incorporated
on March 25, 1986, and has its corporate headquarters at 3900 Paradise Road,
Suite 201, Las Vegas, NV, 89109. The Company collects, organizes and
disseminates timely sports information through wireless services to individual
and corporate customers throughout the United States, Canada and the Caribbean,
as well as news information through a network of resellers.
The Company's objective is to extend its position as the premier provider of
timely comprehensive sports information over wireless media and the internet by
developing a device-agnostic platform, integrating technologically advanced
functionality and features to its service, and connecting with customers from a
variety of mediums.
The Company's Common Stock is currently listed on the NASD Bulletin Board
under the symbol BEPP.
Services and Customers
Sports Information
We collect from multiple sources information and facts attendant to past and
future sporting events, which include standings, partial and final scores, game
schedules, starting rosters and changes, injuries, weather conditions,
statistics, and insights on athletes in a number of professional and college
sports and leagues. The information and facts relate to sporting events held in
the United States as well as major international events and the Olympics. We
collect and review data and information which is fed continuously from three
principal information service providers, namely The Sports Network (TSN), The
Sports Wire and Don Best. After validating the information and data received,
our editorial staff selects, organizes, and repackages the information for the
various services that we offer.
First the information is earmarked for one or several of 15 channels our
subscribers can access, then structured in a format to convey a clear and
efficient message on a four-line LCD
3
<PAGE>
screen. The service tracks progress and highlights of games and events as they
unfold, and is updated as often as every three minutes.
The services provided by TSN and the Sports Wire are subject to fixed
contracts with automatic renewal for annual terms unless canceled by either
party. Services rendered by Don Best are provided on a subscription basis, and
have not been memorialized in a contract. The arrangements are not exclusive
and the wire services provide similar sports information to other customers.
Our customers subscribe to receive sports information on a timely basis via
wireless communication devices under three-month, six-month and twelve-month
subscription arrangements.
Individual customers Individual customers receive the information on a hand-
held battery operated alphanumeric pager and may
subscribe under two programs, namely the Sports Page and
the Score Page. Under both programs, sports information
is organized under 15 channels available directly from a
pager: the first four under each program are identical,
and the remaining 11 offer different quantity and types
of information.
The Sports Page consists of our most expansive listing
of sports information, including news spots and betting
lines from various sources. The Sports Page has received
national recognition in newspapers and magazines
throughout the country.
The Score Page is a lower-priced version of the Sports
Page, which provides access to essential sports
information.
Corporate customers Corporate customers receive selected sports information
via satellite and modem connection that is then
displayed on giant LED screens that adorn their
facilities. We are in the process of closing contracts
with four casinos located in the United States and
Canada to organize and feed selected sports information.
The Company has over 1,700 regular subscribers of the sports information,
with 90% of our subscribers selecting the Sports Page program. Approximately 50%
of our subscribers commit to six-month or twelve-month subscription arrangements
concurrent with the professional football season. Subscription fees are $360
per year for the Sports Page, and $120 per year for the Score Page, and
subscribers pay by check or credit cards. They are notified electronically at
the end of their subscription term of the end of their subscription, and, at
such moment are invited to renew their subscriptions.
Our services can only be accessed through high level Motorola pagers which
offer users rich functionality and full coverage. The Motorola pagers are
reprogrammable via wireless commands allowing us the power to turn on or off any
service at any time directly without depending on telephone providers. The
Company has entered into license agreements with Motorola in regard to the
FLEXSuite of Enabling Protocol (used with FLEX, ReFLEX and InFLEXion
transmissions) affording it access to the source code with a view to developing
new functionality, graphic displays and two-way interactive communication.
These are new features we are currently in the process of developing, however
there are no assurances that such
4
<PAGE>
features will be successfully developed and marketed in a timely fashion to
support our marketing initiatives. See "New Products" below.
Devices are sold subject to the manufacturers' warranties. We do not extend
additional warranties or afford our customers rights to return the devices to
us.
Front Page
On March 23, 1992, the Company signed a joint venture agreement with
National Disatch Center ("NDC") of San Diego, California. We agreed to sell and
promote a news paging service marketed as "The Front Page". The Front Page
service provides headline and top story updates, weather forecasts, daily
business reports, daily sporting event results and television listings and
weekly entertainment headlines and listings. The information sources utilized
by The Front Page service include various wire services such as United Press
International (UPI) and TSN. Information updates are provided in excess of 25
times a day. Under this joint venture, NDC has been reselling the Front Page
information to various paging providers. Revenue generated from this joint
venture have been $41,644 for the fiscal year ended June 30, 2000, and
represents approximately 5% of our business. Under the joint venture agreement
we are bound to share with NDC any revenue generated from the sale of news
information through any channel.
New Products
The Company is in the process of identifying and developing new features and
functionality that it can add to its current offerings as well as develop new
products, including providing the line and wagering tips by subscription service
to a hand held beeper, interactive pagers, and by a telephone 900-line and via
internet web sites.
We are completing the development of a new Internet site which should be
operational by the third quarter of this fiscal year which will provide enhanced
services and content, as well as serve as a marketing vehicle.
We are currently tailoring our services to operate under a WAP (Wireless
Application Protocol) platform. To this end we have also qualified under the
3Com Palm Solution Provider Program, and have access to the source code for Palm
OS software. We are currently in the planning stage for the development of these
new services. Further engineering and investments are required and prototypes
have not yet been developed. There are no assurances that such new products and
services will be successfully developed within the forecasted financial and time
budgetary limits and that such new products and services will be successful in
the marketplace.
Transmission of information
From our headquarters in Las Vegas, Sports Page and Score Page are
disseminated to our individual customers through PageNet Inc., a major wireless
and paging carrier. The information is reduced to digital signals and beamed via
satellite to transmitters owned by PageNet Inc. positioned in cities around the
country. These local transmitters then relay 900
5
<PAGE>
MHz signals within a 30 to 150 mile radius of their location. We have
contracted with PageNet Inc. for a three-year term, subject to yearly
extensions.
The agreement further provides for limitations of time utilization. During
our peak period, namely the football season, we will pay a surplus for the
quantity of information that we disseminate.
The Company is not required to maintain paging licenses.
Markets and Channels
We market our services through a number of advertising and promotion
initiatives, and through our web site. We also have a distributor in Hawaii
which markets our services in this region. This Distributor Agreement is in the
seventh year of a fifteen year term, which may be extended for up to two
additional five year terms. We are also developing a network of wireless
resellers with retail operations.
The Company will continue to rely on its current distributor and its ability
to successfully market the Sports Page and Score Page services through corporate
initiatives and programs. The Company has been and will continue to market its
products directly to its subscribers. The distributor is required to pay the
Company a minimum monthly fee, thus ensuring minimum monthly revenue for the
Company.
The Company intends to continue expansion into other information markets at
such time as the demand arises.
Other Sources of Revenue
We generate revenue from the sale of pagers, and from the reselling of
traditional paging functionality namely personal paging services for a modest
monthly charge. Approximately 35% of the Sports Page subscribers use the
enhanced pager service. In addition, we offer corporate customers the right to
reserve and tailor the information that is provided over specific channels under
the Sports Page and the Score Page services.
Competition
The dissemination of sports and news information is a competitive industry.
There area number of entities that are in direct or indirect competition with
the Company in disseminating sports information. There are a number of
enterprises that provide sports information through a number of traditional
channels like newspapers and television, and now through new media such as the
Internet and wireless hand-held devices and PDAs, two-way pagers and mobile
phones. Several disseminate sports information through a hand-held pager in a
similar fashion as the Company, while others feed sports information through
cable television sports channels, commercial television sports news programs,
sports information periodicals, the sports section of newspapers and radio,
direct dial "900" score lines and online computer services. No one player
dominates any of these channels. New technologies and providers have made the
dissemination of information at any time and anywhere easy and convenient for
any user to access sports information on a timely basis.
6
<PAGE>
The Company believes that it has a number of competitive advantages over
these companies, including product, distribution and customer service. The
Company believes the advantages in its products include comprehensiveness and
convenience.
Intellectual Property
The Company has invested significantly in building it Sports Page and Score
Page brands. It has not registered any of its trademarks, nor has it
investigated whether it has infringed third party trademark rights.
Employees
As of June 30, 2000, the Company had approximately twelve technical,
administrative and clerical personnel. None of the Company's employees are
represented by a labor union, and the Company has never suffered an interruption
of business as a result of a labor dispute. The Company considers its relations
with its employees to be good.
Management
The Board of Directors is composed of the following individuals: Kevin L.
Persinger, Frank H. DeRenzo, and Robert Muniz.
Financial Information about Industry Segment
The Company operates in one industry segment, involving the dissemination of
computer data sports and news information utilizing contracted paging services,
the Internet and via satellite LED display boards. The Company has no foreign
operations or export sales. The Company's operations are within the United
States, primarily in the State of Nevada. The financial information regarding
its domestic operations in the United States is contained in the Financial
Statements included in this report.
ITEM 2. PROPERTIES
The Company does not own or lease any paging transmitters. The Company owns
no real property. The Company has arrangements with the paging companies, which
provide for priority transmission rights. The Company leases office space,
located at 3900 Paradise Road, Suites 200 and 201, Las Vegas, Nevada. The
office space is leased from a non-affiliated lessor and is approximately 3,500
square feet. The term of the lease is 36 months ending June 30, 2001. The base
minimum monthly rent for the term of this lease is $5,800 per month from June
25, 2000 to June 30, 2001.
ITEM 3. LEGAL PROCEEDINGS
We are not aware of any pending or threatened litigation against us that we
expect will have a material adverse effect on our business, financial condition,
liquidity, or operating results. However, legal claims are inherently uncertain
and we cannot assure you that we will not be adversely affected in the future by
legal proceedings.
7
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock, par value $.01, is currently listed on the NASD
Bulletin Board. The Company's initial registration statement was declared
effective by the Securities and Exchange Commission on June 20, 1986. As of its
fiscal year ended June 30, 2000, there were no trades through the National
Association of Securities Dealers. The Bulletin Board does not constitute an
established public market as described in item 201(a)(1) of Regulation S-K. See
"ITEM 1. BUSINESS - General" herein regarding the Company's corporate name and
the ticker symbol for the Company's common stock.
The market price information for the common equity pursuant to Item 201 (a)
(i) (iii) for each fiscal quarter from the first quarter beginning July 1, 1998,
through June 30, 2000, was as follows:
Bid Price Asked Price
High Low High Low
______ _____ ______ ______
1998 First Quarter .150 .040 .280 .080
Second Quarter .938 .031 1.000 .047
Third Quarter .040 .040 .060 .060
Fourth Quarter .050 .0312 .080 .080
1999 First Quarter .0625 .050 .21875 .080
Second Quarter .09375 .0312 .21875 .0937
Third Quarter .1875 .09375 .3750 .2182
Fourth Quarter .875 .10 .3750 .2182
2000 First Quarter .3750 .1875 .50 .1875
Second Quarter .4200 .12 .50 .12
The above bid and asked quotations represent prices between dealers and does
not include retail markup, markdown or commission. They do not represent actual
transactions and have not been adjusted for stock dividends or splits.
No dividends have been declared with respect to the Common Stock since the
Company's inception, and the Company does not anticipate paying dividends in the
foreseeable future. However, there are no restrictions on the ability of the
Company to declare dividends on its Common Stock.
On June 30, 2000, the approximate number of holders of record of the
Company's $.01 par value Common Stock was 250.
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Year ended June 30
2000 1999 1998
______ ______ ______
Results of Operations Data
Operating Revenue $ 755,511 $ 828,331 $ 866,967
Net Income (Loss) (237,650) (290,173) (66,990)
Net Income (Loss)
Per Common Share Outstanding (.06) (.07) (.02)
Balance Sheet Data
Working Capital (deficit) (259,154) (150,005) 136,253
Total Assets 233,460 228,477 439,568
Total Liabilities 466,196 349,560 161,111
Stockholders' Equity (deficit) (232,736) (121,083) 278,457
Long-term Debt 0 0 0
The Company has not paid any dividends on its stock.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the fiscal year ended June 30, 2000 compared to fiscal
year ended June 30, 1999
Revenues
Revenues decreased to $755,511 for the fiscal year ended June 30, 2000, from
$828,331 for the fiscal year ended June 30, 1999, representing a decline in
revenue of $72,820 in fiscal 2000. The Company's Statement of Operations
reflects a net loss of $237,650 for the fiscal year ended June 30, 2000,
compared to a net loss of $290,173 for the fiscal year ended June 30, 1999.
The drop in revenues from 1999 to 2000 was primarily due to a decrease in
revenues generated by the Company's distributors. Our principal distributor on
the East Coast went out of business in the first quarter of the fiscal year
ended June 30, 1999, which resulted in a shortfall of approximately $35,000 in
forecasted revenue. We have not been successful in identifying the customers
which had contracted for our services with this distributor, or establish a new
distributor relationship to cover the region.
The Company has taken a number of steps to regulate the monthly fluctuations
in revenues. The emphasis is now on annual contracts directly with customers,
rather than on month-to-month arrangements through distributors. The Company has
already seen benefits from the "one-year contract / free pager" program it
introduced in 1999. As a result long term pager sales have decreased due to the
attempt to obtain more annual subscribers under the program. Also in 1999 the
Company began a 10-year buy-out of its largest distributor (Northern
California). This buy-out resulted in lower distribution revenues, but larger
per-customer fees as customers' contracts are renewed directly with the Company.
9
<PAGE>
The Front Page revenues have dropped as competition from large and well
known firms increases, and the ready availability of the information from
different media such as the Internet. For instance, Motorola and CNN both offer
a similar service to the Company's Front Page product, at lower prices. Since
1994, the number of local paging companies that have subscribed to the Front
Page service has dropped from 96 to 16.
The Company is in the process of identifying and developing new products as
well as new features and functionality that it can add to its current offerings.
We are completing the development of a new Internet site which should be
operational by the third quarter of this year and which will provide enhanced
services and content, as well as serve as a marketing vehicle. We are currently
tailoring our services to operate under the WAP platform. We are currently in
the planning stage for the development of these new services. Further
engineering and investments are required and prototypes have not yet been
developed. There are no assurances that such new products and services will be
successfully developed within the forecasted financial and time budgetary
limits, and that such new products and services will be successful in the
marketplace.
Operating Cost and Expenses
Cost of revenue consists primarily of the cost of acquiring data from
information service providers, and wire services, wireless and satellite
connectivity. Cost of revenue has increased from $211,775 for the fiscal year
ended June 30, 1999 , compared to $321,041 for the fiscal year ended June 30,
2000. Cost of revenue as a percentage of revenue was 25.6% and 42.5% for the
fiscal years ended June 30, 1999, and 2000 respectively. The increase was
primarily due to the higher cost charged by information service providers and
the higher wireless carrier charges for the upgraded service we are now
offering. During the six month transition period during which we phased in the
upgraded carrier service, the Company was paying for access to both services.
General and Administrative Expenses
General and administrative expenses consists primarily of personnel and
related costs and administrative expenses including rent, utilities and postage,
as well as marketing. General and administrative expenses have decreased from
$806,077 for the fiscal year ended June 30, 1999 to $559,032 for the fiscal year
ended June 30, 2000. Salaries and wages decreased during the fiscal period as a
result of austere salary and expense control programs. Advertising costs have
increased in an effort to explore new markets for the Company's services.
Liquidity and Capital Resources
We had a working capital deficit of $259,154 at June 30, 2000, compared to a
working capital deficit of $150,005 at June 30, 1999. For the fiscal year ended
June 30, 2000, cash used in operating activities was $4,546, as compared to
$252,760 for the fiscal year ended June 30, 1999. For the fiscal year ended June
30, 2000, investing activities used $3,080 as compared to $107,677 for the
fiscal year ended June 30, 1999. For the fiscal year ended June 30, 2000,
financing activities provided $10,000 primarily from proceeds of notes payable.
Net cash increased by $2,374 for the fiscal year ended June 30, 2000 as compared
to a decrease of $193,876 for the fiscal year ended June 30, 1999.
At June 30, 1999, the Company had a note receivable in the amount of
$100,000 (plus $5,997 of accrued interest) due from Maven Properties, Inc. (MPI)
which is a related party to
10
<PAGE>
Maven Enterprises, Inc., (MEI). MEI was a majority shareholder in the Company
owning 45.87% of the common stock outstanding at June 30, 1999. At the time of
the transaction the Chairman of the Board and Chief Executive Officer of the
Company, who was subsequently relieved of his position with the Company, was
also the Chairman of the Board and Chief Executive Officer of MEI and MPI.
During the year ended June 30, 2000, the President of the Company personally
purchased all of the shares of common stock held by MEI at June 30, 1999. The
note was issued, by the Company, to settle obligations of MEI. The note bears
interest at 8% and was due on November 4, 1998. The Company has reason to
believe MEI will not make payment on the note and, accordingly, during the year
ended June 30, 2000, recorded an impairment charge against the full value of the
note receivable plus accrued interest totaling $105,997.
At June 30, 2000, the Company secured a line of credit with Community Bank
of Nevada in the amount of $160,000, with a maturity date of August 14, 2001,
secured by the certificate of deposit in the amount of $160,000. Borrowings on
the line bear interest at 7.25% (payable monthly). At June 30, 2000 and 1999,
outstanding borrowings on this line were $159,931. The line of credit agreement
contains covenants which restrict the Company from incurring additional debt or
utilizing loan proceeds for purposes other than working capital. At June 30,
2000, the Company was in violation of the covenants with respect to use of
proceeds. Due to the violation of the credit line convenant, the amount owed to
the bank is payable upon demand and has been recorded by the Company as a
current liability.
During the year ended June 30, 2000, the President of the Company converted
$10,000 in principal outstanding at June 30, 1999, and an additional $10,000 in
principal loaned to the Company during the year into 500,000 shares of common
stock at the current market price on the date of conversion. Accrued interest,
at June 30, 2000, on the converted notes was paid in cash to the officer
subsequent to year end and not included as part of the conversion.
As shown in the accompanying financial statements, the Company has reported
net losses of $237,650 and $290,173 for the fiscal years ended June 30, 2000 and
1999 respectively, resulting in an accumulated deficit of $1,241,196 at June 30,
2000. The Company's ability to continue as a going concern is ultimately
dependent on its ability to obtain additional financing and to control costs and
generate sufficient revenues to obtain profitable operations. No assurance can
be given that the Company will be successful in these efforts. Management does
not believe that the cash, equivalents, and cash anticipated to be generated
from future operations will be sufficient to meet our working capital needs and
capital expenditures through the next fiscal year. However we may choose to
raise additional cash through the sale of equity or debt prior to such time. We
have no plans to pay dividends with respect to Common Stock in the foreseeable
future.
Subsequent events
In July 2000, the Company received a $50,000 advance from a lender. The
Company expects the advances to be classified as a convertible debenture,
however, the Company is still negotiating the terms of repayment, conversion
price, and the interest rate with the lender.
11
<PAGE>
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED JUNE 30, 1999 COMPARED TO FISCAL
YEAR ENDED JUNE 30, 1998
Revenues
During the fiscal year ended June 30, 1999, revenues were $828,331 as
compared to $866,967 for the fiscal year ended June 30, 1998, representing a
decline in revenue of $38,636 for the fiscal year ended 1999. The Company's
statement of operations for the fiscal year ended June 30, 1999 reflects a net
loss of $290,173, compared to a net loss of $66,990 for the fiscal year ended
1998.
The drop in revenues from 1998 to 1999 was primarily due to a decrease in
revenues provided by the Company's distributors. In 1998 the Company began the
10-year buy-out of the largest remaining distributor (Northern California). As
a result, the Company expects to see diminishing distribution revenues, but
larger per-customer fees as their contracts are renewed directly with Beeper
Plus, Inc. Also, the Company was forced to reduce the monthly fees paid by the
New England distributor in order to keep that company from becoming insolvent.
Pager sales have decreased due to the attempt to lure more annual customers
with a "one year contract, free pager" promotion. The Company expects to see
the benefit of this program in the long term. Front Page revenues have dropped
as competition from large and well known firms increases. Motorola and CNN both
offer a similar service to the Company's Front Page product, at a lower price.
Operating Cost and Expenses
Cost of sales has decreased as the Company has made every effort to acquire
pagers, wire service and satellite fees at lower costs. Advertising costs have
increased in an effort to explore new marketing venues for the Company. This
policy was aggressively pursued in 1998 under the supervision of new management.
Salaries and wages increased in 1998 most notably due to the addition of
temporary staff members. Rent has increased due to an expansion in the
Company's offices.
RESULTS OF OPERATIONS FOR THE THREE, SIX AND NINE MONTH PERIODS ENDED SEPTEMBER
30, AND DECEMBER 31, 1999, AND MARCH 31, 2000 COMPARED TO THE THREE, SIX AND
NINE MONTH PERIODS ENDED SEPTEMBER 30, AND DECEMBER 31, 1998, AND MARCH 31, 1999
This Management's Discussion and Analysis of Financial Condition and Results
of Operations for the three, six and nine months ended September 30 and December
31, 1999 and March 31, 2000, should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto set forth under
Note 13 of the Company's June 30, 2000 Financial Statements included in this
Annual Report on Form 10-K.
Results of Operations
The data has been derived from the unaudited condensed consolidated
financial statements contained in the June 30, 2000 Financial Statements
included in this Form 10-K which, in the opinion of management include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position and results of operations for the interim
periods. The operating results for any period should not be considered
indicative of results for any future period.
12
>PAGE>
Three, six, and nine month periods ended
September 30, 1999 December 31, 1999 March 31, 2000
(unaudited) (unaudited) (unaudited)
Results of Operations Data
Operating Revenue $ 150,621 $ 338,873 $ 567,012
Net Income (Loss) (196,841) (206,878) (208,747)
Net Income (Loss)
Per Common Share
Outstanding (.05) (.05) (.05)
Balance Sheet Data
Working Capital (deficit) (240,344) (250,656) (251, 795)
Total Assets 249,653 232,914 251,957
Total Liabilities 461,571 454,869 475,782
Stockholders' Equity
(deficit) (211,918) (221,955) (223,825)
Long-term Debt 0 0 0
Revenues
Operating revenues for the three, six and nine months ended September 30 and
December 31, 1999 and March 31, 2000 were $150,621, $338,873 and $567,012,
respectively, compared with $217,410, $459,773, and $670,275 for the three, six
and nine months ended September 30 and December 31, 1998, and March 31, 1999,
respectively.
The Company's Statement of Operations reflects net losses of $196,841,
$206,878 and $208,747 for the three, six and nine months ended September 30 and
December 31, 1999 and March 31, 2000, respectively, compared with net losses of
$75,128, $96,270, and $116,750 for the three, six and nine months ended
September 30 and December 31, 1998, and March 31, 1999, respectively. The drop
in revenues from the corresponding periods for the fiscal year ended June 30,
1999 was primarily due to a decrease in revenues generated by the Company's
distributors. Front Page revenues have dropped as competition from large and
well known firms increases, and the ready availability of the information from
different media such as the Internet.
Operating Cost and Expenses
Cost of revenue consists primarily of the cost of data acquired from
information service providers, wire services, wireless and satellite
connectivity. Cost of revenue has increased to $56,785, $107,532 and $190,442
for the three, six and nine months ended September 30 and December 31, 1999 and
March 31, 2000, respectively, compared with $61,983, $108,375, and $176,247 for
the three, six and nine months ended September 30 and December 31, 1998, and
March 31, 1999, respectively. The increase from the corresponding periods for
the fiscal year ended June 30, 1999 was primarily due to the higher cost charged
by information service providers and the higher wireless carrier charges for the
upgraded service we are now offering.
General and administrative expenses
General and administrative expenses consist primarily of personnel and
related costs and administrative expenses including rent, utilities and postage,
as well as marketing. General and administrative expenses have decreased for the
three, six and nine months ended September 30 and December 31, 1999 and March
31, 2000 to $184,774, $330,649 and
13
<PAGE>
$473,882 respectively compared with $244,686, $467,676, and $639, 812 for the
three, six and nine months ended September 30 and December 31, 1998, and March
31, 1999, respectively. Salaries and wages decreased during the fiscal period
as a result of austere salary and expense control programs.
Liquidity and Capital Resources
We had working capital deficits of $240,344, 250,656, and 251,795 for the
three, six and nine months ended September 30 and December 31, 1999 and March
31, 2000, respectively, compared with working capital of $44,879, $22,640, and
$863 for the three, six and nine months ended September 30 and December 31,
1998, and March 31, 1999, respectively.
Cash provided from operations was $2,782, $5,924 for the three and nine
months ended September 30, 1999 and March 31, 2000 whereas cash used from
operations was $2,403, for the six months ended December 31, 1999, compared with
cash used by operations of $89,778, $103,494, and $113,751 for the three, six
and nine months ended September 30 and December 31, 1998, and March 31, 1999.
Impact of Recently Issued Standards
In Fiscal 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (FASB133), "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. It requires
that an entity recognizes all derivatives as either assets or liabilities in the
statement of financial position and measures those instruments at fair value.
Subsequently, FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities -- Deferral of the Effective Date of FASB Statement No.
133", which amends the effective date of FASB133 to all fiscal quarters of all
fiscal years beginning after June 15, 2000. The Company does not believe the
adoption of FASB133 will have amaterial impact on its financial statements.
In December 1999, the Securities and Exchange Commission (SEC) released
Staff Accunting Bulletin No. 101 (SAB101) "Revenue Recognition In Financial
Statements". SAB101 establishes guidelines in applying generally accepted
accounting principles to the recognition of revenue in financial statements
based on the following four criteria; persuasive evidence of an arrangement
exists, delivery has occurred or services have been rendered, the seller's price
to the buyer is fixed or determinable, and collectibility is reasonably assured.
SAB 101, as amended by SAB 101A, is effective no later than the first fiscal
quarter of the fiscal year beginning after December 15, 1999, except that
registrants with fiscal years that begin between December 16, 1999 and March 15,
2000, may report any resulting change in accounting principle no later than
their second fiscal quarter of the fiscal year beginning after December 15,
1999. The Company does not believe that the adoption of SAB101 will have a
material effect on its financial position or result of operations.
ITEM 7A. RISK FACTORS
There are many factors that affect the Company's business and the results of
its operations, some of which are beyond the control of the Company. The
following is a
14
<PAGE>
description of some of the important factors that may cause the actual results
of the Company's operations in future periods to differ materially from those
currently expected or desired.
Our operating results may fluctuate from quarter to quarter.
Our future quarterly operating results may vary, and we could experience
reduced levels of earnings or losses in one or more quarters. Fluctuations in
our quarterly operating results could result from a variety of factors,
including:
- Changes in the demand for our services
- Changes in our pricing policies or those of our competitors
- Market acceptance of new and enhanced versions of our services
- Changes in operating expenses
- Changes in our strategy
- Introduction of alternative technologies and applications by our
competitors
- Effect of potential acquisitions
- Industry and general economic factors
The Company experiences some seasonal trends in the sale of its services.
For example, sales are often stronger during the football season in the
Company's second and third fiscal quarter. Historically, the net result of
seasonal trends has not been material relative to the company's overall results
of operations, but many of the factors that create and affect seasonal trends
are beyond the Company's control.
We have limited or no control over many of these factors. Due to all of
these factors and other risks discussed in this report, your period-to-period
comparisons of our results of operations may not reflect our future
performance.
Our services are evolving, and we cannot be sure they will be successful.
We are continuing to expand our market penetration through marketing
initiatives and the breadth of services namely through our contemplated Internet
initiative. In particular, we will continue to market our products directly to
our subscribers and we are developing a network of wireless resellers that will
serve as distributors. As a result, we cannot be sure that we will achieve the
necessary market penetration and distinguish our services and Internet offering
from the technologies and applications presented by our competitors.
The implementation of our Internet initiative has and is expected to
continue to require significant investment of both financial and management
resources, and the expenses related to our Internet initiative have had and we
expect will continue to have an adverse impact on our operating results and
earnings for the near term. We expect that our operational and development costs
related to our Internet initiative will increase significantly as we invest in
infrastructure and product development, and increase the sales and marketing
efforts. We do not expect to derive significant revenue from these services in
the near future. The success of the Internet initiative will require, among
other things, broad market acceptance by our existing and future customers. If
the Internet initiative does not generate sufficient revenues to achieve and
maintain profitability, our investment could adversely affect our operating
results and earnings in future quarters. If our operating results and earnings
fall below the expectations of public market analysts and investors, the trading
price of our Common Stock is likely to decline.
15
<PAGE>
The success of our business depends on our customers' continuing acceptance of
our services.
Currently, our revenues are derived from the use of information services. As
a result, the success of our business depends upon:
- Our ability to attract new customers and their acceptance of our current
and future service offerings
- Our current customers' adoption and acceptance of additional services that
we currently offer and will offer in the future
If we are unable to increase customer acceptance of our current service
offerings and achieve market acceptance of our future service offerings, our
business, financial condition, and results of operations will be materially
adversely affected.
The market for sports information services is intensely competitive.
We compete with a number of companies providing information services as well
as companies providing sports and news information as collateral content to
their primary offerings. We believe the principal factors on which we compete
include:
- Breadth and quality of services
- Price
- Customer base
- Customer service and support
- Focus, presence and knowledge
- Convenience
- Interactivity
Our industry is characterized by continuing improvements in technology,
which result in the frequent introduction of new products, and channels. While
the Company believes that its strategy and practices afford it an inherent
competitive advantage over some of its competitors, new players, applications
and technology present some of the greatest challenges.
We expect competition to increase as more companies enter the market and
existing competitors continue to change and expand their service offerings. In
addition, consumer portals are also significant competitors to our services.
Some of our potential competitors have longer operating histories, larger
customer bases, and greater brand recognition in electronic markets than we do.
As a result, some of our competitors with other revenue or investment sources
may be able to devote more resources to marketing and promotional campaigns,
adopt more aggressive pricing policies and devote substantially more resources
to product development and service offerings than we can, which may adversely
affect our business.
New technology could make our existing services obsolete.
The market for information services is characterized by rapidly changing
technology and continuously evolving standards. To be successful, we must adapt
by continually improving the performance, features, and reliability of our
services or else our services may become obsolete. We cannot assure you that we
will be able to respond in a timely manner to technological changes. The ability
of competitors to incorporate evolving standards and technologies successfully
into new services may make our services noncompetitive. Technological changes
16
<PAGE>
could force us to lower the price of our services. If we fail to adapt to or
incorporate new standards or technology, it may have a material adverse effect
on our business and results of operations.
We may not be able to effectively manage our growth.
Maintaining profitability during a period of expansion will depend, among
other things, on our ability to manage effectively our operations. If we are
unable to manage our growth effectively, it may have a material adverse effect
on our business and results of operations.
Our success depends upon our ability to attract, train and retain key personnel.
Our success depends significantly upon the performance of our executive
officers and other key employees. We also need to attract, train, retain, and
motivate technical, managerial, and marketing personnel. Competition for
qualified personnel is intense. We cannot assure you that we will be able to
continue to attract and retain the qualified personnel necessary for the
development of our business. If we lose key personnel or fail to recruit
necessary additional personnel, our business and results of operations may be
materially adversely affected.
Our success depends in part on our ability to introduce new services in a timely
manner.
Our future growth depends on our successful and timely introduction of new
services in existing and emerging markets. We cannot assure you that we will
successfully complete development or that if such development is completed, our
planned introduction of these services will gain market acceptance or will meet
the technical or other requirements of potential customers. We increasingly
rely on the Internet for the growth of the market for our service. This depends
upon our timely delivery of an efficient Internet service as well as to our
individual customers' acceptance of our services. Delays in implementation or
the unsuccessful execution of our marketing initiatives could hinder our
business and our results of operations may suffer.
Future acquisitions or investments could adversely affect our results of
operations.
We have made acquisitions in the past and we expect to acquire complementary
businesses or technologies in the future. The success of any acquisition will
depend upon, among other things, our ability to:
- Identify and evaluate the proposed acquisition of complementary businesses
or technologies
- Complete the acquisition on reasonable terms
- Obtain any necessary financing
- Integrate effectively the acquired personnel, operations or technologies
- Retain customers and motivate key personnel
An acquisition could cause a distraction of our management and employees, an
increase in our expenses, an assumption of additional debt, and/or an issuance
of equity which could be dilutive to existing stockholders, and expose us to the
risk that we will fail to successfully implement the acquisition. This may
materially and adversely affect our results of operations and financial
condition.
17
<PAGE>
Our stock price may fluctuate substantially.
The market price of our common stock has fluctuated significantly.
The market price of our common stock could be subject to significant
fluctuations in the future based on factors including:
- Announcements of new services by us or by our competitors
- Fluctuations in our quarterly financial results
- Fluctuations in our competitors' quarterly financial results
- Changes in analysts' estimates of our financial performance or our failure
to meet these estimates
- Conditions in the internet commerce, information services, and high
technology industries
- Conditions in the financial markets
The stock market in general has experienced extreme price and volume
fluctuations which have particularly affected the market prices for many high
technology companies and which have often been unrelated to the operating
performance of the specific companies.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective April 21, 1999, Joseph Zerga, Ltd., the Registrant's Certifying
Accountant, resigned. Joseph Zerga, Ltd.'s reports for the last two years of
its engagement as auditors of the Company have not contained an adverse
opinion or a disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles. Nor has there been any
disagreement with Joseph Zerga, Ltd. on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure. In
November 1999, Hein + Associates LLP, Certified Public Accountants (Hein), were
engaged to serve as the Registrant's new auditors. The election of Hein, was
approved by the Board of Directors of the Registrant. Prior to hiring Hein,
neither management nor anyone acting on its behalf consulted Hein during our two
most recent fiscal years or the subsequent interim periods.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth-certain information regarding each director
and executive officer of the Company:
Name Age Position
____ _____ __________
Frank H. DeRenzo 64 President and Director
Kevin Persinger 32 Vice President of Operations and Director
Robert Muniz 47 Secretary, Treasurer and Director
18
<PAGE>
The Directors of the Company are elected to hold office until the next
annual meeting of shareholders or until their respective successors are duly
elected and qualified. Officers of the Company serve at the discretion of the
Board of Directors and are appointed by the Board of Directors.
Frank H. DeRenzo was elected President and Director of the Company on March
20, 1998. From May of 1997 to March 26, 1999, Mr. DeRenzo served as President
and Director of Maven Enterprises, Inc. of Las Vegas, NV, a media company within
the gaming industry. Since 1989, he has been Vice-President of gaming sales for
Trans-Lux Corporation, the leading manufacturer of LED Displays worldwide, and
is responsible for sports and race book contracts. From 1987 to 1989, he was
President of Intermark Imagineering, Inc. (manufacturer of computerized Keno
systems). From 1984 to 1987, he was Vice President of Sports Form, Inc.
(satellite broadcast of horse racing), From 1984 to 1987, he was Vice-President
of Satellite Simulcast Service, Inc. (transmission and encryption services to
racetracks).
Kevin Persinger was elected as Director of the Company on March 10, 1995.
Kevin Persinger joined the Company on September 18, 1990 as Computer Operator
and was promoted to Computer Programmer. He holds an associate degree in
Business Information Systems.
Robert Muniz was re-appointed as a Director of the Company on April 1, 1999.
From March 20, 1998 to July 1, 1998, Mr. Muniz was a Director of the Company.
Mr. Muniz has been in the gaming industry for over 20 years. From 1978 to the
present he has been the Race Book Manager at the Barbary Coast & Casino in Las
Vegas, Nevada; the Race Book Manager at the Gold Coast Hotel & Casino; and the
Director of Race Book Operations for Coast Resorts, Inc.. Mr.Muniz has served as
a consultant to Hyatt regency, Riveria Hotel & Casino, Las Vegas Dissemination
Company and the University of Arizona's Race Track Industry Program. He also
assisted in the establishment of the Nevada Pari-Mutuel Association.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid by the Company
for its fiscal year ending June 30, 2000, to each of the executive officers of
the Company. During the fiscal years ending June 30, 2000, 1999, and 1998 no
Executive Officer or Director of the Company received cash remuneration in
excess of $60,000. There are no standard arrangements for the compensation of
directors.
Annual Compensation Long Term
Name Year Ended June 30 Compensation
Restricted
2000 1999 1998 Stock Awards (#)
Frank H. DeRenzo Director/President
$30,000 $25,900 $3,400 1,000,000
Kevin Persinger Director/VP Operations $40,000 39,971 33,850 100,000
Robert Muniz Director/
Secretary-Treasurer - - - 100,000
Tom Neavitt (i)
Director/Secretary $1,000 8,000 - -
19
<PAGE>
(i) On January 12, 2000, Mr. Tom Neavitt resigned as a Director and the
Secretary/Treasurer of the Company.
OPTION GRANTS IN FISCAL YEAR 2000
The following table provides information relating to stock options to
purchase Common Stock granted to each of the executive officers named in the
compensation table above during our fiscal year ended June 30, 2000. None of
these options were granted under our Employee Stock Option Plan. Options
granted have a term of 10 years and vest automatically upon their grant.
The exercise price of the options we granted is greater than the fair market
value of our Common Stock based on the closing sales price of our Common Stock
in trading on the Nasdaq Bulletin Board on the trading day prior to the date of
grant. The exercise price may be paid by cash or check. Under this program, the
optionee may provide irrevocable instructions to sell the shares acquired on
exercise and to remit to us a cash amount equal to the exercise price and all
applicable withholding taxes.
We have extended our Employee Stock Option Plan to 2010. Currently no
options have been issued under the Employee Stock Option Plan.
The potential realizable value of options is calculated by assuming that the
price of our Common Stock increases from the exercise price at assumed rates of
stock appreciation of 5% and 10%, compounded annually over the 10 year term of
the option, and subtracting from that result the total option exercise price.
These assumed appreciation rates comply with the rules of the Securities and
Exchange Commission and do not represent our prediction of the performance of
our stock price.
<TABLE>
<CAPTION>
Indiviaual Grants Potential Residual
Value at Assumed
Number of Annual Rates of
Securities Stock Price
of Percentage Exercise Appreciation
Underlying of Total Price per Expiration Option Term
Name Grant Grants Shares Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
_______ ____________ __________ _________ ______ ________________________
Frank H. DeRenzo 1,000,000 83.33 0.04 5.11.10 $ 25,880 $ 68,281
Kevin Persinger 100,000 8.33 0.04 5.11.10 2,588 6,828
Robert Muniz 100,000 8.33 0.04 5.11.10 2,588 6,828
Tom Neavitt (i) - - -
</TABLE>
(i) On January 12, 2000, Mr. Tom Neavitt resigned as a Director and the
Secretary/Treasurer of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The persons set forth on the chart below are known to the Company to be the
beneficial owners of more than 5% of the Company's outstanding Common Stock:
20
<PAGE>
Name/Address Number of Shares Percentage
_______________ ___________________ ____________
Cede & Company (i) 1,039,553 21.6%
P.O. Box 20
Bowling Green Station
New York, NY 10004
Frank DeRenzo 2,342,013 48.7%
3900 Paradise Road,
Suite 201
Las Vegas, NV
89109
(i) CEDE & Company is a nominee for Depository Trust Company. The Company
has been unable to determine how many shareholders this represents.
Security Ownership of Management.
Information concerning the number and percentage of shares of the Company's
outstanding Common Stock beneficially owned by Officers and Directors is set
forth on the chart below.
Name/Address Number of Shares Percentage
_______________ ___________________ ____________
Frank DeRenzo 2,342,013 48.7%
3900 Paradise Road,
Suite 201
Las Vegas, NV
89109
All Officers & Directors as a group 2,346,513 48.8%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended June 30, 2000, the President converted $10,000 in
principal outstanding at June 30, 1999 and an additional $10,000 in principal
loaned to the Company during the 2000 fiscal year into 500,000 shares of common
stock at the current market price on the date of conversion. Accrued interest,
at June 30, 2000, on the converted notes was paid in cash to the officer
subsequent to year end and not included as part of the conversion.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Items filed as part of report:
Attached hereto commencing on Page F-1 are the financial statements and
Supplementary Data required by Item 8 of this Form. Schedules other than those
listed are omitted for the reason that they are not required or are not
applicable, or the required information is shown in the financial statements or
notes thereto. Columns omitted from the schedules filed have been omitted
because the information is not applicable.
21
<PAGE>
(b) Reports on Form 8-K
We filed two current Reports on Form 8-K on May 3, 2000 announcing the
resignation of Joseph Zerga, Ltd. as our certifying accountant on May 17, 1999,
and the engagement of Hein + Associates, LLP to serve as our new auditors.
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. On this October 12, 2000.
Beeper Plus, Inc.
(Registrant)
/S/ Frank DeRenzo
Frank DeRenzo
President
In accordance with the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
Signature Title
/S/ Frank DeRenzo President and Director
Frank DeRenzo
/S/ Kevin Persinger Vice President of Operations and Director
Kevin Persinger
/S/ Robert Muniz Director, Secretary-Treasurer
Robert Muniz
22
<PAGE>
Beeper Plus, Inc.
Financial Statements
FOR THE YEARS ENDED
June 30, 2000, 1999 and 1998
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report - HEIN + ASSOCIATES LLP........................ F-2
Independent Auditor's Report - Joseph F. Zerga, Ltd......................... F-3
Balance Sheets, June 30, 2000 and 1999...................................... F-4
Statements of Operations, For the Years Ended June 30, 2000, 1999 and 1998.. F-5
Statement of Stockholders' Equity (Deficit), For the
Years Ended June 30, 2000, 1999 and 1998.................................. F-6
Statements of Cash Flows, For the Years Ended June 30, 2000, 1999 and 1998.. F-7
Notes to Financial Statements............................................... F-8
Schedule I - Valuation and Qualifying Accounts, For the Years
Ended June 30, 2000, 1999 and 1998........................................ S-1
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
____________________________
To the Stockholders and Board of Directors
Beeper Plus, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheets of Beeper Plus, Inc. as of June
30, 2000 and 1999 and the related statements of operations, stockholders' equity
(deficit), and cash flows for the years ended June 30, 2000 and 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Beeper Plus, Inc. as of June
30, 2000 and 1999 and the results of its operations and its cash flows for the
years ended June 30, 2000 and 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company has suffered losses from operations in each of the past
two years and has an accumulated deficit as of June 30, 2000 of $1,241,196, that
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans with regard to these matters are also described in
Note 3. These financial statements do not include any adjustments relating to
the recoverability and classification of reported asset amounts or the amounts
and classifications of liabilities that might result from the outcome of this
uncertainty.
Our audits referred to above include audits of the financial statement schedule
listed under Item 14(a) of Form 10-K. In our opinion, the financial statement
schedule presents fairly, in all material respects, in relation to the financial
statements taken as a whole, the information required to be stated therein.
/s/HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
Certified Public Accountants
Orange, California
September 14, 2000
F-2
<PAGE>
Joseph F Zerga, Ltd
2950 E Flamingo Rd, Ste L
Las Vegas, NV 89121
(702) 732-2775
INDEPENDENT AUDITORS' REPORT
____________________________
To the Board of Directors
Beeper Plus, Inc.
Las Vegas, Nevada
We have audited the accompanying statements of operations, stockholders' equity
(deficit), and cash flows of Beeper Plus, Inc. for the year ended June 30, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Beeper Plus,
Inc. for the year ended June 30, 1998, in conformity with generally accepted
accounting principles.
/s/Joseph F Zerga, Ltd
Las Vegas, Nevada
October 16, 1998
F-3
<PAGE>
BEEPER PLUS, INC.
BALANCE SHEETS
JUNE 30,
_______________________
2000 1999
_______________________
ASSETS
CURRENT ASSETS:
Cash $ 35,220 $ 32,846
Restricted certificate of deposit 160,000 160,000
Accounts receivable, net of allowance for
doubtful accounts of $53,511 and $59,000
in 2000 and 1999, respectively 7,844 6,013
Inventories - 696
Prepaid expenses and other current assets 3,978 -
__________ __________
Total current assets 207,042 199,555
FURNITURE, FIXTURES AND EQUIPMENT, net of accumulated
depreciation and amortization of $283,796
and $279,012 in 2000 and 1999, respectively 12,368 14,072
OTHER ASSETS 14,050 14,850
__________ __________
TOTAL ASSETS $ 233,460 $ 228,477
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Note payable $ 159,931 $ 159,931
Accounts payable 69,950 28,101
Accrued compensation and related expenses 85,307 63,555
Deferred service revenue 111,797 70,803
Loans from related parties 16,000 26,000
Other current liabilities 23,211 1,170
__________ __________
Total current liabilities 466,196 349,560
__________ __________
COMMITMENTS (NOTE 11)
STOCKHOLDERS EQUITY' EQUITY (Deficit):
Common stock, par value $.01 per share;
10,000,000 authorized shares; issued
and outstanding 4,788,000 and 4,288,000
at December 31, 2000 and 1999, respectively. 47,880 42,880
Additional Paid in Capital 963,950 948,950
Accumulated Deficit (1,241,196) (1,003,546)
Treasury Stock, at cost; 5,000 shares (3,370) (3,370)
Note Receivable, stockholder, - (105,997)
___________ ___________
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (232,736) (121,083)
___________ ___________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 233,460 $ 228,477
=========== ===========
F-4
See accompanying notes to these financial statements
<PAGE>
BEEPER PLUS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
JUNE 30,
______________________
2000 1999 1998
_______ _______ ______
SERVICE REVENUES $ 755,511 $ 828,331 $ 866,967
__________ __________ _________
OPERATING COSTS AND EXPENSES:
Cost of Revenues 321,041 211,775 267,281
General and administrative expenses 559,032 806,077 680,557
Impairment of note receivable, stockholder 105,997 - -
__________ __________ _________
TOTAL OPERATING COSTS AND EXPENSES 986,070 1,017,852 947,838
__________ __________ _________
LOSS FROM OPERATIONS (230,559) (189,521) (80,871)
__________ __________ _________
OTHER INCOME (EXPENSE):
Interest income and other 9,861 18,151 6,256
Interest expense (16,952) (10,653) -
__________ __________ _________
TOTAL OTHER INCOME (EXPENSE) (7,091) 7,498 6,256
__________ __________ _________
LOSS BEFORE INCOME TAX (237,650) (182,023) (74,615)
__________ __________ _________
INCOME TAX BENEFIT (EXPENSE) - (108,150) 7,625
__________ __________ _________
NET LOSS $ (237,650) $ (290,173) $ (66,990)
========== =========== =========
BASIC AND DILUTED LOSS PER SHARE $ (0.06) $ (0.07) $ (0.02)
========== ========== =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,297,975 4,288,000 4,288,000
========== ========== ==========
F-5
See accompanying notes to these financial statements
<PAGE>
BEEPER PLUS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 2000, 1999 and 1998
<TABLE>
<CAPTION>
NOTE TOTAL
COMMON STOCK PAID IN ACCUMULATED TREASURY RECEIVABLE STOCKHOLDERS'
___________________
SHARES AMOUNT CAPITAL (DEFICIT) STOCK STOCKHOLDER EQUITY (DEFICIT)
______________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, June 30, 1997 4,288,000 $ 42,880 $ 948,950 $ (646,383) $ - $ - $ 345,447
Net loss - - - (66,990) - - (66,990)
_________ ________ _________ ___________ _______ _________ __________
BALANCES, June 30, 1998 4,288,000 42,880 948,950 (713,373) - - 278,457
Note receivable, stockholder - - - - - (105,997) (105,997)
Repurchase of treasury stock - - - - (3,370) - (3,370)
Net loss - - - (290,173) - - (290,173)
_________ ______ _______ ___________ _______ _________ ________
BALANCES, June 30, 1999 4,288,000 42,880 948,950 (1,003,546) (3,370) (105,997) (121,083)
Conversion of note payable to
related party 500,000 5,000 15,000 - - - 20,000
Impairment of note receivable,
stockholder - - - - - 105,997 105,997
Net loss - - - (237,650) - - (237,650)
__________ ________ _________ ___________ _______ _______ __________
BALANCES, June 30, 2000 4,788,000 $ 47,880 $ 963,950 $ (1,241,196) $ (3,370) $ - $ (232,736)
========== ======== ========= =========== ======= ======= ==========
</TABLE>
F-6
See accompanying notes to these financial statements
<PAGE>
BEEPER PLUS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,
_______________________________
2000 1999 1998
_______________________________
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (237,650) $ (290,173) $ (66,990)
Adjustments to reconcile net loss to
net cash used in operations:
Depreciation and amortization 5,584 6,812 16,003
Bad debt expense 2,647 - 11,000
Deferred tax expense - 108,150 (7,625)
Impairment of note receivable,
stockholder 105,997 - -
(Increase) decrease in:
Restricted cash - (160,000) -
Accounts Reveivable (4,478) 21,225 (4,567)
Inventories 696 7,730 6,279
Prepaid expenses and other
current assets (3,978) 12,915 (6,814)
Increase (decrease) in:
Accounts Payable 41,850 23,215 3,829
Accrued compensation and
related expenses 21,752 62,138 (11,202)
Deferred service revenue 40,993 (44,772) 48,442
Other current liabilities 22,041 - -
_______ ________ ________
Net cash used in operating activities (4,546) (252,760) (11,645)
_______ ________ ________
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of furniture, fixtures
and equipment (3,080) (1,680) (7,254)
Note receivable, stockholder - (105,997) -
_______ ________ ________
Net cash used in investing activities (3,080) (107,677) (7,254)
_______ ________ ________
CASH FLOW FROM FINANCING ACTIVITIES:
Principle paid to related parties - - (10,000)
Amounts advanced from related parties 10,000 10,000 -
Purchase of Treasury Stock - (3,370) -
Proceeds from issuance of note payable - 159,931 -
_______ ________ ________
Net cash provided by (used in)
financing activities 10,000 166,561 (10,000)
_______ ________ ________
NET INCREASE (DECREASE) IN CASH 2,374 (193,876) (28,899)
CASH, beginning of period 32,846 226,722 255,621
_______ ________ ________
CASH, end of period $ 35,220 $ 32,846 $ 226,722
========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 16,952 $ 9,483 $ -
========= ========= =========
Income taxes paid $ 763 $ - $ -
========= ========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Conversion of note payable to related party
to stock $ 20,000 $ - $ -
========= ========= =========
F-7
See accompanying notes to these financial statements
<PAGE>
BEEPER PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
_____________________________
1. ORGANIZATION AND NATURE OF OPERATIONS:
_____________________________________
Beeper Plus, Inc. ("the Company") was incorporated under the laws of the
State of Nevada on March 25, 1986. On March 31, 1986, the Company acquired
Dial-A-Score, Inc. a Nevada corporation.
The Company disseminates sports and news information directly to customers
nationwide through hand held pagers by utilizing contracted paging services.
The Company also utilizes independent distributors to provide information to
clients within the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
__________________________________________
Cash equivalents - The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
Furniture, Fixtures, and Equipment - Furniture, fixtures and equipment are
stated at cost. Depreciation and amortization is calculated using the
straight-line method over the estimated useful lives (ranging from 5 to 7
years) of the respective assets. The cost of normal maintenance and repairs
is charged to operating expenses as incurred. Material expenditures which
increase the life of an asset are capitalized and depreciated over the
estimated remaining useful life of the asset. The cost of properties sold,
or otherwise disposed of, and the related accumulated depreciation or
amortization are removed from the accounts, and any gains or losses are
reflected in current operations.
Impairment of Long-Lived and Intangible Assets - In the event that facts and
circumstances indicate that the cost of long lived assets may be impaired,
an evaluation of recoverability would be performed. If an evaluation is
required, the estimated future undiscounted cash flows associated with the
asset would be compared to the asset's carrying amount to determine if a
write-down to fair value or discounted cash flow value is required.
Revenue Recognition and Deferred Revenue - Revenue is recognized as services
are provided. Deferred revenue results from the cash received from
customers for the prepayment of services to be provided.
Accounting Estimates - The preparation of the Company's financial statements
in conformity with generally accepted accounting principles requires the
Company's management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying notes.
Actual results could differ from these estimates.
The Company's financial statements are based upon a number of significant
estimates, including the recovery of receivables, estimated lives of
furniture, fixtures and equipment and realization of deferred tax assets.
Due to the uncertainties inherent in the estimation process, it is at least
reasonably possible that these estimates will be further revised in the near
term and such revisions could be material.
Concentrations of Credit Risk - Credit risk represents the accounting loss
that would be recognized at the reporting date if counterparties failed
completely to perform as contracted. Concentrations of credit risk (whether
on or off balance sheet) that arise from financial instruments exist for
groups of customers or counterparties when they have similar economic
characteristics that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic or other
F-8
<PAGE>
BEEPER PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
_____________________________
conditions described below. In accordance with FASB Statement No. 105,
"Disclosure of Information about Financial Instruments with Off-Balance-
Sheet Risk and Financial Instruments with Concentrations of Credit Risk" the
credit risk amounts shown do not take into account the value of any
collateral or security.
The Company operates primarily in one industry segment with customers
located primarily in the Northwest United States, California, and Nevada.
Financial instruments that subject the Company to credit risk consist
principally of accounts and notes receivable. The Company performs ongoing
credit evaluations of its customers and does not require collateral. The
Company also maintains allowances for potential losses on uncollectibility
of accounts receivables as needed, and such losses have been consistent with
Management's estimates.
Fair Value of Financial Instruments - The estimated fair values for
financial instruments under FAS No. 107, "Disclosures about Fair Value of
Financial Instruments", are determined at discrete points in time based on
relevant market information. These estimates involve uncertainties and
cannot be determined with precision. The fair value of the notes payable is
based on borrowing rates that are available to the Company for loans with
similar terms, collateral, and maturity. The estimated fair value of the
accounts receivable and payable approximate their carrying values.
Advertising - The Company expenses advertising when incurred. Advertising
expense for the fiscal years ended June 30, 2000, 1999 and 1998 is $8,228,
$20,867, and $11,964, respectively.
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for income
Taxes". Under the asset and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Earnings per Share - Basic earnings per share excludes dilution and is
calculated by dividing net income available to common stockholders by the
weighted-average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could occur
if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Common stock equivalents for the
years ended June 30, 2000, 1999 and 1998 were anti-dilutive and excluded in
the earnings per share computation.
Impact of Recently Issued Standards - In Fiscal 1999, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133 (FASB133), "Accounting for Derivative Instruments and
Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. It
requires that an entity recognizes all derivatives as either assets or
liabilities in the statement of financial position and measures those
instruments at fair value. Subsequently, FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of
the Effective Date of FASB Statement No. 133", which amends the effective
date of
F-9
<PAGE>
BEEPER PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
_____________________________
FASB133 to all fiscal quarters of all fiscal years beginning after June 15,
2000. The Company does not believe the adoption of FASB133 will have a
material impact on its financial statements.
In December 1999, the Securities and Exchange Commission (SEC) released
Staff Accounting Bulletin No. 101 (SAB101) "Revenue Recognition In Financial
Statements". SAB101 establishes guidelines in applying generally accepted
accounting principles to the recognition of revenue in financial statements
based on the following four criteria; persuasive evidence of an arrangement
exists, delivery has occurred or services have been rendered, the seller's
price to the buyer is fixed or determinable, and collectibility is
reasonably assured. SAB 101, as amended by SAB 101A, is effective no later
than the first fiscal quarter of the fiscal year beginning after December
15, 1999, except that registrants with fiscal years that begin between
December 16, 1999 and March 15, 2000, may report any resulting change in
accounting principle no later than their second fiscal quarter of the fiscal
year beginning after December 15, 1999. The Company does not believe that
the adoption of SAB101 will have a material effect on its financial position
or result of operations.
Stock-Based Compensation - The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and related interpretations in accounting for its employee stock
options. In accordance with FASB Statement No. 123, "Accounting for Stock-
Based Compensation" (FASB123), the Company will disclose the impact of
adopting the fair value accounting of employee stock options. Transaction in
equity instruments with non-employees for goods or services have been
accounted for using the fair value method prescribed by FASB123.
Reclassifications - Certain reclassifications have been made to prior year
financial statements to conform with the current presentation. Such
reclassifications had no effect on net loss.
3. BASIS OF PRESENTATION:
_____________________
As shown in the accompanying financial statements, the Company has reported
net losses of $237,650, $290,173 and $66,990, respectively for the years
ended June 30, 2000, 1999 and 1998 resulting in an accumulated deficit of
$1,241,196 at June 30, 2000. These factors, among others, raise substantial
doubt about the ability of the Company to continue as a going concern for a
reasonable period of time.
The Company's ability to continue as a going concern is ultimately dependent
on its ability to obtain additional financing and to control costs and
generate sufficient revenues to obtain profitable operations. No assurance
can be given that the Company will be successful in these efforts. The
financial statements do not include any adjustments relating to the
recoverability and classification of reported asset amounts or the amounts
and classifications of liabilities that might result from the outcome of
this uncertainty.
4. RESTRICTED CERTIFICATE OF DEPOSIT:
_________________________________
At June 30, 2000 and June 30, 1999, the Company had a certificate of deposit
in the amount of $160,000 which is pledged as security for its note payable
(see Note 7) and is subject to withdrawal restrictions.
F-10
<PAGE>
BEEPER PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
_____________________________
5. FURNITURE, FIXTURES AND EQUIPMENT:
_________________________________
Furniture, fixtures and equipment consisted of:
June 30,
2000 1999
____ ____
Office furniture and equipment $ 156,119 $ 156,119 5 to 7 years
Computer and related equipment 127,665 124,586 5 to 7 years
Lower of usefull
Leasehold improvements 12,380 12,379 life or lease life
________ _______
Total furniture, fixtures
and equipment 296,164 293,084
Less: accumulated depreciation
and amortization (283,796) (279,012)
_________ ________
$ 12,368 $ 14,072
========= ========
Depreciation and amortization expense for the years ended June 30, 2000,
1999, and 1998 was $4,784, $6,812, and $16,003, respectively.
6. NOTE RECEIVABLE, STOCKHOLDER:
____________________________
At June 30, 1999 the Company had a note receivable in the amount of $100,000
(plus $5,997 of accrued interest) due from Maven Properties, Inc. (MPI)
which is a related party to Maven Enterprises, Inc., (MEI). MEI was a
majority shareholder in the Company owning 45.87% of the common stock
outstanding at June 30, 1999. At the time of the transaction the Chairman
of the Board and Chief Executive Officer of the Company, who was
subsequently relieved of his position with the Company, was also the
Chairman of the Board and Chief Executive Officer of MEI and MPI. During
the year ended June 30, 2000, the President of the Company personally
purchased all of the shares of common stock held by MEI at June 30, 1999.
The funds were advanced by the Company to settle obligations of MEI. The
note bears interest at 8% and was due on November 4, 1998. The Company has
reason to believe MEI will not make payment on the note and accordingly,
during the year ended June 30, 2000, recorded an impairment charge against
the full value of the note receivable plus accrued interest totaling
$105,997.
F-11
<PAGE>
BEEPER PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
_____________________________
7. NOTE PAYABLE:
____________
At June 30, 2000 the Company had a secured line of credit with Community
Bank of Nevada in the amount of $160,000, with a maturity date of August 14,
2001, secured by the certificate of deposit in the amount of $160,000.
Borrowings on the line bear interest at 7.25% (payable monthly). At June
30, 2000 and 1999, outstanding borrowings on this line were $159,931. The
line of credit agreement contains covenants which restrict the Company from
incurring additional debt or utilizing loan proceeds for purposes other than
working capital. At June 30, 2000, the Company was in violation of the
covenants with respect to use of proceeds.
8. LOANS FROM RELATED PARTIES:
__________________________
Loans from related parties include the following:
JUNE 30,
__________________
2000 1999
_______ ______
Notes payable to shareholders, non-interest
bearing, due on demand, unsecured $ 16,000 $ 16,000
Note payable to officer, interest at 12%,
due on demand - 10,000
_________ ________
$ 16,000 $ 26,000
========= =========
During the year ended June 30, 2000, the officer converted $10,000 in
principal outstanding at June 30, 1999 and an additional $10,000 in
principal loaned to the Company during the 2000 fiscal year into 500,000
shares of common stock at the current market price on the date of
conversion. Accrued interest, at June 30, 2000, on the converted notes was
paid in cash to the officer subsequent to year end and not included as part
of the conversion.
9. STOCKHOLDERS' EQUITY
____________________
In August 1998, the Company repurchased 5,000 shares of its common stock for
$3,370.
On July 13, 2000, the Board of Directors authorized the issuance of 20,135
shares of common stock to all employees currently employed as of June 30,
2000 for their continued dedication and loyalty to the Company. Compensation
expense of $1,409 was recognized in the year ended June 30, 2000. The
shares were issued to the employees subsequent to June 30, 2000.
Stock Options
_____________
In April 1989, the Company adopted the 1989 Employee Stock Option Plan (the
Plan) covering 500,000 shares. Under the plan, the Company can grant employees
non-statutory, incentive, or performance based stock options. The price of the
options granted pursuant to the plan shall not be less than 100% of the fair
market value of the shares on the date of grant. The options vest immediately
and expire after ten years from the date of grant. Prices for options granted
to employees who own greater than 10% or more of the Company's stock is at least
110% of the market value at date of grant. At June 30, 2000 and 1999, no options
were outstanding under the Plan.
F-12
<PAGE>
BEEPER PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
_____________________________
In May 2000, the Company granted non-plan options to purchase 1,200,000
shares of common stock to the current Directors of the Company. The options
were granted with an exercise price of $0.04 per share which is greater than
the market price on the date of grant. The options vested immediately and
expire in 2010.
As stated in Note 2, the Company has not adopted the fair value accounting
prescribed by FASB123 for employees. Had compensation cost for stock
options issued to employees been determined based on the fair value at grant
date for awards in 2000 consistent with provisions of FASB 123, the
Company's net loss and net loss per share would have been adjusted to the
proforma amounts indicated below:
June 30,
2000
________
Net Loss $ (261,660)
============
Basic and diluted net loss per common share $ (0.06)
============
No options were granted or outstanding during the year ended June 30, 1999
and 1998. The fair value of each option issued during June 30, 2000 was
estimated on the date of grant using the Black-Scholes options-pricing model
using the following assumptions: a risk free interest rate of 6.32%,
expected live of two years, dividend yield of 0%, and expected volatility of
682.7%. The weighted average fair value of the options granted for the year
ended June 30, 2000 was $0.02 per share.
10. INCOME TAXES:
_____________
Income tax expense (benefit) is comprised of the following:
YEAR ENDED JUNE 30,
_______________________________________
2000 1999 1998
__________ _________ ________
Current $ - $ - $ -
Deferred - 108,150 (7,625)
__________ ________ _________
INCOME TAX
EXPENSE (BENEFIT) $ - $ 108,150 $ (7,625)
========== ========= =========
Total income tax expense differed from the amounts computed by applying the
U.S. federal statutory tax as a result of changes in valuation allowances on
deferred tax assets.
F-13
<PAGE>
BEEPER PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
_____________________________
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
JUNE 30,
_______________________
2000 1999
______ ______
Current deferred tax assets:
Allowances for doubtful accounts $ 18,194 $ 20,100
Deferred compensation and accrued vacation 29,004 17,800
Deferred service revenue 38,011 -
_______ _______
85,209 37,900
Less valuation allowance (85,209) (37,900)
_______ _______
Net current deferred tax assets $ - $ -
======== ========
Noncurrent deferred tax assets:
Net operating loss carryforwards 371,355 304,300
Less valuation allowance (371,355) (304,300)
________ ________
Net noncurrent deferred tax assets $ - $ -
======== ========
At June 30, 2000, the Company had net operating loss carryforwards of
approximately $1,100,000, which begin to expire in 2011. These net operating
losses may be subject to annual limitations imposed by the Internal Revenue Code
in the event there is a change in control of the Company.
11. COMMITMENTS:
___________
Operating Leases
The Company leases office space under a non-cancelable operating lease
through June 30, 2001. Additionally, the Company leases certain office
equipment under a noncancellable operating lease through April 2002. The
future minimum lease payments for the terms of these leases are as follows:
YEAR ENDED JUNE 30,
2001 $ 73,400
2002 3,800
________
$ 77,200
========
Rent expense was $71,023, $73,838, and $55,509 for the years ended June 30,
2000, 1999 and 1998, respectively.
Service Contracts
The Company has service contracts (both written and oral) for satellite,
paging, and information services with various vendors. Aggregate monthly
payments due under these contracts were approximately $16,000 as of June 30,
2000. These contracts expire at various dates throughout the fiscal year
ending June 30, 2001, but provide for automatic annual renewals unless
cancelled by either party.
F-14
<PAGE>
BEEPER PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
_____________________________
Sales Contracts
In January 1997, the Company signed a contract with a distributor located in
Northern California. This contract superseded a Distributorship Agreement
originally signed in November 1987. Beginning in June 1998, the Company
makes monthly payments of $16 to the distributor for each active customer in
the territory area for a 10 year period. The Distributor is entitled to 32%
of additional service fees collected from the customers within the
territory. On May 31, 2008, the Company will pay, to the distributor, $100
for each active paging customer inside the territory on that date. The
Company's rights, duties and obligations under the contract will terminate
at this time.
12. SUBSEQUENT EVENTS
_________________
In July 2000, the company received a $50,000 advance from a third party.
The Company expects the advances to be classified as a convertible debenture,
however, the Company is still negotiating the terms of repayment, conversion
price, and the interest rate with the lender.
F-15
<PAGE>
BEEPER PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
_____________________________
13. QUARTERLY FINANCIAL STATEMENTS (UNAUDITED):
__________________________________________
During the fiscal year ended June 30, 2000, the Company did not file
quarterly 10-Q reports as required by the Securities and Exchange
Commission. To comply with the filing requirements, the quarterly
information is being presented herein as an unaudited footnote to the
these audited financial statements.
<TABLE>
<CAPTION
BALANCE SHEETS
September 30, December 31, March 31,
1999 1999 2000
____________ ____________ __________
(unaudited) (unaudited) (unaudited)
ASSETS
______
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $ 35,199 $ 28,187 $ 45,691
Restricted certificate of deposit 160,000 160,000 160,000
Accounts receivable, net of allowance
for doubtful accounts of $59,000 22,048 12,046 14,316
Prepaid expenses and other current assets 3,980 3,980 3,980
____________ _________ _________
Total current assets 221,227 204,213 223,987
FURNITURE, FIXTURES AND EQUIPMENT, net of
accumulated depreciation and
amortization of $279,737, $281,090,
and $282,443, respectively 13,776 14,251 13,720
OTHER ASSETS 14,650 14,450 14,250
____________ ____________ __________
TOTAL ASSETS $ 249,653 $ 232,914 $ 251,957
============ ============ ==========
</TABLE>
<TABLE>
<CAPTION
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
______________________________________________
<S> <C> <C> <C>
CURRENT LIABILITIES:
Note payable $ 159,931 $ 159,931 $ 159,931
Accounts payable 28,879 26,136 54,843
Accrued compensation and related expenses 78,637 80,753 95,328
Deferred service revenue 148,969 142,894 110,525
Loans from related parties 26,000 26,000 36,000
Other current liabilities 19,155 19,155 19,155
__________ __________ __________
Total current liabilities 461,571 454,869 475,782
__________ __________ __________
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock 42,880 42,880 42,880
Additional paid in capital 948,950 948,950 948,950
Accumulated deficit (1,200,378) (1,210,415) (1,212,285)
Treasury stock, at cost $ (3,370) $ (3,370) $ (3,370)
____________ ____________ ____________
Total stockholders' equity (deficit) (211,918) (221,955) (223,825)
____________ ____________ ____________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 249,653 $ 232,914 $ 251,957
============ ============ ===========
</TABLE>
F-16
<PAGE>
BEEPER PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
_____________________________
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE, SIX AND NINE MONTH PERIODS ENDED
_______________________________________________
September 30, December 31, March 31,
1999 1999 2000
____________ ____________ __________
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
SERVICE REVENUES $ 150,621 $ 338,873 $ 567,012
____________ ____________ ___________
OPERATING COSTS AND EXPENSES:
Cost of revenues 56,785 107,532 190,442
General and administrative expenses 184,774 330,649 473,882
Impairment of note receivable, stockholder 105,997 105,997 105,997
____________ ____________ ___________
TOTAL OPERATING COSTS AND EXPENSES 347,556 544,178 770,321
____________ ____________ ___________
LOSS FROM OPERATIONS (196,935) (205,305) (203,309)
OTHER INCOME AND (EXPENSES):
Interest income and other 3,307 6,707 6,771
Interest expense (3,213) (8,280) (12,209)
____________ ____________ ___________
TOTAL OTHER INCOME (EXPENSE) 94 (1,573) (5,438)
NET LOSS $ (196,841) $ (206,878) $ (208,747)
============ ============ ===========
BASIC AND DILUTED LOSS PER SHARE $ (0.05) $ (0.05) $ (0.05)
============ ============ ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,288,000 4,288,000 4,288,000
============ ============ ===========
</TABLE>
F-17
<PAGE>
BEEPER PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
_____________________________
STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED
__________________________________
December 31, March 31,
1999 2000
________________ ____________
(unaudited) (unaudited)
SERVICE REVENUES $ 188,252 $ 228,139
OPERATING COSTS AND EXPENSES:
Cost of revenues 50,747 82,910
General and administrative expenses 145,875 143,233
Impairment of note reveivable, stockholder - -
___________ ___________
TOTAL OPERATING COSTS AND EXPENSES 196,622 226,143
___________ ___________
INCOME (LOSS) FROM OPERATIONS (8,370) 1,996
OTHER INCOME (EXPENSE):
Interest income and other 3,400 64
Interest expense (5,067) (3,929)
___________ ___________
TOTAL OTHER INCOME (EXPENSE) (1,667) (3,865)
___________ ___________
NET LOSS $ (10,037) $ (1,869)
=========== ===========
BASIC AND DILUTED LOSS PER SHARE $ - $ -
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,288,000 4,288,000
=========== ===========
F-18
<PAGE>
BEEPER PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
_____________________________
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE, SIX AND NINE MONTH PERIODS ENDED
_______________________________________________
September 30, December 31, March 31,
1999 1999 2000
____________ ____________ __________
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (196,841) $ (206,878) $ (208,747)
Adjustments to reconcile net loss to
net cash used in operations:
Depreciation and amortization 925 2,478 4,031
Impairment of note receivable,
stockholder 105,997 105,997 105,997
(Increase) decrease in:
Accounts receivable (16,035) (6,033) (8,303)
Inventories 696 696 696
Prepaid expenses and other
current assets (3,980) (3,980) (3,980)
Increase (decrease) in:
Accounts payable 787 (1,957) 26,750
Accrued compensation and
related expenses 15,082 17,198 31,773
Deferred Service revenue 78,166 72,091 39,722
Other current liabilities 17,985 17,985 17,985
___________ ____________ ___________
Net cash provided by (used in)
operating activities 2,782 (2,403) 5,924
___________ ____________ ___________
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of furniture, fixtures and equipment (429) (2,256) (3,079)
___________ ____________ ___________
Net cash used in investing activities (429) (2,256) (3,079)
___________ ____________ ___________
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of note payable to
related party - - 10,000
___________ ____________ ___________
Net cash provided by (used in)
financing activities - - 10,000
___________ ____________ ___________
NET INCREASE (DECREASE) IN CASH 2,353 (4,659) 12,845
CASH, beginning of period 32,846 32,846 32,846
___________ ____________ ___________
CASH, end of period $ 35,199 $ 28,187 $ 45,691
=========== ============ ===========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 2,043 $ 7,110 $ 11,039
=========== ============ ===========
Income taxes paid $ - $ - $ -
=========== ============ ===========
</TABLE>
F-19
<PAGE>
Beeper Plus, Inc.
SUPPLEMENTAL SCHEDULE I - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended June 30, 2000, 1999 and 1998
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND END OF
DESCRIPTION PERIOD EXPENSES DEDUCTIONS PERIOD
<S> <C> <C> <C> <C>
For the year ended June 30, 1998
Allowance for doubtful accounts $ 89,000 $ 11,000 - $ 100,000
For the year ended June 30, 1999
Allowance for doubtful accounts $ 100,000 $ - $ (41,000) $ 59,000
For the year ended June 30, 2000
Allowance for doubtful accounts $ 59,000 $ 2,647 $ (8,136) $ 53,511
</TABLE>
S-1
