UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the nine months ended Sepember 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 000-20786
LEAPFROG SMART PRODUCTS, INC.
(Name of small business issuer in its charter)
COLORADO 84-1076959
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1011 MAITLAND CENTER COMMONS,
MAITLAND , FLORIDA 32751
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number (407) 838-0400
Securities registered pursuant to Section 12(b) of the Securities Exchange
Act:
NONE
Securities registered pursuant to section 12(g) of the Securities Exchange
Act:
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section13 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 [X] No [ ]
State issuer's revenues for its most recent fiscal year:
December 31, 1999 - $121,533
As of September 30, 2000, 8,053,714 shares of
the issuer's Common Stock were outstanding.
<PAGE> 1
ITEM 1. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
The unaudited condensed financial statements of Leapfrog Smart Products,
Inc. for the nine months and three ended September 30, 2000 and 1999 follow.
The financial statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the interim
period represented.
It is suggested that these financial statements be read in conjunction with
the financial statements and notes thereto included in the annual report on
Form 10-KSB for the year ended December 31, 1999.
INDEX TO FINANCIAL STATEMENTS
________
Page
NUMBER
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets - September 30, 2000 and
December 31, 1999 3
Consolidated Condensed Statements of Operations - Quarters ended
September 30, 2000 and 1999, the Nine Months ended
September 30, 2000 and 1999 and for the Period April 11, 1996
(Date of Inception) Through September30, 2000 4
Consolidated Condensed Statements of Changes in Stockholders' Equity
(Deficit) - Nine Months ended September 30, 2000 and 1999 5
Consolidated Condensed Statements of Cash Flows - Nine Months ended
September 30, 2000 and 1999 and for the Period April 11, 1996
(Date of Inception) Through September 30, 2000 7
Notes to Consolidated Financial Statements 8
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September December
30, 2000 31, 1999
<S> <C> <C>
CURRENT ASSETS
Cash $ 13,202 $ 18,529
Accounts receivable 101,837 6,554
Unbilled progress receivables 135,421 -
Inventory 68,811 52,639
Prepaid expenses 325,116 219,740
Notes receivable - related party 26,254 26,600
Other receivables 2,518 9,226
TOTAL CURRENT ASSETS 673,159 333,288
PROPERTY AND EQUIPMENT, NET 263,986 267,073
OTHER ASSETS
Related-party advances 319,162 43,116
Notes receivable - related party - 5,000
Deposits 38,136 8,600
Capitalized software costs, net of accumulated
amortization of $20,042 and $7,600 131,819 68,400
Costs in excess of fair market value of assets
acquired, net of accumulated amortization and
of $4,750 and $2,500 25,250 27,500
$ 1,451,512 $ 752,977
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $1,380,587 $1,859,049
Notes payable - related party 215,258 75,258
Accounts payable 746,020 223,474
Accrued expenses 184,036 99,816
TOTAL CURRENT LIABILITIES 2,525,901 2,257,597
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 500 -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock - no par value; 30,000,000
shares authorized; 8,053,714 and 5,189,769
issued and outstanding 8,419,134 4,006,025
Convertible preferred stock - no par value per
share; 10,000,000 shares authorized;
Series A; 125,000 and 0 shares issued
and outstanding 480,000 -
Series F; 195 and 0 shares issued and
outstanding 14,625 -
Deficit accumulated during development stage (9,988,648) (5,510,645)
(1,074,889) (1,504,620)
$ 1,451,512 $ 752,977
</TABLE>
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
From
Nine Months Nine Quarter Quarter April 11, 1996
Ended Months Ended Ended (Inception)
September Ended September September Through
30, 2000 September 30, 2000 30, 2000 September
30, 2000 30, 2000
<S> <C> <C> <C> <C> <C>
REVENUES 802,345 80,481 634,605 43,385 1,683,135
COST OF SALES 735,644 40,014 577,215 6,302 1,326,073
GROSS PROFIT 66,701 40,467 57,390 37,083 357,062
OPERATING EXPENSES
Personnel and 1,981,589 712,939 751,402 269,457 4,538,338
related expenses
Consulting fees 634,929 142,583 412,021 51,149 1,089,394
General and
administrative 1,571,111 3,759,963 558,533 549,666 211,355
Depreciation and
amortization 69,029 41,106 22,160 13,590 200,228
TOTAL OPERATING
EXPENSES 4,256,658 1,455,161 1,735,249 545,551 9,587,923
OTHER INCOME
(EXPENSE)
Other income, net 40,966 2,562 875 441 62,888
Interest expense (312,080) (381,820) (60,464) (208,482) (803,743)
(271,114) (379,258) (59,589) (208,041) (740,855)
NET LOSS $(4,461,071) $(1,793,952) $(1,737,448) $(9,971,716) (716,509)
Dividends on
preferred stock (16,932) - (7,562) -
Net loss attributable
to common
shareholders (4,478,003) (1,793,952) (1,745,010) (716,509)
BASIC AND DILUTED
NET LOSS PER COMMON
SHARE (.70) (.43) (.24) (0.16)
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 6,388,171 4,143,211 7,265,169 4,463,718
</TABLE>
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Common Stock Preferred Stock During Stockholders'
No Par Value No Par Value Development Equity
Shares Amount Shares Amount Stage (Deficit)
<S> <C> <C> <C> <C> <C> <C>
BALANCE-
DECEMBER 31, 1999 5,189,769 $4,006,025 - - $(5,510,645) $(1,504,620)
MERGER TRANSACTION
WITH ALBARA
CORPORATION 616,797 (14,625) 195 14,625 - -
ISSUANCE OF COMMON
AND PREFERRED STOCK
FOR CASH 1,565,619 2,650,588 125,000 480,000 - 3,130,588
ISSUANCE OF COMMON
STOCK FOR SERVICES 271,000 700,375 - - - 700,375
ISSUANCE OF COMMON
STOCK FOR PAYMENT OF
DEBT 9,360 23,122 - - - 23,122
ISSUANCE OF COMMON
STOCK FOR CONVERSION OF
DEBENTURES 295,003 774,685 - - - 774,685
ISSUANCE OF COMMON STOCK
FOR EXERCISE OF STOCK
OPTIONS 29,500 66,186 - - - 66,186
ISSUANCE OF COMMON STOCK
RELATED TO DEBT
FINANCING 76,666 62,081 - - - 62,081
ISSUANCE OF STOCK OPTIONS
FOR SERVICES - 150,697 - - - 150,697
ACCRUED DIVIDENDS ON
PREFERRED STOCK - - - - (16,932) (16,932)
NET LOSS - - - - (4,461,071) (4,461,071)
BALANCE - SEPTEMBER
30, 2000 8,053,714 $8,419,134 125,195 $494,625 (9,988,648) (1,074,889)
</TABLE>
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT) (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Common Stock Preferred Stock During Stockholders'
No Par Value No Par Value Development Equity
Shares Amount Shares Amount Stage (Deficit)
<S> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER
31, 1998 3,767,219 $1,778,411 - - $(2,413,005) $ (634,594)
ISSUANCE OF COMMON
STOCK FOR CASH 173,132 311,233 - - - 311,233
ISSUANCE OF COMMON STOCK
ON EXERCISE OF STOCK
OPTIONS 64,075 16,019 - - - 16,019
ISSUANCE OF COMMON STOCK
FOR SERVICES 193,720 396,277 - - - 396,277
ISSUANCE OF COMMON STOCK
FOR PAYMENT OF DEBT 25,000 25,000 - - - 25,000
ISSUANCE OF COMMON STOCK
FOR ACQUISITION OF
MINORITY INTEREST
POSITION IN SUBSIDIARY 40,000 30,000 - - - 30,000
ISSUANCE OF COMMON STOCK
RELATED TO DEBT
FINANCING 386,128 290,096 - - - 290,096
NET LOSS - - - - (1,793,952) (1,793,952)
BALANCE - SEPTEMBER
30, 1999 4,649,274 2,847,036 - - (4,206,957) (1,359,921)
</TABLE>
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative:
April 11,
Nine Nine 1996
Months Months (Inception)
Ended Ended Through
September September September 30,
30, 2000 30, 1999 2000
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (4,461,071) (1,793,952) (9,971,716)
Reconciliation of net loss to net cash used in
operating activities
Depreciation 55,380 39,356 181,068
Depreciation and amortization charged 12,122 22,538 38,460
to cost of sales
Amortization 13,650 1,750 16,150
Assets expensed to research and 28,970 - 28,970
development
Loss on disposal/write-off of assets, net 14,775 2,667 24,902
Loss on write-off of related party - 17,870 17,870
note receivable
Common stock and options issued
for services and interest 981,211 686,373 1,988,805
Cash provided by (used in) change in:
Accounts receivable (95,283) (7,835) (101,837)
Unbilled progress revenues (135,421) - (135,421)
Related party advances (276,046) (27,194) (319,162)
Other receivables 6,708 (8,786) (2,518)
Inventory (16,172) (10,576) (68,811)
Prepaid expenses and other assets (133,693) (405,590) (362,033)
Accounts payable 540,373 (100,666) 781,514
Accrued expenses 136,473 24,244 236,289
Deferred income - (11,500) -
Minority interest 500 11,018 500
NET CASH USED IN OPERATING ACTIVITIES (3,327,524) (1,560,283) (7,646,970)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (107,118) (87,511) (537,217)
Net increase in notes receivable - related party (13,654) (17,400) (63,124)
Capitalization of software costs (75,861) (76,000) (151,861)
Proceeds from sale of vehicles - - 8,473
NET CASH USED IN INVESTING ACTIVITIES (196,633) (180,911) (743,729)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable 701,902 1,402,326 3,117,768
Payments on notes payable (474,910) (18,434) (799,394)
Proceeds from exercise of common stock options 21,250 16,019 469,870
Proceeds from sale of common stock 2,650,588 311,233 4,920,399
Proceeds from sale of preferred stock 480,000 - 480,000
Proceeds from related-party borrowings 140,000 - 222,658
Repayments of related-party borrowings - (6,300) (7,400)
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,518,830 1,704,844 8,403,901
NET INCREASE (DECREASE) IN CASH (5,327) (36,350) 13,202
CASH AT BEGINNING OF PERIOD 18,529 40,872 -
CASH AT END OF PERIOD $ 13,202 $ 4,522 $ 13,202
</TABLE>
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months and Quarters Ended September 30, 2000 and 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Leapfrog Smart Products, Inc. (a Colorado corporation) and
Subsidiaries (the "Company") operations include the design,
development, and licensing of Smart card applications and related
hardware and database management systems and services. The Smart
card is a wallet-sized plastic card with an embedded computer chip
carrying accessible data that is retrievable on demand and is
capable of integrating various functions with security features.
Leapfrog Smart Products, Inc. (Leapfrog) was incorporated under
the laws of the State of Florida in 1996 originally under the name
Telephones! Telephones! Inc. Leapfrog was merged into a 100%
owned subsidiary of the Company named Leapfrog Merger, Inc.
Leapfrog owns approximately 95% of the outstanding common stock of
Leapfrog Global IC Products, Inc. (LGIC) and approximately 96% of
the outstanding common stock of Conduit Healthcare Solutions, Inc.
(Conduit). LGIC issued 52,895 shares of it's common stock as an
incentive to purchase Leapfrog stock. Another 5,000 shares were
issued in LGIC from the exercise of an option for $500. Conduit
was originally incorporated in 1997 under the name Leapfrog
Healthcare Products, Inc.
Effective February 18, 2000, Albara Corporation (Albara) acquired,
through its wholly owned subsidiary Leapfrog Merger, Inc., 100% of
the outstanding common stock of the Company in exchange for
5,350,049 shares of Albara common stock. Additionally, the
outstanding stock options of the Company were converted, on a pro
rata basis, into 2,434,950 Albara stock options. Prior to the
merger, Albara was considered to be a publicly held shell company
with no revenues and insignificant expenses, assets and liabilities.
Subsequent to the merger, the Albara records have not been made
available to the Company. Accordingly, since management has been
advised that there are no significant balance sheet or income statement
amounts, proforma information has not been presented. Upon completion
of the merger, the original shareholders of Albara held 616,796 shares
of its common stock and 195 shares of preferred stock. As a result of
the exchange, the former stockholders of the Company gained control of
Albara. For accounting purposes, the acquisition has been accounted
for as a recapitalization of the Company with the Company being treated
as the acquiring entity (reverse acquisition) with no goodwill
recorded. Accordingly, the historical financial statements prior
to February 18, 2000 are those of Leapfrog Smart Products, Inc.
and Subsidiaries with the related stockholders' equity section
being retroactively restated to reflect the equivalent number of
Albara shares received in the merger after giving effect to the
differences in par value. In connection with the merger, Albara
changed its name to Leapfrog Smart Products, Inc. In January 2000
Prior to the merger, Albara increased its authorized shares of no par
value common stock to 30,000,000 and increased its authorized shares of
no par value preferred stock to 10,000,000.
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements include the accounts of Leapfrog Smart Products, Inc.,
Leapfrog Merger, Inc., Conduit Healthcare Solutions, Inc., and
Leapfrog Global IC Products, Inc. (collectively, the Company).
All significant intercompany transactions and balances have been
eliminated in the condensed consolidated financial statements.
These statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation of the results of operations for the
periods presented have been included. Operating results for the nine
month periods and the three month periods are not necessarily
indicative of the results that may be expected in the future.
DEVELOPMENT STAGE COMPANY
Since its inception, the Company's planned principal operations
have not yet begun to produce significant revenue; accordingly,
the Company is considered to be a development stage enterprise.
REVENUE AND EXPENSE RECOGNITION
Revenues are generally recognized when the service has been performed
and related costs and expenses are recognized when incurred. Contracts
for the development of software and installation of the related
hardware that extend over more than one reporting period are
accounted for using the percentage-of-completion method of accounting.
Revenue recognized at the financial statement date under these
contracts is that portion of the total contract price that costs
expended to date bears to the total anticipated final cost, based on
current estimates of cost to complete. Revisions in total costs and
earnings estimates during the course of the contract are reflected in
the accounting period in which the circumstances necessitating the
revision become known. At the time a loss on a contract becomes known
the entire amount of the estimated loss is recognized in the financial
statements. Costs attributable to contract disputes are carried in the
accompanying balance sheet only when realization is probable. Amounts
received on contracts in progress in excess of the revenue earned,
based upon the percent of completion method, are recorded as deferred
revenue and the related costs and expenses incurred are recorded
as deferred costs.
In 2000, the Company entered into a contract with the U.S. General
Services Administration (GSA) to supply GSA with hardwareand software
products related to Smart card technologies and applications.
Significant portions of these contracts may be fulfilled by independent
dealers (the Dealers) authorized by the Company and GSA. Revenues
earned under the GSA contract are recorded by the Company at the gross
amount billed to GSA and the corresponding cost of sales are recorded
at the amount serviced by the Dealers. Revenues and cost of sales
recognized under the GSA contract during the nine-month period ended
September 30, 2000 approximated $449,000 and $436,000, respectively.
NET LOSS PER SHARE OF COMMON STOCK
The basic and diluted net loss per common share in the accompanying
consolidated statements of operations are based upon the net loss
after the deduction of preferred dividends divided by the weighted
average number of common shares outstanding during the periods
presented. Diluted net loss per common share is the same as basic net
loss per common share since the inclusion of all potentially dilutive
common shares that would be issuable upon the exercise of outstanding
stock options and the convertible preferred stock and promissory notes
would be anti-dilutive.
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
STATEMENT OF CASH FLOWS
As an incentive to several investors in debentures, 76,666 and 386,128
shares of stock were issued for a dollar value of $62,000 and
$290,000 for the nine months ended September 30, 2000 and 1999,
respectively. As an incentive to several investors in debentures,
214,119 shares of stock were issued for a dollar value of $161,000 for
the three months ended September 30, 1999.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
CONTINUED OPERATIONS
The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business.
As shown in the accompanying financial statements during the three
month periods ended September 30, 2000 and 1999, the Company
incurred losses of approximately $1.7 million and $717,000,
respectively, and had a deficiency in working capital of approximately
$1.9 million at September 30, 2000. The Company incurred losses of
$4.5 million and $1.8 million for the nine months ended
September 30, 2000 and 1999, respectively. These factors, among
others, may indicate the Company will be unable to continue as a going
concern for a reasonable period of time. The accompanying consolidated
financial statements do not include any adjustments relating to the
outcome of this uncertainty.
LIQUIDITY AND PLAN OF OPERATIONS
At September 30, 2000, the Company had cash of approximately
$13,000 and a deficiency in working capital of $1.9 million.
The Company has a limited operating history and its prospects are
subject to the risks, expenses and uncertainties frequently
encountered by companies in new and rapidly evolving markets such
as Smart card products and services. These risks include the
failure to develop and extend the Company's products and services,
the rejection of such services by Smart card customers, vendors
and/or advertisers, the inability of the Company to maintain and
increase its customer base, as well as other risks and uncertainties.
In the event that the Company does not successfully implement its
business plan, certain assets may not be recoverable.
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
LIQUIDITY AND PLAN OF OPERATIONS (CONT'D)
The Company's continuation as a going concern is dependent upon
its ability to generate sufficient cash flow to meet its obligations on
a timely basis. The Company's primary source of liquidity has been
through the private placement of equity and debt securities. The
Company is presently exploring possibilities with respect to raising
working capital through additional equity and/or debt financings in the
near future. In July 2000, the Company received approval from the
Securities and Exchange Commission ("SEC") for an SB-1 authorizing a
total of 2,909,635 of registered shares. This was amended to 3,433,923
shares on September 7, 2000. The Company is also currently in the
process of filing an SB-2 with the SEC. Subsequent to September
30, 2000 through November 14, 2000, the Company has sold 150,000
additional shares of common stock for $147,000 in net proceeds.
However, there can be no assurance that the Company will be successful
in achieving profitable operations or acquiring additional capital or
that such capital, if available, will be on terms and conditions
favorable to the Company. Based upon its current business plan,
the Company believes that it will generate sufficient cash flow
through operations and external sources of capital to continue to
meet its obligations in a timely manner. If anticipated financing
transactions and operating results are not achieved, management
has the intent and believes that it has the ability to delay or
reduce expenditures so as not to require additional financial
resources, if such resources were not available on terms acceptable to
the Company.
NOTE 2 - NOTES PAYABLE
During the third quarter of 2000, $300,000 in debentures plus accrued
interest of approximately $15,000 were converted into 141,792 shares of
common stock.
Cash paid for interest during the three months ended September 30,
2000 and 1999 was $17,447 and $9,753, respectively. Cash paid for
interest during the nine months ended September 30, 2000 and 1999
was $59,237 and $33,737, respectively.
All notes payable are past due except for several related party
notes that are not due until December of 2000 totaling $50,258.
<PAGE>
NOTE 3 - STOCKHOLDERS' EQUITY
ISSUANCES OF COMMON OR PREFERRED STOCK
Subsequent to the merger, the Company issued 125,000 shares of
Series A Convertible Preferred Stock and received net proceeds of
$480,000. The holders of the Series A Preferred Shares are entitled to
cumulative dividends at the rate of 6% per annum. Each share of
Series A convertible Preferred Stock is convertible into one share
of common stock at the election of the holder thereof. The Company
may require mandatory conversion of all, but not less than all, of
the Series A Preferred shares on or after the first anniversary of
the initial sale if certain stock trading prices are attained or if
there is a reorganization of the Company involving an exchange of
its common stock for shares of a United States domiciled
corporation the shares of which are traded on a national exchange
or an the NASDAQ national market system.
During the first quarter of 2000, the Company issued an aggregate
of 211,000 shares of its common stock for cash and received
proceeds of $838,500.
During the second quarter of 2000, the Company issued an aggregate
of 254,500 shares of its common stock for cash and received
proceeds of $415,250.
During the third quarter of 2000, the Company issued an aggregate
of 1,129,619 shares of its common stock for cash and received
proceeds of $1.4 million.
The shares issued to Albara shareholders consisted of 616,797
shares of common stock and 195 shares of preferred stock. The
preferred stock is Series F and is entitled to receive dividends on
a pro rata basis with holders of common stock. These holders are
entitled to a $100 per share preference on any liquidation of the
Company and shall share pro rata with the common stockholders in
any remaining amounts distributed. Each share is convertible into
15 shares of common stock after August 31, 1993.
WARRANTS
On January 31, 2000 a warrant was issued which was effective on
February 18, 2000 to the former majority shareholder of Albara for the
right to purchase 500,000 shares of common stock at $3.50 per
share on or after April 30, 2000. The warrant expires on January
31, 2010. The exercise price of $3.50 shall be adjusted to $.035
in the event the Company has not closed an equity offering raising
an aggregate of at least $2,500,000 by July 16, 2000. This
warrant is in dispute with a former shareholder. More information
is disclosed in the Legal Proceedings section.
On September 1, 2000, 142,857 warrants were issued as part of a
common stock sale. These warrants can be exercised at $1.625
price per share until March 1, 2001.
On August 8, 2000, 100,000 warrants were issued as part of a
common stock sale. These warrants can be exercised at $2.50 price
per share until November 8, 2000. These warrants were not
exercised by the expiration date.
<PAGE>
NOTE 3 - STOCKHOLDERS' EQUITY (CONT'D)
OPTIONS
Options to purchase 200,000 shares of common stock were issued to
a consultant on May 24, 2000. Options for 50,000 of the shares
vested immediately at a $4 strike price. Additionally, three
50,000 blocks of options vest 60 days, 90 days and 180 days later
at strike prices of $5, $6 and $7, respectively. The options
expire two years after the underlying shares were issued which was
under the Company's SB-1 that became effective in July 2000.
Options were also issued along with the $100,000 related party
note issued on April 28, 2000. The options totaled 20,000 at a
strike price of $1.75 and expire in two years.
Options were issued on August 3, 2000 to a consultant for 50,000
shares. The value recorded for these options with a strike price
of $1.75 was $45,697.
Options were also approved by the Board of Directors for issuance
to employees on September 15, 2000 totaling 1,896,000 shares. The
strike price for the options varied from $1.00 to $4.00. After
the granting of these options, the total outstanding options at
September 30, 2000 was 4,571,450. This was net of a small number
of options that expired or were exercised._
STOCK UNDER EMPLOYMENT AGREEMENTS
Under two employment agreements, the Company is obligated to issue
freely trading shares to two employees of 25,000 each. The agreement
was approved by the Board of Directors on June 29, 2000 and the
employees on July 10, 2000. The shares were not issued by
September 30, 2000 because it was postponed until the Board of
Directors could discuss certain tax ramifications to the
employees. These agreements also call for cash bonuses to be paid
to these employees of 5% of income from operations, defined as net
income before taxes, minority interests, extraordinary items,
amortization of intangibles, interest on long-term debt, and these
bonuses.
AUTHORIZED SHARES
In January 2000, prior to the merger, the authorized shares of no
par value common stock were increased to 30,000,000 and the
authorized shares of no par value preferred stock were increased
to 10,000,000.
NOTE 4 - LEGAL PROCEEDINGS
The Company is party to various legal proceedings. However, management
does not believe the ultimate outcomes to any of these actions will
have a material impact to the Company's financial position.
NOTE 5 - SUBSEQUENT EVENTS
Since September 30, 2000, the Company issued 150,000 shares of common
stock and received net proceeds of $147,000.
On October 7, 2000, the Company borrowed $80,000 from a
shareholder. The terms have not been settled and the loan may be
converted to common stock.
On November 1, 2000, the Company issued a note for $100,000 to
shareholder with a 10% interest rate. The note plus interest is
due on May 1, 2001.
<PAGE>
NOTE 5 - SUBSEQUENT EVENTS (CONT'D)
The Company has been pursuing several private placements. None of
these have resulted in definitive agreements as of November 14,
2000, but the Company was able to fund $150,000 into a newly
formed Singapore subsidiary, Smart Products International, for a
50% ownership in October, 2000. This subsidiary was formed to
market, sell and distribute the Company's software and hardware
products throughout the Asia-Pacific region (excluding Peoples'
Republic of China), and also to market and sell those products
elsewhere as stated in the agreement.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OR
PLAN OF OPERATION
The following discussion should be read in conjunction with the Financial
Statements and notes thereto.
PLAN OF OPERATION
LEAPFROG did not have any external sources of working capital since
inception except for the sale of stock to individuals and the issuance of
short-term notes payable while it was a private company. On February 18,
2000, LEAPFROG merged with Albara Corporation through a reverse acquisition
in which Albara acquired LEAPFROG and the existing shareholders of LEAPFROG
obtained control of Albara. Even with the completion of this business
combination transaction, there can be no assurance that the combined
companies will have sufficient funds to undertake any significant
development, marketing and manufacturing activities. Accordingly, the
Company is being required to seek additional debt or equity financing or
funding from third parties, in exchange for which the Company might be
required to issue a substantial equity position.
For the three months ended September 30, 2000, shares of common stock
totaling 1,129,619 were issued for cash of approximately $1.4 million for
both the exercise of stock options and the private placements of stock with
individuals.
From the period January 1, 2000 through September 30, 2000, total
additional debt of $750,000 was issued to third parties and 1,595,119
shares of restricted common stock were issued for approximately $2.7
million and 125,000 shares of convertible preferred stock were issued for
net proceeds of $480,000.
There is no assurance that the Company will be able to obtain additional
financing on terms acceptable to the Company. If Management is successful
in obtaining additional funding, these funds will be used primarily to
provide working capital needed for repayment of outstanding notes payable,
software development, sales and marketing expense, to finance research,
development and advancement of intellectual property concerns and for
general administration.
The Company has been pursuing several private placements. None of these
have resulted in definitive agreements as of November 14, 2000, but the
Company was able to fund $150,000 into a newly formed Singapore subsidiary,
Smart Products International, for a 50% ownership in October, 2000. This
subsidiary was formed to market, sell and distribute the Company's software
and hardware products throughout the Asia-Pacific region (excluding
Peoples' Republic of China), and also to market and sell those products
elsewhere as agreed.
Management has committed to a $225,000 investment into its China subsidiary
for funding a joint venture to produce and market biometric readers
internationally.
<PAGE>
In July 2000, the Company'S SB-1 authorizing a total of 2,909,635 of
registered shares became effective. This was later amended to 3,433,923 shares
on September 7, 2000. This increased the Company's ability to obtain equity
financing. Subsequent to September 30, 2000 through November 14, 2000, the
Company has sold 150,000 additional shares of common stock for $147,000 in net
proceeds.
RESULTS OF OPERATIONS
REVENUES AND GROSS PROFITS:
LEAPFROG is a development stage company with revenues just beginning to be
recognized. Revenues for the nine months ended September 30, 2000
increased $722,000 to $802,000 from the $80,000 reported for the nine
months ended September 30, 1999. Revenues for the three months ended
September 30, 2000 of $635,000 increased $591,000, from $43,000 for the
three months ended September 30, 1999. Revenues in the third quarter of
2000 increased $440,000 from purchases by the U.S. Government made through
the Company's GSA contract. In addition to these GSA contract revenues,
the increase in revenues during 2000 was due to the recognition of revenue
on the percentage of completion method for three substantially complete
projects involving both hardware and software installation and development.
The completion of both projects will serve as working models for future
sales. All revenues from these projects were associated with the sale of
predominantly hardware related items such as Smart card readers/writers
utilized in pilot evaluation programs, software testing programs and
specialized software solutions by potential future users of LEAPFROG's
software products. Gross margin for the three months ended September 30,
2000 was $57,000 or 9% of revenue. Gross margin for the nine months ended
September 30, 2000 was $67,000 or 8% of revenue. The gross margin for the
nine months ended September 30, 2000 being lower than in the prior year is
due to a loss taken on a specialized software solution and the related
hardware in the first quarter of 2000 and the low margins realized on GSA
contract revenues in 2000. In 1999, the margins were higher due to a one-
time source of revenue that did not have many direct costs. During the
first nine months of 2000 and 1999, LEAPFROG initiated some pilot programs
by providing software and hardware at cost or near cost. These gross
margins are not necessarily indicative of margins expected in future years.
<PAGE>
TOTAL OPERATING EXPENSES:
Total operating expenses for the quarter ended September 30, 2000 increased
$1.2 million from $546,000 to $1.7 million, a 218% increase compared to the
same period in 1999. This increase is net of $55,000 in software
development expenditures that were capitalized during the quarter ended
September 30, 2000. This increase is also net of approximately $27,000 in
employee costs charged to costs of sales and inventory for work directly
chargeable to projects in the third quarter of 2000. This increase is
primarily associated with expense incurred in hiring additional marketing
and sales personnel to prepare for an intended roll-out of products in the
remainder of 2000 as well as administrative staff and engineers.
Significant legal and professional expenses were incurred in the third
quarter of 2000 related to various recurring and non-recurring SEC filings
and in regards to the lawsuits discussed in the legal section. Consulting
fees were also higher due to equity consultants paid with common stock
issued in the current quarter and being amortized from prepaid expenses.
Total operating expenses for the nine months ended September 30, 2000
increased $2.8 million from $1.5 million to $4.3 million, a 193% increase
compared to the same period in 1999. This increase is net of $76,000 and
$76,000 in software development expenditures that were capitalized during
the nine months ended September 30, 2000 and 1999, respectively. This
increase is also net of approximately $81,000 in employee costs charged to
costs of sales and inventory for work directly chargeable to projects in
2000. This increase is primarily associated with expense incurred in hiring
additional marketing and sales personnel to prepare for an intended roll-
out of products in 2000 and 2001 as well as administrative staff and the
related overhead. Significant legal and professional expenses were
incurred related to the closing of the merger in the first quarter of 2000
and continued into the second and third quarters with various recurring and
non-recurring SEC filings and litigation costs.
Personnel and related expenses increased $482,000 or 179% to $751,000 for
the quarter ended September 30, 2000 compared to $269,000 for the same
period in 1999. This increase is net of $55,000 in software development
expenditures that were capitalized during the quarter ended September 30,
2000. This increase is also net of approximately $27,000 in employee costs
charged to costs of sales and inventory for work directly chargeable to
projects in the second quarter of 2000. This increase was primarily due to
a 98% increase in the average number of the staff, including senior
marketing and sales personnel to prepare for an intended rollout of
products in 2000 and 2001 and other administrative staff in preparation for
expected growth and the reporting responsibilities of a public company.
The increase was also due to increased salaries paid to individuals given more
responsibility and compensation expense recognized from the exercise of
stock options.
<PAGE>
Personnel and related expenses increased $1.3 million or 178% to $2.0
million for the nine months ended September 30, 2000 compared to the
$713,000 for the same period in 1999. This increase is net of $76,000 and
$76,000 in software development expenditures that were capitalized during
the nine months ended September 30, 2000 and 1999, respectively. This
increase is also net of approximately $81,000 in employee costs charged to
costs of sales and inventory for work directly chargeable to projects in
2000. This increase was primarily due to a doubling in the average number
of staff, including senior marketing and sales personnel to prepare for an
intended rollout of products in 2000 and 2001 and other administrative
staff in preparation for expected growth and the reporting responsibilities
of a public company. The increase was also due to increased salaries paid
to individuals given more responsibility and compensation expense
recognized from the exercise of stock options.
Consulting fees increased by $361,000 from the $51,000 incurred for the
quarter ended September 30, 1999 to $412,000 for the quarter ended
September 30, 2000. Consulting fees increased by $492,000 from the
$143,000 incurred for the nine months ended September 30, 1999 to $635,000
for the nine months ended September 30, 2000. The expenses in 1999 related
primarily to fees paid to individuals and companies that assisted the
Company in identifying potential contract opportunities and recruiting
distributors and value added resellers who may participate in the intended
product rollout in 2000. In 2000, consultants were employed for the same
purposes as in 1999, but expenses were higher in 2000 partially due to
payment for services of consultants to assist in maintaining a public
market presence.
General and administrative expenses increased to $550,000 for the quarter
ended September 30, 2000 from $211,000 for the same period in 1999. This
$338,000 or 160% increase was due largely to increased legal and other
professional costs related to becoming a public company. General and
administrative expenses increased in several areas with the hiring of new
personnel requiring more space and general overhead. Travel, both domestic
and international, increased approximately $34,000 in the third quarter of
2000 compared to the same period in 1999 due to the Singapore and China
joint ventures and the travel of the newly hired sales force domestically.
General and administrative expenses increased to $1.6 million for the nine
months ended September 30, 2000 from $559,000 for the same period in 1999.
This $1.0 million or 181% increase was due largely to increased legal and
other professional costs related to the merger, lawsuits discussed in the
legal section and for the now required SEC recurring and non-recurring
filings. General and administrative expenses increased in several areas
with the hiring of new personnel requiring more space and general overhead.
Travel, both domestic and international, increased approximately $127,000
in 2000 compared to the same period in 1999 due to the Singapore and China
joint ventures and the travel of the newly hired sales force domestically.
Depreciation and amortization expenses increased $9,000 or 63% to $22,000
for the quarter ended September 30, 2000 compared to $14,000 for the same
period in 1999. The increase was due to the purchase of additional assets
as well as the amortization of capitalized software costs and the addition
attributable to costs of assets acquired in excess of fair market value.
<PAGE>
Depreciation and amortization expenses increased $28,000 or 68% to $69,000
for the nine months ended September 30, 2000 compared to $41,000 for the
same period in 1999. The increase was due to the purchase of additional
assets as well as the amortization of capitalized software costs and the
addition attributable to costs of assets acquired in excess of fair market
value.
OTHER INCOME AND EXPENSE:
Interest expense for the quarter ended September 30, 2000 decreased
$148,000 from $208,000 to $60,000 when compared to the same period in 1999.
In March through July 1999, LEAPFROG completed a short-term debt offering
to a select group of accredited investors providing net proceeds of
$1,402,000. During the third quarter of 1999, the Company issued an
aggregate of $642,000 of these 10% debenture notes. The Company also
issued an aggregate of 214,119 shares of it common stock to some of these
debenture holders as incentive to enter into the agreements. For
accounting purposes, these shares of common stock were valued at $161,000
and that value was included in 1999 interest expense. Substantially all of
the remaining interest expense in the second quarter of 1999 is directly
associated with the $350,000 in bank notes and other short-term notes
payable to one individual totaling $250,000 and only a portion of the
debentures mentioned above.
Interest expense for the nine months ended September 30, 2000 decreased
$70,000 from $382,000 to $312,000 when compared to the same period in 1999.
In March through July 1999, LEAPFROG completed a short-term debt offering
to a select group of accredited investors providing net proceeds of
$1,402,000. During the first nine months of 1999, the Company issued an
aggregate of $1,152,000 of these 10% debenture notes. The Company also
issued an aggregate of 386,128 shares of it common stock to some of the
debenture holders as incentive to enter into the agreements. For
accounting purposes, these shares of common stock were valued at $290,000
and that value was included in interest expense. Substantially all of the
remaining interest expense in the first nine months of 1999 is directly
associated with the $350,000 in bank notes and other short-term notes
payable to one individual totaling $250,000 and only a portion of the
debentures mentioned above.
In January of 2000, $550,000 in debentures were issued with 75,000 shares
of common stock issued as an incentive to enter into these agreements.
These shares resulted in $56,250 in interest expense being recorded. Also,
included in interest expense was $55,000 attributable to the value of the
stock options issued with the $100,000 related party note on April 28,
2000. The interest related to stock issued with debentures and options
issued with the notes that was more in 1999 than in 2000 offset the usual
interest accrued on the debt.
<PAGE>
NET LOSS:
The net loss for the quarter ended September 30, 2000 increased $1.0
million from $716,000 to $1.7 million, a 143% increase compared to the
quarter ended September 30, 1999. This increase is net of $55,000 in
software development expenditures that were capitalized during the quarter
ended September 30, 1999. This increase is primarily associated with
expense incurred in hiring additional marketing and sales personnel to
prepare for an intended roll-out of products in the remainder of 2000 and
2001 as well as administrative staff and engineers. Significant legal and
professional expenses were incurred in the third quarter of 2000 related to
various recurring and non-recurring SEC filings and in regards to the
lawsuits discussed in the legal section. Consulting fees were also higher
due to equity consultants paid with common stock issued in the current
quarter and being amortized from prepaid expenses. Net loss per common
share increased from $.16 per share in 1999 to $.24 in 2000. This increase
is primarily due to the increase in losses realized offset by an increase
in the weighted average number of common shares outstanding from 4,463,718
for the quarter ended September 30, 1999 to 7,265,169 for the quarter ended
September 30, 2000.
The net loss for the nine months ended September 30, 2000 increased $2.7
million from $1.8 million to $4.5 million, a 149% increase compared to the
nine months ended September 30, 1999. This increase is net of $76,000 and
$76,000 in software development expenditures that were capitalized during
the nine months ended September 30, 2000 and 1999, respectively. This
increase is primarily associated with expense incurred in hiring additional
marketing and sales personnel to prepare for an intended roll-out of
products in the remainder of 2000 and 2001 as well as administrative staff
and engineers. Significant legal and professional expenses were incurred
in 2000 related to the closing of the merger, various recurring and non-
recurring SEC filings and in regards to the lawsuits discussed in the legal
section. Consulting fees were also higher due to equity consultants paid
with common stock. Net loss per share of common stock increased from $.43
per share in the first nine months1999 to $.70 in the same period for 2000.
This increase is primarily due to the increase in losses realized offset by
an increase in the weighted average number of common shares outstanding
from 4,143,211 for the nine months ended September 30, 1999 to 6,388,171
for the nine months ended September 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities increased $1.8 million from $1.6
million for the nine months ended September 30, 1999 to $3.3 million for
the nine months ended September 30, 2000. The increase is primarily due to
the higher net loss, higher receivables and higher prepaid expenses offset
slightly by the common stock and stock options issued for services and
interest and the increase in accounts payable and accrued expenses.
Net cash used for investing activities increased $16,000 from $181,000 in
the first nine months of 1999 compared to $197,000 in the same period of
2000. The increase was primarily due to slightly higher fixed asset
purchases in the first nine months of 2000.
<PAGE>
Net cash provided by financing activities increased approximately $1.8
million from $1.7 million for the nine months ended September 30, 1999 to
$3.5 million for the nine months ended September 30, 2000. Financing
activities during 2000 included the issuance of common and preferred stock
providing $3.2 million in the aggregate and the issuance of notes payable
which provided $702,000 offset by $475,000 in repayments of existing notes
payable. Financing activities during 1999 included the issuance of common
stock providing $327,000 in the aggregate and the issuance of notes payable
that provided a net of $1.4 million after repayment of principal in the
amount of $25,000.
Like many early stage technology companies, the majority of LEAPFROG's
assets are intangible assets such as copyrights, trademarks, and research
and development costs which by their very nature are not reflected in the
Company's balance sheet as assets.
In the past, LEAPFROG's Management has been successful in attracting
accredited investors who have purchased newly issued common stock. However,
there can be no assurance that the Company will be able to obtain
additional equity financing on similar terms in the future. Over the past
two years all of LEAPFROG's debt financing has been short-term notes
payable. These notes can only be repaid if the Company successfully raises
additional equity or debt financing. In addition to the cash requirement
associated with repaying these notes, LEAPFROG will not be able to mount an
effective national marketing campaign for its products without an
additional infusion of capital. The Company does not have any commitments
to provide additional capital funding. Accordingly, there can be no
assurance that any additional funds will be available to the Company to
allow it to repay its outstanding debt and to cover the expenses associated
with executing its sales and marketing plan.
Y2K COMPLIANCE
LEAPFROG concluded its efforts concerning its exposure relative to year
2000 issues for both information and non-information technology systems.
Management actively monitors the status of the readiness program of the
Company. LEAPFROG`s out of pocket cost associated with becoming Year 2000
compliant were not significant. These cost were expensed as incurred, and
the Company does not anticipate any additional material expenditure as a
result of Year 2000 issues. Based on operations since January 1, 2000,
including the leap year date of February 29, 2000, the Company has not
experienced any significant disruption or change, and does not expect any
significant impact to its ongoing business a result of the Year 2000 issue.
Additionally, the Company is not aware of any significant Year 2000 issues
or problems that have arisen for its significant customers, vendors or
service providers. As there can be no assurance that the Company's efforts
to achieve Year 2000 readiness have been completely successful or that
customers, vendors and service providers will not experience Year 2000
related failures in the future, the Company will continue to monitor its
exposure to Year 2000 issues and will leave its contingency plans in place
in the event that any significant Year 2000 related issues arise.
<PAGE>
FORWARD LOOKING STATEMENT
This Management's Discussion and Analysis of Financial Condition and
Results of Operations includes a number of forward-looking statements that
reflect Management's current views with respect to future events and
financial performance. Those statements include statements regarding the
intent, belief or current expectations of LEAPFROG and members of its
management team as well as the assumptions on which such statements are
based. Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risk and
uncertainties, and that actual results may differ materially from those
contemplated by such forward-looking statements. Readers are urged to
carefully review and consider the various disclosures made by the Company
in this report and in the Company's other reports filed with the Securities
and Exchange Commission. Important factors currently known to Management
could cause actual results to differ materially from those in forward-
looking statements. The Company undertakes no obligation to update or
revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes in the future operating
results over time. The Company believes that its assumptions are based upon
reasonable data derived from and known about its business and operations
and the business and operations of LEAPFROG. No assurances are made that
actual results of operations or the results of the Company's future
activities will not differ materially from its assumptions.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Leapfrog and its subsidiary, Leapfrog Global IC Products, Inc. ("LGIC")
were named in an action alleging that the companies failed to disclose
certain corporate records as required by Florida Law. Leapfrog's special
Florida litigation counsel has advised the company that the remedies asked
for in the complaint against Leapfrog are not available because Leapfrog is
a Colorado corporation. In any event, the plaintiff is seeking primarily
equitable relief, and not money damages, against both Leapfrog and LGIC.
As such, even if the suit was successful, it would not materially impact
the financial condition of either Leapfrog or LGIC.
Valenti vs. Leapfrog Smart Products, Inc. ("LSP"), etal: case filed against
LSP and a subsidiary seeking production of certain agreements and other
company documents and an inspection of those and other corporation records.
No damages are being sought, except attorney's fees. The amount of those
attorney fees has not been identified by Plaintiff's court filings and we
estimate any potential expense to be less than $6,000.
Leapfrog Smart Products, Inc. ("LSP") vs. Real Provencher: case was filed
by Leapfrog Smart Products, Inc. against Real Provencher, a stockholder of
LSP, alleging stock manipulation. Real Provencher has filed a counterclaim
alleging damages resulting from LSP's failure to release Rule 144
restriction on stock owned by plaintiff. Settlement of the case is being
negotiated and potential damages have not been quantified. On January 31,
2000, as part of a consulting agreement with Provencher, a warrant with an
effective date of February 18, 2000 was issued for the right to purchase
500,000 shares of common stock at $3.50 per share on or after April 30,
2000. The warrant expires on January 31, 2010. The exercise price of
$3.50 was to be adjusted to $.35 in the event the Company did not close an
equity offering raising an aggregate of at least $2.5 million by July 16,
2000.
Publicard vs. Leapfrog Smart Products, Inc. ("LSP"): case was filed by
Publicard against LSP regarding alleged promissory notes in the total sum
of $100,000. LSP has alleged that the promissory notes have been satisfied
and/or that there are financial set-offs available to satisfy any alleged
obligation.
The successful party in this case will likely be awarded attorney fees, to
be paid by the unsuccessful party. The amount of potential attorney fees
and/or other potential damages have not been quantified.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following documents are filed herewith or have been included as
exhibits to previous filings with the Commission and are incorporated
herein by this reference:
EXHIBIT NO. EXHIBIT
### 2.1 Agreement and Plan of Merger
## 3(a) Articles of Incorporation
## 3(b) Bylaws
# 4(a) Agreements Defining Certain Rights of Shareholders
# 4(b) Specimen Stock Certificate
# 10(a)Pre-incorporation Consultation and Subscription
Agreement
## 10.1 Consultation Services Agreement
## 10.2 Legal Services Engagement Agreement
### 10.3 Bleed-Out Agreement
### 10.4 Consulting Agreement
### 10.5 Warrant Agreement
### 10.6 Registration Rights Agreement
x 11 Statement re Computation of Earnings per Share
[required unless the computation can be clearly
determined from financials]
#### 16 Letter on Change in Certifying Accountant
x 21 Subsidiaries of the Registrant
x 27 Financial Data Schedule
# 99.1 Safe Harbor Compliance Statement
____________________________
x filed herewith
# previously filed with the Company's Definitive Information Statement
on Schedule 14C on January 18, 2000.
## previously filed with the Company's Registration Statement on Form S-8
on February 29, 2000
### previously filed with the Company's Form 8-K dated March 8, 2000
#### previously filed with the Company's Form 8-K dated March 17, 2000
##### incorporated herein by reference from the Company's Form SB-1/A filed
July 6, 2000
<PAGE>
(b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the third quarter of the
2000 fiscal year:
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LEAPFROG SMART PRODUCTS, INC.
By: /S/ RANDOLPH TUCKER
Randolph Tucker, CEO
Date: November 14, 2000
In accordance with the Exchange Act, this report has been signed below by
the following persons in the capacities and on the dates indicated.
Signature Title Date
/S/ RANDOLPH TUCKER CEO November 14, 2000
Randolph Tucker & Director
/S/ JAMES K. GORNTO Chief Financial Officer November 14, 2000
James K. Gornto
