U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ x ]QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended March 31, 2000
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
Commission file number 0-25037
stereoscape.com, inc.
(Name of small business issuer in its charter)
Nevada 06-1469654
(State or other jurisdiction of (IRS Employer identification no.)
incorporation or organization)
3440 Highway 9 South, Freehold, New Jersey 07728
(Address of principal executive offices)
(732) 462-7767
(Issuer's telephone number)
---------------------------------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes ...X.... No.........
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes .......No ....... N/A
APPLICABLE ONLY TO CORPORATE ISSUERS
Number of shares outstanding of each of the issuer's classes of common
equity as of March 31, 2000.
Title of Each Class Number of Shares Outstanding
Common Stock, $.001 par value per share 3,358,227
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
stereoscape.com, inc. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET (UNAUDITED)
March 31, 2000
ASSETS
Current Assets:
Cash $ 5,442
Charge card receivables 22,685
Inventories 248,238
Other current assets 10,764
----------
Total Current Assets 287,129
----------
Property and Equipment - Net 10,627
TOTAL ASSETS $ 297,756
==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 472,994
Customer deposits and other advances 360,288
Payroll and sales tax payable 85,366
----------
Total Current Liabilities $ 918,648
----------
Commitments and Contingencies
STOCKHOLDERS' DEFICIENCY
Common Stock
Par value $.001 - 10,000,000 shares authorized,
3,358,227 shares issued and outstanding 3,358
Additional paid in capital 241,017
Deficit (865,267)
----------
Total Stockholders' Deficency (620,892)
----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 297,756
==========
See notes to the consolidated financial statements (unaudited).
2
<PAGE>
stereoscape.com, inc. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended
March 31,
2000 1999
--------------------------------
Sales $ 859,605 $ 1,199,392
Cost of sales 684,033 917,971
--------------------------------
Gross profit 175,572 281,421
Selling, General and Administrative 290,188 253,364
--------------------------------
Net(loss)Earnings $ (114,616) $ 28,057
================================
LOSS PER COMMON SHARE
BASIC AND DILUTED
Net(loss)Earnings $ (0.04) $ 0.01
Weighted average number of
shares used in computation 3,164,127 2,766,893
See notes to the consolidated financial statements (unaudited).
3
<PAGE>
stereoscape.com, inc. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Quarter Months Ended
March 31,
2000 1999
------------------------------
Cash flows from operating activities:
Net (loss) earnings $ (114,616) $ 28,057
Adjustments to reconcile net loss to
net cash used in operations:
Depreciation and amortization 946 792
(Increase) decrease in operating assets:
Charge card receivables (11,720) (1,797)
Inventories 4,942 24,773
Other current assets (3,509) (2,675)
Increase (decrease) in operating liabilities:
Accounts payable 81,355 (78,219)
Customer deposits and advances (5,609) 15,444
Payroll and sales taxes payable (34,904) (17,979)
------------------------------
Net cash used in operating activities (83,115) (31,604)
------------------------------
Cash flow from financing activities:
Issuance of capital stock 85,000 59,375
Proceeds from (repayment of) loan payable - (8,117)
------------------------------
Net cash provided by financing activities 85,000 51,258
------------------------------
Increase in cash 1,885 19,654
Cash at beginning of period 3,557 3,608
------------------------------
Cash at end of period $ 5,442 $ 23,262
==============================
Supplemental disclosure of cash flow information:
Interest paid $ 270 $ 1,069
See notes to the consolidated financial statements (unaudited).
4
<PAGE>
stereoscape.com, inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
stereoscape.com, inc. (the "Company") was established in 1988 under the
name Alliance Health Enterprises, Inc. In December of 1998 the Company's Board
of Directors approved a change in the Company's name from Alliance Technologies,
Inc. and prior to that, in April 1997 the name was changed to Alliance
Technologies, Inc. at which time the Company acquired American Buyers Club
International, Inc. ("ABC") In April, 1997 ABC formed Alpha Sound and Vision,
Inc. as a wholly owned subsidiary.
The Company is located in Freehold, New Jersey and sells high quality home
entertainment equipment. Substantially all business is obtained through
advertising in trade magazines and via the Internet.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All material intercompany balances are
eliminated.
INVENTORIES
Inventories are stated at the lower of cost or market as determined by the
first-in, first-out method.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization is computed utilizing the straight line
method over the estimated useful lives of the related assets, which range
between three and five years.
ADVERTISING COSTS
The Company expenses production costs of print, radio and television
advertisements as of the first date the advertisements take place. All other
advertising costs are expensed as incurred.
EARNINGS PER COMMON SHARE
In the fourth quarter of 1997, the company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (SFAS 128), which supersedes
Accounting Principles Board Opinion No. 15. Under SFAS 128 earnings per common
share is computed by dividing net income (loss) available to common shareholders
by the weighted-average number of common shares outstanding during the period.
Diluted earnings per share do not reflect the potential dilution that could
occur if securities or other contracts to issue common shares were exercised or
converted into common shares or resulted in the issuance of common shares as the
impact of such would be antidilutive given the net losses incurred.
5
<PAGE>
stereoscape.com, inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than a forced sale or liquidation. Significant differences can arise
between the fair value and carrying amount of financial instruments that are
recognized at historical cost amounts.
USE OF 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.
WARRANTY
The Company sells its products with the manufacturer's factory or Alpha's
company warranty. In addition, the Company offers extended warranties, at an
additional cost. The extended warranties are underwritten by a third party for
which the Company pays a fixed fee.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS No. 133"). SFAS No. 133 applies to all entities
and to all types of derivatives, and is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The adoption of SFAS No. 133 in not
expected to materially affect the financial position or results of operations of
the Company.
Effective in 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130"). The Company,
at this time, has no items of comprehensive income other than net income.
The Company adopted Statement Financial Accounting Standard No.131,
Disclosures about Segments of an Enterprise and Related Information (SFAS 131),
in 1998. The Company's chief operating decision maker is the Chief Executive
Officer. There is currently only one operating segment in the Company, therefore
there is no segment information to report.
NOTE 2 -- CUSTOMER DEPOSITS AND OTHER ADVANCES
At March 31, 2000 the Company had $202,043 in customer deposits, which
represent payments made to the Company by credit card or check for the
merchandise that had not been shipped as of that date. In addition, at March 31,
2000 the Company had $158,245 in customers refunds payable, respectively, which
represents an amount owed to customers for returned merchandise or cancelled
orders.
6
<PAGE>
stereoscape.com, inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 3 - FIXED ASSETS, at cost
Depreciation and amortization is computed utilizing the straight-line
method over the estimated useful lives of the related assets, which range
between three and five years.
Fixed assets consists of the following at March 31, 2000:
Furniture and fixtures $ 9,410
Hardware and software costs 14,687
----------
24,097
Less-accumulated depreciation (13,470)
----------
$ 10,627
==========
Note 4 - RECENT SALE OF UNREGISTERED SECURITIES
On February 18, 2000, the Company sold 120,000 unregistered shares of the
Company's common stock. The shares were sold to an accredited investors at $0.50
per share. Total net proceeds were $60,000 for which no commission or broker fee
was paid.
On March 28, 2000, the Company sold 12,500 unregistered shares of the
Company's common stock. The shares were sold to an accredited investors at $2.00
per share. Total net proceeds were $25,000 for which no commission or broker fee
was paid.
The Company intended that the shares be exempt from registration under the
Securities Act by virtue of Section 4(2) and/or Section 4(6) of the Securities
Act and the provisions of Regulation D promulgated thereunder.
7
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Consolidated Unaudited
Financial Statements and related notes which are contained in Item 1 herein.
Results of operations for stereoscape.com, inc. and subsidiary are being
presented on a consolidated basis.
Quarter Ended March 31, 2000 Compared to Quarter Ended March 31, 1999
Net sales for the quarter ended March 31, 2000 decreased 28.3% to $859,605
from $1,199,392 for the quarter ended March 31, 1999. The decrease was the
result of key products being unavailable during the first two month of the
quarter.
Gross profit for the quarter ended March 31, 2000 decreased 37.6% to
$175,572 from $281,421 for the quarter ended March 31, 1999. As a percentage of
net sales, gross profit decreased to 20.4% in the 2000 period compared to 23.5%
in the 1999 period. The decrease was primarily the result of increased sales of
lower margin products, promotional pricing to generate sales increase, and
introductory pricing of new product lines.
Selling, general and administrative expenses for quarter ended March 31,
2000 increased 14.5% to $290,188 from $253,364 for the quarter ended March 31,
1999. The increase in selling, general and administrative expenses consisted
primarily of added administrative staff, computerization of accounting
functions, and installation of internal control systems which are being put in
place to enable the Company to handle a substantial increase in volume in the
year 2000 and thereafter which management believes will result from new sales
techniques including a fully integrated E-commerce website to be activated late
in the year 2000.
Net losses for the quarter ended March 31, 2000 increased to a loss of
($114,616) compared to earnings of $28,057 for the quarter ended March 31, 1999.
This increase was due to increased in operating costs to sustain anticipated
growth.
8
<PAGE>
Liquidity and Capital Resources
At March 31, 2000 and March 31, 1999 the Company had a deficit equity of
($620,892) and ($349,085), respectively.
The Company has historically financed its business through cash flow from
operations and borrowings from executives, which may be utilized from time to
time.
In the first quarter the Company raised $85,000 in privates placement in
exchange for 132,500 shares of its common stock. Under the Agreement other than
piggy-back registration rights, the Company is not required to register the
shares.
The Company expects to require additional capital and at the present time
has no definitive plans but is exploring various opportunities. There can be no
assurance of the ability of the Company to raise such capital. The Company has
no agreements or commitments with any person or entity to raise such capital.
While no specific acquisitions are presently under consideration, the
Company is actively seeking acquisitions and anticipates it may require
additional capital in order to fund any acquisitions or substantial growth in
its current business. To this end, the Company plans to pursue both debt and
equity financing from both private institutions and the public markets to
finance acquisitions as required. No assurance can be given that sufficient
capital will be available when needed.
Anticipated Future Growth
Management believes that the future growth of the Company will be the
result of four efforts; (1) acquisition of other companies in the internet and
home theater related industries, (2) increasing sales via the internet through
an E-Commerce Web Site, (3) obtaining new customers in the existing markets
developing new markets via current marketing channels and the internet, and (4)
controlling and containing operating and administrative costs.
9
<PAGE>
Year 2000 Assessment
The Company began assessing the possible impact of the Year 2000 ("Y2K")
issues on its business operations in 1999. The issue arose because of
information technology ("IT") which utilized a two digit date field. Y2K
introduced the potential for errors and miscalculations related to IT and non-IT
systems which were not designed to accommodate a date of year 2000 and beyond.
As of May 8, 2000, the Company had encountered no significant Y2K related
problems.
The Company successfully implemented a program to assess, mitigate and
remediate the potential impact of the Year 2000 problem throughout the Company.
The cost of remediation efforts were immaterial, and as such the Year 2000
problem did not have a material effect on the financial position of the Company,
nor the results of its operations.
Forward Looking Statements
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains information regarding management's planned growth, financing
and prospective business acquisitions and opportunities. These statements are
forward looking statements that involve risks and uncertainties. The following
is a list of factors, among others, that could cause actual results to differ
materially from the forward looking statements: business conditions and growth
in the Company's market and industry and in the general economy; competitive
factors including increased competition and price pressures; availability of raw
materials and purchased products at competitive prices; and inadequate or
unsatisfactory financing sources.
10
<PAGE>
Part II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On February 18, 2000, the Company sold 120,000 unregistered shares of the
Company's common stock. The shares were sold to an accredited investors at $0.50
per share. Total net proceeds were $60,000 for which no commission or broker fee
was paid.
On March 28, 2000, the Company sold 12,500 unregistered shares of the
Company's common stock. The shares were sold to an accredited investors at $2.00
per share. Total net proceeds were $25,000 for which no commission or broker fee
was paid.
The Company intended that the shares be exempt from registration under the
Securities Act by virtue of Section 4(2) and/or Section 4(6) of the Securities
Act and the provisions of Regulation D promulgated thereunder.
The proceeds from the above placements are being used to as additional
working capital.
Item 6. Exhibit and reports on Form 8-K
(a) Exhibits
None
(b) Reports filed on Form 8K
None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf the
undersigned duly authorized
stereoscape.com, inc.
By: /s/ Steven Wise May 12, 2000
--------------------------
Steven Wise
President (Principal Executive Officer)
Director
By: /s/ Bernard F. Lillis, Jr. May 12, 2000
--------------------------
Bernard F. Lillis, Jr.
Chief Financial Officer (Principal Accounting Officer)
Director
By: /s/ Scott G. Halperin May 12, 2000
--------------------------
Scott G. Halperin
Chairman of the Board of Directors
By: /s/ David Bannon May 12, 2000
--------------------------
David Bannon
Director
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This shedule contains summary financial information extracted from Consolidated
unaudited Financial Statements contained in Form 10QSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,442
<SECURITIES> 0
<RECEIVABLES> 22,685
<ALLOWANCES> 0
<INVENTORY> 248,238
<CURRENT-ASSETS> 287,129
<PP&E> 24,097
<DEPRECIATION> (13,470)
<TOTAL-ASSETS> 297,756
<CURRENT-LIABILITIES> 918,648
<BONDS> 0
0
0
<COMMON> 3,358
<OTHER-SE> (624,650)
<TOTAL-LIABILITY-AND-EQUITY> 297,756
<SALES> 859,605
<TOTAL-REVENUES> 859,605
<CGS> 684,033
<TOTAL-COSTS> 290,188
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (114,616)
<INCOME-TAX> 0
<INCOME-CONTINUING> (114,616)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (114,616)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
