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 June 30, 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 (IRS Employer identification no.)
of 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 June 30, 2000.
Title of Each Class Number of Shares Outstanding
Common Stock, $.001 par value per share 4,663,891
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
stereoscape.com, inc. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET (UNAUDITED)
June 30, 2000
ASSETS
Current Assets:
Cash $ 9,880
Charge card receivables 9,054
Inventories 289,683
Other current assets 7,255
----------
Total Current Assets 315,872
----------
Property and Equipment - Net 9,681
----------
TOTAL ASSETS $ 325,553
==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 467,837
Customer deposits and other advances 413,137
Payroll and sales tax payable 65,923
----------
Total Current Liabilities $ 946,897
----------
Commitments and Contingencies
STOCKHOLDERS' DEFICIENCY
Common Stock
Par value $.001 - 10,000,000 shares authorized,
4,663,891 shares issued and outstanding 4,664
Additional paid in capital 332,211
Deficit (958,219)
----------
Total Stockholders' Deficency (621,344)
----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 325,553
==========
See notes to the consolidated financial statements (unaudited).
stereoscape.com, inc. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-----------------------------------------------------------
Sales $ 442,332 $ 886,351 $1,301,937 $2,085,743
Cost of sales 354,384 678,349 1,038,417 1,596,320
-----------------------------------------------------------
Gross profit 87,948 208,002 263,520 489,423
Selling, General
and Administrative 180,900 231,039 471,088 484,403
-----------------------------------------------------------
Net Earnings (loss) $ (92,952) $ (23,037) $ (207,568) $ 5,020
===========================================================
LOSS PER COMMON SHARE
BASIC AND DILUTED
Net Earnings (loss) $ (0.02) $ (0.01) $ (0.06) $ 0.00
Weighted average
number of shares
used in computation 3,909,909 2,800,409 3,540,727 2,755,843
See notes to the consolidated financial statements (unaudited).
<PAGE>
stereoscape.com, inc. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended
June 30,
2000 1999
-----------------------------
Cash flows from operating activities:
Net earnings (loss) $ (207,568) $ 5,020
Adjustments to reconcile net loss
to net cash used in operations:
Depreciation and amortization 1,892 792
Impairment of Asset - -
(Increase) decrease in operating assets:
Charge card receivables 1,911 (17,632)
Inventories (36,504) (36,690)
Other current assets 35,001 (3,118)
Increase (decrease) in operating liabilities:
Accounts payable 511 91,173
Customer deposits and advances 47,240 (98,993)
Payroll and sales taxes payable (13,804) (16,404)
Accrued expenses - -
-----------------------------
Net cash used in operating activities (171,321) (75,852)
-----------------------------
Cash flow from investing activities:
Purchase of fixed assets - (3,074)
-----------------------------
Net cash used in investing activities - (3,074)
-----------------------------
Cash flow from financing activities:
Issuance of capital stock 177,500 84,375
Proceeds from (repayment of)
loan payable - (8,117)
-----------------------------
Net cash provided by financing activities 177,500 76,258
-----------------------------
(Decrease) increase in cash 6,179 (2,668)
Cash at beginning of period 3,557 3,608
-----------------------------
Cash at end of period $ 9,736 $ 940
=============================
Supplemental disclosure of cash flow information:
Interest paid $ 705 $ 1,069
See notes to the consolidated financial statements (unaudited).
<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.
<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 June 30, 2000 the Company had $178,208 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 June 30,
2000 the Company had $234,929 in customers refunds payable, respectively, which
represents an amount owed to customers for returned merchandise or cancelled
orders.
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 (14,416)
$ 9,681
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.
<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 June 30, 2000 Compared to Quarter Ended June 30, 1999
Net sales for the quarter ended June 30, 2000 decreased 50.1%
to $442,332 from $886,351 for the quarter ended June 30, 1999. The
decrease was the result of the restructuring by new management to
eliminate lower margin sales, and a reduction in advertising
expenditures.
Gross profit for the quarter ended June 30, 2000 decreased
57.8% to $87,948 from $208,002 for the quarter ended June 30, 1999. As
a percentage of net sales, gross profit decreased to 19.9% in the 2000
period compared to 23.4% in the 1999 period. The decrease was primarily
the result of the liquidation of excess inventory at promotional
prices.
Selling, general and administrative expenses for quarter ended
June 30, 2000 decreased 21.7% to $180,900 from $231,039 for the quarter
ended June 30, 1999. The decrease in selling, general and
administrative expenses consisted primarily of cost cutting measures
initiated by new senior management.
Net losses for the quarter ended June 30, 2000 increased to
($92,952) compared to losses of ($23,037)for the quarter ended June 30,
1999. This increase was due to a decrease in sales volume.
Six Months Ended June 30, 2000 Compared to Quarter Ended June 30, 1999
Net sales for the six months ended June 30, 2000 decreased
37.6% to $1,301,937 from $2,085,743 for the six months ended June 30,
1999. The decrease was the direct result of eliminating lower margin
sales and a reduction in advertising expenditures.
Gross profit for the six months ended June 30, 2000 decreased
46.2% to $263,520 from $489,423 for the six months ended June 30, 1999.
As a percentage of net sales, gross profit decreased to 20.2% in the
2000 period compared to 23.4% in the 1999 period. The decrease was
primarily the result of the liquidation of excess inventory at
promotional prices.
Selling, general and administrative expenses for six months
ended June 30, 2000 decreased 2.8% to $471,088 from $484,403 for the
six months ended June 30, 1999. The decrease in selling, general and
administrative expenses consisted primarily of cost cutting measures
initiated by new senior management.
Net losses for the six months ended June 30, 2000 of
($207,568) compared to earnings of $5,020 for the six months ended
June 30, 1999 were a direct result of lower sales and decreased gross
margins.
Liquidity and Capital Resources
At June 30, 2000 and June 30, 1999 the Company had a deficit
equity of ($621,344) and ($347,122), 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.
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.
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 August 18, 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.
<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 as
additional working capital.
Item 6. Exhibit and reports on Form 8-K
(a) Exhibits
None
(b) Reports filed on Form 8K
None
<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/ Mario Bassani August 21, 2000
Mario Bassani
President (Principal Executive Officer)
Chairman of the Board
By: /s/ Steve Wise August 21, 2000
Steve Wise
Director
By: /s/ Gary B. Hyman August 21, 2000
-----------------
Gary B. Hyman
Chief Financial Officer
Director
