<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 10-QSB
/X/ Quarterly Report Pursuant To Section 13 or 15(d) Of The Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2000
/ / Transition Report Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File No. 333-07727
TAKEOUTMUSIC.COM HOLDINGS CORP.
(Exact Name of small business issuer as specified in its charter)
Washington 98-0138706
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
381 Broadway, Suite 201
New York, New York 10013
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 871-0714
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, $0.01 Par Value 12,629,677
(Class) (Outstanding at July 31, 2000)
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
TAKEOUTMUSIC.COM HOLDINGS CORP.
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of June30, 2000 and
December 31, 1999
Condensed Consolidated Statements of Operations for the six
months ended June 30, 2000 and the period from Inception (April
12, 1999) to June 30, 2000
Condensed Consolidated Statements of Operations for the three
months ended June 30, 2000 and the period from Inception (April
12, 1999) to June 30, 1999
Condensed Consolidated Statement of Stockholders' Equity for the
period from Inception (April 12, 1999) to June 30,2000
Condensed Consolidated Statement of Cash Flows for the six
months ended June 30, 2000 and the periods from Inception (April
12, 1999) to June 30, 1999 and June 30, 2000
Notes to Financial Statements
Item 2 - Management's Discussion and Analysis and Plan of Operations
PART II. Other Information
Item 2 - Changes in Securities
Item 6 - Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
takeoutmusic.com, Holdings Corp.
(a development stage company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 879,201 $ 1,105,898
Certificate of deposit -- 300,000
Other current assets 84,760 4,932
------------- -----------------
Total current assets 963,961 1,410,830
FIXED ASSETS, net 114,584 81,619
OTHER ASSETS 5,707 5,707
------------- -----------------
Total assets $ 1,084,252 $ 1,498,156
============= =================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 214,300 $ 92,514
Notes payable 42,500 --
Obligations under capital leases - current portion 13,165 12,869
Deferred revenue 5,067 --
------------- -----------------
Total current liabilities 275,032 105,383
OTHER LIABILITIES
Notes payable to shareholders 183,000 --
Obligations under capital leases, less current portion 2,491 9,033
------------- -----------------
Total other liabilities 185,491 9,033
------------- -----------------
Total liabilities 460,523 114,416
STOCKHOLDERS' EQUITY
Common Stock; $0.01 par value; 100,000,000 shares authorized, 12,629,677
issued and outstanding at June 30, 2000 126,296 100,464
Additional paid in capital 1,764,868 1,643,579
Deferred compensation (122,280) (34,312)
Accumulated deficit (1,145,155) (325,991)
------------- -----------------
Total stockholders' equity 623,729 1,383,740
------------- -----------------
Total liabilities and stockholders' equity $ 1,084,252 $ 1,498,156
============= =================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
takeoutmusic.com Holdings Corp.
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Six From Inception
Months Ended (April 12, 1999) to
June 30, 2000 June 30, 2000
------------- -------------------
<S> <C> <C>
Revenue $ 13,244 $ 13,244
Operating Expenses:
General and administration 411,139 583,621
Selling and marketing 159,193 222,964
Business development 73,476 116,017
Non-cash compensation expense 208,407 211,595
------------- -------------------
Total operating expenses 852,215 1,134,197
------------- -------------------
Loss from operations (838,971) (1,120,953)
INTEREST INCOME 19,807 27,499
------------- -------------------
Loss before provision for income taxes (819,164) (1,093,454)
PROVISION FOR INCOME TAXES -- --
------------- -------------------
Net loss $ (819,164) $ (1,093,454)
============= ===================
Loss Per Share (basic and diluted) $ (0.07) $ (0.11)
Weighted average number of shares outstanding (basic and diluted) 12,540,514 10,301,272
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
takeoutmusic.com Holdings Corp.
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three From Inception
Months Ended (April 12, 1999) to
June 30, 2000 June 30, 1999
------------- -------------------
<S> <C> <C>
Revenue $ 10,272 $ --
Operating Expenses:
General and administration 226,891 --
Selling and marketing 65,007 --
Business development 33,146 1,678
Non-cash compensation expense 201,563 --
------------- -------------------
Total operating expenses 526,607 1,678
------------- -------------------
Loss from operations (516,335) (1,678)
INTEREST INCOME 9,654 --
------------- -------------------
Loss before provision for income taxes (506,681) (1,678)
PROVISION FOR INCOME TAXES -- --
------------- -------------------
Net loss $ (506,681) $ (1,678)
============= ===================
Loss Per Share (basic and diluted) $ (0.04) $ (0.00)
Weighted average number of shares outstanding (basic and diluted) 12,580,776 5,175,000
</TABLE>
<PAGE>
takeoutmusic.com Holdings Corp.
(a development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM APRIL 12,1999 (INCEPTION) TO JUNE 30, 2000
<TABLE>
<CAPTION>
Common Stock
------------------------- Additional Deferred Accumulated
Shares Amount Paid in Capital Compensation Deficit
----------- ----------- --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at April 12, 1999 -- $ -- $ -- $ -- $ --
Issuance of stock to founders, April 12, 1999 5,750 58 -- -- (8)
Stock Split - 900 to 1 5,169,250 51,693 -- -- (51,693)
Proceeds from issuance of common stock in connection
with private placement, net of issuance costs of
$15,668 1,725,004 17,250 77,082 -- --
Proceeds from issuance of common stock in connection
with private placement net of issuance costs of
$263,508 3,146,340 31,463 1,528,997 -- --
Issuance of options to consultants for services
rendered -- -- 37,500 (37,500) --
Amortization of deferred compensation -- -- -- 3,188 --
Net loss for the year ended December 31, 1999 -- -- -- -- (274,290)
----------- ----------- --------------- ------------ -----------
Balance at December 31, 1999 10,046,344 100,464 1,643,579 (34,312) (325,991)
Acquisition of common stock as a result of
merger 2,438,889 24,388 (299,077) -- --
Exercise of warrants 94,444 944 47,931 -- --
Issuance of options to consultants for services
rendered -- -- 296,375 (107,375) --
Amortization of deferred compensation -- -- -- 19,407 --
Issuance of common stock to consultants for
services rendered 50,000 500 76,060 -- --
Net loss for the period ended June 30, 2000 -- -- -- -- (819,164)
----------- ----------- --------------- ------------ -----------
Balance at June 30, 1999 12,629,677 $ 126,296 $ 1,764,868 $ (122,280) $(1,145,155)
----------- ----------- --------------- ------------ -----------
<CAPTION>
Total
-----------
<S> <C>
Balance at April 12, 1999 $ --
Issuance of stock to founders, April 12, 1999 50
Stock Split - 900 to 1 --
Proceeds from issuance of common stock in connection
with private placement, net of issuance costs of
$15,668 94,332
Proceeds from issuance of common stock in connection
with private placement net of issuance costs of
$263,508 1,560,460
Issuance of options to consultants for services
rendered --
Amortization of deferred compensation 3,188
Net loss for the year ended December 31, 1999 (274,290)
-----------
Balance at December 31, 1999 1,383,740
Acquisition of common stock as a result of
merger (274,689)
Exercise of warrants 48,875
Issuance of options to consultants for services
rendered 189,000
Amortization of deferred compensation 19,407
Issuance of common stock to consultants for
services rendered 76,560
Net loss for the period ended June 30, 2000 (819,164)
-----------
Balance at June 30, 1999 $ 623,729
-----------
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
takeoutmusic.com Holdings Corp.
(a development stage company)
CONSOLIDATED FLOWS STATEMENTS OF CASH
<TABLE>
<CAPTION>
From Inception
For the Six (April 12, 1999) to
Months Ended ------------------------------
June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (819,164) $ (1,678) $ (1,093,454)
Adjustments to reconcile net loss to net cash used in
operating activities-
Depreciation and amortization 18,984 -- 25,028
Non-cash compensation expense 208,407 -- 211,595
(Increase) in accounts receivable (3,268) -- (3,268)
(Increase) in other assets -- -- (10,639)
Increase in accounts payable and accrued expense 89,100 1,678 181,614
(Decrease) in notes payable (25,000) -- (25,000)
Increase in deferred revenue 5,067 -- 5,067
------------- ------------- -------------
Net cash used in operating activities (525,874) -- (709,057)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in short term investments 300,000 -- --
Capital expenditure (17,914) -- (53,778)
Capitalization of web-site development costs (34,035) -- (60,205)
Cash acquired through merger 8,499 -- 8,499
Payment of capital lease liabilities (6,248) -- (9,975)
------------- ------------- -------------
Net cash used in investing activities 250,302 -- (115,459)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions on initial capitalization -- 50 50
Proceeds from exercise of warrants 48,875 -- 48,875
Proceeds from private placement -- -- 1,654,792
------------- ------------- -------------
Net cash provided by financing activities 48,875 50 1,703,717
Net increase (decrease) in cash and cash
equivalents (226,697) 50 879,201
Cash and cash equivalents, beginning of
period 1,105,898 -- --
------------- ------------- -------------
Cash and cash equivalents, end of period $ 879,201 $ 50 $ 879,201
============= ============= =============
Supplemental disclosure of cash flow information:
Non-cash investing and financing activities-
Acquisition of common stock as a result of
merger $ -- $ -- $ (274,689)
Issuance of equity to consultant for services
rendered 76,560 -- --
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
takeoutmusic.com Holdings Corp.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY
takeoutmusic.com Holdings Corp. (the "Company"), a Washington corporation, was
incorporated on December 28, 1993. The Company, which has been in the
development stage since July 1999, is engaged in the business of providing
internet and traditional marketing services for music, entertainment and youth
lifestyle products for third party companies. These marketing campaigns will be
designed to raise the visibility of client's products, spark the interest of
consumers and ultimately drive sales of the products. The Company is also
developing music-based websites in support of its marketing programs. The
websites will be primarily content oriented and will also offer music and
lifestyle products for sale, including recordings by direct file transfer over
the internet using a licensed industry supported technology. The Company
operates within one industry segment.
2. BASIS OF PRESENTATION
In the opinion of management, the unaudited consolidated condensed financial
statements included herein have been prepared on a basis consistent with prior
periods reported financial statements and include all material adjustments,
consisting of normal recurring adjustments, necessary to fairly present the
information set forth therein.
Certain information and footnote disclosures normally included in the financial
statements have been condensed or omitted pursuant to rules and regulations of
the Securities and Exchange Commission, although the Company believes that the
disclosures in the unaudited interim financial statements are adequate to ensure
that the information presented is not misleading. The results of operations for
the interim reporting periods presented herein are not necessarily indicative of
any future operating results.
The financial information as of December 31, 1999 is derived from the Company's
Current Report on Form 8-K for the period from inception (April 12, 1999) to
December 31, 1999 as filed with the Securities Exchange Commission and the
Company's Annual Report on Form 10KSB for the year ended December 31, 1999. The
interim financial statements presented herein should be read in conjunction with
the financial statements and the notes thereto included in the Form 10-KSB and
the Form 8K.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ materially from those estimates.
Certain prior period amounts have been reclassified to conform with the current
period presentation.
3. NET LOSS PER COMMON SHARE
The weighted average shares used to compute basic net loss per share include
outstanding shares of common stock from the date of issuance. The calculation of
diluted net loss per share for all periods presented excludes shares of common
stock issuable upon exercise of employee stock options and stock options issued
to advisors and consultants as their effect would be antidilutive. Therefore,
the weighted average number of shares used in the calculation of basic and
dilutive net loss per common share is the same.
The Company had 781,304 warrants outstanding as of June 30, 2000 which were
excluded from the above calculation as their effect would be antidilutive for
the purposes of the calculation of diluted earnings per share.
<PAGE>
takeoutmusic.com Holdings Corp.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
Comprehensive Net Loss
There are no differences between the Company's net loss as reported for any of
the periods reported herein and the Company's comprehensive loss, as defined by
Statement of Financial Accounting Standards No. 130, for each of these
respective periods.
4. MERGER WITH SHAMPAN LAMPORT HOLDINGS LIMITED
On February 4, 2000, TOMCI Acquisition Corp., ("MergerSub"), a Delaware
corporation and a wholly owned subsidiary of Shampan Lamport Holdings Limited
("Shampan" or the "Company"), a Washington corporation, merged with and into
takeoutmusic.com, Inc., a Delaware corporation ("takeoutmusic.com"), pursuant to
an Agreement and Plan of Merger dated January 26, 2000 (the "Merger Agreement").
takeoutmusic.com was the surviving corporation in the merger. In connection with
the Merger, Shampan changed its name to takeoutmusic.com Holdings Corp.
Pursuant to the terms of the Merger Agreement, Shampan issued 10,046,344 shares
of its authorized but previously unissued common stock to the former holders of
takeoutmusci.com common stock based on a conversion ratio of 1.15 shares of
Shampan's common stock for each share of takeoutmusic.com common stock issued
and outstanding as of the effective time of the Merger. The shares issued to the
former takeoutmusic.com stockholders represent approximately 80.5% of the
outstanding common stock of Shampan following the Merger, and the shareholders
of Shampan prior to the Merger represent approximately 19.5% of the outstanding
Common Stock of Shampan following the Merger. The merger was accounted for as a
capital transaction which is equivalent to the issuance of stock by
takeoutmusic.com for Shampan's net liabilities of approximately $275,000,
accompanied by a recapitalization of takeoutmusic.com. All share and per share
information included in these financial statements has been adjusted to
retroactively reflect the recapitalization.
In addition, all outstanding options and warrants to purchase takeoutmusic.com
common stock were converted into options and warrants to purchase common stock
of Shampan. The sole outstanding warrant to purchase an aggregate of 273,598
shares of takoutmusic.com common stock at an exercise price of $0.67 was
converted into a warrant to purchase an aggregate of 314,638 shares of Shampan
common stock at an exercise price of $0.58. takeoutmusic.com incentive stock
options to purchase an aggregate of 783,000 shares of takeoutmusic.com common
stock at an exercise price of $.067 per share were converted into options to
purchase 900,450 shares of Shampan common stock at an exercise price of $0.58
per share.
In addition, the 1999 Incentive Compensation Plan (the "Plan") to grant options
to purchase takeoutmusic.com common stock was converted into the 1999 Incentive
Plan to purchase common stock of Shampan.
5. Notes Payable
(a) Notes Payable to Shareholder
June 30, 2000
-------------
Note payable to Shareholder (i) 128,000
Note payable to Shareholder (ii) 55,000
-------
183,000
-------
<PAGE>
takeoutmusic.com Holdings Corp.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(i) Note payable to Shareholder - On February 13, 1997 the Company
issued a note payable in connection with a proposed private
placement of debt securities in the amount of $750,000. The
Company was advanced the sum of $100,000 under the Note. The
Note is secured by the assets of the Company and bore interest
at 10% per annum. On February 3, 2000 the Note was amended to
include accrued interest through December 31, 1999 of $28,000;
commencing six months from the closing of the Merger, the
automatic conversion into common stock at $3.50 per share, if
the market price of the common stock is equal to or in excess
of $7 per share for a period of 10 consecutive trading days;
and accrue interest at 8% per annum payable on conversion or
maturity. If not converted, the Note matures three years from
the closing date of the Merger.
(ii) Note payable to Shareholder - On May 1, 1998, the Company
issued a note payable in connection with the receipt of
$50,000. The Note is unsecured and bears interest at the fixed
rate of 10% per annum. The Shareholder advanced the further
sum of $5,000 in 1999. On February 3, 2000, the Note was
amended to include, commencing six months from the closing of
the Merger, the automatic conversion into common stock at
$3.50 per share, if the market price of the common stock is
equal to or in excess of $7.00 per share for a period of 10
consecutive trading days. If not converted the Note matures
three years from the closing date of the Merger.
Both of the above notes include a beneficial conversion feature that will result
in an interest charge if and when the price of the Company's stock exceeds $7.00
per share. Such charge will be imputed based on the difference between $3.50 and
the then current fair market value of the Company's stock.
(b) Note Payable
June 30, 2000
-------------
Note payable 42,500
------
Note payable, due November 4, 1998. The Note is unsecured and non- interest
bearing.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements of the Company and related notes included elsewhere in this
Report and in the Company's Current Report on Form 8-K for the period from
inception (April 12, 1999) to December 31, 1999 and the Company's Annual Report
on Form 10KSB for the year ended December 31, 1999. All statements contained
herein (other than historical facts) including, but not limited to, statements
regarding the Company's future development plans, the Company's ability to
generate cash from its operations and any losses related thereto, are based upon
current expectations. These statements are forward looking in nature and involve
a number of risks and uncertainties. Actual results may differ materially from
the anticipated results or other expectations expressed in the Company's forward
looking statements. Generally, the words "anticipate," "believe," "estimate,"
"expects," and similar expressions as they relate to the Company and/or its
management, are intended to identify forward looking statements. Among the
factors that could cause actual results to differ materially are the following:
the inability of the Company to obtain additional financing to meet its capital
needs and general business and economic conditions as well as technological
developments.
Overview
The Company has a limited history of operations and no history of
profitability. It was incorporated as Allegiant Technologies Inc. on December
28, 1993 and thereafter until the cessation of operations developed for sale
various software products primarily for the Macintosh platform. On May 31, 1998
the Company sold its technology assets and product inventory to an arms length
purchaser, commenced a reorganization of its capital and thereafter remained
dormant in search of a new line of business.
On December 9, 1999 the Company announced and reported on Form 8-K that
it entered into a letter of intent to merge with takeoutmusic.com, Inc. The
merger was completed on February 4, 2000. In connection with the merger the
Company changed its name to takeoutmusic.com Holdings Corp. For accounting
purposes, the merger has been treated as a recapitalization of takeoutmusic.com,
Inc. with takeoutmusic.com, Inc. as the acquirer (reverse acquisition). The
historical financial statements prior to February 4, 2000, are those of
takeoutmusic.com, Inc.
As a result of the merger the Company is now in the development stage
and is engaged in the business of providing internet and traditional marketing
services for music, entertainment and youth lifestyle products for third party
companies. These marketing campaigns will be designed to raise the visibility of
client's products, spark the interest of consumers and ultimately drive sales of
the products. The Company is also developing music-based websites in support of
its marketing programs. The websites will be primarily content oriented and will
also offer music and lifestyle products for sale, including recordings by direct
file transfer over the internet using a licensed industry supported technology.
As of June 30, 2000 the Company had a total accumulated deficit of
$1,145,155.
See Notes to the Financial Statements for a description of the
Company's significant accounting policies.
Results of Operations
The Company was not operating prior to June 30, 1999, and had only
incurred minimal start-up expenses as of that date. Therefore, comparing the
results of operations for the current year to comparable periods in the
preceding year would not be meaningful. For the three and six
<PAGE>
months ended June 30, 2000 net revenues were $10,272 and $13,244, respectively,
and net losses were $506,681 and $819,164, respectively.
Liquidity and Capital Resources
As of June 30, 2000 the Company had a cash balance of $879,201, down
from a total of $1,405,898 of cash and short-term investments at December 31,
1999. Working capital decreased from the calendar 1999 year-end total of
$1,305,447 to $688,929 as of June 30, 2000. The Company's total accumulated
deficit also rose from the 1999 year-end balance of $325,991 to $1,145,155 at
June 30, 2000, which amounts included charges to operations for non-cash
compensation expense of $3,188 and $211,595, respectively.
The $183,000 included in Company long-term debt is represented by two
notes, one for $128,000, with interest at 8%, and one for $55,000, without
interest. Both notes mature on February 3, 2003. Both notes, however,
automatically convert into common stock at $3.50 per share (requiring the
issuance of 52,285 shares) if the market price of the common stock is $7.00 per
share or more for a period of ten consecutive trading days.
The Company believes its cash on hand and cash from operations will be
sufficient to maintain its present level of development efforts over the next 12
months, after consideration is given to the reduction in operating expenses due
to certain non-recurring expenses related to the merger in February, 2000.
However, our projections of future cash needs and cash flows may differ from
actual results. The Company is presently contemplating a private placement of
equity securities to facilitate funding of its development efforts at an
accelerated pace. The sale of additional equity securities or convertible debt
could result in additional dilution to our stockholders. We can give you no
assurance that we will be able to generate adequate funds from operations, that
funds will be available to us from debt or equity financings, or that if
available, we will be able to obtain such funds on favorable terms and
conditions. We currently have no definitive arrangements with respect to
additional financing.
PART II - OTHER INFORMATION
Item 2 - Changes in Securities
On March 15, 2000 94,444 shares of common stock were issued upon
exercise of warrants to purchase shares of common stock at an exercise price of
$.5175 per share and on June 29, 2000 50,000 shares of common stock were issued
to RPMC in exchange for consulting services.
The transactions described in this Item 2 did not involve a public
offering and were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
During the period covered by this report the following reports on Form
8-K were filed by the Registrar:
<TABLE>
<CAPTION>
Date of Report Item Reported Description of Item
--------------- ---------------------------------------- -----------------------------------
<S> <C> <C>
May 12, 2000 Item 4 - Changes in Registrant's Reporting engagement of new
Certifying Accountant accountant
May 18, 2000 Item 1 - Change in Control of Registrant Merger
Item 2 - Acquisition of Disposition of Acquisitions by reason of the
Assets merger
Item 5 - Other Events Change of name and election of
new directors
Item 7 - Financial Statements Financials of company acquired by
merger
</TABLE>
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
takeoutmusic.com Holdings Corp.
Dated: August 11, 2000 By: /s/ Mori S. Ninomiya
----------------------------------
Mori S. Ninomiya
President and Chief Executive Officer
