-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VujlgfsaFHotuBG2LdT2TOatRwDeHkyFgsr3lFfIxiDb5D2pUHWd2dN9mwH0GGRF XoLa5A9PJQCjxZ5U/kqeww== 0000950134-01-506110.txt : 20010906 0000950134-01-506110.hdr.sgml : 20010906 ACCESSION NUMBER: 0000950134-01-506110 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLUS SOLUTIONS INC CENTRAL INDEX KEY: 0001081418 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RADIO TV & CONSUMER ELECTRONICS STORES [5731] IRS NUMBER: 880412455 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28331 FILM NUMBER: 1730998 BUSINESS ADDRESS: STREET 1: 14677 MIDWAY ROAD STREET 2: SUITE 206 CITY: ADDISON STATE: TX ZIP: 75001 BUSINESS PHONE: 9726870090 MAIL ADDRESS: STREET 1: 14677 MIDWAY ROAD STREET 2: SUITE 206 CITY: ADDISON STATE: TX ZIP: 75001 FORMER COMPANY: FORMER CONFORMED NAME: SOUND DESIGNS INC DATE OF NAME CHANGE: 19991130 10QSB 1 d90481e10qsb.txt FORM 10QSB FOR QUARTER ENDING JUNE 30, 2001 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2001 000-28331 (Commission File Number) PLUS SOLUTIONS, INC. (Exact Name of Registrant as Specified in Charter) TEXAS 88-0412455 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 14677 MIDWAY ROAD, SUITE 206, ADDISON, TEXAS, U.S.A. (Address of principal executive offices) 75001 (Zip Code) 972-687-0090 (Registrant's telephone number, including area code) 2 ITEM 1. FINANCIAL STATEMENTS PLUS SOLUTIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONDENSED BALANCE SHEETS
JUNE 30, DECEMBER 31, 2001 2000 ------------ ------------ (Unaudited) ASSETS CURRENT ASSETS: Cash $ 17,149 $ 145,609 Prepaid expenses 1,000 100 ------------ ------------ Total current assets 18,149 145,709 PROPERTY AND EQUIPMENT - Net 69,345 89,757 PRODUCT DEVELOPMENT COSTS - Net 157,914 191,160 DEFERRED FINANCING COSTS 71,181 70,139 ------------ ------------ TOTAL $ 316,589 $ 496,765 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Deferred compensation $ 141,616 $ 102,283 Accrued professional fees 125,827 102,327 Accrued interest and other 54,008 7,178 Convertible notes payable - Net of discount of $2,709 147,291 Notes payable 68,317 68,317 ------------ ------------ Total current liabilities 537,059 280,105 CONVERTIBLE NOTES PAYABLE - Net of discount of $181,916 568,084 528,250 STOCKHOLDERS' EQUITY (DEFICIT): Series A voting preferred stock, $.001 par value; 8,000,000 shares authorized; 100,000 shares issued and outstanding 89,250 82,125 Common stock, $.001 par value; 100,000,000 shares authorized; 39,240,000 shares issued and outstanding 39,240 39,240 Common stock warrants 313,000 310,000 Additional paid-in capital 8,675,394 8,675,394 Deficit accumulated during the development stage since October 5, 1998 (9,905,438) (9,418,349) ------------ ------------ Total stockholders' deficit (788,554) (311,590) ------------ ------------ TOTAL $ 316,589 $ 496,765 ============ ============
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS. 2 3 PLUS SOLUTIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE FOR THE THREE FOR THE SIX FOR THE SIX MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED CUMULATIVE JUNE 30, JUNE 30, JUNE 30, JUNE 30, FROM 2001 2000 2001 2000 INCEPTION ------------ ------------ ------------ ------------ ------------ REVENUES $ -- $ -- $ -- $ -- $ -- OPERATING EXPENSES: Salaries and benefits 62,039 185,007 161,988 332,876 1,916,522 General and administrative 109,808 75,236 173,389 113,138 7,538,249 Depreciation and amortization expense 28,473 8,279 56,946 14,591 130,616 ------------ ------------ ------------ ------------ ------------ Total operating expenses 200,320 268,522 392,323 460,605 9,585,387 ------------ ------------ ------------ ------------ ------------ OPERATING LOSS (200,320) (268,522) (392,323) (460,605) (9,585,387) INTEREST AND OTHER EXPENSE - Net (46,474) 0 (87,641) 0 (305,801) ------------ ------------ ------------ ------------ ------------ NET LOSS $ (246,794) $ (268,522) $ (479,964) $ (460,605) $ (9,891,188) Preferred stock - dividends (3,562) 0 (7,125) 0 (14,250) ------------ ------------ ------------ ------------ ------------ Net loss available to common stockholders $ (250,356) $ (268,522) $ (487,089) $ (460,605) $ (9,905,438) ============ ============ ============ ============ ============ Loss per share: Basic $ (0.01) $ (0.01) $ (0.01) $ (0.01) Diluted $ (0.01) $ (0.01) $ (0.01) $ (0.01) Weighted average common and common equivalent shares outstanding: Basic 39,240,000 38,940,000 39,240,000 38,940,000 Diluted 39,240,000 38,940,000 39,240,000 38,940,000
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS. 3 4 PLUS SOLUTIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONDENSED STATEMENTS OF CASH FLOWS UNAUDITED
FOR THE SIX FOR THE SIX MONTHS ENDED MONTHS ENDED CUMULATIVE JUNE 30, JUNE 30, FROM 2001 2000 INCEPTION ------------ ------------ ------------ OPERATING ACTIVITIES: Net loss $ (479,964) $ (460,605) $ (9,891,188) Adjustments to reconcile net loss to net cash used in operating activities: Loss on disposal of property and equipment 5,501 Depreciation of property and equipment 23,700 14,591 84,198 Amortization of debt discount 40,125 57,375 Amortization of product development costs 33,246 41,557 Amortization of deferred financing costs 13,958 18,819 Issuance of common and preferred stock for services 6,659,486 Issuance of common stock warrants for services 71,000 Beneficial conversion feature on convertible notes 187,500 Noncash expense related to options and warrants 40,000 800,000 Net changes in operating assets and liabilities: Prepaid expenses (900) 1,108 (1,000) Accounts payable and accrued expenses 109,663 (11,496) 321,451 ------------ ------------ ------------ Net cash used in operating activities (260,172) (393,410) (1,645,301) ------------ ------------ ------------ INVESTING ACTIVITIES: Additions to property and equipment (3,288) (47,759) (82,627) Capitalized product development costs (51,451) (199,471) ------------ ------------ ------------ Net cash used in investing activities (3,288) (99,210) (282,098) ------------ ------------ ------------ FINANCING ACTIVITIES: Proceeds from issuance of common stock 274,986 1,015,217 Proceeds from issuance of preferred stock 75,000 Proceeds from reverse merger 107,431 32,431 Proceeds from issuance of current debt 5,000 25,000 5,000 Proceeds from issuance of convertible long-term debt 150,000 900,000 Deferred financing costs (15,000) (90,000) Payments on notes payable (5,000) (13,100) Collection of due from stockholder 20,000 ------------ ------------ ------------ Net cash provided by financing activities 135,000 407,417 1,944,548 ------------ ------------ ------------ NET INCREASE (DECREASE) IN CASH (128,460) (85,203) 17,149 CASH, BEGINNING OF PERIOD 145,609 121,629 0 ------------ ------------ ------------ CASH, END OF PERIOD $ 17,149 $ 36,426 $ 17,149 ============ ============ ============
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS. 4 5 PLUS SOLUTIONS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONDENSED FINANCIAL STATEMENTS UNAUDITED 1. GOING CONCERN The condensed financial statements have been prepared assuming that Plus Solutions, Inc. (the "Company") will continue as a going concern. The Company has experienced cumulative operating losses, has an accumulated deficit, and its operations are subject to certain risks and uncertainties, including, among others, risks associated with technology and regulatory trends, growth competition by entities with greater financial and other resources, and the need for additional capital. There can be no assurances that the Company will be successful in becoming profitable or generating positive cash flow in the future. These matters raise substantial doubt about the Company's ability to continue as a going concern. The Company is considered to be a development stage company. The Company is currently exploring various short-term and long-term financing alternatives, but does not know if these alternatives will be successful. The success of these financing alternatives will have a significant impact on the Company's ability to continue as a going concern. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. 2. FINANCIAL STATEMENT POLICIES BASIS OF PRESENTATION. The condensed financial statements include the accounts of the Company. The condensed financial statements reflect all adjustments that are, in the opinion of management, necessary to present a fair statement of the Company's financial position as of June 30, 2001, and the results of operations for the three and six month periods ended June 30, 2001 and 2000. All adjustments are of a normal, recurring nature. These interim financial statements should be read in conjunction with the audited financial statements and the notes thereto prepared by the Company. Operating results for the three and six month periods ended June 30, 2001, are not necessarily indicative of the results to be achieved for the full year. As discussed in Note 3, on March 10, 2000, the Company merged with Sound Designs, Inc. ("Sound Designs"), and the stockholders of the Company received approximately 1.69 shares of Sound Designs common stock for each share of the Company's common stock they owned. At the time of the merger, the Company had 13,876,193 common shares issued and outstanding, and in the merger, 23,340,000 shares of Sound Designs common stock were received. Retroactive effect has been given to the merger in stockholders' equity accounts beginning as of the year ended December 31, 1999, and in all share and per share data in the accompanying condensed financial statements. BUSINESS. The Company, organized in October 1998, is to be a provider of Internet-based, business-to-business, e-commerce solutions and services that enable buyers and suppliers to automate business transactions on the Internet. The Company is headquartered in Addison, Texas. 3. ACQUISITION On March 10, 2000, the Company closed the Agreement and Plan of Merger entered into with Sound Designs, a Nevada corporation. As consideration for the merger, the stockholders of the Company, the accounting acquirer, received approximately 1.69 shares of Sound Designs, the legal acquirer, common stock for each share of the Company's common stock they owned. As a result, the former stockholders of the Company currently own 60% of the outstanding shares of common stock of Sound Designs. In addition, the reverse merger agreement required all existing directors and officers of Sound Designs to resign and name the directors of the Company as the directors of the surviving company which has taken the name of Plus Solutions, Inc. The "reverse merger" resulted in the 5 6 Company being treated as the acquirer for accounting purposes. The transaction was accounted for in a manner similar to a pooling of interests, whereby no goodwill resulted from this transaction, and the Company's equity interest in Sound Designs' net assets was recorded at Sound Designs' historical cost basis. Other than the cash received upon the merger, no other assets or agreements were received from Sound Designs. 4. FINANCING ARRANGEMENTS On September 27, 2000, we entered into a subscription agreement with four investors, The Keshet Fund L.P., Keshet L.P., Nesher Ltd., and Talbiya B. Investments Ltd., which provided for an $8.5 million long-term financing commitment. The financing was arranged by KCM Ltd., a New York, New York investment firm. We initially sold to the investors a total of $500,000 of our 8% convertible notes for a purchase price equal to the principal amount of each note. In November 2000, we sold the investors an additional $250,000 of our convertible notes for a purchase price equal to the principal amount. As a result, each investor currently holds 8% convertible notes in the amount set forth below: The Keshet Fund L.P. ........................................... $185,000 Keshet L.P. .................................................... 390,000 Nesher Ltd. .................................................... 85,000 Talbiya B. Investments Ltd. .................................... 90,000 -------- TOTAL .......................................................... $750,000 ========
The full principal amounts of the convertible notes must be paid on September 27, 2003, and on November 29, 2003. The convertible notes incur interest at the rate of 8% per year, which interest is paid quarterly. The convertible notes are a general obligation of Plus Solutions and payment of principal and interest under the notes is not secured by any specific assets. The offering of the convertible notes to the investors was a private offering made in reliance on Rule 506 of Regulation D under the United States Securities Act. Each of the investors represented to us in the subscription agreement that it qualifies as an accredited investor under Regulation D. In May 2001, we entered into an agreement with the investors to amend the terms of the Subscription Agreement. We agreed with the investors to: o terminate our right to sell any additional convertible notes to the investors; o eliminate any obligation to issue additional warrants to any party; and o limit the maximum percentage of our common stock that the investors, as a group, can own at any time to 4.99%. We received $100,000 on May 14, 2001, and $50,000 on June 18, 2001 from The Keshet Fund L.P. on substantially similar terms as set forth in the subscription agreement executed on September 27, 2000, except for collateral provided to secure such $150,000 in the form of shares of our common stock pledged by our President. In August 2001, a stockholder loaned $225,000 to us for 120 days at an annual interest rate of 10%. Certain of these funds were loaned by us to Applied Technology Solution Integrators, Inc. ("ATSI") in furtherance of our plans to combine the operations of ATSI and the Company. We continue to attempt to raise funds to support our business plan. However, we do not know in what amounts or on what terms such additional financing will be made available or if it will be made available at all. We cannot be certain that such funding will be made available to us in sufficient amounts or on terms that will permit us to pursue our current business plan. 6 7 5. STOCKHOLDERS' EQUITY Related to the above financing arrangements, there were 2,000,000 warrants issued on September 27, 2000, to Alon Enterprises, Ltd., with the warrants being exercisable for a period of five years for common shares, with an exercise price of $0.1365 per share. As of the date of issuance, the warrants were determined to have an estimated fair value of $191,000. As of June 30, 2001, unamortized debt discount of $143,249 is deducted from the related debt. Also related to the above financing arrangements, there were 1,000,000 warrants issued on November 29, 2000, to Alon Enterprises, Ltd., with the warrants being exercisable for a period of five years for common shares with an exercise price of $0.065625 per share. As of the date of issuance, the warrants were determined to have an estimated fair value of $48,000. As of June 30, 2001, unamortized debt discount of $38,667 is deducted from the related debt. Related to the above financing arrangements in May 2001 and June 2001, there were 100,000 warrants and 50,000 warrants issued, respectively, to The Keshet Fund L.P. with the warrants being exercisable for a period of five years for common shares, with an exercise price of $0.021 per share and $0.0168 per share, respectively. As of the date of issuance, the warrants were determined to have an estimated fair value of $2,000 and $1,000, respectively. As of June 30, 2001, unamortized debt discount of $1,750 and $959, respectively, is deducted from the related debt. The Company has also issued 800,000 warrants to a service provider, with the warrants being exercisable for a period of five years for common shares, with an exercise price of $0.20 per share. As of the date of issuance, the warrants were determined to have an estimated fair value of $71,000. During the third quarter of 2000, the Company issued 300,000 shares of common stock at $0.25 per share, and the Company also has issued 100,000 shares of preferred stock at $0.75 per share. 6. RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations." SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001, and eliminates the pooling-of-interests method. The Company does not believe that the adoption of SFAS 141 will have a significant impact on its financial statements. In July 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible Assets", which is effective January 1, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. The Company is currently assessing but has not yet determined the impact of SFAS 142 on its financial position and results of operations. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following is a discussion of the financial condition and results of operations of the Company for the fiscal quarter and six month period ended June 30, 2001 (the "Second Quarter 2001" and "YTD 2001", respectively), as compared to the fiscal quarter and the six month period ended June 30, 2000 (the "First Quarter 2000" and "YTD 2000", respectively). This discussion should be read in conjunction with the Condensed Financial Statements and the related Notes attached hereto. RECENT DEVELOPMENTS We recently agreed with ATSI to combine the operations of ATSI and the Company. It is currently undetermined how this combination will be affected, but the management of both the Company and ATSI are working in conjunction to develop a plan to combine the business in a manner most advantageous for the stockholders of Plus Solutions and ATSI. GENERAL The Company is to be a provider of Internet-based, business-to-business, e-commerce solutions and services that enable buyers and suppliers to automate business transactions on the Internet. The Company is headquartered in Addison, Texas. We currently have sufficient working capital to continue our operations for approximately 30 days. We expect our operations to continue to produce a negative cash flow. Consequently, if we cannot raise additional capital within approximately 30 days, we will not be able to fund our continued operations. If adequate funding is not made available to us on acceptable terms, we will not be able to take advantage of unanticipated opportunities, develop new products or services, fund our continued operations, or otherwise respond to unanticipated competitive pressures. We cannot assure you that sufficient financing will be available on terms favorable to us, if at all. We have received verbal assurances from the investors that additional capital will be made available to us. However, we do not know in what amounts or on what terms such additional financing will be made available. On March 10, 2000, the Company closed the Agreement and Plan of Merger entered into with Sound Designs, Inc. ("Sound Designs"), a Nevada corporation. As consideration for the merger, the stockholders of the Company, the accounting acquirer, received approximately 1.69 shares of Sound Designs, the legal acquirer, common stock for each share of the Company's common stock they owned. In addition, the Company received cash of $107,431 from Sound Designs. As a result, the former stockholders of the Company currently own 60% of the outstanding shares of common stock of Sound Designs. In addition, the merger agreement required all existing directors and officers of Sound Designs to resign and name the directors of the Company as the directors of the surviving company which has taken the name of Plus Solutions, Inc. OPERATIONS There was no revenue in the Second Quarter 2000 nor in the Second Quarter 2001. Total operating expenses, including general and administrative costs, were $268,522 for the Second Quarter 2000 versus $200,320 for the Second Quarter 2001. Contributing significantly to this overall decrease were lower salaries and benefits. Deferred financing costs and amortization expense for the period increased along with legal and accounting costs related to the registration statement. As such, net operating losses decreased when comparing Second Quarter 2000 of $268,522 to the Second Quarter 2001 of $200,320. Total operating expenses, including general and administrative costs were $460,605 for the six months of 2000 versus $392,323 for the six months ended 2001. Contributing significantly to this were decreases in salaries and benefits. Deferred financing costs, amortization expense, product development costs and legal and accounting fees increased in this period. Net operating losses decreased for the six 8 9 months when comparing the first six months of 2000 of $460,605 to the first six months of 2001 of $392,323. Net loss increased for the first six months of 2001 with a total of $479,964 as compared to the first six months of 2000 of $460,605 due to interest expense of $87,641. LIQUIDITY AND CAPITAL RESOURCES On September 27, 2000, we entered into a subscription agreement with four investors to provide up to $8,500,000 of financing to us through the sale of convertible debentures. We sold an aggregate of $750,000 of convertible debentures and as of May 11, 2000, we mutually agreed with the investors to terminate our right to sell additional convertible debentures pursuant to the September 2000 subscription agreement. In May 2001, we entered into an agreement with the investors to amend the terms of the Subscription Agreement. We agreed with the investors to: o terminate our right to sell any additional convertible notes to the investors; o eliminate any obligation to issue additional warrants to any party; and o limit the maximum percentage of our common stock that the investors, as a group, can own at any time to 4.99%. We received $100,000 on May 14, 2001, and $50,000 on June 18, 2001 from The Keshet Fund L.P. on substantially similar terms as set forth in the subscription agreement executed on September 27, 2000, except for collateral provided to secure such $150,000 in the form of shares of our common stock pledged by Max Golden. In August 2001, a stockholder loaned $225,000 to us for 120 days at an annual interest rate of 10%. Certain of these funds were loaned by us to Applied Technology Solution Integrators, Inc. ("ATSI") in furtherance of our plans to combine the operations of ATSI and the Company. We continue to attempt to raise funds to support our business plan. However, we do not know in what amounts or on what terms such additional financing will be made available or if it will be made available at all. We cannot be certain that such funding will be made available to us in sufficient amounts or on terms that will permit us to pursue our current business plan. FORWARD-LOOKING STATEMENTS Management's discussion of the Company's 2001 quarterly period in comparison to 2000, contains forward-looking statements regarding current expectations, risks and uncertainties for future periods. The actual results could differ materially from those discussed here. As well as those factors discussed in this report, other factors that could cause or contribute to such differences include, among other items, cancellation of product development, lack of substantial additional financing, or an inability of management to successfully reduce operating expenses. Therefore, the condensed financial data for the periods presented may not be indicative of the Company's future financial condition or results of operations. 9 10 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 by the undersigned thereunto duly authorized. Date: August 27, 2001 PLUS SOLUTIONS, INC. By: /s/ MAX L. GOLDEN -------------------------------------- Max L. Golden Chairman of the Board of Directors and Chief Executive Officer 10 -----END PRIVACY-ENHANCED MESSAGE-----