Let's post all of the substantive portions of the NT 10-Q:
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PART III -- NARRATIVE
State below in reasonable detail why the Form 10-K, 11-K, 20-F 10-Q, N-SAR, or the transition report or portion thereof, could not be filed within the prescribed time period. (Attach Extra Sheets if Needed.)
Due to unforeseen delay's in the Registrant's continuing implementation and enhancements of a new general ledger and accounting software package, change in accounting personnel, along with a significant increase in the volume of transactions during the quarter ending October 31, 1998 there was a delay in closing the Company's financial statements for the quarter ended October 31, 1998, thus causing an unforeseen delay in filing Form 10-QSB with the Securities and Exchange Commission, but not beyond the five day period of relief set forth in Rule 12-b-25.
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3) Is it anticipated that any significant change in results of operations from the corresponding period for the last fiscal year will be reflected by the earnings statements to be included in the subject report or portion thereof?
|X| Yes |_| No
If so, attach an explanation of the anticipated change, both narratively and quantitatively, and, if appropriate, state the reasons why a reasonable estimate of the results cannot be made.
The Company anticipates a net loss of approximately $5.1 million for the quarter ended October 31, 1998 whereas the net loss for the quarter ended October 31, 1997 was $1,322,375. The significant increase in net loss is due to the Company being fully operational in 1998 whereas it was a development stage company for part of 1997 and only began selling on the internet in July, 1997. Of the loss incurred during the quarter ended October 31, 1998,$596,600 was related to the issuance of the Company's Common Stock in exchange for advertising which aired during the quarter ending October 31, 1998 and resulted in a non-cash charge to earnings. On September 25, 1998 the Company approved the conversion of $350,000 of its liability related to the Robert McNulty Termination and Buy Out Agreement for common stock at a market price of $1.37 (the stock price on September 25, 1998), resulting in an issuance by the Company of 255,474 common shares.
Furthermore, the Company incurred charges against earnings during the quarter ended October 31, 1998 amounting to $80,000 related to resignation of the Company's former Executive Vice President.
In addition, the Company filed a registration statement on Form S-1 (the "Registration Statement") covering all of the shares of Common Stock that are issuable upon conversion of the 8% Convertible Debentures (the "Debentures") in the aggregate amount of $5,000,000 of which $5,000,000 has been issued to date.
Subsequent to October 31, 1998 the Company had $1,225,000 of unsecured promissory notes come due which remains unpaid at this time. Currently the Company is negotiating with several of the promissory note holders to extend the terms of their notes or convert their notes to equity. Such notes were due in November, 1998. The Company is also negotiating with USFI regarding extending the terms of their secured promissory note in the amount of $300,000 which came due December 2, 1998.
As of October 31, 1998, the Company's available cash and cash equivalents was minimal. Subsequent to October 31, 1998, the Company issued an additional $2,500,000 of 8% Convertible Debentures (the "Debentures") to existing Debenture holders. The Company received net proceeds of approximately $2,175,000 of which $900,000 was used to repay certain existing Debentures and the balance was used to fund ongoing operations. On December 7, 1998 the Company entered into a Secured Promissory Note (the "Note") in the amount of $2,500,000 which has been received net of related fees and commissions, the proceeds of which are being used to fund ongoing operations. The Note is secured by the intellectual property of the Company and certain shares of the Company's Common Stock held by Robert McNulty, the Company's former Chief Executive Officer and founder. The Note carries a 10% interest rate per annum and is due and payable thirty (30) days from the date of the Note; provided, however, if within thirty (30) days from the date of this Note, certain conditions are met, the Payee would have the right at its option until January 10, 1999 to convert the principal amount of the Note together with all accrued but unpaid interest into equity. In addition, on December 10, 1998 the Company entered into an Agreement for A Private Equity Line of Common Stock & Warrants Pursuant to Regulation D. The Commitment Amount is $60 million with an optional $40 million add-on with Swartz Private Equity, LLC.
The Management of the Company believes that its current cash on hand will be sufficient to sustain current operations for the fiscal year ending January 31, 1999. The Company anticipates that if it can satisfy the conditions to the funding of the Private Equity Line of Common Stock & Warrants it will have sufficient cash flow to sustain operations for the fiscal year ending January 31, 2000. However, if it is unable to satisfy those conditions, the Company would need to seek additional funds in order to sustain its ongoing operations. There can be no assurance that such capital resources will be available or, if available, that such funding will be on terms acceptable to the Company.
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