SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file number: 0-27645
PLANET411.COM INC.
(Exact name of registrant as specified in its charter)
DELAWARE 88-0258277
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
440 Rene Levesque West, Suite 401, Montreal, Quebec Canada H2Z 1V7
(514) 866-4638
(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ] No {X} (became subject to filing requirements February 25, 2000)
At May 12, 2000, there were 24,950,841 shares of the registrant's common stock
outstanding.
PART I. FINANCIAL INFORMATION
Planet 411.com Corporation
(A Development Stage Company)
Consolidated Financial Statements
Financial Statements
Consolidated Operations 2
Consolidated Deficit 2
Consolidated Cash Flows 3
Consolidated Balance Sheets 4
Notes to Consolidated Financial Statements 5 and 6
12-05-2000
Planet 411.com Corporation
(A Development Stage Company)
Consolidated Operations
Consolidated Deficit
(In U.S. dollars)
================================================================================
Unaudited
---------------------------------------------------------------------------
For the period For the period
1998-07-31 1998-07-31
Three months Three months (inception) Nine months (inception)
ended ended through ended through
1999-03-31 2000-03-31 1999-03-31 2000-03-31 2000-03-31
----------- ----------- ----------- ----------- -----------
$ $ $ $ $
CONSOLIDATED OPERATIONS
Revenue -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Operating and administrative expenses
Salaries 49,136 340,874 83,004 717,048 963,781
Fringe benefits 5,773 32,716 10,654 69,915 99,045
Subcontracts 1,326 413,204 6,739 428,797 439,602
Training 1,160 2,468 1,874 26,266
Advertising and marketing research 873 112,447 38,569 366,375 414,325
Transportation 457 720 823 1,801 3,455
Promotion 5,532 4,460 9,327 35,730 62,432
Rent 13,489 46,301 35,198 81,462 133,934
Web hosting and maintenance of
licenses 3,491 167,063 11,721 465,468 524,324
Equipment rental 2,601 1,949 2,601 5,578
Maintenance and repairs 1,062 173 3,045 918 5,606
Taxes and permits 78 8,496 5,040 15,728 27,028
Insurance 386 3,274 1,350 10,856 13,325
Office supplies and courier 10,365 25,103 17,690 48,570 100,923
Communications 4,363 13,806 10,307 25,912 41,465
Professional fees 59,256 225,941 91,002 302,144 515,506
Bank charges 410 4,827 651 9,475 11,081
Interest on long-term debt 440 311 2,116 1,153 4,204
Service contracts 50 26,130 91,809
Travel 17,596 1,361 17,596 17,209 47,202
Foreign exchange (1,572) (14,062) (44,166)
Amortization of capital assets 9,200 103,176 26,568 213,460 326,385
----------- ----------- ----------- ----------- -----------
184,393 1,505,332 375,817 2,828,564 3,813,110
----------- ----------- ----------- ----------- -----------
Net loss 184,393 1,505,332 375,817 2,828,564 3,813,110
=========== =========== =========== =========== ===========
Basic loss per share
Weighted average number of 0.01 0.03 0.01 0.06 0.10
outstanding shares of common stock =========== =========== =========== =========== ===========
(the special voting stock considered
as 25,094,996 shares of common
stock) 25,094,996 49,447,942 25,094,996 49,146,471 37,501,922
=========== =========== =========== =========== ===========
CONSOLIDATED DEFICIT
Deficit, beginning of period (Note 1) 191,424 2,307,778 984,546
Net loss 184,393 1,505,332 375,817 2,828,564 3,813,110
----------- ----------- ----------- ----------- -----------
Deficit accumulated during the
development stage, end of period 375,817 3,813,110 375,817 3,813,110 3,813,110
=========== =========== =========== =========== ===========
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
Planet 411.com Corporation
(A Development Stage Company)
Consolidated Cash Flows
(In U.S. dollars)
================================================================================
Unaudited
--------------------------------------------------------
For the period For the period
1998-07-31 1998-07-31
(inception) Nine months (inception)
through ended through
1999-03-31 2000-03-31 2000-03-31
----------- ----------- -----------
$ $ $
OPERATING ACTIVITIES
Net loss (375,817) (2,828,564) (3,813,110)
Non-cash item
Amortization of capital assets 26,568 213,460 326,385
Changes in non-cash working capital items
Sales taxes receivable (23,725) (94,332) (132,114)
Other receivables (529) (40,852) (40,852)
Prepaid expenses (311,437) (18,588) (49,800)
Accounts payable 648,424 618,653 639,308
Accrued liabilities 10,012 493,221 597,011
----------- ----------- -----------
Cash flows from operating activities (26,504) (1,657,002) (2,473,172)
----------- ----------- -----------
INVESTING ACTIVITIES
Cash position of acquired company 263
Term deposit (10,228) (20,424)
Advances to directors and shareholders (16,581) (3,736) (6,863)
Advances to related companies (10,319) (44,242)
Other advances 10,766 (2,929)
Capital assets (692,239) (305,219) (1,164,310)
Effect of exchange rate changes 750 1,296 4,375
----------- ----------- -----------
Cash flows from investing activities (718,389) (307,121) (1,234,130)
----------- ----------- -----------
FINANCING ACTIVITIES
Loan 127,157 127,157
Advances from directors 33,751 34,407
Repayment of long-term debt (6,734) (4,635) (11,588)
Issuance of preferred shares of a subsidiary company -
non-controlling interest 285,474
Issuance of capital stock 928,918 1,135,778 2,150,222
Cancellation of capital stock (35,000) (35,000)
Advance payment on capital stock units 1,000,020 1,539,020
Effect of exchange rate changes (35,372) (26,088) (52,560)
----------- ----------- -----------
Cash flows from financing activities 886,812 2,230,983 4,037,132
----------- ----------- -----------
Net increase in cash 141,919 266,860 329,830
Cash, beginning of period 62,970
----------- ----------- -----------
Cash, end of period 141,919 329,830 329,830
=========== =========== ===========
SUPPLEMENTAL DATA
Cash paid during the period for interest 2,116 1,153 4,204
=========== =========== ===========
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
Planet 411.com Corporation
(A Development Stage Company)
Consolidated Balance Sheets
(In U.S. dollars)
================================================================================
Unaudited
---------------------------
2000-03-31 1999-06-30
---------- ----------
$ $
ASSETS
Current assets
Cash 329,830 62,970
Term deposit, 3.75%, maturing on April 19, 2000 20,620 10,196
Sales taxes receivable 132,114 37,782
Other receivables 40,852
Advances to directors and shareholders, without interest 6,688 2,673
Prepaid expenses 49,800 31,212
---------- ----------
579,904 144,833
Other advances, without interest or repayment terms 2,929 13,695
Capital assets 1,058,579 968,591
---------- ----------
1,641,412 1,127,119
========== ==========
LIABILITIES
Current liabilities
Accounts payable 854,400 235,747
Accrued liabilities 597,011 103,790
Loan, 10%, repayable on demand 127,157
Instalments on long-term debt 9,035 8,834
---------- ----------
1,587,603 348,371
Advances from directors, without interest or repayment terms 34,407 656
Long-term debt 1,279 6,115
Non-controlling interest 285,474 285,474
---------- ----------
1,908,763 640,616
---------- ----------
SHAREHOLDERS' EQUITY (DEFICIENCY)
Capital stock (Note 4)
Special voting stock, having a par value of $0.001, holding a number of votes equal to
the number of exchangeable shares of 3560309 Canada Inc. outstanding other than those
held directly or indirectly by the Company, 1 share authorized; 1 share June 30, 1999 and
March 31, 2000 issued and outstanding -- --
Preferred stock, having a par value of $0.001, 10,000,000 shares authorized; none issued -- --
Common stock, having a par value of $0.001, 69,999,999 shares authorized; 24,084,315
(June 30,1999) and 24,950,841 (March 31, 2000) issued and outstanding 24,951 24,084
Contributed surplus (Note 4) 3,573,368 934,437
Advance payment on capital stock units 539,000
Cumulative translation adjustments (52,560) (26,472)
Deficit accumulated during the development stage (3,813,110) (984,546)
---------- ----------
(267,351) 486,503
---------- ----------
1,641,412 1,127,119
========== ==========
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
Planet 411.com Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
(In U.S. dollars)
(Unaudited)
================================================================================
1 - RESTATEMENT OF PRIOR PERIOD UNAUDITED FINANCIAL STATEMENTS
During the three-month period ended March 31, 2000, the Company discovered
previously incurred but unrecorded advertising and marketing research expenses
of $127,840 and web hosting and maintenance of licenses (previously Internet
connection) expenses of $217,860. The expenses were incurred in the three-month
period ended December 31, 1999. As a result, the Company has restated the
accompanying unaudited consolidated financial statements for the three months
and the six months ended December 31, 1999 and for the period July 31, 1998
(inception) through December 31, 1999 to record an increase in advertising and
marketing research expenses of $127,840 and web hosting and maintenance of
licenses expenses of $217,860. The restatement adjustments result in an increase
in the deficit, beginning of period for the three months ended March 31, 2000 of
$345,700.
================================================================================
2 - NATURE OF OPERATIONS
The Company, in its development stage, is involved in the e-business industry.
It provides end-to-end quality e-business solutions to businesses interested in
doing e-tailing (selling of retail goods on the Internet).
================================================================================
3 - BASIS OF PRESENTATION
The financial statements reflect all adjustments which are, in the opinion of
management, necessary to present fairly the Company's financial position as at
March 31, 2000, results of operations for the nine and three-month periods ended
March 31, 2000 and 1999 and cash flows for the nine-month period ended March 31,
2000 and 1999. The financial statements should be read in conjunction with the
summary of significant accounting policies and notes to financial statements
included in the Company's Form 10/A. The results of operations for the nine and
three-month periods ended March 31, 2000 are not necessarily indicative of the
results to be expected for the full year.
Planet 411.com Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
(In U.S. dollars)
(Unaudited)
================================================================================
4 - CAPITAL STOCK AND CONTRIBUTED SURPLUS
Contributed
Special voting stock Common stock surplus
----------------------------- ------------------------------ ------------
Number of Number of
shares Amount shares Amount Amount
----------- ---------- ----------- ---------- ------------
$ $ $
Special voting stock
(25,094,996 votes) 1 104,444
Balance outstanding on
April 20, 1999, date of
reverse takeover 8,484,315 8,484 (64,407)
June 1999 - exercise of
warrants 15,600,000 15,600 894,400
----------- ---------- ----------- ---------- ------------
Balance June 30, 1999 1 -- 24,084,315 24,084 934,437
August 1999 -
cancellation of common
stock (600,000) (600) (34,400)
September 1999 - capital
stock units issued 107,800 108 538,892
October 1999 - capital
stock units issued 233,340 233 349,777
November 1999 - capital
stock units issued 333,340 334 499,676
----------- ---------- ----------- ---------- -----------
Balance December 31,
1999 1 -- 24,158,795 24,159 2,288,382
January 2000 - capital
stock units issued 111,940 112 149,888
March 2000 - capital
stock units issued 680,106 680 1,135,098
----------- ---------- ----------- ---------- ------------
Balance March 31, 2000 1 -- 24,950,841 24,951 3,573,368
=========== ========== ========== ========== ============
At March 31, 2000, warrants to purchase 107,800 shares of common stock for
$5.00, 233,340 and 333,340 shares of common stock for $1.50, 111,940 shares of
common stock for $1.34 and 680,106 shares of common stock for $1.67 are
outstanding. The warrants expire August 30, October 15, November 30 and December
30, 2000 and March 29, 2001 respectively.
Stock options
Effective March 2, 2000, the Company adopted the 2000 Stock Option Plan (the
"2000 Plan"). The 2000 Plan is administered by the Board of Directors who have
sole discretion and authority to determine individuals eligible for awards under
the 2000 Plan. The 2000 Plan provides for issuance of a total of 10,000,000
options, within a period of 10 years from the effective date. The conditions of
exercise of each grant are determined individually by the Board at the time of
the grant. During the quarter ended March 31, 2000, 7,507,000 options at an
exercise price of $2.00 have been granted under this plan. No compensation
expense is required since the Company follows APB 25 in accounting for these
options.
Planet 411.com Corporation
(A Development Stage Company)
Consolidated Financial Statements
Financial Statements
Consolidated Operations 2
Consolidated Deficit 2
Consolidated Cash Flows 3
Consolidated Balance Sheets 4
Notes to Consolidated Financial Statements 5 to 7
Planet 411.com Corporation
(A Development Stage Company)
Consolidated Operations
Consolidated Deficit
(In U.S. dollars)
================================================================================
Unaudited
-------------------------------------------------------------------------
For the period
1998-07-31
Three months For the period Six months (inception)
ended 1998-07-31 ended through
Three months 1999-12-31 (inception) 1999-12-31 1999-12-31
ended (Restated - through (Restated - (Restated -
1998-12-31 Note 1) 1998-12-31 Note 1) Note 1)
----------- ----------- ----------- ----------- ----------
$ $ $ $ $
CONSOLIDATED OPERATIONS
Revenue -- -- -- -- --
----------- ----------- ----------- ----------- ----------
Operating and administrative expenses
Salaries 27,117 195,800 33,868 376,174 622,907
Fringe benefits 2,919 18,902 4,881 37,199 66,329
Subcontracts 5,198 10,024 5,413 15,593 26,398
Training 1,308 442 1,308 1,874 26,266
Advertising 37,696 234,994 37,696 253,928 301,878
Transportation 336 185 366 1,081 2,735
Promotion 3,167 26,678 3,795 31,270 57,972
Rent 14,544 11,806 21,709 35,161 87,633
Web hosting and maintenance of licenses 3,584 292,009 8,230 298,405 357,261
Equipment rental 1,414 1,949 2,977
Maintenance and repairs 1,885 412 1,983 745 5,433
Taxes and permits 4,962 2,740 4,962 7,232 18,532
Insurance 964 5,440 964 7,582 10,051
Office supplies and courier 4,885 11,661 7,325 23,467 75,820
Communications 4,872 3,837 5,944 12,106 27,659
Professional fees 25,150 6,230 31,746 76,203 289,565
Bank charges 132 1,003 241 4,648 6,254
Interest on long-term debt 1,128 277 1,676 842 3,893
Service contracts 26,080 26,080 91,759
Travel 8,461 15,848 45,841
Foreign exchange (17,422) (12,490) (42,594)
Amortization of capital assets 15,242 56,959 17,368 110,284 223,209
----------- ----------- ----------- ----------- ----------
156,503 896,518 191,424 1,323,232 2,307,778
----------- ----------- ----------- ----------- ----------
Net loss 156,503 896,518 191,424 1,323,232 2,307,778
Basic loss per share 0.01 0.02 0.01 0.03 0.07
=========== =========== =========== =========== ==========
Weighted average number of outstanding
shares of common stock (the special voting
stock considered as 25,094,996 shares of
common stock) 25,094,996 48,994,707 25,094,996 48,997,374 35,407,340
=========== =========== =========== =========== ==========
CONSOLIDATED DEFICIT
Deficit, beginning of period 34,921 1,411,260 984,546 0
Net loss 156,503 896,518 191,424 1,323,232 2,307,778
----------- ----------- ----------- ----------- ----------
Deficit accumulated during the development
stage, end of period 191,424 2,307,778 191,424 2,307,778 2,307,778
=========== =========== =========== =========== ==========
================================================================================
The accompanying notes are an integral part of the consolidated financial statements.
Planet 411.com Corporation
(A Development Stage Company)
Consolidated Cash Flows
(In U.S. dollars)
Unaudited
-----------------------------------------------------------
For the period
1998-07-31
For the period Six months (inception)
1998-07-31 ended through
(inception) 1999-12-31 1999-12-31
through (Restated - (Restated -
1998-12-31 Note 1) Note 1)
---------- ---------- ----------
$ $ $
OPERATING ACTIVITIES
Net loss (191,424) (1,323,232) (2,307,778)
Non-cash item
Amortization of capital assets 17,368 110,284 223,209
Changes in non-cash working capital items
Sales taxes receivable (34,963) (10,403) (48,185)
Prepaid expenses (2,649) (61,601) (92,813)
Accounts payable 26,509 347,974 368,629
Accrued liabilities 13,432 29,281 133,071
---------- ---------- ----------
Cash flows from operating activities (171,727) (907,697) (1,723,867)
---------- ---------- ----------
INVESTING ACTIVITIES
Cash position of acquired company 263
Term deposit (10,196)
Advances to directors and shareholders (28,098) (3,127)
Other advances 13,695
Capital assets 2F(Note 4) (89,748) (120,497) (979,588)
Effect of exchange rate changes 96 3,042 6,121
---------- ---------- ----------
Cash flows from investing activities (117,750) (103,760) (986,527)
---------- ---------- ----------
FINANCING ACTIVITIES
Advances from (to) related companies 37,147 (44,242)
Advances from directors 5,519 6,175
Repayment of long-term debt (2,901) (3,019) (9,972)
Issuance of preferred shares of a subsidiary
company - non-controlling interest 285,474
Issuance of capital stock 344,528 1,014,444
Cancellation of capital stock (35,000) (35,000)
Advance payment on capital stock units 1,000,020 1,539,020
Effect of exchange rate changes (16,161) 658 (25,814)
---------- ---------- ----------
Cash flows from financing activities 362,613 968,178 2,730,085
---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents 73,136 (43,279) 19,691
Cash and cash equivalents, beginning of
period 62,970
---------- ---------- ----------
Cash and cash equivalents, end of period 73,136 19,691 19,691
---------- ---------- ----------
SUPPLEMENTAL DATA
Cash paid during the period for interest 1,676 842 3,893
========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
================================================================================
Planet 411.com Corporation 4
(A Development Stage Company)
Consolidated Balance Sheets
(In U.S. dollars)
================================================================================
Unaudited
--------------------------
1999-12-31
(Restated
Note 1) 1999-06-30
---------- ----------
$ $
ASSETS
Current assets
Cash 19,691 62,970
Term deposit, 3.75%, maturing on April 19, 2000 10,392 10,196
Sales taxes receivable 48,185 37,782
Advances to directors and shareholders, without interest 2,952 2,673
Prepaid expenses 92,813 31,212
---------- ----------
174,033 144,833
Other advances, without interest or repayment terms 13,695
Capital assets 975,287 968,591
---------- ----------
1,149,320 1,127,119
LIABILITIES
Current liabilities
Accounts payable 583,721 235,747
Accrued liabilities 133,071 103,790
Instalments on long-term debt 9,572 8,834
---------- ----------
726,364 348,371
Advances from directors, without interest or repayment terms 6,175 656
Long-term debt 2,358 6,115
Non-controlling interest 285,474 285,474
---------- ----------
1,020,371 640,616
---------- ----------
SHAREHOLDERS' EQUITY
Capital stock 2F(Note 4)
Special voting stock, having a par value of $0.001, holding a number of
votes equal to the number of exchangeable shares of 3560309 Canada Inc.
outstanding other than those held directly or indirectly by the Company, 1
share authorized; 1 share June 30, 1999 and
December 31, 1999 issued and outstanding -- --
Preferred stock, having a par value of $0.001, 10,000,000 shares authorized; none issued -- --
Common stock, having a par value of $0.001, 69,999,999 shares authorized; 24,084,315
(June 30,1999) and 24,158,795 (December 31, 1999) issued and outstanding 24,159 24,084
Contributed surplus 2F(Note 4) 2,288,382 934,437
Advance payment on capital stock units 2F(Note 5) 150,000 539,000
Cumulative translation adjustments (25,814) (26,472)
Deficit accumulated during the development stage (2,307,778) (984,546)
---------- ----------
128,949 486,503
---------- ----------
1,149,320 1,127,119
========== ==========
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
Planet 411.com Corporation 5
(A Development Stage Company)
Notes to Consolidated Financial Statements
(In U.S. dollars)
(unaudited)
================================================================================
1 - RESTATEMENT OF UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
During the three-month period ended March 31, 2000, the Company discovered
previously incurred but unrecorded advertising and marketing research expenses
of $127,840 and web hosting and maintenance of licences (previously internet
connection) expenses of $217,860. The expenses were incurred in the three-month
period ended December 31, 1999. As a result, the company has restated the
unaudited consolidated financial statements for the three months and the six
months ended December 31, 1999 and for the period July 31, 1998 (inception)
through December 31, 1999 to record an increase in marketing research expenses
of $127,840 and web hosting and maintenance of licenses expenses of $217,860.
The following table summarizes the restatement adjustments which increase the
following balances recorded by the Company.
(Unaudited)
----------------------------------------------------
For the period
1998-07-31
Three months Six months (inception)
ended ended through
1999-12-31 1999-12-31 1999-12-31
------------ ---------- --------------
$ $ $
Consolidated Balance sheets
Current liabilities 345,700 345,700 345,700
Deficit accumulated during the development stage 345,700 345,700 345,700
Consolidated Operations
Operating and administrative expenses 345,700 345,700 345,700
Net loss 345,700 345,700 345,700
Effect on basic loss per share 0.01 0.01 0.01
================================================================================
2 - NATURE OF OPERATIONS
The Company, in its development stage, is involved in the e-business industry.
It provides end-to-end quality e-business solutions to businesses interested in
doing e-tailing (selling of retail goods on the Internet).
Planet 411.com Corporation 6
(A Development Stage Company)
Notes to Consolidated Financial Statements
(In U.S. dollars)
(unaudited)
================================================================================
3 - BASIS OF PRESENTATION
The financial statements reflect all adjustments which are, in the opinion of
management, necessary to present fairly the Company's financial position as at
December 31, 1999, results of operations for the six and three-month periods
ended December 31, 1999 and 1998 and cash flows for the six-month periods ended
December 31, 1999 and 1998. The financial statements should be read in
conjunction with the summary of significant accounting policies and notes to
financial statements included in the Company's Form 10/A. The results of
operations for the six and three-month periods ended December 31, 1999 are not
necessarily indicative of the results to be expected for the full year.
================================================================================
4 - CAPITAL STOCK AND CONTRIBUTED SURPLUS
Special Common Contributed
voting stock stock surplus
--------------------------- ------------------------------ -------------
Number of Number of
shares Amount shares Amount
--------- ------- ---------- -------- -------------
$ $ $
Special voting stock
(25,094,996 votes) 1 104,444
Balance outstanding on
April 20, 1999, date of
reverse takeover 8,484,315 8,484 (64,407)
June 1999 - exercise of
warrants 15,600,000 15,600 894,400
--------- --------- ---------- -------- ---------
Balance June 30, 1999 1 -- 24,084,315 24,084 934,437
August 1999, cancellation of
common stock (600,000) (600) (34,400)
September 1999, capital
stock units issued 107,800 108 538,892
October 1999, capital stock
units issued 233,340 233 349,777
November 1999, capital stock
units issued 333,340 334 499,676
--------- --------- ---------- -------- ---------
Balance December 31, 1999 1 -- 24,158,795 24,159 2,288,382
========= ========= ========== ======== =========
At December 31, 1999, warrants to purchase 107,800 shares of common stock for
$5.00, 233,340 and 333,340 shares of common stock for $1.50 and 111,940 shares
of common stock for $1.34 are outstanding. The warrants expire August 30,
October 15, November 30 and December 30, 2000 respectively.
Planet 411.com Corporation 7
(A Development Stage Company)
Notes to Consolidated Financial Statements
(In U.S. dollars)
(unaudited)
================================================================================
5 - ADVANCE PAYMENT ON CAPITAL STOCK UNITS
The Company received $150,000 with respect to a private placement for 111,940
units at $1.34 per unit. Each unit consists of one share of common stock and one
share purchase warrant. Each warrant will entitle the holder to purchase one
additional share of common stock of the Company for $1.34 within one year from
the date of closing of the offer, December 30, 1999. As of December 31, 1999, no
shares of common stock have been issued with respect to this private placement.
Item 2. Management's Discussion and Analysis of Financial Position and Results
of Operations
Forward Looking Statements
The following presentation contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These statements are
based on our current expectations and relate to anticipated future events that
are not historical facts, such as our business strategies and their intended
results. Our actual results could differ materially from those set forth in the
forward-looking statements as a result of (i) changes in general economic
conditions, (ii) changes in the assumptions used in making these statements,
(iii) our lack of a long-term operating history, (iv) competition generally, and
in the technology sector in particular, (v) our ability to attract, hire, train
and retain competent personnel in a variety of functions, (vi) our ability to
raise sufficient capital to fund our expansion, and (vii) our continued ability
to generate virtual stores that attract visitors to our e-merchants' websites.
Results of Operations
Periods ended March 31, 2000 versus Periods ended March 31, 1999
Operating and administrative expenses incurred for the nine months ended
March 31, 2000 were $2,828,564, an increase of $2,452,747 from the same expenses
incurred during the eight-month period from the Company's inception through
March 31, 1999. Operating and administrative expenses for the three months
ending March 31, 2000, were $1,505,332, an increase of $1,320,939 from the same
expenses incurred during the three months ended March 31, 1999. In each case,
these increases represent the cost of growing the Company, building its
infrastructure and product, hiring and paying employees, market research and
marketing and expenses connected with arranging financing. In particular, the
increases in the March 2000 expenses over the March 1999 figures reflect the
following:
o the Company had more employees, and those employees were earning
higher salaries (increase over three- and nine-month periods from
prior year: $291,738; $634,044), and the Company also incurred more
consultants' fees during the period;
o the Company incurred increased professional fees, primarily in
connection with the preparation of the Company's interim financial
statements and securities
14
filings, as the Company's common stock once again became eligible for
quotation on the Over-the-Counter Bulletin Board (increases:
$166,685; $211,142);
o the Company incurred increased market research costs, as the Company
defined its positioning and documented the market information needed
to define the industry e-strategy and e-marketing (increases:
$111,574; $327,806);
o the Company incurred increased subcontract fees as it required ad hoc
resources to complete the product development from both a management
and a technical point of view (increases: $411,878; $422,058);
o the Company's web hosting fees increased significantly as the Company
finalized its product testing (increases: $163,572; $453,747); and
o the Company increased miscellaneous other costs, commensurate with
its increased planning, research and development, marketing and other
activities.
As of March 31, 2000, the Company had an accumulated deficit of $3,813,110,
versus a $375,817 deficit as of March 31, 1999.
Restatement of Results of Operations for the Periods Ended December 31, 1999
The Company's new management has implemented an accounting system and has
improved its internal accounting controls, including for (among others)
procurements, purchases and disbursements. When preparing the Company's
quarterly report for the third fiscal quarter, the Company determined that it
had not recorded as payable during the second fiscal quarter certain expenses
that it incurred during that quarter. The Company inadvertently recorded these
expenses in the wrong quarter; i.e., the third quarter instead of the second
quarter. Consequently, expenses for the second quarter were understated by
$345,700. The following discussion and analysis of the second fiscal quarter
reflects the Company's corrected accounting for these expenses. Management
believes that its enhanced systems and internal controls, including the use of
monthly financial statements, will enable the Company to prevent these errors
from occurring in the future.
Operating and administrative expenses incurred through for the three-month
period ended December 31, 1999 were $896,518 compared to $156,503 for the same
period in 1998. The Company's expenses for the six-month period ended December
31, 1999 were $1,323,232 compared to $191,424 for the five-month (from
inception) period ended December 31, 1998. The increases in the December 31,
1999 figures over the December 31, 1998 figures reflect the following:
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o the Company had more employees, and those employees were earning
higher salaries;
o increased professional fees were incurred, primarily in connection
with the Company's preparation of interim financial statements, the
ongoing development of the Company's business plan and the preparation
of securities documents and the Company's efforts to obtain bank
financing and financing from other sources;
o increased advertising and promotion costs were incurred, as the
Company used a significant portion of its resources to revise its
business plan and market its intended services, neither of which had
been fully developed in 1998; and
o increased miscellaneous other costs, commensurate with the Company's
increased planning, research and development, marketing and other
activities.
As of December 31, 1999, the Company had an accumulated deficit of $2,307,778,
compared with $191,424 as of December 31, 1998.
Liquidity and Capital Resources
During the third fiscal quarter, the Company issued 680,106 Units in
consideration of an aggregate cash amount of $1,135,778. Each of such Units
consisted of (a) one share of common stock, par value $0.001 ("Common Stock"),
and (b) one warrant to purchase another share of common stock at a strike price
of $1.67. The amount had been previously advanced to the Company and was
converted into equity on March 29, 2000.
The Company has had no other financing. These Units represent the sole
source of the Company's working capital received during the third fiscal
quarter. At the end of the third fiscal quarter, the Company had $329,830 in
cash available to fund operations. The Company anticipates that it will begin to
earn revenues from its customers commencing with the fourth fiscal quarter of
this year, as we will begin to place virtual stores online during that quarter.
The Company is seeking a new credit facility and is also attempting to
raise approximately $20 million through private transactions involving debt
and/or equity. The Company believes this amount will be sufficient to fund its
operations through the next 24 months, including the promotion of the Company's
products and services and the completion of the Company's required
infrastructure in terms of additional equipment and personnel. The failure to
obtain additional financing within the next four months would have a material
adverse effect on the financial position and results of operation of the
Company. There is no assurance that the Company will be able to raise any more
working capital through equity financing or that such credit line is available
to the Company at commercially reasonable rates. Any such financing may be at
terms that will dilute the Company's existing shareholders.
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Item 3. There have been no material changes from the information provided with
respect to market risk in the registrant's Form 10, filed February 22, 2000.
[The remainder of this page intentionally left blank]
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds. During the third fiscal
quarter, the Company issued 680,106 Units in consideration of an aggregate cash
amount of $1,135,778. Each of such Units consisted of (a) one share of Common
Stock, and (b) one warrant to purchase another share of common stock at a strike
price of $1.67 on or before March 29, 2001. The amount had been previously
advanced to the Company and was converted into equity on March 29, 2000.
The sale of the Units was exempt from registration under Regulation S. The
purchaser is not a U.S. person. The purchaser was at no time relevant to the
Unit purchase within the United States, and the transaction is an offshore
transaction. No directed selling efforts were used in the United States. The
purchaser still holds the Units.
Effective March 2, 2000, the Company adopted the 2000 Stock Option Plan (the
"2000 Plan"). The 2000 Plan is administered by the Board of Directors who have
sole discretion and authority to determine individuals eligible for awards under
the 2000 Plan. The 2000 Plan provides for issuance of a total of 10,000,000
options, within a period of 10 years from the effective date. The conditions of
exercise of each grant are determined individually by the Board at the time of
the grant. During the quarter ended March 31, 2000, 7,507,000 options at an
exercise price of $2.00 have been granted under this plan.
Items 3. through 5. The registrant has nothing to report under these items.
Item 6. Exhibits and Reports on From 8-K.
(a) Exhibits -
10 Master Merchant Agreement dated April 6, 2000 between 9066-
4871 Quebec Inc.
and The Toronto-Dominion Bank
27 Financial Data Schedule
(b) Reports on Form 8K - None were filed in the quarter ended March 31, 2000.
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Signature
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.
PLANET411.COM INC.
Dated: May 12, 2000 By: /s/ Laval Bolduc
------------------------------------------
Laval Bolduc
Chief Financial Officer
(Authorized Signatory) and Treasurer
(Principal Accounting Officer)
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