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 September 30, 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
(Address of principal executive offices) (zip code)
(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 [X] No
At November 13, 2000, there were 26,037,876 shares of the registrant's common
stock outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Planet 411.com Inc.
(A Development Stage Company)
Consolidated Financial Statements
Financial Statements
Consolidated Balance Sheets F-2
Consolidated Operations and Comprehensive Loss F-3
Consolidated Changes in Shareholders'
Equity (Deficiency) F-4
Consolidated Cash Flows F-5
Notes to Consolidated Financial
Statements F-6 to 7
F-1
Planet 411.com Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(In U.S. dollars)
- --------------------------------------------------------------------------------
Unaudited
-----------
2000-09-30 2000-06-30
--------------------------
$ $
ASSETS
Current assets
Cash 3,393 89,837
Term deposits, 4.25% to 4.8% , maturing
on March and April 2001 21,339 30,901
Accounts receivable 3,019 5,904
Sales taxes receivable 28,073 113,681
Advances to directors and shareholders, without interest 8,904 9,071
Prepaid expenses 41,676 89,564
--------------------------
Total current assets 106,404 338,958
Capital assets, net 813,683 941,075
--------------------------
920,087 1,280,033
==========================
LIABILITIES
Current liabilities
Accounts payable 899,216 924,382
Accrued liabilities 510,176 554,416
Promissory notes (note 3) 771,941 33,800
Instalments on long-term debt 3,378 8,122
--------------------------
Total current liabilities 2,184,711 1,520,720
Advances from directors and shareholders,
without interest or repayment terms 6,635 13,520
Redeemable preferred stock of a subsidiary 285,474 285,474
--------------------------
2,476,820 1,819,714
--------------------------
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 September 30, 2000 and
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; 26,037,876
(September 30, 2000) and 24,950,841 (June
30, 2000) issued and outstanding 26,038 24,951
Contributed surplus 4,876,723 3,573,368
Advance payment on capital stock units 1,304,442
Accumulated other comprehensive income 128,445 23,570
Deficit accumulated during the development stage (6,587,939) (5,466,012)
--------------------------
(1,556,733) (539,681)
--------------------------
920,087 1,280,033
==========================
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
Planet 411.com Inc.
(A Development Stage Company)
Consolidated Operations and Comprehensive Loss
(In U.S. dollars)
(Unaudited)
- --------------------------------------------------------------------------------
For the period
1998-07-31
Three months Three months (inception)
ended ended through
2000-09-30 1999-09-30 2000-09-30
----------- ----------- -----------
$ $ $
Revenue 7,251 -- 13,911
----------- ----------- -----------
Operating and administrative expenses
Salaries 365,481 180,374 1,632,775
Fringe benefits 37,536 18,297 222,143
Subcontracts 69,470 5,569 791,821
Training 1,432 26,779
Advertising and marketing research 117,874 18,934 619,304
Transportation 896 3,448
Promotion 536 4,592 65,219
Rent 38,990 23,355 204,989
Web hosting and maintenance of licenses 112,575 6,396 712,207
Equipment rental 1,689 9,510
Maintenance and repairs 1,016 333 18,277
Taxes and permits 9,580 4,492 42,953
Insurance 742 2,142 6,533
Office supplies and courier 12,946 11,806 132,339
Communications 11,881 8,269 77,678
Professional fees 113,439 69,973 1,163,770
Bank charges 8,578 3,645 35,262
Interest on long-term debt 233 565 4,847
Service contracts 519 94,021
Travel 7,932 7,387 79,735
Foreign exchange 96,491 4,932 21,737
Loss on disposal of assets 8,931 8,931
Amortization of capital assets 112,739 53,325 627,572
----------- ----------- -----------
1,129,178 426,714 6,601,850
----------- ----------- -----------
Net loss 1,121,927 426,714 6,587,939
Other Comprehensive Income
Foreign exchange translation adjustment 104,875 26,369 128,445
----------- ----------- -----------
Comprehensive loss 1,017,052 400,345 6,459,494
=========== =========== ===========
Basic loss per share 0.03 0.01 0.28
=========== =========== ===========
Weighted average number of outstanding shares of
common stock (the special voting stock considered as
8,364,998 shares of common stock) 33,623,045 32,270,044 23,702,314
=========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
Planet 411.com Inc.
(A Development Stage Company)
Consolidated Changes in Shareholders' Equity (Deficiency)
Consolidated Deficit
(In U.S. dollars)
(Unaudited)
- --------------------------------------------------------------------------------
Advance
payment on
Special Common Contributed capital stock
voting stock stock surplus units
-------------------------- -------------------------- ----------- -----------
Number of Number of
shares Amount shares Amount Amount Amount
----------- ----------- ----------- ----------- ----------- -----------
$ $ $ $ $ $
Special voting stock (8,364,998 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 -
for cash 15,600,000 15,600 894,400
Advance payment on capital stock units 539,000
Foreign exchange translation adjustment
Net loss
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1999 1 -- 24,084,315 24,084 934,437 539,000
August 1999, cancellation of common
stock - for cash (600,000) (600) (34,400)
September 1999, capital stock units
issued 107,800 108 538,892 (539,000)
Foreign exchange translation adjustment
Net loss
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1999 1 -- 23,592,115 23,592 1,438,929
October 1999, capital
stock units issued - for cash 233,340 233 349,777
November 1999, capital
stock units issued - for cash 333,340 334 499,676
January 2000, capital
stock units issued - for cash 111,940 112 149,888
March 2000, capital stock
units issued - for cash 680,106 680 1,135,098
Advance payment on capital stock units 1,304,442
Foreign exchange translation adjustment
Net loss
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 2000 1 -- 24,950,841 24,951 3,573,368 1,304,442
September 2000, capital stock units
issued 1,087,035 1,087 1,303,355 (1,304,442)
Foreign exchange translation adjustment
Net loss
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 2000 1 -- 26,037,876 26,038 4,876,723 --
=========== =========== =========== =========== =========== ===========
Deficit
Accumulated accumulated Total
other during the shareholders'
comprehensive development equity
income stage (deficiency)
--------------- -------------- ---------------
Amount Amount Amount
--------------- -------------- ---------------
$ $ $
Special voting stock (8,364,998 votes) 104,444
Balance outstanding on April 20, 1999,
date of reverse takeover (55,923)
June 1999 - exercise of warrants -
for cash 910,000
Advance payment on capital stock units 539,000
Foreign exchange translation adjustment (26,472) (26,472)
Net loss (984,546) (984,546)
----------- ----------- -----------
Balance at June 30, 1999 (26,472) (984,546) 486,503
August 1999, cancellation of common
stock - for cash (35,000)
September 1999, capital stock units
issued
Foreign exchange translation adjustment 26,369 26,369
Net loss (426,714) (426,714)
----------- ----------- -----------
Balance at September 30, 1999 (103) (1,411,260) 51,158
October 1999, capital
stock units issued - for cash 350,010
November 1999, capital
stock units issued - for cash 500,010
January 2000, capital
stock units issued - for cash 150,000
March 2000, capital stock
units issued - for cash 1,135,778
Advance payment on capital stock units 1,304,442
Foreign exchange translation adjustment 23,673 23,673
Net loss (4,054,752) (4,054,752)
----------- ----------- -----------
Balance at June 30, 2000 23,570 (5,466,012) (539,681)
September 2000, capital stock units
issued
Foreign exchange translation adjustment 104,875 104,875
Net loss (1,121,927) (1,121,927)
----------- ----------- -----------
Balance at September 30, 2000 128,445 (6,587,939) (1,556,733)
=========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
Planet 411.com Inc.
(A Development Stage Company)
Consolidated Cash Flows
Consolidated Deficit
(In U.S. dollars)
(Unaudited)
- --------------------------------------------------------------------------------
For the period
1998-07-31
Three months Three months (inception)
ended ended through
2000-09-30 1999-09-30 2000-09-30
------------ ------------ -----------
$ $ $
OPERATING ACTIVITIES
Net loss (1,121,927) (426,714) (6,587,939)
Non-cash item
Amortization of capital assets 112,739 53,325 627,572
Loss on disposal of assets 8,931 8,931
Changes in non-cash working capital items
Accounts receivable 2,885 (3,019)
Sales taxes receivable 85,608 11,709 (28,073)
Prepaid expenses 47,888 (65,364) (41,676)
Accounts payable (63,561) 15,546 713,614
Accrued liabilities (44,240) 40,455 510,176
---------- ---------- ----------
Cash flows from operating activities (971,677) (371,043) (4,800,414)
---------- ---------- ----------
INVESTING ACTIVITIES
Cash position of acquired company 263
Term deposit 9,562 (21,339)
Advances to directors and shareholders 167 (9,358)
Other advances 13,695
Proceeds from disposal of assets 2,192 2,192
Capital assets (64,695) (33,808) (1,363,747)
Effect of exchange rate changes 99,569 (1,240) 100,332
---------- ---------- ----------
Cash flows from investing activities 46,794 (21,353) (1,291,658)
---------- ---------- ----------
FINANCING ACTIVITIES
Advances to related companies (44,242)
Advance from directors 167 5,510 13,687
Repayment of long-term debt (4,744) (2,224) (18,524)
Proceeds promissory notes 738,760 772,560
Issuance of preferred shares of a subsidiary company - non-
controlling interest 285,474
Issuance of capital stock 3,150,242
Cancellation of capital stock (35,000) (35,000)
Advance payment on capital stock units 350,010 1,843,442
Effect of exchange rate changes 104,256 26,369 127,826
---------- ---------- ----------
Cash flows from financing activities 838,439 344,665 6,095,465
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (86,444) (47,731) 3,393
Cash and cash equivalents, beginning of period 89,837 62,970
---------- ---------- ----------
Cash and cash equivalents, end of period 3,393 15,239 3,393
========== ========== ==========
SUPPLEMENTARY INFORMATION
Cash paid during the period for interest 233 565 4,126
========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
Planet 411.com Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(In U.S. dollars)
(Unaudited)
- --------------------------------------------------------------------------------
1 - 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).
Going concern
The Company's consolidated financial statements for the three-month period ended
September 30, 2000 have been prepared on a going concern basis which
contemplates the realization of assets and the settlement of liabilities in the
normal course of business. The Company has incurred net losses of $1,121,927 in
the three-month period ended September 30, 2000 and $5,466,012 in the period
July 31, 1998 (inception) through June 30, 2000. In adition the Company has a
shareholders' deficiency of $1,556,733 and a working capital deficiency of
$2,078,307. These factors raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
The Company's management plans to raise capital to fund continuing operations by
the utilization of one or a combination of the following:
1) Private placement of equity securities and/or debenture financing through
negotiations with capital investors.
2) Formation of a joint venture of the Company with a stategic partner to
provide the capital resources to deploy the operations.
3) Agreement with an underwriter to undertake a public issuance of shares.
- --------------------------------------------------------------------------------
2 - 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
September 30, 2000, results of operations and cash-flows for the three-month
period ended September 30, 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-K. The results
of operations for the three-month period ended September 30, 2000 are not
necessarily indicative of the results to be expected for the full year.
- --------------------------------------------------------------------------------
3 - PROMISSORY NOTES
During the three-month period ended September 30, 2000, the Company received
$545,000* and and issued promissory notes due on demand at any time after
January 1st, 2001. The company also received $193,760* as short term
interest-free demand loans.
2000-09-30 2000-06-30
----------- -----------
10% 33,181 33,800
5% 545,000
Interest-free 193,760
----------- -----------
Total 771,941 33,800
=========== ===========
Subsequent to September 30th, 2000, the Company received $99,535* as short term
interest-free demand loans.
* Received from certain shareholders
F-6
Planet 411.com Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(In U.S. dollars)
(Unaudited)
- --------------------------------------------------------------------------------
4 - CAPITAL STOCK
Stock split
On September 20, 2000, the directors of 3560309 Canada Inc. reduced by reverse
split the number of issued and outstanding exchangeable shares by a factor of
3:1 such that three (3) of such exchangeable became one (1) exchangeable share.
The number of outstanding exchangeable shares decreased from 25,094,996 to
8,364,998. As a result, the number of votes available on the special voting
stock issued by the Company has been reduced by a factor of 3:1 to 8,364,998.
Warrants
At September 30, 2000, in connection with the issuance of stock units, warrants
to purchase 233,340 and 333,340 shares of common stock for $1.50, 111,940 shares
of common stock for $1.34, 680,106 shares of common stock for $1.67 and
1,087,035 shares of common stock for $1.20 are outstanding. The warrants expire
October 15, November 30, December 30, 2000, March 29, 2001 and September 5, 2001
respectively.
Stock compensation plan
The following table summarizes the changes in the stock option plan during the
quarter:
Weighted
Range of Number average
exercise price of options exercise price
--------------- ----------- --------------
$ $
Outstanding, June 30, 2000 1.38 - 2.00 8,103,723 1.98
Granted 0.69 - 1.97 729,503 1.55
Cancelled 2.00 (9,985) 2.00
----------- -------------
Outstanding, September 30, 2000 8,823,241 1.90
=========== =============
Options exercisable, end of period 1,193,750 2.00
=========== =============
F-7
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. A
more complete (although non-exhaustive) description of the risk factors
applicable to our business is found in our Annual Report on Form 10-K for the
fiscal year ended June 30, 2000.
Results of Operations
Three-month Period ended September 30, 2000 compared to Three-month Period
ended September 30, 1999
The Company made the first sales of its products and services in the fourth
quarter of its last fiscal year, during which it placed its first virtual stores
online. During the first quarter of the current fiscal year, five more merchants
went online using the Company's solution, although revenues for the quarter did
not increase materially from the previous quarter. One of these new merchants
reflects the Company's change in focus to medium- and large-scale retailers,
which are the retailers that the Company believes have the most potential for
profitable Internet-generated business. The Company believes that the change in
focus will enable it to increase its revenues significantly beyond current
levels, if it obtains sufficient financing, as discussed below, but there is no
assurance that the Company will be able to do so.
Operating and administrative expenses incurred for the three months ended
September 30, 2000 were $1,129,178, an increase of $702,464 from the same
expenses incurred during the three months ended September 30, 1999. 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 attempting to arrange financing. In particular, the
increases in the September 2000 expenses over the September 1999 figures reflect
the following:
o the Company had more employees, and those employees were earning higher
salaries (increase in salaries and employee benefits over three-month
period from prior year: $204,346) 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 in
connection with its securities filings and private placement negotiations
(increase: $43,466);
o the Company incurred increased advertising and marketing costs, as the
Company officially launched its web-based e-tailing solution for retailers
(increases: $98,940);
2
o the Company incurred increased subcontract fees as it required additional
resources to complete its product development from both a management and a
technical point of view (increase: $63,901);
o the Company's web hosting and maintenance of licensing fees increased
significantly as the Company has completed its pilot program that is
formally launched and functional (increase: $106,179).
For the quarter ended September 30, 2000, the Company had a net loss of
$1,121,927, compared to a net loss for the quarter ended September 30, 1999, of
$426,714. As of September 30, 2000, the Company had an accumulated deficit of
$6,587,939, compared to an accumulated deficit of $1,411,260 as of September 30,
1999.
Liquidity and Capital Resources
During the quarter ended September 30, 2000, the Company received a loan of
$545,000 from a shareholder. The loan bears interest at five percent and is
payable on demand at any time after January 1, 2001. The Company also obtained
interest-free demand loans from two shareholders (including the shareholder who
made the first loan) in the aggregate amount of $193,760 (Cdn.$292,000)
(references to Canadian dollar amounts indicate that the loan was made in
Canadian dollars). At September 30, 2000, the Company had $3,393 in cash
available to fund operations. Subsequent to the end of the quarter, the Company
received an additional $99,535 (Cdn.$150,000) in the form of an interest-free
demand loan from a third shareholder.
The Company requires substantial financing within the next thirty (30) days
to continue to fund its operations at current levels. The Company's current
monthly operating expenses total approximately $180,000, of which a substantial
portion is now being provided through financing of trade and other payables with
suppliers and other creditors. Failure to obtain financing within this
time-frame will require the Company to either substantially reduce its
operations or cease operations altogether. Further, the Company anticipates that
it will require additional financing aggregating about $3,700,000 to enable it
to expand its operations as currently planned through May 2001, and thereafter
will require an additional $16,000,000 to fund its planned operations for the
following 18 months, including the deployment 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 this long-term
financing would have a material adverse effect on the financial position and
results of operation of the Company, and would be likely to cause the Company to
sharply reduce the products and services offered and ongoing development of its
solution. The Company has no arrangements or commitments for any immediate or
long-term financing, and there is no assurance that the Company will be able to
raise any more working capital through equity or debt financing, or that any
such financing will be available at commercially reasonable rates. Furthermore,
any such financing may be at terms that could dilute the Company's existing
shareholders.
Item 3. There have been no material changes from the information provided with
respect to market risk in the registrant's Form 10-K.
[The remainder of this page intentionally left blank]
3
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds.
During the quarter ended on September 30, 2000, in lieu of paying $39,880
in accrued salary, the Company issued to the executive officers of the Company
options to purchase an aggregate of 350,003 shares of Common Stock at an
exercise price of $0.69 per share. These options expire on March 2, 2005. The
salary payments that the Company saved were used for general corporate purposes.
During the quarter, the Company issued additional options to its officers and
certain employees to purchase an aggregate of 379,500 shares of Common Stock at
exercises prices ranging from $1.16 to $1.97 per share. These options also
expire on March 2, 2005. The Company relied on the exemption from registration
provided in Regulation S under the Securities Act of 1933, as amended, as all of
the Company's executive officers and employees are Canadian citizens who are
located in Canada and did not undertake any activities in the United States in
connection with the issuance of the options. The Company did not engage in any
directed selling efforts in the United States in connection with this share
issuance.
Items 3 through 5. The registrant has nothing to report under these items.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -27 - Financial Data Schedule
(b) Reports on Form 8K - None were filed in the quarter ended September 30,
2000.
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: November 13, 2000 By: /s/ Laval Bolduc
--------------------------
Laval Bolduc
Chief Financial Officer
(Authorized Signatory)
Treasurer
(Chief Accounting Officer)
4