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, 2001
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 May 14, 2001, 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
March 31, 2001
Financial Statements
Consolidated Balance Sheets F-2
Consolidated Operations F-3
Consolidated Changes in Shareholders'
Equity (Deficiency) F-4
Consolidated Cash Flows F-5
Notes to Consolidated Financial
Statements F-6 TO F-9
Planet 411.com Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(In U.S. dollars)
====================================================================================================================================
(Unaudited)
2001-03-31 2000-06-30
---------- -----------
$ $
ASSETS
Current assets
Cash 2,684 89,837
Term deposits, 4.6% to 4.9%, maturing April 2001 19,019 30,901
Accounts receivable 4,009 5,904
Sales taxes receivable 5,101 113,681
Advances to directors and shareholders, 8% (without interest June 30, 2000) 5,959 9,071
Prepaid expenses 16,927 89,564
---------- ----------
53,699 338,958
Capital assets, net 562,678 941,075
---------- ----------
616,377 1,280,033
========== ==========
LIABILITIES
Current liabilities
Accounts payable 1,066,233 924,382
Accrued liabilities 364,165 554,416
Interest-free demand loan from a director and shareholder 139,470 --
Short-term debt 739,624 33,800
Instalments on long-term debt 8,122
---------- ----------
2,309,492 1,520,720
Advances from directors and shareholders, without interest or repayment terms 4,755 13,520
Redeemable preferred stock of a subsidiary 266,261 285,474
---------- ----------
2,580,508 1,819,714
---------- ----------
SHAREHOLDERS' DEFICIENCY
Capital stock (Note 3)
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,
share authorized; 1 share March 31, 2001 and June 30,
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;
26,037,876 (March 31, 2001) 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 837,190 1,304,442
Accumulated other comprehensive income 437,907 23,570
Deficit accumulated during the development stage (8,141,989) (5,466,012)
---------- ----------
(1,964,131) (539,681)
---------- ----------
616,377 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
(Unaudited)
(In U.S. dollars)
==============================================================================================================================
For the period
1998-07-31
Three months Three months Nine months Nine months (inception)
ended ended ended ended through
2001-03-31 2000-03-31 2001-03-31 2000-03-31 2001-03-31
----------- ----------- ---------- ----------- ----------
Revenue $ 781 $ -- $ 11,145 $ -- $ 17,805
----------- ----------- ---------- ----------- ----------
Operating and administrative expenses
Salaries 223,115 340,874 874,480 717,048 2,141,774
Fringe benefits 28,378 32,716 93,422 69,915 278,029
Subcontracts 3,391 413,204 80,638 428,797 802,989
Training 472 646 1,874 27,425
Advertising and marketing research (710) 112,447 106,154 366,375 607,583
Transportation 186 720 1,056 1,801 4,504
Promotion 1,962 4,460 2,998 35,730 67,681
Rent 36,709 46,301 113,064 81,462 279,063
Web hosting and maintenance of licenses 116,706 167,063 346,910 465,468 946,542
Rental, maintenance and repairs 608 2,774 3,914 3,519 28,997
Taxes and permits 10,407 8,496 29,107 15,728 62,480
Insurance 702 3,274 2,165 10,856 7,956
Office supplies and courier (72) 25,103 23,431 48,570 142,824
Communications 7,670 13,806 31,556 25,912 97,353
Professional fees 71,656 225,941 237,016 302,144 1,287,347
Interest on short-term debt and bank
charges 6,795 4,827 34,097 9,475 60,781
Interest on long-term debt 22 311 388 1,153 5,002
Service contracts 328 50 1,415 26,130 94,917
Travel 4,485 1,361 14,268 17,209 86,071
Foreign exchange 280,254 (1,572) 352,497 (14,062) 277,743
Loss (gain) on disposal of capital assets (404) 7,217 7,217
Amortization of capital assets 108,750 103,176 330,683 213,460 845,516
----------- ----------- ---------- ----------- ----------
901,410 1,505,332 2,687,122 2,828,564 8,159,794
----------- ----------- ---------- ----------- ----------
Net loss 900,629 1,505,332 2,675,977 2,828,564 8,141,989
Other comprehensive income
Foreign exchange translation adjustment 353,549 26,746 414,337 26,088 437,907
----------- ----------- ---------- ----------- ----------
Comprehensive loss 547,080 1,478,586 2,261,640 2,802,476 7,704,082
=========== =========== ========== =========== ==========
Basic and diluted loss per share 0.03 0.05 0.08 0.09 0.32
=========== =========== ========== =========== ==========
Weighted average number of outstanding shares of
common stock (the special
voting stock considered as 8,364,998
shares of common stock) 34,402,874 32,717,944 34,141,033 32,416,473 25,699,752
=========== =========== ========== =========== ==========
=============================================================================================================================
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)
(Unaudited)
(In U.S. dollars)
====================================================================================================================================
Special Common
voting stock stock
--------------------------- ----------------------------
Number of Number of
shares Amount shares Amount
------------ ------------ ------------- -------------
$ $
Special voting stock (8,364,998 votes) 1
Balance outstanding on April 20, 1999, date of reverse takeover 8,484,315 8,484
June 1999 - exercise of warrants - for cash 15,600,000 15,600
Advance payment on capital stock units
Foreign exchange translation adjustment
Net loss
------------ ------------ ------------- -------------
Balance at June 30, 1999 1 -- 24,084,315 24,084
August 1999, cancellation of common stock - for cash (600,000) (600)
September 1999, capital stock units issued 107,800 108
Foreign exchange translation adjustment
Net loss
------------ ------------ ------------- -------------
Balance at September 30, 1999 1 -- 23,592,115 23,592
October 1999, capital stock units issued - for cash 233,340 233
November 1999, capital stock units issued - for cash 333,340 334
Foreign exchange translation adjustment
Net loss
------------ ------------ ------------- -------------
Balance at December 31, 1999 1 -- 24,158,795 24,159
January 2000, capital stock units issued - for cash 111,940 112
March 2000, capital stock units issued - for cash 680,106 680
Advance payment on capital stock units
Foreign exchange translation adjustment
Net loss
------------ ------------ ------------- -------------
Balance at June 30, 2000 1 -- 24,950,841 24,951
September 2000, capital stock units issued 1,087,035 1,087
Foreign exchange translation adjustment
Net loss
------------ ------------ ------------- -------------
Balance at September 30, 2000 1 -- 26,037,876 26,038
Advance payment on capital stock units
Foreign exchange translation adjustment
Net loss
------------ ------------ ------------- -------------
Balance at December 31, 2000 1 -- 26,037,876 26,038
Advance payment on capital stock units
Foreign exchange translation adjustment
Net loss
------------ ------------ ------------- -------------
Balance at March 31, 2001 1 -- 26,037,876 26,038
============ ============ ============= =============
Advance Accumulated
payment on other
Contributed capital stock comprehensive
surplus units income
------------- ------------- -------------
Amount Amount Amount
------------- ------------- -------------
$ $ $
Special voting stock (8,364,998 votes) 104,444
Balance outstanding on April 20, 1999, date of reverse takeover (64,407)
June 1999 - exercise of warrants - for cash 894,400
Advance payment on capital stock units 539,000
Foreign exchange translation adjustment (26,472)
Net loss
------------- ------------- -------------
Balance at June 30, 1999 934,437 539,000 (26,472)
August 1999, cancellation of common stock - for cash (34,400)
September 1999, capital stock units issued 538,892 (539,000)
Foreign exchange translation adjustment 26,369
Net loss
------------- ------------- -------------
Balance at September 30, 1999 1,438,929 -- (103)
October 1999, capital stock units issued - for cash 349,777
November 1999, capital stock units issued - for cash 499,676
Foreign exchange translation adjustment 25,917
Net loss
------------- ------------- -------------
Balance at December 31, 1999 2,288,382 -- 25,814
January 2000, capital stock units issued - for cash 149,888
March 2000, capital stock units issued - for cash 1,135,098
Advance payment on capital stock units 1,304,442
Foreign exchange translation adjustment (2,244)
Net loss
------------- ------------- -------------
Balance at June 30, 2000 3,573,368 1,304,442 23,570
September 2000, capital stock units issued 1,303,355 (1,304,442)
Foreign exchange translation adjustment 104,875
Net loss
------------- ------------- -------------
Balance at September 30, 2000 4,876,723 -- 128,445
Advance payment on capital stock units 266,631
Foreign exchange translation adjustment (44,087)
Net loss
------------- ------------- -------------
Balance at December 31, 2000 4,876,723 266,631 84,358
Advance payment on capital stock units 570,559
Foreign exchange translation adjustment 353,549
Net loss
------------- ------------- -------------
Balance at March 31, 2001 4,876,723 837,190 437,907
============= ============= =============
Deficit
accumulated Total
during the shareholders'
development equity
stage (deficiency)
----------- --------------
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)
Net loss (984,546) (984,546)
------------ ------------
Balance at June 30, 1999 (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
Net loss (426,714) (426,714)
------------ ------------
Balance at September 30, 1999 (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
Foreign exchange translation adjustment 25,917
Net loss (896,518) (896,518)
------------ ------------
Balance at December 31, 1999 (2,307,778) 30,577
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 (2,244)
Net loss (3,158,234) (3,158,234)
------------ ------------
Balance at June 30, 2000 (5,466,012) (539,681)
September 2000, capital stock units issued
Foreign exchange translation adjustment 104,875
Net loss (1,121,927) (1,121,927)
------------ ------------
Balance at September 30, 2000 (6,587,939) (1,556,733)
Advance payment on capital stock units 266,631
Foreign exchange translation adjustment (44,087)
Net loss (653,421) (653,421)
------------ ------------
Balance at December 31, 2000 (7,241,360) (1,987,610)
Advance payment on capital stock units 570,559
Foreign exchange translation adjustment 353,549
Net loss (900,629) (900,629)
------------ ------------
Balance at March 31, 2001 (8,141,989) (1,964,131)
============ ============
=======================================================================================================
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
(Unaudited)
(In U.S. dollars)
====================================================================================================================================
For the period
1998-07-31
Nine months Nine months (inception)
ended ended through
2001-03-31 2000-03-31 2001-03-31
----------- ----------- ------------
$ $ $
OPERATING ACTIVITIES
Net loss (2,675,977) (2,828,564) (8,141,989)
Non-cash items
Amortization of capital assets 330,683 213,460 845,516
Loss on disposal of capital assets 7,217 7,217
Changes in non-cash working capital items
Accounts receivable 582 (40,852) (5,322)
Sales taxes receivable 109,498 (94,332) (4,183)
Prepaid expenses 71,904 (18,588) (17,660)
Accounts payable 188,044 618,653 965,219
Accrued liabilities (174,474) 493,221 379,942
---------- ---------- ----------
Cash flows from operating activities (2,142,523) (1,657,002) (5,971,260)
---------- ---------- ----------
INVESTING ACTIVITIES
Cash position of acquired company 263
Term deposit 11,882 (10,228) (19,019)
Advances to directors and shareholders 3,112 (3,736) (6,413)
Other advances 10,766
Proceeds from disposal of capital assets 7,372 7,372
Capital assets (60,372) (305,219) (1,359,424)
---------- ---------- ----------
Cash flows from investing activities (38,006) (308,417) (1,377,221)
---------- ---------- ----------
FINANCING ACTIVITIES
Loan 127,157
Advances to related companies (44,242)
Advance from directors (8,765) 33,751 4,755
Repayment of long-term debt (8,122) (4,635) (21,902)
Proceeds interest-free demand loan from a director and shareholder 139,470 173,270
Proceeds on short-term debt 805,418 805,418
Repayment of short-term debt (89,883) (89,883)
Issuance of preferred shares of a subsidiary company - non-controlling interest 285,474
Issuance of capital stock 1,135,778 3,150,242
Cancellation of capital stock (35,000) (35,000)
Advance payment on capital stock units 837,190 1,000,020 2,680,632
---------- ---------- ----------
Cash flows from financing activities 1,675,308 2,257,071 6,908,764
---------- ---------- ----------
Effect of exchange rate changes 418,068 (24,792) 442,401
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (87,153) 266,860 2,684
Cash and cash equivalents, beginning of period 89,837 62,970
---------- ---------- ----------
Cash and cash equivalents, end of period 2,684 329,830 2,684
========== ========== ==========
SUPPLEMENTARY INFORMATION
Cash paid during the period for interest 91 1,153 4,217
========== ========== ==========
====================================================================================================================================
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
(Unaudited)
(In U.S. dollars)
- --------------------------------------------------------------------------------
1 - NATURE OF OPERATIONS
- --------------------------------------------------------------------------------
The Company, in its development stage, was involved in the e-business industry.
It provided end-to-end quality e-business solutions to businesses interested in
doing e-tailing (selling of retail goods on the Internet). During the quarter,
the Company has recognized, however, that due to the slower market penetration
of the e-retail business in Canada, further implementation of that business
would not maximize returns to shareholder. As a result, the Company believes
that it should capitalize on its strengths in transaction and payment processing
and has begun to develop a real-time financing solution for e-retailers as well
as brick and mortar retailers. This solution is web-based, which will enable
retailers to process their customers' loans and to complete their sales in
"real-time".
As a result of the orientation, the Company closed on a temporary basis the
Canadian e-retail operations and terminated the Canadian merchants. The United
States-based e-retail business was kept operational through an agreement with a
strategic alliance in the United States.
Going concern
The Company's consolidated financial statements for the nine-month period ended
March 31, 2001 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 $2,675,977 in the nine-month
period ended March 31, 2001 and $8,141,989 in the period July 31, 1998
(inception) through March 31, 2001. In addition, the Company has a shareholders'
deficiency of $1,964,131 and a working capital deficiency of $2,255,793.
In December 2000, two service providers informed the Company that their
contracts would be terminated as they were owed approximately $230,000 and the
amounts were not being paid. Following negotiations payment schedules were put
in place and the service contracts continued. Subsequent to March 31, 2001, the
Company did not renew the contracts as a result of the new orientation and the
two service providers are still owed $244,000. The Company is currently
negotiating arrangements by which these suppliers will be paid once the
Company's financial situation will improve.
Also in December 2000, the Company received a demand letter from a supplier to
pay approximately $55,000 and the Company paid $24,400 towards this claim and
since then it was agreed with the supplier that additional payments will be made
once the Company's financial situation will improve.
As previously reported, in January the Company issued an option to Cash Card,
Inc., exercisable for approximately 74.7% (60% on a fully diluted basis) of the
Company's authorized and issued shares of common stock in consideration for an
aggregate exercise price of approximately $6,000,000. However, because Cash Card
never paid the option premium, in accordance with the terms of the option, its
expiration date was automatically accelerated and the option terminated.
F-6
Planet 411.com Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
(In U.S. dollars)
- --------------------------------------------------------------------------------
1 - NATURE OF OPERATIONS (continued)
- --------------------------------------------------------------------------------
Prior to the termination of the option, Cash Card had assigned to the Company
one contract that Cash Card had procured, and the termination of the option will
have no impact on this assignment. Furthermore, Cash Card and the Company have
executed a letter of understanding whereby Cash Card has agreed to assign
additional Internet-based transaction processing contracts on terms to be
negotiated on a case-by-case basis.
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 strategic 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
March 31, 2001, results of operations for the nine and three-month periods and
cash flows for the nine-month period ended March 31, 2001 and 2000. 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 nine and three-month
periods ended March 31, 2001 are not necessarily indicative of the results to be
expected for the full year.
- --------------------------------------------------------------------------------
3 - 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 of such exchangeable became one 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.
F-7
Planet 411.com Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
(In U.S. dollars)
- --------------------------------------------------------------------------------
3 - CAPITAL STOCK (Continued)
- --------------------------------------------------------------------------------
Warrants
At March 31, 2001, in connection with the issuance of stock units, warrants to
purchase 1,087,035 shares of common stock for $1.20 are outstanding. The
warrants expire June 22, 2001.
Advance payment for capital stock
During the quarters ended March 31, 2001 and December 31, 2000, the Company
received $570,559 (CDN $885,972) and $266,631 (CDN $414,028) respectively with
respect to a private sale of 10,733,205 shares of common stock at $0.078 per
share. As of March 31, 2001, no shares have been issued with respect to this
private sale.
Subsequent to March 31, 2001, the Company received $135,093 (US$40,000 and
CDN$150,000) with respect to a private sale for approximately 1,731,961 shares
of common stock at $0.078 per share.
Stock compensation plans
2000 Stock Option Plan
The following table summarizes the changes in the 2000 Stock Option Plan (the
"2000 Plan") during the nine-month period ended March 31, 2001:
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 (146,745) 2.00
----------- -------------
Outstanding, March 31, 2001 8,686,481 1.90
=========== =============
Options exercisable, end of period 3,733,886 2.00
=========== =============
No more options will be granted under the 2000 Plan.
2001 Stock Option Plan
Effective February 28, 2001, the Company adopted the 2001 Stock Option Plan (the
"2001 Plan"). The 2001 Plan is administered by the Board of Directors who have
sole discretion and authority to determine individuals eligible for awards under
the 2001 Plan. The 2001 Plan provides for issuance of a total of 7,500,000
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. On March 16, 2001, 3,690,000 options at an exercise price of $0.18
have been granted under this plan.
F-8
Planet 411.com Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
(In U.S. dollars)
- --------------------------------------------------------------------------------
3 - CAPITAL STOCK (Continued)
- --------------------------------------------------------------------------------
2001 Senior Officers Stock Option Plan
Effective January 1, 2001, the Company adopted the 2001 Senior Officers Stock
Option Plan. Under this Plan, the Company may grant options to senior officers
of the Company or any of its subsidiaries, for up to 10,000,000 shares of common
stock. The exercise price of each option granted under the plan will equal or
exceed the then-current price of the Company's common stock. The plan was
approved by the Company's Board of Directors on January 3, 2001, On January 9,
2001, the Company granted its two most senior officers options to purchase an
aggregate of 2,855,695 shares at an average price of $0.1875 per share. The
options vested on January 24, 2001, concurrently with the Company's entering
into the aforementioned Cash Card option. As of March 31, 2001, such 2,855,695
shares constitute all of the shares subject to options granted under this plan.
No compensation expense is required since the Company follows APB 25 in
accounting for these options.
F-9
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 ability to
efficiently implement our new business plan (discussed below). 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- and Nine-Month Periods ended March 31, 2001 compared to Three- and
Nine-Month Periods ended March 31, 2000
General
The Company made the first sales of its products and services in the fourth
quarter of its last fiscal year (ending June 30, 2000), 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. During the
first quarter of this fiscal year, the Company changed its focus to medium- and
large-scale retailers, instead of small- and medium-sized retailers. During the
third fiscal quarter (ended March 31, 2001), the Company had revenues of $781
and did not place any new virtual stores on line. Revenues for the first nine
months of the fiscal year were $11,145.
As previously reported, the Company developed a business plan featuring a
solution to support online sales for e-retailers. The Company has recognised,
however, that due to the slower market penetration of the e-retail business in
Canada, further implementation of that business plan would not maximize returns
to stockholders. As a result, the Company believes that it should capitalize on
its strengths in transaction and payment processing and has begun to develop a
real-time consumer financing solution for e-retailers as well as brick and
mortar retailers. This solution is web-based, which will enable retailers to
process the customers' loans and to complete their sales in "real-time"..
This new orientation had the following impacts on the current e-retail business:
2
o We closed on a temporary basis the Canadian e-retail operations and we
terminated the Canadian merchants as per our agreements with them.
o We kept operational the United States-based e-retail business through
an agreement with a strategic alliance in the United States.
o We were able to reduce our "burn rate" by not renewing the maintenance
contract for transactional software and by no longer utilizing
unnecessary web hosting services.
o We reduced also our staffing to reflect the new mix of employees
required with the financing program.
In the immediate future, the Company will concentrate on completing and
marketing the financing solution in the United States. The Company is currently
working to establish the strategic alliances necessary to deliver the financing
solution, and has signed agreements with parties who are believed to be in
position to contribute significantly as allies.
Results of Operations
Operating and administrative expenses for the first nine months of the
fiscal year were $2,687,122, a decrease of $141,442, or 5%, over the nine-month
period ended March 31, 2000. Operating and administrative expenses for the three
months ended March 31, 2001 were $901,410, which represents a decrease of
$603,922, or 40%, in expenses incurred for the three months ended March 31,
2000.
The variances of the expenses incurred during the three- and nine-month
periods ended March 31, 2001, compared to March 31, 2000, reflect the following:
o The Company had fewer employees in the fiscal quarter ended March 31,
2001 than in the quarter ended March 31, 2000. Salary and benefit
expenses decreased by $122,097, or 33%, for the fiscal quarter and
increased by $180,939, or 23%, for the nine-month period ended March
31, 2001, compared to March 31, 2000. The Company reduced its salary
expenses by $79,597 from the second fiscal quarter ($285,884) to the
third fiscal quarter ($223,115) as a result of the aforementioned
reduction in the number of employees.
o The Company continued to incur 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. These amounts decreased $154,285, for the
fiscal quarter and $65,128, or 22%, for the nine-month period ended
March 31, 2001, compared to the respective periods ended March 31,
2000.
o Due to the Company's increased office space, its rent increased by
$31,602 for the nine-month period ended March 31, 2001, as compared to
the nine-month period ended March 31, 2000. Subsequent to March 31,
2001, the Company negotiated the
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cancellation of one lease for office space, which resulted in its
reducing the monthly rent by approximately half.
o The aforementioned increases in expenses were offset by decreases in
advertising and marketing research costs in the three months ended
March 31, 2001. Expenses for market studies and public relations costs
related to the Company's business model and its publicity campaign
that were incurred in the fiscal quarter ended March 31, 2000 were not
incurred in subsequent periods. This resulted in decreases in
advertising and marketing of $113,157 for the fiscal quarter and
$260,221 for the nine-month period ended March 31, 2001, compared to
the respective periods ended March 31, 2000.
o Lower web hosting and maintenance of licensing fees contributed
significantly to the decrease in administrative and operating
expenses. Because the Company did not renew certain online services
that management believed were no longer required under the new
business plan, these fees decreased by $50,357 and $118,558 for the
fiscal quarter and nine-month period ended March 31, 2001, as compared
to the respective periods ended March 31, 2000.
For the fiscal quarter ended March 31, 2001, the Company had a net loss of
$900,629, compared to a net loss for the quarter ended March 31, 2000, of
$1,505,332. For the nine months ended March 31, 2001, the Company had a net loss
of $2,675,977, compared to a net loss for the nine months ended March 31, 2000,
of $2,828,564.
Liquidity and Capital Resources
During the fiscal quarters ended December 31, 2000, and March 31, 2001, the
Company received advances of $837,190 (Cdn.$1,300,000) with respect to a private
sale of 10,733,205 shares of its common stock at $0.078 per share. Subsequent to
March 31, 2001, the Company received an additional $135,093 (US$40,000 and
Cdn.$150,000) advance with respect to 1,731,961 additional shares of common
stock to be purchased by the same investor for $0.078 per share. (References in
this report to Canadian dollar amounts indicate that the applicable loan or
advance was made in Canadian dollars.) None of the aforementioned share
issuances are reflected in the Company's issued and outstanding share capital.
At March 31, 2001, the Company had $2,684 in cash and negative working
capital of $2,255,793. The Company's current monthly operating expenses total
approximately $110,000, which will be funded by private investors through the
end of May 2001. The Company is currently negotiating with these investors for
funding in order to sustain the Company through the end of the year. Failure to
obtain immediate and ongoing financing from our stockholders and other investors
over the next few months will require the Company to either further reduce its
operations or cease operations altogether.
The Company expects that it will require additional financing beyond that
required for its current operations if it is to cover the negative working
capital and to develop and commercialize the financing solution. The failure to
obtain this incremental short-term financing would have a
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material adverse effect on the Company, and would result in the Company sharply
reducing (or eliminating entirely) the funds dedicated to, and the planned
development of, its financing solution. The Company has no arrangements or
commitments for long-term financing, and there is no assurance that the Company
will be able to raise additional working capital through equity or debt
financing at commercially reasonable rates, if at all. Furthermore, any such
financing may be at terms that could significantly dilute the Company's existing
shareholders.
As previously reported, in January 2001 the Company issued an option to
Cash Card, Inc., exercisable for approximately 74.7% (60% on a fully-diluted
basis) of the Company's authorized and issued shares of common stock in
consideration for an aggregate exercise price of approximately $6,000,000.
However, because Cash Card never paid the option premium, in accordance with the
terms of the option, its expiration date was automatically accelerated and the
option terminated.
Prior to the termination of the option, Cash Card had assigned to the
Company one contract that Cash Card had procured, and the termination of the
option has had no impact on this assignment. Furthermore, Cash Card and the
Company have executed a letter of understanding whereby Cash Card has agreed to
assign additional Internet-based transaction processing contracts to the Company
on terms to be negotiated on a case-by-case basis.
* * *
Item 3. There have been no material changes from the information provided with
respect to market risk in the registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 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 three months ended March 31, 2001 (and as described under
"Liquidity and Capital Resources") the Company received $837,190
(Cdn.$1,300,000) as an advance to be applied to the purchase of 10,733,205
shares of the Company's common stock at a price of $0.078 per share. The same
investor made a second advance of an aggregate of $135,093 ($40,000 plus
Cdn.$150,000) during April and May 2001 for 1,731,961 additional shares at the
same price. The advances were used for general corporate purposes, predominantly
to fund the operations of the Company's operating subsidiary through secured
loans. (It is uncertain whether these loans will be treated as "loans" for tax
and other purposes by applicable authorities.) The Company is relying on the
exemption from registration provided in Regulation S under the Securities Act of
1933, as amended, as the investor is not a "U.S. Person," the transaction was
effected in an offshore transaction, offering restrictions implemented and the
Company did not engage in any directed selling efforts in the United States in
connection with these transactions.
Effective January 1, 2001, the Company adopted the 2001 Senior Officers
Stock Option Plan. Under this plan, the Company may grant options to senior
officers of the Company or any of its subsidiaries, for up to 10,000,000 shares
of common stock. The exercise price of each option granted under the plan will
equal or exceed the then-current market price of the Company's common stock. The
plan was approved by the Company's Board of Directors on January 3, 2001. On
January 9, 2001, the Company granted its two most senior officers options to
purchase an aggregate of 2,855,695 shares at an average price of $0.1875 per
share. The options vested on January 24, 2001, concurrently with the Company's
entering into the aforementioned Cash Card option. As of March 31, 2001, such
2,855,695 shares constitute all of the shares subject to options granted under
this plan.
Effective February 28, 2001, the Company adopted the 2001 Stock Option Plan
(the "2001 Plan"). The 2001 Plan is administered by the Board of Directors who
have sole discretion and authority to determine individuals eligible for awards
thereunder. The 2001 Plan provides for issuance of options to purchase a total
of 7,500,000 shares of common stock exercisable on or prior to February 28,
2011. The conditions of exercise of each grant are determined by the Board at
the time of the grant. During the quarter ended March 31, 2001, 3,690,000
options at an exercise price of $0.18 were granted under the 2001 Plan.
The Company does not intend to issue any additional options under the stock
option plan approved in March 2000.
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Items 3 through 5. The registrant has nothing additional to report under these
items.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10 - 2001 Senior Officers Stock Option Plan
(b) Reports on Form 8K - The Company filed a Form 8-K filed with the
Securities and Exchange Commission on February
8, 2001 in connection with the Cash Card option
described herein (Item 1).
[Signature Page is Next]
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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 17, 2001 By: /s/ Laval Bolduc
------------------------------
Laval Bolduc
Chief Financial Officer
(Authorized Signatory)
and Treasurer
(Chief Accounting Officer)
[Exhibit 10 is Next]
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