SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JULY 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-26454
PL BRANDS, INC.
(Exact name of Small Business Issuer as Specified in its Charter)
Delaware 98-0142664
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)
421 North Wabasha Street, Suite 260
St. Paul, Minnesota 55102
(Address of Principal Executive Offices)
(651) 291-2993
(Issuer's Telephone Number, Including Area Code)
260 Bartley Drive
Toronto, Ontario, Canada M4A 1G5
(Former address, if changed since last report)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date:
Common, $.001 par value per share:
16,899,279 outstanding as of December 31, 2000
PART I - FINANCIAL INFORMATION
PL BRANDS, INC. AND SUBSIDIARIES
Index to Financial Information
Period Ended July 31, 2000
(Unaudited)
Item Page Herein
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Earnings
and Accumulated Deficit 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and
Analysis or Plan of Operation 8
PL BRANDS INC.
Condensed Consolidated Balance Sheets
July 31, 2000 and April 30, 2000
==========================================================================
July 31, 2000 April 30, 2000
------------- --------------
ASSETS
CURRENT
Cash $ 1,883,518 $ 3,039
Other receivable 4,378 --
- --------------------------------------------------------------------------
1,887,896 3,039
INTELLECTUAL PROPERTY
Proprietorship Information Database
and Search Engine 2,999,500 --
- --------------------------------------------------------------------------
$ 4,887,396 $ 3,039
==========================================================================
LIABILITIES
CURRENT
Accounts payable $ 108,843 $ 84,480
- --------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
CAPITAL STOCK 16,899 9,143
ADDITIONAL PAID-IN CAPITAL 7,564,973 2,128,906
ACCUMULATED DEFICIT (2,803,319) (2,219,490)
- --------------------------------------------------------------------------
4,778,553 (81,441)
- --------------------------------------------------------------------------
$ 4,887,396 $ 3,039
==========================================================================
PL BRANDS INC.
Condensed Consolidated Statements of Earnings
and Accumulated Deficit
=========================================================================
For the three months ending
------------------------------
July 31, 2000 July 31, 1999
------------- -------------
[S] [C] [C]
NET SALES $ -- $ --
OPERATING EXPENSES 589,269 41,978
- -------------------------------------------------------------------------
LOSS FROM OPERATIONS (589,269) (41,978)
OTHER INCOME 5,440 --
- -------------------------------------------------------------------------
NET LOSS (583,829) (41,978)
ACCUMULATED DEFICIT, BEGINNING OF PERIOD (2,219,490) (2,085,156)
- -------------------------------------------------------------------------
ACCUMULATED DEFICIT, END OF PERIOD $ (2,803,319) $ (2,127,134)
=========================================================================
NET LOSS PER BASIC AND DILUTED SHARE $ (0.050) $ (0.005)
=========================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 11,756,714 9,143,279
=========================================================================
PL BRANDS INC.
Condensed Consolidated Statements of Cash Flows
========================================================================================
For the three months ending
------------------------------
July 31, 2000 July 31, 1999
------------- -------------
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss from continuing operations $ (583,829) $ (41,978)
Non-cash shares in lieu of cash compensation 499,000 --
Changes in assets and liabilities affecting cash flows
Accounts receivable - other (4,378) --
Accounts payable 24,363 (1,952)
- ----------------------------------------------------------------------------------------
Net cash (used for) provided by operating activities (64,844) (43,930)
Net cash flows from discontinued operations -- 46,036
- ----------------------------------------------------------------------------------------
(64,844) 2,106
- ----------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of Intellectual Property,
database and search engine (500,000) --
- ----------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net proceeds from sale of common stock 2,445,323 --
- ----------------------------------------------------------------------------------------
NET INCREASE IN CASH 1,880,479 2,106
CASH, BEGINNING OF PERIOD 3,039 415
- ----------------------------------------------------------------------------------------
CASH, ENDING OF PERIOD $ 1,883,518 $ 2,521
========================================================================================
NON-CASH TRANSACTIONS
Issuance of 1,500,000 common shares for
services provided $ 748,500 $ --
Issuance of 4,500,000 common shares for purchase of
intellectual property, database and search engine $ 2,250,000 $ --
PL BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIIDATED FINANCIAL STATEMENTS
NOTE 1 UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying interim financial statements are unaudited, but
in the opinion of the management of the Company, contain all adjustments,
consisting of only normal recurring accruals, necessary to present fairly
the financial position at July 31, 2000, the results of operations of the
three month periods ended July 31, 1999 and 2000, and the cash flows for
the three month periods ended July 31, 1999 and 2000. The results of
operations for the three month period ended July 31, 2000 are not
necessarily indicative of the results of operations to be expected for the
full fiscal year ended April 30, 2001. Reference is made to the Company's
Form 10-KSB for the year ended April 30, 2000. All amounts are U.S.$
except for the reference to Canadian $400,000 in the following paragraph.
The Company's principal business was initially in development,
production and marketing of private label prepared foods. Prior to January
1, 1994 the Company's activities were primarily limited to research and
development of its business plan and recruitment of personnel. Full-time
operations began in March 1994. On August 19, 1994 the Company purchased
100% of the outstanding shares of Alma Pack Bottling Corporation ("Alma
Pack"). Until January 1998, Alma Pack's bottling business comprised the
Company's principal operation. Under this strategy, the Company was never
able to attain profitability and there continued to be a stockholders
deficit. In 1998, the Company revised its strategy and sold all of the
shares of Alma Pack Bottling Corporation and acquired all of the issued and
outstanding shares (the "Gandalf Shares") of Gandalf Graphics Limited
("Gandalf") from Marcella Downey ("Downey") for Canadian $400,000 which was
paid by issuing a promissory note to Downey for Canadian $400,000 (the
"Note") with the principal due and payable on January 1, 2000. Gandalf
provided digital pre-press services and digital print services. Pursuant
to an agreement made as of May 1, 1999 wherein the Company acknowledged
that it had not and would not repay the principal amount of the Note and
any accrued and unpaid interest to Downey on January 1, 2000, the parties
decided to resolve any controversy that would result from the inability of
the Company to pay, and agreed that Downey return the Note to the Company
in exchange for the return of the Gandalf Shares. During the fiscal year
ended April 30, 2000, the Company had no material business operations.
NOTE 2 - RECENT ACTIVITIES
In May 2000, the Company entered into an agreement to acquire
substantially all of the assets of Oth.net, Inc., a Florida corporation, as
well as the Oth.net domain name, in exchange for 4,500,000 shares of the
Company's Common Stock and $500,000, which funds were paid on June 30,
2000. Oth.net, Inc. is an internet based search engine for music on the
world wide web. As a result, it is contemplated that there will be a change
in the executive officers and directors of the Company. In addition,
during the quarter ended July 31, 2000, the Company sold 1,000,000 and
756,000 restricted shares of Common Stock at $.50 and $3.00, respectively,
to a total of nine investors for an aggregate consideration of $2,768,000
and issued an aggregate of 1,500,000 restricted shares of Common Stock to
certain persons in connection with employment arrangements and other
services rendered after April 30, 2000 and cash in the aggregate amount of
$1,500. Such funds will be used for operations and development of the
business resulting from the acquisition of substantially all of the assets
of Oth.net, Inc.
Pursuant to the agreement to acquire substantially all of the
assets of Oth.net, Inc., the Company has recognized, in exchange for the
4,500,000 restricted shares of Common Stock, an asset of Intellectual
Property identified as Proprietorship Information and Database. The
Intellectual Property has been valued
at $2,999,500. The final allocation between the asset and goodwill
purchased has not been determined to date. Both the Intellectual Property
and goodwill, if any, will be amortized over three years.
During the same period of time as the purchase of the Oth.net
domain name and Intellectual Property, an employment compensation
arrangement was made between the Company and Richard Barbari who has been
engaged by the Company. As enticement to join the Company, Mr. Barbari and
his nominees purchased 1,000,000 restricted shares of the Company's Common
Stock at $.001 per share. The deemed value and expense to the Company
recognized was the same as the $.50 per share value for 1,000,000 shares
sold in June 2000. Therefore, the Company has recognized an expense of
$499,000 in connection with the stock purchased by Richard Barbari and his
nominees.
During the quarter ended July 31, 2000, the Company also issued
500,000 restricted shares of Common Stock to another party in connection
with services rendered after April 30, 2000 in connection with the
transaction discussed above. The deemed value to the Company recognized
was the same as the $.50 per share value recognized in the stock
compensation given to Richard Barbari, provided, however, that the deemed
value has been capitalized as a cost of the acquisition and not expensed.
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion should be read in conjunction with the
Financial Information and Notes thereto included in this report.
Background
PL Brands, Inc. (the "Company") was originally incorporated under
the name "Malone Road Investments, Ltd." on August 6, 1990 in the Isle of
Man. The Company was redomesticated in the Turks and Caicos Islands on
April 21, 1992, and subsequently domesticated as a Delaware corporation on
May 12, 1994. Pursuant to Delaware law the Company is deemed to have been
incorporated in Delaware as of August 6, 1990. The Company changed its
name to PL Brands, Inc. on June 6, 1994.
Unless the context otherwise requires, all references herein to the
"Company" refer to PL Brands, Inc. and its consolidated subsidiaries.
The Company's principal business was initially in development,
production and marketing of private label prepared foods. Prior to January
1, 1994 the Company's activities were primarily limited to research and
development of its business plan and recruitment of personnel. Full-time
operations began in March 1994. On August 19, 1994 the Company purchased
100% of the outstanding shares of Alma Pack Bottling Corporation ("Alma
Pack"). Until January 1998, Alma Pack's bottling business comprised the
Company's principal operation. Under this strategy, the Company was never
able to attain profitability and the continued stockholders' deficiency
raised doubt about the Company's ability to continue as a going concern.
In 1998 the Company revised its strategy and sold all of the shares
of Alma Pack and acquired all of the issued and outstanding shares (the
"Gandalf Shares") of Gandalf Graphics Limited ("Gandalf") from Marcella
Downey ("Downey") for Canadian $400,000 which was paid by issuing a
promissory note to Downey for Canadian $400,000 (the "Note") with the
principal due and payable on January 1, 2000. Gandalf provided digital
pre-press services and digital print services. Pursuant to an agreement
made as of May 1, 1999 wherein the Company acknowledged that it had not and
would not repay the principal amount of the Note and any accrued and unpaid
interest to Downey on January 1, 2000, the parties decided to resolve any
controversy that would result from the inability of the Company to pay, and
agreed that Downey return the Note to the Company in exchange for the
return of the Gandalf Shares.
From January 1998 through the end of the fiscal 1999, the business
of Gandalf comprised the Company's principal operation. During the fiscal
year ended April 30, 2000, the Company had no material business operations.
See, however, "Result of Operations/Plan of Operation" below.
Unless otherwise noted all information herein is given in U.S.
dollars.
Results of Operations/Plan of Operation
In May 2000, the Company entered into an agreement to acquire
substantially all of the assets of Oth.net, Inc., a Florida corporation, as
well as the Oth.net domain name, in exchange for 4,500,000 shares of the
Company's Common Stock and $500,000, which funds were paid on June 30,
2000. Oth.net, Inc. is an internet based search engine for music on the
world wide web. As a result, it is contemplated that there will be a
change in executive officers and directors of the Company. In addition,
during the quarter ended July 31, 2000, the Company sold 1,000,000 and
756,000 restricted shares of Common Stock at $.50 and $3.00, respectively,
to a total of nine investors for an aggregate consideration of $2,768,000
and issued an aggregate of 1,500,000 restricted shares of Common Stock to
certain persons in connection with employment
arrangements and other services rendered after April 30, 2000 and cash in
the aggregate amount of $1,500. Such funds will be used for operations and
development of the business resulting from the acquisition of substantially
all of the assets of Oth.net, Inc.
Pursuant to the agreement to acquire substantially all of the
assets of Oth.net, Inc., the Company has recognized, in exchange for the
4,500,000 restricted shares of Common Stock, an asset of Intellectual
Property identified as Proprietorship Information and Database. The
Intellectual Property has been valued at $2,999,500. The final allocation
between the asset and goodwill purchased has not been determined to date.
Both the Intellectual Property and goodwill, if any, will be amortized over
three years.
During the same period of time as the purchase of the Oth.net
domain name and Intellectual Property, an employment compensation
arrangement was made between the Company and Richard Barbari who has been
engaged by the Company. As enticement to join the Company, Mr. Barbari and
his nominees purchased 1,000,000 restricted shares of the Company's Common
Stock at $.001 per share. The deemed value and expense to the Company
recognized was the same as the $.50 per share value for 1,000,000 shares
sold in June 2000. Therefore, the Company has recognized an expense of
$499,000 in connection with the stock purchased by Richard Barbari and his
nominees.
During the quarter ended July 31, 2000, the Company also issued
500,000 restricted shares of Common Stock to another party in connection
with services rendered after April 30, 2000 in connection with the
transaction discussed above. The deemed value to the Company recognized
was the same as the $.50 per share value recognized in the stock
compensation given to Richard Barbari, provided, however, that the deemed
value has been capitalized as a cost of the acquisition and not expensed.
The Company had no sales from continuing operations for the three
months ended July 31, 2000 and three months ended July 31, 1999. This was
due to the disposal of Gandalf, the Company's only operating segment
through the return of the Note to the Company in exchange for the return of
the Gandalf Shares as of May 1, 1999. Operating expenses were
approximately $589,000 and the loss from continuing operations and net
loss both were approximately $584,000 for the three months ended July 31,
2000 compared to operating expenses, loss from continuing operations and
net loss all of which were approximately $42,000 for the three months ended
July 31, 1999. This change is primarily due to the recognition in the
three month period ended July 31, 2000 of an expense of $499,000 in
connection with the issuance of 1,000,000 shares described above to Richard
Barbari and his nominees as well as an increase in other operating costs
compared to the comparable period of 1999.
Liquidity and Capital Resources
On July 31, 2000, the Company had cash and working capital of
approximately $1,884,000 and $1,779,000, respectively, and stockholders'
equity of approximately $4,779,000. See "Results of Operations/Plan of
Operation" above for information on the funds received from investors
during the quarter ended July 31, 2000.
As a result of the acquisition of substantially all of the assets
of Oth.net, Inc., the Company intends to expand the Oth.net business from
primarily an internet based search engine for music on the world wide web
to a more diverse digital entertainment business organization providing
music, video and movie content on the internet. The Company is in the
process of rewriting its web site and is developing new software that will
be directed at the peer-to-peer environment.
Management believes that Company funds are adequate to meet cash
requirements through at least the next twelve months. However, such funds
together with any operating revenues that may be recognized
may be insufficient to implement the business plan beyond that time. Thus,
substantial additional capital will, in all likelihood, be needed in order
to fund operations beyond that time. As of the date of this report, no
assurance can be given that such funding will be available to the Company.
Forward-Looking Statements
This report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs and
assumptions made by the Company's management as well as information
currently available to the management. When used in this document, the
words "anticipate", "believe", "estimate", and "expect" and similar
expressions, are intended to identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated or
expected. The Company does not intend to update these forward-looking
statements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
In May 2000, the Company entered into an agreement to acquire
substantially all of the assets of Oth.net, Inc., a Florida
corporation, as well as the Oth.net domain name, in exchange
for 4,500,000 shares of the Company's Common Stock and
$500,000. Such transaction was completed as of July 21, 2000.
During the quarter ended July 31, 2000, the Company sold an
aggregate of 1,756,000 restricted shares of Common Stock to
nine investors for an aggregate consideration of $2,768,000
and issued an aggregate of 1,500,000 restricted shares of
Common Stock to certain persons in connection with employment
arrangements and other services rendered after April 30, 2000
and cash in the aggregate amount of $1,500.
All of the foregoing shares were issued in reliance upon the
exemption from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended, for "transactions by the
issuer not involving any public offering".
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K.
Listed below are reports on Form 8-K filed during the
fiscal quarter ended July 31, 2000.
Form 8-K (dated July 21, 2000) - Items reported: 2, 5 and 7.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the undersigned
thereunto duly authorized.
PL BRANDS, INC.
(Registrant)
Dated: January 12, 2001 By: /s/Robert Brown
Robert Brown,
Vice President - Finance, Secretary,
Treasurer (Principal Accounting and
Financial Officer)