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 OCTOBER 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)
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 x No
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 October 31, 2000
(Unaudited)
Item Page Herein
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Earnings 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
APRIL 30, 2000 AND OCTOBER 31, 2000
April 30,2000 October 31, 2000
---------------- ----------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,039 $ 1,667,460
Accounts receivable -- 24,070
Prepaid expenses -- 873
---------------- ----------------
Total current assets 3,039 1,692,403
Office furniture and equipment -- 44,934
Less accumulated depreciation -- 2,150
---------------- ----------------
Net fixed assets -- 42,784
---------------- ----------------
Intellectual Property, net
Proprietary Information Database and Search Engine -- 2,666,222
---------------- ----------------
Total assets $ 3,039 $ 4,401,409
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable - trade $ 84,480 $ 58,084
Salaries and vacation payable -- 45,055
Accrued payroll taxes -- 36,206
---------------- ----------------
Total current liabilities 84,480 139,345
---------------- ----------------
SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock 9,143 16,899
Additional paid-in capital 2,128,906 7,564,973
Accumulated Deficit (2,219,490) (3,319,808)
---------------- ----------------
Total shareholders' equity (deficit) (81,441) 4,262,064
---------------- ----------------
Total liabilities and shareholders' equity $ 3,039 $ 4,401,409
================ ================
Page 1 of 3
PL BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THREE AND SIX MONTHS ENDED OCTOBER 31, 2000 AND 1999
For the three months ended For the six months ended
October 31, October 31,
------------------------------ ------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
Net sales 18,430 -- $ 18,430 --
Operating expenses 558,793 78,055 1,148,062 120,033
------------- ------------- ------------- -------------
Loss before other income (expenses) (540,363) (78,055) (1,129,632) (120,033)
------------- ------------- ------------- -------------
Other income (expenses) 23,874 -- 29,314 --
------------- ------------- ------------- -------------
Loss from operations (516,489) (78,055) (1,100,318) (120,033)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net earnings (loss) $ (516,489) $ (78,055) $ (1,100,318) $ (120,033)
============= ============= ============= =============
Accumulated deficit - beginning (2,803,319) (2,127,134) (2,219,490) (2,085,156)
Accumulated deficit - ending $ (3,319,808) $ (2,205,189) $ (3,319,808) $ (2,205,189)
============= ============= ============= =============
Net loss per basic and diluted shares $ (0.03) $ (0.01) $ (0.08) $ (0.01)
============= ============= ============= =============
Weighted average shares outstanding 16,899,279 9,143,279 14,313,948 9,143,279
============= ============= ============= =============
Page 2 of 3
PL BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED OCTOBER 31, 2000 AND 1999
For the six months ended
October 31,
----------------------------
2000 1999
------------ ------------
OPERATING ACTIVITIES
Net loss $ (1,100,318) $ (96,600)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common shares issued in lieu of cash compensation 500,000 --
Depreciation and amortization 335,427 --
Changes in operating assets and liabilities:
Accounts receivable - other -- 130,405
Prepaid expenses (873)
Accounts receivable (24,070) --
Accounts payable (26,396) (28,848)
Accrued salaries payable 45,056 --
Accrued payroll taxes 36,206 --
------------ ------------
Net cash used in operating activities (234,968) 4,957
INVESTING ACTIVITIES
Purchase of intellectual property - Oth.net (500,000) --
Purchase of office furniture and equipment (44,934) --
------------ ------------
Net cash used in investing activities (544,934) --
------------ ------------
FINANCING ACTIVITIES
Net proceeds from sale of Common Stock 2,444,323 (3,981)
------------ ------------
Net cash provided by financing activities 2,444,323 (3,981)
------------ ------------
Increase/(decrease) in cash 1,664,421 976
Cash at the beginning of the period 3,039 415
------------ ------------
Cash at the end of the period $ 1,667,460 $ 1,391
============ ============
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, $ 2,250,000 --
database and search engine
Page 3 of 3
PL BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED 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 October 31, 2000, the results of operations of the three and six
month periods ended October 31, 1999 and 2000, and the cash flows for the six
month periods ended October 31, 1999 and 2000. The results of operations for
the three and six month periods ended October 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.dollars 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 - ACQUISITION OF ASSETS
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 for 1,000,000 shares sold in June 2000, provided, however, that the
deemed value has been capitalized as a cost of the acquisition and not expensed.
Pro forma results of operations are as follows and include adjustments for
amortization of intangible assets, salaries under employment agreements and the
sale of stock as if the aforesaid transactions occurred as of May 1, 1999:
Six months ended Six months ended
October 31, 2000 October 31, 1999
Revenue $ 44,359 $ 135,234
Net loss $ (859,047) $ 1,179,111)
Basic and diluted net loss per share $ (0.05) $ (0.07)
Shares outstanding 16,899,279 16,899,279
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 for 1,000,000 shares sold in June 2000, provided, however, that the
deemed value has been capitalized as a cost of the acquisition and not expensed.
The Company reported sales from operations for the three and six months
ended October 31, 2000 and 1999 of approximately $18,000 and $0, respectively.
The revenue for the three and six months ended October 31, 2000 was derived from
banner advertising. The source of the advertising revenue was from the
operations of Oth.net, Inc. There were no comparable sales during the three and
six months ended October 31, 1999 due to 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 $560,000 and $80,000 for the three months ended
October 31, 2000 and 1999, respectively. The majority of the expenses for the
three months ended October 31, 2000 were primarily amortization, contract labor
and payroll. Expenses for the three months ended October 31, 1999 were
primarily consulting fees and payroll. The Company also had interest income of
approximately $24,000 and $29,000 for the three and six months ended October 31,
2000, respectively. Operating expenses for the six months ended October 31, 2000
and 1999 were approximately $1,148,000 and $120,000, respectively. For the six
months ended October 31, 2000, the Company recognized 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 $335,000 from depreciation and
amortization. The remaining increase in other operating costs compared to the
comparable period of 1999 were primarily contract labor and payroll. For the
three months ended October 31, 2000 and 1999, the Company had a loss from
continuing operations of approximately $516,000 and $78,000, respectively. For
the six months ended October 31, 2000 and 1999, the Company had a loss from
continuing operations of approximately $1,100,000 and $120,000, respectively
Liquidity and Capital Resources
On October 31, 2000, the Company had cash and working capital of
approximately $1,670,000 and $1,553,000, respectively, and stockholders' equity
of approximately $4,262,000. 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 the 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.
None.
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 October 31, 2000.
None.
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 26, 2001 By: /s/Robert Brown
Robert Brown,
Vice President - Finance, Secretary,
Treasurer (Principal Accounting and
Financial Officer)