SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 21, 2000
PL BRANDS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-26454 98-0142664
(State or other jurisdiction Commission (I.R.S. Employer
of incorporation or File number) Identification
organization) Number)
421 North Wabasha Street
Suite 260
St. Paul, Minnesota 55102
(Address of principal (Postal Code)
executive offices)
Registrant's telephone number, including area code: (651) 291-2993
EXPLANATORY NOTE
PL Brands, Inc. is filing this Amendment No. 1 on Form 8-K/A to its
Current Report on Form 8-K, dated July 21, 2000, solely for the purpose of
filing the financial statements and pro forma financial information
required to be filed in connection with the acquisition of substantially
all of the assets of Oth.net, Inc.
Item 7. Financial Statements and Exhibits.
Financial Statements of Businesses Acquired and Pro Forma Financial
Information:
The financial statements and pro forma financial information
required to be filed are attached hereto.
SIGNATURES
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.
PL BRANDS, INC.
(Registrant)
Dated: February 2, 2001 By: /s/ Robert Brown
Name: Robert Brown
Title: Vice President - Finance,
Secretary, and Treasurer
OTH.NET
(A PROPRIETORSHIP)
AND
OTH.NET, INC.
COMBINED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
PERIOD FROM JANUARY 1, 2000 TO MAY 31, 2000
OTH.NET
(A PROPRIETORSHIP)
AND
OTH.NET, INC.
COMBINED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
PERIOD FROM JANUARY 1, 2000 TO MAY 31, 2000
TABLE OF CONTENTS
PAGE
Independent Auditors' Report.................................................1
Financial Statements:
Combined Balance Sheets....................................................2
Combined Statements of Operations..........................................3
Combined Statements of Proprietor's Capital/
Stockholder's Equity.....................................................4
Combined Statements of Cash Flows..........................................5
Notes to Combined Financial Statements.....................................6
INDEPENDENT AUDITORS' REPORT
To The Proprietor/Stockholder
Oth.net (a Proprietorship) and Oth.net, Inc.
Palm Coast, Florida
We have audited the accompanying combined balance sheets of Oth.net and Oth.net,
Inc. as of December 31, 1999 and May 31, 2000, and the related combined
statements of operations, proprietor's capital/stockholder's equity and cash
flows for the year ended December 31, 1999 and the period from January 1, 2000
to May 31, 2000. These combined financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
combined financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Oth.net and Oth.net,
Inc. as of December 31, 1999 and May 31, 2000, and the results of its operations
and its cash flows for the year and period then ended in conformity with
generally accepted accounting principles.
CALLAHAN, JOHNSTON & ASSOCIATES, LLC
Minneapolis, Minnesota
June 27, 2000
OTH.NET
(A PROPRIETORSHIP)
AND
OTH.NET, INC.
COMBINED BALANCE SHEETS
MAY 31, 2000 AND DECEMBER 31, 1999
May 31, December 31,
2000 1999
------------ ------------
ASSETS
Current assets:
Cash $ -- $ --
Accounts receivable 25,736 148,664
Prepaid expenses -- 499
------------ ------------
Total current assets 25,736 149,163
------------ ------------
Other assets:
Organization costs, net of accumulated
amortization of $46 639 --
------------ ------------
- ------------------------------------------------------------------------------------------
Total assets $ 26,375 $ 149,163
============ ============
- ------------------------------------------------------------------------------------------
LIABILITIES AND PROPRIETOR'S CAPITAL/STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 776 $ --
Due to stockholder 500 --
------------ ------------
Total current liabilities 1,276 --
------------ ------------
Proprietor's capital/stockholder's equity:
Common stock, $1 par value, 1,000 shares
authorized; issues and outstanding
1,000 in 2000 and -0- in 1999 1,000 --
Proprietor's capital/retained earnings 24,099 149,163
------------ ------------
Total proprietor's capital/
stockholder's equity 25,099 149,163
------------ ------------
- ------------------------------------------------------------------------------------------
Total liabilities and proprietor's
capital stockholder's equity $ 26,375 $ 149,163
============ ============
- ------------------------------------------------------------------------------------------
The accompanying notes are an integral part of
these combined financial statements.
2
OTH.NET
(A PROPRIETORSHIP)
AND
OTH.NET, INC.
COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
PERIOD FROM JANUARY 1, 2000 TO MAY 31, 2000
Period from
January 1, 2000 Year Ended
To December 31,
May 31, 2000 1999
--------------- ---------------
Advertising revenue $ 106,413 $ 270,467
--------------- ---------------
Operating expenses:
Amortization 46 --
Server and computer expenses 6,326 4,611
Telephone 2,180 1,184
Professional fees 5,064 --
--------------- ---------------
Total operating expenses 13,616 5,795
--------------- ---------------
Net profit $ 92,797 $ 264,672
=============== ===============
The accompanying notes are an integral part of
these combined financial statements.
3
OTH.NET
(A PROPRIETORSHIP)
AND
OTH.NET, INC.
COMBINED STATEMENTS OF PROPRIETOR'S CAPITAL/STOCKHOLDER'S EQUITY
YEAR ENDED DECEMBER 31, 1999
PERIOD FROM JANUARY 1, 2000 TO MAY 31, 2000
Proprietor's
Common Stock Capital/
--------------------------- Retained
Shares Amount Earnings Total
------------ ------------ ------------ ------------
1999 net profit -- $ -- $ 264,672 $ 264,672
1999 distributions -- -- (115,509) (115,509)
------------ ------------ ------------ ------------
Balances at December 31, 1999 -- -- 149,163 149,163
Issuance of common stock at
incorporation February 4, 2000 1,000 1,000 -- 1,000
Net profit January 1, 2000 to
May 31, 2000 -- -- 92,797 92,797
Distributions January 1, 2000 to
May 31, 2000 -- -- (217,861) (217,861)
------------ ------------ ------------ ------------
Balances at May 31, 2000 1,000 $ 1,000 $ 24,099 $ 25,099
============ ============ ============ ============
The accompanying notes are an integral part of these combined
financial statements.
4
OTH.NET
(A PROPRIETORSHIP)
AND
OTH.NET, INC.
COMBINED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
YEAR ENDED DECEMBER 31, 1999
PERIOD FROM JANUARY 1, 2000 TO MAY 31, 2000
Period from
January 1, 2000 Year Ended
To December 31,
May 31, 2000 1999
--------------- ---------------
Cash flows from operating activities:
Net profit $ 92,797 $ 264,672
Adjustments to reconcile net profit
to net cash flows from operating
activities:
Legal fees paid by proprietor 815 --
Amortization 46 --
Accounts receivable 122,928 (148,664)
Prepaid expenses 499 (499)
Accounts payable and accrued expenses 776 --
--------------- ---------------
Net cash flows from operating activities 217,861 115,509
--------------- ---------------
Cash flows from investing activities:
Incurrence of organization costs -- --
--------------- ---------------
Cash flows from financing activities:
Proceeds from common stock -- --
Due to stockholder -- --
Distributions (217,861) (115,509)
--------------- ---------------
Net cash flows from financing activities (217,861) (115,509)
--------------- ---------------
Increase (decrease) in cash -- --
Cash, beginning of period -- --
--------------- ---------------
Cash, end of period $ -- $ --
=============== ===============
Summary of noncash activity:
In February 2000, the Company's stockholder advanced $1,500 to fund the
incorporation of Oth.net, Inc. and legal fees of $815. These monies advanced
funded the stockholder's capital contribution of $1,000 and resulted in a
$500 Due to Stockholder.
The accompanying notes are an integral part of
these combined financial statements.
5
OTH.NET
(A PROPRIETORSHIP)
AND
OTH.NET, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
PERIOD FROM JANUARY 1, 2000 TO MAY 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
NATURE OF ORGANIZATION
Oth.net, Inc. was incorporated February 4, 2000, under the laws of the
State of Florida. To date operations have not commenced in Oth.net, Inc.
Operations through May 31, 2000, have been carried out through Oth.net, a
proprietorship.
Oth.net, a proprietorship, was started in May 1998 as a music and video
search engine. Oth.net's software enables consumers to quickly locate
specific artists and specific songs and videos (movies) on the Internet.
BASIS OF ACCOUNTING
The accompanying combined financial statements are presented using an
accrual basis of accounting and are in accordance with generally accepted
accounting principles.
REVENUE RECOGNITION
Revenues to date relate to advertising revenues earned from banner
advertising and/or links placed on pages of the Oth.net web site. Oth.net
software has the ability to track music searches on the Internet and
present banner advertising tailored to the specific search that the user
is conducting. The advertising can be changed moment by moment or search
by search to target the specific customers using the search engine at a
given moment. Revenues are recognized in the period the advertising is
displayed on the pages of the Oth.net web site.
ORGANIZATION COSTS
Organization costs are carried at cost and are being amortized over sixty
months using the straight-line method.
6
OTH.NET
(A PROPRIETORSHIP)
AND
OTH.NET, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(Continued)
YEAR ENDED DECEMBER 31, 1999
PERIOD FROM JANUARY 1, 2000 TO MAY 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
INCOME TAXES
Oth.net, a proprietorship, is not a taxpaying entity for purposes of
federal or state income tax purposes. Revenues and expenses flow through
to the proprietor for inclusion in his income tax return. Oth.net, Inc.
has elected to be treated as a Subchapter S corporation whereby revenues
and expenses flow through to the stockholder for inclusion in his
individual return. Accordingly, no income tax provision is provided in
the accompanying combined financial statements.
CONCENTRATIONS, RISKS AND UNCERTAINTIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
CUSTOMER CONCENTRATIONS AND RECEIVABLES
Oth.net, a proprietorship and Oth.net, Inc. grant uncollaterized
credit to customers. Management believes all accounts receivable are
collectible and has not provided for an allowance for doubtful
accounts. While the ultimate loss may differ, management believes that
any loss will not have a material impact on the proprietorship
Company's financial position. Due to uncertainties in the settlement
process, however, it is at least reasonably possible that management's
estimate will change during the next year. That amount cannot be
estimated.
7
OTH.NET
(A PROPRIETORSHIP)
AND
OTH.NET, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(Continued)
YEAR ENDED DECEMBER 31, 1999
PERIOD FROM JANUARY 1, 2000 TO MAY 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
(Continued)
CONCENTRATIONS, RISKS AND UNCERTAINTIES (Continued)
A receivable from a large customer totaled 95.5% of accounts
receivable at December 31, 1999 and 100% of accounts receivable at May
31, 2000.
One customer accounted for 94.0% of revenues in 1999 and 95.2% of
revenues in 2000.
COMPETITION
Many of the Proprietorship/Company's competitors and likely
competitors have substantially greater resources and experience than
the Company.
KEY PERSONNEL
Marketing efforts, consulting services and technical and
administrative efforts of the Proprietor/Stockholder have accounted
for 100% of the Proprietorship/Company's revenues inception to date.
No employment agreement currently exists with the
Proprietor/Stockholder (See Note 2).
8
OTH.NET
(A PROPRIETORSHIP)
AND
OTH.NET, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(Continued)
YEAR ENDED DECEMBER 31, 1999
PERIOD FROM JANUARY 1, 2000 TO MAY 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
(Continued)
CONCENTRATIONS, RISKS AND UNCERTAINTIES (Continued)
LEGAL EXPOSURE
Lawsuits have been filed against one of the Proprietorship/Company's
competitors, Napster, alleging that Napster encourages piracy on the
Internet by enabling and allowing its users to trade copyrighted songs
through its servers. These suits allege violation of the law as
follows:
o Copyright infringement
o Unlawful use of digital audio interface device, and
o Racketeering Influenced and Corrupt Organizations Act (RICO)
The cases against Napster raise questions about whether a software
manufacturer is liable for the ways in which their products are used.
An unfavorable response against Napster could negatively impact the
operations of the Proprietorship/Company. The ultimate outcome of
these lawsuits and their impact on the Proprietorship/Company cannot
be determined at this time.
2. PURCHASE AGREEMENT
On May 9, 2000, Oth.net, Inc. and its stockholder entered into an
agreement to transfer all of the outstanding shares of Oth.net, Inc. for
4.5 million shares of PL Brands, Inc. In this agreement the proprietor of
Oth.net also agreed to transfer the Oth.net domain name to PL Brands,
Inc. for $500,000. At closing all accounts receivable of Oth.net, Inc.
shall be transferred to the stockholder. The stockholder shall also be
responsible for all accounts payable debts and the like of Oth.net, Inc.
9
OTH.NET
(A PROPRIETORSHIP)
AND
OTH.NET, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(Continued)
YEAR ENDED DECEMBER 31, 1999
PERIOD FROM JANUARY 1, 2000 TO MAY 31, 2000
2. PURCHASE AGREEMENT (Continued)
The purchase agreement anticipates that by the date of closing the
Oth.net, Inc. will have entered into an employment contract with its
President and sole stockholder. This employment contract will be for an
initial term of two years and shall pay $125,000 per year with the usual
benefits, including health insurance and an employee stock option plan.
As of the date of the audit, this employment contract has not been
entered into and the Company has not established an employee stock option
plan.
This purchase agreement becomes null and void if the following do not
occur by the date indicated:
o the payment of $500,000 by June 30, 2000, and
o issuance of 4.5 million shares of PL Brands, Inc. stock in exchange
for all of the outstanding shares of Oth.net, Inc. by July 15,
2000.
3. RELATED PARTY TRANSACTIONS
DUE TO STOCKHOLDER
The Due to Stockholder is unsecured, non interest bearing and due on
demand.
OFFICE SPACE/FURNITURE AND EQUIPMENT
The Proprietorship/Company currently receives office space and use of
certain furniture and equipment from its Proprietor/Stockholder under
a month-to-month agreement at no cost. No value has been reflected for
this donated rentals in the accompanying financial statements.
10
PL BRANDS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 2000
PL Brands, Inc. Oth.net inc.
For the year ended For the year ended Pro Forma Pro Forma
April 30, 2000 May 31, 2000 Adjustments Combined
------------------ ------------------ ------------------ ------------------
Net sales -- 331,656 -- 331,656
Operating expenses 185,300 16,996 1,883,828 2,086,124
------------------ ------------------ ------------------ ------------------
Loss before other income (expenses) (185,300) 314,660 (1,883,828) (1,754,468)
------------------ ------------------ ------------------ ------------------
Other income (expenses) 50,966 -- -- 50,966
------------------ ------------------ ------------------ ------------------
Net earnings (loss) $ (134,334) $ 314,660 $ (1,883,828) $ (1,703,502)
================== ================== ================== ==================
Net loss per basic and diluted share -- -- -- $ (0.10)
================== ================== ================== ==================
Shares outstanding 9,143,279 -- 7,756,000 16,899,279
================== ================== ================== ==================
PL BRANDS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2000
PL Brands, Inc. Oth.net inc.
For the six months ended For the six months ended Pro Forma Pro Forma
October 31, 2000 October 31, 2000 Adjustments Combined
----------------- ------------------------ ------------------- ------------
Net sales -- $ 44,359 $ -- $ 44,359
Operating expenses 622,516 546,294 (215,342) 953,468
--------------- ------------------------ ---------------- ---------
Loss before other income
(expenses) (622,516) (501,935) 215,342 (909,109)
-------------- ------------------------ ------------------------
Other income (expenses) 48,400 1,662 -- 50,062
------------------ ------------------------ ------------------------
Net earnings (loss) $ (574,116) $ (500,273) $ 215,342 $(859,047)
=================== ======================== ========================
Net loss per basic
and diluted share -- -- -- $ (0.05)
========================
Shares outstanding 14,313,948 -- 2,585,331 16,899,279
=================== ======================= ========================
1. BASIS OF PRESENTATION
The pro forma condensed consolidated statements of operations have been
prepared in accordance with accounting principles generally accepted in
the United States of America to reflect P.L. Brands, Inc.'s (the
Company) acquisition of substantially all of the assets of Oth.net,
Inc. ("Oth.net") effective June 30, 2000. The acquisition has been
accounted for using the purchase method.
The financial information has been derived from the following financial
statements that have been prepared in accordance with accounting
principles generally accepted in the United States of America:
For the year ended April 30, 2000
(a) The audited financial statements of the Company for the year ended
April 30, 2000.
(b) The audited financial statements of Oth.net for the year ended
December 31, 1999 and the period from January 1, 2000 to May 31, 2000.
The Oth.net financial statements included in the pro forma results
include the period from January 1, 2000 to May 31, 2000 and the
seven-month period ended December 31, 1999.
For the six months ended October 31, 2000
(a) The unaudited financial statements of the Company for the six
months ended October 31, 2000.
(b) The unaudited financial statements of Oth.net for the six months
ended October 31, 2000.
The pro forma condensed consolidated statement of operations should be
read in conjunction with the notes thereto included in the following
pages and the financial statements referred to above. The pro forma
condensed consolidated statement of operations may not be indicative
either of results that actually would have occurred if the business
combinations had taken place on the dates indicated, or the results
which may be achieved in the future.
2. DESCRIPTION OF TRANSACTIONS
Acquisition of Oth.net, Inc.
On June 30, 2000, the Company acquired substantially all of the assets
of Oth.net, Inc., a corporation based in Burnsville, MN. Details of
the consideration and the fair values of the net assets acquired are
below.
Net assets acquired:
Intellectual Property $ 2,999,500
Consideration:
Cash $ 500,000
Common Shares (4,500,000 shares issued) 2,250,000
Acquisition fees (500,000 shares issued) 249,500
$ 2,999,500
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.
3. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
The pro forma condensed consolidated statement of operations for the
year ended April 30, 2000 and six months ended October 31, 2000 gives
effect to the above acquisitions as if they occurred on May 1, 1999.
(a) Intellectual Property
The Company has recognized an asset of Intellectual property identified
as Proprietorship Information and Database. The Intellectual Property
has been valued at $2,999,500.
The pro forma financial statements have been adjusted for amortization
of the Intellectual Property over three years, annual salaries totaling
$385,000 related to employment agreements executed in connection with
the acquisition, and $499,000 of compensation expense related to the
sale of 1,000,000 shares of common stock to an officer of the company
in connection with the acquisition. In addition, all 7,756,000 shares
of common stock issued in connection with the acquisition and related
financing have been deemed to be outstanding for the entire period.