<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
QUARTERLY REPORT ISSUED UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the nine month period ending September 30, 2000
CHATTOWN.COM NETWORK, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-2027283 0-22373
--------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Commission File
of Incorporation) Identification Number) Number
200 South Washington Blvd., Suite 9, Sarasota, Florida 34236
--------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (941) 957-1009
--------------
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15 (d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE TO CORPORATE ISSUERS
On November 10, 2000, the Registrant had outstanding 35,494,656 shares of common
stock.
-1-
<PAGE> 2
CHATTOWN.COM NETWORK, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet, September 30, 2000
and December 31, 1999........................................ 3
Consolidated Statements of Operations,
Nine and Three Months Ended September 30, 2000 and 1999...... 4
Consolidated Statement of Stockholders Equity................ 5
Consolidated Statements of Cash Flows,
Nine Months Ended September 30, 2000......................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................ 9
Item 2. Changes in Securities and Use of Proceeds.................... 9
Item 3. Defaults Upon Senior Securities.............................. 9
Item 4. Submission of Matters to a Vote of Security Holdings......... 9
Item 5. Other Information............................................ 9
Item 6. Exhibits and Reports on Form 8-K............................. 9
-2-
<PAGE> 3
CHATTOWN.COM NETWORK, INC.
PROFORMA CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 146,517 $ 98,932
Investments at market value 51,183
Accounts receivable - net 9,923 45,565
Prepaid expense 17,500
Due from related party 10,000
--------- ---------
TOTAL CURRENT ASSETS 217,623 161,997
EQUIPMENT - NET 14,525 8,699
--------- ---------
$ 232,148 $ 170,696
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 7,770 $ 1,083
Accrued expenses 219,119 8,048
--------- ---------
TOTAL CURRENT LIABILITIES 226,889 9,131
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 200,000,000
shares authorized; no shares issued and
outstanding
Common stock, $.001 par value, 200,000,000
shares authorized; 35,259,656 shares
issued and outstanding, respectively 35,495 35,495
Additional paid-in capital 10,500 10,500
Accumulated earnings (40,736) 115,570
--------- ---------
5,259 161,565
--------- ---------
$ 232,148 $ 170,696
========= =========
</TABLE>
See accountants' review report.
-3-
<PAGE> 4
CHATTOWN.COM NETWORK, INC.
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months Three months Nine months Three months
ended ended ended ended
September 30, 2000 September 30, 2000 September 30, 1999 September 30, 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
REVENUES
Membership fees - net $ 182,481 $ 8,049 $ 121,301 $ 27,797
Advertising 445,731 57,142 169,908 75,944
Marketing services 209,145 60,430
--------- --------- --------- ---------
837,357 125,621 291,209 103,741
EXPENSES
Selling, administrative, and
general 265,723 87,469 559,967 80,927
Research and development 4,985
--------- --------- --------- ---------
265,723 87,469 564,952 80,927
NET INCOME FROM OPERATIONS 571,634 38,152 (273,743) 22,814
OTHER INCOME (EXPENSE)
Interest/other (7,983) 2,351 (390) 3,818
Loss on permanent decline
of securities (205,964)
Collaborative and grant income 137,300
Gain on securities 10,753 10,753
--------- --------- --------- ---------
203,194 13,104 136,910 3,818
--------- --------- --------- ---------
NET INCOME (LOSS) BEFORE TAXES 368,440 51,256 (136,833) 26,632
--------- --------- --------- ---------
PROVISION FOR INCOME TAXES 219,119 15,189
--------- --------- --------- ---------
NET INCOME (LOSS) $ 149,321 $ 36,067 $(136,833) $ 26,632
========= ========= ========= =========
NET INCOME (LOSS) PER SHARE $ .0042 $ .0010 $ (.0039) $ .0006
========= ========= ========= =========
</TABLE>
See accountants' review report.
-4-
<PAGE> 5
CHATTOWN.COM NETWORK, INC.
PROFORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
------------------------------ Paid-in Accumulated
Shares Amount Capital Earnings Total
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at,
January 1, 1999 34,994,656 $ 34,995 $ (24,000) $ 5,451 $ 16,446
Issuance of common
stock for services 500,000 500 34,500 35,000
Distributions (156,348) (156,348)
Net income 266,467 266,467
----------- ----------- ----------- ----------- -----------
Balance,
December 31, 1999 35,494,656 35,495 10,500 115,570 161,565
Distributions (305,627) (305,627)
Net income 149,321 149,321
----------- ----------- ----------- ----------- -----------
Balance at,
September 30, 2000 35,494,656 $ 35,495 $ 10,500 $ (40,736) $ 5,259
=========== =========== =========== =========== ===========
</TABLE>
See accountants' review report.
-5-
<PAGE> 6
CHATTOWN.COM NETWORK, INC.
PROFORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES
NET INCOME (LOSS) $ 149,321 $(136,833)
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING
ACTIVITIES
Depreciation 3,064 900
Loss on permanent markdown of securities 205,964
Decrease in accounts receivable 18,142 182,657
Increase in note receivable and accrued expenses 217,758
Increase (decrease) in accounts payable 16,687 (210,469)
--------- ---------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 610,936 (163,745)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (7,080) (6,918)
Stock received for advertising (239,891)
Gain on marketable securities (10,753)
--------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES (257,724) (6,918)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (305,627) (156,468)
Sale of assets 308,050
--------- ---------
NET CASH (USED) PROVIDED BY
FINANCING ACTIVITIES (305,627) 151,582
--------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 47,585 (19,081)
CASH AND CASH EQUIVALENTS,
beginning of year 98,932 70,048
--------- ---------
CASH AND CASH EQUIVALENTS,
end of period $ 146,517 $ 50,967
========= =========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ -- $ 4,211
========= =========
</TABLE>
See accountants' review report.
-6-
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The following discussion and analysis should be read in conjunction with the
Financial Statements appearing elsewhere in this Report on Form 10-QSB.
RESULTS OF OPERATIONS
The Company was formed in January 1993 as a Delaware corporation under the name
Vaxcel, Inc. The Company historically engaged in the development and
commercialization of vaccine adjuvants and delivery systems until the second
quarter of 1999, when it sold all of the rights to its technologies for cash and
discontinued all of its operations. During the third quarter of 1999 the Company
settled all of its liabilities from the proceeds it collected from the sale of
its technologies, and remained a shell from that time until April 2000. On April
10, 2000, the Company purchased a 100% interest in Value Plus Marketing, Inc., a
private internet company, in consideration of 24,000,000 shares of the Company's
common stock. The statements of operations for the three- and nine-month periods
ended September 30, 2000, and September 30, 1999, were prepared on a pro forma
consolidated basis to give effect to the stock purchase agreement described in
the preceding sentence as if such transaction had occurred on January 1, 1998,
for statement of operations purposes and, for balance sheet purposes, on
December 31, 1997.
The Company had revenues of $837,357 for the nine months ended September 30,
2000, compared to revenues of $291,209 for the nine months ended September 30,
1999. Selling, general and administrative expenses decreased from $564,952 for
the nine months ended September 30, 1999, to $265,723 for the comparable period
in 2000. The Company had a loss from operations of $273,743 for the nine months
ended September 30, 1999, compared to net income from operations of $571,634 for
the nine months ended September 30, 2000. The Company had net income of $368,440
for the nine months ended September 30, 2000, compared to a loss of $136,833 for
the comparable 1999 period.
The decrease in selling, administrative and general expenses in the nine months
ended September 30, 2000, compared to the comparable 1999 period is attributable
to the different businesses of the Company in the nine-month period ended
September 30, 1999, compared to its business for the nine months ended September
30, 2000. As noted in the first paragraph under this caption, the Company was
not active during the first quarter of 2000, and in April 2000 the Company
acquired its current business operations. The Company's operating revenues
increased substantially in the nine months ended September
-7-
<PAGE> 8
30, 2000, compared to the comparable 1999 period primarily as a result of the
commencement of various advertising programs on the Company's websites in
September 1999. A substantial portion of the Company's advertising and marketing
services revenues are paid in the form of marketable securities. At the time
that the securities are delivered to the Company, the Company establishes a
value for the securities based substantially on their market value. Some of
these securities declined in value subsequent to their delivery to the Company
and, accordingly, the Company has recorded a loss on decline of securities of
$205,964 for the nine months ended September 30, 2000, although no such loss was
recorded in the three months ended September 30, 2000.
The Company's revenues increased from $107,741 for the three month
period ended September 30, 1999, to $125,621 for the three month period ended
September 30, 2000. However, the Company's revenues for the three months ended
September 30, 2000, declined from its revenues of $279,844 for the three months
ended June 30, 2000. The Company believes that its business declines during the
third quarter of each calendar year for seasonal reasons. Accordingly, the
Company expects its revenues and net income from operations to increase in the
fourth quarter of 2000 from its revenues and net income in the third quarter of
2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company had current assets of $217,623 at September 30, 2000, compared to
current assets of $161,997 at December 31, 1999. Substantially all of the
Company's current assets are in the form of cash and cash equivalents, which
consist substantially of marketable securities paid to the Company as
compensation for its advertising services. At September 30, 2000, the Company
had current liabilities of $226,889 compared to current liabilities of $9,131 at
December 31, 1999, at which date the Company had ceased operations and paid
substantially all of its debts. Upon acquiring all of the equity of Value Plus
Marketing, Inc., in April 2000, the Company assumed the business operations of
the acquired company, including accrued expenses.
The Company believes that its current assets, together with income from
operations, are sufficient to carry on the Company's business as now conducted.
The Company may in the future expand its existing business operations through
the creation of new websites, the acquisition for cash, debt and securities of
other websites, or the creation or acquisition of other businesses. The Company
has not identified any new business opportunity as of the date of this report on
Form 10-QSB.
-8-
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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
None.
-9-
<PAGE> 10
SIGNATURES
In accordance with 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, duly authorized.
CHATTOWN.COM NETWORK, INC.
(Registrant)
Dated: November 14, 2000 By: /s/ Thomas Clay
---------------------------------
Thomas Clay, President
-10-
