UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report: April 10, 2000
Chattown.com Network, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
162467 10 4 582027283
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(CUSIP Number) (IRS Employer Identification Number)
c/o Thomas Clay, President
200 South Washington Blvd. Suite 9
Sarasota, Florida 34236
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(Address of principal executive offices)
(941) 941-957-1009
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(Registrant's telephone number, including area code)
1
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ITEM 2. Acquisition or Disposition of Assets
The Company expanded its Internet holdings with the addition of Bell2Bell.com,
PennyPicks.com and StockMarketChat.com in conjunction with the acquisition of
Value Plus Marketing, Inc. subsequent to the closing of the transaction. The
attached financials include the acquisition of these sites. All other terms of
the stock purchase agreement remain the same. For more information, please see
Form 8-K filed on April 20, 2000.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
A. Financial Statements of Acquired Business.
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Financial statements are hereby attached beginning on page F-1.
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CHATTOWN.COM NETWORK, INC.
REPORT ON AUDITS OF PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
Bobbitt, Pittenger & Company, P.A.
<PAGE>
CHATTOWN.COM NETWORK, INC.
CONTENTS
PAGE
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-1
PRO FORMA CONSOLIDATED BALANCE SHEETS F-2
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS F-3
PRO FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY F-4
PRO FORMA CONSOLIDATED STATEMENTS OF CASH FLOWS F-5
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS F-6
<PAGE>
[Letterhead of Bobbitt, Pittenger & Company, P.A.]
May 31, 2000
TO THE STOCKHOLDERS
Chattown.com Network, Inc.
Sarasota, Florida
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited the accompanying pro forma consolidated balance sheets of
Chattown.com Network, Inc. as of December 31, 1999 and 1998 and the related pro
forma consolidated statements of operations, stockholders' equity and cash flows
for the years then ended. These pro forma consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these pro forma consolidated financial statements based on our
audits.
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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the pro forma consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Chattown.com Network, Inc. as of December 31, 1999 and 1998 and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/Bobbitt, Pittenger & Company, P.A.
Certified Public Accountants
F-1
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CHATTOWN.COM NETWORK, INC.
PRO FORMA CONSOLIDATED BALANCE SHEETS
December 31,
1999 1998
ASSETS
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CURRENT ASSETS
Cash and cash equivalents $ 98,932 $ 9,819
Accounts receivable 45,565 7,488
Prepaid expense 17,500
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TOTAL CURRENT ASSETS 161,997 17,307
PROPERTY AND EQUIPMENT
Computers 7,498 7,498
Software 9,517 2,599
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17,015 10,097
Less accumulated depreciation 8,316 4,695
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8,699 5,402
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$170,696 $22,709
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December 31,
1999 1998
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,083 $
Accrued expenses 8,048 6,263
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TOTAL CURRENT LIABILITIES 9,131 6,263
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 2,000,000
shares authorized; no shares issued and
outstanding
Common stock, $.001 par value, 200,000,000
shares authorized; 35,494,656 and
34,994,656 shares issued and outstanding,
respectively 35,495 34,995
Additional paid-in capital 10,500 (24,000)
Accumulated earnings 115,570 5,451
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TOTAL CURRENT LIABILITIES 161,565 16,446
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TOTAL CURRENT LIABILITIES AND
STOCKHOLDERS' EQUITY $ 170,696 $ 22,709
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F-2
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CHATTOWN.COM NETWORK, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
December 31,
1999 1998
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REVENUES
Membership fees - net $ 274,727 $ 318,448
Advertising 188,582
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463,309 318,448
EXPENSES
Online and hosting service 104,265 87,978
Office expense 43,510 8,250
Automobile 16,381 22,465
Other expense 9,573 902
Advertising 6,559 642
Depreciation 3,620 2,952
Telephone 3,149 5,210
Travel 2,715 5,571
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189,772 133,970
NET INCOME FROM OPERATIONS 273,537 184,478
OTHER INCOME (EXPENSE)
Interest/other 10,430 16
Stock compensation (17,500)
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(7,070) 16
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NET INCOME FROM CONTINUING OPERATIONS $ 266,467 $ 184,494
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See notes to financial statements.
F-3
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<TABLE>
CHATTOWN.COM NETWORK, INC.
PRO FORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Earnings Total
----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at
January 1, 1998 34,994,656 $34,995 $(24,000) $ 22,386 $ 33,381
Distributions (201,429) (201,429)
Net Income 184,494 184,494
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Balance at
December 31, 1998 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
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Balance at
December 31, 1999 35,494,656 $35,495 $ 10,500 $ 115,570 $ 161,565
========== ======== ========= ========== ===========
</TABLE>
See notes to financial statements.
F-4
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CHATTOWN.COM NETWORK, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31,
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES
Customer and advertising receipts $ 425,232 $ 326,965
Interest and other income 10,262
Cash paid to suppliers (183,116) (136,845)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 252,378 190,120
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (6,917)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (156,348) (201,429)
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NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 89,113 (11,309)
CASH AND CASH EQUIVALENTS,
beginning of year 9,819 21,128
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CASH AND CASH EQUIVALENTS,
end of year $ 98,932 $ 9,819
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December 31,
1999 1998
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RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
NET INCOME $266,467 $ 184,494
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation 3,620 2,952
(Increase) decrease in accounts receivable (38,077) 8,517
Increase in accounts payable 1,083
Increase (decrease) in accrued liabilities 1,785 (5,843)
Stock compensation expense 17,500
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NET CASH PROVIDED BY OPERATING ACTIVITIES $252,378 $ 190,120
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F-5
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CHATTOWN.COM NETWORK, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Chattown.com Network, Inc. (formerly Vaxcel, Inc.) ("the Company") has presented
the 1999 and 1998 pro forma consolidated financial statements which give effect
to the stock purchase agreement as set forth in Note A to these financial
statements as if such transactions had occurred, for balance sheet purposes, on
December 31, 1997 and, for statement of operations purposes, on January 1, 1998.
These pro forma consolidated financial statements should be read in conjunction
with the Company's and the acquired Company's separate financial statements and
notes thereto appearing elsewhere in the Form 8-K dated April 10, 2000. The pro
forma information is not necessarily indicative of the results that would have
been reported had such events actually occurred on the dates specified, nor is
it indicative of the Company's future results.
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was formed on January 6, 1993 as a wholly-owned subsidiary of CytRx
corporation (CytRx). On June 2, 1999, A-Z Professional Consultants, Inc., a Utah
corporation ("A-Z"), entered into a Stock Acquisition Agreement ("Agreement")
with CytRx. A-Z purchased 9,625,000 shares or 87.5% of the Company's issued and
outstanding shares of common stock for two hundred fifty thousand dollars
($250,000) and discontinued all operations of the Company. A-Z did not apply
push down accounting to the net assets acquired from Vaxcel, Inc. In addition,
CytRx terminated its license of Optivax to Vaxcel, resulting in the assignment
of CytRx of Vaxcel's rights and obligations under its license agreement to
Corixa Corporation.
On April 10, 2000, the Company entered into a Stock Purchase Agreement
("Agreement") with Value Plus Marketing, Inc. ("Value Plus"), a private internet
company headquartered in Sarasota, Florida. Pursuant to the Agreement, the
Company purchased 100% of the stock of Value Plus, for twenty four million
shares of the common stock of the Company. The 24,000,000 shares of the
Company's common stock is equivalent to approximately 69% of the Company's
issued and outstanding shares of its common stock. The stock purchase was
accounted for under the pooling of interests method of accounting.
Revenue and Cost Recognition
Revenue is generated from membership fees, advertising sales and other website
visits originating at the Company's web sites. The Company recognizes income and
the related expenses when earned and incurred, respectively.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with a maturity of three months or less to be cash
equivalents.
F-6
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CHATTOWN.COM NETWORK, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounts Receivable
The Company uses the direct write-off method to account for uncollectible
accounts receivable. There were no uncollectible accounts in 1999 or 1998.
Advertising
The Company expenses advertising costs as incurred.
Prepaid Expense
On September 17, 1999, the Company issued 500,000 shares of its common stock to
its President for services. The prepaid expense consists of the value of the
common stock which was unearned as of December 31, 1999. The amount was earned
subsequent to December 31, 1999.
Property and Equipment
Property and equipment are carried at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets, which vary
from three to five years.
Income per Common and Common Equivalent Share
The computation of basic earnings per common share is computed using the
weighted average number of common shares outstanding during the year.
The computation of diluted earnings per common share is based on the weighted
average number of the shares outstanding during the year plus common stock
equivalents which would arise from the exercise of stock options and warrants
outstanding using the treasury stock method and the average market price per
share during the year. Common stock equivalents are not included in the diluted
earnings per share calculation when their effect is antidilutive. At December
31, 1999 and 1998, there were no outstanding stock options or warrants.
Stock Based Compensation
The Company may grant stock options to key employees, directors and consultants
with an exercise price equal to the fair market value of the shares at the date
of grant. At December 31, 1999 and 1998 there were no options granted.
F-7
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CHATTOWN.COM NETWORK, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates in the Preparation of Financial Statements
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
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
NOTE B - DISCONTINUED OPERATIONS
On June 2, 1999, the Company discontinued all operations of Vaxcel. These pro
forma financial statements do not include the discontinued operations of Vaxcel.
NOTE C - INCOME TAXES
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $12,000,000 and research and development tax credit carryforwards
of approximately $111,000. These carryforwards are available to offset future
taxable income and begin to expire in 2008. The utilization of the net operating
loss carryforwards is dependent upon the tax laws in effect at the time the net
operating loss carryforwards can be utilized. The Tax Reform Act of 1986
significantly limits the annual amount that can be utilized for certain types of
these carryforwards as a result of the change in ownership.
A valuation allowance has been established for the net deferred tax asset due to
the uncertainty of the Company's ability to realize such asset.
F-8
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CHATTOWN.COM NETWORK, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
NOTE D - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of current assets and current
liabilities. The carrying amount of these assets and liabilities approximates
fair value because of the short-term nature of these items.
NOTE E - COMMITMENTS AND CONTINGENCIES
The Company leases various automobiles under non-cancelable leases expiring
through December 2000. Expense under these operating leases was $16,381 and
$22,465 for 1999 and 1998, respectively.
Future minimum lease payments under all operating leases total $10,170 at
December 31, 1999.
NOTE F - SUBSEQUENT EVENTS
On April 3, 2000, the Company adopted a stock benefit plan authorizing the
issuance of 750,000 shares of the Company's common stock, par value $.001. At
the discretion of the Board of Directors, shares may be issued or options to
acquire shares may be granted.
F-9
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SIGNATURES
Pursuant to the requirement of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Dated: June 9,2000
Chattown.com Network, Inc.
By: /s/ Thomas Clay
Name: Thomas Clay
Title: President and Director
The following exhibit(s) are incorporated by reference:
EXHIBIT PAGE
NO. NO. DESCRIPTION
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10 * Stock Purchase Agreement dated April 10, 2000, by and
between Chattown.com Network, Inc., and Thomas Clay and Mark
Schellenberger (from Form 8-K filed with the SEC on April
20, 2000).
10(a) * Addendum to Stock Purchase Agreement, by and between the
parties to the Stock Purchase Agreement dated April 10, 2000
(from Form 8-K filed with the SEC on April 20, 2000).
3
