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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 six month period ending June 30, 2000
CHATTOWN.COM NETWORK, INC.
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(Exact name of registrant as specified in its charter)
Delaware 58-2027283 0-22373
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(State or other jurisdiction (IRS Employer Commission File
of Incorporation) Identification Number) Number
200 South Washington Blvd., Suite 9, Sarasota, Florida 34236
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(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 August 15, 2000, the Registrant had outstanding 35,494,656 shares of common
stock.
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CHATTOWN.COM NETWORK, INC.
<TABLE>
<CAPTION>
INDEX
Page No.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet, June 30, 2000
and December 31, 1999..................................................................3
Consolidated Statement of Operations,
Six and Three Months Ended June 30, 2000 and 1999......................................4
Consolidated Statement of Stockholders Equity..........................................5
Consolidated Statement of Cash Flows,
Six Months Ended June 30, 2000.........................................................6
Item 2. Management's Discussion and Analysis or Plan of Operation.............................7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................................8
Item 2. Changes in Securities and Use of Proceeds..............................................8
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
</TABLE>
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CHATTOWN.COM NETWORK, INC.
Consolidated Balance Sheets
June 30, 2000, and December 31, 1999
UNAUDITED
June 30, December 31,
2000 1999
-------- ------------
ASSETS
Cash and cash equivalents $215,521 $ 98,932
Investments at market value 29,011
Accounts receivable - net 45,565 45,565
-------- --------
Prepaid expense 17,500
TOTAL CURRENT ASSETS 290,097 161,997
EQUIPMENT - NET 8,066 8,699
-------- --------
$298,163 $170,696
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 1,669 $ 1,083
Accrued expenses 111,014 8,048
-------- --------
TOTAL CURRENT LIABILITIES 112,683 9,131
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 shares
issued and outstanding, respectively 35,495 35,495
Additional paid-in capital 10,500 10,500
Accumulated earnings 139,485 115,570
-------- --------
185,480 161,565
-------- --------
$298,163 $170,696
======== ========
See accountants' compilation report.
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CHATTOWNN.COM NETWORK, INC.
Consolidated Statements of Operations
Six and Three Months Ended June 30, 2000 and 1999
UNAUDITED
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 2000 June 30, 2000 June 30, 1999 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Membership fees - net $ 174,432 $ 49,834 $ 224,985 $ 130,017
Advertising 537,304 230,010
--------- --------- --------- ---------
711,736 279,844 224,985 130,017
EXPENSES
Selling, administrative, and
general 178,254 109,426 491,075 343,897
Research and development 4,985 4,985
--------- --------- --------- ---------
NET INCOME FROM OPERATIONS 533,482 170,418 (271,075) (213,865)
OTHER INCOME (EXPENSE)
Interest/other (10,334) (3,177) (3,262) (475)
Loss on permanent decline
of securities (205,964) (158,449)
Collaborative and grant income 136,384 116,385
--------- --------- --------- ---------
(216,298) (161,626) 133,122 115,910
--------- --------- --------- ---------
NET INCOME (LOSS) BEFORE TAXES 317,184 8,792 (137,953) (97,955)
--------- --------- --------- ---------
PROVISION FOR INCOME TAXES 111,014
--------- --------- --------- ---------
NET INCOME (LOSS) $ 206,170 $ 8,792 $(137,953) $ (97,955)
========= ========= ========= =========
</TABLE>
See accountants' compilation report.
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CHATTOWN.COM NETWORK, INC.
Consolidated Statement of Stockholders' Equity
UNAUDITED
<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 (182,255) (182,255)
Net income 206,170 206,170
---------- ---------- ---------- ---------- ----------
Balance at,
June 30, 2000 35,494,656 $ 35,495 $ 10,500 $ 139,485 $ 185,480
========== ========== ========== ========== ==========
</TABLE>
See accountants' compilation report.
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CHATTOWN.COM NETWORK, INC.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2000
UNAUDITED
<TABLE>
<CAPTION>
June 30, 2000
----------------------
2000 1999
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<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
NET INCOME $ 206,170 $(137,953)
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING
ACTIVITIES
Depreciation 1,810 1,510
Loss on permanent markdown of securities 205,964 (38,077)
Increase in accounts receivable 17,500 300,000
Decrease in prepaid expense 86 92,940
Increase in note receivable and accrued expenses 102,966 426,884
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 534,496 645,304
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (677)
Stock received for advertising (234,975)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (235,652)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (182,255) (41,171)
Loan repayments (156,798)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (182,255) (197,969)
NET INCREASE IN
CASH AND CASH EQUIVALENTS 116,589 447,335
CASH AND CASH EQUIVALENTS,
beginning of year 98,932 9,819
--------- ---------
CASH AND CASH EQUIVALENTS,
end of year $ 215,521 $ 457,154
========= =========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ -- $ --
========= =========
</TABLE>
See accountants' compilation report.
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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 financial statements for the three- and six-month periods
ended June 30, 2000, and June 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 $711,736 for the six months ended June 30, 2000,
compared to revenues of $224,985 for the six months ended June 30, 1999.
Selling, general and administrative expenses decreased from $491,075 for the six
months ended June 30, 1999, to $178,254 for the comparable period in 2000. The
Company had a loss from operations of $271,075 for the six months ended June 30,
1999, compared to net income from operations of $533,482 for the six months
ended June 30, 2000. The Company had net income of $317,184 for the six months
ended June 30, 2000, compared to a loss of $137,953 for the comparable 1999
period.
The decrease in selling, administrative and general expenses in the six months
ended June 30, 2000, compared to the comparable 1999 period is attributable to
the different businesses of the Company in the six-month period ended June 30,
1999, compared to its business for the six months ended June 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 six months ended June 30, 2000, compared to the
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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 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 $158,449 for the three months ended June 30, 2000, and
$205,964 for the six months then ended.
LIQUIDITY AND CAPITAL RESOURCES
The Company had current assets of $290,097 at June 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 June 30, 2000, the Company had current liabilities
of $112,683 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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 10, 2000, the Company issued 12,000,000 shares of
common stock each to Thomas Clay and Mark Schellenberger in exchange for 100% of
the issued and outstanding stock of Value Plus Marketing, Inc. These shares were
issued on a private basis pursuant to Section 4(2) of the Securities Act of
1933.
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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
8-K/A filed June 9, 2000
8-K filed May 19, 2000
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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.
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(Registrant)
Dated: August 18, 2000 By: /s/ THOMAS CLAY
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Thomas Clay, President
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