FORM 10QSB
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended Commission File Number
----------------- ----------------------
September 30, 2000 000-03651
PNW CAPITAL, INC.
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1474412
-------------------------------- -------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
12925 W. Arlington Pl., Littleton, CO 80127
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 412-2469
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 [ ]
The number of common shares without par value outstanding on June 30,
2000 was 42,240,000 shares.
======================================================================
<PAGE>
<TABLE>
<CAPTION>
PNW CAPITAL, INC. (Formerly Winchester Mining Corporation)
(A development stage enterprise)
Balance Sheets
September 30, 2000 and December 31, 1999
<S> <C> <C>
September 30, December 31,
2000 1999
(Unaudited) (Audited)
------------------- -------------------
ASSETS
Current assets:
Cash $ 2,923 $ 219
Inventory, at cost 6,121 2,816
Prepaid expenses 4,169 970
------------------- -------------------
Total current assets 13,213 4,005
------------------- -------------------
Property and equipment, at cost, net of
accumulated depreciation 11,605 -
------------------- -------------------
Other assets:
Investment in Multiplex Raceway Systems 75,030 -
Website development costs in process 71,861 -
Goodwill, net of accumulated amortization 144,917 -
------------------- -------------------
Total other assets 291,808 -
------------------- -------------------
------------------- -------------------
Total assets $316,626 $ 4,005
=================== ===================
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 46,393 $ 26,118
Due to related parties - 36,332
Accrued liability for contingencies 25,000 25,000
------------------- -------------------
Total current liabilities 71,393 87,450
------------------- -------------------
------------------- -------------------
Total liabilities 71,393 87,450
------------------- -------------------
Commitments and contingencies - -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.0001 par value, 100,000,000
shares authorized, 49,540,000 and 33,750,000
shares issued and outstanding 4,954 3,375
Capital in excess of par value 1,684,935 923,414
Deficit accumulated during the
development stage (1,444,656) (1,010,234)
------------------- -------------------
Total stockholders' equity (deficit) 245,233 (83,445)
------------------- -------------------
Total liabilities and stockholders' equity $316,626 $ 4,005
=================== ===================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PNW CAPITAL, INC. (Formerly Winchester Mining Corporation)
(A development stage enterprise)
Statements of Loss and Deficit for the Periods Ended September 30, 2000 and 1999
(Unaudited)
<S> <C> <C> <C>
Cumulative
November 6,
1996 through Nine Months
September 30, Ended September 30,
------------------------------------------
2000 2000 1999
--------------------- ---------------------- ------------------
Revenues $ 15,537 $ - $ 9,394
--------------------- ---------------------- ------------------
Less, Costs and expenses:
Cost of revenues 76,201 - 64,205
Consulting and management fees 896,325 340,799 121,449
Provision for contingencies 25,000 - 25,000
Depreciation and amortization 5,526 4,987 305
Writeoffs and abandonments of
mineral properties 276,000 - -
Other general and administrative 184,394 89,584 5,943
--------------------- ---------------------- ------------------
Total operating expenses 1,463,446 435,370 216,902
--------------------- ---------------------- ------------------
Loss from operations (1,447,909) (435,370) (207,508)
--------------------- ---------------------- ------------------
Other income (expense):
Interest income 2,724 419 -
Foreign exchange 529 529 -
--------------------- ---------------------- ------------------
Total other income (expense) 3,253 948 -
--------------------- ---------------------- ------------------
Loss before taxes on income (1,444,656) (434,422) (207,508)
Provision for income taxes - - -
--------------------- ---------------------- ------------------
Net loss $(1,444,656) (434,422) (207,508)
=====================
Deficit accumulated during the development stage:
Beginning (1,010,234) (750,830)
---------------------- ------------------
Ending $(1,444,656) $(958,338)
====================== ==================
Basic earnings (loss)
per common share $ (0.01) $ (0.01)
====================== ==================
Weighted average shares outstanding 38,647,409 34,255,480
====================== ==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PNW CAPITAL, INC. (Formerly Winchester Mining Corporation)
(A development stage enterprise)
Statements of Loss and Deficit For The Three Months Ended
September 30, 2000 and 1999
(Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Three Months
Ended September 30,
------------------------------------------
2000 1999
---------------------- ------------------
Revenues $ - $ 4,002
---------------------- ------------------
Less, Costs and expenses:
Cost of revenues - 8,373
Consulting and management fees 266,749 1,000
Depreciation and amortization 2,766 -
Other general and administrative 31,234 1,534
---------------------- ------------------
Total operating expenses 300,749 10,907
---------------------- ------------------
Loss from operations (300,749) (6,905)
---------------------- ------------------
Other income (expense):
Interest income - -
Foreign exchange 74 -
---------------------- ------------------
Total other income (expense) 74 -
---------------------- ------------------
Loss before taxes on income (300,675) (6,905)
Provision for income taxes - -
---------------------- ------------------
Net loss (300,675) (6,905)
Deficit accumulated during the development stage:
Beginning (1,143,981) (951,433)
---------------------- ------------------
Ending $(1,444,656) $(958,338)
====================== ==================
Basic earnings (loss)
per common share $ (0.01) $ (0.00)
====================== ==================
Weighted average shares outstanding 43,010,652 33,750,000
====================== ==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PNW CAPITAL, INC. (Formerly Winchester Mining Corporation)
(A development stage enterprise)
Statements of Cash Flows For The Periods Ended
September 30, 2000 and 1999
(Unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative
November 6,
1996 through Nine Months
September 30, Ended September 30,
----------------------------------------
2000 2000 1999
--------------------- ------------------ -------------------
Cash flows from operating activities:
Net loss $(1,444,656) $ (434,422) $ (207,508)
Adjustments to reconcile net income to
cash provided (used) by development
stage activities:
Provision for bad debts 45,507 -
Depreciation and amortization 5,525 4,986 -
Change in current assets and liabilities:
Inventory (6,121) (3,305) -
Prepaid expenses (4,708) (3,199) (3,878)
Accounts payable and accrued expenses 46,393 20,275 4,670
Accrued liability for contingencies 25,000 - 25,000
Due to related parties 945,000 313,668 36,066
--------------------- ------------------ -------------------
--------------------- ------------------ -------------------
Cash flows from operating activities (388,060) (101,997) (145,650)
--------------------- ------------------ -------------------
--------------------- ------------------ -------------------
Cash flows from investing activities:
Purchase of equipment (12,451) (12,451) -
Investment in Multiplex (75,000) (75,000) -
Website development costs (71,861) (71,861) -
Acquisition of goodwill (149,057) (149,057) -
Loan to related party (50,000) - -
Loan repayments 4,493 - -
--------------------- ------------------ -------------------
--------------------- ------------------ -------------------
Cash flows from investing activities (353,876) (308,369) -
--------------------- ------------------ -------------------
--------------------- ------------------ -------------------
Cash flows from financing activities:
Net proceeds from sale of common stock 744,859 413,070 146,621
--------------------- ------------------ -------------------
--------------------- ------------------ -------------------
Cash flows from financing activities 744,859 413,070 146,621
--------------------- ------------------ -------------------
--------------------- ------------------ -------------------
Net increase (decrease)
in cash and equivalents $ 2,923 2,704 971
=====================
=====================
Cash and equivalents:
Beginning of period 219 149
------------------ -------------------
------------------ -------------------
End of period $ 2,923 $ 1,120
================== ===================
================== ===================
Supplemental cash flow disclosures:
Cash paid for interest $ - $ - $ -
Cash paid for income taxes - - -
Non-cash financing and
investing activities:
Shares issued for debt 595,000 - 275,000
Shares issued for services 350,000 350,000
Shares issued for investment 30 30
</TABLE>
<PAGE>
PNW CAPITAL, INC. (FORMERLY WINCHESTER MINING CORPORATION)
(A development stage enterprise)
Notes to Unaudited Financial Statements
September 30, 2000
--------------------------------------------------------------------------------
The accompanying unaudited interim financial statements include all adjustments
which in the opinion of management are necessary in order to make the
accompanying financial statements not misleading, and are of a normal recurring
nature. However, the accompanying unaudited financial statements do not include
all of the information and footnotes necessary for a complete presentation of
financial position, results of operations, cash flows and stockholders' in
conformity with generally accepted accounting principles. Except as disclosed
herein, there has been no material change in the information disclosed in the
notes to the financial statement included in the Company's annual report for the
year ended December 31, 1999. Operating results for the three and nine months
ended September 30, 2000 are not necessarily indicative of the results than can
be expected for the year ended December 31, 2000.
Note 1 - Development stage activities:
The Company is continuing to develop its on-line websites, from which it intends
to sell licensed products from Disney, National Football League, National
Basketball Association, Major League Baseball, NCAA, and similar organizations.
Approximately $72,000 has been incurred in development costs as of September 30,
2000, and completion is expected by the end of 2000. Accordingly, the Company is
still deemed to be a development stage enterprise.
Note 2 - Inventories:
Inventories are stated at the lower of cost or market, with cost determined
using the first-in first-out (FIFO) method, and consist of licensed products
(finished goods) held for sale when the Company's websites become operational.
Note 3 - Property and equipment:
Property and equipment are stated at cost less accumulated depreciation,
computed on the straight-line method over the estimated useful lives of the
assets. Estimated lives of depreciable assets range from five to seven years.
Note 4 - Investment in Multiplex Raceway Systems:
In May, 2000, the Company purchased 300,000 shares of Multiplex Raceway Systems,
a privately-held company engaged in the development of fiber optic multiple
access systems, at a cost of $75,000 in cash. Then, in September, 2000, the
Company issued 300,000 shares of restricted common stock as additional purchase
price; this transaction was recorded at the par value of the stock issued, or
$30. The investment represents 2.4% of the total outstanding stock of Raceway.
The stock purchase represents the Company's initial investment against a total
commitment to purchase 25% of Raceway's stock for total consideration of
$500,000 in cash and 2,000,000 shares of PNW Capital, Inc. common stock. The
investment is recorded at cost.
Note 5 - Website development costs in process:
As indicated in Note 1 above, the company is in the process of developing
websites from which to conduct its on-line retail operations. In March 2000, the
Emerging Issues Task Force reached a consensus on Issue No. 00-2, Accounting for
Website Development Costs, ("EITF Issue No. 00-2") to be applicable to all
website development costs incurred for the quarter beginning after June 30,
2000. The consensus states that for specific website development costs, the
accounting should be based generally on AICPA Statement of Position 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. Under SOP 98-1, development costs are capitalized and amortized to income
over the estimated useful life of the website. The Company has elected to adopt
EITF Issue No. 00-2 and SOP 98-1 retroactively to January 1, 2000.
<PAGE>
The Company has incurred $71,861 in development costs through September 30,
2000, which have been capitalized; no amortization has been recorded, as the
sites are incomplete. No costs had been incurred prior to January 1, 2000.
Note 6 - Goodwill:
On May 9, 2000, the Company acquired all the outstanding stock of Hi-Plains
Energy Corp., a Wyoming corporation that was also in the development stage, for
$15,600. Concurrently therewith, the Company paid consulting and legal fees of
$134,420 to facilitate the merger of Hi-Plains into Winchester, and the filing
of related forms with the Securities and Exchange Commission. The total of
$150,020 has been treated as the cost of the Hi-Plains shares.
Effective May 13, 2000, Hi-Plains was merged into Winchester, Winchester changed
its name to PNW Capital, Inc., and each share issued and outstanding immediately
prior to the effective date remained as issued and outstanding common stock in
Winchester (renamed PNW) without change.
The purchase of the Hi-Plains stock and subsequent merger into PNW has been
treated as a purchase, under which the excess of the purchase price ($150,020)
over the net assets of Hi-Plains ($963) has been capitalized as Goodwill, and is
being amortized over a 15 year life. Amortization of $2,484 was recognized
during the quarter ended September 30, 2000.
Note 7 - Federal income tax:
The currently payable (refundable) provision (credit) for Federal income tax
consists of the following:
September 30,
----------------------------------------
2000 1999
----------------- -----------------
Currently payable (refundable)
provision (credit)
attributable to:
Current operations ($147,700) ($70,500)
Less:
Limitation due to absence
----------------- -----------------
Net amount payable
(refundable) $ - $ -
================= =================
The Company follows Statement of Financial Accounting Standards number 109 (SFAS
109), Accounting for Income Taxes. Deferred income taxes reflect the net effect
of (a) temporary difference between carrying amounts of assets and liabilities
for financial purposes and the amounts used for income tax reporting purposes,
and (b) net operating loss carryforwards. The cumulative tax effect at the
expected rate of 34% of significant items comprising the Company's net deferred
tax amounts are as follows:
September 30,
2000
-----------------
Deferred tax assets
attributable to:
Net operating loss carry-
Less, Valuation allowance (491,100)
-----------------
Net deferred tax assets $ -
=================
<PAGE>
At September 30, 2000, the Company had net operating loss carryovers which
expire as follows:
Expires: Amount
December 31, 2011 $10,100
December 31, 2012 489,200
December 31, 2013 251,500
December 31, 2014 259,400
December 31, 2015 434,400
-----------------
Total $1,444,600
=================
Note 8 - Common stock:
During the development stage, the Company has issued shares of its common stock
as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Price Per
Description and Dates Shares Share Amount
------------------------------------------------ ----------------- -- ----------------- --- ----------------
Shares issued for cash:
November 7, 1996 50,000 $0.010 $500
February 27, 1997 20,000,000 0.010 200,000
July 17, 1998 5,200,000 0.062 320,000
March 15, 1999 2,000,000 0.050 100,000
March 31, 1999 1,000,000 0.050 50,000
March 13, 2000 1,790,000 0.161 288,190
May 17, 2000 6,700,000 0.218 146,302
Shares issued for debt (1):
March 15, 1999 3,500,000 0.050 175,000
March 31, 1999 2,000,000 0.050 100,000
Shares issued for services(2):
September 20, 2000 7,000,000 0.050 350,000
</TABLE>
(1) Value based on face value of obligation relieved.
(2) Value based on quoted value of shares issued.
Note 9 - Restatement of first quarter, 2000 results of operations:
As a result of the implementation of SOP 98-1 (see Note 5 above), the Company
retroactively capitalized $69,261 in website development costs that had
previously been expensed during the quarter ended March 31, 2000. Following is a
summary of the Company's operations for the quarter ended March 31, 2000, as
restated:
Quarter Ended March 31,
---------------------------------------
2000 1999
---------------- -----------------
Revenues $ - $ -
---------------- -----------------
Less:
Costs of revenues - 50,026
Consulting and management fees 35,669 113,833
Provision for contingencies - 25,000
Other general and administrative 21,349 346
---------------- -----------------
Loss before taxes on income (57,018) (189,205)
Provision for taxes on income - -
---------------- -----------------
Net loss ($57,018) ($189,205)
================ =================
<PAGE>
The accompanying unaudited interim financial statements include all adjustments
which in the opinion of management are necessary in order to make the
accompanying financial statements not misleading, and are of a normal recurring
nature. However, the accompanying unaudited financial statements do not include
all of the information and footnotes necessary for a complete presentation of
financial position, results of operations, cash flows and stockholders' in
conformity with generally accepted accounting principles. Except as disclosed
herein, there has been no material change in the information disclosed in the
notes to the financial statement included in the Company's annual report for the
year ended December 31, 1999. Operating results for the three and nine months
ended September 30, 2000 are not necessarily indicative of the results than can
be expected for the year ended December 31, 2000.
Note 1 - Development stage activities:
The Company is continuing to develop its on-line websites, from which it intends
to sell licensed products from Disney, National Football League, National
Basketball Association, Major League Baseball, NCAA, and similar organizations.
Approximately $72,000 has been incurred in development costs as of September 30,
2000, and completion is expected by the end of 2000. Accordingly, the Company is
still deemed to be a development stage enterprise.
Note 2 - Inventories:
Inventories are stated at the lower of cost or market, with cost determined
using the first-in first-out (FIFO) method, and consist of licensed products
(finished goods) held for sale when the Company's websites become operational.
Note 3 - Property and equipment:
Property and equipment are stated at cost less accumulated depreciation,
computed on the straight-line method over the estimated useful lives of the
assets. Estimated lives of depreciable assets range from five to seven years.
Note 4 - Investment in Multiplex Raceway Systems:
In May, 2000, the Company purchased 300,000 shares of Multiplex Raceway Systems,
a privately-held company engaged in the development of fiber optic multiple
access systems, at a cost of $75,000 in cash. Then, in September, 2000, the
Company issued 300,000 shares of restricted common stock as additional purchase
price; this transaction was recorded at the par value of the stock issued, or
$30. The investment represents 2.4% of the total outstanding stock of Raceway.
The stock purchase represents the Company's initial investment against a total
commitment to purchase 25% of Raceway's stock for total consideration of
$500,000 in cash and 2,000,000 shares of PNW Capital, Inc. common stock. The
investment is recorded at cost.
Note 5 - Website development costs in process:
As indicated in Note 1 above, the company is in the process of developing
websites from which to conduct its on-line retail operations. In March 2000, the
Emerging Issues Task Force reached a consensus on Issue No. 00-2, Accounting for
Website Development Costs, ("EITF Issue No. 00-2") to be applicable to all
website development costs incurred for the quarter beginning after June 30,
2000. The consensus states that for specific website development costs, the
accounting should be based generally on AICPA Statement of Position 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. Under SOP 98-1, development costs are capitalized and amortized to income
over the estimated useful life of the website. The Company has elected to adopt
EITF Issue No. 00-2 and SOP 98-1 retroactively to January 1, 2000.
<PAGE>
The Company has incurred $71,861 in development costs through September 30,
2000, which have been capitalized; no amortization has been recorded, as the
sites are incomplete. No costs had been incurred prior to January 1, 2000.
Note 6 - Goodwill:
On May 9, 2000, the Company acquired all the outstanding stock of Hi-Plains
Energy Corp., a Wyoming corporation that was also in the development stage, for
$15,600. Concurrently therewith, the Company paid consulting and legal fees of
$134,420 to facilitate the merger of Hi-Plains into Winchester, and the filing
of related forms with the Securities and Exchange Commission. The total of
$150,020 has been treated as the cost of the Hi-Plains shares.
Effective May 13, 2000, Hi-Plains was merged into Winchester, Winchester changed
its name to PNW Capital, Inc., and each share issued and outstanding immediately
prior to the effective date remained as issued and outstanding common stock in
Winchester (renamed PNW) without change.
The purchase of the Hi-Plains stock and subsequent merger into PNW has been
treated as a purchase, under which the excess of the purchase price ($150,020)
over the net assets of Hi-Plains ($963) has been capitalized as Goodwill, and is
being amortized over a 15 year life. Amortization of $2,484 was recognized
during the quarter ended September 30, 2000.
Note 7 - Federal income tax:
The currently payable (refundable) provision (credit) for Federal income tax
consists of the following:
September 30,
----------------------------------------
2000 1999
----------------- -----------------
Currently payable (refundable)
provision (credit)
attributable to:
Current operations ($147,700) ($70,500)
Less:
Limitation due to absence
----------------- -----------------
Net amount payable
(refundable) $ - $ -
================= =================
The Company follows Statement of Financial Accounting Standards number 109 (SFAS
109), Accounting for Income Taxes. Deferred income taxes reflect the net effect
of (a) temporary difference between carrying amounts of assets and liabilities
for financial purposes and the amounts used for income tax reporting purposes,
and (b) net operating loss carryforwards. The cumulative tax effect at the
expected rate of 34% of significant items comprising the Company's net deferred
tax amounts are as follows:
September 30,
2000
-----------------
Deferred tax assets
attributable to:
Net operating loss carry-
Less, Valuation allowance (491,100)
-----------------
Net deferred tax assets $ -
=================
<PAGE>
At September 30, 2000, the Company had net operating loss carryovers which
expire as follows:
Expires: Amount
December 31, 2011 $10,100
December 31, 2012 489,200
December 31, 2013 251,500
December 31, 2014 259,400
December 31, 2015 434,400
-----------------
Total $1,444,600
=================
Note 8 - Common stock:
During the development stage, the Company has issued shares of its common stock
as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Price Per
Description and Dates Shares Share Amount
------------------------------------------------ ----------------- -- ----------------- --- ----------------
Shares issued for cash:
November 7, 1996 50,000 $0.010 $500
February 27, 1997 20,000,000 0.010 200,000
July 17, 1998 5,200,000 0.062 320,000
March 15, 1999 2,000,000 0.050 100,000
March 31, 1999 1,000,000 0.050 50,000
March 13, 2000 1,790,000 0.161 288,190
May 17, 2000 6,700,000 0.218 146,302
Shares issued for debt (1):
March 15, 1999 3,500,000 0.050 175,000
March 31, 1999 2,000,000 0.050 100,000
Shares issued for services(2):
September 20, 2000 7,000,000 0.050 350,000
</TABLE>
(3) Value based on face value of obligation relieved.
(4) Value based on quoted value of shares issued.
Note 9 - Restatement of first quarter, 2000 results of operations:
As a result of the implementation of SOP 98-1 (see Note 5 above), the Company
retroactively capitalized $69,261 in website development costs that had
previously been expensed during the quarter ended March 31, 2000. Following is a
summary of the Company's operations for the quarter ended March 31, 2000, as
restated:
Quarter Ended March 31,
---------------------------------------
2000 1999
---------------- -----------------
Revenues $ - $ -
---------------- -----------------
Less:
Costs of revenues - 50,026
Consulting and management fees 35,669 113,833
Provision for contingencies - 25,000
Other general and administrative 21,349 346
---------------- -----------------
Loss before taxes on income (57,018) (189,205)
Provision for taxes on income - -
---------------- -----------------
Net loss ($57,018) ($189,205)
================ =================
<PAGE>
The effect of the restatement on cash flows for the quarter ended March 31, 2000
was to increase operating cash flows by $69,261, and to decrease cash flows from
investing activities by the same amount.
Note 10 - Stock options and stock issued for services:
In August, 2000, the Company adopted the 2000 Nonqualified Stock Option Plan.
The Plan sets aside 10,000,000 shares of common stock option for issuance to
employees, directors, officers, attorneys, accountants, consultants or advisors
to the company. The Plan has a ten year term.
On September 20, 2000, the Company granted options to two officers and two
consultants to purchase 7,000,000 shares of the Company's common stock at $0.05
per share under the Plan. The options were immediately exercised, and shares
were issued in satisfaction of the Company's obligation to the four individuals
for consulting services rendered through September 30, 2000. The transaction was
recorded by a charge to expense for $257,035, and a charge of $92,965 against
amounts previously accrued for such services, for a total value of $350,000.
Also on September 20, 2000, the Company granted options to five consultants (one
of whom is also a director) to purchase 2,200,000 shares at $0.05 per share
under the Plan. The options are exercisable at any time before ten years from
the date the Plan was adopted. At September 30, 2000, none of these options had
been exercised.
Note 11 - Subsequent event: On September 25, 2000, the Company authorized the
acquisition of 100% of the outstanding stock of Peanut Butter and Jelly, Inc. in
exchange for 47,460,000 restricted common shares of the Company, subject to the
completion of an appropriate agreement. In connection therewith, the Company's
three Directors, Wayne Miller, Gary Burnie, and Barry Miller, agreed to resign,
subject to Notice being mailed to shareholders under Section 14f, to be replaced
by Daniel C. Silva and Joseph L. McFarland, Jr.
Peanut Butter and Jelly, Inc. is also a development stage company.
The acquisition is expected to be completed prior to the end of calendar year
2000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Liquidity and Capital Resources
-------------------------------
The Company's cash position at September 30, 2000 was $2,923, an increase of
$2,704 from December 31, 1999.
Other assets increased by $291,808, consisting of increases in Investment in
Multiplex Raceway Systems of $75,030, increase in Website Development Costs in
Process of $71,861, and increase in Goodwill (net) of $144,917. These items are
described more fully in the notes to the financial statements.
The above increases in assets were financed from the sale of 6,700,000 shares of
common stock for net proceeds of $413,070 during the first nine months of the
current year. Also, the Company issued 7,000,000 shares of its common stock to
four officers, directors and consultants in connection with its 2000
Nonqualified Stock Option Plan, and in satisfaction of the Company's obligation
to the four for management and consulting services rendered. The transaction was
recorded by a charge to expense for $257,035, and a charge of $92,965 against
amounts previously accrued for such services, for a total value of $350,000.
RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
The Company had no revenues during the nine months ended September 30, 2000,
compared to $9,394 during the comparable period of 1999. The 1999 revenues were
derived from referral fees to internet casino sites, an activity which has since
ceased.
Loss from operations increased to ($434,422) in 2000, compared to ($207,508) in
1999, primarily as a result of increases in consulting and management fees and
other general and administrative expenses. There was no provision or credit for
income taxes in either period. The loss per share was ($.01) for the period in
both 2000 and 1999.
The Company expects continued losses as it remains in the development stage and
while it completes development of its websites. The Company expects the websites
to be operational by the end of 2000. The Company also expects to experience
continuing development stage losses after completion of its acquisition of
Peanut Butter and Jelly, Inc.
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO SAME PERIOD IN 1999
The Company operations were focused on its website development during the
third quarter. The Company was also seeking to restructure and recapitalize, in
light of the decline in internet business opportunities and high cost of
successful execution of its business model. The Company had no revenues during
the quarter in 2000 and $4,002 in revenues in the quarter in 1999.
The Company incurred $300,749 in expenses in the quarter in 2000, of which
$266,749 were compensation expenses to officers, directors and others. By
comparison the Company had $10,907 in expenses in the quarter of 1999. The
Company had a net loss of ($300,749) and ($6,905) in the quarter in 2000 and
1999 respectively. Loss per share was ($.01) in 2000 and ($.0) in 1999 in the
quarter.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None. See item 5.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other information.
Stock Options
In August, 2000, the Company adopted the 2000 Nonqualified Stock Option Plan.
The Plan sets aside 10,000,000 shares of common stock option for issuance to
employees, directors, officers, attorneys, accountants, consultants or advisors
to the company. The Plan has a ten year term.
On September 20, 2000, the Company granted options to four officers, directors
and consultants to purchase 7,000,000 shares of the Company's common stock at
$0.05 per share under the Plan. The options were immediately exercised, and
shares were issued in satisfaction of the Company's obligation to the four
individuals for consulting services rendered through September 30, 2000. The
transaction was recorded by a charge to expense for $257,035, and a charge of
$92,965 against amounts previously accrued for such services, for a total value
of $350,000.
Also on September 20, 2000, the Company granted options to five consultants (one
of whom is also a director) to purchase 2,200,000 shares at $0.05 per share
under the Plan. The options are exercisable at any time before ten years from
the date the Plan was adopted. At September 30, 2000, none of these options had
been exercised.
Acquisition of Peanut Butter and Jelly, Inc.
On September 25, 2000, the Company authorized the acquisition of 100% of the
outstanding stock of Peanut Butter and Jelly, Inc. in exchange for 47,460,000
restricted common shares of the Company, subject to the completion of an
appropriate agreement. In connection therewith, the Company's three Directors,
Wayne Miller, Gary Burnie, and Barry Miller, resigned, to be effective upon 10
days after filing of the 14f and mailing to shareholders and were replaced by
Daniel C. Silva and Joseph L. McFarland, Jr. Peanut Butter and Jelly, Inc. is
also a development stage company.
The acquisition is expected to be completed prior to the end of calendar year
2000.
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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 thereto duly authorized.
Dated this 4th day of December 2000.
PNW CAPITAL, INC.
BY:
/s/Daniel C. Silva
Daniel C. Silva, President
