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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A2
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-26451
PRO NET LINK CORP.
Incorporated in the IRS Employer Identification
State of Nevada Number 88-0333454
645 Fifth Avenue
New York, New York 10022
(212) 688-8838
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 No X
Registrant had 50,268,570 shares of common stock outstanding as of September 30,
1999.
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This report consists of 14 pages
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PRO NET LINK CORP.
INDEX
PART I - FINANCIAL INFORMATION
Page
No.
---
ITEM 1. Financial Statements
Condensed Statements of Operations - Three
Months Ended September 30, 1999 and 1998............................3
Condensed Balance Sheets - as of September
30, 1999 and June 30, 1999..........................................4
Condensed Statements of Cash Flows - Three
Months Ended September 30, 1999 and 1998...........................5-6
Notes to Condensed Financial Statements............................ 7-8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................................................9-12
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.....................................13
SIGNATURES....................................................................14
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ITEM 1. FINANCIAL STATEMENTS
PRO NET LINK CORP.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
------------ ------------
<S> <C> <C>
Revenue
Membership $ 1,802 $ 11,759
Barter 240,000 --
------------ ------------
Total Revenue 241,802 11,759
------------ ------------
Expenses
Barter expenses 240,000 --
Website development 277,308 159,701
Commission 66,500 12,375
Selling, general and administrative 307,040 161,724
Non-cash compensation expense 340,000 --
Depreciation 5,688 3,271
Interest expense (net) 3,511 303
------------ ------------
Total expenses 1,240,047 337,374
------------ ------------
Net loss ($ 998,245) ($ 325,615)
============ ============
Basic loss per share of common stock ($ .02) ($ .01)
============ ============
Weighted average common shares outstanding 50,224,820 38,099,500
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PRO NET LINK CORP.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30, June 30,
1999 1999
<S> <C> <C>
Current assets
Cash $ 58,865 $ 285,259
Prepaid expenses 30,000 104,912
----------- -----------
Total current assets 88,865 390,171
Fixed assets, net of accumulated depreciation
of $28,436 at September 30, 1999 and
$22,748 at June 30, 1999 191,469 113,985
Other assets 144,885 144,385
----------- -----------
Total assets $ 425,219 $ 648,541
=========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities
Loan payable - bank $ 500,000 $ --
Accounts payable and accrued expenses 284,132 396,664
Deferred income 39,780 42,325
Notes payable - shareholder 3,520 3,520
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Total current liabilities 827,432 442,509
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Shareholders' (deficit) equity
Common stock $.001 par value, 150,000,000 shares authorized; issued 50,268,570
shares at September 30, 1999 and 50,068,570 shares at
June 30, 1999 50,269 50,069
Common stock to be issued; 600,000 shares at
September 30, 1999 and 800,000 shares at
June 30, 1999 600 800
Additional paid-in capital 5,561,368 5,221,368
Deficit (4,864,450) (3,866,205)
Stock subscriptions receivable (1,150,000) (1,200,000)
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Total shareholders' (deficit) equity (402,213) 206,032
----------- -----------
Total liabilities and shareholders'
(deficit) equity $ 425,219 $ 648,541
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PRO NET LINK CORP.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net loss ($998,245) ($325,615)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 5,688 3,271
Amortization of deferred rental income (2,545) --
Non-cash compensation 340,000 --
Changes in assets and liabilities
Decrease in prepaid expenses 74,912 7,713
Increase in other assets (500) --
(Decrease) increase in accounts payable
and accrued expenses (112,532) 13,955
--------- ---------
Net cash used in operating activities (693,222) (300,676)
--------- ---------
Cash flows from investing activities
Purchase of fixed assets (83,172) (30,382)
--------- ---------
Net cash used in investing activities (83,172) (30,382)
--------- ---------
Cash flows from financing activities
Proceeds from sale of common stock 50,000 200,000
Proceeds from notes payable - bank 500,000 180,000
Repayment of notes payable to shareholders -- (60,300)
Repayment of notes payable to others -- (23,500)
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Net cash provided by financing activities 550,000 296,200
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Net decrease in cash and cash equivalents (226,394) (34,858)
Cash - beginning of period 285,259 258,139
--------- ---------
Cash - end of period $ 58,865 $ 223,281
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PRO NET LINK CORP.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
--------- ------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,083 $ 1,250
========= =======
Supplemental schedule of non cash financing and investing activities:
Barter sales in exchange for website and
marketing expenses $ 240,000 $ --
========= =======
Security deposit of previous tenant credited
on new lease $ -- $52,073
========= =======
Stock options issued in conjunction with consulting agreement--
non-cash compensation $ 340,000
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PRO NET LINK CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note - 1 Interim Financial Statements.
The Company is no longer in the development stage and the interim
financial statements of Pro Net Link Corp. (the "Company" or "Pro Net
Link") have been prepared in accordance with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all information and disclosures necessary for a presentation of the
Company's financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. In the
opinion of management, these financial statements reflect all
adjustments, consisting only of normal recurring accruals, necessary
for a fair presentation of the Company's financial position, results of
operations and cash flows for such periods. The results of operations
for any interim periods are not necessarily indicative of the results
for the full year.
Note - 2 Earnings (Loss) per Common Share:
The reconciliation of basic and diluted (loss) earnings per common
share computation is as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
----------- ------------
<S> <C> <C>
Net (loss) available for common
stock equivalent shares
deemed to have a dilutive effect ($ 998,245) ($ 325,615)
=========== ============
(Loss) per common share
Basic ($ .02) ($ .01)
=========== ============
Diluted ($ .02) ($ .01)
=========== ============
Shares used in computation:
Basic:
Weighted average common shares 50,224,820 38,099,500
=========== ============
Diluted:
Weighted average common shares
Common stock equivalents (1) (1)
----------- ------------
50,224,820 38,099,500
=========== ============
</TABLE>
(1) For the three months ended September 30, 1999 and the
three months ended September 30, 1998 the effect of
exercising the outstanding stock options would have been
anti-dilutive and therefore, the use of common stock
equivalent shares was not considered.
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PRO NET LINK CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
Note - 3 Related Party Agreements.
On February 19, 1999, the Company entered into a consulting agreement with
Zagoren-Zozzora, Inc. ("ZZI"), under which ZZI provides on-going marketing
and business functions to Pro Net Link, including the development of
marketing plans, general business consultation, supervision of marketing
tools and the investigation and recommendation of strategic alliances and
other business opportunities. Glenn Zagoren, the President of ZZI,
currently serves as Chairman of the Board of Directors of Pro Net Link, and
spends substantially all of his time in such capacity. The current
consulting agreement, which expires in February 2000, provides that ZZI be
paid $10,000 per month by Pro Net Link for its services. For the quarter
ended September 30,1999, Pro Net Link paid ZZI $30,000. In addition, the
Company recognized $340,000 of non cash compensation expense related to
options granted to Mr. Zagoren during the year ended June 30, 1999. An
additional $660,000 will be amortized through the remaining period of the
consulting agreement.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended September 30, 1999 and September 30, 1998
Revenue
The Company's revenue increased from $11,759 for the three month period ended
September 30, 1998 to $241,802 for the three month period ended September 30,
1999. 99.3% of the revenue in 1999 occurred as a result of Pro Net Link's
bartering transactions with approximately ten companies in exchange for website
development and marketing expenses. Such revenue increase offsets a decrease in
cash revenues from membership fees from $11,759 to $1,082 in such periods. This
reduction was the result of the Company's gradual modification of its fee
structure which currently emphasizes streams of income other than membership
fees.
As of September 30, 1999, Pro Net Link had over 2,300 registered members from
approximately 95 countries (of which 22 were subscription paying members and 40
were members who had previously paid subscription fees (and for whom the
Company waived further payment)). As of September 30, 1998, Pro Net Link had
approximately 450 members (of which 40 were subscription paying members).
For much of the period beginning from the Company's inception in July 1997 to
the fiscal quarter ending June 30, 1999, the Company has been designing,
developing and marketing its website. The Company believes that the increases
in its revenue are generally the result of its transition to its revenue
generation stage, which has provided the Company with opportunities to generate
revenues in cash and in bartering transactions.
Expenses
Total expenses, excluding non-cash compensation expense of $340,000, increased
from $337,374 for the three month period ended September 30, 1998 to $900,047
for the three month period ended September 30, 1999. Additionally, the expenses
during this period include a non-cash compensation expense of $340,000, which
is the fair market value of options issued with respect to consulting services
being provided by a company whose president is also the Chairman of the
Company. The Company also incurred $240,000 of marketing and website
development expenses through barter transactions.
Bartering transactions resulted in $240,000 of expenses related to marketing
and website development. Website development expenses increased by
approximately $118,000. General and administrative expenses increased by
approximately $145,000 due to an increase of $120,000 in payroll for new
employees and an increase in insurance costs of $20,000.
YEAR 2000
Many current installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot reliably
distinguish dates beginning on January 1, 2000 from
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dates prior to the year 2000. Many companies' software systems may need to be
upgraded or replaced in order to correctly process dates beginning in 2000 and
to comply with the "Year 2000" requirements. Pro Net Link has reviewed its
internal programs and has determined that all products and
information/non-information technologies systems are Year 2000 compliant, due in
large part to the limited operating history of Pro Net Link and the emphasis on
compliance during the planning and development stages of Pro Net Link. To date,
Pro Net Link has not incurred costs which can be attributed to Year 2000
compliance and believes that any future actions taken in connection with Year
2000 compliance will not have a material effect on its operating results or
financial condition.
Pro Net Link works with third parties, including vendors and companies with
which it enjoys cooperative service relationships, that use equipment and
software that may not be Year 2000 compliant. We have sought and received
written assurances of Year 2000 compliance from the suppliers of our access to
the Internet. We believe that our website will not be adversely affected by
other third parties that are not Year 2000 compliant because our site and its
content is hosted entirely by our own servers.
LIQUIDITY AND CAPITAL RESOURCES
Pro Net Link has used cash in its operating and investing activities in varying
amounts since the inception of its business in July 1997. For the quarter ended
September 30, 1999, net cash used in operating activities was $693,222 and net
cash used in investing activities was $83,172. Net cash provided by financing
activities during this period was $550,000, which consisted of $500,000 of
borrowings under a revolving credit facility ($200,000 of which was repaid in
October of 1999), and of $50,000 from the proceeds of the issuance of equity of
the Company. At September 30, 1999, the Company had $58,865 of cash.
During October of 1999, the Company repaid $200,000 of the $500,000 of
indebtedness it had incurred under its revolving credit facility. As a result,
the Company currently has such amount available to it under such facility at
terms which include an interest rate of 1% over the lender's base rate. In
September and October 1999 the Company received $500,000 in partial payment of
certain capital stock subscriptions (which were priced at $2.00 per share).
Additionally, the Company expects the $700,000 balance of these capital stock
subscriptions to be received in November and December of 1999. However, there
can be no assurances that such amounts will be paid.
Historically, most of the Company's liquidity has been provided by private
placements of equity securities which reached approximately $ 3,224,000,
cumulatively, from the date of the Company's inception through October 31, 1999.
The substantial capital investments required to initiate Pro Net Link's services
and the funding of the Company's initial operations has resulted in negative
cash flow in all periods since its inception. The Company expects that it will
continue to have substantial capital requirements in connection with the
continued development, implementation and marketing of its products and
services. Based on our current estimates of cash requirements for
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the next 12 months and beyond, which includes cash to fund our expansion
activities associated with the development of the Company's markets, Pro Net
Link expects to continue to have negative cash flow throughout 1999 and in 2000.
Although we plan to invest in expansion of certain of our business units, we
have no material commitments for such items at this time. There can be no
assurance that Pro Net Link will attain break-even cash flow in this fiscal
year, or in future fiscal periods.
However, we believe the trend for cash flows for the Company is positive. Due to
our transition from our development stage to the implementation of our selling
phase with the launch of the current version of our website in April of 1999, we
have begun to generate more significant revenues. The Company's recent
activities have included the launch of its Internet trade news facility, known
as PNL-TV, whose programming includes paid advertising, and the hiring of
additional sales professionals. The Company believes that its revenues will
increase as it continues to implement its business plan. The Company believes
that these revenues will meet some of its capital requirements.
Until sufficient cash flow is generated, Pro Net Link will be required to
utilize its revenues and current and future capital resources to meet all of its
cash flow requirements in the next 12 months and beyond. Pro Net Link's most
significant source of capital resources is currently its revolving credit
facility, which is secured by a standby letter of credit, and which provides a
$500,000 line of credit at terms which include an interest rate of 1% over the
lender's base rate. To the extent the revolving credit facility is insufficient
to meet its capital requirements at any time during the next twelve months and
beyond, the Company will be required to issue additional debt and/or equity
securities or secure additional credit facilities.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Since indebtedness under our revolving credit facility bears floating interest
rates, we run the risk that our cost of capital under the facility will
fluctuate based on changes in interest rates. Under our current risk management
policies, we do not use interest rate derivative instruments to manage our
exposure to interest rate changes.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
The information set forth above in "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" includes forward-looking
statements that involve numerous risks and uncertainties including, but not
limited to, the demand for the Company's services and the ability of the Company
to successfully implement its strategies, each of which may be impacted, among
other things, by economic and competitive or technological conditions.
Forward-looking statements can be identified by the use of forward-looking
terminology such as "estimates," "projects," "anticipates," "expects,"
"intends," "believes," or the negative thereof or other variations thereon or
comparable terminology or by discussions of strategy that involve risks and
uncertainties. The
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Company's actual results could differ materially from those anticipated in such
forward-looking statements and readers are cautioned not to place undue reliance
on any forward-looking statements contained in this report. The Company
undertakes no obligation to publish the results of any adjustments to these
forward-looking statements that may be made to reflect events on or after the
date of this report or to reflect the occurrence of unexpected events.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit Index
Number Exhibit
3.1 Amended and Restated Articles of Incorporation of Pro Net
Link. Exhibit 3.1 to the Company's Registration Statement
on Form 10, filed with the Commission on June 21, 1999
(No. 000-26451) is incorporated herein by reference.
3.2 By-laws of Pro Net Link. Exhibit 3.2 to the Company's
Registration Statement on Form 10, filed with the
Commission on June 21, 1999 (No. 000-26451) is
incorporated herein by reference.
27.1 Financial Data Schedule (For SEC Use Only). Filed previously.
b. Reports on Form 8-K
No reports on Form 8-K were filed during the first
quarter of the registrant's fiscal year ending June 30,
2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Form 10Q/A2 to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: January 27, 2000
PRO NET LINK CORP.
(Registrant)
By: /s/ Jean Pierre Collardeau
Jean Pierre Collardeau
Chief Executive Officer
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