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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 2000
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 X No
Registrant had 52,044,737 shares of common stock outstanding as of November 10,
2000.
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This report consists of 9 pages
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PRO NET LINK CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
No.
---
ITEM 1. Financial Statements
<S> <C>
Condensed Statements of Operations - Three
Months Ended September 30, 2000, and Three Months
Ended September 30, 1999 and from July 25, 1997
(inception) through September 30, 2000 .................................... 1
Condensed Balance Sheets - as of September
30, 2000 and June 30, 2000................................................ 2
Condensed Statements of Cash Flows - Three
Months Ended September 30, 2000 and 1999 ................................. 3
Notes to Condensed Financial Statements ................................... 4
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................................................... 5
ITEM 3. Quantitative and Qualitative Disclosure
About Market Risk ......................................................... 6
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K........................................... 8
SIGNATURES.......................................................................... 9
</TABLE>
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ITEM 1. FINANCIAL STATEMENTS
PRO NET LINK CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Cumulative July 25,
September 30, 1997 (inception)
Through September 30,
2000 1999 2000
------------ ------------ ----------
<S> <C> <C> <C>
REVENUE $ 2,130 $ 1,802 $ 97,979
------------ ------------ -----------
EXPENSES
Website Development 55,227 139,308 1,246,119
Commissions 48,750 66,500 405,356
Selling, General &
Administrative 792,192 445,040 5,116,308
Non-Cash Compensation
Expense -- -- 1,942,836
Depreciation Expense 18,486 5,688 91,138
Interest Expense (Net) 24,338 3,511 58,533
------------ ------------ -----------
Total Expenses 938,971 660,047 8,860,268
------------ ------------ -----------
Net Loss $ (936,861) $ (658,245) $ 8,762,309
============ ============ ===========
Basic Loss Per Share of
Common Stock $ (0.02) $ (0.01) $ (0.17)
============ ============ ===========
Weighted Average Common
Shares Outstanding 51,378,070 50,224,820 51,378,070
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PRO NET LINK CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 220,058 $ 47,388
Accounts Receivable 11,647 24,390
Prepaid Expenses 44,083 29,833
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TOTAL CURRENT ASSETS 275,789 101,611
FIXED ASSETS (NET) 289,950 308,436
OTHER ASSETS 48,667 48,667
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TOTAL ASSETS 614,406 458,714
=========== ===========
LIABILITIES AND SHAREHOLDERS EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Loan Payable - bank $ -- $ 400,000
Accounts Payable and Accrued
Expenses 175,610 180,543
Deferred Income 28,529 31,045
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TOTAL CURRENT LIABILITIES 204,139 611,588
LONG TERM LIABILITIES:
Notes Payable to Shareholder 1,500,000 --
----------- -----------
TOTAL LIABILITIES 1,704,139 611,588
----------- -----------
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value, 1,500,000
shares authorized; 51,378,070
shares issued at September 30, 2000
and 51,378,070 shares issued at
June 30, 2000 51,378 51,378
Additional Paid-in Capital 7,621,196 7,621,196
Deficit Accumulated During Development
Stage (8,762,309) (7,825,448)
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TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (1,089,735) (152,874)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ 614,406 $ 458,714
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PRO NET LINK CORP.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (936,861) $ (658,245)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 18,486 5,688
Amortization of deferred rental income (2,516) (2,545)
Changes in assets and liabilities:
Decrease (increase) in prepaid and other
current assets (14,250) 74,912
Decrease (increase) in accounts receivable 12,743 --
Decrease (increase) in other assets -- (500)
(Decrease) increase in accounts payable
and accrued expenses (4,932) (112,532)
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NET CASH USED IN OPERATING ACTIVITIES (927,330) (693,222)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets -- (83,172)
CASH USED IN INVESTING ACTIVITIES -- (83,172)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock -- 50,000
Proceeds from notes payable to shareholder 1,500,000 --
Proceeds from (repayment of) note payable - bank (400,000) 500,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,100,000 550,000
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 172,670 (226,394)
CASH AT BEGINNING OF PERIOD 47,388 285,259
CASH AT END OF PERIOD $ 220,058 $ 58,865
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 16,672 $ 1,083
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PRO NET LINK CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note - 1 Interim Financial Statements.
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 the periods presented. The results of operations
for any interim periods are not necessarily indicative of the
results that might be anticipated for the full year. The
accompanying financial statements should be read in
conjunction with the financial statements and notes thereto
from the Company's annual report on Form 10-K for the year
ended June 30,2000.
Note - 2 Management Agreement.
On August 8, 2000, Pro Net Link entered into an agreement
with an entity to provide executive management and marketing
services to the Company. This relationship was terminated on
September 28, 2000. Compensation and legal expenses related
to the agreement were approximately $250,000 for the three
months ended September 30, 2000
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Pro Net Link is a development stage corporation formed in July 1997 with a
limited operating history. Pro Net Link is a business-to-business ("B2B") firm
that is focused on facilitating the conduct of international trade through
various tools and services accessible through its Internet Website. It
additionally delivers international trade-related news, programming and services
through its Website. Sources of revenue to date include registered "premium"
user fees, banner advertising and, most recently, our Leaders in Global Trade
program.
We have not generated profits since our mid-1997 start-up. Substantial expenses
have been incurred since inception associated with our corporate formation, the
conduct of market research, the building of an operating infrastructure, product
development, solicitation of users, and the design, development and promotion of
our Website and related services. Pro Net Link's revenues have been limited.
Since inception, Pro Net Link has incurred significant losses, resulting in an
accumulated deficit of $8,762,309 as at September 30, 2000.
An evaluation of our prospects must be considered in light of the risks
associated with companies in the early stages of development, particularly for
ones in the rapidly evolving B2B Internet marketplace. Certain risks for Pro Net
Link include, but are not limited to, having an unproven business model, capital
requirements and, if the Company successfully expands its operations, management
of growth. To address these risks, we must, among other things, continue to
develop and successfully execute our business and marketing plans, continue to
expand and otherwise improve our Website and enhance our operating
infrastructure. There can be no assurance that we will be successful in
addressing these risks, and the failure to do so could prevent Pro Net Link from
generating profitable operations.
We believe that our success will depend, in large part, on our ability to create
market awareness and acceptance for our products, to increase sustainable
sources of revenue, to raise additional operating capital, to enhance and expand
our operations, to build technology and non-technology infrastructures and to
continue product research and development. Related to these considerations, in
fiscal year 2001, we are focused on supplementing our revenue base and realizing
a return on the product development expenditures incurred to date by creating or
penetrating markets for our various content remarketing, Leaders in Global
Trade, Virtual Trade Show and other products that we believe are sufficiently
developed to market. Website enhancement and the development of additional
products and technology innovations also characterize our fiscal 2001 efforts.
RESULTS OF OPERATIONS
Three months ended September 30, 2000 and September 30, 1999
Revenues. As noted, during the three month periods ended September 30, 2000 and
September 30, 1999, Pro Net Link was a development stage enterprise.
Accordingly, it engaged in limited revenue generating operations. Revenue
increased from $1,802 for the three months ended September 30, 1999 to $2,130
for the three months ended September 30, 2000.
Expenses. Total expenses increased from $660,047 for the three months ended
September 30, 1999 to $938,971 for the three months ended September 30, 2000,
resulting in a net loss of $936,861 for the current period, compared to a loss
of $658,245 for the previous period. The increase in expenses was primarily
attributable to an increase in compensation, legal and related costs associated
with the hiring of further staff in the areas of executive management,
technology development and maintenance and sales and marketing.
On August 8, 2000, Pro Net Link entered into an agreement with GlobalNet
Venture Partners, Inc., to provide executive management and marketing services
to the Company. This relationship was terminated on September 28, 2000.
Compensation and legal expenses related to the GlobalNet Venture Partners, Inc.,
relationship were approximately $250,000 for the quarterly period ended
September 30, 2000, and thus account for the principal increase in expense
between the two periods.
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Additional cost increases primarily relate to higher legal and accounting fees
attributable to filings with the Securities and Exchange Commission associated
with our becoming a "reporting company" pursuant to the Securities Exchange Act
of 1934. Expenses attributable to Website development declined, as in-house
staff performed many of the development and maintenance functions previously
outsourced.
INFLATION
Inflationary factors did not directly bear on our operations during the fiscal
periods since our inception.
LIQUIDITY AND CAPITAL RESOURCES
Pro Net Link has generated negative cash flows from operations in all periods
since its inception in July 1997. At September 30, 2000, our net cash position
of $220,058 represented an increase of $172,670, compared to June 30, 2000.
During the three months ended September 30, 2000, net negative cash from
operations of $927,330 primarily reflected our $936,861 net loss in the period.
Net cash provided by financing during this period was $1,100,000 comprised of a
repayment of bank debt of $400,000 and of new loans from a shareholder of
$1,500,000 as follows:
On August 8, 2000, Pro Net Link's President, Jean Pierre
Collardeau, loaned Pro Net Link an aggregate of $1,000,000
in consideration of the issuance of a convertible note
bearing interest at 12% per annum and due August 8, 2001.
The note is convertible into shares of the Company's common
stock at $1.89 per share, subject to adjustments as defined
in the convertible note. On October 10, 2000, the note
maturity date was extended by one year to August 8, 2002.
In September, 2000, Pro Net Link's President, Jean Pierre
Collardeau, loaned Pro Net Link $500,000. In consideration
of the aforesaid loan, Pro Net Link issued a 12% Note to
Jean Pierre Collardeau, dated October 10, 2000. Under this
note, the loan is repayable on October 12, 2001 and bears
interest at the Note of 12% per annum.
Subsequent to September 30, 2000, Pro Net Link entered into arrangements to
obtain further debt and equity capital as follows:
On October 10, 2000, Pro Net Link sold 666,667 of its shares
of common stock in a private placement for $500,000.
On October 10, 2000, the Company and its President entered
into a Note Purchase Agreement (the "Agreement"). Pursuant
to the Agreement, subject to certain conditions, the
President is obligated to lend the Company up to an
aggregate principal amount of $2,000,000. The commitment
terminates at the earlier of October 10, 2001 or the date by
which the cumulative principal amount of borrowings under
the Agreement reaches $2 million. On the date that the
commitment terminates, amounts then outstanding will be
combined into one note that will be due in two years.
Borrowings will bear interest at 12% per annum.
It is projected that the arrangements described above will provide sufficient
capital resources to meet our operating needs through September 30, 2001.
We currently estimate that our base cash requirements for the next 12 months,
which will include operating and marketing expenses, in addition to further
technology and product development, will approximate $2,500,000. Although we
have no material commitments during the next 12 months or beyond, 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. There can be no assurances that Pro Net Link will
attain break-even cash flow in any future periods.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK
INTEREST RATE RISK AND USE OF DERIVATIVES
During fiscal year 2000, Pro Net Link had available to it a $500,000 secured
bank line of credit. Indebtedness under the revolving credit facility was priced
on a floating interest rate basis and, accordingly, we were subject to a risk of
rising interest rates. Outstanding liabilities under the facility were repaid on
August 2, 2000 and we allowed the facility to lapse on August 6, 2000. On
October 10, 2000, Pro Net Link entered into a Note Purchase Agreement with its
President, Jean Pierre Collardeau, pursuant to which he is obligated to lend the
Company up to an aggregate amount of $2,000,000. To date, Mr. Collardeau has not
funded any loans to the Company under this agreement. Under our current risk
management policies we do not contemplate using interest rate derivative
instruments to manage exposure to rate changes. Since indebtedness under our
note purchase facility with Mr. Collardeau does not bear floating interest
rates, we do not run the risk that our cost of capital under the facility will
fluctuate based upon changes in interest rates.
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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 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) Exhibits. The following exhibits are filed as part of this Form 10-Q.
Exhibit
Number Description
----------- ---------------
3.1 Amended and Restated Articles of Incorporation (1)
3.2 Amended and Restated Bylaws (1)
10.1 2000 Stock Option Plan (3)
10.2 Amendment to the Pro Net Link Corp. 2000 Stock Option Plan,
dated August 8, 2000(4)
10.3 Consulting Agreement by and between Pro Net Link and
Zagoren-Zozzora, Inc., dated as of February 19, 1999 (2)
10.4 Shareholder and Voting Agreement, by and among Pro Net Link,
Jean Pierre Collardeau, Glenn Zagoren and certain other
parties, dated as of August 8, 2000. (4)
10.5 Registration Rights Agreement, by and among Pro Net Link,
Jean Pierre Collardeau, Glenn Zagoren and certain other
parties, dated as of August 8, 2000. (4)
10.6 Information Provider Agreement by and between Pro Net Link
and Dun and Bradstreet, Inc., dated as of May 1, 2000.(5)
10.7 Note Purchase Agreement, by and between Pro Net Link and
Jean Pierre Collardeau, dated October 10, 2000.(5)
10.8 12% Convertible Note issued by Pro Net Link to Jean Pierre
Collardeau, dated August 8, 2000(4)
27.1 Financial Data Schedule (for Commission use only)*
--------------------------------------------------------------------------------
* Filed herewith.
(1) Filed as an exhibit to the Registrant's Registration Statement on Form 10
filed with the Commission on June 21, 1999.
(2) Filed as an exhibit to the Registrant's Registration Statement on Form 10/A
filed with the Commission on December 14, 1999.
(3) Filed as an exhibit to the Registrant's Quarterly Report for the period
ended March 31, 2000 on Form 10-Q filed with the Commission on May 15, 2000.
(4) Filed as an exhibit to the Registrant's Report of Form 8-K filed with the
Commission on August 8, 2000.
(5) Filed as an exhibit to the Registrant's Registration Statement on Form 10-K
filed with Commission on October 13, 2000.
(b) Reports on Form 8-K.
Report on Form 8-K, dated August 8, 2000, announcing certain agreements between
Pro Net Link, GlobalNet Venture Partners, Inc. and other parties.
Report on Form 8-K, dated September 28, 2000, announcing certain agreements
between Pro Net Link, GlobalNet Venture Partners, Inc. and other parties.
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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 thereunto duly authorized.
Dated: November 14, 2000
PRO NET LINK CORP.
(Registrant)
By: /s/ Jean Pierre Collardeau
Jean Pierre Collardeau
President and Chief Executive Officer
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