U.S. Securities and Exchange Commission
Washington, D.C. 20549
----------------------
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarter ended September 30, 2000.
------------------
|_| 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 0-23905
thatlook.com, Inc.
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(Exact Name of Small Business Issuer in its Charter)
Nevada 87-0447497
------ ------------
(State or other juris- IRS Employer
diction of incorporation) I.D. No.)
5003 Rt. 611 Stroudsburg, PA 18360
(Address of Principal Executive Offices)
570-420-0318
Registrant's Telephone Number
Indicate by check mark whether the Registrant (1) has filed all reports
required to be file 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.
(1) Yes X No (2) Yes X NO
--- --- --- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Not Applicable
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the Registrant's classes of
common equity, as of the latest practicable date:
November 1, 2000
29,524,471
thatlook.com, Inc.
INDEX TO FORM 10-QSB
ITEM
NO.
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I FINANCIAL INFORMATION
1. Financial Statements:
Consolidated Balance Sheets at September 30, 2000 (unaudited) and
December 31, 1999
Consolidated Statements of Operations for three and nine month periods
ending September 30, 2000 and September 30, 1999 (unaudited)
Consolidated Statements of Cash Flows nine month periods ending
September 30, 2000 and September 30, 1999 (unaudited)
Notes to Financial Statements
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
II OTHER INFORMATION
1. Legal Proceedings
2. Changes in securities and use of proceeds
3. Defaults upon senior securities
4. Submission of Matters to a Vote of Security Holders
5. Other Information
6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
thatlook.com, Inc. and Subsidiaries
-----------------------------------
Consolidated Balance Sheets
---------------------------
Page 1 of 2
September 30, December 31,
2000 1999
(Unaudited)
---------- ---------
-ASSETS-
CURRENT ASSETS
Cash $ 192,858 $ 63,471
Accounts receivable - finance company 113,694 73,827
Accounts receivable, net of allowance of $80,000
and $25,465 respectively. 418,141 75,672
Notes receivable, net of allowance of $48,889
and $72,336 respectively. 306,216 393,376
Interest receivable 6,020 22,903
Loan receivable, shareholder 14,000 14,000
Subscription receivable - 300,000
Prepaid advertising 3,995,819 133,162
Prepaid expenses and other assets 347,455 204,449
--------- ---------
Total Current Assets 5,394,203 1,280,860
Fixed assets - net 529,161 370,506
Notes receivable, net of allowance of $41,647
and $128,596 respectively. 271,386 700,746
Prepaid advertising 1,526,126 -
---------- ----------
Total Assets $7,720,876 $2,352,112
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
thatlook.com, Inc. and Subsidiaries
-----------------------------------
Consolidated Balance Sheets
---------------------------
Page 2 of 2
September 30, December 31,
2000 1999
(Unaudited)
---------- ---------
- LIABILITIES AND STOCKHOLDERS' EQUITY -
CURRENT LIABILITIES
Lines-of-credit payable $ 581,080 $ 885,367
Current Portion of:
Notes payable 265,777 203,000
Capital lease obligations 28,275 38,364
Notes payable - shareholders 330,000 -
Accounts payable 681,651 688,143
Accrued expenses 346,323 285,473
Payroll and payroll taxes payable 58,195 45,600
Other liabilities 90,174 263,495
---------- ----------
Total Current Liabilities 2,381,475 2,409,442
Convertible subordinated debentures 1,855,138 1,873,297
Notes payable 81,542 -
Capital lease obligations 20,296 22,700
Notes payable - shareholders 275,000 -
---------- ----------
Total liabilities 4,613,451 4,305,439
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.001 par value,
30,000,000 shares authorized,
no shares issued or outstanding - -
Common stock, $.001 par value, 50,000,000
shares authorized, and 29,224,471
and 15,880,874 shares issued
and outstanding at September 30, 2000
and December 31, 1999, respectively 29,224 15,881
Additional paid-in-capital 11,327,757 4,258,276
Accumulated deficit (8,249,556) (6,227,484)
---------- ----------
Total Stockholders' equity (deficit) 3,107,425 (1,953,327)
---------- ----------
Total Stockholders' equity and liabilities $7,720,876 $2,352,112
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
thatlook.com, Inc. and Subsidiaries
-----------------------------------
Consolidated Statements of Operations
-------------------------------------
For The Three Months Ended September 30, 2000 and 1999
------------------------------------------------------
2000 1999
(Unaudited) (Unaudited)
----------- -----------
REVENUE:
Marketing fees $ 666,370 $ 678,345
Gain on sale of notes receivable 177,682 272,262
Other 19,238 106,288
----------- -----------
TOTAL REVENUE 863,290 1,056,895
----------- -----------
SALES AND MARKETING EXPENSES:
Media, advertising and promotion 536,038 422,611
Payroll and payroll taxes 217,037 271,674
Telephone 26,433 47,861
Credit reporting services 26,692 15,533
Other 43,410 25,888
----------- -----------
TOTAL SALES AND MARKETING EXPENSES 849,610 783,567
----------- -----------
GENERAL AND ADMINISTRATIVE EXPENSES:
Rent and utilities 25,620 38,677
Payroll and payroll taxes 152,184 266,098
Professional and consulting 157,652 133,118
Other 212,234 178,074
----------- -----------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 547,690 615,967
----------- -----------
OTHER EXPENSES (INCOME):
Interest expense 75,671 368,662
Interest income (29,840) (266,721)
Writeoff of deferred investment banking fees 802,773 -
Bad debts 126,002 133,364
Bad debts recovery - (200,000)
----------- -----------
TOTAL OTHER EXPENSES 974,606 35,305
----------- -----------
TOTAL EXPENSES 2,371,906 1,434,839
----------- -----------
NET LOSS $(1,508,616) $ (377,944)
============ ===========
BASIC LOSS PER SHARE $ (0.05) $ (0.03)
============ ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 29,091,406 12,057,483
============ ==========
The accompanying notes are an integral part of these consolidated financial
statements.
thatlook.com, Inc. and Subsidiaries
-----------------------------------
Consolidated Statements of Operations
-------------------------------------
For The Nine Months Ended September 30, 2000 and 1999
-----------------------------------------------------
2000 1999
(Unaudited) (Unaudited)
----------- -----------
REVENUE:
Marketing fees $ 2,169,850 $ 2,480,863
Gain on sale of notes receivable 621,637 954,580
Other 79,105 215,388
----------- -----------
TOTAL REVENUE 2,870,592 3,650,831
----------- -----------
SALES AND MARKETING EXPENSES:
Media, advertising and promotion 1,258,808 1,120,527
Payroll and payroll taxes 572,919 858,273
Telephone 113,256 161,062
Credit reporting services 100,178 107,119
Other 58,604 54,735
----------- -----------
TOTAL SALES AND MARKETING EXPENSES 2,103,765 2,301,716
----------- -----------
GENERAL AND ADMINISTRATIVE EXPENSES:
Rent and utilities 83,064 101,285
Payroll and payroll taxes 534,217 804,410
Professional and consulting 418,172 379,517
Other 494,114 472,801
----------- -----------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 1,529,567 1,758,013
----------- -----------
OTHER EXPENSES (INCOME):
Interest expense 220,699 1,246,320
Interest income (100,066) (948,756)
Writeoff of deferred investment banking fees 802,773 -
Bad debts 335,926 291,685
Bad debt recovery - (200,000)
----------- -----------
TOTAL OTHER EXPENSES 1,259,332 389,249
----------- -----------
TOTAL EXPENSES 4,892,664 4,448,978
----------- -----------
NET LOSS $(2,022,072) $ (798,147)
============ ===========
BASIC LOSS PER SHARE $ (0.10) $ (0.07)
============ ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 20,527,233 11,663,772
============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
thatlook.com, Inc. and Subsidiaries
-----------------------------------
Consolidated Statements of Cash Flows Page 1 of 2
-------------------------------------
For The Nine Months Ended September 30, 2000 and 1999
-----------------------------------------------------
2000 1999
(Unaudited) (Unaudited)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,022,072) $ (798,147)
Adjustments to reconcile net loss to net
cash(used in) operating activities:
Depreciation 121,583 74,404
Bad debts 335,926 291,685
Writeoff of deferred investment banking fees 788,073 -
Issuance of common stock for payment
of services and accrued interest 23,767 -
Changes in assets and liabilities:
(Increase)in accounts and interest receivable (419,988) (116,251)
Decrease(Increase)in other assets 292,931 (214,096)
(Decrease)Increase in accounts payable (6,492) 215,192
Increase in accrued expenses 60,850 89,443
Increase (Decrease)in payroll and payroll taxes 12,595 (53,742)
Increase in other liabilities 12,711 238,790
---------- -----------
Net cash(used in)operating activities (800,116) (272,722)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes receivable purchased (3,572,398) (6,455,983)
Notes receivable sold 3,532,241 5,945,821
Proceeds from collection of notes receivable 258,018 1,933,972
Acquisition of fixed assets (261,412) (49,210)
---------- -----------
Net cash (used in) provided by investing
activities (43,551) 1,374,600
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments on lines-of-credit (304,287) (1,704,385)
Borrowings from shareholders 455,000 228,947
Borrowings of other debt 226,659 45,000
Repayments of notes payable and capital leases (106,818) (50,170)
Issuance of common stock and receipt of
subscription receivable 702,500 617,000
---------- -----------
Net cash provided by(used in)
financing activities 973,054 (863,608)
---------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 129,387 238,270
Cash and cash equivalents, beginning of period 63,471 202,340
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 192,858 $ 440,610
========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
thatlook.com, Inc. and Subsidiaries
-----------------------------------
Consolidated Statements of Cash Flows Page 2 of 2
-------------------------------------
For The Nine Months Ended September 30, 2000 and 1999
-----------------------------------------------------
2000 1999
(Unaudited) (Unaudited)
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest $ 158,119 $ 993,235
========== ==========
Taxes $ - $ -
========== ==========
Acquisition of equipment under capital lease $ 18,826 $ -
========== ==========
SUPPLEMENTAL SCHEDULE OF NON CASH ACTIVITY:
Common Stock and Warrants issued for
prepaid investment banking services $ 788,073 $ -
========== ==========
Common Stock issued for prepaid
advertising and consulting services $ 5,501,100 $ -
========== ==========
Common Stock issued for other assets $ 159,500 $ -
========== ==========
Prepaid Advertising in exchange for
Note payable $ 150,000 $ -
========== ==========
Conversion of Note Payable to Common Stock $ 25,000 $ -
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
thatlook.com, Inc. and Subsidiaries
-----------------------------------
Notes to Consolidated Financial Statements
------------------------------------------
NOTE 1 - In the opinion of management, the accompanying unaudited and
consolidated financial statements of thatlook.com, Inc. and its wholly owned
subsidiaries, contain all adjustments necessary to present fairly the
Company's financial position as of September 30, 2000 and the results of its
operations and cash flows for all periods presented.
The accounting policies followed by the Company are set forth in Note 3 to the
Company's consolidated financial statements included in its Annual Report on
Form 10-KSB for the year ended December 31, 1999, which is incorporated herein
by reference. Specific reference is made to this report for a description of
the Company's notes to consolidated financial statements included therein.
The results of operations for the periods ended September 30, 2000 are not
necessarily indicative of the results to be expected for the full year.
Certain prior year amounts have been restated to conform with the presentation
for the periods ended September 30, 2000.
NOTE 2 - DESCRIPTION OF BUSINESS:
thatlook.com, Inc., through one of its subsidiaries, is in the business of
direct response marketing service, serving a network of physicians that
specialize in performing elective, cosmetic procedures. thatlook.com uses a
combined, multi-media approach, including the Internet, television, radio,
print and direct mail. The Company's marketing efforts generate patients who
seek elective cosmetic surgery. After it pre-screens patients interested in
cosmetic surgery for creditworthiness, the Company refers the patients
generated from its marketing programs to participating physicians who pay a
monthly marketing fee. thatlook.com, Inc., through another one of its
subsidiaries, Elective Investments, Inc., purchases patient notes receivable
from physicians, primarily for immediate resale.
NOTE 3 - MEDIA BROKER AND MEDIA CONSULTANT:
In June 2000, the Company agreed to issue to a media broker 11,250,000
unregistered, restricted shares of common stock in return for advertising and
media credits, and public relations totaling $30 million. The credits span a
vast array of media from which the Company can choose, including network and
cable television spots, radio time, space in over 200 magazines, Internet Web
sites, billboards and other promotional venues. Based upon the discounted
amount of the Company's past media placements relative to published rate card
amounts (which is the maximum published rate available), the Company
discounted the value of the advertising and media credits to a level the
Company believes depicts fair value. Thus, the transaction was recorded at
$5,001,000. The agreement also includes a provision for an additional $10
million of advertising and media credits, and public relations in exchange for
shares of unregistered, restricted common stock, at a value per share to be
mutually agreed at the time of the exchange.
thatlook.com, Inc. and Subsidiaries
-----------------------------------
Notes to Consolidated Financial Statements
------------------------------------------
NOTE 3 - MEDIA BROKER AND MEDIA CONSULTANT (Continued):
In July 2000, the Company agreed to issue 750,000 shares of registered common
stock on Form S-8 filed with the Securities and Exchange Commission to a
marketing consultant in exchange for consulting and media buyer services.
Based upon prior experience with marketing consultants, the Company valued the
consulting services at $500,100, using 10% of the $5,001,000 media costs
mentioned above. The marketing consultant is the sole shareholder of the
company that agreed to provide media broker services in exchange for
11,250,000 shares of common stock.
NOTE 4 - INVESTMENT BANKERS, BROKER, AND RELATED AGREEMENTS:
In September 2000, the Company and an investment banker agreed to cancel their
February 2000 agreement. As of the date of the cancellation, the investment
banker had not raised any equity financing, and the Company sought to hire a
new investment banker. As compensation for canceling the February agreement,
the investment banker is entitled to keep the 750,000 warrants to purchase the
Company's common stock, which were issued to the investment banker as an
inducement to enter into the February 2000 agreement. As further compensation,
the Company agreed to pay the investment banker 1% of the net proceeds
received by the Company from the sale of its capital stock to non-directors,
non-employees, and/or non-officers of the Company from the date of the
cancellation through December 31, 2000, which at September 30,2000 aggregated
zero dollars. The Company and the investment banker also agreed to change the
warrant agreement. The Company agreed to include the 750,000 warrants in the
next registration it files with the Securities and Exchange Commission. The
demand registration rights and anti-dilution provisions were eliminated from
the warrant agreement.
The cancellation of the investment banker's agreement also affected a broker's
agreement. The broker, who introduced the investment banker, received 70,000
warrants upon the execution of the investment banker's February 2000
agreement. The investment banker's and broker's warrants were valued at
$563,311 using the Black-Scholes options pricing model. The value of the
warrants was included originally in other assets as deferred finance costs and
additional paid-in-capital. The investment banker's and broker's additional
rights to 2,250,000 and 210,000 warrants, respectively, were canceled at the
time of the investment banker's cancellation agreement. Originally, the
additional warrants were to be issued on a pro-rata basis for each dollar
raised by the investment banker up to $5 million dollars. Since the investment
banker's agreement was cancelled, these costs were written off.
In conjunction with the investment banker's efforts, the investment banker
believed that agreements with two consulting firms and an advertising firm
were necessary elements to raise additional equity. The three firms received
common stock and warrants valued at $224,762. In addition, the Company
incurred legal and consulting expenses totaling $14,700 to negotiate and
prepare the agreements related to raising capital. The value of these
consulting, advertising and legal services was included originally in other
assets and additional paid-in-capital. Since the investment banker's
agreement was cancelled, these costs were written off.
thatlook.com, Inc. and Subsidiaries
-----------------------------------
Notes to Consolidated Financial Statements
------------------------------------------
NOTE 4 - INVESTMENT BANKERS, BROKER, AND RELATED AGREEMENTS (Continued):
In September and October 2000, the Company has been negotiating agreements
with a new investment banker and an additional investor relations firm. While
negotiations with the new investment banker are not final, management believes
it will execute an agreement in early November 2000. In October 2000, the
Company executed an agreement with a new investor relations firm, as more
fully described in Note 12.
NOTE 5 - LINE-OF-CREDIT:
The Company utilizes a line-of-credit with a bank to fund notes receivable
purchases. The line-of-credit permits maximum borrowings of $1,000,000, due on
demand, with interest payable at the bank's base rate (9.75% at September 30,
2000) plus 4%, totaling an annual rate of 13.75% at September 30, 2000. This
line-of-credit is collateralized by certain notes receivable and is guaranteed
by a principal shareholder. The amount outstanding under this line-of-credit
as of September 30, 2000 was $581,080.
As of September 30, 2000, the Company was not in compliance with certain of
the required covenants. Based upon current delinquency of patients' payments,
the Company needs to supply the bank with approximately $199,000 in patient
notes receivable, net of the Company's purchase discount, to be in compliance
with the line-of-credit covenants. In July 2000, the Company obtained a
waiver when approximately $195,000 of patient notes receivable, net of the
Company's purchase discount, were necessary to be in compliance with the
restrictive covenants. Management believes that improved collections and a
plan to replace defaulted loans will enable the Company to get a waiver as of
December 31, 2000.
NOTE 6 - CAPITAL TRANSACTIONS:
Stock Issuance
--------------
In July 2000, a principal shareholder exercised a right to acquire 800,000
shares of unregistered, restricted common stock, according to a December 1999,
warrant agreement. The warrant agreement included a cashless exercise
provision, which the shareholder utilized. Thus, based upon the market value
of the Company's common stock on the date of exercise, 84,211 shares were used
to pay for the shares in the warrant agreement. The resulting 715,789 shares
were issued to the shareholder.
In July 2000, the Company signed a three-month investor relations services
agreement with a consulting firm, in exchange for $30,000 and 75,000 shares of
restricted, unregistered shares of the Company's common stock. These shares
of common stock were valued at $2.00 per share, or $150,000
In September 2000, a note holder exercised a right to convert a note payable
and accrued interest of $26,323 to 17,549 shares of restricted common stock.
NOTE 6 - CAPITAL TRANSACTIONS (Continued):
Stock Compensation Plan:
-----------------------
In August 1999, the Company adopted the 1999 Stock Incentive Plan to provide
employees, officers, directors and consultants an opportunity to acquire a
proprietary interest in the Company as an incentive to remain in such service.
The Company reserved initially 1,250,000 shares for the incentive plan.
According to the plan's design, the number of shares of common stock available
for issuance under plan automatically increased by 4% of the outstanding
shares of common stock at January 1, 2000, which aggregated 635,234 additional
shares. Thus, 1,885,234 shares of common stock are issuable currently under
the Plan. The annual automatic increase may not exceed 900,000 shares per
year. The following table summarizes the status of options in the Plan to
purchase "unrestricted," "registered" shares of common stock for the nine
months ended September 30, 2000:
Shares
Outstanding at 1/1/00 380,250
Granted 760,900
Exercised (3,069)
Forfeited (35,625)
Outstanding at 9/30/00 1,102,456
The exercise price of each option equals the market price of the Company's
stock on the date of grant, or an amount that exceeds the closing price on the
date of grant. The options were issued with various terms, not to exceed ten
years. Employee and officer options generally vest 25% on the first
anniversary after the grant date, and 2.0833% per month thereafter. Options
for members of the board of directors and consultants vest over varying terms,
in some cases immediately, but generally over one to three years. However, in
the first nine months of 2000, 100,000 options were granted to a director,
which vested immediately. In addition, in October 2000, 150,000 options were
granted to an officer, which vested immediately.
NOTE 7 - INVESTOR RELATIONS:
FWB Frankfurter Wertpapierborse Stock Exchange Listing in Frankfurt, Germany
----------------------------------------------------------------------------
In July 2000, the Company's board of directors authorized the listing of the
Company's common stock on the Neuer Internet Stock Exchange, based in Hamburg,
Germany. In October 2000, the Company announced that the Company's listing on
the Hamburg Exchange had been transferred to the FWB Frankfurter
Wertpapierborse Stock Exchange in Frankfurt, Germany.
NOTE 8 - NEW FINANCING COMMITMENT:
In August 2000, the Company executed an agreement to sell patient notes
receivable to a new institutional lender. The term of the agreement is open
until canceled in writing. The notes receivable are sold without recourse.
NOTE 9 - RELATED PARTY TRANSACTIONS:
In August and September 2000, a principal shareholder invested a total of
$130,000 in the Company in exchange for promissory notes payable on demand.
These notes bear interest at 12% per annum. At September 30, 2000, notes
payable totaling $605,000 were due to principal shareholders, $330,000
short-term and $275,000 long-term.
thatlook.com, Inc. and Subsidiaries
-----------------------------------
Notes to Consolidated Financial Statements
------------------------------------------
NOTE 10 - ACQUISITION LETTER OF INTENT:
In September 2000, the Company signed a letter of intent to acquire Hutchison
International, Inc., a breast implant distributor in Baton Rouge, Louisiana.
The planned closing date is on or before December 23, 2000. The acquisition
is subject primarily to the distributor's and its consultants' ability to
convince the Company's that there is a significant likelihood that the
distributor can get the Food and Drug Administration's (FDA) approval to sell
a specific breast implant in the United States. In addition, the distributor
must demonstrate that its license to sell the implants in the United States
will be in place for five years with at least one five year extension
available. Furthermore, the Company must raise at least $880,000 to fund the
distributor's operations prior to the FDA's approval.
NOTE 11 - COMMITMENTS AND CONTINGENCIES:
On September 5, 2000, a complaint was filed in the United States District
Court Middle District of Pennsylvania (Case #3:CV-00-1577) on behalf of a
prior employee, regarding termination of an employment contract and
discrimination. The complaint seeks unspecified amounts including punitive
damages plus interest, and attorney's fees. In management's opinion, the
Company has adequate legal defenses respecting each of these actions and does
not believe that any such matters, either individually or in the aggregate,
will materially affect the Company's results of operations or its financial
position.
On September 22, 2000, a complaint was filed in the Superior Court of
California, County of San Francisco (Case #311644) on behalf of a patient,
against a surgeon and the Company, regarding complications with the patient's
surgery, the competence and negligence of the surgeon, and alleged
misrepresentations by the surgeon and the Company. In a settlement demand
dated August 9, 2000, the patient sought $750,000. The complaint seeks
unspecified amounts including punitive damages plus interest and attorney's
fees. While the Company plans to vigorously defend its position, if
necessary, the Company believes that it can enforce its management agreement
with the doctor where the doctor and the Company agreed to indemnify, hold
harmless, and agreed to defend each other against claims arising out of
negligence, or fault, or the performance of obligations under the management
agreement.
NOTE 12 - SUBSEQUENT EVENT:
In October 2000, the Company signed an agreement with a consulting firm to
provide investor relations and related Internet services. Upon execution of
the agreement, the Company agreed to issue 300,000 shares of restricted,
common stock to the consultant. The Company also agreed to file a Form SB-2
with the Securities and Exchange Commission within 15 days so that the common
stock would become freely tradable, upon the Commission's approval.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FOR THE QUARTER ENDED SEPTEMBER 30, 2000.
Background
----------
thatlook.com, Inc.(TLC), formerly known as Cooperative Images, Inc. TLC was
incorporated in New Jersey on December 5, 1994. TLC is in the business of
direct response marketing service, serving a network of physicians that
specialize in performing elective, cosmetic procedures. TLC uses a combined,
multi-media approach, including the Internet, television, radio, print and
direct mail. The Company's marketing efforts generate patients who seek
elective cosmetic surgery. After it pre-screens patients interested in
cosmetic surgery for creditworthiness, the Company refers the patients
generated from its marketing programs to participating physicians who pay a
monthly marketing fee.
Elective Investments, Inc., (EII), was incorporated on November 26, 1996. EII
prepares financing packages for creditworthy patients of physicians. A
substantial portion of the resulting receivables between the physicians and
the patients are purchased by EII from the physicians, primarily for immediate
resale. It also pre-screens patients interested in cosmetic surgery for
creditworthiness for physicians who generate their own patients separately
from TLC's marketing programs.
On January 25, 1999, Cooperative Images, Inc. changed its name to
thatlook.com, Inc. by filing an amendment to its certificate of incorporation.
In April 1999, Elective Investments, Inc. (EII), a Pennsylvania corporation,
became a wholly-owned subsidiary of TLC when all its shareholders contributed
their respective shares of capital stock to TLC.
On April 29, 1999, TLC completed a reverse merger with a public entity,
whereby
a 100% interest in TLC was acquired by First Target Acquisition, Inc., in
exchange for 9,999,000 "restricted" shares of TLC. TLC became a wholly-owned
subsidiary of FTA. TLC is deemed to be the accounting acquirer. The
financial statements were retroactively restated for TLC, and EII its
wholly-owned subsidiary, for all periods presented. The reverse merger was
accounted for as a recapitalization. Prior to the reverse merger FTA had been
dormant
and operationally inactive for many years. Following the reverse merger, FTA,
a Nevada corporation and TLC's parent company, changed its name to
thatlook.com, Inc. (the "Company") on July 23, 1999, to reflect the name of
the principal operating business.
The financial information presented herein, includes: (i) Consolidated Balance
Sheets as of September 30, 2000 (Unaudited) and December 31, 1999; (ii)
Consolidated Statements of Operations (Unaudited) for the three month and nine
month periods ended September 30, 2000 and 1999 and (iii) Consolidated
Statements of Cash Flows (Unaudited) for the nine month periods ended
September 30, 2000 and 1999.
RESULTS OF OPERATIONS:
----------------------
Overview
--------
In the third quarter ending September 30, 2000, the Company made progress
scheduling media from the media venture capital deal closed in June 2000.
However, the media schedules placed were 60-90 days later and less frequent
than our original expectations. Development of new ads and the logistics of
getting proper ads placed under the media venture capital arrangement were
substantially more time-consuming than we expected. Anticipating the
utilization of the media venture capital, the Company reduced its commitments
to the regular, cash-media that it had been using. Consequently, magazine,
television, Internet and radio advertising were 23% lower in the third quarter
of 2000, as compared to the third quarter of 1999. Conversely, total media
and promotional expenses increased in the third quarter of 2000. The increase
relates primarily to additional promotional fees to recruit physicians and the
expense of sponsoring a NASCAR race. As a result of these promotional
efforts, the number of physicians enrolled in the Company's marketing program
increased 24% in the third quarter of 2000.
While operating, payroll and interest expenses were lower in the third quarter
of 2000 compared to the prior year, total expenses increased dramatically
because the Company wrote off $802,773 of previously deferred investment
banking fees. This writeoff was for warrants and other securities issued in
the first and second quarter to an investment-banking firm and its affiliates
in anticipation of capital being raised on our behalf. Since no funds were
raised, the agreement was canceled resulting in a write-off of these
previously deferred costs.
In the second quarter of 2000, we cautioned that it would take one to two
quarters, or more, to dramatically increase media spending, utilizing the
media venture capital. We now believe that we have our media placements under
control. In the fourth quarter of 2000, our media placements include both
media venture capital and cash media schedules. We will begin to see
increased patient traffic during the fourth quarter. The results of
operations will likely begin to benefit in the second half of the fourth
quarter.
Plan of Operation - Comparison of Quarters Ended September 30, 2000 and 1999
----------------------------------------------------------------------------
Revenue
-------
Marketing fee revenues were $666,370 and $678,345 for the quarters ended
September 30, 2000 and 1999 respectively, which represented a 2% decrease.
Marketing fee revenues were $2,169,850 and $2,480,863 for the nine-month
periods ended September 30, 2000 and 1999 respectively, which represented a
13% decrease. Placement of media schedules from the media venture capital
agreement closed in June 2000 occurred later than expected, which negatively
impacted marketing revenues in the third quarter of 2000. The year-to-date
decrease compared to the same period in 1999 relates primarily to the
Company's 1999 decision to reduce the number of physicians in its marketing
program and the switch to a three-tiered pricing structure. These changes
enabled the Company to switch to a more flexible marketing program that could
be implemented more effectively for physicians new to the program and
physicians located in smaller
media markets.
As media spending ramps us in the next two quarters, a key challenge for the
Company will be to enroll physicians in its marketing program in select
geographic areas where patient responses will exceed the Company's contractual
performance guarantees. The new, tiered-pricing structure enables the Company
to tailor its marketing efforts to a physician's expectations and the
physician's individual geographical market. In addition to the change to a
tiered pricing program, the Company now typically defers collection of
marketing fee revenues for the first three months on new contracts.
Previously, new physicians had to pay cash-in-advance. This new payment plan
more closely matches proceeds the physicians receive from surgeries with the
payments for generating patients. In short, replacing prepayments with
deferred payments, eliminates the biggest deterrent to enroll in the marketing
program. Management believes that, with new patient imaging software, tiered
pricing, and deferred payments, it can increase the size of its physician
base.
Gains on sale of notes receivable were $177,682 and $272,262 for the quarters
ended September 30, 2000 and 1999 respectively, which represented a decrease
of 35%. Gains on sale of notes receivable were $621,637 and $954,580 for the
nine-month periods ended September 30, 2000 and 1999 respectively, which also
represented a decrease of 35%. Less media spending in the third quarter of
2000 compared to the same period in 1999 negatively impacted loan volume. The
yield on loan sales, as a percentage of face value, was 11.1% in the third
quarter of 2000, as compared to 13.5% for the third quarter of 1999. The
yield on loan sales, as a percentage of face value, was 12.3% for the
nine-month period ended September 30, 2000, as compared to 11.4% for the
nine-month period ended September 30, 1999. The yield in the third quarter of
2000 was lower because the Company switched in January 2000 from a two-tiered
loan purchase price structure to a single-level price structure for the
physicians. In August 2000, the Company signed a loan purchase agreement with
an additional finance Company. Management believes that multiple finance
companies enable the Company to optimize the yield on loan sales. The Company
currently sells loans to three separate finance companies. Management
believes that the yield on loan sales will average approximately 11% to 12% in
2000.
As the Company increases its physician base and media spending, loan volume
will increase. Additional loan volume creates the potential need for
additional finance companies, depending on the appetite of the Company's three
current finance companies.
Other revenue was $19,238 and $106,288 for the quarters ended September 30,
2000 and 1999 respectively. Other revenue was $79,105 and $215,388 for the
nine-month periods ended September 30, 2000 and 1999 respectively. In the
third quarter of 1999, the Company recorded a one-time adjustment of $93,654
for recourse fees earned immediately rather than over twelve months.
Expenses
--------
Media, advertising and promotional fees were $536,038 and $422,611 for the
quarters ended September 30, 2000 and 1999 respectively. Media, advertising
and promotional fees were $1,258,808 and $1,120,527 for the nine-month periods
ended September 30, 2000 and 1999 respectively. The 27% increase in the third
quarter 2000 compared to the third quarter of 1999 relates primarily to
additional promotional fees to recruit physicians and the expense of
sponsoring a NASCAR race. Before promotional fees and the expense of the
NASCAR race sponsorship, media expenses as a percentage of marketing fee
revenue were approximately 47% and 61% for quarters ended September 30, 2000
and 1999, respectively. The decrease is in part a result of the Company's use
of magazine advertising beginning in the fourth quarter of 1999. In some
cases, the print media cost to generate patient traffic for physicians is 50%
lower than past television advertising, on a per patient basis.
As anticipated media spending increases dramatically in the fourth quarter of
2000, the Company needs to enroll a requisite number of physicians in the
marketing program in select geographic areas where patient responses exceed
the Company's contractual performance guarantees. The number of physician's
enrolled in the Company's marketing program increased 24% in the third quarter
of 2000 as a result of promotional spending and recruitment efforts.
Payroll expenses for sales and marketing personnel was $217,037 and $271,674
for the quarters ended September 30, 2000 and 1999,respectively, which
represents a decrease of $54,637, or 20%. Payroll expenses for sales and
marketing personnel was $572,919 and $858,273 for the nine-month periods ended
September 30, 2000 and 1999,respectively, which represents a decrease of
$285,354, or 33%. Staff reductions in the second half of 1999 led to these
decreases in 2000. The Company made the reductions because it was over
staffed based upon its volume of business and gains in operational
efficiencies. The Company installed a predictive dialer to improve the
efficiency of its in-bound and out-bound call management systems and related
payroll expenses. The Company continues to save up to 40% of payroll costs
for telephone service representatives.
Telephone expenses for sales and marketing decreased to $26,433 from $47,861
for the quarters ended September 30, 2000 and 1999, respectively. Telephone
expenses for sales and marketing decreased to $113,256 from $161,062 for the
nine-month periods ended September 30, 2000 and 1999, respectively. As a
percentage of total revenue, telephone expense decreased to 3.1% from 4.5% for
the quarters ended September 30, 2000 and 1999, respectively. The decrease
relates primarily to the Company's transition to a new long distance carrier.
The new carrier's contract includes higher fixed cost below minimum volume
levels, but lower per unit costs on calls above the minimum. Management
believes that the Company will earn these savings provided certain volume
levels are met, particularly as media spending increases.
Credit bureau expense was $26,692 and $15,533 for the quarters ended September
30, 2000 and 1999, respectively, which represented a increase of $11,159, or
72% Credit bureau expense was $100,178 and $107,119 for the nine-month periods
ended September 30, 2000 and 1999, respectively, which represented a decrease
of $6,941,or 7%. The increase in the third quarter of 2000 compared to the
same period in 1999 relates to a finance company's decision to delay the point
in our lending process when our staff may use the finance company's scoring
model and credit reporting system. Previously, our staff members used the
finance company's scoring model to screen all patients. This increase in the
number of credit reports was offset, in part, by a new credit bureau contract
with lower per unit costs.
Rent and utilities expenses were $25,620 and $38,677 for the quarters ended
September 30, 2000 and 1999, respectively, which represented a decrease of
$13,057, or 34%. Rent and utilities expenses were $83,064 and $101,285 for the
nine-month periods ended September 30, 2000 and 1999, respectively, which
represented a decrease of $18,221, or 18%. The Company began leasing a new
location, starting April 1, 2000. The new office space has approximately 40%
more square feet of workspace. Rent expense has been slightly lower due to
lower year-to-date utility costs, compared to the prior building lease.
Management believes that the current location will have higher utility costs,
particularly as new employees and equipment are added. The Company also
leased a separate location for Elective Investments, during the third quarter
of 1999.
Payroll expenses for general and administrative personnel were $152,184 and
$266,098 for the quarters ended September 30, 2000 and 1999 respectively,
which represented a decrease of $113,914 or 43%. Payroll expenses for general
and administrative personnel were $534,217 and $804,410 for the nine-month
periods ended September 30, 2000 and 1999 respectively, which represented a
decrease of $270,193 or 34%. In December 1999, the Company reduced its
staffing to more cost effective levels. Lower volume and a smaller loan
portfolio require less support staff such as loan processors, collections and
servicing personnel.
Professional and consulting expenses were $157,652 and $133,118 for the
quarters ended September 30, 2000 and 1999 respectively. Professional and
consulting expenses were $418,172 and $379,517 for the nine-month periods
ended September 30, 2000 and 1999 respectively. The elimination of management
and guarantee fees in 1999, saved the Company $247,378 during the first three
quarters of 2000. However, these savings were offset by litigation costs and
higher consulting and legal fees related primarily to being a public
registrant with the Securities and Exchange Commission.
Other general and administrative expenses were $212,234 and $178,074 for the
quarters ended September 30, 2000 and 1999, respectively, which represented an
increase of $34,160, or 19%. Other general and administrative expenses were
$494,114 and $472,801 for the nine-month periods ended September 30, 2000 and
1999, respectively, which represented an increase of $21,313, or 5%. This
expense increased in the second quarter primarily due to depreciation expense
for fixed asset additions, such as the purchase of a predictive dialer.
Interest expense was $75,671 and $368,662 for the quarters ended September 30,
2000 and 1999. Interest expense was $220,699 and $1,246,320 for the
nine-month periods ended September 30, 2000 and 1999. Interest expense
decreased following a December 1999 balance sheet restructuring. As part of
the restructuring, a finance company purchased patients' notes receivable to
pay down a line-of-credit, which was collateralized by the notes receivable.
In addition, the Company converted notes payable to equity. Most importantly,
the balance sheet restructuring significantly reduced high interest-rate debt.
The interest expense decrease related to the restructuring was offset, in
part, by the addition of $655,000 of convertible debt and promissory notes in
the first three quarters of 2000.
This restructuring also led to a significant decline in interest income.
Interest income was $29,840 and $266,721 for the quarters ended September 30,
2000 and 1999, respectively. Interest income was $100,066 and $948,756 for
the nine-month periods ended September 30, 2000 and 1999, respectively. Two
issues explain the large decrease. First, as part of the restructuring, a
finance company purchased approximately $3.3 million of patients' notes
receivable. Second, the Company's decision to sell loans means that the
underlying loan portfolio decreases over time, since few loans are added to
the portfolio.
In September 2000, the Company and an investment banker agreed to cancel their
February 2000 agreement to raise funds for the Company. The cancellation
caused the Company to write off $802,773 of previously deferred investment
banking fees for the investment banker's agreement, a broker's agreement, and
other related agreements.
As of the date of the cancellation, the investment banker had not raised any
equity financing, and the Company sought to hire a new investment banker. As
compensation for canceling the February agreement, the investment banker is
entitled to keep the 750,000 warrants to purchase the Company's common stock,
which were issued to the investment banker as an inducement to enter into the
February 2000 agreement.
The cancellation of the investment banker's agreement also affected a broker's
agreement. The broker, who introduced the investment banker, received 70,000
warrants upon the execution of the investment banker's February 2000
agreement. The investment banker's and broker's warrants were valued at
$563,311 using the Black-Scholes options pricing model. The value of the
warrants was included originally in other assets as deferred finance costs and
additional paid-in-capital. The investment banker's and broker's additional
rights to 2,250,000 and 210,000 warrants, respectively, were canceled at the
time of the investment banker's cancellation agreement. Originally, the
additional warrants were to be issued on a pro-rata basis for each dollar
raised by the investment banker up to $5 million dollars. Since the investment
banker's agreement was cancelled, these costs were expensed.
In conjunction with the investment banker's efforts, the investment banker
believed that agreements with two consulting firms and an advertising firm
were necessary elements to raise additional equity. The three firms received
common stock and warrants valued at $224,762. In addition, the Company
incurred legal and consulting expenses totaling $14,700 to negotiate and
prepare the agreements related to raising capital. The value of these
consulting, advertising and legal services was included originally in other
assets and additional paid-in-capital. Since the investment banker's
agreement was cancelled, these costs were written off.
The Company recorded a $200,000 bad debt recovery in the third quarter of
1999. This recovery was offset in the fourth quarter of 1999 as part of the
previously discussed December 1999 restructuring with the finance company.
Bad debt expense (without consideration of the bad debt recovery) was $126,002
and $133,364 for the quarters ended September 30, 2000 and 1999. Bad debt
expense was $335,926 and $291,685 for the nine-month periods ended September
30, 2000 and 1999, respectively. The increase for the nine-month period
relates primarily to increases in the reserve for doubtful accounts on loans
not previously written off. The Company's restructuring plans included staff
reductions in the collection department, which negatively impacted patient
payments. The Company plans to outsource the majority of the collections,
which should curtail the erosion of the quality of the loan portfolio. The
Company's needs for a collection staff have been declining due to its strategy
to sell loans to recognize immediately the gain on sale.
Liquidity and Capital Resources
-------------------------------
The Company's balance sheet, particularly working capital and stockholders'
equity, improved dramatically with the signing of an agreement to issue
11,250,000 million shares of common stock in exchange for $30 million dollars
of advertising and media credits. The agreement also includes a provision for
an additional $10 million of advertising and media credits in exchange for
shares of unregistered, restricted common stock, at a value per share to be
mutually agreed at the time of the exchange.
While the balance sheet improved as a result of the media venture capital
agreement, the Company still needs additional capital to provide the resources
to grow the Company and to improve the efficiency and effectiveness of the
business systems and business model. As mentioned above, the February 2000
agreement with an investment banker did not generate any new cash. In
September 2000, the investment banker and the Company agreed to cancel the
February agreement. As a result of a settlement agreement, the investment
banker is entitled to keep the warrants it received upon executing the
February agreement as compensation and the Company is entitled to hire a new
investment banker.
In September and October 2000, the Company has been negotiating agreements
with a new investment banker and an additional investor relations firm. While
negotiations with the new investment banker are not final, management believes
it will execute an agreement in early November 2000. In October 2000, the
Company executed an agreement with a new investor relations firm.
The Company's corporate strategy is to sell loans and record the purchase
discount as a gain on sale in the month sold. Should the Company not be able
to sell the loans, earnings would be adversely affected. Three finance
companies currently purchase the majority of the Company's loans. Should the
Company not be able to sell all of its loans or place the loans on a
line-of-credit with a bank, marketing revenues would also be adversely
affected.
While the outstanding balance on a $1 million line-of-credit with a bank at
September 30, 2000 was $581,080, the Company is unable to borrow the
additional balance up to the $1 million dollar limit. The underlying patient
notes receivable, which represent the collateral for the line-of-credit, are
below the formula amounts required by the line-of-credit agreement. The
Company needs to collect on certain delinquent loans so that the loans count
in the "availability" formula. Based upon current delinquency of patients'
payments, the Company needs to supply the bank with approximately $199,000 in
patient notes receivable, net of the Company's purchase discount, to be in
compliance with the line-of-credit covenants. As of September 30, 2000, the
Company was not in compliance with certain of the required covenants. In July
2000, the Company obtained a waiver when approximately $195,000 of patient
notes receivable, net of the Company's purchase discount, were necessary to be
in compliance with the restrictive covenants. Management believes that
improved collections and a plan to replace defaulted loans will enable the
Company to obtain a waiver as of December 31, 2000.
In the fourth quarter of 2000, increased media spending and other operating
expenses will be incurred before marketing revenue and gains on sales of loans
will be earned. This is because patient appointments with physicians and
patient surgeries typically lag media spending by one to three months. In the
fourth quarter of 2000, our media placements include both media venture
capital and cash media schedules. The cash savings from use of the media
credits will used to fund other working capital needs.
Cautionary Statement on Forward-Looking Statements:
---------------------------------------------------
Except for the historical information contained herein, certain of the matters
discussed in this quarterly report on Form 10-QSB are "forward-looking
statements," as defined in Section 21E of the Securities Exchange Act of 1934,
which involve certain risks and uncertainties, which could cause actual
results to differ materially from those discussed herein including, but not
limited to, risks relating to changing economic conditions, maintaining and
increasing both our consumer base and network of physicians, changes in Food
and Drug Administration Regulations for breast implants, changes in the
Federal Trade Commissions regulations on Internet privacy, changes and
compliance with Federal and State Lending Regulations, and competing
effectively with existing and potential competitors and changes in interest
rates.
Item 3 Quantitative And Qualitative Disclosures about Market Risk:
-------------------------------------------------------------------
Elective Investments, Inc. currently purchases notes receivable contracts from
cosmetic physicians. The contracts include the highest statutory interest
rate allowed by the governing state laws.
The Company is subject to market risk for changes in interest rates and could
be subjected to increased or decreased competition from other finance
companies, which could have a material adverse effect on the Company's
financial results.
II OTHER INFORMATION
1. Legal Proceedings
Active Litigation: Defendant
----------------------------
On May 5, 1998, the Company entered into an agreement with a teleservices
company to borrow $200,000 with a 15% annual interest rate, payable in full on
November 30, 1998. The note was delivered by the payee to provide inbound
teleservices as defined. At September 30, 2000 the balance due on this note
was $180,000. A principal shareholder of the Company personally guarantees
the note. At September 30, 2000, the Company was in default under this note
and the payee has instituted a lawsuit for repayment of the balance plus
interest. The Company has counter sued claiming inadequate performance in
providing inbound teleservices. A judgment in the amount of $202,550 plus
accrued interest has been entered against the Company for outstanding
principal payments, interest and teleservices invoices. The judgment has been
stayed, pending a hearing at an undetermined future date. The difference
between the $180,000 principal balance and $202,550 judgment and additional
accrued interest has been recorded as a liability by the Company and is
included in accrued expenses in the financial statements for 2000.
On September 5, 2000, a complaint was filed in the United States District
Court Middle District of Pennsylvania (Case #3:CV-00-1577) on behalf of a
prior employee, regarding termination of an employment contract and
discrimination. The complaint seeks unspecified amounts including punitive
damages plus interest, and attorney's fees. In management's opinion, the
Company has adequate legal defenses respecting each of these actions and does
not believe that any such matters, either individually or in the aggregate,
will materially affect the Company's results of operations or its financial
position.
On September 22, 2000, a complaint was filed in the Superior Court of
California, County of San Francisco (Case #311644) on behalf of a patient,
against a surgeon and the Company, regarding complications with the patient's
surgery, the competence and negligence of the surgeon, and alleged
misrepresentations by the surgeon and the Company. In a settlement demand
dated August 9, 2000, the patient sought $750,000. The complaint seeks
unspecified amounts including punitive damages plus interest and attorney's
fees. While the Company plans to vigorously defend its position, if
necessary, the Company believes that it can enforce its management agreement
with the doctor where the doctor and the Company agreed to indemnify, hold
harmless, and agreed to defend each other against claims arising out of
negligence or fault or the performance of obligations under the management
agreement.
2. Changes in securities and use of proceeds
Proceeds From Debt
------------------
Proceeds from a principal shareholder in the third quarter of 2000 were
received in exchange for promissory notes payable on demand. The proceeds
were used primarily for working capital and payment of cash-in-advance media
payments.
Investment Bankers, Broker, and Related Agreements:
--------------------------------------------------
In September 2000, the Company and an investment banker agreed to cancel their
February 2000 agreement. As of the date of the cancellation, the investment
banker had not raised any equity financing, and the Company sought to hire a
new investment banker. As compensation for canceling the February agreement,
the investment banker is entitled to keep the 750,000 warrants to purchase the
Company's common stock, which were issued to the investment banker as an
inducement to enter into the February 2000 agreement. As further compensation,
the Company agreed to pay the investment banker 1% of the net proceeds
received by the Company from the sale of its capital stock to non-directors,
non-employees, and/or non-officers of the Company from the date of the
cancellation through December 31, 2000, which at September 30,2000 aggregated
zero dollars. The Company and the investment banker also agreed to change the
warrant agreement. The Company agreed to include the 750,000 warrants in the
next registration it files with the Securities and Exchange Commission. The
demand registration rights and anti-dilution provisions were eliminated from
the warrant agreement.
The cancellation of the investment banker's agreement also affected a broker's
agreement. The broker, who introduced the investment banker, received 70,000
warrants upon the execution of the investment banker's February 2000
agreement. The investment banker's and broker's warrants were valued at
$563,311 using the Black-Scholes options pricing model. The value of the
warrants was included originally in other assets as deferred finance costs and
additional paid-in-capital. The investment banker's and broker's additional
rights to 2,250,000 and 210,000 warrants, respectively, were canceled at the
time of the investment banker's cancellation agreement. Originally, the
additional warrants were to be issued on a pro-rata basis for each dollar
raised by the investment banker up to $5 million dollars. Since the investment
banker's agreement was cancelled, these costs were written off.
In conjunction with the investment banker's efforts, the investment banker
believed that agreements with two consulting firms and an advertising firm
were necessary elements to raise additional equity. The three firms received
common stock and warrants valued at $224,762. In addition, the Company
incurred legal and consulting expenses totaling $14,700 to negotiate and
prepare the agreements related to raising capital. The value of these
consulting, advertising and legal services was included originally in other
assets and additional paid-in-capital. Since the investment banker's
agreement was cancelled, these costs were written off.
In September and October 2000, the Company has been negotiating agreements
with a new investment banker and an additional investor relations firm. While
negotiations with the new investment banker are not final, management believes
it will execute an agreement in early November 2000. In October 2000, the
Company executed an agreement with a new investor relations firm.
3. Defaults upon senior securities
See Item 1 - Legal Proceedings.
4. Submission of Matters to a Vote of Security Holders
None.
5. Other Information
None.
6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed in the second quarter.
Exhibit Index
Exhibit
Number Description
------- -----------
10.1.1 Tidewater Finance Company Agreement
10.1.2 World of Internet Finders Fee Agreement
10.1.3 World of Internet.com AG Consulting Agreement
10.1.4 Sivla, Inc. Consulting Agreement
10.1.5 Hutchison International, Inc. Letter of Intent
10.1.6 Financial Capital Consultants, Inc.
11.1 Computation of Per Share Earnings
27.1 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
thatlook.com, Inc.
Date: November 1, 2000 /s/Gerard A. Powell
---------------------
Gerard A. Powell
President, Director,
Chief Executive Officer
Date: November 1, 2000 /s/Marvin P. Metzger
----------------------
Marvin P. Metzger
Chief Financial Officer
