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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to _______________
000-24835
(Commission file number)
PTN Media, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 38-3399098
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
455 East Eisenhower Parkway, Suite 15, Ann Arbor, Michigan 48108
(Address of principal executive offices)
(734) 327-0579
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity. As of June 30, 2000 - 4,427,862 shares of Common Stock
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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PTN Media, Inc.
Index
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<CAPTION>
Page
Number
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of June 30, 2000 2
Condensed Consolidated Statements of Operations for the three and six
months ended June 30, 2000 and 1999 and cumulative during development
stage from May 27, 1997 to June 30, 2000 3
Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and 1999 and cumulative during development stage
from May 27, 1997 to June 30, 2000 4
Notes to Condensed Consolidated Financial Statements 5-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-13
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Change in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 14
Part III. EXHIBITS
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
PTN MEDIA, INC. AND SUBSIDIARY
(a Development Stage Company)
CONDENSED CONSOLIDTAED BALANCE SHEETS
AS OF JUNE 30, 2000
(unaudited)
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ASSETS
CURRENT ASSETS:
Cash $ 540,923
Other receivables 40,000
Prepaid expenses 431,250
-------------
TOTAL CURRENT ASSETS 1,012,173
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FIXED ASSETS, NET 19,820
OTHER ASSETS 31,226
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TOTAL ASSETS $ 1,063,219
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 181,533
License fees payable 428,000
Short-term loans payable 191,250
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TOTAL CURRENT LIABILITIES 800,783
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, par value $0.01; 1,000,000 shares
authorized; 2,600 shares issued and outstanding 26
Common stock, par value $0.001; 10,000,000 shares
authorized; 4,427,862 shares issued and outstanding 4,428
Additional paid-in capital 6,003,173
Deficit accumulated during the development stage (5,745,191)
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TOTAL SHAREHOLDERS' EQUITY 262,436
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,063,219
=============
</TABLE>
See accompanying notes to financial statements.
2
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PTN MEDIA, INC. AND SUBSIDIARY
(a Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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<CAPTION>
For the Three For the Six Cumulative
Months Ended Months Ended during the
June 30, June 30, development stage
--------------------------- ----------------------------- May 27, 1997 to
2000 1999 2000 1999 June 30, 2000
------------ ------------ -------------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
REVENUES $ 457 $ 3,884 $ 3,298 $ 13,216 $ 21,486
------------ ------------ -------------- ------------ --------------------
EXPENSES:
Cost of revenue 186,457 30,000 196,457 43,923 2,378,108
Product development 269,586 98,885 426,886 158,885 1,869,908
General and administrative 381,948 98,033 635,119 175,244 1,403,501
------------ ------------ -------------- ------------ --------------------
TOTAL EXPENSES 837,991 226,918 1,258,462 378,052 5,651,517
------------ ------------ -------------- ------------ --------------------
LOSS FROM OPERATONS (837,534) (223,034) (1,255,164) (364,836) (5,630,031)
------------ ------------ -------------- ------------ --------------------
OTHER INCOME (EXPENSES):
Interest expense (4,625) (19,350) (12,309) (32,475) (115,199)
Interest income - - - - 39
------------ ------------ -------------- ------------ --------------------
TOTAL OTHER INCOME (EXPENSE) (4,625) (19,350) (12,309) (32,475) (115,160)
------------ ------------ -------------- ------------ --------------------
NET LOSS $ (842,159) $ (242,384) $ (1,267,473) $ (397,311) $ (5,745,191)
============ ============ ============== ============ ====================
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.19) $ (0.07) $(0.29) $ (0.12) $ (1.68)
============ ============ ============== ============ ====================
WEIGHTED AVERAGE NUMBER OF COMMON OUTSTANDING 4,407,483 3,440,262 4,311,145 3,388,881 3,411,923
============ ============ ============== ============ ====================
</TABLE>
See accompanying notes to financial statements.
3
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PTN MEDIA, INC. AND SUBSIDIARY
(a Development Stage Company)
CONDENSED CONSOLIDTED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Cumulative
Months Ended during the
June 30, Development stage
------------------------------- May 27, 1997 to
2000 1999 June 30, 2000
--------------- -------------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,267,473) $(397,311) $ (5,745,191)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 4,979 2,087 11,435
Shares issued for professional and legal fees 185,625 - 1,062,125
Waiver of compensation payable - - 121,000
Issuance of shares for license fees - - 1,084,728
Changes in operating assets and liabilities:
Accounts receivable (40,000) 4,488 (40,000)
Prepaid expenses 284,375 - (431,250)
Accounts payable and accrued expenses (8,866) 52,295 302,940
License fees payable 28,000 (140,000) 428,000
-------------- -------------- -----------------
NET CASH USED IN OPERATING ACTIVITIES (813,360) (478,441) (3,206,213)
-------------- -------------- -----------------
CASH FLOWS FROM INVESTNG ACTIVITIES:
Purchase of fixed assets - (18,340) (31,255)
Security and other deposits paid (31,226) - (31,226)
-------------- -------------- -----------------
NET CASH USED IN INVESTING ACTIVTIES (31,226) (18,340) (62,481)
-------------- -------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans received from (paid to) officer (26,000) (38,156) 477,844
Proceeds from short-term loans - 275,000 653,750
Payments from shareholders - - 2,957
Proceeds from exercise of warrants 1,000 - 31,000
Proceeds from private placement offerings, net 838,970 - 1,792,470
Proceeds from sale of common stock of subsidiary 525,000 525,000
Proceeds from sale of common and preferred stock, net - 313,493 326,596
-------------- -------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,338,970 550,337 3,809,617
-------------- -------------- -----------------
INCREASE IN CASH 494,384 53,556 540,923
CASH, BEGINNING OF PERIOD 46,539 702 -
-------------- -------------- -----------------
CASH, END OF PERIOD $ 540,923 $ 54,258 $ 540,923
============== ============== =================
</TABLE>
See accompanying notes to financial statements.
4
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PTN MEDIA, INC. AND SUBSIDIARY
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - DESCRIPTION OF COMPANY AND GOING CONCERN
UNCERTAINTY:
PTN Media, Inc. ("PTN" or the "Company") was incorporated in Delaware on January
13, 1998 and is the successor to Interactive Entertainment Studio, Inc. ("IES").
IES was incorporated in the State of Nevada on May 27, 1997 and was merged into
the Company in March 1998, for the sole purpose of changing the domicile of the
Company to Delaware. The Company has been in the development stage in accordance
with Statement of Financial Accounting Standards No. 7, since its inception.
The Company is an interactive content provider focusing on providing leading
branded content for well-defined target audiences using a combination of new and
traditional media. The Company provides this content on its interactive web
sites in the form of articles and photographs pertaining to fashion, beauty,
style and entertainment. These web sites, utilizing celebrity models as hosts,
will provide an avenue for users to share general tips and advice relating to
the subjects covered.
The Company, since its inception, has incurred net losses of $5,745,191 through
June 30, 2000. The Company has relied on bridge financing, the proceeds from the
sale of common stock through an initial public offering, the sale of common and
preferred stock in private placements and the sale of common stock in its
Fragrancedirect.com, Inc. subsidiary to fund its activities. The Company may be
unable to continue in existence unless it is able to arrange additional
financing. The financial statements do not include any adjustments relating to
the recoverability of assets that might be necessary in the event the Company
cannot continue in existence.
The accounting policies followed by the Company are set forth in Note 2 to the
Company's financial statements included in its annual report on Form 10-KSB for
the year ended December 31,1999 and which are incorporated herein by reference.
Specific reference is made to this report for a description of the Company's
securities and the notes to the financial statements included therein.
5
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PTN MEDIA, INC. AND SUBSIDIARY
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, continued
(Unaudited)
NOTE 1 - DESCRIPTION OF COMPANY AND GOING CONCERN
UNCERTAINTY, continued:
In the opinion of management, the accompanying unaudited interim condensed
consolidated financial statements of PTN Media, Inc., and subsidiary contain all
adjustments necessary to present fairly the Company's financial position as of
June 30, 2000 and the results of its operations for the six month periods ended
June 30, 2000 and 1999 and for the cumulative period during the development
stage (May 27, 1997 to June 30, 2000) and its cash flows for the six month
periods ended June 30, 2000 and 1999 and for the cumulative period during the
development stage (May 27, 1997 to June 30, 2000).
The results of operations for the six months ended June 30, 2000 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2000.
NOTE 2 - SALE OF SHARES:
In February 2000 the Company issued 182,000 shares of its common stock in a
private placement offering at $5.00 per share. The Company paid offering costs
in connection with this private placement offering of $71,030.
In addition, during the first and second quarters of 2000, certain holders of
the Company's Series A preferred stock converted 1,650 and 1,350 shares,
respectively, of Series A preferred stock into 33,000 and 27,000 shares,
respectively, of the Company's common stock.
During the second quarter of 2000, the Company's subsidiary,
Fragrancedirect.com, Inc. sold 210,000 shares of its common stock at $2.50 per
share. The gross proceeds of $525,000 have been included in additional paid-in
capital.
6
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PTN MEDIA, INC. AND SUBSIDIARY
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, continued
(Unaudited)
NOTE 3 - SHORT-TERM LOANS PAYABLE:
In July and August 1997, the Company received $56,250 through the issuance of 8%
promissory notes and common stock purchase warrants to acquire Company stock.
The 45,000 warrants issued, which expire in July 2001, entitle the holders to
purchase 45,000 shares of common stock at an exercise price of $3.00 per share,
the deemed fair value of the warrants at the time of issuance. The notes and
accrued interest are payable one year from the date of issuance or the closing
of an equity funding of the Company of a minimum of $500,000, whichever is
sooner. In 1999, one of the note holders converted $25,000 of principal and
$5,500 of accrued interest into 6,100 shares of the Company's common stock. The
remainder of the notes continues to be outstanding notwithstanding the fact that
payments owed by the Company thereunder are now past due. Interest accrued as of
June 30, 2000 aggregated $4,750.
In March 1999, the Company completed the sale of 5.5 units, each unit consisting
of a $50,000 promissory note, bearing interest at an annual rate of 10%, and
warrants to purchase 10,000 shares of common stock at $7.50 per share. During
the fourth quarter of 1999, these promissory notes were converted to 2,750
shares of Series A preferred stock. As of June 30, 2000, $20,625 of accrued
interest related to these promissory notes is unpaid.
In July and August of 1999, the Company's subsidiary, Fragrancedirect.com, Inc.
("Fragrance") issued 10% promissory notes aggregating $160,000. The notes are
due the earlier of one year or the completion of an initial public offering of
Fragrance common stock. In addition, Fragrance issued to the note holders an
aggregate of 96,000 two-year warrants to purchase Fragrance common stock at
$3.50 per share. As of June 30, 2000, $14,667 of accrued interest related to
these promissory notes is unpaid.
7
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PTN MEDIA, INC. AND SUBSIDIARY
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS, continued
(Unaudited)
NOTE 4- LOANS PAYABLE - OFFICER:
In April 1998, the Company's Chairman, President and Chief Executive Officer,
provided the Company with a revolving credit line with a maximum of $500,000
available. In September 1998, the Board of Directors of the Company authorized
an increase in this line to $610,000 and in November and December 1998, further
increases to $1,000,000, were authorized. Loans drawn under this line bear
interest at a rate of 9% per annum from the date they are made to the Company
and are payable by May 2001, provided, however, that if the Company raises gross
proceeds in an IPO of at least $1,500,000, the entire outstanding amount and
accrued interest will be repaid from the proceeds from the IPO. In January 2000,
the Company borrowed an additional $4,000 and repaid $20,000 and $1,500 of such
loans and accrued interest on such loans, respectively. In February 2000, the
principal and accrued interest of $432,844 and $65,907, respectively, were
converted into an aggregate of 110,000 shares of the Company's common stock.
NOTE 5 - LICENSE AGREEMENT:
The Company continues to owe model Tyra Banks $100,000 in connection with
calendar fees and Claudia Schiffer $300,000 in connection the second year
royalty payment per her agreement. During the second quarter of 2000, the
arbitrator in the Tyra Banks litigation awarded Ms. Banks $128,000. The Company
is currently asking the arbitrator to correct a computational error in the
award. However, the Company has accrued the $128,000 as an accrued liability in
the accompanying financial statements.
On March 30, 2000, the Company entered into an agreement with a company
controlled by Downtown Julie Brown to give the Company her services for weekly
radio shows to air on weekends. The Company is obligated to pay her $100,000
annually for one year plus give her 10,000 shares of common stock.
NOTE 6 - EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share has been computed on the basis of the weighted average
number of common shares outstanding during each period presented according to
the standards of SFAS No.128 "Earnings Per Share" ("SFAS 128").
8
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The following discussion and analysis should be read in conjunction
with our consolidated financial statements and related footnotes for the year
ended December 31, 1999 included in our Annual Report on Form 10-KSB. The
discussion of results, causes and trends should not be construed to imply any
conclusion that such results or trends will necessarily continue in the future.
Overview
We are an interactive content provider focusing on providing leading
branded content for well-defined target audiences using a combination of new and
traditional media. We provide this content on its interactive web sites in the
form of articles and photographs pertaining to fashion, beauty, style and
entertainment. These web sites, utilizing celebrity models as hosts, will
provide an avenue for users to share general tips and advice relating to the
subjects covered.
We, since our inception, have incurred net losses of $5,745,191. We may
be unable to continue in existence unless we are able to arrange additional
financing to supplement our initial public offering, bridge financing, sale of
preferred stock and common stock, and recent sale of common stock of our
subsidiary, Fragrancedirect.com, Inc.
We have not yet generated any significant revenues and are still
considered in the development stage. Through June 30, 2000, cumulative revenues
totaled $21,486. We continue to incur costs associated with the development of
our web sites.
Additionally, we have advanced $134,000 to a company controlled by
fashion model, Tyra Banks, pursuant to certain agreements between us and Ms.
Banks' company and have also incurred expenses of approximately $10,000, to
date, in connection with the development of the intended web site to have been
hosted by Ms. Banks and in connection with the development of calendars
featuring her. In June 1998, Ms. Banks declared us in breach of these agreements
based on our alleged failure to pay the full amount of all advances and
reimbursable expenses allegedly owed pursuant to such agreements. The agreement
relating to the creation and sale of calendars has been terminated. Although Ms.
Banks also claims that the web site agreement has been terminated, we believe
that we are currently in full compliance with this agreement, and that Ms. Banks
has refused to perform thereunder.
On December 8, 1998, attorneys for Tyra Banks and Bankable, Inc., an entity
controlled by Ms. Banks, made a Demand for Arbitration against us under the
commercial arbitration rules of the American Arbitration Association. Ms. Banks'
attorneys alleged
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that we failed to make timely payments of money due upon the execution of the
web site license agreement and calendar agreement between Ms. Banks and us
("Agreements"), and refused to return photographs, pictures, prints, negatives
and images of Ms. Banks. Ms. Banks is seeking damages under the Calendar
Agreement in the amount of $161,333, damages under the Web Site Agreement of
$370,000 and legal fees. On January 15, 1999, through our attorneys, filed an
Answer and Counterclaim to Ms. Banks' Demand for Arbitration. We raised several
defenses to Ms. Banks' claims and claimed a breach by Ms. Banks and Bankable,
Inc. of the web site agreement. We are seeking the amount of $264,000 in damages
related to the Agreements. A preliminary administrative conference was held on
January 19, 1999, and a hearing was held in October 1999 and we filed briefs on
March 6, 2000 in response. In July, 2000 the Arbitrator awarded Ms. Banks
$128,000. We are currently asking the Arbitrator to correct a computational
error in the award.
We entered into a Web Site License Agreement with Claudia Schiffer (the
"Schiffer License Agreement") which grants us the exclusive license for an
on-line Internet service devoted to Ms. Schiffer. We have the right to use Ms.
Schiffer's name and likeness for an Internet site including a merchandise
"boutique", monthly column and interviews or on-line chat sessions. Ms. Schiffer
also would make promotional appearances and voice recordings to promote the site
and provide content for it. The Schiffer License Agreement would continue until
the year 2001. We would pay Ms. Schiffer guaranteed minimum royalties of
$300,000 for the first year (which amount was paid) of the Schiffer License
Agreement, $400,000 for the second year (of which $100,000 has been paid), and
$500,000 for the third year, which would be credited against earned royalties
ranging from 25% to 80% of site revenues and profits from boutique merchandise
sales.
The Schiffer License Agreement also granted to Ms. Schiffer, 269,682
shares of common stock (the "Shares"), with the right to maintain the ratio of
her common stock ownership to that of our President. We have agreed to indemnify
Ms. Schiffer for any U.S. income tax liability resulting from the issuance of
these shares, however, we have been assured that Ms. Schiffer is not a U.S.
citizen or resident, and therefore is not likely to be responsible for any such
taxes.
In June 1999, we entered into a License Agreement with model Estella
Warren. This license provides for an on-line Internet service and downloadable
electronic calendars featuring the name and likeness of Ms. Warren. This
agreement continues until the first anniversary of the date the service is
launched and required payment of the entire fee of $30,000 at the time of
execution. Ms. Warren also receives a royalty equal to 20% of revenues received
in connection with calendar sales.
On March 30, 2000, we entered into an agreement with a company
controlled by Downtown Julie Brown to give us her services for weekly radio
shows to air on weekends. We are obligated to pay her $100,000 annually for one
year plus give her 10,000 shares of common stock.
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We created a new subsidiary in July 1999, Fragrancedirect.com, Inc. and
launched "www.fragrancedirect.com." On this web site we sell colognes, perfumes
and other fragrances direct to Internet users, much in the same way that books
are sold on web sites such as "Amazon.com." The site will be promoted through
hyper-links from our affiliated web sites. We also intend to create mutual
linking arrangements with operators of apparel sites and to make barter
arrangements for advertising. We anticipate that our prices will be lower than
the manufacturer's suggested retail prices, however, not necessarily less than
all retail outlets. The web site is currently being completed.
We recently signed a letter of intent with Palm, Inc. to collaborate to
design and market the Palm(tm) Vx Claudia Schiffer Edition handheld computer. We
have negotiated a royalty fee license with Ms. Schiffer.
Also during the second quarter we began our radio shows with hosts
Downtown Julie Brown and supermodel Veronica Webb. We are currently seeking to
expand the markets where our programs are aired.
We intend to obtain product liability insurance in such amounts as it
may deem appropriate to insure against any possible product liability exposure
resulting from the sale of fragrances on the web site.
There can be no assurance that we will generate substantial revenues
from the web site. In addition, we are aware of at least two similar web sites
attempting to compete for the on-line fragrance business.
Cash Requirements
In April 1998, our Chairman, President and Chief Executive Officer
provided us with a revolving credit line with a maximum of $500,000 available.
In September 1998, our Board of Directors authorized an increase in this line to
$610,000 and in November and December 1998, further increases to $1,000,000,
were authorized. Loans drawn under this line bear interest at a rate of 9% per
annum from the date they are made to us and are payable by May 2001, provided,
however, that if we raises gross proceeds in an IPO of at least $1,500,000, the
entire outstanding amount and accrued interest will be repaid from the proceeds
from the IPO. In February 2000, the principal and accrued interest of $432,844
and $65,907, respectively, were converted into an aggregate of 110,000 shares of
our common stock.
On September 18, 1998, the Securities and Exchange Commission declared
effective our Registration Statement concerning an Initial Public Offering
("IPO") of 400,000 shares of common stock, which we hoped would generate
proceeds of approximately $1,600,000. This IPO expired on January 31, 1999. As
of December 31, 1998, we had completed the sale of 66,900 shares of common stock
and in February 1999, closed on the sale of an additional 62,000 shares of
common stock, realizing aggregate net proceeds of $326,596. The net proceeds
from this offering, along with
11
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bridge loans received in 1997, have been used to satisfy our obligations under
the License Agreements entered into with the fashion models.
During 1999, we issued 190,000 shares of common stock for professional
services valued at $637,500. We also issued 200,000 warrants to purchase shares
of common stock for professional services valued at $200,000 and we issued
25,000 options to purchase shares of common stock for legal fees valued at
$25,000. During the second quarter of 2000 we issued 25,000 shares of common
stock for services valued at $185,625.
In March 1999, we completed the sale of 5.5 units, each unit consisting
of a $50,000 promissory note, bearing interest at an annual rate of 10%, and
warrants to purchase 10,000 shares of common stock at $7.50 per share. During
the second quarter of 1999, we completed the sale of 2,400 shares of Class A
Preferred Stock in a private offering of such securities, generating net
proceeds of $216,000. The purchasers of these securities also received two-year
warrants to purchase 5,000 shares of common stock for every $25,000 of Preferred
Stock purchased at an exercise price of $7.50. The preferred shares accumulate
dividends at the rate of $10 per share per annum and are convertible to common
shares at the option of the holders.
During the fourth quarter of 1999, we issued 402,500 shares of common
stock in a series of private placement offerings for aggregate proceeds of
$737,500. In addition, in February 2000 we issued 182,000 shares of common stock
in a private placement offering for aggregate proceeds of $910,000.
In July and August of 1999, our subsidiary Fragrancedirect.com, Inc.
("Fragrance") issued 10% promissory notes aggregating $160,000. The notes are
due the earlier of one year or the completion of an initial public offering of
Fragrance common stock. In addition, Fragrance issued to the note holders an
aggregate of 96,000 two-year warrants to purchase Fragrance common stock at
$3.50 per share. In addition during the second quarter of 2000, Fragrance sold
210,000 shares of its common stock at $2.50 per share for gross proceeds of
$525,000.
We may determine, depending on the opportunities available to it, to
seek additional equity or debt financing to fund the cost of its operations.
There can be no assurance that additional financing will be available to us on
commercially reasonable terms, or at all. In the event that we are unable to
raise additional funds, we could be required to either substantially reduce or
terminate our operations.
Forward looking statements
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Shareholders are cautioned that all
forward-looking statements involve risks and uncertainty, including without
limitation, the ability of us to
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fully establish our web sites Although we believe the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements contained in the report will prove to be
accurate.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
On December 8, 1998, attorneys for Tyra Banks and Bankable, Inc., an
entity controlled by Ms. Banks, made a Demand for Arbitration against the
Company under the Commercial Arbitration Rules of the American Arbitration
Association. Ms. Banks' attorneys alleged that the Company failed to make timely
payments of money due upon the execution the Web Site License Agreement and
Calendar Agreement between Ms. Banks and the Company ("Agreements"), and refused
to return photographs, pictures, prints, negatives and images of Ms. Banks. Ms.
Banks is seeking damages under the Calendar Agreement in the amount of $161,333,
damages under the Web Site Agreement of $370,000 and legal fees. On January 15,
1999, the Company, through its attorneys, filed an Answer and Counterclaim to
Ms. Banks' Demand for Arbitration. The Company raised several defenses to Ms.
Banks' claims and claimed a breach by Ms. Banks and Bankable, Inc. of the Web
Site Agreement. The Company is seeking the amount of $264,000 in damages related
to the Agreements. A preliminary administrative conference was held on January
19, 1999, and a hearing was held in October 1999 and the Company filed briefs on
March 6, 2000 in response. In July 2000 the Arbitrator awarded Ms. Banks
$128,000. The Company is currently asking the Arbitrator to correct a
computational error in the award.
Item 2. Change in Securities and Use of Proceeds
In February 2000, the Company sold 182,000 shares of its common stock
in a private placement offering for gross proceeds of $910,000.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
13
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Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 - Financial Data Schedule
(b) Reports on Form 8-K
On July 14, 2000 and August 16, 2000, the Company filed a current
report on Form 8-K reporting that it had terminated Lazar, Levine & Felix, LLP
as its independent certified public accountants and retained Merdinger,
Fruchter, Rosen & Corso, P.C as its independent certified public accountants. In
connection with the audits of the two most recent fiscal years and during any
subsequent interim periods preceding such termination of Lazar, Levine & Felix,
LLP, there did not develop any disagreements on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure between such former independent certified accountants and management
of the Company or other reportable events which have not been resolved to the
Company's former independent certified accountants' satisfaction
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.
PTN Media, Inc.
By: /s/ Peter Klamka
---------------------
Peter Klamka
Chief Executive and Principal
Accounting Officer
Date: August 21, 2000
