FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] Quarterly Report pursuant to Section 13 or 15(d [X] Quarterly Report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000
[ ] Transition report pursuant to Section 13 or [ ] Transition report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission file number 000-26233
Techlabs, Inc.
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(Exact name of small business issuer as specified in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
65-0843965
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(IRS Employer Identification No.)
3435 Galt Ocean Drive, Fort Lauderdale, Florida 33308
----------------------------------------------- )
(Address of principal executive offices)
954-630-0027
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(Issuer's telephone number)
Not applicable
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(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 ( ).
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. As of August 10, 2000, the
registrant had issued and outstanding 7,806,666 shares of common stock.
Transitional Small Business Disclosure Format (check one). Yes ( ) No (x)
<PAGE>
This discussion in this quarterly report regarding Techlabs and our
business and operations contains "forward-looking statements." These
forward-looking statements use words such as "believes," "intends," "expects,"
"may," "will," "should," "plan," "projected," "contemplates," "anticipates," or
similar statements. These statements are based on our beliefs, as well as
assumptions we have used based upon information currently available to us.
Because these statements reflect our current views concerning future events,
these statements involve risks, uncertainties and assumptions. Actual future
results may differ significantly from the results discussed in the
forward-looking statements. A reader, whether investing in our common stock or
not, should not place undue reliance on these forward-looking statements, which
apply only as of the date of this annual report.
When used in this Quarterly Report on Form 10-QSB, "Techlabs,", "we,"
"our," and "us" refers to Techlabs Inc. and our subsidiaries Interplanner.com,
Inc. ("Interplanner"), StartingPoint.com, Inc. ("MyStartingPoint"), InternetChic
Marketing, Inc. ("InternetChic Marketing"), Tech Capital, Inc. ("Tech Capital")
and Tech Investments, Inc. ("Tech Investments").
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
Page Number
<S> <C>
Consolidated Balance Sheets at June 30, 2000 (unaudited)
and December 31, 1999 3
Consolidated Statements of Operations for the three months and six months ended
June 30, 2000 (unaudited) and 1999 (unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity 5
Consolidated Statements of Cash Flows for the six months ended June 30, 2000
(unaudited) and 1999 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7
</TABLE>
2
<PAGE>
Techlabs, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(UNAUDITED)
June 30, December 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 69,718 $ --
Prepaid Expenses 37,500 75,000
Marketable equity securities 672,031 3,130,000
----------- -----------
Total Current Assets 779,249 3,205,000
Property and Equipment,
Net of accumulated depreciation 1,114,209 1,112,218
Intangible and Other Assets
Deposits and other 5,503 5,503
Investment securities 725,000 50,000
Intangibles 900,000 1,000,000
----------- -----------
Total Assets $ 3,523,961 $ 5,372,721
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 410,912 $ 261,805
Stockholder note payable -- 732,941
----------- -----------
Total Current Liabilities 410,912 994,746
Long-term Notes Payable to Stockholders 937,391 --
----------- -----------
Total Liabilities 1,348,303 994,746
STOCKHOLDERS' EQUITY
Preferred stock - special class A ($.001 par value, 12,500,000 shares
authorized, 9,000,000 shares issued and outstanding) 9,000 9,000
Common stock ($.001 par value, 50,000,000 shares
authorized, 7,815,000 shares issued and outstanding) 7,815 7,335
Additional paid-in capital 5,589,690 4,639,335
Accumulated deficit (3,285,825) (277,695)
----------- -----------
2,320,680 4,377,975
Less: Stockholder note receivable (145,022) --
----------- -----------
Total Stockholders' Equity 2,175,658 4,377,975
----------- -----------
$ 3,523,961 $ 5,372,721
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
3
<PAGE>
Techlabs, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Net revenues $ 19,352 $ -- $ 31,977 $ --
Operating Expenses
Cost of revenues 40,918 -- 72,681 --
Other general and administrative 360,364 85,727 531,011 236,143
----------- ----------- ----------- -----------
Total operating expenses 401,282 85,727 603,692 236,143
----------- ----------- ----------- -----------
Operating loss (381,930) (85,727) (571,715) (236,143)
Other Income (Expense)
Interest income 2,494 2,972
Realized loss on trading securities (46,151) (46,151)
Unrealized loss on trading securities (2,263,236) -- (2,393,236) --
----------- ----------- ----------- -----------
Total other income (expense (2,306,893) 0 (2,436,415) 0
Loss before provision for income
and cumulative effect of change
in accounting principle (2,688,823) (85,727) (3,008,130) (236,143)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Loss before cumulative effect of
change in accounting principle (2,688,823) (85,727) (3,008,130) (236,143)
Cumulative effect of change in
in accounting principle -- 3,000 -- (8,849)
Net Loss $(2,688,823) (82,727) $(3,008,130) (244,992)
=========== =========== =========== ===========
Earnings per share:
Basic and diluted
Before cumulative effect of change
in accounting principle $ (0.36) $ (0.01) $ (0.41) (0.05)
=========== =========== =========== ===========
Net income (loss) and comprehensive income
(loss) per common share $ (0.36) $ (0.01) $ (0.41) (0.05)
=========== =========== =========== ===========
Basic and diluted weighted average
shares outstanding 7,421,868 6,999,505 7,387,088 4,629,586
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
4
<PAGE>
Techlabs, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
------------------------------------------------------ Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit
--------- ----------- --------- ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999, audited - $ - 1,100,000 $ 1,100 $ 24,900 $ -
February, 1999:
Issuance of restricted shares
to founders for $1,500 cash and
$118,500 in compensation. 1,500,000 1,500 118,500
Conversion of common
shares into preferred shares 9,000,000 9,000 (1,000,000) (1,000) (8,000)
Issuance of shares under private
placement offerings -
March 1999, at $.10 per share
net of offering costs of $7,830 5,000,000 5,000 487,170
April 1999, at $1.00 per share 230,000 230 229,770
April, 1999 issuance of:
Restricted shares for services 5,000 5 37,495
Shares for investment securities 250,000 250 2,249,750
December, 1999:
Shares issued in asset acquisition 250,000 250 1,499,750
Net loss and comprehensive loss (277,695)
--------- ----------- --------- ----------- -------------- ----------------
Balance, December 31, 1999 9,000,000 9,000 7,335,000 7,335 4,639,335 (277,695)
Stock options exercised 60,000 60 142,025
Shares issued for services 120,000 120 133,630
Shares issued for investment securities 300,000 300 674,700
Note receivable from stockholder
Net loss and comprehensive loss (3,008,130)
--------- ----------- --------- ----------- -------------- ----------------
Balance, June 30, 2000, unaudited 9,000,000 $ 9,000 7,815,000 $ 7,815 $ 5,589,690 $ (3,285,825)
========= =========== ========= =========== ============== ================
</TABLE>
[RESTUBBED]
<TABLE>
<CAPTION>
Stockholder
Note
Receivable Total
----------------- --------------
<S> <C> <C>
Balance, January 1, 1999, audited $ - $ 26,000
February, 1999:
Issuance of restricted shares
to founders for $1,500 cash and
$118,500 in compensation. 120,000
Conversion of common
shares into preferred shares 0
Issuance of shares under private
placement offerings -
March 1999, at $.10 per share
net of offering costs of $7,83 492,170
April 1999, at $1.00 per share 230,000
April, 1999 issuance of:
Restricted shares for services 37,500
Shares for investment securities 2,250,000
December, 1999:
Shares issued in asset acquisition 1,500,000
Net loss and comprehensive loss (277,695)
---------------- -------------
Balance, December 31, 1999 4,377,975
Stock options exercised 142,085
Shares issued for services 133,750
Shares issued for investment securities 675,000
Note receivable from stockholder (145,022) (145,022)
Net loss and comprehensive loss (3,008,130)
---------------- -------------
Balance, June 30, 2000, unaudited $ (145,022) $ 2,175,658
---------------- -------------
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
5
<PAGE>
Techlabs, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(UNAUDITED)
Six Months Ended
June 30,
2000 1999
----------- -----------
<S> <C> <C>
Operating Activities
Net loss $(3,008,130) $ (244,992)
Adjustments to reconcile net loss to
net cash used in operating activities
Unrealized loss (gain) on securities 2,393,236 --
Realized loss (gain) on securities 46,151
Cumulative effect of change in accounting principle -- 8,849
Common stock issued for compensation 133,750 156,000
Amortization and depreciation 183,334 --
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses 37,500 --
Increase in other receivable -- (4,559)
Increase in accounts payable 146,171 24,018
----------- -----------
Net Cash Used in Operating Activities (67,988) (60,684)
Investing Activities
Web site development costs (85,325) (35,000)
Purchase of marketable securities -- (677,000)
Proceeds from stock sales 18,581 --
Deposits -- --
----------- -----------
Net Cash Used in Investing Activities (66,744) (712,000)
Financing Activities
Advances from stockholders 204,450 37,500
Proceeds from sale of stock -- 723,670
----------- -----------
Net Cash Provided by Financing Activities 204,450 761,170
----------- -----------
Change in Cash and Cash Equivalents 69,718 (11,514)
Cash and cash equivalents, beginning of period 0 15,000
----------- -----------
Cash and cash equivalents, end of period $ 69,718 $ 3,486
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
6
<PAGE>
Techlabs, Inc.
Notes to Consolidated Financial Statements
(unaudited)
Note 1 - Significant Accounting Policies
Business. The accompanying unaudited condensed and consolidated
financial statements of Techlabs, Inc. (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month and six month periods ended
June 30, 2000 are not necessarily indicative of the results that may be expected
for the fiscal year ending December 31, 2000. For further information, refer to
the audited consolidated financial statements and footnotes thereto for the
fiscal year ended December 31, 1999 included in the Company's Annual Report on
Form 10-KSB.
Basis of Presentation. The consolidated financial statements include
the accounts of the Company (formerly a development stage company) and its
wholly owned subsidiaries, Interplanner.com, Inc., Starting Point.com, Inc and
Internetchic.com, Inc. All material intercompany transactions have been
eliminated.
Property and Equipment. Property and equipment at June 30, 2000
consisted principally of web-sites and related costs. Depreciation on assets
placed in service is determined using the straight-line method over the
estimated useful lives of the related assets. Significant improvements are
capitalized while maintenance and repairs are expensed as incurred. At June 30,
2000, the Company had capitalized approximately $697,543 in development costs
related to Interplanner.com's calendar technology. The Company will begin
depreciating the related costs over a three-year period in third quarter of
fiscal 2000 pursuant to the Company's full-scale launch of the site. The Company
is depreciating the remaining $500,000 related to the purchased assets of
Starting Point.com over a three year period and recorded approximately $42,000
and $83,0000 in expense for the three and six month periods ended June 30, 2000.
On an ongoing basis, management reviews the value and period of
amortization or depreciation of long-lived assets, including costs in excess of
net assets of subsidiaries acquired. During this review, the Company reevaluates
the significant assumptions used in assessing the carrying cost of long-lived
assets. Although the assumptions may vary from transaction to transaction, they
generally include revenue growth, operating results, cash flows and other
indicators of value. Management then
7
<PAGE>
Techlabs, Inc.
Notes to Consolidated Financial Statements
(unaudited)
Note 1 - Significant Accounting Policies - (continued)
determines whether any adjustment is then required for permanent impairment of
the value of long-lived assets based upon events or circumstances which have
occurred since acquisition.
Intangibles. Intangible assets consist of domain names, trade names and
contracts related to a purchased Internet web portal site and meta-search
technology. Amortization for intangibles is determined using the straight-line
method over a five year period. Amortization expense totaled $50,000 and
$100,000 for the three and six month periods ended June 30, 2000.
Investment Securities. Investment securities consist of both securities
for which there is no readily determinable market and marketable equity
securities. Investments for which there is no readily determinable market value
are included on the accompanying June 30, 2000 balance sheet among "Other
Assets" at cost. Dividends from those securities distributed to the Company are
included in income to the extent they represent earnings of the investee
company. Dividends in excess of earnings are treated as a reduction in the
investment, and indications of an other-than-temporary decline in value are
treated as a reduction in the carrying value of the investment.
Marketable equity securities are classified into one of three
categories: trading, available-for-sale, or held-to-maturity. Trading securities
are acquired and held principally for the purpose of selling them in the near
term. Held-to-maturity securities are those securities that the Company has the
ability and intent to hold to maturity. All other securities not included in the
trading or held-to-maturity categories are available- for-sale securities.
Management determines the appropriate classification of marketable
investment securities at the time they are acquired and evaluates the continuing
appropriateness of the classification at each balance sheet date. Trading
securities, consisting primarily of actively trading equity securities, are
stated at fair value. For valuing trading securities with temporary
restrictions, management considers the effects on quoted market prices of the
temporary restrictions in light of the volatility in prices of the specific
security. Realized and unrealized gains and losses are included in income.
Earnings Per Share. Basic earnings per share (EPS) is based on the
weighted average number of common shares outstanding during the year, whereas
diluted EPS also gives effect to all dilutive potential common shares, if any,
that were outstanding
8
<PAGE>
Techlabs, Inc.
Notes to Consolidated Financial Statements
(unaudited)
Note 1 - Significant Accounting Policies - (continued)
during the period. At the date of these financial statements, all of the
Company's contingent shares were anti-dilutive.
Recent Accounting Pronouncements. Statement of Financial Accounting
Standards No. 133 (SFAS 133) establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities on the balance sheet
at their fair value. This statement, as amended by SFAS 137, is effective for
financial statements for all fiscal quarters of all fiscal years beginning after
June 15, 2000. Because it does not currently invest in derivative financial
instruments or engage in hedging activities, the Company does not expect the
adoption of this standard to have a material impact on its financial position,
results of operations or cash flows.
The Company has adopted the provisions of Statement of Position 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Accordingly, the Company has capitalized external costs incurred
at June 30, 2000 of $697,543 to acquire and develop customized software and an
Internet web-site for internal use.
The Company has adopted Statement of Financial Accounting Standards No.
131 (SFAS 131) "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 changes the way public companies report information about
segments of their business in their annual financial statements and requires
them to report selected segment information in their quarterly reports issued to
stockholders. It also requires entity-wide disclosures about the products and
services an entity provides, the material countries in which it holds assets and
reports revenues and its major customers. The Company does not have any
reportable segments.
Note 2 - Cumulative Effect of Change in Accounting Principle
Statement of Position 98-5, Reporting on the Costs of Start-Up
Activities ("SOP 98-5"), was issued by the Accounting Standards Executive
Committee of the American Institute of Certified Public Accountants, was
effective for the Company in 1999. SOP 98-5 required the Company, in 1999, to
expense costs capitalized in 1998 associated with start-up activities. Adoption
of SOP 98-5 also required the Company to report the
9
<PAGE>
Techlabs, Inc.
Notes to Consolidated Financial Statements
(unaudited)
Note 2 - Cumulative Effect of Change in Accounting Principle (continued)
effects of applying SOP 98-5 as a cumulative effect of a change in accounting
principles in its June 30, 1999 financial statements.
Note 3 - Statement of Cash Flows Supplemental Disclosure
During the six months ended June 30, 2000 and 1999, the Company paid no
interest or income taxes, and the following transactions not affecting cash
occurred:
(a) The Company recorded $2,393,236 in unrealized losses on
trading securities during the six months ended June 30, 2000.
(b) The Company issued 1,500,000 shares of its restricted common
stock as founders' stock, valued at $120,000, of which
$118,500 was non-cash compensation for services during the six
months ended June 30, 1999.
(c) The Company issued 60,000 shares of its common stock pursuant
to the stock option plan to three employees of the Company in
exchange for promissory notes totaling $142,050 and cash
proceeds of $35.
(d) The Company issued 120,000 shares of its common stock, valued
at $133,750, for services during the six months ended June 30,
2000.
(e) The Company issued 300,000 shares of its common stock, valued
at $675,000, for a minority interest in a privately held
company during the six months ended June 30, 2000.
Note 4 - Investment Securities
In April 1999, the Company purchased 1,000,000 shares of preferred
stock in TheBigHub.com, Inc. for $627,000 in cash. In addition, the Company
issued 250,000 shares of its common stock valued at $2,250,000 primarily in
consideration for the conversion of the preferred stock for an equal number of
shares of TheBigHub.com, Inc. common stock. Additionally the Company entered
into a marketing alliance with the BigHub.com.
10
<PAGE>
These marketable equity securities contain legal restrictions which
began lapsing in April 2000 and limit the number of shares that may be disposed
of at any one time by the Company. During the three months ended June 30, 2000,
the Company liquidated a portion of these securities and it is management's
intent is to continue to liquidate its position in these securities in the near
term. Accordingly, these securities are classified as trading securities and are
comprised as follows:
Among Current Assets:
Trading securities:
Marketable equity securities, at cost $ 2,877,000
Gross unrealized loss (2,204,969)
-----------
Marketable equity securities,
at fair value $ 672,031
===========
In May 1999, the Company purchased for cash consideration of $50,000 a
minority interest consisting of 50,000 shares of convertible preferred stock in
Focalex, Inc., a privately held company. The investment was recorded at cost and
is included in the balance sheet at June 30, 2000 in other assets.
On April 12, 2000, the Company acquired a 25% equity interest in
HandRes, Inc. in exchange for 300,000 shares of the Company's restricted common
stock valued at $675,000 based on the closing bid price for the Company's common
stock at the date of the transaction. HandRes, Inc. is a developer and provider
of Web-based software applications, including reservation and business-related
Internet content, targeted to wireless handheld device users. The investment was
recorded at cost and is included in the balance sheet at June 30, 2000 in other
assets.
Note 5 - Acquisition of Assets of Starting Point, LLC
In December 1999, the Company completed its purchase of certain assets
of Starting Point, LLC, from its parent company, Yesmail.com, Inc. (Yesmail), in
exchange for 250,000 shares of the Company's restricted common stock. The
purchased assets consist principally of search engine technologies, domain
names, trade names and contracts related to Starting Point's web portal site and
meta-search technology. As part of the purchase agreement, the Company
guaranteed the value of its shares issued to Yesmail would have a minimum value
of $1.5 million one year after the date of the transaction (Note 7).
The purchase price of $1,500,000 was allocated $500,000 to the web-site
and $1,000,000 to intangibles consisting principally of domain names, trade
names and contracts. Depreciation and amortization expense totaling $91,667 was
recorded for
11
<PAGE>
Techlabs, Inc.
Notes to Consolidated Financial Statements
(unaudited)
Note 5 - Acquisition of Assets of Starting Point, LLC - (continued)
the three and six month periods ended June 30, 2000 related to the purchased
assets. During the six months ended June 30, 2000, the Company created a wholly
owned subsidiary, Starting Point.com, Inc.
Note 6 - Commitments and Contingencies
As discussed at Note 5, the Company acquired certain assets ("assets")
in exchange for 250,000 shares of its restricted common stock. These shares
carry with them "piggyback" registration rights. Additionally, the Company has
guaranteed a minimum value of $1,500,000 for the 250,000 shares given in
exchange for the assets, such value to be determined as of the close of trading
one year from the date of the acquisition on December 7, 1999. Any deficiency in
the price of the Company's common stock is to be satisfied through the issuance
of additional shares. The per share closing price of the Company's stock at June
30, 2000 was $.5625 indicating a deficiency of approximately $1,359,375 between
the guaranteed value and the value of the stock given at the transaction date.
Note 7 - Stockholders' Equity
During the six months ended June 30, 2000, the Company issued to three
employees 60,000 shares of common stock for $2.37 per share pursuant to the
Company's stock option plan. Cash proceeds from the issuance of these shares
were $35 and the Company accepted promissory notes totaling $145,022 for the
balance.
During the six months ended June 30, 2000, the Company acquired a 25%
equity interest in HandRes, Inc. in exchange for 300,000 shares of the Company's
restricted common stock valued at $675,000.
During the six months ended June 30, 2000, the Company issued 120,000
shares of its common stock valued at $133,750 for professional services.
During the six months ended June 30, 1999 the Company issued to its
founders, including 750,000 shares to an officer, 1,500,000 shares of common
stock valued at $.08 per share and subject to continuing legal restrictions.
Cash proceeds from the issuance of these shares were $1,500 and the Company
recognized expense of $118,500 for the balance.
12
<PAGE>
Techlabs, Inc.
Notes to Consolidated Financial Statements
(unaudited)
Note 7 - Stockholders' Equity - (continued)
During the six months ended June 30, 1999, the Company sold in a
private placement exempt from registration, 1,500,000 shares of common stock at
$.10 per share. Available with these shares were options to purchase an
additional 3,500,000 shares also at a purchase price of $.10 per share. These
options were later exercised, resulting in aggregate proceeds to the Company
from the two blocks of $492,170.
Note 8 - Related Party Transactions
During the six months ended June 30, 1999, the Company converted
1,000,000 shares of the founders common stock into 9,000,000 shares of Class A
special preferred stock.
During the six months ended June 30, 2000, certain stockholders in the
Company made cash advances totaling $204,450 in order to meet the Company's
operational needs. These advances at June 30, 2000 totaled $937,391 and are
included in the balance sheet under the caption "Long-term Notes Payable to
Stockholders".
Item 2.
Management's Discussion and Analysis or Plan of Operation
Results of Operations
Net revenues for the three months and six months ended June 30, 2000 increased
to $19,352 and $31,977, respectively, from the same periods in the prior fiscal
year. We were still in the development stage during the three months and six
months ended June 30, 1999 and reported no revenues. The increase in revenues
was attributable to advertising revenues generated from MyStartingPoint.com,
Inc. and Interplanner.com.
Other general and administrative expenses increased $274,637, or approximately
320%, in the three months ended June 30, 2000 from the corresponding period in
fiscal 1999. General and administrative expenses increased $294,868, or
approximately 124%, for the six months ended June 30, 2000 from the six months
ended June 30, 1999. Included in other general and administrative expenses at
June 30, 2000 is a non- recurring $133,000 non-cash charge related to stock
compensation paid to an officer, and a non-recurring $118,000 non-cash charge
related to stock compensation paid to an investment banking firm. Giving effect
to these non-cash charges, other general and
13
<PAGE>
administrative expenses increased $43,868 in the first six months of fiscal
2000. This increase is primarily attributable to the launch of Interplanner.com
during the second quarter of fiscal 2000, including our co-branded calendar
service with Free Internet.com.
During the second quarter of fiscal 2000 we began liquidating our position in
the marketable equity securities of the BigHub.com, Inc. Realized loss on
trading securities, which represents the difference between the carrying value
of the security at March 31, 2000 and amount we received upon its sale during
the three months ended June 30, 2000, was $46,151. The unrealized loss on
trading securities was $2,263,236 and $2,393,236, respectively, for the three
months and six months ended June 30, 2000. Unrealized loss on trading securities
is the difference in the fair market value of the stock at June 30, 2000 from
its fair market value at March 31, 2000. The non-cash loss is a result of the
decrease in the market value at June 30, 2000 compared to December 31, 1999 of
holdings in the common stock of the BigHub.com, Inc.
As a result of all the above, our net loss increased by $2,688,823 and
$3,008,130, respectively, for the three and six months ended June 30, 2000 from
the comparable periods in fiscal 1999.
Liquidity and Capital Resources
Working capital at June 30, 2000 decreased to $368,337 compared to $2,210,254 at
December 31, 1999. Approximately $2,457,969 of the net decrease in working
capital is attributable to a decrease at June 30, 2000 in the market value of
our holdings in the BigHub.com, Inc. from the market value of those securities
at December 31, 1999.
Our principal sources of capital during the first six months of fiscal 2000 were
from stockholder advances totaling $204,450, and $18,581 from the open market
sale of shares of the BigHub.com. Our principal uses of capital during the first
six months of fiscal 2000 were $67,988 for funding of operations, and $85,325
for capitalized web site development costs related to Interplanner.com.
Other than working capital which is available to us from the liquidation of the
marketable equity securities we own in the BigHub.com, Inc., we currently have
no source for working capital to fund our current operations. In order to
provide sufficient cash to fund our operations at their current levels, we may
be forced to continue liquidating the marketable securities we hold in the
BigHub.com, Inc. at a time when the stock price of the BigHub.com is lower than
it has been in recent months.
If we are to pursue the further implementation of our business plan, we will be
required to make various capital expenditures to continue the development of our
subsidiaries' operations during the balance of fiscal 2000. As of the date of
this quarterly report, we estimate the total costs of these capital expenditures
will be approximately $3 million to
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$5 million. We will be required to raise additional capital during the next 12
months to satisfy these cash requirements. In May 2000 we hired an investment
banking firm to consult with us on a variety of matters, including matters
related to an equity capital raise. At this time, however, we have no agreements
or understanding with any third parties regarding additional capital, and we
cannot guarantee that we will be successful in obtaining capital upon terms
acceptable to us, if at all.
As a result of the uncertainty in our ability to raise sufficient capital to
continue the implementation of our business plan, we may begin to explore
opportunities for a business combination with an operating company. Because of
our limited revenues and need for additional capital to further develop our
businesses, it is possible that such a business combination, if pursued, may
result in a change of control of Techlabs. As of the date of this quarterly
report, we have no agreements or understandings regarding any merger or
acquisition transactions with any third parties, and we are unable to predict at
this time the terms or conditions of any proposed business combination if we
should elect to pursue this strategy.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
During the six months ended June 30, 2000 we issued 120,000 shares of
our common stock, valued at $133,750, for services, in transactions exempt from
registration under the Securities Act of 1933 in reliance on an exemption under
Section 4(2) of the act. Included in these issuances were 100,000 shares issued
to an investment banking firm and 20,000 shares issued to an employee as
compensation under our qualified stock option plan. The recipients were either
accredited investors or were financially sophisticated investors with knowledge
and experience in financial and business matters that they were capable of
evaluating the merits and risks of the prospective investment and had access to
all relevant information reasonably necessary to evaluate Techlabs.
During the six months ended June 30, 2000 we also issued 60,000 shares
of our common stock to three employees upon the exercise of previously granted
options under our qualified stock option plan in exchange for promissory notes
totaling $142,050 and cash proceeds of $35. These transactions were exempt from
registration under the Securities Act of 1933 in reliance on an exemption under
Section 4(2) of the act. These notes, which bear interest at 8% per annum, are
due over periods ranging from August 2001 until November 2001.
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
In June 2000 we entered into a five year employment agreement with our
president and CEO, Thomas J. Taule. Under the terms of the agreement, we pay Mr.
Taule an annual salary of $150,000, subject to increases and bonuses as set
forth in the agreement. We can terminate the employment of Mr. Taule either with
or without good cause. If we terminate Mr. Taule without cause, or if his
employment is terminated following a change of control of Techlabs, we are
obligated pay Mr. Taule a lump sum amount equal to the amount of base
compensation, benefits and bonuses due for the remainder of the term of the
agreement. We have agreed not to terminate Mr. Taule's agreement without cause
during the first three years of the term. To the extent that Mr. Taule's
employment is terminated for cause, or if he terminates the agreement, no
severance benefits shall be paid. The employment agreement contains customary
non- disclosure provisions, as well as an non-compete following the termination
of the agreement.
A copy of the employment agreement with Mr. Taule is filed as an
exhibit to this quarterly report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
No. Description
--- -----------
10 Employment Agreement with Thomas J. Taule
27 Financial Data Schedule
(b) None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Techlabs, Inc.,
a Florida corporation
Date: August 14, 2000 /s/ Thomas J. Taule
--------------------------------------
Thomas J. Taule,
President and Chief Executive Officer
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INDEX TO EXHIBITS
No. Description
--- -----------
10 Employment Agreement with Thomas J. Taule
27 Financial Data Schedule
