UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the six month period ended June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from -------------- to ------------------
Commission file number: 333-79831
Pipeline Data Inc.
------------------
(Exact name of small business issuer
as specified in its charter)
Delaware 13-3953764
----------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
250 East Hartsdale Avenue, Suite 21,
Hartsdale NY 10530; (914) 725-7028
--------------------------------------------------------------
(Address and telephone number of principal executive offices,
principal place of business,
and name, address and telephone number of agent for service of process)\
Jack Rubinstein
250 East Hartsdale Avenue, Suite 21,
Hartsdale New York 10530
(914) 725-7028
Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. N/A
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of September 12, 2000, the
Company there are 3,080,758 shares of common stock issued and outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
PIPELINE DATA INC.
JUNE 30, 2000 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Page Number
-----------
Special Note Regarding Forward Looking Information...................... 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements............................................ 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................... 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................... 17
Item 2. Changes in Securities and Use of Proceeds....................... 17
Item 3. Defaults Upon Senior Securities................................. 17
Item 4. Submission of Matters to a Vote of Security Holders............. 17
Item 5. Other Information............................................... 17
Item 6. Exhibits and Reports on Form 8-K................................ 17
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
To the extent that the information presented in this Quarterly Report on
Form 10-QSB for the quarter ended June 30, 2000 discusses financial projections,
information or expectations about our products or markets, or otherwise makes
statements about future events, such statements are forward- looking. We are
making these forward-looking statements in reliance on the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Although we
believe that the expectations reflected in these forward-looking statements are
based on reasonable assumptions, there are a number of risks and uncertainties
that could cause actual results to differ materially from such forward-looking
statements. These risks and uncertainties are described, among other places in
this Quarterly Report, in "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
In addition, we disclaim any obligations to update any forward-looking
statements to reflect events or circumstances after the date of this Quarterly
Report. When considering such forward-looking statements, you should keep in
mind the risks referenced above and the other cautionary statements in this
Quarterly Report.
3
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The condensed financial statements for the period ended June 30, 2000
included herein have been prepared by Pipeline Data, Inc., (the "Company")
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (the "Commission"). In the opinion of management, the
statements include all adjustments necessary to present fairly the financial
position of the Company as of June 30, 2000, and the results of operations and
cash flows for the six month periods ended June 30, 1999 and 2000.
The Company's results of operations during the six months of the Company's
fiscal year are not necessarily indicative of the results to be expected for the
full fiscal year.
The financial statements included in this report should be read in
conjunction with the financial statements and notes thereto in the Company's
Annual Report on Form 10-KSB for the fiscal years ended December 31, 1999.
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
STATEMENTS
Report of Reviewing Independent Accountant..................... 5
Balance Sheet as of June 30, 2000 and
December 31, 1999........................................... 6
Statement of Operations for the three months
ended June 30, 2000 and 1999................................ 7
Statement of Cash Flows for the three months
ended June 30, 2000 and 1999................................ 8
Statement of Stockholders' Equity for the
three months ended June 30, 2000........................... 9
Notes to Consolidated Financial Statements..................... 10
4
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PIPELINE DATA, INC.
(a development stage company)
BALANCE SHEET
December 31, June 30, 2000
1999 Unaudited
----------- --------------
Assets
Current assets $114,868 $555,771
-------- -------
Total current assets 114,868 555,771
Total assets $114,868 $555,771
======== ========
Liabilities and Stockholders' Equity
Current liabilities
Accrued expenses $21,000 $25,500
------- -------
Total current liabilities 21,000 25,500
Stockholders' equity
Preferred stock authorized 5,000,000 shares;
$0.001 par value each.
At December 31, 1999 and June 30, 2000
there are -0- and -0- shares oustanding.
Common Stock authorized 20,000,000 shares,
$0.001 par value each. 2,325 2,325
At December 31, 1999 and June 30, 2000,
there are 2,325,000 and 2,325,000
shares outstanding respectively .
Additional paid in capital 631,346 631,346
Common stock and warrants subscribed 453,000
Deficit accumulated during the development stage (539,803) (556,400)
--------- ---------
Total stockholders' equity 93,868 530,271
------- -------
Total liabilities and stockholders' equity $ 114,868 $555,771
========= ========
See accompanying notes to financial statements.
5
<PAGE>
PIPELINE DATA, INC.
(a development stage company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the period
For the six months For the six from inception,
months ended months ended June 23, 1997, to
June 30, 1999 June 30, 2000 June 30, 2000
Unaudited Unaudited Unaudited
-------------- --------------- ----------------
<S> <C> <C> <C>
Revenue $30,000 $-0- $52,500
Costs of goods sold -0- -0- -0-
Gross profit 30,000 -0- 52,500
Operations General and administrative 58,649 16,597 207,626
Non cash compensation - legal
and consulting fee 394,000
Depreciation and amortization ------ --------- 2,852
Total expense 58,649 16,597 604,478
Loss from operations (28,649) (16,597) (551,978)
Other income and expense
Interest expense 1,050 4,422
1,050 4,422
Net income (loss) $(29,699) $(16,597) $(556,400)
--------- -------- ---------
Net income (loss) per share -basic $(0.02) $(0.00)
Number of shares outstanding-basic 1,250,000 2,325,000
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
PIPELINE DATA, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the period
For the six For the six from inception,
months ended months ended June 23, 1997, to
June 30, 1999 June 30, 2000 June 30, 2000
Unaudited Unaudited Unaudited
--------------- -------------- ----------------
<S> <C> <C> <C> .
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(29,699) $(16,597) $(556,400)
Adjustments to reconcile net loss
to cash used in operating activites
Add items not affecting cash
Non cash compensation consulting fees
paid with shares of common stock 394,000
Depreciation 2,852
Changes in non-cash operating accounts
Accrued expenses 4,500 25,500
-------- -------- --------
TOTAL CASH FLOWS USED BY OPERATIONS (23,699) (12,097) (134,048)
CASH FLOWS FROM FINANCING ACTIVITIES
Officer loan payable (72,622) -0-
Sale of shares of common stock 114,672 453,000 577,750
Capital contribution 114,921
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 42,050 453,000 692,671
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of office equipment (2,852)
------- --------- --------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (2,852)
NET INCREASE (DECREASE) IN CASH 18,351 440,903 555,771
CASH BALANCE BEGINNING OF PERIOD 4,367 114,868 -0-
CASH BALANCE END OF PERIOD $ 22,718 $555,771 $555,771
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
PIPELINE DATA, INC.
(a development stage company)
STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Additional Warrants Deficit
Common Stock Common paid in accumulated during
Date Stock capital developent stage Total
---- ------------ ------- ----------- -------- ----------------- -------
<S> <C> <C> <C> <C> <C> <C>
June 23,1997 100 $1 $9,748 $9,749
Forward split of shares 1,000,000 1,000 8,749 9,749
Cancellation of shares (750,000) (750) 750
Net loss (38,620) (38,620)
December 31, 1997 restated 250,000 250 9,499 (38,620) (28,871)
Shares issued for 752,500 752 187,373 188,125
consulting fees
Net loss (236,509) (236,509)
Balance December 31, 1998 1,002,500 1,002 $196,872 (275,129) (77,255)
Sale of shares 1,247,500 1,248 310,627 311,875
Capital contribution 105,172 105,172
Cancellation of shares (25,000) (25) (6,225) (6,250)
Issuance of shares for 100,000 100 24,900 25,000
legal fees
Net loss (264,674) (264,674)
Balance December 31, 1999 2,325,000 $2,325 $631,346 (539,803) $93,868
Unaudited
Sale of shares and warrants 453,000
Net loss (16,597) (16,597)
Balances June 30, 2000 2,325,000 $2,325 $631,346 $453,000 $(556,400) $530,271
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
PIPELINE DATA, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE A--BASIS OF PRESENTATION The accompanying unaudited financial
statements have been prepared in accordance with generally accepted principles
for interim financial information, 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 necessary adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results of Pipeline Data, Inc. (the
"Company") for the six months ended June 30, 1999 and 2000 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2000.
NOTE B--EARNINGS PER SHARE
Basic loss per common share is computed by dividing the loss by the
weighted average number of common shares outstanding during the period. During
the six month periods through June 30, 2000, there were no dilutive securities
outstanding.
NOTE C - INCOME TAXES
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 1999 and June 30, 2000,
the Company had no material current tax liability, deferred tax assets, or
liabilities to impact on the Company's financial position because the deferred
tax asset related to the Company's net operating loss carry forward and was
fully offset by a valuation allowance.
At June 30, 2000, the Company has net operating loss carry forwards for
income tax purposes of $556,400. These carry forward losses are available to
offset future taxable income, if any, and expire in the year 2010.
The components of the net deferred tax asset as of June 30, 2000 are as
follows:
Deferred tax asset:
Net operating loss carry forward $ 189,176
Valuation allowance $ (189,176)
Net deferred tax asset $ -0-
The Company recognized no income tax benefit from the loss generated for
the period from the date of inception to June 30, 2000. SFAS No. 109 requires
that a valuation allowance be provided if it is more likely than not that some
portion or all of a deferred tax asset will not be realized. The Company's
ability to realize benefit of its deferred tax asset will depend on the
generation of future taxable income. Because the Company has yet to recognize
significant revenue from the sale of its products, the Company believes that a
full valuation allowance should be provided.
9
<PAGE>
NOTE F - COMMITMENTS AND CONTINGENCIES
a. Lease agreements
The company occupies office space at the office of the President at 250
East Hartsdale Avenue, Hartsdale, New York, 10530 at a monthly rental of $500.
b. Officer Compensation
For the period from inception, June 23, 1997, to June 30, the company has
accrued a minimal compensation of $500 per month as compensation to Mr.
Rubinstein as consideration for services while the company is in the development
stage of development.
NOTE G - PUBLIC OFFERING
The Company is in the process conducting a public offering of the following
securities:
(i) 1,000,000 shares of common stock at a price of $0.50 per share,
(ii) 1,000,000 Class A Redeemable Warrants, at a price of $0.10 per Warrant, and
(iii) 1,000,000 Class B Redeemable Warrants at a price of $0.10 per Warrant.
The Company also is registering, concurrently with the offering, the sale
of 1,250,000 shares of Common Stock owned by shareholders. Any proceeds and
profits from their sale will go to these shareholders and not to the Company.
The selling shareholders may resell their Common Stock at prices below our
initial offering price. They have agreed not to sell any of their shares until
one year from the effective date of this Registration Statement.
As of June 30, 2000, the Company has received subscriptions for an
aggregate of 757,690 shares of common stock for an aggregate of 741,550 warrants
for an aggregate consideration of $453,000. Subsequent to the date of the
financial statements, the Company made delivery of both the share and the
warrant certificates.
Item 2. Management's Discussion and Analysis or Plan of Operation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 2000 AND FOR THE PERIOD
FROM INCEPTION (JUNE 23, 1997) TO JUNE 30, 2000.
The following discussion relates to the results of our operations to date,
and our financial condition:
This prospectus contains forward looking statements relating to our
company's future economic performance, plans and objectives of management for
future operations, projections of revenue mix and other financial items that are
based on the beliefs of, as well as assumptions made by and information
currently known to, our management. The words "expects, intends, believes,
anticipates, may, could, should" and similar expressions and variations thereof
are intended to identify forward-looking statements. The cautionary statements
set forth in this section are intended to emphasize that actual results may
differ materially from those contained in any forward looking statement.
10
<PAGE>
Development stage activities.
The company has been a development stage enterprise from its inception June
23, 1997 to June 30, 2000. The company is in the process of developing a web
site on the World Wide Web for the purpose of selling health care products and
sharing its expertise by doing consulting.
During this period, management devoted the majority of its efforts to
initiating the process of the web site design and development, obtaining new
customers for sale of consulting services, developing sources of supply,
developing and testing its marketing strategy and finding a management team to
begin the process of: completing its marketing goals; furthering its research
and development for its products; completing the documentation for and selling
initial shares through the company's private placements; and completing the
documentation for the company's initial public offering. These activities were
funded by the company's management and investments from stockholders. The
company has not yet generated sufficient revenues during its limited operating
history to fund its ongoing operating expenses, repay outstanding indebtedness,
or fund its web site and product development activities. There can be no
assurance that development of the web site will be completed and fully tested in
a timely manner and within the budget constraints of management and that the
company's marketing research will provide a profitable path to utilize the
company's marketing plans. Further investments into web site development,
marketing research as defined in the company's operating plan will significantly
reduce the cost of development, preparation, and processing of purchases and
orders by enabling the company to effectively compete in the electronic market
place.
During this developmental period, the company has been financed through
officer's loans with a balance of $43,672 from Jack Rubinstein, which were
converted to additional paid in capital as of June 30, 1999. The company also
financed its activities through the sale of shares of common stock and warrants
aggregating $692,671.
Results of Operations for the six months ended June 30, 2000 as compared to
the six months ended June 30, 1999.
For the six months ended June 30, 2000, the company generated net sales of
$-0- as compared to $30,000 for the six months ended June 30, 1999 representing
an decrease of $30,000. The company's cost of goods sold for the six months
ended June 30, 2000 was $-0- as compared to $-0- for the six months ended June
30, 1999. The company's gross profit on sales was approximately $-0- for the six
months ended June 30, 2000 as compared to $30,000 for the six months ended June
30, 1999. The decrease in sales and gross profit is the result of focusing the
Company's efforts on completing the website and developing its internet
business.
The company's general and administrative costs aggregated approximately
$16,597 for the six months ended June 30, 2000 as compared to $58,649 for the
six months ended June 30, 1999 representing an decrease of $42,052. An analysis
of expenses for the six months ended June 30, 2000 includes spending for
professional fees of $11,260, rent of $3,000, office expense of $87, officer
compensation of $2,250.
11
<PAGE>
Results of Operations for the period from inception (June 23, 1997) to June
30, 2000.
For the period from the company's inception, June 23, 1997, through June
30, 2000, a period of approximately 36 months, the company generated net sales
of $52,500 (an average of $1,458 per month). The company's cost of goods sold on
sales was approximately $-0- for the period from the company's inception June
23, 1997, through June 30, 2000. The gross profit from sales for this 36 month
period is $52,500. Management believes the gross profit of an average of
approximately $1,458 per month for the period from inception, June 23, 1997,
through June 30, 2000, will improve and stabilize once the company's web site
facilities become realized at the completion of the public offering and its
marketing plans become fully implemented.
The company's general and administrative costs aggregated approximately
$604,478 for the period from inception, June 23, 1997, through June 30, 2000. Of
these initial startup costs, approximately $40,000 is attributed to wages,
telephone of $12,804, professional fees of $68,798, rent of $22,875, and office
and computer expenses of $47,251, $394,000 in consulting expenses paid with
shares of common stock and $18,750 in officer compensation.
Liquidity and Capital Resources.
The company increased its cash position to $555,771 at June 30, 2000 from a
cash balance of $-0- at June 23, 1997. The Company has increased its cash
position by approximately $453,000 through the sale of an aggregate of 757,690
shares of common stock for an aggregate of 741,550 warrants. Working capital at
June 30, 2000 was positive at $530,271. The Company expended cash through its
negative cash flows from operations of $12,097 for the six months ended June 30,
2000.
Management believes that it will be able to fund the company through its
present cash position and the continuation of offering consulting services and
the receipt of additional capital contributions until the company's web site is
developed and on-line and the process of a public offering is completed.
Capital Commitments and Future Expenditures
Our web site located at http://www.healthpipeline.com is currently
operational and may be "clicked on" for inspection. We believe that expansion
and modification of the web site and business will occur in several stages.
The first stage consists of initial web site construction and collection of
health-related data from existing web sites and service providers and equipping
our facility with hardware, primarily workstations and dedicated data feed
supply lines. This has been partially completed. To complete the development of
our web-site, we require:
o a web-enabled platform by which we can implement an Internet application
that will be scalable (capable of growing to support additional users)
enough to handle hundreds or thousands of users, yet flexible enough to
meet continually changing business requirements and
o highly defined customization enabling a subscriber to specify his/her
fields of interest within the entire spectrum of health, medicine, and
pharmacy. Through this feature, we will be able to create a database of
user profiles (a knowledgebase of subscribers) which we can market to
medical research companies, companies involved in clinical trials,
marketers and other sources of revenue generation.
12
<PAGE>
This phase of development will commence upon receipt of the minimum
proceeds from this offering. The completion of this portion of our development
is dependent upon the receipt of the maximum proceeds from this offering. In the
event that we do not raise the maximum amount sought by this offering, we will
have to seek alternative sources of financing. We cannot assure you that we will
be able to secure financing from other sources. Assuming we raise the maximum
offering amount, we anticipate the completion of our website development around
the second quarter of 2001.
Neither the purchase/installation of workstations and dedicated T-1 supply
lines nor the development of a web enabled platform with highly defined
customization has taken place. Hardware requirements require approximately
$30,000 of capital expenditures and T-1 supply lines can be leased for
approximately $1500-$2000 per month. Thus, completion of workstation/T-1 supply
lines portion would require approximately $54,000 and to complete the
development of the web-site would require a total of approximately $175,000
during the next twelve (12) months. The next stage of operation/expansion
consists of marketing/advertising expenditures. To refine and commence our
marketing strategy, we require, among other things:
o a market study on the largest recruiters of clinical trial participants and
their recruitment methods in the hopes of tapping this potential revenue
producing source upon the commercialization of our site. We expect to be
completed the third quarter of 2000. We expect to commence this campaign
upon receipt of the minimum proceeds;
o the execution of a consumer public relations and advertising campaign to
raise awareness of the site and subsequently attract visitors to the site.
This campaign will include on-line and off-line activities. As a first
step, we have retained Rainbow Media to act as our promotional agent. Among
their activities will be arranging for media interviews and press coverage,
distributing news releases, and any other activity that might raise the
profile of our company and our services. We expect to commence this
campaign after the completion of our website, which we anticipate occurring
no earlier than the second quarter 2001. This will be an ongoing campaign;
o the execution of a business-to-business public relations and advertising
campaign to attract pharmaceutical firms, pharmacy chains, medical device
manufacturers, clinical trial companies, biotechnology firms and other
health care marketers, as well as their advertising agencies, as
advertisers and/or sponsors. We expect to commence this campaign during the
third quarter of 2000. This will be an ongoing campaign; and
o the execution of an ongoing effort to build relationships with strategic
organizations in the healthcare and information technology sectors. These
organizations would include healthcare marketers including pharmaceutical
firms, medical service companies--as well as charitable research
foundations and publishers, pharmacies, clinical trial organizations,
allied health-care groups, and customer media. We expect to commence this
campaign upon receipt of the minimum proceeds. This will be an ongoing
campaign.
We estimate that approximately $175,000 may be needed for this stage of
operation/expansion. The completion of this phase of our development is
dependent upon the receipt of the maximum proceeds from this offering. In the
event that we do not raise the maximum amount sought by this offering, we will
have to seek alternative sources of financing. We cannot assure you that we will
be able to secure financing from other sources.
13
<PAGE>
The next stage of operation/expansion consists of attempts to engage in
assembling a high quality management team and strategic alliances with health
care professionals and organizations having synergies with our company. The
exact details of this stage are difficult to predict and a number of different
strategies have evolved in the current dynamic information marketplace. In
addition, web site development has increased rapidly and web site capabilities
maybe achieved by purchasing future, existing sites rather than developing them
internally. Several existing health care web sites have been able to recruit
health professionals through the use of stock options and other forms of
incentive compensation which require little current, out of pocket expenditure.
We are unable to predict whether we can replicate this strategy. Accordingly, we
estimate that approximately $175,000 may be needed for this stage of
operation/expansion, which we will commence upon the receipt of the minimum
proceeds of this offering.
Taken together and using these highest cost estimates, approximately
$525,000 of capital expenditures/development costs can be expected in order to
effectuate the three step process outlined above. Therefore we anticipate that
most of the net proceeds of this offering will be consumed in effectuating this
strategy. This is a non-underwritten offering and we cannot predict whether it
will be completed successfully. Should we not be able to complete this offering,
we would need to seek further financing. We have no present financing
commitments and would need to seek further financing. It is not certain that
such financing could be obtained, or if obtained, would be available at
commercially reasonable rates.
14
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.
PIPELINE DATA INC.
By: /s/ Jack Rubinstein
--------------------
Jack Rubinstein
President and Chief Financial Officer
Dated: September 12, 2000
15
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