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U. S. SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
OF 1934
For the transition period from _______ to _______
Commission file Number 0-29711
PageLab Network, Inc.
(Exact name of small business issuer)
Minnesota 41-1596056
(State of incorporation) IRS Employer Identification number
43 Main St SE, Suite #508, Minneapolis, MN 55414
(Address of principal executive offices)
(612) 362-9224
(Registrant's telephone number)
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 periods 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 [ ]
The number of shares outstanding of each of the registrant's classes of
capital stock, as of August 1, 2000 :
Common Stock, no par value, 10,522,665 shares.
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PageLab Network, Inc.
Index
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
Page
<S> <C> <C>
Balance Sheets -
June 30, 2000 and December 31, 1999 3
Statements of Operations -
Three and six months ended June 30, 2000 and 1999 4
Statements of Stockholders' Equity -
Six months ended June 30, 2000 5
Statements of Cash Flows -
Six months ended June 30, 2000 and 1999 6
Notes to Financial Statements - June 30, 2000 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 8
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS 8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8
ITEM 5. OTHER INFORMATION 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8
SIGNATURES 9
</TABLE>
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PAGELAB NETWORK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Current Assets
Cash $ 32,391 $ 18,441
Accounts receivable 3,250 3,247
Prepaid expenses 0 1,628
----------------- ------------------
Total current assets 35,641 23,316
Property and Equipment, Net 38,543 17,195
Intangibles, Net 211,126 235,034
Other assets 6,800 0
----------------- ------------------
TOTAL ASSETS $ 292,110 $ 275,545
================= ==================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 47,133 $ 9,035
Current portion of long-term debt 32,000 36,879
----------------- ------------------
Total current liabilities 79,133 45,914
LONG-TERM DEBT, NET OF CURRENT PORTION 91,218 161,569
STOCKHOLDERS' EQUITY
Common Stock, 40,000,000 shares authorized;
no par or stated value 838,132 307,500
Accumulated deficit (716,373) (239,438)
----------------- ------------------
121,759 68,062
----------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 292,110 $ 275,545
================= ==================
</TABLE>
See Accompanying Notes to Financial Statements.
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PAGELAB NETWORK, INC.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------------- ---------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 684 $ - $ 2,493 $ -
COSTS AND EXPENSES:
Costs of revenues earned 13,568 - 28,136 -
Selling, general and administrative 149,153 - 303,821 -
Research and development 63,511 - 146,930 -
----------------- -------------- -------------- ------------
Total Costs and Expenses 226,232 - 478,887 -
----------------- -------------- -------------- ------------
OPERATING INCOME (LOSS) (225,548) - (476,394) -
OTHER INCOME (EXPENSE):
Other income 3,114 3,114
Interest expense (2,298) - (4,735) -
Interest income 278 - 1,080 -
----------------- -------------- -------------- ------------
NET LOSS $ (224,454) $ - $ (476,935) $ -
================= ============== ============== ============
WEIGHTED AVERAGE SHARES OUTSTANDING 9,445,995 9,101,832
================= ==============
BASIC AND DILUTED EARNINGS PER SHARE ($0.02) ($0.05)
================= ==============
</TABLE>
See Accompanying Notes to Financial Statements.
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PAGELAB NETWORK, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK COMMON
OUTSTANDING STOCK
---------------------- --------------------
<S> <C> <C>
Balance, December 31, 1999 8,457,665 $307,500
Common Stock issued, January 2000 1,950,000 390,000
Reduction of Subscription Notes Receivable, February 2000 3,334
Stock-based compensation expense 22,298
Common Stock issued May/June 2000 115,000 115,000
Retirement of Investment Account shares (1,000,000)
Net loss for the six months ended June 30, 2000
---------------------- --------------------
Balance, June 30, 2000 9,522,665 $838,132
====================== ====================
See Accompanying Notes to Financial Statements.
<CAPTION>
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
--------------------- ----------------------
<S> <C> <C>
Balance, December 31, 1999 ($239,438) $68,062
Common Stock issued, January 2000 390,000
Reduction of Subscription Notes Receivable, February 2000 3,334
Stock-based compensation expense 22,298
Common Stock issued May/June 2000 115,000
Retirement of Investment Account shares -
Net loss for the six months ended June 30, 2000 (476,935) (476,935)
--------------------- ----------------------
Balance, June 30, 2000 ($716,373) $121,759
===================== ======================
</TABLE>
See Accompanying Notes to Financial Statements.
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PAGELAB NETWORK, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
---------------------------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($476,935) $ -
Adjustments required to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 27,686 -
Stock-based compensation expense 22,298 -
Gain on sale of property (3,114)
(Increase) decrease in:
Accounts receivable (3) -
Prepaid expenses 1,628 -
Other assets (6,800)
Increase (decrease) in:
Accounts Payable 38,098 -
-------------------- ---------------
NET CASH USED IN OPERATIONS (397,142) -
-------------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (25,221) -
Purchase of intangibles (791) -
Proceeds from sale of property 4,000 -
-------------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (22,012) -
-------------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock and warrants 458,334 -
Proceeds from loan 4,000 -
Reduction of long-term debt (29,230) -
-------------------- ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 433,104 -
-------------------- ---------------
Increase in Cash and Cash Equivalents 13,950 -
Beginning Cash Balance 18,441 -
-------------------- ---------------
Ending Cash Balance $32,391 $ -
==================== ===============
NON-CASH TRANSACTIONS:
Long-term Debt Converted to Common Stock $50,000
</TABLE>
See Accompanying Notes to Financial Statements.
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PageLab Network, Inc.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. They should be read in conjunction with the financial statements
for the year ended December 31, 1999 included in the Company's Form 10SB
registration statement. In the opinion of management, the interim condensed
financial statements include all adjustments (consisting of normal recurring
accruals) necessary for the fair presentation of the results for interim periods
presented. The results of operations for the three and six months ended June 30,
2000, are not necessarily indicative of the results to be expected for the full
year. Because the Company began operating in July 1999, the statements of
operations and cash flows for the periods ended June 30, 1999 have no activity.
Earnings per share is computed using the weighted average shares of common stock
outstanding during the period. Options and warrants are anti-dilutive and were
therefore excluded from the calculation.
Corporate Liquidity: The Company is currently attempting to raise equity through
a $300,000 private placement. In addition, the Company is also pursuing a debt
financing arrangement, exercise of existing stock warrants as well as an
additional private placement offering. The Company is also prepared to reduce
its operating levels to reduce liquidity needs. However, no assurance can be
given that the Company will be able to secure additional financing when needed,
or at all.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2000
Our purpose is to enable e-commerce merchants to gain market share on the web by
obtaining ideal Internet customer traffic in a cost-effective manner. This is
accomplished by focusing on search engine technologies and expert services that,
on one hand, allows Internet users to receive highly relevant search results
through dialogue, while on the other hand, providing e-commerce merchants with
visibility and affiliations that help them gain market share on the web.
The results of operations for the period ended June 30, 2000 do not include
quarter-to-quarter comparisons since the Company did not commence operations
until July 1999.
As a result of a decision in late 1999 to improve our core technology and
realign ourselves with a different target customer base, the revenue stream from
merchant advertising fees has decreased from levels achieved during the third
and fourth quarters of 1999. In addition, we have accelerated the development of
a dialogue-based search engine technology called Subjex in the first and second
quarters of 2000. These development efforts resulted in a beta launch of Subjex
during the quarter ended June 30, 2000.
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We have reassessed the strategic positioning of Subjex in the marketplace as a
necessary element in the growing influence of wireless and handheld
infrastructure. We believe that the Subjex search engine technology is highly
suitable for licensing to wireless and handheld device manufacturers, including
adaptability to a voice recognition interface. Furthermore, our business
development efforts are also being directed to large corporate or private
databases where Subjex can be licensed as a friendly user interface to such
data. We believe that the Subjex(TM) dialogue-based search engine has enormous
opportunities in the Asian and European markets where wireless and handheld
technology is achieving significant growth. We are currently pursuing strategic
alliances or joint ventures in this regard.
We believe that the improvements made to our core technologies during the second
quarter ended June 30, 2000, including the beta launch of Subjex, will now allow
us to begin revenue generation through our business development efforts. Revenue
streams have begun in July as a result of the agreements with e-commerce
merchants for purposes of the Subjex affiliate network program and top search
engine rankings. Since the nature of our revenue streams in the Subjex affiliate
network program and top search engine rankings is performance-based, it is
necessary to achieve a higher penetration of e-commerce merchants, while at the
same time increasing the number of Subjex users. We expect to obtain revenue
through licensing fees from the deployment of Subjex as an on-site web site
search tool or other private databases, but such revenue will likely begin to
occur in the fourth quarter ended December 31, 2000.
Research and development costs include internal and subcontracted expenses to
perform improvements to our core technologies which support our expert services
associated with merchant advertising, as well as the development of Subjex.
Quarter-over-quarter expenses for research and development reflect a decrease of
24% primarily as a result of a reduction in contracted expenses for technology
development.
Selling, general and administrative expenses for the quarter ended June 30, 2000
were $149,153 compared to $154,668 for the quarter ended March 31, 2000. If
one-time expenses of approximately $50,000 for business planning and advisory
service fees were excluded from the March 31, 2000 quarterly S,G&A amount, the
quarter-over-quarter increase in S,G&A expenses was 43%. This increase is
primarily related to the addition of new personnel to support the sales and
marketing and financial operations.
Our working capital at June 30, 2000 is not sufficient to attain our plans in
the near term. To address this liquidity need, we are currently selling shares
of Common Stock in a private placement, obtaining early exercises of stock
warrants and managing operational expenses. As of June 30, 2000, the Company had
received commitments for approximately 40% of a $300,000 private placement. Our
existing warrant holders from a previous private placement offering are being
encouraged to exercise their warrants by August 15, 2000, through the issuance
of a replacement warrant incentive. We expect that the combination of the
current private stock sales and warrant exercises would provide liquidity to
fund operations through September.
In the event that such funding initiatives are unable to meet operating capital
requirements, we are conducting corollary efforts for temporary bridge note
financing, a credit facility with a financial institution, and a expense
reduction plan. Also, to help meet our longer-term liquidity needs, in August
2000, we entered into a commitment with a finder to accomplish private placement
offering for $2 million. However, there can be no assurance that our private
equity placements will be completed and/or that we will be able to obtain
financing on terms acceptable to the Company. Therefore, the Company may be
forced to curtail its operations and scale back its business plan.
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PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities and Use of Proceeds
In May and June 2000, the Company commenced a private placement offering for
Common Stock. The total shares and money raised as of June 30, 2000 in
conjunction with this offering was $115,000.
Item 3 - Defaults on Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
During the quarter ended June 30, 2000, we filed a Form 8-K in connection with a
change in our Certifying Accountant. This report was filed May 10, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PageLab Network, Inc.
(registrant)
/s/ Andrew D. Hyder Date: August 8, 2000
-----------------------------------
Andrew D. Hyder, President and CEO
/s/ John Brand Date: August 8, 2000
------------------------------------
John Brand, Chief Financial Officer
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