<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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: 29951
PEDIANET.COM, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-1727874
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15 West End Avenue
Brooklyn, New York 11235
(Address of principal executive offices)
(Zip Code)
718-332-3994
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At November 6, 2000, there were 5,429,896 shares of Common Stock, $.001
par value, outstanding.
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
Certain information and footnote disclosures required under
generally accepted accounting principles have been condensed or omitted from the
following consolidated financial statements pursuant to the rules and
regulations of the Securities and Exchange Commission. It is suggested that the
following financial statements be read in conjunction with the year-end
financial statements and notes thereto included in the Company's Annual Report
on Form 10-SB/A dated May 22, 2000.
The results of operations for the nine month period ended
September 30, 2000 are not necessarily indicative of the results for the entire
fiscal year or for any other period.
<PAGE>
PEDIANET.COM, INC.
INDEX
Page Number
-----------
Part I. Financial Information
Item 1. Financial Statements 1
Consolidated Balance Sheets as
of September 30, 2000 (unaudited)
and December 31, 1999 2
Consolidated Statements of Operations
and Comprehensive Income for the
Three and Nine Months Ended
September 30, 2000 and 1999 (unaudited) 3 - 4
Consolidated Statements of Cash
Flows for the Nine Months Ended
September 30, 2000 and 1999
(unaudited) 5
Notes to Consolidated Financial
Statements (unaudited) 6 - 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10 - 12
Part II. Other Information
Item 1. Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Default in Senior Securities 13
Item 4 Submission of Matters to a
Vote of Security Holders 13
Item 5 Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
PEDIANET.com, INC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 101,074 $ 151,687
Marketable securities 10,000 25,000
Accounts receivable-shareholder 15,000 25,000
Prepaid interest 20,584 82,335
----------- -----------
Total Current Assets 146,658 284,022
Property, furniture and equipment - net 96,729 157,653
Other assets 4,800 --
----------- -----------
TOTAL ASSETS $ 248,187 $ 441,675
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 72,454 $ 129,864
Accrued expenses 27,900 92,530
Note payable 568,800 793,800
Loans payable-related parties -- 48,611
----------- -----------
Total Liabilities 669,154 1,064,805
----------- -----------
Commitments and Contingencies
Stockholders' (Deficiency):
Preferred stock, par value $.10
per share, 10,000,000 shares authorized;
outstanding 10,003 shares 1,000 1,000
Common stock, par value $.001 per share
50,000,000 shares authorized;
outstanding 5,429,896 and 5,248,557
shares 5,430 5,249
Additional paid-in capital 2,245,021 1,836,883
Cumulative other comprehensive (loss) (40,000) (25,000)
Note receivable - subscription agreement (625,000) (850,000)
Deficit (2,007,418) (1,591,262)
----------- -----------
Total Stockholders' (Deficiency) (420,967) (623,130)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' (DEFICIENCY) $ 248,187 $ 441,675
=========== ===========
</TABLE>
See notes to financial statements
-2-
<PAGE>
PEDIANET.com, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Sponsorship income $ -- $ 1,000 $ -- $ --
Website income -- 3,500 -- --
----------- ----------- ----------- -----------
-- 4,500 -- --
Cost and Expenses:
Selling, general
and administrative 356,228 345,359 142,551 78,966
Interest expense-net 59,928 -- 20,553 --
----------- ----------- ----------- -----------
Net (loss) $ (416,156) $ (340,859) $ (163,104) $ (78,966)
=========== =========== =========== ===========
Net (loss) per common
share - basic and diluted $ (0.08) $ (0.10) $ (0.03) $ (0.03)
=========== =========== =========== ===========
Weighted average of common
shares outstanding -
basic and diluted 5,341,076 3,686,386 5,424,026 3,686,386
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
-3-
<PAGE>
PEDIANET.com, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------------- -----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net loss $(416,156) $(340,859) $(163,104) $ (78,966)
Other comprehensive loss net of income taxes:
Unrealized gain (loss) on
marketable securities (40,000) -- 7,500 --
--------- --------- --------- ---------
Comprehensive loss $(456,156) $(340,859) $(155,604) $ (78,966)
========= ========= ========= =========
</TABLE>
See notes to financial statements
-4-
<PAGE>
PEDIANET.com, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(416,156) $(340,859)
Adjustments to reconcile net loss to cash used in operating activities:
Non-cash compensation for services -- 89,325
Depreciation 2,558 2,672
Amortization 58,366 58,366
Changes in operating assets and liabilities:
Decrease in accounts receivable 25,000 --
Decrease in prepaid interest 61,751 --
Increase in other assets (4,800) --
(Decrease) increase in accounts
payable and accrued expenses 2,668 175,603
--------- ---------
Net Cash (Used in) Operating Activities (270,613) (14,893)
--------- ---------
Cash flows from financing activities:
Proceeds from notes receivable 225,000 --
Proceeds from loans payable -- 1,500
Payments on loans (5,000) (1,500)
Proceeds from exercise of stock options -- 15,000
--------- ---------
Net Cash Provided by Financing Activities 220,000 15,000
--------- ---------
Net (increase) in cash and
cash equivalents (50,613) 107
Cash and cash equivalents - beginning of year 151,687 (107)
--------- ---------
Cash and cash equivalents - end of year $ 101,074 $ --
========= =========
Supplementary information:
Conversion of accounts payable to common stock $ 47,178
=========
Conversion of notes payable to common stock $ 225,000
=========
</TABLE>
See notes to financial statements
-5-
<PAGE>
PEDIANET.com, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTANT POLICIES
The consolidated balance sheet as of September 30, 2000 and the
consolidated statements of operations and comprehensive loss and cash
flows for the period presented herein have been prepared by
Pedianet.com Inc ("PediaNet" or the "Company") and are unaudited. In
the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary to present fairly the financial
position, results of operations and comprehensive loss and cash flows
for all periods presented have been made. The information for December
31, 1999 was derived from audited financial statements.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business.
As of September 30,2000 the Company has no revenues for the current
year.
The Company's ability to continue as a going concern is dependant upon
its ability to obtain additional debt and/or equity financing and
realize revenues from its website sufficient to cover its overhead. The
Company intends to derive future revenues from the design and
implementation of their Pediatrics Information Directory System and
will offer a number of website services to members of the Pediatric
profession. These potential revenue streams will come from offering
website design of Internet home pages for Pediatricians, registration
of domain addresses, setup of access service and webmaster services. In
addition, the Company's aim is to license and distribute the Devset
software and upgrades to Devset module. The Company expects to commence
implementation of these services when funding becomes available. The
Company also plans to generate future revenues from digital space,
pediatric internet digital TV, pediatric national database
subscriptions, instructional courses and online conferences.
In addition to internal growth, the Company intends to expand through
acquisitions and new product development. In this quarter, the Company
has focused substantial time and succeeded in finding compatable
companies to acquire.
In August 2000, the Company entered into an agreement to form a new
subsidiary, which will be owned 80% by PediaNet.com Inc. and 20% by Dr.
Melvin D. Koplow, to create products and services from proprietary and
exclusive integrated technologies, which will be marketed to a broad
variety of businesses and internet companies. Dr. Koplow has resigned
his position as Chief Executive Officer and Director of PediaNet.com
activities to assume a new position as President and Chief Executive
Officer of the new subsidiary. PediaNet.com will provide total funding
of approximately $130,000 to the new subsidiary.
In September 2000, the Company signed a letter of intent to merge with
Psy-Ed Corporation, DBA Exceptional Parent Magazine ("EP"), a company
engaged in publishing and distributing of a national magazine designed
to serve families and professionals who are involved in the care and
development of children and young adults with disabilities and special
health care needs.
-6-
<PAGE>
Under the terms of the letter of intent, EP shareholders will receive
27.3 shares of PediaNet Common Stock for each share of EP Common Stock,
Series A Preferred Stock and Series B Preferred Stock. In addition,
each shareholder of Series B Preferred Stock will receive 6.8 shares of
PediaNet Common Stock for the $27.45 per shares of EP unpaid dividends
through December 31, 2000. The merger is subject to due diligence by
both PediaNet and EP.
On October 12, 2000 the Company signed a letter of intent to acquire
drpaula.com, Inc a Company engaged in operating a pediatric website.
Under the terms of the letter of intent, 2,000,000 shares of
PediaNet.com common stock will be issued to drpaula.com shareholders.
The entire transaction is subject to approval by drpaul.com Inc's
preferred and common shareholders as well as the board of directors.
There is no assurance that additional capital will be obtained, that a
revenue stream from its website will be commercially successful or that
the Company will be successful in its endeavors to acquire compatible
companies.
The Company currently does not have commitments for capital
expenditures and does not expect to purchase property or equipment over
the next twelve months that cannot be financed in the ordinary course
of business. The Company estimates that is will require $1,000,000 to
support its planned activities over the next twelve months.
3. EARNINGS PER COMMON SHARE
Basic and diluted loss per common share is computed by dividing net
loss by the weighted average number of common shares outstanding during
the year. Diluted earnings per common share are computed by dividing
net earnings by the weighted average number of common and potential
common shares during the year. Potential common shares are excluded
from the loss per share calculation because the effect would be
antidilutive. Potential common shares relate to the preferred stock
that is convertible into common stock, convertible debt and outstanding
warrants.
4. RECAPITALIZATION
On December 31, 1999 the Company merged with Ultraphonics-USA, Inc and
issued 10,003 shares of its preferred stock and 1,518,171 shares of its
common stock in exchange for the outstanding shares of
Ultraphonics-USA, Inc. In connection with the share exchange the
Company acquired the assets net of liabilities of Ultraphonics-USA, Inc
with a net book value of $154,538. For accounting purposes, the merger
has been treated as a recapitalization of PediaNet Inc as the
accounting acquirer. The historical financial statements prior to
December 31, 1999 are those of PediaNet Inc.
-7-
<PAGE>
The financial statements include the Statements of Operations of the
Company, exclusive of Ultraphonics, for the nine months ended September
30, 2000 and 1999. The net assets acquired by the Company included the
following at December 31, 1999:
Cash $ 100,000
Marketable securities 50,000
Notes receivable-
shareholders 850,000
Prepaid interest 82,335
----------
Assets acquired 1,082,335
Liabilities assumed 927,797
----------
$ 154,538
==========
5. NOTES RECEIVABLE/NOTES PAYABLE
As part of the recapitalization with Ultraphonics, the Company assumed
the subscription agreement in connection with a private placement of
Ultraphonic's common stock in December 1999. In connection with the $1
million financing under Rule 504 of Regulation D of the Securities Act
of 1933, Ultraphonics offered (i) 900,000 shares of Ultraphonic common
stock at $.22 per share; (ii) $793,800 of Ultraphonic's one year, 10%
convertible promissory notes which are convertible into shares of
common stock at $1.50 per share and (iii) 410,000 warrants at $.01 per
warrant, each warrant exercisable at $.01 per share. Ultraphonics
received $100,000 in cash, $50,000 in marketable securities and
received a note receivable in the amount of $850,000, bearing interest
at 10%, due June 28, 2000, which was extended until August 28, 2000. In
August 2000, the Company extended the note until December 31, 2000 and
reassigned the principal balance of $625,000 to three outside parties.
As part of the extension agreement with one of the parties, they
guarantee to pay the $50,000 quarterly payments to the Company's public
relations firm as described in Note 7. As of September 30, 2000,
$225,000 has been paid to the Company.
The convertible note payable of $793,000 is due December 28, 2000.
Interest is payable on the due date and thereafter until the obligation
is discharged. The note is convertible into 529,200 of the Company's
common stock at the option of the holder. As of September 30, 2000,
$225,000 of this note was converted into 150,000 shares of common
stock.
The note receivable and note payable are obligations of the same
related party. At September 30, 2000 the Company did not offset the
note receivable against the note payable as it is not the intention of
the Company to offset the two obligations at maturity. The Company has
offset the note receivable-subscription agreement ($625,000 as of
September 30, 2000) against stockholder's equity until the note has
been paid.
6. LOANS PAYABLE - RELATED PARTIES
As part of the recapitalization with Ultraphonics, the Company assumed
the related party loan payable in December 1999. On April 26, 2000, a
related party issued 30,750 shares of the Company's common stock for
payment of the Company's related party loan payable of $43,611 and
accrued interest and court costs of $77,530. The Company recorded this
transaction as a contribution to paid-in-capital.
-8-
<PAGE>
7. SUBSEQUENT EVENTS
(a) On October 12, 2000 the Company signed a letter of intent to acquire
drpaula.com, Inc a Company engaged in pediatric website. Under the
terms of the letter of intent, 2,000,000 shares of PediaNet.com common
stock will be issued to drpaula.com shareholders. The entire
transaction is subject to approval by drpaul.com Inc's preferred and
common shareholders as well as the board of directors.
(b) On November 13, 2000, the Company signed an agreement to engage a
public relations firm to provide services for the Company. The Company
will issue 200,000 shares of restricted common stock and will pay
quarterly payments of $50,000 for the 18 month term of the agreement.
The Company will record non-cash compensation expense of $94,000. The
quarterly payments will be paid by a third party as part of the
reassignment of the Company's Note Receivable. (See Note 5)
-9-
<PAGE>
Item 2. Management's' Discussion and Analysis of Financial Condition and
Results of Operations
-----------------------------------------------------------------
The Company's quarterly and annual operating results are affected by a
wide variety of factors that could materially and adversely affect
revenues and profitability, including competition; changes in consumer
preferences and spending habits; the inability to successfully manage
growth; seasonality; the ability to introduce and the timing of the
introduction of new products and the inability to obtain adequate
supplies or materials at acceptable prices. As a result of these and
other factors, the Company may experience material fluctuations in
future operating results on a quarterly or annual basis, which could
materially and adversely affect its business, financial condition,
operating results, and stock prices. Furthermore, this document and
other documents filed by the Company with the Securities and Exchange
Commission (the "SEC") contain certain forward-looking statements under
the Private Securities Litigation Reform Act of 1995 with respect to
the business of the Company. These forward-looking statements are
subject to certain risks and uncertainties, including those mentioned
above, and those detailed in the Company's Form 10-SB dated May 22,
2000, which may cause actual results to differ materially from these
forward-looking statements. An investment in the Company involves
various risks, including those mentioned above and those which are
detailed from time to time in the Company's SEC filings.
Results of Operations
---------------------
PediaNet intends to derive future revenues from the design and
implementation of their Pediatrics Information Directory System and
will offer a number of website services to members of the Pediatrics
profession. These potential revenue streams will come from offering
website design of Internet home pages for Pediatricians, registration
of domain addresses, setup of access service and webmaster service. In
addition, the Company's aim is to license and distribute the Devset
software and upgrades to Devset module. The Company expects to commence
implementation of these services when funding becomes available. The
Company also plans to generate future revenues from digital space,
pediatric internet digital TV, pediatric national database
subscriptions, instructional courses and online conferences.
In addition to internal growth, the Company intends to expand through
acquisitions and new product development. In this quarter, the Company
has focused its efforts and succeeded in finding compatible companies
to acquire.
In August 2000, the Company entered into an agreement to form a new
subsidiary, which will be owned 80% by PediaNet.com Inc. and 20% by Dr.
Melvin D. Koplow, to create products and services from proprietary and
exclusive integrated technologies, which will be marketed to a broad
variety of businesses and internet companies. Dr. Koplow has resigned
his position as Chief Executive Officer and Director of PediaNet.com
activities to assume a new position as President and Chief Executive
Officer of the new subsidiary. PediaNet.com will provide total funding
of approximately $130,000 to the new subsidiary.
In September 2000, the Company signed a letter of intent to merge with
Psy-Ed Corporation, DBA Exceptional Parent Magazine ("EP"), a company
engaged in publishing and distributing of a national magazine designed
to serve families and professionals who are involved in the care and
development of children and young adults with disabilities and special
health care needs.
-10-
<PAGE>
Under the terms of the letter of intent, EP shareholders will receive
27.3 shares of PediaNet Common Stock for each share of EP Common Stock,
Series A Preferred Stock and Series B Preferred Stock. In addition,
each shareholder of Series B Preferred Stock will receive 6.8 shares of
PediaNet Common Stock for the $27.45 per shares of EP unpaid dividends
through December 31, 2000. The merger is subject to due diligence by
both PediaNet and EP.
On October 12, 2000 the Company signed a letter of intent to acquire
drpaula.com, Inc a Company engaged in operating a pediatric website.
Under the terms of the letter of intent, 2,000,000 shares of
PediaNet.com common stock will be issued to drpaula.com shareholders.
The entire transaction is subject to approval by drpaul.com Inc's
preferred and common shareholders as well as the board of directors.
There is no assurance that additional capital will be obtained, that a
revenue stream from its website will be commercially successful or that
the Company will be successful in its endeavors to acquire compatible
companies.
Nine Months Ended September 30, 2000 compared to
Nine Months Ended September 30, 1999
-------------------------------------------------
Sales
-----
Sales decreased from $4,500 for the nine months ended September 30,
1999 to $-0- for the nine months ended September 30, 2000. The Company
expects to commence implementation of its website services sometime
early in the third quarter of 2000.
Selling, General and Administrative Expenses
--------------------------------------------
Selling, general and administrative expenses increased from $345,359
for the nine months ended September 30, 1999 to $356,228 for the nine
months ended September 30, 2000. This increase is primarily due to the
addition of payroll and additional professional fees relating to the
recapitalization in the nine months ended September 30, 2000.
Interest Expense
-----------------
Interest expense increased from $-0- for the nine months ended
September 30, 1999 to $61,751 for the nine months ended September 30,
2000. This increase is due to interest expense for warrants issued
below fair market value which expire December 31, 2000.
Three Months Ended September 30, 2000 compared to
Three Months Ended September 30, 1999
--------------------------------------------------
Sales
-----
Sales remained the same for the three months ended September 30, 1999
and September 30, 2000. The Company expects to commence implementation
of its website services sometime early in the third quarter of 2000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased from $78,966 for
the three months ended September 30, 1999 to $142,551 for the three
months ended September 30, 2000. This increase is primarily due to
additional professional fees relating to the recapitalization and the
addition of payroll in the three months ended September 30, 2000.
-11-
<PAGE>
Interest Expense
----------------
Interest expense increased from $-0- for the three months ended
September 30, 1999 to $20,584 for the three months ended September 30,
2000. This increase is due to interest expense for warrants issued
below fair market value which expire December 31, 2000.
Liquidity and Capital Resources
-------------------------------
As of September 30, 2000 the Company needs to obtain additional
financing to fulfill its activities and achieve a level of sales
adequate to support its cost structure. The main revenue stream is
expected to be from specialized services, such as advertising and
sponsors, digital space, pediatric internet TV, pediatric national
database subscriptions, instructional courses and online conferences.
There can be no assurance that any revenue will be generated from these
sources.
The Company estimates that it will require approximately $1,000,000 to
support the planned activities over the next twelve months. The Company
expects to generate working capital from the collection of $850,000 in
notes receivable and from debt and equity financing. Although the
Company received $225,000 against the notes receivable in 2000, the
Company at present does not have adequate cash reserves to meet its
future cash requirements. The Company's ability to continue as a going
concern will depend upon successful completion of any financing, any
future acquisitions or its ability to generate revenue from advertising
and sponsors. The Company does not expect to have to purchase any
property or equipment over the next year that cannot be financed in the
ordinary course of business.
Other Matters
-------------
Year 2000
Impact of Year 2000
-------------------
The Company's mission critical systems have operated without
interruption during 2000. Furthermore, the Company has not experienced
a failure of any non-critical devices or systems. In addition, the
Company has not experienced a delay from any service providers or
vendors.
-12-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company is not presently subject to any legal
proceedings which are material to the consolidated results
of operations or financial condition of the Company.
Item 2. Changes in Securities
---------------------
None.
Item 3. Default in 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
--------------------------------
(a) Exhibits: Exhibit 27.1 Financial Data Schedule.
(b) There were no Current Reports on Form 8-K filed by the
registrant during the quarter ended September 30, 2000.
-13-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
PEDIANET.COM, INC
Date: November 14, 2000 By: /s/Steven Richter
----------------------------
Steven Richter
President
-9-
