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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 June 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 August 1, 2000, there were 5,399,896 shares of Common Stock, $.001
par value, outstanding.
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PEDIANET.COM, INC.
INDEX
Page Number
-----------
Part I. Financial Information
Item 1. Financial Statements 1
Balance Sheets as of
June 30, 2000 (unaudited) and
December 31, 1999 2
Statements of Operations
and Comprehensive Income
for the Three and Six Months Ended
June 30, 2000 and 1999 (unaudited) 3 - 4
Statements of Cash Flows
for the Six Months Ended
June 30, 2000 and 1999
(unaudited) 5
Notes to Consolidated Financial
Statements (unaudited) 6 - 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9 - 10
Part II. Other Information
Item 1. Legal Proceedings 11
Item 2 Changes in Securities 11
Item 3 Default in Senior Securities 11
Item 4 Submission of Matters to a
Vote of Security Holders 11
Item 5 Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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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 six month period ended June 30, 2000
are not necessarily indicative of the results for the entire fiscal year or for
any other period.
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PEDIANET.com, INC
BALANCE SHEETS
ASSETS
June 30 December 31,
2000 1999
----------- -----------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 167,332 $ 151,687
Marketable securities 2,500 25,000
Accounts receivable-shareholder 22,500 25,000
Prepaid interest 41,168 82,335
----------- -----------
Total Current Assets 233,500 284,022
Property, furniture and equipment - net 117,037 157,653
Other assets 4,800 --
----------- -----------
TOTAL ASSETS $ 355,337 $ 441,675
=========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
Current Liabilities:
Accounts payable $ 59,075 $ 129,864
Accrued expenses 30,325 92,530
Note payable 613,800 793,800
Loans payable-related parties -- 48,611
----------- -----------
Total Liabilities 703,200 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 5,399,896 and 5,248,557
shares 5,400 5,249
Additional paid-in capital 2,207,551 1,836,883
Cumulative other comprehensive (loss) (47,500) (25,000)
Note receivable - subscription agreement (670,000) (850,000)
Deficit (1,844,314) (1,591,262)
----------- -----------
Total Stockholders' (Deficiency) (347,863) (623,130)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' (DEFICIENCY) $ 355,337 $ 441,675
=========== ===========
See notes to financial statements
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PEDIANET.com, INC
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Sponsorship income $ -- $ 1,000 $ -- $ 1,000
Website income -- 3,500 -- --
----------- ----------- ----------- -----------
-- 4,500 -- 1,000
Cost and Expenses:
Selling, general
and administrative 254,844 266,393 170,360 81,764
----------- ----------- ----------- -----------
Loss from operations (254,844) (261,893) (170,360) (80,764)
Other income
Interest income 1,792 -- 1,090 --
----------- ----------- ----------- -----------
Net (loss) $ (253,052) $ (261,893) $ (169,270) $ (80,764)
=========== =========== =========== ===========
Net (loss) per common
share - basic and diluted $ (0.05) $ (0.08) $ (0.04) $ (0.03)
=========== =========== =========== ===========
Weighted average of common
shares outstanding -
basic and diluted 5,299,145 3,686,386 5,320,116 3,686,386
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
-3-
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PEDIANET.com, INC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net loss $(253,052) $(261,893) $(169,270) $ (80,764)
Other comprehensive loss
net of income taxes:
Unrealized loss on
marketable securities (47,500) -- (1,250) --
--------- --------- --------- ---------
Comprehensive loss $(300,552) $(261,893) $(170,520) $ (80,764)
========= ========= ========= =========
</TABLE>
See notes to financial statements
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PEDIANET.com, INC
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
----------------------
2000 1999
--------- ---------
Cash flows from operating activities:
Net (loss) $(253,052) $(261,893)
Adjustments to reconcile net loss to
cash used in operating activities:
Non-cash compensation for services -- 89,925
Depreciation 1,705 1,781
Amortization 38,911 38,911
Changes in operating assets and
liabilities:
Decrease in accounts receivable 25,000 --
Decrease in prepaid interest 41,167 --
Increase in other assets (4,800) --
(Decrease) increase in accounts
payable and accrued expenses (8,286) 116,383
--------- ---------
Net Cash (Used in) Operating Activities (159,355) (14,893)
--------- ---------
Cash flows from financing activities:
Proceeds from notes receivable 180,000 --
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 175,000 15,000
--------- ---------
Net (increase) in cash and
cash equivalents 15,645 107
Cash and cash equivalents - beginning of year 151,687 (107)
--------- ---------
Cash and cash equivalents - end of year $ 167,332 $ --
========= =========
Supplementary information:
Conversion of accounts payable to common stock $ 47,178
=========
Conversion of notes payable to common stock $ 180,000
=========
See notes to financial statements
-5-
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PEDIANET.com, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTANT POLICIES
The balance sheet as of June 30, 2000 and the 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 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 June 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 sometime in the early third quarter of
2000. 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. While the Company has no
present agreements to acquire additional companies, it intends to focus
on companies that exhibit stable, aggressive growth that would
complement the services offered on its website.
There is no assurance that additional capital will be obtained, revenue
stream from it website will be commercially successful or that the
Company will be successful in its endeavors to acquire compatible
companies.
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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 $850,000 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.
The financial statements include the Statements of Operations of the
Company, exclusive of Ultraphonics, for the six months ended June 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
==========
-7-
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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 has been extended until August 28,
2000. As of June 30, 2000, $180,000 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 June 30, 2000, $180,000
of this note was converted into 120,000 shares of common stock.
The note receivable and note payable are obligations of the same
related party. At June 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 ($670,000 as of June
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.
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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 sometime early in the third quarter of
2000. 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. While the Company has no
present agreements to acquire additional companies, it intends to focus
on companies that exhibit stable, aggressive growth that would
complement the services offered on its website.
There is no assurance that additional capital will be obtained, revenue
stream from its website will be commercially successful or that the
Company will be successful in its endeavors to acquire compatible
companies.
-9-
<PAGE>
Six Months Ended June 30, 2000 compared to
------------------------------------------
Six Months Ended June 30, 1999
------------------------------
Sales
-----
Sales decreased from $4,500 for the six months ended June 30, 1999 to
$-0- for the six months ended June 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 decreased from $266,393
for the six months ended June 30, 1999 to $254,844 for the six months
ended June 30, 2000. This decrease is primarily due to additional
expenses recorded from the issuance of stock issued for services in the
three months ended June 30, 1999.
Interest Expense
----------------
Interest expense increased from $-0- for the six months ended June 30,
1999 to $41,167 for the six months ended June 30, 2000. This increase
is due to interest expense for warrants issued below fair market value
which expire December 31, 2000.
Three Months Ended June 30, 2000 compared to
--------------------------------------------
Three Months Ended June 30, 1999
--------------------------------
Sales
-----
Sales decreased from $1,000 for the three months ended June 30, 1999 to
$-0- for the three months ended June 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 $81,764 for
the three months ended June 30, 1999 to $170,360 for the three months
ended June 30, 2000. This increase is primarily due to additional
professional fees relating to the recapitalization.
Interest Expense
----------------
Interest expense increased from $-0- for the three months ended June
30, 1999 to $20,584 for the three months ended June 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 June 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.
-10-
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The Company estimates that it will require approximately $850,000 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 $180,000 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.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None.
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 June 30, 2000.
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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: August 10, 2000 By: /s/Steven Richter
------------------------------------
Steven Richter
President
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