U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to __________.
Commission file number 000-14614
PRINTONTHENET.COM, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 59-1270754
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7700 N.W. 37th Avenue, Miami, Florida 33147
(Address of principal executive offices) (Zip Code)
(305) 691-2800
(Issuer's telephone number, including area code)
NET LNNX, INC.
324 Datura Street, Suite 200, West Palm Beach, Florida 33401
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the (issuer) (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or
such shorter period that registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years.
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes [ ] No [ ]
Applicable only to corporate issuers
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
19,134,102 as of August 12, 1999.
Transitional Small Business Disclosure Format
(Check one):
Yes [ ] No: [ ]
<PAGE>
PRINTONTHENET.COM, INC.
INDEX TO FORM 10-QSB
Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet as of June 30, 1999 . . . . . . 3
Condensed Consolidated Statement of Operations for the
three months ended June 30, 1999 and the period from
January 27, 1999 (inception)
to June 30, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statement of Cash Flows for the
period from January 27, 1999 (inception) to June 30, 1999. . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . 8
Part II-Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 12
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . . 12
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . 12
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . 12
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 12
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE> 2
ITEM 1. FINANCIAL STATEMENTS
PRINTONTHENET.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1999
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 3,863
PROPERTY AND EQUIPMENT,NET 6,377
DEPOSITS 93,342
-------------
TOTAL ASSETS $ 103,582
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 13,208
SHAREHOLDER LOANS 164,800
COMMITMENT
SHAREHOLDERS' EQUITY
Preferred stock, no par value (stated
value $.001 per share); 5,000,000 shares
authorized; 1,000,000 shares issued and
outstanding 1,000
Common stock, no par value; 20,000,000
shares authorized, 19,134,102 issued
and outstanding 15,771
Deficit accumulated during the development stage (91,197)
-------------
TOTAL SHAREHOLDERS' EQUITY (74,426)
-------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 103,582
=============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 3
PRINTONTHENET.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the period from
For the Three January 27, 1999
Months Ended (inception
June 30, 1999 to June 30, 1999
(Unaudited) (Unaudited)
------------- -------------------
<S> <C> <C>
Operating expenses:
Advertising and promotion $ 3,661 $ 9,728
Professional fees 67,456 69,907
Other operating expenses 8,419 11,562
------------- -------------
TOTAL OPERATING EXPENSE AND NET LOSS $ 79,536 $ 91,197
============= =============
Net loss per common share:
Basic and diluted (0.00) (0.00)
============ ============
Weighted average shares outstanding 19,134,102 19,134,102
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 4
PRINTONTHENET.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Period from January 27, 1999 (inception) to June 30, 1999
(Unaudited)
Cash flows from operating activities:
Net loss $ (91,197)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 437
Increase in accounts payable 13,208
------------
NET CASH USED IN
OPERATING ACTIVITIES (77,552)
------------
Cash flows from investing activities:
Expenditures for property and equipment (6,814)
Expenditures for deposits (93,342)
------------
NET CASH USED BY INVESTING ACTIVITIES (100,156)
------------
Cash flows from financing activities:
Proceeds from issuance of common and preferred stock 16,771
Shareholder loans 164,800
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 181,571
------------
NET INCREASE IN CASH AND CASH
END OF PERIOD $ 3,683
============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 5
PRINTONTHENET.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(1) Basis of Presentation
The financial information included herein is unaudited;
however such information reflects all adjustments
(consisting solely of normal recurring adjustments), which
are, in the opinion of management, necessary for a fair
statement of results for the interim period. These financial
statements should be read in connection with Net Lnnx's
annual financial statements included in its Form 10-KSB and
in connection with the Net Lnnx's Form 8-K/A filed May 7,
1999, which included POTN's audited balance sheet as of
February 17, 1999.
The accompanying condensed consolidated financial statements
include the accounts of Net Lnnx, Inc. (an inactive company)
and its wholly owned subsidiary PrintOnTheNet.Com, Inc. (a
development stage company) (POTN), (collectively referred to
as the "Company").
On March 11, 1999 a newly formed subsidiary of Net Lnnx,
Inc. acquired all of the outstanding common stock of POTN in
exchange for 16,500,000 no par value shares of Net Lnnx's
common stock and 1,000,000 no par value shares (stated value
of $.001) of Net Lnnx's preferred stock, which is
convertible into 7,207,000 shares of common stock.
Concurrent with this transaction, the newly formed
subsidiary was merged into POTN with POTN being the
surviving wholly owned subsidiary of Net Lnnx. For
accounting purposes the acquisition has been treated as a
recaptilization of POTN with POTN as the acquirer (reverse
acquisition). The historical financial statements prior to
March 11, 1999 are those of POTN.
On July 26, 1999, Net Lnnx, Inc., a Pennsylvania
corporation, was merged with and into its wholly-owned
subsidiary, PrintOnTheNet.com, Inc., a Delaware corporation,
resulting in the reincorporation of Net Lnnx in the State of
Delaware. The name of the corporation surviving the merger
is PrintOnTheNet.com, Inc. The reincorporation and name
change were previously reported in Net Lnnx's (now known as
POTN) Form 8-K filed on August 9, 1999. The results of the
merger will be reflected in the financial information
included in the Company's Form 10-QSB for the period ending
September 30, 1999, however, the name change is being
reflected in this quarterly report.
<PAGE> 6
(2) Loss Per Share
Loss per share has been calculated using the weighted
average number of shares outstanding during the period.
Shares issued in the reverse acquisition noted above have
been treated as outstanding since inception (January 27,
1999).
(3) Shareholders Equity
POTN was capitalized with $52,000 of cash (of which $27,000
was provided during the month of March 1999) which was used
to fund POTN's operations, and to pay Net Lnnx's
liabilities. The net effect of the reverse acquisition on
equity was to reflect $16,771 of net proceeds from the
issuance of common and preferred stock.
(4) Shareholder Loans
During the three months ended June 30, 1999, certain major
shareholders of the Company loaned the Company $164,800 to
fund expenses on an informal basis. These loans will not be
repaid by the Company prior to August 1, 2000. The specific
terms of these loans will be finalized during the upcoming
quarter and described in detail in the Company's Form 10-QSB
for the period ending September 30, 1999.
(5) Commitment
On March 17, 1999 the Company entered into a software
development agreement, requiring the developer to design,
develop and implement applications software and a Web site
that will allow POTN's customer to design, store, recall and
order commercially printed products. POTN is required to pay
the developer $147,500 for this service. As of June 30,
1999, the Company has paid $93,342 of such amount which is
included in Deposits in the accompanying Condensed
Consolidated Balance Sheet. The agreement requires the
software to be delivered to the Company by July 17, 1999.
The Company currently plans on funding this obligation
through capital contributions by the Company's majority
shareholder.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-QSB contains forward-
looking statements. For this purpose, any statements contained
in it that are not statements of historical fact may be deemed to
be forward-looking statements. Without limiting the foregoing,
the words "believes," "anticipates," "plans," and "expects," and
similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could
cause the Company's actual results to differ materially from
those indicated by such forward-looking statements. These
factors include those set forth in the Company's 1998 Annual
Report on Form 10-KSB under the caption "Certain Factors That May
Affect Future Results."
The following discussion for the Company's results of
operations and financial condition should be read in conjunction
with the Company's condensed consolidated unaudited Financial
Statements listed in Part I, Item 1 and the Notes thereto
appearing elsewhere in this Form 10-QSB, and the Company's
audited Financial Statements listed in Item 7 and the Notes
thereto appearing in the Company's 1998 Annual Report on Form 10-
KSB.
GENERAL
On March 11, 1999, a newly formed subsidiary of Net Lnnx,
Inc. acquired all of the outstanding common stock of POTN in
exchange for 16,500,000 no par value shares of Net Lnnx's common
stock and 1,000,000 no par value shares (stated value of $.001)
of Net Lnnx's preferred stock, which is convertible into
7,207,000 shares of common stock. Concurrent with this
transaction, the newly formed subsidiary was merged into POTN,
with POTN being the surviving wholly owned subsidiary of Net
Lnnx, Inc. For accounting purposes, the acquisition has been
treated as a recapitalization of POTN with POTN as the acquirer
(reverse acquisition). The historical financial statements prior
to March 11, 1999 are those of POTN. As a result, POTN
shareholders now own approximately 90% of the Company's common
stock, assuming the shares of preferred stock are converted into
shares of common stock. This change in control was previously
reported in the Company's Form 8-K filed on March 26, 1999.
On July 26, 1999, Net Lnnx, Inc., a Pennsylvania
corporation, was merged with and into its wholly-owned
subsidiary, PrintOnTheNet.com, Inc., a Delaware corporation,
resulting in the reincorporation of Net Lnnx in the State of
Delaware. The name of the corporation surviving the merger is
PrintOnTheNet.com, Inc. The reincorporation and name change were
previously reported in Net Lnnx's (now known as POTN) Form 8-K
filed on August 9, 1999. The results of the merger will be
reflected in the financial information included in the Company's
Form 10-QSB for the period ending September 30, 1999, however,
the name change is being reflected in this quarterly report.
PLAN OF OPERATION
POTN plans to operate an Internet business that provides a
fully interactive venue through which companies of all sizes will
be able to design and order their printing materials via the
World Wide Web. The site will allow the user to see an image of
what they will be receiving in a "what you see is what you get"
format before submitting an order. The system will allow a wide
<PAGE> 8
choice of options including font, layout, paper, color and
graphics. The choices extend to any type of printing including
letterhead, forms, business cards, envelopes and invitations.
On February 17, 1999, POTN entered into an Exclusive
Production and Sales Agreement (the "Agreement") with National
Lithographers and Publishers, Inc. and PrintAmerica Management
Co., Inc. (collectively the "PrintAmerica Companies") which
provides that POTN shall, for a period of at least two (2) years,
have the exclusive right to purchase at a preferred price from
the PrintAmerica Companies all printed goods and items required
in the course of POTN's business operations. Benjamin Rogatinsky
and Samuel Rogatinsky, collectively the majority shareholders of
the Company, own the PrintAmerica Companies through a family
trust.
Building and Maintaining the Web Site
The Company is currently building its Web site. It is
anticipated that the POTN site will offer two features which POTN
believes will distinguish it from other interactive sites on the
World Wide Web selling printing services. First, the site will
employ graphic on-the-fly technology, allowing purchasers to see
an image of what they will be receiving before they submit the
order. This interactive Web site will employ the "what you see is
what you get" technology. Secondly, POTN expects to use the
PrintAmerica Companies' large printing sales force to negotiate
and establish Web based secure accounts directly with existing
and new large corporate clients. It is anticipated that clients
will be able to set up accounts for free and pay only when orders
are made. Business cards, forms and other documents will be
laid-out in standard templates, and users can view and make real
time changes to names, addresses and other adjustable items.
Each secure site will have a unique look and nomenclature. The
secure sites will be developed to meet the particular nuances of
each client's needs. While POTN expects to be purchasing its own
dedicated servers, it anticipates contracting with an off-site
location to house and maintain the server for a fee. The site
will have a T1 connection, 24-hour support, and redundant backup
systems. Programmers and graphic artists familiar with Web site
design will be hired in-house to establish and update the open
and secure platforms as required.
Marketing
The Company intends to utilize the sales force of the
PrintAmerica Companies to market to large corporate clients and
will also rely on search engines to attract business. POTN
expects to use direct advertising to market the Web site to
individuals and small businesses.
Production
The Company will be contracting printing work related to its
business to the PrintAmerica Companies, through the exclusive
Agreement with the PrintAmerica Companies. This arrangement
offers the following advantages.
* Ability to leverage the PrintAmerica Companies' sales
staff and customer base.
* The PrintAmerica Companies have already made the capital
investment for machinery and equipment and have the
system in place to produce work product within 48 hours
in most cases.
<PAGE> 9
* The PrintAmerica Companies currently operate three plants
and currently have excess capacity. The Company will be
provided a high priority given the volume of work
anticipated. The PrintAmerica Companies can immediately
accommodate the projected work flow and have the ability
to add machinery and equipment as warranted.
* Under the Exclusive Production and Sales Agreement and
given the ownership structure of PrintAmerica Companies,
control and quality of production will be assured to a
greater degree than is the case with most third party
arrangements.
* The Company will be able to focus all of its attention on
building and maintaining the interactive Web site.
* The Company will not carry inventory, a major impediment
to realizing profit for many Web based retailers today.
Distribution
All shipping will be handled by the PrintAmerica Companies.
Shipping will be completed from the PrintAmerica Companies'
production facilities directly to consumers via U.S. Mail, and
for additional charges via UPS and FedEx. International shipping
will be done on a case-by-case basis.
Year 2000 Compliance
Computer-based systems that utilize two digits rather than
four digits to define the applicable year may fail to properly
recognize date sensitive information when the year changes to
2000. We are in the process of completing a comprehensive review
of our computer-based systems to determine if they will be
affected by resulting Year 2000 related compliance issues, that
is whether those systems have Year 2000 related "computer bugs."
So far this review has revealed no material Year 2000 related
compliance issues. Because most of our systems are relatively
new, we do not expect to incur Year 2000 compliance related costs
that would be material to us. We are asking for confirmation
from outside vendors, financial institutions and others that they
are Year 2000 compliant or that they are developing and
implementing plans to become Year 2000 compliant. However, there
is no assurance that these outside vendors, financial
institutions and others will timely resolve their own Year 2000
compliance issues or that any such failure would not have an
adverse effect on us. We believe we are devoting the necessary
resources to timely address all Year 2000 compliance issues over
which we have control.
Future Acquisitions
The Company has entered into separate non-binding letters of
intent to acquire three printing facilities located in Broward
County, Florida and is currently performing due diligence
procedures. The facilities are expected to be purchased during
the third fiscal quarter. The aggregate purchase price for such
facilities is approximately $2.0 million, to be paid by the
<PAGE> 10
issuance of common stock by the Company. There can be no
assurance that any or all of these transactions will be
consummated.
RESULTS OF OPERATIONS
Revenues
The Company had no revenues during the quarter and the
period from January 27, 1999 (inception) through June 30, 1999.
Operating Expenses
Operating expenses for the quarter and for the period from
January 27, 1999 (inception) through June 30, 1999 included
$3,661 and $9,728 in advertising and promotion costs, $67,456 and
$69,907 in professional fees, and $8,419 and $11,562 in other
operating expenses, respectively, all being considered startup
activities. During the quarter ended June 30, 1999 certain
shareholders provided loans to the Company totaling $164,800 (see
Note 4 of Notes to Condensed Consolidated Financial Statements),
and the Company accrued $564 of interest expense which is
included in operating expenses. The Company did not have any
operations during the same time period last year so no
comparisons can be made.
Liquidity
The Company is currently being funded by capital
contributions and loans from its major stockholders as needed to
pay the ongoing expenses of the Company and the development of
the Web site.
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER
None.
ITEM 5. OTHER INFORMATION
The Company has entered into separate non-binding letters of
intent to acquire three printing facilities located in Broward
County, Florida and is currently performing due diligence
procedures. The facilities are expected to be purchased during
the third fiscal quarter. The aggregate purchase price for such
facilities is approximately $2.0 million, to be paid by the
issuance of common stock by the Company. There can be no
assurance that any or all of these transactions will be
consummated.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit Description
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
Form 8-K/A filed on May 7, 1999 reported financial
information concerning the Acquisition of POTN.
Form 8-K filed on August 9, 1999 reported information
concerning the reincorporation of the Company in the State
of Delaware.
<PAGE> 12
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 hereunto duly authorized.
PRINTONTHENET.COM, INC.
By: /s/ Paul Lambert
Paul Lambert, Chief Financial Officer,
Director (Principal Accounting Officer &
Duly Authorized Director & Officer of
the Registrant)
By: /s/ Benjamin Rogatinsky
Benjamin Rogatinsky, Chief Executive
Officer, Director
(Duly Authorized Director & Officer of
the Registrant)
Dated: August 13, 199
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from registrant's
Form 10-QSB for the quarter ended June 30, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<CASH> 3,863
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,863
<PP&E> 6,814
<DEPRECIATION> (437)
<TOTAL-ASSETS> 103,582
<CURRENT-LIABILITIES> 13,208
<BONDS> 0
0
1,000
<COMMON> 15,771
<OTHER-SE> (91,197)
<TOTAL-LIABILITY-AND-EQUITY> 103,582
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 91,197
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (91,197)
<INCOME-TAX> 0
<INCOME-CONTINUING> (91,197)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (91,197)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
</TABLE>
