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, 2000.
[ ] 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 65-0896930
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4491 South State Road 7, Suite 214, Ft. Lauderdale, FL 33314
------------------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(954) 581-4233
-------------------
(Issuer's telephone number, including area code)
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 corporate issuers
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 27,560,456 as of August 9, 2000.
Transitional Small Business Disclosure Format
(Check one):
Yes [ ] No: [X]
<PAGE>
PRINTONTHENET.COM, INC. AND SUBSIDIARY
Contents
Page
Part I. Financial Information
Item 1. Consolidated Financial Statements (Unaudited)
Balance sheet as of June 30, 2000 2
Statements of operations for the three and six months ended
June 30, 2000 and 1999 3
Statements of cash flows for the six months ended June 30, 2000
and 1999 4
Notes to financial statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Operations 9
Part II. Other Information
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
PRINTONTHENET.COM, INC. AND SUBSIDIARY
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet (Unaudited)
June 30, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $ 3,276,000
Funds held in escrow 140,000
Accounts receivable, net of allowance for
doubtful accounts of $62,000 381,000
Inventories 121,000
Prepaid expenses 43,000
Other receivables (including due from
stockholders of $165,000) 225,000
------------
Total current assets 4,186,000
Property and equipment, net of accumulated
depreciation and amortization of $154,000 787,000
Goodwill and other intangible assets, net of
accumulated amortization of $206,000 868,000
Other assets 32,000
------------
$ 5,873,000
============
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable, current portion $ 147,000
Capital lease obligations, current portion 29,000
Accounts payable 817,000
Accrued expenses 81,000
Subscriptions refundable 300,000
------------
Total current liabilities 1,374,000
Notes payable - noncurrent portion 430,000
Capital lease obligations - noncurrent portion 118,000
------------
1,922,000
------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000
shares authorized, 3,360,000 shares of
Series B shares issued and outstanding
(convertible into 67,200,000 shares
of common stock) 3,000
Common stock, $.001 par value,
225,000,000 shares authorized,
27,560,456 shares issued and
outstanding 28,000
Additional paid-in capital 23,107,000
Deferred compensation (4,659,000)
Treasury stock (resale or retirement
restricted): 13,361,111 shares (1,114,000)
Accumulated deficit (13,414,000)
------------
3,951,000
------------
$ 5,873,000
============
</TABLE>
See notes to financial statements.
2
<PAGE>
PRINTONTHENET.COM, INC. AND SUBSIDIARY
Consolidated 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>
Sales $ 626,000 $ 672,000 $ 1,296,000 $ 1,332,000
Cost of sales 523,000 459,000 956,000 908,000
------------ ------------ ------------ ------------
Gross profit 103,000 213,000 340,000 424,000
Selling, general and administrative expenses 1,224,000 313,000 2,005,000 669,000
Software development expenses 97,000 200,000
Fair value of warrants issued 9,990,000 9,990,000
------------ ------------ ------------ ------------
Loss from operations (11,208,000) (100,000) (11,855,000) (245,000)
Interest expense, net (10,000) (34,000) (38,000) (62,000)
------------ ------------ ------------ ------------
Net loss $(11,218,000) (134,000) $(11,893,000) $ (307,000)
============ ============ ============ ============
Net loss per common share:
Basic and diluted $ (.43) $ (.00) $ (.49) $ (.01)
============ ============ ============ ============
Weighted average shares outstanding 26,015,000 27,341,000 24,486,000 22,796,000
============ ============ ============ ============
</TABLE>
See notes to financial statements.
3
<PAGE>
PRINTONTHENET.COM, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(11,893,000) $ (307,000)
Adjustments to reconcile net loss to net cash provided by
(used in) operating
activities:
Depreciation and amortization 124,000 57,000
Fair value of warrants issued 9,990,000
Deferred compensation 252,000
Changes in other operating assets and liabilities (246,000) 6,000
------------ ------------
Net cash used in operating activities (1,773,000) (244,000)
Cash flows from investing activities:
Purchases of property and equipment (4,000) (26,000)
Repurchase of accounts receivable previously sold to Factor (346,000)
Net cash used for acquisitions (75,000)
------------ ------------
Net cash used in investing activities (350,000) (101,000)
------------ ------------
Cash flows from financing activities:
Bank overdraft (25,000) 160,000
Proceeds from stockholder loans (net of repayments) 286,000 138,000
Net proceeds from sale of securities 6,196,000
Proceeds from sale of warrants 160,000
Principal repayments on notes payable (88,000) (45,000)
Principal repayments on capital lease obligations (17,000)
Capital contributions 92,000
Purchase of treasury stock (1,113,000)
------------ ------------
Net cash provided by financing activities 5,399,000 345,000
------------ ------------
Net increase (decrease) in cash and cash equivalents 3,276,000 -
Cash and cash equivalents - beginning of year - -
------------ ------------
Cash and cash equivalents - end of year $ 3,276,000 $ -
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the years
for:
Interest $ 33,000 $ 38,000
Supplemental schedule of noncash investing and financing activities:
Capital lease obligations 17,000 -
Stockholder loans and due to affiliate contributed to capital 1,314,000
</TABLE>
See notes to financial statements.
4
<PAGE>
PRINTONTHENET.COM, INC. AND SUBSIDIARY
Notes to Financial Statements
June 30, 2000
NOTE A - THE COMPANY AND BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of PrintOnTheNet.Com, Inc. and its subsidiary ("POTN" or the
"Company") and have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
related to the Company's organization, significant accounting policies and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. These unaudited condensed consolidated financial statements reflect, in
the opinion of management, all material adjustments (which include only normal
recurring adjustments) necessary to fairly state the financial position and the
results of operations for the periods presented and the disclosures herein are
adequate to make the information presented not misleading. Operating results for
interim periods are not necessarily indicative of the results that can be
expected for a full year. These interim financial statements should be read in
conjunction with the Company's audited consolidated financial statements and
notes thereto included in the Company's most recent Annual Report on Form
10-KSB.
The Company provides printing services for small to medium sized businesses and
consumers in the South Florida region. The Company intends to provide the same
printing services through the Internet and is currently developing its website
and the related software. Customers will have access to a private customized
secure website containing a digital catalog of their custom printed materials,
with which they can modify and proofread their orders using any Internet enabled
personal computer. These orders will be printed at the Company's printing
facilities.
On December 30, 1999, the Company acquired PrintAmerica Interactive, Inc.
("PrintAmerica") for 1,000,000 shares of common stock. The acquisition was
recorded at the historical cost of PrintAmerica's assets and liabilities in a
manner similar to a pooling of interests for accounting purposes since
PrintAmerica was owned by the parents of the Company's two principal
stockholders who collectively owned approximately 86% of the common stock of
POTN on the date of the acquisition. PrintAmerica was merged into POTN in
January 2000.
The accompanying financial statements include (i) the historical accounts of
POTN for the six months ended June 30, 2000 and from January 27, 1999 (date
incorporated) through June 30, 1999, and (ii) the historical accounts of
PrintAmerica and its wholly owned subsidiary Denny Printing, Corp. for the six
months ended June 30, 2000 and 1999. All significant intercompany balances and
transactions have been eliminated.
NOTE B - STOCKHOLDER LOANS and DUE TO AFFILIATE
During 1999 and the quarter ended March 31, 2000, Benjamin Rogatinsky and Samual
Rogatinsky (the "Rogatinskys") funded the Company's operations with personal
loans including amounts borrowed through National Holding Company, Inc.'s
("National Holding", affiliated with the Company through common ownership)
account with Merrill Lynch Business Financial Services, Inc. ("Merrill Lynch").
Benjamin Rogatinsky was the Chairman and CEO of the Company through June 8, 2000
and was an officer of PrintAmerica. Samuel Rogatinsky was President of POTN
through June 8, 2000 and was an officer of PrintAmerica. These loans were
interest free and had no fixed due date. PrintAmerica had co-guaranteed the
National Holding debt to Merrill Lynch. In March 2000, Merrill Lynch commenced
an action against National Holding and the guarantors seeking repayment of the
loans; in June 2000 the lawsuit was settled and the guaranties released (see
Note D). As part of the lawsuit settlement and guaranty release, the stockholder
loans (amounting to $1,263,000) were contributed to capital in June 2000.
During the period from 1998 through March 31, 2000, the Company purchased
printing services from National Lithographers & Publishers, Inc. ("National
Lithographers"), a wholly owned subsidiary of National Holding, and provided
printing services to National Lithographers during the same periods.
Additionally, the Company paid certain expenses on behalf of National
Lithographers during the quarter ended March 31, 2000. The net cumulative effect
of all such transactions was a payable to National Lithographers of $51,000,
which was, pursuant to the settlement, also contributed to capital in June 2000.
5
<PAGE>
PRINTONTHENET.COM, INC. AND SUBSIDIARY
Notes to Financial Statements
June 30, 2000
NOTE C - COMMITMENTS AND CONTINGENCY
In March 2000, the prior management of the Company determined that the Company
was subject to certain corporate guaranties of the obligations of certain
corporate affiliates (see Note D).
Neither the private placement memorandum used in connection with the February
2000 offering of the Company's securities (see Note E), nor documents filed with
the Securities and Exchange Commission related to the PrintAmerica merger,
disclosed the existence of these corporate guaranties. These guaranties were
subsequently released by the financial institutions which were the beneficiaries
thereof (see Note D). The Company may be subject to claims based on alleged
securities laws violations and such actions may be initiated by the federal
authorities, state authorities, or certain persons who bought or sold the
Company's securities during the relevant time period. No specific allegations
have been made; therefore, no conclusion can be reached as to what impact, if
any, any inquiries may have on the Company or its operations.
The Company offered the investors in the February 2000 private placement the
right to rescind their investment (see Note E(1)).
NOTE D - GUARANTIES AND LITIGATION MATTERS
Subsequent to its merger with PrintAmerica, the Company's prior management
became aware that PrintAmerica had guaranteed up to $7,500,000 in obligations of
National Lithographers to First Southern Bank (the "Bank"). In January 2000, the
Company had also guaranteed this indebtedness to the Bank. In March 2000 the
underlying indebtedness secured by these guaranties went into default and there
were insufficient assets of National Lithographers to satisfy the debt.
Subsequently, National Lithographers filed for an assignment for the benefit of
creditors.
PrintAmerica had also guaranteed the obligations of National Holding to Merrill
Lynch. On March 15, 2000, National Holding's indebtedness to Merrill Lynch of
approximately $1,045,000 was in default and Merrill Lynch instituted a lawsuit
against the borrowers and all the guarantors including PrintAmerica (and by
operation of law of the Company) to collect the amount owed.
In June 2000, the Company, the Rogatinskys, Merrill Lynch and the Bank settled
their disputes and the Company obtained a release from Merrill Lynch and the
Bank with respect to the guaranties and dismissal of the Merrill Lynch action as
against the Company. As of this date, pursuant to the settlement:
(a) All shares of POTN common stock owned by the Rogatinskys, their
families and related entities are pledged to the Bank and the Company was
assigned a second priority lien on the same, and the Bank has a first priority
lien on the shares repurchased by, or otherwise returned to the Company in (b),
(c) and (d) below.
(b) The Company has purchased 12,361,111 shares of its common stock for
$1,112,500 ($0.09 per share) from the Rogatinskys. The proceeds received by the
Rogatinskys from the sale of these shares were paid to Merrill Lynch and the
Bank. Such shares are classified as treasury stock in the accompanying balance
sheet.
(c) The Rogatinskys have agreed to personally satisfy the balance owed
to Merrill Lynch; the Company was released from any further obligation. On or
before June 30, 2001, the Rogatinskys, at their option, may sell to the Company
that number of shares necessary (based on a formula described below) to generate
proceeds of $142,500 on June 30, 2001, and the proceeds from this transaction
will be paid directly to Merrill Lynch. The price per share with respect to each
such sale will be the lower of $0.09 per share, or one-half of the then current
market price per share.
6
<PAGE>
PRINTONTHENET.COM, INC. AND SUBSIDIARY
Notes to Financial Statements
June 30, 2000
(d) The Company purchased a printing press from National Lithographers
(and obtained an assignment of lien from Merrill Lynch), which was owned by
National Lithographers, for $225,000. In June 2000 the Company sold the press
for gross proceeds of approximately $60,000; the Rogatinskys are obligated to
cover the shortfall from $225,000, at the Company's option, by either (i)
transferring to the Company such additional number of shares of POTN common
stock at the lesser of $0.09 per share, or one-half of the then current market
price per share to make up the shortfall, or (ii) under certain circumstances,
selling enough shares to generate proceeds sufficient to pay the shortfall. The
Company has not received any of the proceeds from the sale of the equipment, and
has recorded a receivable of $225,000 (which includes $165,000 due from the
Rogatinskys) as of June 30, 2000.
(e) In order to provide certain anti-dilution protection to the Bank
with respect to its common stock purchase warrant for 5,000,000 shares (see (f)
below), the Company has agreed to issue additional shares of common stock to the
Rogatinskys if (i) the Company sells (in certain circumstances) its common stock
for less than $.30 per share, or (ii) if, at the time of sale, the Company's
common stock trades for less than $.30 per share. These additional shares will
be issued only as collateral to secure the Bank's position; the Rogatinskys will
not have any voting control thereof, and when and if the Rogatinskys
indebtedness is repaid to the Bank, the shares issued pursuant to this
anti-dilution protection will be returned to the Company.
(f) The Company issued to the Bank two-year warrants to purchase
5,000,000 shares of the Company's common stock at $0.30 per share. These
warrants were valued at $2,150,000 using the Black-Scholes pricing model and
recorded as a `fair value of warrants issued' charge during the quarter ended
June 30, 2000.
(g) The shares pledged to the Bank by the Rogatinskys are initially
restricted from sale for a period of one year. Thereafter, such shares may be
liquidated by the Bank pursuant to terms of the settlement agreement which
limits the number of shares the Bank may sell in each 90-day period to that
number of shares which represents in value up to 25% of the outstanding
principal balance of the indebtedness (plus accrued interest and expenses) of
the Rogatinskys to the Bank. Additionally, daily sales by the Bank may not
exceed 5% of the average daily trading volume of the Company's common stock over
the preceding 20 business days. The Rogatinskys and the Company have a right of
first refusal with respect to the sale by the Bank of the pledged common stock.
(h) All of the shares issued to the sellers in connection with the
acquisition of PrintAmerica (see Note A) have been returned to the Company, in
exchange for the special release of the sellers of PrintAmerica to the Company.
Such shares are included in treasury stock in the accompanying balance sheet.
(i) Effective June 2000, the Rogatinskys have resigned as officers and
directors of the Company.
(j) All amounts payable by the Company pursuant to stockholder loans
(totaling $1,263,000 as of June 30, 2000) and due to affiliate (totaling $51,000
as of June 30, 2000) (see Note B) were contributed to the capital of the
Company.
(k) The Company obtained release from all of the parties to the omnibus
settlement described above.
NOTE E - PRIVATE PLACEMENTS
[1] February 2000 private placement:
In February 2000, the Company raised approximately $3,040,000 ($2,677,000 net of
fees and offering costs of $363,000) in a private placement offering of units.
Each unit was sold for $100,000 and consisted of 28,409 shares of Series A
Convertible Preferred Stock (each share is convertible into 10 shares of common
stock); an aggregate of
7
<PAGE>
PRINTONTHENET.COM, INC. AND SUBSIDIARY
Notes to Financial Statements
June 30, 2000
863,633 shares of Preferred Stock were issued. Upon recognition by prior
management of the Company that certain guaranties had not been previously
disclosed in the private placement memorandum circulated for this offering (see
Notes C and D), the Company offered rescission to the subscribers of the units.
Through June 30, 2000, an aggregate of $840,000 in cash had been returned, and
subsequently an additional $300,000 in cash had been returned pursuant to the
rescission offer, and the other subscriber rolled over their funds into the June
Private Placement.
In addition, in December 1999, Commonwealth purchased from the Company for
$100,000 warrants to purchase 6,000,000 shares of common stock at an exercise
price of $0.10 per share. These warrants expire in December 2005.
[2] June 2000 private placement:
In June 2000, the Company raised approximately $6,720,000 (net of fees
and offering costs of $613,000) (including $1,900,000 rolled over from the
February 2000 Private Placement) in a second private placement offering of
units. Each unit was sold for $100,000 and consisted of 50,000 shares of Series
B Convertible Preferred Stock (each share is convertible into 20 shares of
common stock) having a liquidation value of $2.00 per share. An aggregate of
3,360,000 shares of Series B Convertible Preferred Stock (convertible into
67,200,000 shares of Common Stock) were issued. All subscribers to the February
2000 private placement were offered the option to convert their investment into
this offering. Commonwealth received fees of 10% of the gross proceeds in excess
of $3,040,000 and warrants to purchase 13,548,600 shares of common stock at an
exercise price of $0.10 per share. The warrants issued to the Placement Agent in
connection with the February 2000 offering have been canceled. In addition, in
April and May 2000, prior to the transaction and at the Company's request due to
lack of working capital, Commonwealth, Robert Priddy and Neal Polan, purchased
from the Company for $160,000, five-year warrants to purchase 16,000,000 shares
of common stock at an exercise price of $0.10 per share. These warrants were
valued at $7,840,000 using the Black-Scholes pricing model and recorded as an
expense during the quarter ended June 30, 2000 (included in the classification
'fair value of warrants issued' in the accompanying statement of operations).
Subsequent to the closing of this offering Mr. Priddy joined the Company as
Chairman of the Board of Directors and Mr. Polan was appointed Chief Executive
Officer.
In July 2000, the Company raised an additional $640,000 (net of fees and
offering costs of $105,000) under the second private placement.
NOTE F - EMPLOYMENT OPTIONS AND WARRANTS
On June 8, 2000 Neal Polan, who was appointed Chief Executive Officer, was
granted warrants to purchase 7,673,333 shares of the Company's common stock at
$0.10 per share. The warrants vest in twelve equal quarterly installments
commencing in August 2000. Also on June 8, 2000, the Company appointed Robert
Norris as Chief Financial Officer, and Michael Brummer as Director of Strategic
Operations. In connection with their appointments, Mssr.'s Norris and Brummer
were granted options to purchase 500,000 shares (10% of such options vesting
immediately and the remainder vesting in equal annual installments over three
years) and 225,000 shares of the Company's common stock (vesting immediately) at
$.10 per share, respectively, under the Company's 1999 Stock Incentive Plan.
The above noted employment warrants and options were valued at an aggregate
amount of $4,911,000 using the Black-Scholes pricing model and recorded as
deferred compensation expense. The Company amortized $252,000 for amounts vested
through June 30, 2000 (which is included in selling, general and administrative
expense).
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Operations
The Management's Discussion and Analysis of Financial Condition and Results of
Operations included herein should be read in conjunction with the Consolidated
Financial Statements and Notes to Financial Statements of POTN and subsidiary
included in Item 1. above. Such Unaudited Consolidated Financial Statements
included (i) the historical accounts of POTN for the six months ended June 30,
2000 and from January 27, 1999 (date incorporated) through June 30, 1999, and
(ii) the historical accounts of PrintAmerica for the six months ended June 30,
2000 and 1999. All significant intercompany balances and transactions have been
eliminated. The Company's Financial Statements have been prepared in accordance
with generally accepted accounting principles in the United States.
The financial information in Management's Discussion and Analysis of Financial
Condition and Results of Operations refers to continuing operations.
Results of Operations
Sales were $626,000 and $1,296,000 during the three and six months ended June
30, 2000 compared to sales of $672,000 and $1,332,000 during the three and six
months ended June 30, 1999. Sales during the 2000 period included revenue
derived from three acquisitions made subsequent to March 31, 1999; however, a
significant amount of management's time was devoted to efforts to settle issues
related to certain previously undisclosed guaranties (see Note D of Notes to
Financial Statements). Given the limited amount of management resources then
available, this adversely affected sales and operations, particularly during the
second quarter of 2000.
Cost of Sales was $523,000 (83.5% of sales) and $956,000 (73.8% of sales) during
the three and six months ended June 30, 2000, respectively, compared to $459,000
(68.3% of sales) and $908,000 (68.2% of sales) during the three and six months
ended June 30, 1999. Cost of sales for the three and six months ended June 30,
1999 relates entirely to the operations of PrintAmerica, which was a privately
held company during that period. The increased cost of sales as a percentage of
sales during 2000 is a result of several factors, including increased pricing
from vendors and, to a large extent, management's efforts as discussed above.
Our Management is presently evaluating its operations, including its current
plant facilities and staffing structure. The result of this evaluation may lead
to a consolidation of facilities and personnel, although no definite decisions
have been made to date.
Software development expenses were $97,000 and $200,000 during the three and six
months ended June 30, 2000. Such costs relate to development of our web site and
internet strategy. We did not incur any such costs during the 1999 period.
Selling, general and administrative ("SG&A") expenses were $1,224,000 and
$2,005,000 during the three and six months ended June 30, 2000, respectively,
versus $313,000 and $669,000 during the three and six months ended June 30,
1999, respectively. A substantial portion of 1999 SG&A expense ($234,000 and
$578,000 during the three and six months ended June 30, 1999, respectively)
relates to the operations of PrintAmerica. The increase from 1999 to 2000 is
attributable to several factors, including (i) the incurrence of significant
professional fees and other costs relating to certain guaranty and litigation
matters, (ii) professional fees and other costs associated with being a
publicly-traded company, (iii) increased infrastructure costs incurred in
preparing for future growth both internally and through acquisitions, and
relating to implementation of the web site and internet strategy, and (iv) non
cash compensation expense related to the issuance of employment related warrants
and options (the Company will record a quarterly non cash compensation expense
of approximately $399,000 during the next twelve quarters relating to such
warrants - see Note F of Notes to Financial Statements).
The Company recorded a charge classified as fair value of warrants issued
amounting to $9,990,000 during the quarter ended June 30,2000. This charge
relates to warrants issued to a bank (see Note D of Notes to Financial
Statements) and warrants sold (see Note E of Notes to Financial Statements).
During the three and six month periods ended June 30, 2000, we had a net loss of
$11,218,000, or $.43 basic and diluted loss per share, and $11,893,000, or $.49
basic and diluted earnings per share, respectively. During the three and six
month periods ended June 30, 1999, we had a net loss of $134,000, or $.00 basic
and diluted loss per share, and $307,000, or $.01 basic and diluted earnings per
share, respectively. The principal reasons for the significant increase in net
loss from 1999 to 2000 are discussed above.
9
<PAGE>
Liquidity and Capital Resources
Net cash used in operating activities was $1,773,000 during the six months ended
June 30, 2000 period. The most significant components include decreased cash of
$1,527,000 resulting from the net loss (net of non cash depreciation and
amortization expenses of $124,000, a non cash charge for fair value of warrants
of $9,990,000 and a non cash charge to compensation expense of $252,000), and
decreased cash of $246,000 resulting from changes in operating assets and
liabilities.
During the 2000 period net cash used for investing activities was $350,000,
relating primarily to a repurchase of $346,000 of accounts receivable in
connection to the termination of the Company's factoring arrangement with First
Southern Bank (see the Company's Form 10-QSB for the quarterly period ended
March 31, 2000).
During the 2000 period net cash provided by financing activities was $5,399,000,
consisting primarily of $6,196,000 of net proceeds from the February and June
Private Placements, offset by the purchase of treasury stock of $1,113,000 in
connection with the litigation settlements.
At June 30, 2000, we had working capital of $2,812,000 (including cash of
$3,276,000). In July 2000 we raised an additional $640,000 (net of fees and
offering costs) and completed the private placement. Management believes that it
will be able to fund its operations through September 2001.
Forward Looking Statements
Except for historical information contained herein, certain matters discussed
herein are forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. All
statements, other than statements of historical facts, that address future
activities, events or developments, including such things as future revenues,
product development, market acceptance, responses from competitors, capital
expenditures (including the amount and nature thereof), business strategy and
measures to implement strategy, competitive strengths, goals, expansion and
growth of our business and operations, plans, references to future success and
other such matters, are forward-looking statements. The words anticipates,
believes, estimates, expects, plans, intends, should, seek, will, and similar
expressions are intended to identify these forward-looking statements, but are
not the exclusive means of identifying them. These statements are based on
certain historical trends, current conditions and expected future developments
as well as other factors we believe are appropriate in the circumstances.
However, whether actual results will conform to our expectations and predictions
is subject to a number of risks and uncertainties that may cause actual results
to differ materially, our success or failure to implement our business strategy,
our ability to market successfully our on-line printing and publishing concept,
changes in consumer demand, changes in general economic conditions, the
opportunities (or lack thereof) that may be presented to and pursued by us,
changes in laws or regulations, changes in technology, the rate of acceptance of
the Internet as a commercial vehicle, competition in the Internet printing and
publishing business and other factors, many of which are beyond our control.
Consequently, all of the forward-looking statements made in this Report are
qualified by these cautionary statements and there can be no assurance that the
actual results we anticipate will be realized or, even if substantially
realized, that they will have the expected consequences to or effects on us or
our business or operations. We assume no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
10
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On March 15, 2000, Merrill Lynch Business Financial Services, Inc. ("Merrill
Lynch") filed an action in the Circuit Court for the Eleventh Judicial in and
for Dade County, State of Florida, Civil Division against National Holding,
National Lithographers, PrintAmerica (and by operation of law, POTN) and the
Rogatinksys (among other defendants). National Holding"s indebtedness to Merrill
Lynch in the amount of approximately $1,045,000 was in default and Merrill Lynch
institute this lawsuit to collect the amount owed. See Note D of Notes to
Financial Statements included in Part I of this report.
In June 2000 the parties settled the matter and we obtained a release from the
subject corporate guaranty and a dismissal of the Merrill Lynch action.
Item 4. Submission of Matters to a Vote of Security Holders.
On May 17, 2000, our Board of Directors of the Company approved an Amendment to
its Restated Certificate of Incorporation (the "Amendment") to increase its
authorized capital stock to 225,000,000 shares of Common Stock from 80,000,000
shares of Common Stock. No change was made to the authorized number of shares of
the Company's Preferred Stock. The Board of Directors deemed it advisable and in
our best interests to have available additional authorized but unissued shares
of Common Stock in an amount adequate to facilitate the raising of additional
capital through the private sale of the Company's capital stock including in
connection with the June private placement.
On May 17, 2000, and in accordance with Section 228 of the Delaware General
Corporation Law, the written consent of the holders of the outstanding shares of
voting capital stock of the Company was obtained. Under Delaware law, such a
written consent may be substituted for a special meeting. Accordingly, the
stockholders will not asked to take action on the Amendment at any future
meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit Description
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
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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.
PRINTONTHENET.COM, INC.
Date: August 18, 2000 By: /s/ NEAL J. POLAN
Neal J. Polan
Chief Executive Officer
Date: August 18, 2000 By: /s/ ROBERT NORRIS
Robert Norris
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule
