SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
| X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
--------------------
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to _______________
COMMISSION FILE NO. 0-20190
PIRANHA, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 36-3859518
------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6060 N. CENTRAL EXPRESSWAY, DALLAS, TEXAS 75206
------ -----------------------------------------------
(Address of principal executive offices) (Zip Code)
(214) 800-2835
Registrant's telephone number
APPLICABLE ONLY TO CORPORATE REGISTRANTS
As of August 14, 2000, 9,172,054 shares of Common Stock, $.001 par value, were
issued and outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
INDEX TO QUARTERLY REPORT ON FORM - 10QSB
PAGE NO.
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheet 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3 Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 4
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 21E of the Securities and Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. These
statements involve risks and uncertainties, including these risks discussed in
the section entitled "Item 6, Management's Discussion and Analysis or Plan of
Operations" and elsewhere in the Quarterly Report on Form 10-QSB. The actual
results that the Company achieves may differ materially from the results
discussed or implied in such forward-looking statements due to such risks and
uncertainties. Words such as "believes," "anticipates," "expects," "future,"
"intends," "may" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying such
statements. The Company undertakes no obligation to revise any of these
forward-looking statements.
1
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
See attached financial statements.
<PAGE>
PIRANHA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(UNAUDITED)
ASSETS
Cash $ 583,689
U.S. Government securities 2,298,325
Marketable securities 168,483
Accounts receivable 20,000
Prepaid expenses and deposits 143,492
------------------
TOTAL CURRENT ASSETS 3,213,989
Property and Equipment 922,194
Goodwill 1,750,000
Intangible and other Assets 11,555,638
------------------
$ 17,441,821
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 1,020,422
Dividends payable 196,800
Accrued liabilities 1,005,640
Stockholder loans and other notes payable 214,421
------------------
TOTAL CURRENT LIABILITIES 2,437,283
Preferred stock $ 462,500
Common stock, $.001 par value, 100,000,000 shares authorized;
9,086,054 shares issued and outstanding 9,086
Additional paid-in capital 36,529,051
Stock subscription receivable (44,500)
Accumulated deficit (21,951,599)
------------------
TOTAL STOCKHOLDERS' EQUITY 15,004,538
------------------
$ 17,441,821
==================
See notes to the consolidated financial statements
3
<PAGE>
PIRANHA, INC, AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUES $ 48,095 $ - $ 48,095 $ -
------------ ----------- ------------ -----------
COSTS AND EXPENSES
General and administrative 2,655,482 3,791,370
Depreciation 34,651 49,708
------------ ----------- ------------ -----------
Total Costs and Expenses 2,690,133 3,841,078
------------ ----------- ------------ -----------
Loss before interest (2,642,038) (3,792,983)
Interest income 30,687 30,687
Interest (expense) (10,260) (21,580)
------------ ----------- ------------ -----------
Loss from continuing operations (2,621,611) (3,783,876)
Loss from discontinued operations 0 (7,015) 0 (14,182)
------------ ----------- ------------ -----------
Net loss (2,621,611) (7,015) (3,783,876) (14,182)
Preferred stock dividends (13,450) (40,950) (31,900) (81,900)
------------ ----------- ------------ -----------
Net loss applicable to common stock $(2,635,061) $ (47,965) $(3,815,776) $ (96,082)
============ =========== ============ ===========
Basic and Diluted Loss Per Common Share:
Loss from continuing operations $ (0.30) $ (0.01) $ (0.49) $ (0.02)
Loss from discontinued operations 0.00 0.00 0.00 0.00
Net loss per common share
------------ ----------- ------------ -----------
- basic and diluted $ (0.30) $ (0.01) $ (0.49) $ (0.02)
============ =========== ============ ===========
Weighted average common shares outstanding 8,726,821 4,979,632 7,795,345 4,979,632
============ =========== ============ ===========
</TABLE>
See notes to the consolidated financial statements
4
<PAGE>
PIRANHA, INC. AND SUBSIDIARIES
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 $ (3,783,876) $ (14,182)
Adjustments to reconcile net loss
to net cash used in operations:
Depreciation 49,708
Loss from discontinued operations 14,182
Changes in assets and liabilities:
Increase in accounts receivable (20,000)
Increase in prepaid expenses (130,097)
Decrease in stock subscription receivable 800,000
Increase in goodwill and other assets (17,513)
Decrease in accounts payable and accrued liabilities (316,713)
Decrease in stockholder loans and other notes payable (612,740)
---------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (4,031,231) 0
---------------- ---------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of property and equipment (923,659)
Investment in marketable securities (168,483)
Investment in U.S. Government securities (1,006,817)
---------------- ---------------
TOTAL CASH FLOWS USED IN INVESTING ACTIVITIES (2,098,959) 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 6,380,000
---------------- ---------------
TOTAL CASH FLOWS FROM FINANCING ACTIVITES 6,380,000 0
NET INCREASE IN CASH 249,810 0
CASH AT BEGINNING OF YEAR 333,879 0
---------------- ---------------
CASH AT END OF PERIOD $ 583,689 $ 0
================ ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 2,210 $ 0
================ ===============
Cash paid during the period for income taxes $ 0 $ 0
================ ===============
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Issuance of common stock upon conversion of accounts payable $ 171,405 $ 0
================ ===============
Issuance of common stock for acquisitions 1,750,000 0
================ ===============
Issuance of common stock upon conversion of preferred stock $ 2,037,750 $ 0
================ ===============
</TABLE>
See notes to the consolidated financial statements
5
<PAGE>
PIRANHA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION:
The accompanying unaudited financial statements reflect all adjustments which,
in the opinion of management, are necessary for a fair presentation of financial
position and the results of operations for the interim periods presented. The
results of operations for any interim periods are not necessarily indicative of
the results attainable for a full fiscal year.
These statements have been prepared by the Company and are unaudited. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principals have been
omitted. As such, these financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999.
NOTE 2 - LITIGATION
In July 1994, the Company discharged four officers of its Dream Factory
subsidiary. The officers who were discharged commenced an action against the
Company seeking damages arising out of the alleged wrongful termination of their
employment. The Company subsequently settled the claims of two officers. The
Company is engaged in settlement negotiations with the remaining two officers, a
husband and wife and has accrued a provision of $700,000 in its consolidated
financial statements. The remaining cases are pending in Connecticut state
court.
The Company was a defendant in the case of Benjamin B. LeCompte, III, a
stockholder, v. Classics International Entertainment, Inc., in the United States
District Court for the Northern District of Illinois, Eastern Division. This
case involved a claim by LeCompte that the Company owed him 573,066 shares of
Common Stock pursuant to an alleged conversion of a promissory note into said
shares. The note, in the principal amount of $200,000, and the accrued interest
thereon, are included in the accompanying consolidated financial statements. On
April 3, 2000, this case was dismissed for lack of jurisdiction. On April 12,
2000, LeCompte filed an action against the Company in the Circuit Court of Cook
County, Illinois, asserting substantially the same claims as in the case which
was dismissed. The Company believes this action is without merit, and intends to
vigorously defend itself in this matter.
The Company is subject to various federal, state and local laws affecting its
business, and believes that it is in material compliance with all applicable
laws and regulations.
6
<PAGE>
NOTE 3 - PREFERRED STOCK
At June 30, 2000 Preferred Stock consisted of 5,000,000 authorized shares of
which the following were issued and outstanding:
Common Shares
PREFERRED STOCK Issuable on
--------------- Amount Conversion
Series A, 9% cumulative, convertible, redeemable;
10,000 shares issued and outstanding $ 50,000 2,866
Series B, 9% cumulative, convertible, redeemable;
412,500 shares issued and outstanding 412,500 165,445
------- -------
TOTAL $ 462,500 168,311
======= =======
NOTE 4 - CHANGES IN COMMON STOCK
During the period covered by this Report an aggregate of 500,423 shares of
Company Common Stock were offered and sold without registration under the
Securities Act of 1933, as amended ("Act"), as not involving any public offering
in reliance upon the exemption from registration contained in Section 4(2) of
the Act.
On March 13, 2000 an aggregate of 2,866 shares of Common Stock were authorized
for issuance on conversion of 10,000 shares of the Company's Series A 9%
Convertible Cumulative Redeemable Preferred Stock.
On March 15, 2000 an aggregate of 10,000 shares of Common Stock were authorized
for issuance to Piranha Propellers in exchange for the domain name
"piranha.com."
On March 15, 2000 an aggregate of 10,500 shares of Common Stock were authorized
for issuance to two individuals for services previously rendered.
In May 2000 an aggregate of 133,333 shares of Common Stock were issued to The
Interpublic Group of Companies, Inc.
On or about June 15, 2000 an aggregate of 324,224 shares of Common Stock were
issued to an individual on conversion of $500,000 of the Company's Series C 4%
Convertible Cumulative Redeemable Preferred Stock.
On June 19, 2000 an aggregate of 19,500 shares of Common Stock were issued to
four persons or entities in exchange for the cancellation of amounts due for
services.
NOTE 5 - SUBSEQUENT EVENTS
In August, 2000 an aggregate of 446,827 shares of Common Stock were authorized
for issuance to various parties in exchange for $3,301,000 cash previously
received subsequent to June 30, 2000.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Piranha has become a technology-based company with a line of digital asset
management products being developed for sale and/or licensing. The data
compression software products under the Piranha brand are designed to improve
Internet speed and to provide image clarity at compression rates which the
Company believes are higher than those presently available in the marketplace on
a variety of platforms. These compression products are directed to Internet
applications such as full motion streaming video, lossless image and text string
compression and highly compressed, high resolution static images.
The Company currently anticipates that its available funds and resources,
including product sales which commenced the week of June 19, 2000, will be
sufficient to meet its anticipated needs for working capital and capital
expenditures for the next twelve months. The Company may need to raise
additional funds in the future in order to fund more aggressive brand promotion
and more rapid expansion, to develop new or enhanced products, to respond to
competitive pressures or to acquire complementary businesses or technologies. If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of the stockholders of the Company will be
reduced, stockholders may experience dilution and such securities may have
rights, preferences or privileges senior to those of the rights of the Company's
Common Stock. There can be no assurance that additional financing will be
available on terms favorable to the Company, or at all. If adequate funds are
not available or not available on acceptable terms, the Company may not be able
to fund its expansion, promote its brand names as the Company desires, take
advantage of unanticipated acquisition opportunities, develop or enhance
products or respond to competitive pressures. Any such inability could have a
material adverse effect on the Company's business, results of operations and
financial condition.
The Company is continuously involved in the development of new products and
related technology. The Company's products are designed to support
business-to-business, e-commerce and Internet related activities associated with
advanced business-to-consumer on-line shopping applications. Products currently
under development are expected to provide a methodology to support the emerging
e-commerce market demand for solutions to the traditional bottlenecks and time
delays associated with the e-commerce shopping experience that the Company
believes are superior to those presently available. The Company believes that
its Piranha Stream technology will provide the first real video-on-demand
solution for the Internet.
The Company may experience rapid growth, which would place a significant strain
on the Company's managerial, financial and operational resources. The Company is
required to manage multiple relationships with numerous outside parties. These
requirements WILL BE EXACERBATED IN THE EVENT OF FURTHER growth of the Company
or in the number of third party relationships, and there can be no assurance
that the Company's systems, procedures or controls will be adequate to support
the Company's operations or that Company management will be able to manage any
growth effectively. To effectively manage its potential growth, the Company must
continue to implement and improve its operational, financial and management
information systems and to expand, train and manage its employee base. The
Company anticipates that the number of its employees will increase significantly
in the next twelve months.
To date, the Company has not incurred any significant problems associated with
the inability of software applications and operational programs not properly
recognizing calendar dates in the year 2000 in the following areas: (1)
accounting and reporting systems, (2) office automation and contact management
software, (3) systems of third party vendors incorporated into the Company's
developmental products, and (4) the Company's developmental products.
8
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In July 1994, the Company discharged four officers of its Dream Factory
subsidiary. The officers who were discharged commenced an action against the
Company seeking damages arising out of the alleged wrongful termination of their
employment. The Company subsequently settled the claims of two officers. The
Company is engaged in settlement negotiations with the remaining two officers, a
husband and wife. The Company is engaged in settlement negotiations with the two
remaining officers, a husband and wife, and has accrued a provision of $700,000
in its consolidated financial statements. The remaining cases are pending in
Connecticut state court.
The Company was a defendant in the case of Benjamin B. LeCompte, III, a
stockholder, v. Classics International Entertainment, Inc., in the United States
District Court for the Northern District of Illinois, Eastern Division. This
case involved a claim by LeCompte that the Company owed him 573,066 shares of
Common Stock pursuant to an alleged conversion of a promissory note into said
shares. The note, in the principal amount of $200,000, and the accrued interest
thereon, are included in the accompanying consolidated financial statements. On
April 3, 2000 this case was dismissed for lack of jurisdiction. On April 12,
2000, LeCompte filed an action against the Company in the Circuit Court of Cook
County, Illinois, asserting substantially the same claims as in the case which
was dismissed. The Company believes this action is without merit, and intends to
vigorously defend itself in this matter.
The Company is subject to various federal, state and local laws affecting its
business, and believes that it is in material compliance with all applicable
laws and regulations.
ITEM 2. CHANGES IN SECURITIES
During the period covered by this Report an aggregate of 500,434 shares of
Company Common Stock were offered and sold without registration under the
Securities Act of 1933, as amended ("Act"), as not involving any public offering
in reliance upon the exemption from registration contained in Section 4(2) of
the Act.
On March 13, 2000 an aggregate of 2,866 shares of Common Stock were authorized
for issuance on conversion of 10,000 shares of the Company's Series A 9%
Convertible Cumulative Redeemable Preferred Stock.
On March 15, 2000 an aggregate of 10,000 shares of Common Stock were authorized
for issuance to Piranha Propellers in exchange for the domain name
"piranha.com."
On March 15, 2000 an aggregate of 10,500 shares of Common Stock were authorized
for issuance to two individuals for services previously rendered.
In May 2000 an aggregate of 133,333 shares of Common Stock were issued to The
Interpublic Group of Companies, Inc.
On or about June 15, 2000 an aggregate of 324,224 shares of Common Stock were
issued to an individual on conversion of $500,000 of the Company's Series C 4%
Convertible Cumulative Redeemable Preferred Stock.
On June 19, 2000 an aggregate of 19,500 shares of Common Stock were issued to
four persons or entities in exchange for the cancellation of amounts due for
services.
ITEM 3 . DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
9
<PAGE>
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The exhibits designated with an asterisk (*) have previously been filed with the
Commission and are incorporated by reference.
EXHIBIT NO. DESCRIPTION
*10.10 Lease Agreement for 2425 N. Central Expressway, Richardson, Texas.
*10.11 Lease Agreement for 33 N. LaSalle, Chicago, Illinois.
*10.13 Lease Agreement for 5250 Northland Drive, Grand Rapids, Michigan.
27 Financial Data Schedule
(b) Reports on Form 8-K:
A report on Form 8-K was filed on April 28, 2000.
A report on Form 8-K was filed on May 26, 2000.
A report on Form 8-K was filed on June 27, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PIRANHA, INC.
SIGNATURE TITLE
/s/ Edward W. Sample Chairman of the Board and Chief Executive Officer
Edward W. Sample (Principal Executive Officer)
/s/ Richard S. Berger Chief Financial Officer, Secretary and Director
Richard S. Berger (Principal Financial and Accounting Officer)
/s/ Michael Steele Director
Michael Steele
/s/Joseph H. Sherrill, Jr. Director
Joseph H. Sherrill, Jr.
/s/Arthur R. Tauder Director
Arthur R. Tauder
/s/ W. Barger Tygart Director
W. Barger Tygart
Dated: August 14, 2000
