SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
| X | EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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.
------------------------------------------------------
(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.)
1350 NORTH LAKE SHORE DRIVE SUITE 315 SOUTH, CHICAGO, IL 60610
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(312)664-7852
----------------------------
Registrant's telephone number
CLASSICS INTERNATIONAL ENTERTAINMENT, INC.
----------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
APPLICABLE ONLY TO CORPORATE REGISTRANTS
As of May 10, 2000, 8,608,997 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. Financial Statements
Consolidated Balance Sheet 3
Consolidated Statement of Operations 4
Consolidated Statement of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operations 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3 . Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
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.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
See attached financial statements.
<PAGE>
PIRANHA, INC. AND SUBSIDIARIES
(FORMERLY CLASSICS INTERNATIONAL ENTERTAINMENT, INC. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
ASSETS
Cash $ 3,274,324
U.S. Government Securities 2,413,053
Prepaid expenses 12,370
------------------
TOTAL CURRENT ASSETS 5,699,747
285,656
1,750,000
11,555,638
------------------
$ 19,291,041
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 1,306,482
Dividends payable 288,600
Accrued liabilities 1,005,853
Stockholder loans and other notes payable 427,161
------------------
TOTAL CURRENT LIABILITIES 3,028,096
Preferred stock $ 1,012,488
Common stock, $.001 par value, 100,000,000 shares
authorized; 8,585,631 shares issued and outstanding 8,586
Additional paid-in capital 34,602,908
Stock subscription receivable (44,500)
Accumulated deficit (19,316,537)
------------------
TOTAL STOCKHOLDERS' EQUITY 16,262,945
------------------
$ 19,291,041
==================
See notes to the consolidated financial statements
3
<PAGE>
PIRANHA, INC, AND SUBSIDIARIES
(FORMERLY CLASSICS INTERNATIONAL ENTERTAINMENT, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
------------ -----------
REVENUES $ 0 $ 0
COSTS AND EXPENSES
General and administrative 1,135,888
Interest expense - net 11,320
Depreciation 15,057
------------ -----------
TOTAL COSTS AND EXPENSES 1,162,265 0
Loss from continuing operations (1,162,265) 0
Loss from discontinued operations 0 7,167
------------ -----------
Net loss (1,162,265) (7,167)
Preferred stock dividends (18,450) (40,950)
------------ -----------
Net loss applicable to common stock $ (1,180,715) $ (48,117)
============ ===========
Basic and Diluted Loss Per Common Share:
Loss from continuing operations $ (0.17) $ (0.01)
Loss from discontinued operations 0.00 0.00
------------ -----------
Net loss per common share - basic and diluted $ (0.17) $ (0.01)
============ ===========
Weighted average common shares outstanding 6,863,868 4,406,566
============ ===========
See notes to the consolidated financial statements
4
<PAGE>
PIRANHA, INC. AND SUBSIDIARIES
(FORMERLY CLASSICS INTERNATIONAL ENTERTAINMENT, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------
2000 1999
---------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (1,162,265) $ (7,167)
Depreciation 15,057
Loss from discontinued operations 7,167
Adjustments to reconcile net loss
to net cash used in operations:
Decrease in stock subscription receivable 800,000
Decrease in prepaid expenses 1,025
Decrease in accounts payable and accrued liabilities (201,844)
Decrease in stockholder loans and other notes payable (400,000)
---------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (948,027) 0
---------------- ---------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment (252,470)
Investment in intangibles and other assets (17,513)
---------------- ---------------
TOTAL CASH FLOWS USED IN INVESTING ACTIVITIES (269,983) 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Investment in U.S. Government Securities (1,121,545)
Proceeds from the sale of common stock 5,280,000
---------------- ---------------
TOTAL CASH FLOWS FROM FINANCING ACTIVITES 4,158,455 0
NET INCREASE IN CASH 2,940,445 0
CASH AT BEGINNING OF YEAR 333,879 0
---------------- ---------------
CASH AT END OF PERIOD $ 3,274,324 $ 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
================ ===============
Issuance of common stock for acquisitions $ 1,750,000 $ 0
================ ===============
Issuance of common stock upon conversion of preferred stock $ 1,382,500 $ 0
================ ===============
</TABLE>
See notes to the consolidated financial statements
5
<PAGE>
PIRANHA, INC. AND SUBSIDIARIES
(FORMERLY CLASSICS INTERNATIONAL ENTERTAINMENT, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 period 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 - ACQUISITIONS
a. ACQUISITION OF ROGUE RIVER SOFTWARE, INC.
On February 24, 2000, the Company acquired all of the capital stock of
Rogue River Software, Inc. (formerly Grand Rapids Science Group, Inc.)
in exchange for 89,892 shares of the Company's common stock, the fair
market value of which was one million dollars ($1,000,000).
In connection with the acquisition, the Company committed to grant the
sellers performance based stock options to purchase 150,000 shares of
common stock at a price of $7.50 per share as well as incentive based
stock options to purchase 22,500 shares of common stock at a price of
$5.00 per share.
b. ACQUISITION OF ON-LINE MARKETING, INC.
On March 24, 2000, the Company acquired all of the capital stock of
On-Line Marketing, Inc. in exchange for 55,556 shares of the Company's
common stock, the fair market value of which was seven hundred fifty
thousand dollars ($750,000).
In connection with the acquisition, the Company committed to grant the
sellers performance based stock options to purchase 150,000 shares of
common stock at a price of $5.00 per share.
NOTE 3 - 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 for
$600,000. The Company is engaged in settlement negotiations with the remaining
two officers. A provision for settlement of litigation of $700,000 was recorded
in the year ended December 31, 1999, and is included as an accrued liability in
the accompanying consolidated balance sheet.
The Company was a defendant in the case of Benjamin B. LeCompte, III, a
stockholder, v. Classics International Entertainment, Inc., in the United States
6
<PAGE>
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.
NOTE 4 - CHANGES IN COMMON STOCK
During the period covered by this Report an aggregate of 1,890,176 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 January 21, 2000, an aggregate of 57,307 shares of Common Stock were issued
on conversion of 200,000 shares of the Company's Series A 9% Convertible
Cumulative Redeemable Preferred Stock.
On February 24, 2000, 89,892 shares of Common Stock, the fair market value of
which was one million dollars ($1,000,000), were issued in exchange for all of
the capital stock of Rogue River Software, Inc., formerly Grand Rapids Science
Group, Inc.
On March 24, 2000, 55,556 shares of Common Stock, the fair market value of which
was seven hundred fifty thousand dollars ($750,000), were issued in exchange for
all of the capital stock of On-Line Marketing, Inc.
During March 2000, an aggregate of 851,421 shares of Common Stock were issued on
exercise of the Company's outstanding Class A and Class B warrants.
On March 31, 2000, an aggregate of 836,000 shares of Common Stock were issued to
various parties pursuant to the receipt of five million two hundred eighty
thousand dollars ($5,280,000) in cash during the quarter.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Piranha, Inc.(TM) has become a technology company with a line of digital asset
management products being developed for sale and/or licensing. The data
compression software products under the Piranha(TM) brand are designed for use
on a variety of platforms, and are intended 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. 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'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 technology will provide the
first real video-on-demand solution for the Internet with full screen (up to 640
x 480), full motion viewing using only one file for all connections. Current
beta products include:
o Piranha Net(TM) - This web based product utilizes Piranha's proprietary
lossless and lossy data compression algorithms, and is expected to allow
commercial web sites to download up to 50 times faster than what is
currently available. A page that currently takes 50 seconds is expected to
take as little as 1 second with the Piranha Net(TM) product.
o Piranha Byte(TM) - This Streaming FTP lossless data compression product is
used for downloading files to or from a server or user. A multitude of file
types can be delivered for archival or immediate use at compression rates
and data transfer speeds substantially greater than current competitive
products.
o Piranha Stream(TM) - This product is a plug-in or browser-based
full-motion, full-screen video product compatible with a number of audio
codec products. Individual frames are compressed at a measurable ratio of
692:1 The images are compressed twice utilizing existing player technology
making the decompressed frames broadband suitable.
All Piranha(TM) software products have been developed on the Linux operating
system and have been successfully ported to Microsoft and Apple operating
platforms. Future Products will include:
o An e-commerce application covering transaction, data mining, and other
e-commerce disciplines.
o A product combining all Piranha(TM) technologies into one suite of tools to
handle enterprise solutions for the largest customers. This product will
include data base interfacing with Oracle and other enterprise data
warehouse software.
o An affordable software rental that offers a variety of solutions from a
full suite of products to a smaller version designed to meet the specific
needs of the customer.
o Increased processing power delivered through custom DSP chip integration
for tailored hardware/software solutions.
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, which the Company
anticipates will increase significantly in the next twelve months.
8
<PAGE>
The Company believes that its available funds 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 existing stockholders of the Company will be reduced, 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.
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.
<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 for
$600,000. The Company is engaged in settlement negotiations with the remaining
two officers. A provision for settlement of litigation of $700,000 was recorded
in the year ended December 31, 1999, and is included as an accrued liability in
the accompanying consolidated balance sheet.
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 1,890,176 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 January 21, 2000, an aggregate of 57,307 shares of Common Stock were issued
on conversion of 200,000 shares of the Company's Series A 9% Convertible
Cumulative Redeemable Preferred Stock.
On February 24, 2000, 89,892 shares of Common Stock, the fair market value of
which was one million dollars ($1,000,000), were issued in exchange for all of
the capital stock of Rogue River Software, Inc., formerly Grand Rapids Science
Group, Inc.
On March 24, 2000, 55,556 shares of Common Stock, the fair market value of which
was seven hundred fifty thousand dollars ($750,000), were issued in exchange for
all of the capital stock of On-Line Marketing, Inc.
During March 2000, an aggregate of 851,421 shares of Common Stock were issued on
exercise of the Company's outstanding Class A and Class B warrants.
On March 31, 2000, an aggregate of 836,000 shares of Common Stock were issued to
various parties pursuant to the receipt of five million two hundred eighty
thousand dollars ($5,280,000) in cash during the quarter.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 9, 2000, the Company filed an information statement, the contents of
which are hereby incorporated by reference, wherein the Company informed its
stockholders that the Board of Directors had received written consents from a
majority of stockholders authorizing (i) a change in the name from Classics
International Entertainment Inc. to Piranha, Inc., (ii) an increase in the
authorized Common Stock from 30,000,000 shares to 100,000,000 shares, and (iii)
a reverse stock split so that each 3.49 outstanding shares were converted into
one share of Common Stock outstanding, and that such changes had been approved
by the Board of Directors.
On March 15, 2000, stockholders owning a majority of the Company's issued and
outstanding shares of Common Stock executed a written consent which provided for
the adoption of The Piranha, Inc. 2000 Stock Incentive Plan and The Piranha,
Inc. Stock Option Plan for Non-Employee Directors. These Plans, which had
previously been adopted by the Company's Board of Directors, and such
stockholder action are described in the Company's definitive Schedule 14C
Information Statement filed with the Commission on May 3, 2000, the contents of
which are hereby incorporated by reference.
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
*3.1.2 Amendment to Certificate of Incorporation of the
Registrant, incorporated by reference to the
Registrant's Form 8-K filed March 15, 2000.
*10.44 Merger Agreement with IBP and Classics Acquisition
Corp., incorporated by reference to the Registrant's
Form 8-K filed March 15, 2000.
*10.45 Acquisition of Zideo.com, Inc. incorporated by reference
to the Registrant's Schedule 14C filed February 9, 2000.
*22.1.2 Subsidiaries of the Registrant
27 Financial Data Schedule
(b) Reports on Form 8-K:
A report on Form 8-K was filed on March 15, 2000, reporting events in Item 4.
<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.
By: /s/ Edward W. Sample
------------------------
Edward W. Sample
Chairman and
Chief Executive Officer
By: /S/ RICHARD S. BERGER
-------------------------
Richard S. Berger
Principal Financial Officer
Dated: May 15, 2000
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(Replace this text with the legend)
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<CIK> 0000894789
<NAME> PIRANHA, INC.
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 3,274,324
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<PP&E> 301,134
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1,012,488
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