SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended APRIL 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-26454
PL BRANDS, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 98-0142664
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification
organization) Number)
260 Bartley Drive
Toronto, Ontario, Canada M4A 1G5
(Address of principal (Zip Code)
executive offices)
Issuer's telephone number, including area code: (416) 750-9656
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock ($.001 par value)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year: $0
The aggregate market value of the Common Stock held by non-affiliates
of the Issuer was indeterminable insofar that there has been
no available bid price since September 21, 1998 and no available
asked price since January 11, 1999. The number of shares outstanding
of the Common Stock ($.001 par value) of the Issuer as of the
close of business on August 31, 2000 was 16,899,279.
Documents Incorporated by Reference: None
<PAGE>
PART I
Item 1. Description of Business.
General Development; Business of the Company
PL Brands, Inc. (the "Company") was originally incorporated under
the name "Malone Road Investments, Ltd." on August 6, 1990 in the Isle of
Man. The Company was redomesticated in the Turks and Caicos Islands on
April 21, 1992, and subsequently domesticated as a Delaware corporation on
May 12, 1994. Pursuant to Delaware law the Company is deemed to have been
incorporated in Delaware as of August 6, 1990. The Company changed its
name to PL Brands, Inc. on June 6, 1994.
Unless the context otherwise requires, all references herein to the
"Company" refer to PL Brands, Inc. and its consolidated subsidiaries.
The Company's principal business was initially in development,
production and marketing of private label prepared foods. Prior to January
1, 1994 the Company's activities were primarily limited to research and
development of its business plan and recruitment of personnel. Full-time
operations began in March 1994. On August 19, 1994 the Company purchased
100% of the outstanding shares of Alma Pack Bottling Corporation ("Alma
Pack"). Until January 1998, Alma Pack's bottling business comprised the
Company's principal operation. Under this strategy, the Company was never
able to attain profitability and the continued stockholder's deficiency
raised doubt about the Company's ability to continue as a going concern.
In 1998 the Company revised its strategy and sold all of the shares
of Alma Pack and acquired all of the issued and outstanding shares (the
"Gandalf Shares") of Gandalf Graphics Limited ("Gandalf") from Marcella Downey
("Downey") for Canadian $400,000 which was paid by issuing a promissory
note to Downey for Canadian $400,000 (the "Note") with the principal due
and payable on January 1, 2000. Gandalf provides digital pre-press
services and digital print services. Pursuant to an agreement made as of
May 1, 1999 wherein the Company acknowledged that it has not and shall not
repay the principal amount of the Note and any accrued and unpaid interest
to Downey on January 1, 2000, the parties decided to resolve any
controversy that would result from the inability of the Company to pay, and
agreed that Downey return the Note to the Company in exchange for the
return of the Gandalf Shares. The effect of these transactions are
appropriately reflected in the accompanying financial statements.
From January 1998 through the end of the fiscal 1999, the business
of Gandalf comprised the Company's principal operation. During the fiscal
year ended April 30, 2000, the Company had no material business operations.
See, however, "Recent Developments" below.
Unless otherwise noted all information herein is given in U.S.
dollars.
Prior Business in the Printing Industry
The information described in the following generalized discussion
is intended only to provide a background against which the previous
business of the Company may be evaluated. As indicated above, from January
1998 through the end of the fiscal 1999, the business of Gandalf comprised
the Company's principal operation. The business of Gandalf is no longer
part of the Company's operations. During the fiscal year ended April 30,
2000, the Company had no material business operations.
Over the last several years, the printing industry has been changed
considerably due to technological advancements. Technology has led to the
streamlining of processing steps, more efficient and effective
<PAGE>
material and labour usage which has resulted in increased productivity
and output.
Another effect of technological advancement on the print industry
involves the smaller print businesses. The smaller print businesses are
consolidating in order to accommodate the high capital cost of equipment
necessary for economic survival in the evolving print industry.
Print companies have changed from performing parts of the print
process such as: pre-press activities, printing production or post-press
operations to performing a greater percentage of the overall process.
Customers are demanding these increased services from their print
providers.
Gandalf provides on-demand, short run, and digital color pre-press
and printing services. Full service capabilities, which are demanded in
today's market, of high quality products are provided. The print business
is going through dramatic technological changes. The traditional process
remains unchanged but the computerization of the pre-press stage has added
significantly to the profitability of the companies that have invested in
the technology. Film, which had been used for proofing and finished
product, has been eliminated.
Gandalf provides digital pre-press services including high-
resolution scanning, color separations and proofing, electronic imposition,
film output, copy dot scanning, computer to plate, customized programming,
on-line computer systems, photo/job archiving, database management, and
large format proofing. Gandalf also provides digital print services
including E-Print 1000-four-color offset printing, direct from digital
file, personalization, digital proofing, and complete finishing
capabilities.
The materials for Gandalf's products are readily available from a
wide source of suppliers, and Gandalf is not dependant upon any one
supplier or group of suppliers. Gandalf utilizes unique and proprietary
software and has over 150 active customers none of whom Gandalf has a
dependence on.
Employees
Other than its officers, the Company had no employees during the
fiscal year ended April 30, 2000.
Recent Developments
In May 2000, the Company entered into an agreement to acquire
substantially all of the assets of Oth.net, Inc., a Florida corporation, as
well as the Oth.net domain name, in exchange for 4,500,000 shares of the
Company's Common Stock and $500,000, which funds were paid on June 30,
2000. Oth.net, Inc. is an internet based search engine for music on the
world wide web. Such transaction was completed as of July 21, 2000. As a
result, it is contemplated that there will be a change in management of the
Company. In addition, subsequent to the end of fiscal 2000, the Company
sold an aggregate of 1,756,000 restricted shares of Common Stock to nine
investors for an aggregate consideration of $2,768,000 and issued an
aggregate of 1,500,000 restricted shares of Common Stock to certain persons
in connection with employment arrangements and other services rendered
after April 30, 2000 and cash in the aggregate amount of $1,500. Such
funds will be used for operations and development of the business resulting
from the acquisition of substantially all of the assets of Oth.net, Inc.
<PAGE>
Item 2. Description of Property.
The Company currently maintains its principal executive offices at
260 Bartley Drive, Toronto, Ontario, Canada, M4A 1G5. Its telephone number
is (416) 750-9656. As a result of the completion of the transaction to
acquire substantially all of the assets of Oth.net, Inc., the Company plans
to obtain other office space.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which the
Company is a party or to which any of its property is subject.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders.
PART II
Item 5. Market for Common Equity
and Related Stockholder Matters.
(a) Market Information.
The Common Stock has traded infrequently and sporadically in the
over-the-counter market and has been but is not currently listed on the OTC
Bulletin Board. In addition, the Common Stock has been quoted in the "pink
sheets" promulgated by the National Quotation Bureau, LLC. Since May 1997,
the symbol for the Common Stock has been "PLBI". Prior thereto, the
Common Stock was listed under the symbol "PLCB" and before then "PLBC".
According to the records of the National Quotation Bureau, LLC, the last
available bid price of the Common Stock was $5.00 on September 21, 1998 and
the last available asked price was $5.50 on January 11, 1999.
The following chart sets forth the range of the high and low bid
quotations for the Company's Common Stock for each period indicated. The
quotations represent prices between dealers and do not include retail
markups, markdowns, commissions or other adjustments and may not represent
actual transactions.
Period Bid Prices
Fiscal year ended April 30, 1998: High Low
May 1, 1997 to July 31, 1997 $5 $4
Aug. 1, 1997 to Oct. 31, 1997 $5 $5
Nov. 1, 1997 to Jan. 31, 1997 $5 $5
Feb. 1, 1998 to April 30, 1998 $5 $5
<PAGE>
Fiscal year ended April 30, 1999: High Low
May 1, 1998 to July 31, 1998 $5 $5
Aug. 1, 1998 to Oct. 31, 1998 $5 $5
Nov. 1, 1998 to Jan. 31, 1999 None None
Feb. 1, 1999 to April 30, 1999 None None
Fiscal year ended April 30, 2000: High Low
May 1, 1999 to July 31, 1999 None None
Aug. 1, 1999 to Oct. 31, 1999 None None
Nov. 1, 1999 to Jan. 31, 2000 None None
Feb. 1, 2000 to April 30, 2000 None None
(b) Holders.
As of the end of the fiscal year covered by this report, there
were approximately 550 record holders of the Company's Common Stock.
(c) Dividends.
The Company has never declared any cash dividends on its Common
Stock and does not anticipate declaring cash dividends in the foreseeable
future.
Item 6. Management's Discussion and Analysis or Plan of
Operation.
The following discussion of the Company's financial condition and
results of operations is based on the Company's Consolidated Financial
Statements and the related notes thereto.
Background
PL Brands, Inc. (the "Company") was originally incorporated under
the name "Malone Road Investments, Ltd." on August 6, 1990 in the Isle of
Man. The Company was redomesticated in the Turks and Caicos Islands on
April 21, 1992, and subsequently domesticated as a Delaware corporation on
May 12, 1994. Pursuant to Delaware law the Company is deemed to have been
incorporated in Delaware as of August 6, 1990. The Company changed its
name to PL Brands, Inc. on June 6, 1994.
Unless the context otherwise requires, all references herein to the
"Company" refer to PL Brands, Inc. and its consolidated subsidiaries.
The Company's principal business was initially in development,
production and marketing of private label prepared foods. Prior to January
1, 1994 the Company's activities were primarily limited to research and
development of its business plan and recruitment of personnel. Full-time
operations began in March 1994. On August 19, 1994 the Company purchased
100% of the outstanding shares of Alma Pack Bottling Corporation ("Alma
Pack"). Until January 1998, Alma Pack's bottling business comprised the
Company's principal operation. Under this strategy, the Company was never
able to attain profitability and the continued stockholder's deficiency
raised doubt about the Company's ability to continue as a going concern.
<PAGE>
In 1998 the Company revised its strategy and sold all of the shares
of Alma Pack and acquired all of the issued and outstanding shares (the
"Gandalf Shares") of Gandalf Graphics Limited ("Gandalf") from Marcella
Downey ("Downey") for Canadian $400,000 which was paid by issuing a
promissory note to Downey for Canadian $400,000 (the "Note") with the
principal due and payable on January 1, 2000. Gandalf provides digital
pre-press services and digital print services. Pursuant to an agreement
made as of May 1, 1999 wherein the Company acknowledged that it has not and
shall not repay the principal amount of the Note and any accrued and unpaid
interest to Downey on January 1, 2000, the parties decided to resolve any
controversy that would result from the inability of the Company to pay, and
agreed that Downey return the Note to the Company in exchange for the
return of the Gandalf Shares. The effect of these transactions are
appropriately reflected in the accompanying financial statements.
From January 1998 through the end of the fiscal 1999, the business
of Gandalf comprised the Company's principal operation. During the fiscal
year ended April 30, 2000, the Company had no material business operations.
See, however, "Recent Developments" under Part I, Item 1.
Unless otherwise noted all information herein is given in U.S.
dollars.
Results of Operations/Plan of Operation
As a result of the transactions discussed above with Alma Pack and
Gandalf, the net assets (liabilities) of each have been segregated from
continuing operations in the consolidated balance sheets included within
the accompanying financial statements, and operating results of each are
segregated and reported as discontinued operations in the consolidated
statements of earnings and consolidated statements of cash flows included
within the accompanying financial statements.
The Company reported net sales from continuing operations of $0 for
each of the years ended April 30, 2000 and April 30, 1999. Operating
expenses from continuing operations were approximately $185,000 in
fiscal 2000 compared to operating expenses of approximately $70,000
in fiscal 1999. The Company had a loss from continuing operations
of approximately $134,000 during fiscal 2000 compared to a loss
from continuing operations of approximately $70,000 during fiscal 1999.
During fiscal 2000, the Company reported a net loss of approximately
$134,000 compared to net earnings of approximately $43,000
during fiscal 1999. The change is primarily due to income from operations
of Gandalf of approximately $191,000 being reported in fiscal 1999 and a
loss on disposal of Gandalf being reported of approximately $78,000 in
fiscal 1999.
In May 2000, the Company entered into an agreement to acquire
substantially all of the assets of Oth.net, Inc., a Florida corporation, as
well as the Oth.net domain name, in exchange for 4,500,000 shares of the
Company's Common Stock and $500,000, which funds were paid on June 30,
2000. Oth.net, Inc. is an internet based search engine for music on the
world wide web. Such transaction was completed as of July 21, 2000. As a
result, it is contemplated that there will be a change in management of the
Company. In addition, subsequent to the end of fiscal 2000, the Company
sold an aggregate of 1,756,000 restricted shares of Common Stock to nine
investors for an aggregate consideration of $2,768,000 and issued an
aggregate of 1,500,000 restricted shares of Common Stock to certain persons
in connection with employment arrangements and other services rendered
after April 30, 2000 and cash in the aggregate amount of $1,500. Such
funds will be used for operations and development of the business resulting
from the acquisition of substantially all of the assets of Oth.net, Inc.
Liquidity and Capital Resources
On April 30, 2000, the Company had a working capital deficit of
approximately $81,000 as compared
<PAGE>
to a working capital surplus of approximately $53,000 on April 30, 1999.
On April 30, 2000, the Company had a stockholders' deficit
of approximately $81,000 as compared to stockholders' equity
of approximately $53,000 on April 30, 1999. See
"Results of Operations/Plan of Operation" above for information on the
funds received from investors subsequent to the end of fiscal 2000.
Item 7. Financial Statements.
See the Consolidated Financial Statements annexed to this report.
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.
Set forth below are the present directors and executive officers of
the Company. See, however, "Recent Developments" under Part I, Item 1.
As a result, it is contemplated that there will be a change in management
of the Company. Directors are elected to serve until the next annual
meeting of stockholders and until their successors have been elected and
have qualified. Officers serve at the discretion of the Board of
Directors.
Present Position Has Served As
Name Age and Offices Director Since
Robert Brown 38 Vice President - Finance, 1994
Secretary, Treasurer and
Director
Larry Downey 54 Chief Operating Officer 1998
None of the directors and officers is related to any other director
or officer of the Company.
Set forth below are brief accounts of the business experience
during the past five years of each director and executive officer of the
Company and each significant employee of the Company.
ROBERT BROWN has been Vice President - Finance, Secretary,
Treasurer and Director of the Company since May 1994. Mr. Brown was
controller of Trafficon Holdings, Inc., a transportation company, from 1986
to 1990. Mr. Brown was Vice President of Finance of Colonial Export
Corporation from 1990 to 1991, of Resource Food and Beverage Corporation
from 1991 to 1994, and of Spring Cola Beverage Corporation from 1991 to
1994.
<PAGE>
LARRY DOWNEY has been a Director of the Company since 1998 and
Chief Operating Officer since 1998. Mr. Downey has over 35 years
experience in the print industry. His career began in sales and management
positions. In 1979, Mr. Downey and two partners began a pre-press house.
In 1990, Mr. Downey bought out his two partners. In 1995, Mr. Downey
expanded Gandalf into digital printing.
Item 10. Executive Compensation.
No compensation was paid by the Company to any executive officer
prior to April 30, 1994. Directors are reimbursed for expenses incurred in
connection with the performance of their duties as directors. In fiscal
2000 and 1999, respectively, Andre Corbeil, formerly the Chief Executive
Officer of the Company, was paid $63,000 and $50,000, Robert Brown, Chief
Financial Officer was paid $33,000 and $33,000, Larry Downey was paid
$28,000 and $18,000. In Fiscal 2000, there are no other forms of long term
or other compensation.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
The following table (which does not take into account the issuance
of securities reflected in "Recent Developments" under Part I, Item 1
above) sets forth, as of the end of the fiscal year covered by this report,
certain information with regard to the record and beneficial ownership of
the Company's Common Stock by (i) each stockholder owning of record or
beneficially 5% or more of the Company's Common Stock, (ii) each director
individually, (iii) all officers and directors of the Company as a group:
Amount and Nature of Percent
Name Beneficial Ownership of Class
Paramount Securities & Trust SA(1) 1,931,561 21.1%
NZ Capital Markets Ltd.(2) 1,539,200 16.8%
CBFE & SA(3) 693,761 7.6%
West Side Nominees Ltd.(4) 680,224 7.4%
Larry Downey(5) 0 -
Robert Brown(5) 5 *
Officers and Directors
as a Group (2 persons) 5 *
(1) Its address is Rue De La Servette 67, 1202 Geneva, Switzerland.
(2) Its address is 11 Manners Street, Wellington, New Zealand.
(3) Its address is PO Box N-4975, Nassau, Bahamas.
(4) Its address is Mandara North Ridge, Grand Turk, Turks & Caicos
Island.
(5) Indicates a Director of the Company. The address for each is 260
Bartley Drive, Toronto, Ontario, Canada.
<PAGE>
Item 12. Certain Relationships and Related Transactions.
In 1998, the advances from related parties which were due to
directors, were non-interest bearing, unsecured and had no fixed terms of
repayment. During 1999, the advances were repaid. During 2000, the
Company paid rent of $Nil (1999 - $33,145; 1998 - $17,470) to a company
owned by the spouse of a director of the Company. During the 1999 fiscal
year, the Company purchased capital assets in the amount of $390,490 from a
company that is 100% owned by one of the Company's directors and chief
operating officer. The transactions are measured under normal trade terms
and conditions. As at April 30, 2000, $Nil (1999 - $135,357) of this
amount is included in accounts payable.
As stated in Part I, Item 1, in 1998 the Company acquired all of
the issued and outstanding shares (the "Gandalf Shares") of Gandalf
Graphics Limited ("Gandalf") from Marcella Downey ("Downey") for Canadian
$400,000 which was paid by issuing a promissory note to Downey for Canadian
$400,000 (the "Note") with the principal due and payable on January 1,
2000. Pursuant to an agreement made as of May 1, 1999 wherein the Company
acknowledged that it has not and shall not repay the principal amount of
the Note and any accrued and unpaid interest to Downey on January 1, 2000,
the parties decided to resolve any controversy that would result from the
inability of the Company to pay, and agreed that Downey return the Note to
the Company in exchange for the return of the Gandalf Shares. Marcella
Downey is the spouse of Larry Downey, a director and officer of the
Company.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Certificate of Incorporation (1)
3.2 Amendment to Certificate of Incorporation(1)
3.3 Bylaws(1)
21.0 Subsidiaries of the Registrant - PL Brands
Canada and PLBC (NRO), Inc. are incorporated
in Ontario.
___________________
(1) Incorporated by reference to the exhibits filed with
the Company's Registration Statement on Form 10-SB,
file no. 0-24888.
(b) Reports on Form 8-K.
Listed below are reports on Form 8-K filed during the last quarter
of the period covered by this report:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
PL BRANDS, INC.
(Registrant)
By:/s/Robert Brown
Robert Brown,
Vice President - Finance
Dated: November 7, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant, and in the capacities and on the dates indicated:
Signature Title Date
/s/Robert Brown Vice President - Finance, 11/7/00
Robert Brown Secretary, Treasurer
and Director (Principal
Executive Officer and
Principal Accounting and
Financial Officer)
/s/Larry Downey Chief Operating Officer 11/7/00
Larry Downey and Director
<PAGE>
Consolidated Financial Statements of
PL BRANDS, INC.
April 30, 1997 April 30, 2000 and 1999
(Expressed in U.S. Dollars)
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
PL Brands, Inc.
We have audited the accompanying consolidated balance sheets of PL Brands, Inc.
and subsidiaries as April 30, 2000 and 1999 and the related consolidated
statements of earnings, stockholders' equity and cash flows for the two years in
the period ended April 30, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of PL Brands, Inc. and subsidiaries as
of April 30, 2000 and 1999 and the results of their operations and their cash
flows for each of the two years in the period ended April 30, 2000, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ DELOITTE & TOUCHE LLP
Chartered Accountants
Toronto, Ontario
July 21, 2000
<PAGE>
<TABLE>
<CAPTION>
PL BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2000 AND 1999
(EXPRESSED IN U.S. DOLLARS)
===========================================================================================
2000 1999
----------- -----------
ASSETS
CURRENT
<S> <C> <C>
Cash $ 3,039 $ 415
NET ASSETS OF DISCONTINUED OPERATIONS (Note 3) -- 1,525,056
-------------------------------------------------------------------------------------------------
-
$ 3,039 $ 1,525,471
=================================================================================================
=
LIABILITIES
CURRENT
Accounts payable $ 84,480 $ 97,828
Net liabilities of discontinued operations (Note 3) -- 1,374,750
--------------------------------------------------------------------------------------------
84,480 1,472,578
--------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
CAPITAL STOCK (Note 5) 9,143 9,143
ADDITIONAL PAID-IN CAPITAL 2,128,906 2,128,906
ACCUMULATED DEFICIT (2,219,490) (2,085,156)
-------------------------------------------------------------------------------------------------
-
(81,441) 52,893
-------------------------------------------------------------------------------------------------
-
$ 3,039 $ 1,525,471
=================================================================================================
=
Page 1 of 11
</TABLE>
<PAGE>
PL BRANDS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED APRIL 30, 2000 AND 1999
(EXPRESSED IN U.S. DOLLARS)
================================================================================
2000 1999
----------- -----------
NET SALES $ -- $ --
OPERATING EXPENSES 185,300 70,277
-------------------------------------------------------------------------------
LOSS BEFORE UNDERNOTED ITEMS (185,300) (70,277)
OTHER INCOME 50,966 --
-------------------------------------------------------------------------------
LOSS FROM CONTINUING OPERATIONS (134,334) (70,277)
-------------------------------------------------------------------------------
DISCONTINUED OPERATIONS (Note 3)
INCOME FROM OPERATIONS OF
GANDALF GRAPHICS LIMITED -- 191,172
LOSS ON DISPOSAL OF
GANDALF GRAPHICS LIMITED -- (77,961)
-------------------------------------------------------------------------------
INCOME FROM DISCONTINUED OPERATIONS -- 113,211
-------------------------------------------------------------------------------
NET (LOSS) EARNINGS $ (134,334) $ 42,934
===============================================================================
LOSS FROM CONTINUING OPERATIONS PER BASIC
AND DILUTED SHARE $ -- $ (0.01)
===============================================================================
(LOSS) EARNINGS FROM DISCONTINUED OPERATIONS
PER BASIC AND DILUTED SHARE $ (0.01) $ 0.01
===============================================================================
NET LOSS PER BASIC AND DILUTED SHARE $ (0.01) $ --
===============================================================================
Page 2 of 11
<PAGE>
<TABLE>
<CAPTION>
PL BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED APRIL 30, 2000 AND 1999
(EXPRESSED IN U.S. DOLLARS)
=================================================================================================
========
==
Accumulated
Capital Additional Other
Stock Paid-in Accumulated Comprehensive
Amount Capital Deficit Income (Loss) Total
----------- ----------- ----------- -------------- --------
<S> <C> <C> <C> <C> <C>
BALANCE - APRIL 30, 1998 $ 9,143 $ 2,128,906 $(2,128,090) $ 57,420 $ 67,379
COMPREHENSIVE EARNINGS
Foreign currency translation
adjustments -- -- -- 48,493 48,493
Transfer foreign currency
translation adjustments
to discontinued operations -- -- -- (105,913) (105,913)
Net earnings -- -- 42,934 -- 42,934
-------------------------------------------------------------------------------------------------
BALANCE - APRIL 30, 1999 9,143 2,128,906 (2,085,156) -- 52,893
COMPREHENSIVE EARNINGS
Net loss -- -- (134,334) -- (134,334)
-------------------------------------------------------------------------------------------------
BALANCE - APRIL 30, 2000 $ 9,143 $ 2,128,906 $(2,219,490) $ -- $ (81,441)
=================================================================================================
Page 3 of 11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PL BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 2000 AND 1999
(EXPRESSED IN U.S. DOLLARS)
==================================================================================
2000 1999
--------- ---------
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Loss from continuing operations $(134,334) $ (70,277)
Changes in assets and liabilities affecting cash flows
Accounts receivable -- 69,881
Accounts payable (13,348) (142)
----------------------------------------------------------------------------------
Net cash used for operating activities (147,682) (538)
Net cash flows from discontinued
operations (129,219) 854,269
----------------------------------------------------------------------------------
(276,901) 853,731
INVESTING ACTIVITY
Net cash flows from discontinued operations -- (763,487)
FINANCING ACTIVITY
Net cash flows from discontinued operations -- (138,539)
----------------------------------------------------------------------------------
CASH USED FOR CONTINUED AND
DISCONTINUED OPERATIONS (276,901) (48,295)
PROCEEDS ON DISPOSAL OF GANDALF 279,525 --
EFFECT ON EXCHANGE RATE CHANGES
ON CASH -- 48,493
----------------------------------------------------------------------------------
NET INCREASE IN CASH 2,624 198
CASH, BEGINNING OF YEAR 415 217
----------------------------------------------------------------------------------
CASH, END OF YEAR $ 3,039 $ 415
==================================================================================
SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest paid on continuing operations $ -- $ 37,000
Income taxes paid on continuing operations $ -- $ --
Interest paid on discontinued operations $ -- $ --
Income taxes paid on discontinued operations $ -- $ --
Page 4 of 11
</TABLE>
<PAGE>
PL BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2000 AND 1999
(EXPRESSED IN U.S. DOLLARS)
================================================================================
1. BASIS OF PRESENTATION
The Company has disposed of all of its business operations and the
following relate to balances and transactions generally reflected within
discontinued operations.
PL Brands, Inc. (the "Company") was incorporated under the laws of the
State of Delaware on May 12, 1994 concurrently with the filing of a
Certificate of Domestication by its predecessor, Malone Road Investments,
Ltd., which was incorporated in the Isle of Man on August 6, 1990.
Pursuant to Delaware corporate law, the Company is declared to have been
incorporated in Delaware as of August 6, 1990.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries.
Until January 1998, the Company's traditional line of business had been
bottling water through its principal subsidiary Alma Pack Bottling
Corporation ("Alma Pack"). Under this strategy the Company was not able to
attain profitability and the continued stockholder's deficiency raised
doubt about the Company's ability to continue as a going concern. In 1998
the Company revised its strategy and sold all of the shares of Alma Pack
and acquired all of the issued and outstanding shares (the "Gandalf
Shares") of Gandalf Graphics Limited ("Gandalf") from Marcella Downey
("Downey") for Canadian $400,000 which was paid by issuing a promissory
note to Downey for Canadian $400,000 (the "Note") with the principal due
and payable on January 1, 2000. Gandalf provides digital pre-press
services and digital print services. Pursuant to an agreement made as of
May 1, 1999 wherein the Company acknowledged that it has not and shall not
repay the principal amount of the Note and any accrued and unpaid interest
to Downey on January 1, 2000, the parties decided to resolve any
controversy that would result from the inability of the Company to pay,
and agreed that Downey return the Note to the Company in exchange for the
return of the Gandalf Shares.
As a result of the transactions discussed above with Alma Pack and
Gandalf, the net assets (liabilities) of each have been segregated from
continuing operations and reported as discontinued operations. See Note 3
for further discussion of discontinued operations.
As of April 30, 2000 the Company had incurred an accumulated deficit of
approximately $2,219,000. Management has made arrangements for positive
cash flow through the issue additional shares of common stock as described
in Note 11.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income taxes
Deferred taxes are provided for the income tax effects of temporary
differences in reporting transactions for financial reporting and tax
reporting purposes. The Company records income taxes under the liability
method as required by Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". Under the liability method, deferred tax
assets and liabilities are determined based on the differences between the
financial accounting and tax basis of assets and liabilities. Deferred tax
assets or liabilities at the end of each period are determined using the
currently enacted tax rate.
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PL BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2000 AND 1999
(EXPRESSED IN U.S. DOLLARS)
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventory
Inventory is stated at the lower of cost, on a first-in first-out basis,
or net realizable value.
Capital assets
Capital assets are recorded at cost. Amortization of capital assets other
than leasehold improvements is provided on the declining balance basis
using the following annual rates:
Production equipment 12.5%
Computer software 50%
Computer equipment 12.5%
Office equipment 10%
Leasehold improvements are amortized on a straight-line basis over the
lesser of the term of the lease and 10 years.
Management reassesses the value of the capital assets on a periodic basis
and, where applicable writes such amounts down to an amount not in excess
of its estimated net recoverable amount.
Goodwill
The excess of purchase consideration over market value of net identifiable
assets acquired is recorded as goodwill. Goodwill is being amortized on a
straight-line basis over fifteen years commencing in the month of
acquisition.
Management reassesses the recoverability of the goodwill on a periodic
basis and, where applicable writes such amounts down to an amount not in
excess of its estimated net realizable value determined based on future
cash flows calculated on a non-discounted basis.
Revenue recognition
Revenue is recognized at the time of delivery of goods and services.
Functional currency
The functional currency of the subsidiaries is the Canadian dollar. All
amounts in the balance sheet have been converted to U.S. dollars using the
exchange rate as of the end of period and using a weighted average rate of
exchange for income statement accounts. A significant portion of the
amounts reported on the balance sheet are either realized or settled in
Canadian dollars.
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PL BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2000 AND 1999
(EXPRESSED IN U.S. DOLLARS)
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Estimates
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
during the reported period. Actual results could differ from those
estimates.
In the first quarter of 1998, the Company adopted SFAS No. 130 Reporting
Comprehensive Income, and made certain reclassifications to prior years'
consolidated financial statements to conform to the new reporting
standard. SFAS No. 130 establishes standards for reporting and displaying
comprehensive income and its components in a full set of general purpose
financial statements. Comprehensive income includes all changes in
stockholders' equity during a period except those resulting from
investments by owners and distributions to owners. The adoption of SFAS
No. 130, resulted in revised and additional disclosures but had no effect
on the consolidated financial position, results of operations, or cash
flows of the Company.
In 1998, the Company also adopted SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information which specifies the presentations
and disclosure of operating segment information. SFAS No. 131 requires
that segment information of earlier years be restated to conform to the
new standard. The adoption of SFAS No. 131 resulted in revised and
additional disclosures but had no effect on the consolidated financial
position, results of operations, or cash flows of the Company.
In June 1998, the Financial Accounting Standards Board issued SFAS No 133,
Accounting for Derivative Instruments and Hedging Activities, which as
amended is required to be adopted by the Company in the year ending April
30, 2002. The Statement will require the Company to recognize all
derivatives on the balance sheet at fair value. Management has not yet
determined the effect SFAS No. 133 will have, if any, on the Company's
consolidated financial position, results of operations or cash flows.
SAB74 requires disclosure of the impact that recently Issued Accounting
Standards will have on the financial statements in a future period. In
December 1999, SAB No. 101, Revenue Recognition, was issued and is
effective for fiscal years subsequent to December 3, 1999. The Company
will adopt SAB No. 101 effective for the 2001 fiscal year. The Company has
not yet determined the impact that SAB No. 101 will have on the results of
its worldwide web operations when such statement is adopted.
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PL BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2000 AND 1999
(EXPRESSED IN U.S. DOLLARS)
================================================================================
3. DISCONTINUED OPERATIONS
On January 1, 1998, the Company purchased its interest in Gandalf from an
individual whose spouse subsequently became a director and Chief Operating
Officer of the Company. The Company issued a note as consideration for the
purchase price.
Effective May 1, 1999, the Company disposed of its interest in Gandalf and
returned the Gandalf shares to the spouse of this director in satisfaction
of the aforementioned note. The disposal of Gandalf, effective as of May
1, 1999, was indicative of conditions existing at the April 30, 1999
balance sheet date. Accordingly, the financial statements as of and for
the period ended April 30, 1999 and the prior period financial statements
and related notes thereto present Gandalf as a discontinued operation. The
resulting loss on disposition of $77,961 has been recorded within 1999
discontinued operations.
The results of the discontinued operations are summarized as follows:
2000 1999
--------------- ---------------
Revenues
Gandalf Graphics Limited $ -- $ 2,685,163
=========================================================================
Earnings from discontinued operations
net of interest and income taxes
Gandalf Graphics Limited $ -- $ 133,752
=========================================================================
Assets and liabilities of discontinued operations are as follows:
2000 1999
--------------- ---------------
Current assets $ -- $ 857,152
Current liabilities -- (2,153,941)
Provision for loss on disposal -- (77,961)
-------------------------------------------------------------------------
Net current liabilities $ -- $ (1,374,750)
=========================================================================
Non-current assets $ -- $ 1,696,694
Long-term liabilities -- (171,638)
-------------------------------------------------------------------------
Net non-current assets $ -- $ 1,525,056
=========================================================================
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PL BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2000 AND 1999
(EXPRESSED IN U.S. DOLLARS)
================================================================================
4. RELATED PARTY TRANSACTIONS AND BALANCES
In 1998, the advances from related parties which were due to directors,
were non-interest bearing, unsecured and had no fixed terms of repayment.
During 1999, the advances were repaid. During the year the Company paid
rent of $Nil (1999 - $33,145) to a company owned by the spouse of a
director of the Company. During the 1999 fiscal year, the Company
purchased capital assets in the amount of $390,490 from a company that is
100% owned by one of the Company's directors and chief operating officer.
The transactions are measured under normal trade terms and conditions. As
at April 30, 2000, $Nil (1999 - $135,357) of this amount is included in
accounts payable.
As described in Note 3, the original purchase of the interest in Gandalf
and subsequent disposal of this interest was transacted with the spouse of
a director.
5. CAPITAL STOCK
Common stock
The Company is authorized to issue 20,000,000 common shares with a $.001
par value each. At April 30, 2000 and 1999 there were 9,143,279 shares
issued and outstanding. When voting, each share equals one vote.
Preferred stock
The Company is authorized to issue 1,000,000 preferred shares with a $.001
par value each. Currently the Company has no shares outstanding. The
Company's Board of Directors has authority to issue all or any of the
authorized but unissued preferred stock in one or more series and to
determine voting rights, preferences as to dividends and liquidation,
conversion rights, and other rights of such series.
6. INCOME TAXES
As at April 30, 2000, the Company had a deferred tax asset of $628,000
(1999 - $576,000) resulting from cumulative losses of approximately
$1,570,000 (1999 - $1,440,000). A full valuation allowance has been
provided for the deferred tax asset in 2000 and 1999 since the Company's
history of losses indicate that the benefit arising from these losses may
not be realized.
Page 9 of 11
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PL BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2000 AND 1999
(EXPRESSED IN U.S. DOLLARS)
================================================================================
6. INCOME TAXES (CONTINUED)
As of April 30, 2000 the Company has net operating losses available to
apply against future taxable income, that expire in the following years:
Canada United States Total
----------- ------------- -----------
2002 $ 624,000 $ - $ 624,000
2003 309,000 - 309,000
2004 156,000 - 156,000
2005 43,000 - 43,000
2006 130,000 - 130,000
2011 - 110,000 110,000
2012 - 100,000 100,000
2018 - 108,000 108,000
---------------------------------------------------------
$ 1,262,000 $ 308,000 $ 1,570,000
=========================================================
The Company's basic tax rate is approximately 40%. Some of the
subsidiaries have incurred losses that will be used to offset future
taxable income. One of the subsidiaries had taxable income in prior years
and the related tax expense has been reported in those financial
statements. The deferred tax liability of $Nil (1999 - $122,512)
represents the future tax liability resulting from the timing differences
with respect to the recognition of amortization on capital assets for
accounting purposes and that which is allowable for tax purposes.
A reconciliation of the Company's effective tax rate is as follows:
Statutory rate 34.0%
State taxes (net of federal benefit) 3.3
Impact of permanent differences 2.7
Impact of valuation allowance (40.0)
-------------------------------------------------------------------------
Effective tax rate 0.0%
=========================================================================
7. SEGMENT INFORMATION
The Company operated and managed its operations in one reportable segment,
the prepress industry and in one geographical area being Canada.
The Company received all of its other income from Gandalf in 2000 and 64%
of its revenue in 1999 from four customers with one of the four accounting
for 23% of revenues.
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PL BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2000 AND 1999
(EXPRESSED IN U.S. DOLLARS)
================================================================================
8. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share has been calculated using the weighted average
number of shares of common stock outstanding during the respective years.
Because there were no outstanding stock options, warrants or other items
that would have a dilutive effect, basic and diluted earning (loss) per
share amounts are the same in all periods presented.
9. COMMITMENTS
The Company incurred rent expense during the past three years as follows:
2000 $ --
1999 $ 98,000
1998 $ 80,000
The Company is not committed to any operating leases as at April 30, 2000.
10. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
Foreign exchange risk
The Company's revenue and some of its expenses were in Canadian dollars.
The Company has not undertaken any foreign exchange hedging arrangements
to manage these risks.
Fair value of financial instruments
The carrying amounts of cash, accounts receivable, bank indebtedness,
accounts payable and accrued liabilities approximate their fair value
because of the short maturity of these instruments. The Company estimates
that the fair value of other financial instruments which include long-term
debt approximates their carrying value because the amounts are either due
on demand or have short terms to maturity.
11. SUBSEQUENT EVENTS
In May 2000, the Company entered into an agreement to acquire certain
assets of Oth.net, Inc., a Florida corporation, as well as the Oth.net
domain name in exchange for 4,500,000 shares of the Company's common stock
and $500,000. Oth.net, Inc. is an internet based search engine for music
on the world wide web. Such transaction was completed as of July 21, 2000.
The Company issued 1,000,000 restricted shares of common stock to one
investor for $500,000, issued an aggregate of 756,000 restricted shares of
common stock to eight investors for an aggregate consideration of
$2,268,000, and issued an aggregate of 1,500,000 restricted shares of
common stock to certain persons in connection with employment arrangements
and other services rendered after April 30, 2000 and cash in the aggregate
amount of $1,500.
Such funds will be used for operations and development of the business
resulting from the acquisition of all of the assets of Oth.net, Inc.
Page 11 of 11
