Planet City status as of May 18, 2000
Re: our ongoing attempts to become a fully reporting company
We have been trying to get our SEC Form 10-SB filed since November of '99. The process started last August, and was all set to go except for the audited financials. The audit couldn't be completed because we were lacking information from the inactive Millennium Software Solutions (MSS) subsidiary in Montreal. Several attempts to obtain the information were unsuccessful. We were advised to unwind the acquisition and have the auditors prepare the '99 audit without their information. Our corporate books had identifiable transactions of amounts that were advanced to them, so we at least had the financial impact on Planet City corporate of their involvement. That amount could be written off, according to the auditors. The auditors also had to restate the '98 financials because the MSS acquisition was completed during that year.
As reported in my last status report, the restatement required a sign off by our former auditors because they had done the original '98 audit. The restatement was sent to the former auditors, with the expectation set by the current auditors that it would take 2 or 3 days for one of the former auditor's staff to review what had been done. I fudged the estimate to two weeks and put that in my status report. The restatement was sent to the former auditors during the first week of April. Unfortunately, that's when every auditor in the US was buried with tax filings. When our former auditor finally looked at what was being requested of them three weeks later, they disagreed with the concept and would not sign off on the restatement. They said the SEC would reject the filing immediately without the subsidiary's data.
So, now we have a different problem. The current and former auditors have opposing opinions of how to handle this situation. We're right back where we started. Everything is ready to go for the SEC filing but the audit.
We now have two separate "projects" active to get past this road block.
Project 1): I called the SEC Small Business unit and informed them of the situation. They understand the facts as I presented them, and will provide their opinion on how to proceed as soon as they get concurrence among themselves. Apparently that's not an easy thing to do. When they do get around to providing an initial opinion, we'll probably have to provide additional supporting documentation to obtain a waiver (if we can get one?). That waiver will be combined with the audit as it was completed by our current auditors, and with the rest of the SEC Form 10-SB information that has been ready since late November. Then, the whole bundle will be electronically filed by our lawyers.
Project 2): We recently (last week) obtained authorization from the former President of the subsidiary to allow the auditors to deal directly with the bank to access historical banking transaction information. We are now waiting for an estimate from the auditors on the amount of time it will take to reconstruct the accounting records from bank statements and canceled checks. This has to be done because the subsidiary has gone out of business and no longer has their books. After the books have been reconstructed, our current auditors will re-audit '99, then turn the audit over to the lawyers, who will file the SEC Form 10-SB. The reconstruction process will take a good deal of time (several weeks?), and will therefore be an expensive activity.
That's where we stand with the filing. We're frustrated. Our shareholders are frustrated. Until that audit is completed, we can't file to become fully reporting, which is the gating factor to our being relisted on the OTC Bulletin Board. Until then, we will remain on the Pink Sheets. Our current Pink Sheets situation impacts our ability to attract new investors, and it impacts the stock price, which in turn impacts our ability to attract new employees. It also impacts our ability to retain key employees because the employee stock options we used to entice them here have lost their value. As a result, we have lost a couple of valued employees to attrition. The lack of financial information from MSS has had a tremendous negative impact on the company as a whole.
In other areas:
The recent tech stock "correction" came at a bad time for us (I guess there's never a "good" time for a correction). Our stock weathered the initial storm, but lost about 35% of its value a couple of days later. I think that panicked some investors and the stock retreated some more shortly after that. The result was that the stock lost 50% of its value within a week. It hasn't recovered yet.
For several weeks prior to the correction, we had been working out the details of an acquisition of another company, and had come to comfortable terms. After the stock lost its value, the plans fell apart. We had to terminate the immediate acquisition plans because it would have been too dilutive to existing shareholders to double the number of shares we would have issued for the candidate company. Both companies are still very interested in merging, but we will have to wait until the conditions are right to do so. In the meantime, we're trying to work out arrangements where we can work together in other ways to provide each other assistance where needed.
The tech stock correction also spooked one of our prospects for which we were going to provide wireless applications. Their stock price was impacted negatively, so their enthusiasm has waned for the time being. We're also in a holding pattern with respect to an alliance with a provider of wireless services. They're having their own SEC filing problems.
On the positive side, we are in discussions with multiple firms regarding our supplying technical expertise to assist them in their development projects. We recently announced a partnership with Rhino Productions, Inc. which has already provided a candidate for a collaboration in the wireless arena.
We are making good progress on the development of our Java/XML Component Based Development system, and plan to put it to good use in some of the upcoming consulting projects.
Our Software Services group is fully booked for the next several weeks. We will be expanding our technical staff when we can land some of the project contracts that we are currently tracking.
We are finishing up the existing Web Services projects, and looking for a replacement for our Web Services Manager who was recruited away from us several weeks ago.
Despite all the barriers and disappointments we faced over the past year, our staff remains confident that we can make this company successful for our shareholders and for ourselves sometime in the future. The major stumbling block has been, and continues to be, the SEC filing. We are doing what we can to get around that obstacle.
When I accepted the role of CEO in late March of '99, I committed to keep our investors informed of what is happening within their company. I report on the positive AND the negative aspects of our situation, to the extent possible without releasing data that could be considered insider information. I release these status reports to all interested parties who are on our email list. If you would like to be included in that list, please email info@planetcity.com and they'll be happy to add you to the list.
I have received telephone calls and/or emails from several of our shareholders over the past few months. Most of them just want reassurance that we are still operating, and have a plan to proceed. Only a couple have stated they would be selling their shares. This indicates to me that our shareholders are behind us and understand the challenges we are facing. That provides moral, as well as financial, support for our company and for our dedicated employees. We thank you for that.
Our sole subsidiary, Planet City Software, Inc., celebrated its first anniversary in early May. Thank you for supporting us through our first year of operations. We have talent, we have vision, and we have opportunity. We also have loyal shareholders who have stayed with us through this challenging year. We hope to reward you handsomely for your support.
A disclaimer statement follows my sign off.
Regards,
Terry E. Dennis, President & CEO
Planet City Corp (OTC: PINC)
Certain of the statements contained herein which are not historical facts are forward-looking statements with respect to events, the occurrence of which involve risks and uncertainties. Any such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. In addition to the general difficulties inherent in forecasting future operating results, particularly in a rapidly changing global economy, other factors can affect performance. Those factors include, but are not limited to, competitive forces, fluctuations in operating results, reliance on industry standards, dependence on new products, risks associated with acquisitions, intellectual property protection and disputes, economic fluctuations, staff turnover, and naturally occurring phenomena. |
