0000891092-01-500874.txt : 20011119
0000891092-01-500874.hdr.sgml : 20011119
ACCESSION NUMBER: 0000891092-01-500874
CONFORMED SUBMISSION TYPE: 10QSB
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010930
FILED AS OF DATE: 20011106
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: INTERNET ADVISORY CORP
CENTRAL INDEX KEY: 0000831489
STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799]
IRS NUMBER: 870426358
STATE OF INCORPORATION: UT
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10QSB
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-16665
FILM NUMBER: 1776025
BUSINESS ADDRESS:
STREET 1: 2455 EAST SUNRISE BLVD
STREET 2: SUITE 401
CITY: FT LAUDERDALE
STATE: FL
ZIP: 33304
BUSINESS PHONE: 8885220958
MAIL ADDRESS:
STREET 1: 2455 EAST SUNRISE BLVD
STREET 2: SUITE 401
CITY: FT LAUDERDALE
STATE: FL
ZIP: 33304
FORMER COMPANY:
FORMER CONFORMED NAME: OLYMPUS MTM CORP
DATE OF NAME CHANGE: 19970215
10QSB
1
file001.txt
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2001
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For the transition period from _______________ to _______________
Commission file number 0-16665
The Internet Advisory Corporation
-------------------------------------------
(Exact name of small business issuer as
specified in its charter)
Utah 87-042 6358
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
150 E. 58th Street, New York, NY 10022
---------------------------------------------------------------------
(Address of principal executive offices)
(212) 421-8480
---------------------------------------------------------------------
(Issuer's telephone number)
_____________________________________________________________________
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 |X| No |_|
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date: 14,445,018 as of October 29,
2001
Transitional Small Business Disclosure Format (check one). Yes |_|; No |X|
The Internet Advisory Corporation
September 30, 2001
Quarterly Report on Form 10-QSB
Table of Contents
Page
----
Special Note Regarding Forward Looking Statements..............................3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements...................................................4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.....................................................13
Item 5. Other Information.....................................................14
Item 6. Exhibits and Reports on Form 8-K......................................14
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
To the extent that the information presented in this Quarterly Report on
Form 10-QSB for the quarter ended September 30, 2001 discusses financial
projections, information or expectations about our products or markets, or
otherwise makes statements about future events, such statements are
forward-looking. We are making these forward-looking statements in reliance on
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Although we believe that the expectations reflected in these
forward-looking statements are based on reasonable assumptions, there are a
number of risks and uncertainties that could cause actual results to differ
materially from such forward-looking statements. These risks and uncertainties
are described, among other places in this Quarterly Report, in "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
In addition, we disclaim any obligations to update any forward-looking
statements to reflect events or circumstances after the date of this Quarterly
Report. When considering such forward-looking statements, you should keep in
mind the risks referenced above and the other cautionary statements in this
Quarterly Report.
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS Page
----
Consolidated Balance Sheets as of September 30, 2001
and December 31, 2000................................................5
Consolidated Statements of Operations for the three and
nine-months ended September 30, 2001 and September 30, 2000........6-7
Consolidated Statement of Deficiency In Assets.........................8
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2001 and September 30, 2000............................9
Notes to Consolidated Financial Statements............................10
4
INTERNET ADVISORY CORPORATION
CONSOLIDATED BALANCE SHEET
September 30, December 31,
2001 2000
------------- ------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 64,811 $ 21,031
Accounts receivable 4,525 4,452
----------- -----------
Total Current Assets 69,336 25,483
----------- -----------
PROPERTY AND EQUIPMENT, Net 372,580 480,094
----------- -----------
OTHER ASSETS:
Security deposits 14,582 14,361
----------- -----------
Total Other Assets 14,582 14,361
----------- -----------
TOTAL ASSETS $ 456,498 $ 519,938
=========== ===========
LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
Accounts payable $ -- $ 231,534
Accrued expenses -- 559,941
Prepetition debt 854,641 --
Post petition accrued expenses 36,000 --
Deferred revenue 716 18,352
Loan payable - officer -- 30,500
----------- -----------
Total Current Liabilities 891,357 840,327
----------- -----------
TOTAL LIABILITIES 891,357 840,327
----------- -----------
DEFICIENCY IN ASSETS
Common stock, $.001 par value; 50,000,000
shares authorized, 14,445,018 issued
and outstanding 14,445 14,445
Additional paid-in capital 3,423,014 3,423,014
Accumulated deficit (3,872,318) (3,757,848)
----------- -----------
Total Deficiency in assets (434,859) (320,389)
----------- -----------
TOTAL LIABILITIES AND DEFICIENCY
IN ASSETS $ 456,498 $ 519,938
=========== ===========
See notes to consolidated financial statements.
5
INTERNET ADVISORY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended
---------------------------------------
September 30, 2001 September 30, 2000
------------------ ------------------
(Unaudited) (Unaudited)
NET SALES $ 76,248 $ 121,168
COST OF GOODS SOLD 529 --
------------ ------------
GROSS PROFIT 75,719 121,168
GENERAL AND ADMINISTRATIVE EXPENSES 89,440 493,137
------------ ------------
NET LOSS FROM OPERATIONS (13,721) (371,969)
OTHER INCOME -- 433
------------ ------------
NET LOSS BEFORE INCOME TAXES (13,721) (371,536)
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET LOSS $ (13,721) $ (371,536)
============ ============
NET LOSS PER SHARE $ (0.00) $ (0.03)
============ ============
WEIGHTED AVERAGE OF COMMON
SHARES OUTSTANDING 14,445,018 14,094,017
============ ============
See notes to consolidated financial statements.
6
THE INTERNET ADVISORY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended
---------------------------------------
September 30, 2001 September 30, 2000
------------------ ------------------
(Unaudited) (Unaudited)
NET SALES $ 252,227 $ 480,211
COST OF GOODS SOLD 89,290 --
------------ ------------
GROSS PROFIT 162,937 480,211
GENERAL AND ADMINISTRATIVE EXPENSES 277,150 1,612,492
------------ ------------
NET LOSS FROM OPERATIONS (114,213) (1,132,281)
OTHER INCOME (EXPENSE)
Interest Expense (257) --
Other Income -- 1,111
------------ ------------
NET LOSS BEFORE INCOME TAXES (114,470) (1,131,170)
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET LOSS $ (114,470) $ (1,131,170)
============ ============
NET LOSS PER SHARE $ (0.01) $ (0.08)
============ ============
WEIGHTED AVERAGE OF COMMON
SHARES OUTSTANDING 14,445,018 13,605,128
============ ============
See notes to consolidated financial statements.
7
THE INTERNET ADVISORY CORPORATION
CONSOLIDATED STATEMENT OF DEFICIENCY IN ASSETS
Common Stock Additional
----------------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 13,344,017 $ 13,344 $ 2,712,115 $(1,718,640) $ 1,006,819
----------- ----------- ----------- ----------- -----------
Proceeds from the sale of stock 700,000 701 299,299 300,000
Issued stock for services 400,000 400 411,600 412,000
Net loss (2,039,208) (2,039,208)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2000 14,444,017 14,445 3,423,014 (3,757,848) (320,389)
----------- ----------- ----------- ----------- -----------
Net loss (114,470) (114,470)
----------- ----------- ----------- ----------- -----------
Balance, September 30, 2001
(Unaudited) 14,444,017 $ 14,445 $ 3,423,014 $(3,872,318) $ (434,859)
=========== =========== =========== =========== ===========
See notes to consolidated financial statements.
8
THE INTERNET ADVISORY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
---------------------------------------
September 30, 2001 September 30, 2000
------------------ ------------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (114,470) $(1,131,170)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation expense 107,514 98,948
Accounts receivable (73) --
Prepaid expenses -- 16,300
Security deposits (221)
Accounts payable (231,534) (17,699)
Accrued expenses (559,941) --
Debt restructuring 890,641 --
Deferred revenue (17,636) --
----------- -----------
CASH FLOW PROVIDED BY (USED IN)
OPERATING ACTIVITIES 74,280 (1,033,621)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment -- (60,537)
Purchase of investments -- 50,000
----------- -----------
CASH FLOW (USED IN) INVESTING
ACTIVITIES -- (10,537)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal collections on loan -- 637,650
Proceeds from officer loan (30,500) --
Proceeds from sale of securities -- 500,000
----------- -----------
CASH FLOW (USED IN) PROVIDED BY
FINANCING ACTIVITIES (30,500) 1,137,650
----------- -----------
NET INCREASE IN CASH 43,780 93,492
CASH AT BEGINNING OF PERIOD 21,031 57,087
----------- -----------
CASH AT END OF PERIOD $ 64,811 $ 150,579
=========== ===========
See notes to consolidated financial statements.
9
THE INTERNET ADVISORY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Internet
Advisory Corporation (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation
(consisting of normal recurring accruals) have been included. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Operating results expected for the nine months ended
September 30, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. For further information, refer
to the financial statements and footnotes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2000. Per share
data for the periods are based upon the weighted average number of shares of
common stock outstanding during such periods, plus net additional shares issued
upon exercise of options and warrants.
Note 2. New Accounting Developments
In June 2001, the FASB issued SFAS No. 141, "Business Combination", SFAS
No. 142, "Goodwill and Other Intangible Assets" and SFAS No. 143, "Accounting
for Asset Retirement Obligations". SFAS No. 141 requires the use of the purchase
method of accounting and prohibits the use of the pooling-of-interest method of
accounting for business combinations initiated after June 30, 2001. It also
requires that the Company recognize acquired intangible assets apart from
goodwill. SFAS No. 142 requires, among other things, that companies no longer
amortize goodwill, but instead test goodwill for impairment at least annually.
In addition, SFAS No. 142 requires that the Company identify reporting units for
the purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. SFAS No. 143
establishes accounting standards for recognition and measurement of a liability
for an asset retirement obligation and the associated asset retirement cost,
which will be effective for financial statements issued for fiscal years
beginning after June 15, 2002. The adoption of SFAS No. 141, SFAS No. 142 and
SFAS No. 143 is not expected to have a material effect on the Company's
financial position, results of operations and cash flows.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" which basically further clarifies
SFAS No. 121 and methods of
10
quantifying potential impairments or disposal of assets as well as the related
reporting of such impairments or disposals.
Note 3. Going Concern
These financial statements have been prepared assuming the Company will
continue as going concern. The Company has suffered recurring losses amounting
to $3.9 million. The Company is in default of several of its trade payable
obligations. The Company intends to raise additional financing through debt or
equity in the near future to enable the Company to continue operations for at
least one year.
Note 4. Bankruptcy
On May 25, 2001, the Company voluntarily filed for protection under
Chapter 11 of the U.S. Bankruptcy Code to restructure its balance sheet, while
continuing to provide service to its business customers.
11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Result of Operations.
For the three-month periods ended September 30, 2001 and September 30,
2000, we had revenues of $76,248 and $121,168, respectively. For the nine-month
periods ended September 30, 2001 and September 30, 2000 we had revenues of
$252,227 and $480,211, respectively. The decreases in revenues were attributable
to changes in market conditions. Our cost of goods sold was $529 for the
three-month period ended September 30, 2001 and $0 for the three-month period
ended September 30, 2000. Our cost of goods sold was $89,290 for the nine-month
period ended September 30, 2001 and $0 for the nine-month period ended September
30, 2000. We incurred general and administrative expenses of $89,440 for the
three-month period ended September 30, 2001 and $493,137 for the three-month
period ended September 30, 2000. General and administrative expenses were
$277,150 for the nine months ended September 30, 2001 and $1,612,492 for the
nine months ended September 30, 2000. For the three-month period ended September
30, 2001 we had a net loss of $13,721 or approximately $0 per share as compared
to a net loss of $371,536 or approximately $.03 per share for the three-month
period ended September 30, 2000. For the nine-month period ended September 30,
2001 we had a net loss of $114,470 or approximately $.01 per share as compared
to a net loss of $1,131,170 or approximately $.08 per share for the nine-month
period ended September 30, 2000. The reduction in our net losses for the three
and nine month periods ended September 30, 2001 is primarily attributable to our
ability to reduce operating expenses. We recognize revenues as they are earned,
not necessarily as they are collected. Direct costs such as hosting expense,
design cost and server expense are classified as cost of goods sold. The
increase in cost of goods sold during the three and nine-month periods ended
September 30, 2001 is primarily attributable to increased bandwidth costs.
General and administrative expenses include accounting, advertising, contract
labor, bank charges, depreciation, entertainment, equipment rental, insurance,
legal, supplies, pay roll taxes, postage, professional fees, telephone and
travel. The decrease in general and administrative expenses during the three and
nine-month periods ended September 30, 2001 is primarily attributable to the
decrease in employee levels which went from a high of twenty-five to our current
level of five employees.
Liquidity and Capital Resources.
Our auditor's report that accompanied our audited financial statements for
the year ended December 31, 2001 indicated that there is substantial doubt
respecting our ability to continue as a going concern. The qualification was due
to our need to generate positive cash flow from operations or obtain additional
financing. Consequently, on May 25th, 2001 we voluntarily filed for protection
under Chapter 11 of the U.S. Bankruptcy Code to restructure our balance sheet,
while continuing to provide services to our business customers.
We have incurred losses since the inception of our Internet business.
Although we technically achieved a profit during the quarter ended June 30,
2001, this was solely the result of the reversal of approximately $86,000 in
professional fees relating to the bankruptcy proceeding. Our net loss of $13,721
during the quarter ended September 31, 2001 is primarily due to our not
achieving expected third quarter revenues. We attribute this to the general
downturn in the economy.
12
We do, however, expect to achieve profitability by the end of the fourth quarter
due to our continuing efforts to reduce general and administrative expenses. No
assurance can be given however, that this will prove to be the case. Since our
inception, we have been dependent on acquisitions and funding from lenders and
investors to conduct operations. As at September 30, 2001 we had an accumulated
deficit of $3,872,318 compared to an accumulated deficit of $3,757,848 at
December 31, 2000. As at September 30, 2001, we had total current assets of
$69,336 and total current liabilities of $891,357 or negative working capital of
$822,021. At December 31, 2000, we had total current assets of $25,483 and total
current liabilities of $840,327 or negative working capital of $814,844. We
currently have no material commitments for capital expenditures. We will
continue to evaluate possible acquisitions of or investments in business,
products and technologies that are complimentary to ours. These may require the
use of cash, which would require us to seek financing. We believe that existing
net sales will be sufficient to pay our current operating expenses. However, we
may sell additional equity or debt securities or seek additional credit
facilities to fund acquisition-related or other business costs. Sales of
additional equity or convertible debt securities would result in additional
dilution to our stockholders. We may also need to raise additional funds in
order to support more rapid expansion, develop new or enhanced services or
products, respond to competitive pressures, or take advantage of unanticipated
opportunities. Our future liquidity and capital requirements will depend upon
numerous factors, including the success of our service offerings and competing
technological and market developments. Our future liquidity will also be
affected by the manner in which we emerge from the bankruptcy proceeding.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Except as otherwise disclosed herein, no material legal proceedings are
pending to which we or any of our property is subject, nor to our knowledge are
any such proceedings threatened. On March 21, 2001 a judgment in the amount of
$12,359.60 was entered against us in the Circuit Court of the 17th Judicial
Circuit in and for Broward County, Florida in favor of Diamondpoint.Com, Inc., a
Florida corporation, in connection with a claim of breach of contract. We
subsequently filed an appeal seeking to overturn this judgement. The matter is
expected to be settled in the bankruptcy proceeding.
Our prior management signed several agreements for Internet based services
which are currently in dispute. In one instance, the dispute relates to whether
the contracted for services were ever provided to us. In other instances the
disputes relate to the timing of the provision of such services to us. To date,
none of these disputes have resulted in litigation. Our auditors have recorded a
$500,000 accrued liability for such services. This matter is expected to be
settled in the bankruptcy proceeding.
13
Item 5. Other Information
On May 25, 2001, we voluntarily filed for protection under Chapter 11 of
the US Bankruptcy Code (the "Bankruptcy Code") with the US Bankruptcy Court for
the Southern District of Florida (the "Bankruptcy Court"). Since such filing
date, we have continued in possession of our property and have managed our
business as a debtor in possession under Sections 1107 and 1108 of the
Bankruptcy Code. We intend to utilize the Chapter 11 process to restructure our
balance sheet through the reduction of debt thereby increasing our operating
flexibility. The Chapter 11 filing has not impacted our day to day operations
with regard to our employees, customers and general business operations. On
August 29, 2001 we filed a Disclosure Statement and Plan of Reorganization with
the Bankruptcy Court which has been conditionally approved. A confirmation
hearing in which we hope to receive final approval and confirmation of our Plan
of Reorganization is scheduled for November 7, 2001. No assurance can be given,
however, that the Bankruptcy Court will confirm our Plan of Reorganization or
that if confirmed, that we will emerge from bankruptcy in the manner we
anticipate.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized.
The Internet Advisory Corporation
Dated: November 2, 2001 By: /s/ Richard Goldring
-----------------------------------------
Richard Goldring
President, Chief Executive Officer and
Chief Financial Officer
14