FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For the transition period from to
Commission file number 0-15415
KINETIKS.COM, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 76-0478045
(State or other jurisdiction of IRS Employer
incorporation or organization) Identification Number
c/o C. Garold Sims, 1775 Sherman Street, Suite 2015, Denver,CO 80203
(Address of Principal Offices) (Zip Code)
Registrant's telephone number, including area code: 303-830-6660
N/A
(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 last 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 [ ]
As of June 30, 1999, 6,446,638 shares of Common Stock have been issued,
4,446,638 shares of Common Stock of the Registrant were outstanding.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Balance Sheets at June 30, 1999 (unaudited) and December 31, 1998
Statements of Operations for the Three Months Ended June 30, 1999
(unaudited) and June 30, 1998 (unaudited)
Statements of Operations for the Six Months Ended June 30, 1999
(unaudited) and June 30, 1998 (unaudited)
Statements of Cash Flows for the Six Months Ended June 30, 1999
(unaudited) and June 30, 1998 (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION:
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The financial statements included herein have been prepared
by Kinetiks.com, Inc. (the Company) without audit, pursuant
to the rules and regulations of the Securities and Exchange
Commission (SEC). Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such SEC rules and
regulations. In the opinion of management of the Company
the foregoing statements contain all adjustments necessary
to present fairly the financial position of the Company as
of June 30, 1999, its results of operations for the three
month period ended June 30, 1999, its results of operations
for the six month period ended June 30, 1999, and its cash
flows for the six month period ended June 30, 1999. The
Company's balance sheet as of December 31, 1998 included
herein has been derived from the Company's audited financial
statements as of that date included in the Company's annual
report on Form 10-KSB. The results for these interim
periods are not necessarily indicative of the results for
the entire year.
Kinetiks.com, Inc.
(A Development Stage Company)
Balance Sheet
June 30, December 31,
1999 1998
(unaudited)
Assets
Current assets:
Cash 0 169
Total Current assets 0 169
0 169
Liabilities and Stockholders' (deficit)
Current liabilities:
Judgments payable 88,455 205,471
Notes payable 41,070 177,976
Accounts payable 432,464 862,531
Accrued compensation 75,858 105,503
Other accrued expenses 12,838 41,680
Total current liabilities 650,685 1,393,161
Stockholder's (deficit):
Preferred stock, $.001 par value,
500,00 shares authorized;
none issued 0 0
Common stock, $.001 par value;
20,000,000 shares authorized;
6,446,638 issued;3,389,083
outstanding as of December 31,
1998, 4,446,638 outstanding
as of June 30, 1999. 6,448 5,390
Less, treasury stock (2,000) (2,000)
Additional paid in capital 6,380,397 6,061,517
Deficit accumulated during
develop stage (7,035,530) (7,457,899)
Total stockholders' (deficit) (650,685) (1,392,992)
0 169
See accompanying notes
Kinetiks.com, Inc.
(A Development Stage Company)
Statements of Operations
For the three months ended June
1999 1998
(unaudited) (unaudited)
Revenue: 0 0
Operating expenses:
General and administrative 252,121 22,598
252,121 22,598
Operating loss: (252,121) (22,598)
Other income (expense):
Interest expense (3,382) (5,033)
Loss before extraordinary item: (255,503) (27,631)
Extraordinary gain related to
extinguishment of debt 714,880 0
Net income: 459,377 (27,631)
Earnings per common share, basic:
Loss from continuing operations (0.07) (0.01)
Extraordinary items 0.18 0
Net income available to common stockholders 0.11 (0.01)
Earnings per common share, fully diluted:
Loss from continuing operations (0.05) 0
Extraordinary items 0.15 0
Net income available to common stockholders .10 0
Shares used in computing net gain per
common and common equivalent share,
weighted average, basic share
computation 3,929,529 3,389,083
Shares used in computing net gain per
common and common equivalent share,
weighted average, fully diluted
computation 4,737,573 0
See accompanying notes
Kinetiks.com, Inc.
(A Development Stage Company)
Statements of Operations
For the six months ended June 30,
1999 1998
(unaudited) (unaudited)
Revenue: 0 0
Operating expenses:
General and administrative 284,508 25,652
284,508 25,652
Operating loss: (284,508) (25,652)
Other income (expense):
Interest expense (8,003) (12,179)
Loss before extraordinary item: (292,511) (37,851)
Extraordinary gain related to
extinguishment of debt 714,880 0
Net income: 422,369 (37,851)
Earnings per common share, basic:
Loss from continuing operations (0.08) (0.01)
Gain from extraordinary items 0.20 .00
Net income available to common
stockholders .12 (0.01)
Earnings per common share, fully diluted:
Loss from continuing operations (0.07) 0
Extraordinary items 0.16 0
Net income available to common
stockholders .09 0
Shares used in computing net (loss)
per common and common equivalent share,
weighted average, basic share
computation 3,663,585 3,389,083
Shares used in computing net gain per
common and common equivalent share,
weighted average, fully diluted
computation 4,354,317 0
See accompanying notes
Kinetiks.com, Inc.
(A Development Stage Company)
Cash Flow Statements
For the six months ended June 30
1999 1998
(unaudited) (unaudited)
Operating Activities:
Net cash used in operating activities (96,851) (240)
Net cash provided by investing activities 0 0
Financing Activities:
Proceeds from notes payable 64,328 240
Proceeds from stock issuance 32,523 0
Net cash provided by financing activities 96,851 240
Net change in cash (169) 0
Cash at beginning 169 0
Cash at end 0 0
See Accompanying notes
Kinetiks.com, Inc.
Notes to Financial Statements
June 30,1999 (Unaudited)
1. Earnings per share
The Company follows SFAS No. 128 when calculating earnings
per share. This statement replaces the presentation of
primary earnings or loss per share (EPS) with a presentation
of basic EPS. It also requires dual presentation of basic
and diluted EPS for all entities with complex capital
structures and requires reconciliation of the numerator and
denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. Basic EPS
excludes dilution; diluted EPS reflects the potential
dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock
that then shared in the earnings of the entity.
2. Commitments and Contingencies
Securities and Exchange Commission
Previously, the Company has failed to timely file the
required Forms 10-KSB and 10-QSB as required by the
Securities and Exchange Commission. The Company and its
officers and former directors could be subject to certain
fines and penalties from the SEC for its failure to timely
file these reports. The Company cannot determine the
effect, if any, that this uncertainty may have on its
financial position. During the first quarter of 1999 the
Company became current by filing its delinquent quarterly
and annual reports.
3. Notes Payables
Notes payable consists of the following as of: June 30,1999
Note payable, interest at 8%,
principal and interest due
April 1997, without collateral. 5,000
Note payable, business
development company, interest
at 8%, no stated repayment
terms, and without collateral 36,071
Total $ 41,071
In March 1997, the Company borrowed $5,000 from a
shareholder and issued warrants to purchase 10,000 shares of
the Company's common stock at $.25 per share. In April
1997, when the Company was unable to pay this note, the
Company issued additional warrants to purchase 10,000 shares
of the Company's common stock at $.25 per share. The
exercise price of the warrants approximated the fair market
value of the Company's stock on the dates of these grants.
The Company borrowed $36,071 from The Rockies Fund, "a business
development company," as defined by the Investment Company Act
of 1940, during May and June of 1999. This note bears interest
at 8%, has no stated repayments terms and is without collateral.
No warrants were issued in relation to this note
As of June 1999, the president of The Rockies Fund, certain
of his family members and other entities that are controlled
by the president of the Fund, Inc. and his wife, own shares
and warrants totaling 1,555,832 and 1,450,000, respectively.
The shares owned represent approximately 35.8% of the
outstanding shares of the Company. Of the shares owned,
900,000 shares were purchased at $.05 per share directly
from the former president and vice president of the Company
in private transactions and 522,332 shares of restricted
common stock were issued in exchange for debt. All other
stock was purchased on the open market.
Beginning in 1994, the SEC began an investigation into
certain matters including the administrative and record
keeping practices of the Fund, its securities trading
activities and those of its officers and directors. In
September 1996, the Fund received notification from the SEC
that the SEC staff was planning to recommend that an
enforcement action be brought against the Fund, its
president, and each of its directors due to certain
violations of federal securities laws. The SEC invited the
Fund to make a submission setting forth the Fund's position
and arguments regarding the SEC staff's planned
recommendation. The Fund did so in October 1996, and at the
SEC's request, the Fund supplemented its submission in
December 1996. An administrative trial was held before
the SEC's Chief Administrative Judge in November 1998.
During this trial the Fund vigorously contested the SEC's
allegations. No decision has been rendered.
During the first three months of fiscal 1999 the Company
borrowed an additional $29,122 from The Rockies Fund, a
business development company, according to the Investment
Act of 1940. Then during the month of April, 1999 the
Company borrowed an additional $8,156. All of these debts as
well as the debt accumulated during 1997 and 1998 were
forgiven in exchange for the issuance of 522,332 shares of
restricted common stock. This transaction was executed on
April 30, 1999.
4. Sale of Stock
During the three months ended June 30, 1999, the Company
sold in a private transaction to one accredited investor
505,316 restricted shares of its common stock for $34,323,
or approximately $.06 per share. At the time of this
private placement, the Company's stock was trading at
approximately $.63 per share as quoted on the electronic
bulletin board. The Company recorded the difference between
the fair market value of the stock and the issuance of the
shares as stock issuance expense and additional paid in
capital in the amount of $ 212,653.
5. Troubled Debt Restructuring
During the quarter ended June 30, 1999, the Company entered
into various agreements with judgement creditors, unsecured
creditors and former employees to restructure certain of its
debts as follows:
Creditor Recorded Cash Fair Gain on Debt
Amount Consideration Market Restructuring
Value of
Stock Issued
Judgment Creditors 146,080 13,878 0 132,202
Notes Payable 232,122 2,953 72,091 157,078
Former Employees 33,410 1,529 2,671 29,211
Accounts Payable 412,353 15,963 0 396,389
Total 823,965 34,323 74,762 714,880
The Company recorded the gain on the debt restructuring in
accordance with Statement of Financial Accounting Standards
No. 15 " Accounting by Debtors and Creditors for Troubled
Debt Restructuring." For payables settled for cash, the
Company recorded the difference between the recorded amount
of the payable and the cash payment as a gain on
restructuring. For payables settled with the issuance of
the Company $.001 par value common stock, the Company
recorded the difference between the fair market value of the
Company's restricted common stock granted and the recorded amount of
the payable settled as a gain on restructuring. The Company
issued 551,239 shares of its restricted common stock to settle
certain payables.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read together with
the Financial Statements and Notes thereto appearing in Item 1.
Forward-Looking Statements
In addition to historical information, this Quarterly Report
contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. The
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ
materially from those reflected in the forward-looking
statements. Factors that might cause such a difference
include, but are not limited to the success of the Company's
efforts in identifying and entering into an agreement with
an acquisition or merger candidate and in negotiating
settlements with its judgment creditors and other claimants.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's
analysis only as of the date of this report. The Company
undertakes no obligation to revise these forward-looking
statements to reflect subsequent events or circumstances.
Readers should refer to and carefully review the information
in future documents the Company files with the Securities
and Exchange Commission.
Business Activities
During the quarter ended June 30, 1999 the Company had no
business operations. Its activities were limited (1) to
filing its delinquent SEC reports, and (2) negotiating
compromised settlements with its creditors.
As a result of its negotiations with creditors, the Company
settled for cash payments in the aggregate of $34,323,
judgment debts of $146,080, accounts and other payables of
$445,763 and unsecured debts and interest of $232,122. The
Company obtained substantially all of the funds utilized to
settle and discharge the judgments and other delinquent
claims from the sale of 535,223 shares of its common stock
to an accredited investor. In addition the Company settled
with one creditor utilizing funds borrowed from The Rockies
Fund, a business development company under the Investment
Company Act of 1940 that owned beneficially approximately 35.8
percent of the outstanding shares of the Company. Finally,
the Company issued 522,332 shares of common stock to The
Rockies Fund in satisfaction of $130,198 of obligations due
and payable as of April 30, 1999.
The Company continued its efforts to identify a merger or
acquisition candidate utilizing funds and management
services provided by The Rockies Fund. There is no
agreement or other commitment requiring The Rockies Fund to
finance any of those activities, the Company's business or
its debt restructuring activities and no assurance can be
given that The Rockies Fund will continue to provide funds
to the Company for such activities.
The sole director of the Company, Gregory S. Carr, appointed
two additional directors during the period covered by this
report. They are Herbert G. Kanarick and Bradley-Alison Smith,
both of whom are Certified Public Accountants. Mr. Kanarick
is a partner in a public accounting firm and the president of
a company not affiliated with the Company. Ms. Smith, acting
as a consultant to the Company during the quarter covered by
this report, has devoted substantially all of her time to negotiating
the extinguishment of the Company's delinquent debt.
Ms. Smith is the daughter of Mr.Kanarick.
Results of Operations for the Three Months Ended June 30, 1999 as
compared to the Three Months Ended June 30, 1998:
There were no business operations during either period.
Revenues:
Revenue for both three-month periods was zero.
Expenses:
Operating expenses increased from $22,598 to $252,121 due to
an increase in professional expense and the expense related
to the issuance of stock in exchange for the extinguishment
of debt. The professional expenses were in relation to the
completion of outstanding SEC quarterly and annual reports
and their filing.
The Company incurred $3,382 in interest expense in relation
to the two outstanding notes and debt that was extinguished
during the quarter.
Based on the foregoing information, the Company recorded a
loss prior to extraordinary items of $(255,503) versus a
loss of $(27,631) one year ago. This represents a loss of
$(.07) per share available to shareholders versus a $(.01)
loss during the same period a year ago. The extraordinary
items contributed $.18 per share causing basic net income
to be $.11 per share. When fully diluted, net earnings per
share is $.10.
Results of Operations for the Six Months Ended June 30, 1999
as compared to the Six Months Ended June 30, 1998:
There were no business operations during either period.
Revenues:
Revenue for both six-month periods was zero.
Expenses:
The operating loss increased from $(25,652) to $(284,508)
during the six-month period. This represents a substantial
increase in professional expenses and the expense related to
the issuance of stock in exchange for the extinguishment of
debt. Interest expense decreased from $12,179 to $8,003 due
to the elimination of the debt, to which the interest was
associated during the second quarter.
Management knows of no trends or uncertainties, other than
those referred to within, that will have, or are reasonably
likely to have, a material impact on the income and expenses
of the Company.
Liquidity and Capital resources: June 30, 1999 as compared
to December 31, 1998:
The Company has no assets as of the end of the period. The
only source of cash that the Company presently has, is its
largest investor, The Rockies Fund, Inc.
Current liabilities substantially decreased to $650,685 from
$1,393,161 as of December 31, 1998. No new judgments have
been filed.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
During 1997 and 1998, a number of the Company's vendors and
former employees filed legal actions and obtained judgments
against the Company. A number of claims were asserted not
only against the Company, but also against Gregory S. Carr
and Dyann Carr personally as guarantors of loans and lease
obligations. The Company does not have any funds available
to pay the judgments or claims that have not been satisfied.
No lawsuits were filed against the Company in the period
covered by this report.
The Company settled unpaid judgments in the aggregate amount
of $146,080. As of the end of June 30, 1999, the Company is
subject to the following judgments:
Judgment of $44,435 payable to Berger & Co., a temporary
employment agency;
Judgment of $26,865.11 payable to Staffware, Inc., a temporary
employment agency;
Judgment of $5,533.95 payable to Montgomery County, Texas,
for property taxes;
Judgment of $4,750 payable to SDX, Inc., a marketing firm;
California Labor Commission's award of $6,870.93 payable to
Hank Savage, a former employee.
Item 2. Change in Securities
None.
Item 3. Defaults Upon Senior Securities
The following security was in default:
Unsecured note payable,
shareholder, interest at 8%,
Principal and interest due
April 1997. $5,000
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the shareholders
during the period ended June 30, 1999.
Item 5. Other Information
The Company recognizes the need to ensure its
operations will not be adversely impacted by Year 2000
software failures. Software failures due to
processing errors potentially arising from
calculations using the Year 2000 date are a known
risk. The Company is addressing this risk to the
availability and integrity of financial systems and
the reliability of the operational systems.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27
(b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
KINETIKS.COM, INC.
Dated: 8/23/99 By: /s/ Gregory S. Carr
Gregory S. Carr, Secretary
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