FORM 10-QSB/A
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 March 31, 1997
[ ] 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
N/A
c/o C. Garold Sims, 1775 Sherman Street, Suite 2015, Denver, Colorado 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 [ ] No [X]
As of April 27, 1999, 5,389,083 shares of Common Stock
have been issued, 3,389,083 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 March 31, 1997 (unaudited) and
December 31, 1996
Statements of Operations for the Three Months Ended
March 31, 1997 (unaudited) and March 31, 1996 (unaudited)
Statements of Cash Flows for the Three Months Ended
March 31, 1997 (unaudited) and March 31, 1996 (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 consolidated 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 March 31, 1997, its results of
operations for the three month period ended March 31, 1997,
and its cash flows for the three month period ended March 31,1997.
The Company's balance sheet as of December 31, 1996 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.
The accompanying financial statements should be read in conjunction
with the financial statements and the notes thereto filed as a part of the
Company's annual report on Form 10-KSB.
Kinetiks.com, Inc.
(A Development Stage Company)
Balance Sheets
March 31,1997 December 31,1996
(unaudited)
Assets
Current assets:
Cash 0 40,923
Short term investments 0 5,784
Accounts receivable, net 13,354 13,354
Prepaid expenses and other current assets 0 15,000
Total current assets 13,354 75,061
Property and equipment, net 0 45,145
13,354 120,206
Liabilities and Stockholders' (Deficit)
Current liabilities:
Judgments payable 0 0
Notes payable 116,500 48,042
Accounts payable 1,072,407 1,058,368
Accrued compensation 170,463 187,095
Other accrued expenses 53,418 11,244
Total current liabilities 1,412,788 1,304,749
Note payable to shareholder officer 143,841 201,263
Stockholders' (deficit):
Preferred stock, $.001 par value,
500,000 shares authoried;none issued 0 0
Common stock, $.001 par value;
20,000,000 shares authorized;
5,389,083 issued; 3,389,083
outstanding December 31, 1996 5,390 5,390
Less treasury stock, 2,000,000 shares (2,000) (2,000)
Additional paid-in capital 5,811,272 5,790,428
Deficit accumulated during the
development stage (7,357,937) (7,179,624)
Total stockholders'(deficit) (1,543,275) (1,385,806)
13,354 120,206
See accompanying notes
Kinetiks.com, Inc.
(A Development Stage Company)
Statements of Operations
For the three months ended March 31,
1997 1996
(unaudited) (unaudited)
Revenue 231,480 160,903
Operating expenses:
Cost of revenue 66 195,653
Research and development 0 37,739
Sales and Marketing 101,295 678,359
General and administrative 300,497 419,585
401,858 1,331,336
Operating loss (170,378) (1,170,433)
Other income (expense):
Interest expense (8,068) (11,376)
Interest income 133 35,622
Net loss (178,313) (1,146,187)
Net loss per common and common
equivalent (0.05) (0.21)
Shares used in computing net
loss per common and common
equivalent share 3,389,083 5,380,000
See accompanying notes
Kinetiks.com, Inc.
(A Development Stage Company)
Statements of Cash Flows
For the three months ended March 31,
1997 1996
(unaudited) (unaudited)
Operating Activities:
Net cash used in operating activities (149,032) (1,361,205)
Investing activities:
Proceeds from short-term investments 3,109 0
Purchase of equipment 0 (298,249)
Net cash provided by investing activities 0 (298,249)
Financing Activities:
Proceeds from notes payable 105,000 270,000
Repayment of notes 0 (30,000)
Net cash provided by financing activities 105,000 240,000
Net change in cash (40,923) (1,419,454)
Cash at beginning 40,923 1,896,964
Cash at end 0 477,510
See accompanying notes
Kinetiks.com, Inc.
Notes to Financial Statements March 31, 1997
(Unaudited)
1. Asset Sale
Danro Purchase Order
In October 1996 the Company entered into a Purchase Order
(the "Agreement") with Danro Corporation ("Danro") whereby
the Company sold to Danro essentially all of its computer
hardware assets for $200,000. The Agreement provided that
the Company would receive a downpayment of $65,000 and the
remaining $135,000 would be advanced once the Company satisfied
the following conditions: 1) execution of one or more leases
between the Company and Danro covering the purchased items;
2) adoption by the Board of Directors of a work-out plan; and
3) delivery of such financial information as required by Danro.
Effective December 5, 1996 the Agreement was amended whereby
the Company and Danro agreed to adjust the purchase price
downward to $138,700, the amount that had already been
received by the Company. The Company agreed to repurchase
the equipment by January 15, 1997 and to pay lease fees of
$25,000 and legal fees incurred by Danro in the amount of $4,000.
Effective February 5, 1997 the Company and Danro entered
into an Equipment Rental Extension Agreement (the
"Extension Agreement"). The Extension Agreement provided an
extension for the Company to repurchase its assets to March 31,
1997 and called for immediate payment of all rental fees
due Danro from October 1,1996. The Company additionally
agreed to pay legal fees incurred by Danro in the amount of $1,830.
The Company was unable to pay any of the required payments
pursuant to these agreements, nor was it able to ultimately
repurchase its assets. Since the Company was in default of
the Agreement and The Extension Agreement, all amounts due
to Danro were accelerated. Accordingly, the Company recorded
legal fees and lease expense in the amounts of $5,829 and
$56,829 respectively, as of December 31, 1996.
Trader Letter Agreement
In November 1996 the Company and Trader Publishing Company
("Trader") entered into a Letter Agreement (the "Letter
Agreement") whereby Trader would acquire substantially all
of the assets and properties used by the Company for a
purchase price of $750,000, consisting of $550,000 for the
assets being sold, $100,000 for a one-year consulting
agreement with the Company, and $100,000 for a five-year non-
compete agreement. Trader advanced the Company $110,000 as
an earnest money deposit for this Letter Agreement. The
agreement contained a provision that in the event of a
breach of the Letter Agreement that resulted from events
beyond the control of the Board of Directors or the then,
president and executive officer, and his wife, who was an
officer and director, the Company would pay Trader a break-
up fee in the amount of $35,000.
On December 19, 1996 Trader loaned the Company $110,000
pursuant to a promissory note. The note bore interest at
the prime rate plus 3% and was due January 30, 1997. The
promissory note was also subject to a security agreement
encumbering essentially all of the assets of the Company.
On March 4, 1997, the Company filed a preliminary proxy
statement with the Securities and Exchange Commission. The
Company intended to solicit proxies seeking shareholder
approval of the proposed sale of substantially all the
Company's assets to Trader pursuant to the Letter of Intent
entered into in November 1996. The Company's Board of
Directors unanimously approved the asset sale to Trader and
intended to recommend that shareholders vote in favor of the
proposed asset sale. However, the Company was unable to
obtain a "fairness opinion" from a financial advisor
regarding the fairness of the proposed asset sale, and the
proposed sale of assets to Trader failed to close and
proxies were not solicited to approve the sale. The Company
was unable to satisfy a number of conditions required to
close the proposed asset sale, including the ability to
provide audited financial statements and the ability to convey
assets subject to the proposed sale free and clear of all
liens and encumbrances.
As a result of the Company and Trader being unable to
finalize a definitive agreement pursuant to the Letter of
Intent, Trader advised the Company on March 31, 1997 that
the earnest money deposit plus all sums due under the
Commercial Note, plus interest and expenses, were due and
payable. Trader also gave notice of its intent to exercise
all its rights under the security agreement unless payment
was made.
On April 9, 1997, Trader entered a confession of judgment on
the Commercial Note payable by the Company to Trader in the
Circuit Court of Norfolk, Virginia. On April 18, 1997,
Judgment was entered against the Company in the District
Court of Harris County, Texas, and a Notice of Public Sale
of the Company's assets covered by the security agreement
was posted for May 13, 1997.
In addition, Trader filed suit against the Company on April
18, 1997 alleging breach of the Letter of Understanding and
demanding repayment of the earnest money deposit of $110,000
plus penalties ($35,000 for the break-up fee) and expenses
($36,000 in legal fees).
Wildwood LLC
On May 19, 1997 the Company and Trader entered into a
Settlement Agreement and Release in that Wildwood Capital
LLC ("Wildwood"), a nonaffiliate whose managing member is
the owner of Danro, agreed to pay Trader $228,000 for the
right to obtain the assignment of the judgment, the
litigation, and the liens securing the assets.
Simultaneously, with the execution of the Settlement
Agreement, the Company executed and delivered to Wildwood a
bill of sale transferring, assigning, and conveying to
Wildwood and settlement of the judgment and in lieu of
foreclosure by Wildwood essentially all of the Company's assets.
Although this transaction was not completed until May 1997,
the Company recorded the entire transaction, due to its
nature, as a type I subsequent event, as of December 31, 1996.
The Company recorded the loss on the sale of assets for the
year ended December 31, 1996, as follows:
Write-off net book value of assets assigned to Wildwood $ (414,389)
Write-off prepaid marketing (50,000)
Write-off net book value of License Agreement (148,840)
Trader deposit for Letter Agreement 110,000
Note payable to Trader 110,000
Proceeds from Danro pursuant to Purchase Agreement 138,700
$ (254,538)
2. Earnings per share
The Company used 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.
3. Summary of Significant Accounting Policies
Revenue and Cost of Revenue
Service revenues from the sale of advertising space are
recognized and ratably over the period in which the
advertisements are displayed on the Internet. Payments
received in advance for providing advertising services and
contract amounts that have been billed but have not been
earned are recorded as deferred revenue. All costs related
to revenue producing activities are expenses as incurred.
The Company recorded revenues, and a corresponding charge to
cost of revenues from barter transactions at the estimated
fair value of the products or services received.
The Company believed that the majority of costs associated
with an advertisement were included in the set-up period and
intended to develop statistical information regarding the
advertisement cost cycle based upon experience. However,
the Company's operations ceased before meaningful data was
obtained to substantiate this belief.
Cash Equivalents and Short-term Investments
The Company considers all highly liquid investments with
original maturities of three months or less to be cash
equivalents.
Short-term investments include a certificate of deposit that
has an original maturity ranging from four to six months.
4. Notes Payables
Notes payable consists of the following as of March 31, 1997:
Note payable, shareholder, interest at
10.91%, no stated repayment terms,
and without collateral. $ 9,000
Note payable, shareholder, interest at
8%, principal and interest due April
1997, without collateral. 50,000
Note payable, interest at 8%,
principal and interest due April
1997, without collateral. 5,000
Note payable, shareholder, no stated
interest, no stated repayment terms,
without collateral. 2,500
Note payable, shareholder, business
development company, interest at 18%
(in default), due March 30, 1997, and
without collateral. 25,000
Note payable, shareholder venture capital
firm, interest at 10%, principal and
interest due March 1997, without
collateral. 25,000
Note payable, shareholder/officer,
interest at 9%, principal and interest
due January 1997, without collateral. 140,576
Total $257,076
The note of $9,000 represents a restructured note between the
Company and a shareholder. In January 1997 the Company and the
shareholder exchanged an existing note payable in the amount of
$30,000 and accrued interest with a new $9,000 note payable and
surrendered to the shareholder the Company's boat, which had a
net book value at the date of this restructuring of $26,815. The
new note bears interest at 10.91%, has no stated repayment terms,
and is without collateral.
In March 1997, the Company borrowed $50,000 from a shareholder
and issued warrants to purchase 100,000 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 100,000 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 same shareholder converted a note payable in the amount of
$15,000 into 50,000 shares of the Company's common stock in
February 1997. The note accrued interest at 7%, and was without
collateral. The stock issued was from the treasury, and had been
contributed by a director and former officer of the Company.
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.
During 1997, the Company borrowed funds from a former employee
and shareholder. The balance remaining is $2,500. There are no
repayment terms and interest does not accumulate.
In February 1997, the Company borrowed $25,000 from The Rockies
Fund (The "Fund"), a shareholder that is a "business development
company" under the Investment Company Act of 1940. In connection
with the execution of the $25,000 note, the Company issued
warrants to purchase 50,000 shares of the Company's common stock
at $.25 per share. Additionally, the note agreement requires the
Company to issue 50,000 warrants monthly for every month that the
note is in default. As of December 31, 1998, the Company has granted
1,150,000 warrants to this shareholder. In 1998, the Company
borrowed an additional $61,476 from The Rockies Fund. In connection
with the execution of this note no warrants were issued. The note
bears interest at 8%, has no stated repayment terms and is without
collateral. During the period ended March 31, 1999 the Company
borrowed an additional $29,128 from the Fund. This note bears
interest at 8%, has no stated repayments terms and is without collateral.
No warrents were issued in association with this note.
As of April 1999 the president of the 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
1,073,500 and 1,300,000, respectively. The shares owned represent
approximately 32% 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. The remaining shares owned were purchased
in open market transactions.
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.
In January 1997, the Company borrowed $25,000 from Caribou
Capital, Inc. ("Caribou"), a nonaffiliate. In connection with
this borrowing, the Company issued warrants to purchase 50,000
shares of the Company's common stock at $.25 per share. In March
1997, when the Company was unable to pay this note, the Company
issued additional warrants to purchase 50,000 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 date of grant.
The note payable to shareholder/officer consists of amounts advanced
by Mr. Carr to fund the operating and start-up expense of the Company
and the contribution of certain operating assets. The note bore
interest at 9% per annum and matured in Januray 1997. In January 1997,
when the Company was unable to pay this note, the shareholder/officer
accepted as partial payment, the Company's automobile. The net book value
of the automobile approximated $21,000, which the shareholder/officer
and the Company believed to be the estimated fair market value.
During the year ended the Company reduced the principal amount owed to
the shareholder/officer by $18,756, which represented personel charges
made by the shareholder/officer on the Company's credit card. As of
March 31, 1997, the note's principal balance was $140,576.
4. Research and Development Costs
Research and development expenditures are charged to expense as
incurred. Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased
or Otherwise Marketed," requires capitalization of certain
software development costs subsequent to the establishment of
technological feasibility.
Based upon the Company's product development process,
technological feasibility is established upon completion of a
working model. Costs incurred by the Company between completion
of the working model and the point at which the product is ready
for general release have been insignificant. All research and
development costs have been expensed.
5. Commitments and Contingencies
Leases
The Company leased its office space and certain office equipment
under noncancellable operating lease agreements expiring through
the year 2000. An officer and director and a former officer and
director personally guaranteed certain of these leases. Due to
the lack of operating funds and the inability of the Company to
raise additional equity capital, the Company defaulted on all of
its leases, and accordingly, the lease creditors accelerated all
remaining payments. Certain of the lease creditors filed legal
proceedings against the Company during the years ended December
31, 1997 and obtained court ordered judgments against the Company
and the officer and director and former officer and director.
Securities and Exchange Commission
The Company has failed to timely file the required Forms 10-KSB
and Forms 10-QSB as required by the SEC. The Company and its
officers and 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.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Financial Statements and Notes thereto appearing elsewhere in
this report.
Certain statements in this Management's Discussion and Analysis
of Financial Condition and Results of Operations which are not
historical facts are forward-looking statements such as
statements relating to future operating results, existing and
expected competition, financing and refinancing sources and
availability and plans for future development or expansion
activities and capital expenditures. Such forward-looking
statements involve a number of risks and uncertainties that may
significantly affect the Company's liquidity and results in the
future and, accordingly, actual results may differ materially
from those expressed in any forward-looking statements. Such
risks and uncertainties include, but are not limited to, those
related to effects of competition, leverage and debt service
financing and refinancing efforts, and general economic
conditions.
The following discussion and analysis should be read in
conjunction with the consolidated financial statements and notes
thereto appearing elsewhere in this report.
In February 1997 Dyann L. Carr, a director and former officer,
contributed 50,000 shares of Company common stock to the
treasury. These shares of common stock were immediately re-
issued to a note holder, David Figueiredo. Mr. Figueiredo
converted a $15,000, note that had been issued in November 1996,
into 50,000 shares of Company stock. As part of this transaction
the Company recorded interest expense in the amount of $5,223.
In February 1997 Greg S. Carr, the Company founder and corporate
secretary, agreed to accept the Company vehicle as partial payment
for his outstanding loan. The value of the vehicle was agreed to
be $21,000 which approximated the fair value.
As of March 31, 1997, the Company was still a "development stage
company." Although the Company had established a nationwide
sales staff in 1996, revenues had not met expectations and the
Company had not been able to develop its proprietary software to
place the advertising on-line as quickly as it had anticipated.
The Company was forced to focus on raising capital rather than
executing its business plan. Unfortunately, the Company could
not raise the necessary capital with which to execute its
business plan and sold all of its assets May 19, 1997 (See
Financial Footnotes).
In the first quarter of 1997 a nationwide search was to have,
begun for a new CEO. At the December 1996 Board of Directors
meeting, Gregory S. Carr resigned as President and accepted
the position of corporate secretary and remained as a director
with the Company. Charles L. Powell was appointed acting
President. However, no actual search was ever enacted.
On March 14, 1997 Mr. Salus, a director, resigned his position
with the Company. The Board of Directors did not replace him.
By the contractual closing date of March 31, 1997, the Company
was attempting to complete the sale of its assets to Trader
Publications. Instead of the sale coming to its anticipated
closure Trader Publications sued the Company in April 1997 to
receive its earnest monies and the repayment of a short-term 1996
note plus interest and attorney fees. The Company received a
judgment totaling $291,000. On May 19, 1997 Wildwood Capital,
a privately owned Texas Corporation, stepped into the position of
Trader, purchased the assets, and continues operates the Internet
Waterway site (See Financial Footnotes). Mr. Carr, the former
president and one of the founders of Kinetiks.com, Inc.,
provided consulting services for Wildwood Capital since the sale
of the assets until April 1999.
Although this transaction was not completed until May 1997, the
Company recorded the entire transaction, due to its nature, as a
Type I Subsequent Event as of December 31, 1996 (See Financial
Footnotes).
The Company had no operations since the sale of its assets in
May 1997 until The Rockies Fund loaned the Company additional
monies starting in March 1997. These funds, totaled $61, 476 at
the end of 1998, and in the quarter ended March 31, 1999 an
additional $29,128 has been loaned. These funds have been used
by the Company to bring its accounting records up-to-date, and
complete an independent audit. In addition The Rockies Fund is
working with the Company to develop its corporate strategy; this
includes reducing the over $1.3 million dollars in debt and
discussing a possible merger with potential candidates. The
Rockies Fund, Inc. has had discussions with multiple potential
merger and/or acquisition candidates. However, no agreement has been
finalized. If a favorable debt settlement can not be reached the
Company may be forced to explore other alternatives.
Results of Operations for the Three Months Ended March 31, 1997
as compared to the Three Months Ended March 31, 1996:
The Company's revenues were derived from the construction of
marine industry websites and from the sale of advertising
from businesses involved in the boating and fishing industry and
the advertising appeared on the Internet Waterway web-site. In
addition a small portion of the revenue was derived from the on-line
sales of marine accessories. Until 1997 the Company included
"trade-outs" with magazines and boat show booths as revenue,
and accounted for this type of revenue with a matching cost-of-goods
entry (See Financial Footnotes).
Due to lack of funding during this operating quarter the focus
shifted from selling ad space to attempting to arrange short-term
financing until permanent financing could be arranged that would
allow the Company to continue its operations.
Revenues
Revenue for the three-month period increased $60,477, or 37.6%
from $160,903 to $231,480. Although all of the revenue recorded
for this three-month period was from cash receipts, not barter, the
revenue was not enough to cover expenses that totaled $401,858.
The field-based sales staff had been eliminated, and therefore, the
ability to further increase sales was difficult.
Expenses
Operating expenses decreased substantially, $929,478 or 79.4%,
when comparing the three months ended March 31, 1996 and 1997 due
to the fact that the Company's operations almost completely
curtailed. The majority or 74.8% of expenses were allocated to
general and administrative. General and Administrative expenses
decreased from $419, 585 to $ 300,497 or 28.3%. The component,
Sales and Marketing, decreased from $678,359 to $101,295, or
85.1%. Thus demonstrating that the Company was no longer in the
position to promote itself.
Based on the foregoing, the Company reported an operating loss of
$(170,378) and a net loss of $(178,313). This represents a loss
of $(.05) per share.
Liquidity and Capital resources: March 31, 1997 as compared to
December 31, 1996
Through this date, the Company's primary source of cash had been
its IPO in 1995. In addition the founder and multiple
shareholders had loaned the Company money in the form of notes.
Since cash generated internally through operations had not been
sufficient to cover expenditures, the Company entered into
additional debt financing during this quarter. The Company raised
$105,000 through the issuance of notes. This funding was
intended to be short-term; re-paid when the Trader transaction
closed. Since the Trader transaction was never finalized, the
four notes issued during this three month period are all
outstanding, accruing interest, and one of the notes continues to
accrue warrants monthly (See Notes Payable).
During the three months ended March 31, 1997 working capital
continued to be negative and the Company used all its cash and
was forced to liquidate its remaining short-term investments to
meet daily operating needs while attempting to merge the Company
with a stronger financial partner or obtain permanent financing.
The remaining current assets consisted of accounts receivable in
the amount of $13,354. This represents a decrease in current
assets of $61,707. During this same three-month period current
liabilities increased $108,039 due to an increase in both accounts
payable and other accrued expenses. No judgments had been filed at
this juncture.
Fixed assets decreased from $45,145 to zero during the first
three months of the fiscal year 1997. These assets were used to
reduce outstanding debt. These assets had consisted of a Company
vehicle and Company boat and its trailer. The Company automobile
was given to an officer and a director of the Company in order to
reduce the note payable to shareholder/officer $21,000, this
amount was estimated to be the fair value of the vehicle. The
note was further reduced due to the Company paying personnel
expenses of the director and officer. In a separate transaction
the Company's boat and its trailer were used in lieu of multiple
cash payments to another note holder. This allowed the Company to
exchange the remaining note balance of $30,000 for a new note in
the amount of $9,000 at 10.91% with no repayment terms stated.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Due to the lack of operating funds and the inability to raise
additional capital, the Company has defaulted in its payments to
a number of creditors and former employees. Numerous persons
have filed legal proceedings against the Company during 1997 and
1998. Claims have been asserted not only against the Company,
but also in certain instances against Gregory S. Carr and Dyann
Carr personally as guarantors of loans or leases. The Company
does not have sufficient funds to pay any of the judgments or
claims against it.
Corporate
Advanta Business Services Corporation filed a complaint on May
16, 1997 against the Company and the Carrs for non-payment under
an equipment lease. The complaint was filed in the Superior Court of New
Jersey, Camden County, New Jersey then transferred to Dallas County Court,
Dallas, Texas. A judgment in the amount of $39,495.11 was entered
against the Company and the Carrs in August 1997.
Greentree Financial Services filed suit against the Company and
the Carrs individually for non-payment of an equipment lease.
Suit was filed on May 27, 1997, in County Civil Court #3, Harris
County, Texas. A judgment against the Company and the Carrs was
entered on January 7, 1999 in the amount of $34,919.16.
On January 12, 1998, Lease Acceptance Corporation against the
Company and the Carrs in the Circuit Court for the County of
Oakland, Pontiac, Michigan. The suit alleged non-payment of a
lease for office furniture. The suit was referred by the court to
mediation, but was not successfully resolved through the
mediation process. A default judgment was entered on June 1,
1998, in the amount of $19,209.70 against the Company and the
Carrs.
Berger & Co., a temporary employment agency, filed suit against
the Company in 9th Judicial District Court for Montgomery County,
Texas on May 14, 1997. Plaintiff alleged non-payment of sums due
for temporary technical personnel used by the Company. Judgment
was entered in Berger and Company's favor. As a result of a
second amended final judgment, the court entered a judgment in
favor of Berger & Co. on June 3, 1998 in the amount of
$44,435.00.
Staffware, Inc., another temporary employment agency, filed suit
for non-payment of fees for temporary staff County Civil Court,
No. 1, in Harris County, Texas on March 1, 1997. A default
judgment was entered against the Company in the amount of
$26,865.11.
The Assessor's Office of Montgomery County, Texas filed suit
against the Company on November 9, 1998 in the amount of
$1,582.95 representing unpaid property taxes for 1996 and 1997.
Property taxes were assessed by Montgomery County on exhibition
equipment stored in a satellite storage facility. In addition
Montgomery County filed an additional suit representing the
unpaid portion of the property taxes representing the school
district in the amount of $3,951. The Company has no funds with
which to pay these unpaid property taxes.
SDX, Inc., a marketing firm, filed suit against the Company on
October 26, 1996 in Pct. 1, Pos. 2, Houston, Texas over the
disputed terms of a contract it entered into with the Company.
On June 13, 1997, the court entered a judgment in SDX, Inc.'s
favor in the amount of $4,750. The company as no available funds
to satisfy the judgment.
Federal Express Corporation filed suit against the Company on
September 19, 1997 in Montgomery County District Court,
Montgomery County, Texas seeking to recover $10,274.30 plus
interest for unpaid delivery fees. A default judgment was
entered on December 16, 1997. The judgment remains unsatisfied
due to the Company's lack of available funds. Federal Express
obtained a writ of execution on December 17, 1998.
Pennebaker Designs filed suit against the Company and the Carrs
on July 2, 1997 in the District Court for Harris County, Texas
alleging damages in the amount of $12, 997.50. The case was
dismissed on May 28, 1998 for non-suit.
Sanwa Leasing Corporation filed suit against the Company and the
Carrs on August 19, 1997 in the Sixth Judicial District, Oakland
County, Michigan alleging that $19, 989.04 is due. A default
judgment was entered on November 4, 1997.
Employee
Hank Savage, a former employee, filed a claim for unpaid wages in
the office of the Labor Commissioner, State of California on
April 16, 1997. The Commission awarded the former employee a
total of $6,870.93. This amount of the award includes sums for
unpaid wages, commissions due, and penalty. The Company has no
funds available to pay the award.
Additional vendors, note holders, and former employees have
refrained from suing the Company because of its known inability
to satisfy the claims of creditors.
Item 2. Change in Securities
Change in Rights of Securities
During this fiscal quarter the Board of Directors of the Company
retained voting control of 1,000,000 shares of common stock owned
by its founders, Gregory S. and Dyann L. Carr. This voting
control was to be for a period of six months. At the Board of
Director's meeting in December 1996 this matter had been voted
upon.
Item 3. Defaults Upon Senior Securities
The following securities were considered to be in default:
Note payable, shareholder, interest
at 8%, principal and interest due
April 1997, without collateral. 50,000
Note payable, interest at 8%,
principal and interest due April
1997, without collateral. 5,000
Note payable, shareholder,business
development company, interest at 18%
(in default), due March 30, 1997, and
without collateral. 25,000
Note payable, venture capital firm,
interest at 10%, principal and interest
due March 1997, without collateral. 25,000
Note payable, shareholder/officer, 9%,
principal and interest due January
1997 without collateral 140,576
Total $245,576
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the shareholders during
the first quarter of 1997. Although the Company filed a
preliminary proxy statement with the Securities and Exchange
Commission in March 1997, the proposed sale of assets
contemplated by the preliminary proxy statement did not transpire
(see Financial Footnotes) and it was unnecessary to submit the
matter to a vote of the shareholders.
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
(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: 5/18/1999 By: /s/Gregory S. Carr
Gregory S. Carr,Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 13,354
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,354
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,354
<CURRENT-LIABILITIES> 1,412,788
<BONDS> 0
0
0
<COMMON> 5,390
<OTHER-SE> (1,548,665)
<TOTAL-LIABILITY-AND-EQUITY> 13,354
<SALES> 231,480
<TOTAL-REVENUES> 231,480
<CGS> 66
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8068
<INCOME-PRETAX> (178,313)
<INCOME-TAX> 0
<INCOME-CONTINUING> (170,378)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (178,313)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
