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 September 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 September 30, 1999,5,000,000 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 September 30, 1999 (unaudited) and
December 31, 1998
Statements of Operations for the Three Months Ended
September 30, 1999 (unaudited) and September 30, 1998 (unaudited)
Statements of Operations for the Nine Months Ended
September 30, 1999 (unaudited) and September 30, 1998 (unaudited)
Statements of Cash Flows for the Nine Months Ended
September 30, 1999 (unaudited) and September 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 September 30, 1999, its results of operations for the three
month period ended September 30, 1999, its results of operations
for the nine month period ended September 30, 1999, and its cash
flows for the nine month period ended September 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)
Consolidated Balance Sheet
September 30, December 31,
1999 1998
(unaudited)
Assets
Current assets:
Cash 96 169
Total Current assets 96 169
96 169
Liabilities and Stockholders' (deficit)
Current liabilities:
Judgments payable 83,705 205,471
Notes payable 0 177,976
Accounts payable 319,322 862,531
Accrued compensation 59,112 105,503
Other accrued expenses 510 41,680
Total current liabilities 462,649 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;
3,389,083 outstanding as of
December 31,1998, 7,000,000
issued;5,000,000 outstanding
as of September 30, 1999. 7,000 5,390
Less, treasury stock (2,000) (2,000)
Additional paid in capital 6,842,185 6,061,517
Deficit accumulated during
develop stage (7,309,738) (7,457,899)
Total stockholders' (deficit) (462,553) (1,392,992)
96 169
See accompanying notes
Kinetiks.com, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
For the three months ended September
1999 1998
(unaudited) (unaudited)
Revenue: 0 0
Operating expenses:
General and administrative 331,605 14,411
331,605 14,411
Operating loss: (331,605) (14,411)
Other income (expense):
Interest expense (60,276) (4,025)
Loss before extraordinary item: (391,881) (18,436)
Extraordinary gain related to
extinguishment of debt 207,342 0
Extraordinary loss related to
extinguishment of debt (89,669) 0
Net loss: (274,209) (18,436)
Earnings per common share, basic:
Loss from continuing operations (0.02) (0.01)
Extraordinary items 0.11 0
Net income available to common stockholders 0.09 (0.01)
Shares used in computing net (loss)
per common and common equivalent
share, weighted average, basic share
computation 5,297,759 0
See accompanying notes
Kinetiks.com, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
For the nine months ended September 30,
1999 1998
(unaudited) (unaudited)
Revenue: 0 0
Operating expenses:
General and administrative 616,393 40,063
616,393 40,063
Operating loss: (616,393) (40,063)
Other income (expense):
Interest expense (68,280) (16,224)
Loss before extraordinary item: (684,673) (56,287)
Extraordinary gain related to
extinguishment of debt 922,222 0
Extraordinary loss related to
extinguishment of debt (89,669) 0
Net income: 148,161 (56,287)
Earnings per common share, basic:
Loss from continuing operations (0.15) (0.02)
Gain from extraordinary items 0.18 .00
Net income available to common
stockholders .03 (0.02)
Earnings per common share, fully diluted:
Loss from continuing operations (0.13) 0
Extraordinary items 0.15 0
Net income available to common
stockholders .02 0
Shares used in computing net income
per common and common equivalent share,
weighted average, basic share
computation 4,654,482 3,389,083
Shares used in computing net income per
common and common equivalent share,
weighted average, fully diluted
computation 5,403,894 0
See accompanying notes
Kinetiks.com, Inc.
(A Development Stage Company)
Consolidated Cash Flow Statements
For the nine months ended September 30
1999 1998
(unaudited) (unaudited)
Operating Activities:
Net cash used in operating activities (92,624) (33,721)
Net cash provided by investing activities 0 0
Financing Activities:
Proceeds from notes payable 81,520 40,563
Proceeds from stock issuance 11,008 0
Repayment of notes 0 (6,700)
Net cash provided by financing activities 92,528 33,863
Net change in cash (73) 142
Cash at beginning 169 0
Cash at end 96 142
See Accompanying notes
Kinetiks.com, Inc.
Notes to Financial Statements
September 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
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.
3. Notes Payables
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 the quarter that ended September 30, 1999 this note was
converted into equity in the form of restricted common stock.
The Company borrowed $17,192 from The Rockies Fund, "a business
development company," as defined by the Investment Company Act
of 1940, during July, August and September of 1999. No warrants
were issued in relation to this note. During the quarter ended
September 30, 1999 this note was converted into equity in the
form of restricted common stock.
As of September 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 1,480,832 and 650,000, respectively.
The shares owned represent approximately 28.6% of the
outstanding shares of the Company. Of the shares owned,
650,000 shares were purchased at $.05 per share directly
from the former president and vice president of the Company
in private transactions and 722,332 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.
4. Sale of Stock
During the three months ended September 30, 1999, the Company
sold in a private transaction to one accredited investor
26,944 restricted shares of its common stock for $11,008,
or approximately $.41 per share. At the time of this
private placement, the Company's stock was trading at
approximately $1.09 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 $ 10,981.
5. Troubled Debt Restructuring
During the quarter ended September 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 4,750 500 0 4,250
Notes Payable 59,898 0 148,128 (85,713)
Former Employees 21,882 1,132 506 19,703
Accounts Payable 193,795 9,372 5,819 179,433
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 26,418 shares of its restricted common stock to settle
certain payables.
6. Subsidiary
During the quarter the Company formed a subsidiary, eLiner
Corporation. The Company owns 100% of the outstanding stock.
7. Susequent Events
On October 11, 1999 the Company's wholly owned subsidiary
entered into an agreement and Plan of Merger to acquire by merger
substantially all of the assets of Imagenuity, Inc., a Florida
corporation. The Plan provides that the Registrant will issue to
Jon V. Ludwig, the sole shareholder of Imagenuity, 10,000,000
shares of its $0.001 per value Common Stock and 250,000 shares of its
Series A Preferred Convertible Stock, each share of which has the voting,
dividend and liquidation rights of 50 shares of the Common Stock.
Subject to the satisfaction of certain conditions, including the
successful completion of a private placement of 2,500,000 shares
of the Company's stock for $1,000,000, the Merger will be
effective as of November 1, 1999. Following the Merger, Mr.
Ludwig will own 75 percent of the issued and outstanding capital
stock of Registrant.
Imagenuity, Inc., is an Internet consulting company
that develops, installs and implements web-based applications for
its customers. It has been operating under the trade name
eLinear since May 1999. Imagenuity's principal office is
situated in Westminster, Colorado.
Imagenuity transferred and assigned to Elinear
Corporation its computer equipment, proprietary software
applications, and certain intangible property, all of which
Elinear Corporation will continue to use in its business.
Imagenuity is a corporation that elected to be treated as an
"S" corporation under the Internal Revenue Code of 1986 and files
information returns with the Internal Revenue Service on a
calendar-year basis. Effective the day before the parties
executed the Plan of Merger, Imagenuity distributed $312,849 in
cash and receivables to permit the current shareholder, and its
prior shareholders, to pay income taxes attributable to
Imagenuity's operations during the period January 1 through
October 31, 1999.
Item 7. Financial Statements and Exhibits.
The audited financial statements of Imagenuity for the
fiscal years ended December 31, 1997, and December 31, 1998, and
the unaudited financial statements for the interim periods that
are required by Item 7(a) of Form 8-K will be filed as soon as
available, but not later than December 24, 1999.
Registrant will file the pro forma financial information
required by Article 11 of Regulation S-X as soon as available,
but not later than December 24, 1999.
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 September 30, 1999 the Company had no
business operations. Its activities were limited to
(1) negotiating compromised settlements with its creditors,
and (2) meeting with potential merger or acquistion candidates.
As a result of its negotiations with creditors, the Company
settled for cash payments in the aggregate of $11,008,
judgment debts of $4,750, accounts and other payables of
$184,501. The Company obtained substantially all of the funds
utilized to settle and discharge the judgments and other delinquent
claims from the sale of 26,944 shares of its common stock
to an accredited investor. In addition the Company settled
with all unsecured debt holders by issuing 205,905 shares of
restricted stock to Delores Davis and The Rockies Fund.
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.
Results of Operations for the Three Months Ended September 30, 1999 as
compared to the Three Months Ended September 30, 1998:
There were no business operations during either period.
Revenues:
Revenue for both three-month periods was zero.
Expenses:
Operating expenses increased from $14,411 to $331,605 due to
multiple stock issuance expenses in relation to the issuance
of restricted common stock.
The Company incurred $60,276 in interest expense in relation
to the two outstanding notes and debt that was extinguished
during the quarterand an adjustment in the amount of an
account payable.
Based on the foregoing information, the Company recorded a
loss of $(391,881) versus a loss of $(18,436) one year ago
before the extraordinary items related to the extinguishment
of debt. This represents a loss of $(.02) per share available
to shareholders versus a $(.01) loss during the same period
a year ago. The extraordinary items contributed $.11 per
share causing basic net income to be $.09 per share.
Results of Operations for the Nine Months Ended September 30, 1999
as compared to the Nine Months Ended September 30, 1998:
There were no business operations during either period.
Revenues:
Revenue for both nine-month periods was zero.
Expenses:
The operating loss increased from $(56,287) to $(684,673)
during the nine-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 incresed from $16,224 to $68,280
mainly due to an adjustment in the amount of an account
payable. Due to an extraordinary gain of $922,222 a net
gain was produced in the amount of $148,161. Basic earnings
per share were $.03, while fully diluted earnings per share
were $.02.
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: September 30, 1999 as compared
to December 31, 1998:
The Company has virtually 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 $462,649 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 has not had any funds available
to pay the judgements for claims that have not been satisfied.
The 4,750.00 SDX judgement against the Company was extinugished
during the quarter ended September 30, 1999.
No lawsuits were filed against the Company in the period
covered by this report.
Item 2. Change in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
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 September 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: 11/22/99 By: /s/ Gregory S. Carr
Gregory S. Carr, Secretary
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