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 March 31, 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 [ ] 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, 1999 (unaudited) and
December 31, 1998
Statements of Operations for the Three Months Ended
March 31, 1999 (unaudited) and March 31, 1998 (unaudited)
Statements of Cash Flows for the Three Months Ended
March 31, 1999 (unaudited) and March 31, 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 March 31, 1999, its results of
operations for the three month period ended March 31, 1999 and its cash flows
for the three month period ended March 31, 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. 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.
Kinetiks.com, Inc.
(A Development Stage Company)
Balance Sheets
March 31,1999 December 31,1998
(unaudited)
Assets
Current assets:
Cash 4,103 169
Total Current assets 4,103 169
4,103 169
Liabilities and Stockholders' (Deficit)
Current liabilities:
Judgments payable 205,471 205,471
Notes payable 199,873 177,976
Accounts payable 876,953 862,531
Accrued compensation 105,503 105,503
Other accrued expenses 46,302 41,680
Total current liabilities 1,434,102 1,393,161
Stockholder's (deficit):
Preferred stock, $.001 par value,
500,000 shares authorized; none
issued 0 0
Common stock, $.001 par
value; 20,000,000 shares
authorized;5,389,083 issued;
3,389,083 outstanding
as of December 31, 1998 5,390 5,390
Less, treasury stock (2,000) (2,000)
Additional paid in capital 6,061,517 6,061,517
Deficit accumulated during
develop stage (7,494,906) (7,457,899)
Total stockholders' (deficit) (1,429,999) (1,392,992)
4,103 169
See accompanying notes
Kinetiks.com, Inc.
(A Development Stage Company)
Statements of Operations
For the three months ended March 31
1999 1998
(unaudited) (unaudited)
Revenue: 0 0
Operating expenses:
General and administrative 32,386 3,054
32,386 3,054
Operating loss: (32,386) (3,054)
Other income (expense):
Interest expense (4,621) (7,166)
Net loss: (37,007) (10,220)
Net loss per common and common
equivalent shares (0.01) (0)
Shares used in computing net
loss per common and common
equivalent shares 3,389,083 3,389,083
See accompanying notes
Kinetiks.com, Inc.
(A Development Stage Company)
Cash Flow Statements
For the three months ended March 31
1999 1998
(unaudited) (unaudited)
Operating Activities:
Net cash used in operating activities (17,963) (240)
Net cash provided by investing activities 0 0
Financing Activities:
Proceeds from notes payable 21,897 240
Net cash provided by financing activities 21,897 240
Net change in cash 3,934 0
Cash at beginning 169 0
Cash at end 4,103 0
See accompanying notes
Kinetiks.com, Inc.
Notes to Financial Statements March 31, 1999
(Unaudited)
1. 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.
2. 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 December 31, 1998 and obtained
court ordered judgments against the Company and the officer
and director and former officer and director. As of
December 31, 1998, judgments from lease creditors were $113,613.
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 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
Notes payable consists of the following:
March 31, 1999
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,business development
company, interest at 8%,
no stated repayment terms, and
without collateral. 61,476
Note payable, business development
company, interest at 8%,
no stated repayment terms, and
without collateral. 29,128
Note payable, venture capital firm,
interest at 10%, principal and
interest due March 1997,
without collateral. 25,000
Total $177,976
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 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.
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.
During 1997 and 1998, the Company borrowed $25,000 and $61,476,
respectively, 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. No warrants were issued
pursuant to the $61,476 note payable. 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 warrants were
issued in relation to 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.
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.
During the quarter ended March 31, 1999 the Company had no
active operations. The Company focused its attention on
completing the necessary preparation for the independent
annual audits of the years ended December 31, 1996,
December 31, 1997, and December 31, 1998.
The funds with which to complete the preparation for, and
the independent audits of fiscal years ended December 31,
1996, December 31, 1997, and December 31, 1998 were loaned
to the Company by The Rockies Fund, Inc. (See Notes
Payable). The total amount loaned during the three months
ended March 31, 1999 was $29,128. The note bears interest
at 8%, there is no collateral or specific repayment terms.
The Rockies Fund, Inc., a business development company,
is assisting the Company to develop the most advantageous
corporate strategy. This includes focusing attention on
reducing the debt that totals over $1.3 million dollars
and discussing a merger or an acquisition with potential
candidates. Although The Fund, on the Company's behalf,
has spoken with many prospects, nothing has been finalized.
Without a favorable settlement of the outstanding debt the
Company may find it necessary to explore other opportunities.
The Company believes that the Fund will continue to assist
with funding and management until the proper strategy is
developed. However, there can be no assurance.
Results of Operations for the Three Months Ended March 31, 1999 as
compared to the Three Months Ended March 31, 1998:
There were no active operations during either period.
Revenues
Revenue for both three-month periods was zero.
Expenses
Operating expenses increased from $3,054 to $32,386 due to
an increase in professional expense. All expenses were
related to the preparation for, and the independent audits
for 1996, 1997, and 1998, and the preparation and
completion of the quarterly reports for the same periods.
The Company incurred $4,621 in interest expense in relation
to the outstanding debt. This represents a $2,545 decrease
in interest expense due to a reduction in the amount of
notes payable.
Based on the foregoing information, the Company recorded a
$(37,007) loss versus a loss of $(10,220) one year ago.
This represents a loss of $(.01) per share.
Liquidity and Capital resources: March 31, 1999 as compared
to December 31, 1998:
The Company's only assets consist of $4,103 cash on hand.
The cash is part of the most recent loan from The Rockies
Fund, Inc. to be used in conjunction with audit preparation
and completion.
Current Liabilities increased $40,941 from $1,393,161 to $1,434,102.
No new judgments have been filed.
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
None.
Item 3. Defaults Upon Senior Securities
The following securities were in default:
March 31, 1999
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, 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
Total $177,976
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 March 31, 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: 05/17/1999 By:/s/Gregory S. Carr
Gregory S. Carr, Secretary
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