UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999. Commission File No. 0-28720.
SALES ONLINE DIRECT INC.
(Exact name of small business issuer in its charter)
Delaware 73-1479833
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
4 Brussels Street, Worcester, Massachusetts 01610
(Address of principal executive office)(Zip Code)
Issuer's Telephone Number, Including Area Code: (508) 753-0945
Securities Resolution Advisors, Inc.
(Former Name)
(Securities registered pursuant to Section 12(b) of the Act)
Common Stock, $0.001 Par Value
(Title of each class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No __
Transitional Small Business Disclosure Format (check one):
Yes ___ No X
As of October 31, 1999, the registrant had outstanding 43,893,912 shares of its
Common Stock, par value of $0.001, its only class of
voting securities.
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements: 1
-------
Consolidated Balance Sheets -
September 30, 1999 (unaudited) and December 31, 1998 1
Consolidated Statement of Operations -
Three and Six-months ended September 30, 1998 2
Consolidated Statement of Shareholders' Equity - 3
Six-months ended September 30, 1999 and 1998
Consolidated Statement of Cash Flows -
Six-months ended September 30, 1998 and 1999 4
Notes to Consolidated Financial Statements -
Six-months ended September 30, 1999 and 1998 6
Item 2. Management's Discussion and Analysis or Plan of Operations 9
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Part II - Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
-------
Signatures 14
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Sales OnLine Direct, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
Assets
<S> <C> <C>
Current Assets:
Cash and equivalents $ 563,701 $ -
Accounts receivable 93,783 -
Marketable securities 374,436 -
Merchandise inventories 772,479 -
Due from affiliates 5,674 7,164
Due from Shareholders 3,075 -
Other current assets 59,377 -
Total current assets 1,872,525 7,164
Property and equipment, net 263,493 20,479
Other assets 125,145 -
Total assets $2,261,163 $27,643
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $114,366 $ -
Accrued liabilities 124,457 7,160
Due to affiliates - 8,245
Total current liabilities 238,823 15,405
Shareholders' equity:
Common stock 43,894 1,000
Paid in capital 3,210,587 -
Accumulated earnings (deficit) (1,232,141) 12,238
2,022,340 13,238
Less stock subscriptions receivable - (1,000)
Total shareholders' equity 2,022,340 12,238
Total liabilities and shareholders' equity $2,261,163 $27,643
</TABLE>
The accompanying notes are an integral part of these financial statements
1
<PAGE>
Sales OnLine Direct, Inc.
Consolidated Statement of Operations
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998
For The Three For The Nine For The Three For The Nine
Months Ended Months Ended Months Ended Months Ended
<S> <C> <C> <C> <C>
Revenues $ 380,148 $ 692,792 $ - $ -
Cost of revenues 363,232 437,063 - -
Gross profit 16,916 255,729 - -
Sales, general and
administrative expenses 665,520 1,456,714 - -
Loss from operations (648,604) (1,200,985) - -
Other expense 89,927 43,394 - -
Provision for taxes
on income - - - -
Net loss $ (738,531) $ (1,244,379) $ - $ -
Earnings per share:
Basic and diluted $ (.017) $ (.028) $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial statements
2
<PAGE>
Sales OnLine Direct, Inc.
Consolidated Statement of Shareholders' Equity
For the Nine Months Ended September 30, 1999
<TABLE>
<CAPTION>
Stock
Common Stock Paid in Retained Subscription
Shares Par value Capital Earnings Receivable Total
<S> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1999 40,000 $ 1,000 $ -- $ 12,238 $(1,000) $ 12,238
Contribution of Assets
of World Wide Collectors
Digest -- -- 33,229 -- -- 33,229
Contribution of Merchandise
Inventories -- -- 769,764 -- -- 769,764
Subtotal 40,000 1,000 802,993 12,238 (1,000) 815,231
Recapitalization 6,525,000 5,565 (5,565) -- -- --
Subtotal 6,565,000 6,565 797,428 12,238 (1,000) 815,231
Acquire Securities Resolution
Advisers, Inc. 37,328,912 37,329 (36,841) -- -- 488
Assignment of Options -- -- 2,450,000 -- -- 2,450,000
Collection of Stock
Subscription Receivable -- -- -- -- 1,000 1,000
Net loss -- -- -- (1,244,379) -- (1,244,379)
Balance-September 30, 1999 43,893,912 $ 43,894 $ 3,210,587 $(1,232,141) $ -- $ 2,022,340
</TABLE>
The accompanying notes are an integral part
of these financial statements
3
<PAGE>
Sales OnLine Direct, Inc.
Consolidated Statement of Cash Flows
For the Nine Months Ended September 30,
1999 1998
Operating activities:
Net loss $ (1,244,379) $ --
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 33,314 --
Realized loss on marketable securities 15,069 --
Unrealized loss on marketable securities 49,912 --
Changes in assets and liabilities:
Accounts receivable (81,942) --
Merchandise inventories 28,739 --
Due from affiliates 4,164 --
Due from shareholder (158) --
Other current assets (51,262) --
Accounts payable 11,351 --
Accrued liabilities 89,952 --
Total cash used in
Operating activities (1,145,240) --
Investing Activities:
Acquisition of property and equipment (230,994) --
Acquisition of marketable securities (2,149,446) --
Sale of marketable securities 1,710,029 --
Acquisition of Securities Resolution
Advisors, Inc. 488 --
Merger with Rotman Auction, Inc. 9,864 --
Other assets (70,000) --
Total cash used in
Investing activities (730,059) --
Financing Activities:
Assignment of options 2,450,000 --
Stock subscription receivable 1,000 --
Repayment of officer loan (12,000) --
Total cash provided by
Financing activities 2,439,000 --
Increase in cash 563,701 --
Cash and equivalents - beginning -- --
Cash and equivalents - ending $ 563,701 $ --
The accompanying notes are an integral part
of these financial statements
4
<PAGE>
Sales OnLine Direct, Inc.
Consolidated Statement of Cash Flows (continued)
For the Nine Months Ended September 30,
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
1999 1998
---- ----
Interest $ -- $ --
Income taxes $ -- $ --
Supplemental Schedule of Non-cash Investing and Financing Activities
The acquisition of Internet Auction, Inc. was accounted
for as a reverse acquisition utilizing the purchase method of
accounting. The assets of Securities Resolution Advisors, Inc.
were recorded at their fair value as follows:
1999 1998
---- ----
Cash received in the transaction $ 488 $ --
Contributions of inventories $ 769,764 $ --
Contribution of the net assets of World Wide Collectors
Digest, Inc. accounted for utilizing the purchase method of
accounting. The assets were recorded at their fair values
as follows:
Due from shareholder $ 2,737 $ --
Other current assets 1,000 --
Property and equipment 29,877 --
Liabilities assumed (385) --
Paid in capital $ 33,229 $ --
Merger of Rotman Auction, Inc. accounted for utilizing
the purchase method of accounting. The assets were recorded
at their fair values as follows:
Accounts receivable $ 11,841 $ --
Merchandise inventories 31,454 --
Due from affiliate 10,919 --
Other current assets 7,115 --
Goodwill 68,905 --
Property and equipment 1,697 --
Due to Shareholder (11,820) --
Other liabilities assumed (129,975) --
Cash Received in the transaction 9,864 --
Common stock subscribed $ -- $ 1,000
The accompanying notes are an integral part
of these financial statements
5
<PAGE>
Sales OnLine Direct, Inc.
Notes to Consolidated Financial Statements
For the Nine Months Ended September 30, 1999 and 1998
(1) ORGANIZATION
On February 1, 1999 Internet Auction, Inc. (IA), and Rotman Auction
Inc. (RA), both Massachusetts corporations, effectuated a statutory
merger whereby the surviving company was IA.
Prior to February 25, 1999 IA received approximately $770,000 of
inventories of sports memorabilia from family members of its
shareholders. In addition, IA received the net assets of World Wide
Collectors Digest, Inc., a company owned by a shareholder.
On February 25, 1999, Securities Resolution Advisors, Inc. (SRAD), a
Delaware corporation, acquired all the outstanding common shares of IA
in exchange for 37,368,912 shares of SRAD. The acquisition was
accounted for utilizing the purchase method of accounting as a reverse
acquisition with IA being the survivor for accounting purposes. As a
result of this transaction the former IA shareholders hold
approximately 80% of the outstanding shares of SRAD. The consolidated
financial statements include the accounts of IA for the period January
1, 1999 through September 30, 1999 and RA and SRAD since their
acquisitions on February 1, 1999 and February 25, 1999, respectively.
All material intercompany transactions have been eliminated. IA, SRAD,
and RA collectively are hereinafter referred to as the Company.
On March 18, 1999 SRAD changed its name to Sales OnLine Direct Inc.
(SOLD).
(2) SIGNIFICANT ACCOUNING POLICIES
General:
The financial statements included in this report have been
prepared by the Company pursuant to the rules and regulations
of the United States Securities and Exchange Commission for
interim reporting and include all adjustments (consisting only
of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation. These financial
statements have not been audited.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations for interim reporting.
The Company believes that the disclosures contained herein are
adequate to make the information presented not misleading.
However, these financial statements should be read in
conjunction with the financial statements and notes thereto
included in the Company's annual report for the year ended
December 31, 1998, which is included in the Company's Form
10-KSB/A. The audited financial statement of IA was included
in the Company's Form 8-K/A. The financial data for the
interim periods presented may not necessarily reflect the
results to be anticipated for the complete year.
Line of business:
The Company currently has four main divisions under its
corporate umbrella. The Company offers consumers a branded
network of comprehensive shopping services, a person to person
auction site, a full service consignment auction house and a
collectible site. The Company is developing an Internet
community that specializes in e-commerce sales. Through the
Internet websites of its operating divisions, the Company
brings buyers and sellers together to buy and sell items
including collectibles such as antiques, coins, computers,
memorabilia, stamps and toys. The Company, through its four
divisions, maintains a person-to-person trading community in a
variety of formats consisting of auctions, e-commerce,
classifieds, and store front web design and hosting. These
services permit sellers to list items for sale, buyers to bid
on them, and all users to browse for items in a
fully-automated online service that is available 24 hours a
day, seven days a week.
6
<PAGE>
Cash equivalents:
The Company considers all liquid investments purchased with
maturities of three months or less to be cash equivalents.
Inventories:
Inventories are valued at the lower of cost, first in first
out (FIFO) basis, or market. When collectibles are purchased
in bulk, specific values are assigned to the significant
components and nominal values to the remainder of the goods.
Property and equipment:
Property and equipment, comprised of computers, furniture and
fixtures and display equipment, is stated at cost and
depreciated using the straight-line method over estimated
useful lives of five to ten years. Renewals and betterments
are capitalized while repairs and maintenance are charged to
operations as incurred.
Other assets:
Included in other assets are Goodwill and other intangible
assets that are being amortized over their estimated useful
lives.
Income taxes:
Taxes are provided for items entering into the determination
of net income for financial reporting purposes, irrespective
of when such items are reported for income tax purposes.
Valuation allowances are recorded when realization of any
deferred tax assets is uncertain. Accordingly, deferred income
taxes have been provided for all temporary differences.
Revenue recognition:
Revenues from consignment auctions are recognized when the
related auction closes and bids are finalized. Revenues
related to sales of goods through auctions are recognized when
the auction closes and the bidding is finalized. Website
hosting and advertising revenues are recognized in the month
that the hosting and advertising services are rendered.
Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Although these estimates are based
upon management's knowledge of current events and actions to
be undertaken in the future, they may differ from actual
results.
(3) DISCONTINUED OPERATIONS
On February 24, 1999 the former management of SRAD completed its
planned exchange of the its wholly owned subsidiary, Securities
Resolution Advisors, Inc., a New York corporation, for eight million
(8,000,000) shares of the issued and outstanding common shares of the
Company held by its former President, Richard Singer.
(4) ASSIGNMENT OF OPTIONS
During April 1999 the Company assigned and surrendered options it held
to acquire 502,500 shares of its own stock. The net cash proceeds
totaling approximately $2,450,000 have been recorded in cash and paid
in capital.
7
<PAGE>
(5) INCOME TAXES
The provision for income taxes consist of the following deferred tax
items:
1999 1998
Federal $ (423,100) $ --
State (124,500) --
Total (547,600) --
Valuation allowance 547,600 --
Total provision for
(benefit from) taxes $ -- $ --
(6) RELATED PARTY TRANSACTION
Included in Property and Equipment is approximately $70,000 of
equipment and software acquired from a company that is owned by
officers of SOLD.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements (within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934) regarding Sales OnLine
Direct, Inc. (the "Company") and its business, financial condition, results of
operations and prospects. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates" and similar expressions or variations
of such words are intended to identify forward-looking statements in this
Report. Additionally, statements concerning future matters such as the
development of new services, technology enhancements, purchase of equipment,
credit arrangements, possible changes in legislation and other statements
regarding matters that are not historical are forward-looking statements.
Although forward-looking statements in this Report reflect the good
faith judgment of the Company's management, such statements can only be based on
facts and factors currently known by the Company. Consequently, forward-looking
statements are inherently subject to risks and uncertainties, and actual results
and outcomes may differ materially from results and outcomes discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences in results and outcomes include without limitation those discussed
below as well as those discussed elsewhere in this Report. Readers are urged to
carefully review and consider the various disclosures made by the Company in
this Report, which attempts to advise interested parties of the risks and
factors that may affect the Company's business, financial condition, results of
operations and prospects. For a more complete discussion of these and other risk
factors, please see "RISK FACTORS" in Item 1 of the Company's Form 10-KSB for
the fiscal year ended December 31, 1998 filed with the Securities and Exchange
Commission on April 15, 1999.
Overview
The Company has developed its web site as a new portal site for the
collectibles industry. While it is still in the process of development, the site
is intended to become the premier collectibles portal on the Internet. Because
of the Company's web site technology, online auctions and knowledge of the
collectibles industry, the Company is focused on developing its site as a new
hub for collectors. This hub will consist of a collector's portal, a global
auction search and a research site found on the Company's web site. These three
distinct components of the web site will be integrated on the portal and will
appear seamless to the public.
The Company's search engine will provide a global auction search for
all collectibles. This search engine, scheduled to become operational in
February 2000, will bring unlimited items to bidders' desktops. It will also
notify bidders when auction items become available and will enable the viewer to
place bids.
The unique advantage of the Company's proposed new research site,
scheduled to be launched by June 2000, is the research engine that will capture
and retrieve unlimited information for collectors. Visitors will be able to
educate themselves about specific collectible items. As a comprehensive research
center, collectors will be able to:
9
<PAGE>
o view items of interest
o obtain realized pricing histories
o make inquiries of authentication and appraisal experts
o read the latest articles on particular collectibles
o chat with individuals with common interests
As a search engine for the collectibles industry, the Company's web
site is intended to provide its visitors with information with which to make
educated decisions regarding collectibles. The advanced architectural technology
of the search engine will allow for the collection of information about
collectible items. Buyers and sellers will have access to historical pricing
information based on realized prices, authentication, expert opinions, articles
and other publications, appraisal services, feedback opportunities and community
discussions. Because fraudulently sold items are the largest concern facing the
industry and its consumers, the Company will provide visitors with the research
tools to complete transactions based on the most accurate, verified material
available. Buyers and sellers will also benefit from direct linkage to auctions,
storefronts, and classifieds, thus reducing the buyer's search time for desired
items while accelerating the sale cycle for the seller.
As a "collectibles community", the site will not only meet the
collectibles needs of its visitors but their other service needs as well. The
web site's user friendly approach will personalize the Web by providing visitors
with a wide range of the more typical search engine services, e.g., news, email,
stock quotes, travel, etc.
Results of operations
For the quarter ended September 30, 1999, the Company continued to
experience rapid growth in its online traffic. To support this new level of
activity, the Company made significant investment in personnel, infrastructure
and marketing programs during the third quarter.
For the three months ended September 30, 1999, revenue was $380,148,
most of which is primarily attributable to an increase in sales of the Company's
own inventory and a decrease in consignment sales, as well as fees from buyers
and sellers through the operations of Rotman Auction. This represents a 250%
increase over revenues for the second quarter ended June 30, 1999 of $155,189.
Costs of revenues increased from $46,582 in the second quarter to
$363,323 in the third quarter. This increase is due to the fact that most of the
revenues for the third quarter were derived from sales of the Company's own
inventory rather than fee based income primarily from consignment sales
generated for the second quarter. As a result, gross proft decreased from
$108,607 in the second quarter to $16,916 in the current quarter.
Sales, general and administrative ("SG&A") expenses for the quarter
ended September 30, 1999, was $665,520 compared to $583,458 for the quarter
ended June 30, 1999. This increase in SG&A expenses include higher personnel
costs and consulting fees attributable primarily to the Company's engineering
and product development. These costs and fees were offset by a decrease in
advertising costs of $32,000.
10
<PAGE>
As a result of the significant SG&A expenses and the relatively brief
period of combined operations, the Company had a loss for the quarter of
$738,531, or approximately ($.017) compared to a loss of ($.010) per share for
the three months ended June 30, 1999. The loss for the three months ended
September 30, 1999 was due in part to investments in infrastructure, expansion
of operations and development of the Company's software systems and products.
The Company expects to continue to experience losses for the next two quarters
as it continues to make significant investments the Company's software systems
and online offerings.
The Company believes that inflation has not had a material effect of
its results of operations.
Liquidity and Capital Resources
Management believes that the Company has sufficient liquidity and
capital resources to finance the Company's operations through the end of the
current fiscal year. In April 1999 the Company assigned certain options it held
for approximately $2,450,000; it is not anticipated that this will be a
significant or recurring source of capital in the future. Cash and cash
equivalents decreased from $1,587,797 at June 30, 1999 to $563,701 at September
30, 1999. This decrease is attributable to the investments in infrastructure,
expansion of operations and development of the Company's software systems and
products. Management anticipates that as the Company continues to grow and
expand its operations into the next fiscal year, additional capital resources
may be required to fund such growth. The Company currently has no commitments
for capital.
Year 2000 Systems Readiness Disclosure
Computer systems, software packages, and microprocessor dependent
equipment may cease to function or generate erroneous data when the year 2000
arrives. The problem affects those systems or products that are programmed to
accept a two-digit code in date code fields. To correctly identify the year
2000, a four-digit date code field will be required to be what is commonly
termed "year 2000 compliant."
The Company may realize exposure and risk if the systems for which it
is dependent to conduct day-to-day operations are not year 2000 compliant. The
potential areas of exposure include electronic data exchange systems operated by
third parties with which the Company transacts business, certain products
purchased from third parties for resale, and computers, software, telephone
systems and other equipment used internally. The Company has been communicating
with the suppliers and others with whom it does business to coordinate year 2000
readiness. The responses received by the Company to date have indicated that
steps have been undertaken to address this concern. However, if such third
parties are not able to make all systems year 2000 compliant, there could be a
material adverse impact on the Company.
The Company has determined that its principal transaction processing
software is year 2000 compliant. Accordingly, the Company does not anticipate
any material adverse operational issues to arise. The Company completed its year
2000 compliance assessment during the second quarter of 1999. Because the
principal transaction processing software was already year 2000 compliant, when
it was acquired, management expects that the Company's present and future costs
11
<PAGE>
in connection with its year 2000 compliance project are and will be minimal;
however, future anticipated costs are difficult to estimate with any certainty
and may differ materially from those currently projected. The estimated costs do
not include time and costs that may be incurred as a result of any potential
failure of third parties to become year 2000 compliant or costs to implement the
Company's future contingency plans. The Company has not yet developed a
contingency plan in the event that any non-compliant critical systems are not
remedied by January 1, 2000, nor has it formulated a timetable to create such
contingency plan. If third parties with whom the Company does business fail to
make their systems year 2000 compliant in a timely manner, the year 2000 issue
could have a material adverse effect on the Company's business, financial
condition and results of operations.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No.
27 Financial Data Schedule
(b) Reports on Form 8-K:
On August 16, 1999, the Registrant filed a Current Report on Form
8-K/A, dated February 25, 1999, to amend Item 7 to include the necessary
financial statements and pro forma financial information with regard to the
Registrant's acquisition of Internet Auction, Inc.
13
<PAGE>
SIGNATURES
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 thereunto duly authorized.
Dated: November 15, 1999 SALES ONLINE DIRECT INC.
Registrant
/s/ Gregory Rotman
------------------
Gregory Rotman, President
/s/ Richard Rotman
------------------
Richard Rotman
Vice President, Treasurer
and Principal Financial Officer
14
<PAGE>
LIST OF EXHIBITS
Exhibit No. Description
27 Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001017655
<NAME> Sales Online Direct Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 563,701
<SECURITIES> 374,436
<RECEIVABLES> 93,783
<ALLOWANCES> 0
<INVENTORY> 772,479
<CURRENT-ASSETS> 1,872,525
<PP&E> 263,493
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,261,163
<CURRENT-LIABILITIES> 238,823
<BONDS> 0
0
0
<COMMON> 43,894
<OTHER-SE> 1,978,446
<TOTAL-LIABILITY-AND-EQUITY> 2,261,163
<SALES> 692,792
<TOTAL-REVENUES> 692,792
<CGS> 437,063
<TOTAL-COSTS> 1,456,714
<OTHER-EXPENSES> 43,394
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,244,379)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,244,379)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,244,379)
<EPS-BASIC> (.028)
<EPS-DILUTED> (.028)
</TABLE>
