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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 March 31, 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 No X
Transitional Small Business Disclosure Format (check one):
Yes No X
As of April 30, 1999, the registrant had outstanding 46,411,140 shares of its
Common Stock, par value of $0.001, its only class of voting securities.
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<PAGE>
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements:
Item 2. Management's Discussion and Analysis or Plan of Operations
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Sales OnLine Direct, Inc.
Consolidated Balance Sheets
March 31, 1999
<TABLE>
<CAPTION>
Assets
March 31, December 31,
<S> <C> <C>
1999 1998
Current Assets:
Cash and Equivalents $58,432 $ -
Accounts receivable 7,452 -
Merchandise inventories 787,212 -
Due from affiliates 5,674 7,164
Due from Shareholders 3,075 -
Other current assets 19,100 -
Total current assets 880,945 7,164
Property and equipment, net 49,988 20,479
Other assets 69,825 980
Total assets $1,000,758 28,623
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $127,743 $ -
Accrued liabilities 118,919 5,000
Due do affiliates - 8,245
Due to shareholder 12,000 -
Total current liabilities 258,662 13,245
Shareholders' equity:
Common stock 43,894 1,000
Paid in capital 760,587 -
Accumulated deficit -61,385 15,378
743,096 16,378
Less stock subscriptions receivable -1,000 -1,000
Total shareholders' equity 742,096 15,378
Total liabilities and shareholders' equity $1,000,758 $28,623
The accompanying notes are an integral part
of these financial statements
</TABLE>
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<PAGE>
Sales OnLine Direct, Inc.
Consolidated Statement of Operations
For the Three Months Ended March 31,
1999 1998
Revenues $157,455 $ -
Cost of revenues 27,249 -
Gross margin 130,969 -
Sales, general and
administrative expenses 206,969 -
Loss from operations -76,763 -
Provision for taxes on income - -
Net loss $-76,763 $ -
Earnings per share:
Basic and diluted $-.002 $ -
The accompanying notes are an integral part
of these financial statements
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Sales OnLine Direct, Inc.
Consolidated Statement of Shareholders' Equity
For the Three Months Ended March 31, 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 $ - $15,378 $-1,000 $ 15,378
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 15,378 -1,000 818,371
Recapitalization 6,525,000 5,565 -5,565 - - -
Subtotal 6,565,000 6,565 797,428 15,378 -1,000 818,371
Acquire Securities
Resolution Advisors, Inc. 37,328,912 37,329 -36,841 - - 488
Net loss - - - -76,763 - -76,763
Balance - March 31, 1999 43,893,912 43,894 760,587 -61,385 -1,000 742,096
The accompanying notes are an integral part
of these financial statements
</TABLE>
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Sales OnLine Direct, Inc.
Consolidated Statement of Cash Flows
For the Three Months Ended March 31,
1999 1998
Operating activities:
Net loss $-76,763 $ -
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 2,125 -
Changes in assets and liabilities:
Accounts receivable 4,389 -
Merchandise inventories 14,006 -
Due from affiliates 4,164 -
Due from shareholder -158 -
Other current assets -10,985 -
Accounts payable 86,574 -
Accrued liabilities 24,728 -
Total cash provided by
Operating activities 48,080 -
Investing Activities:
Acquisition of Securities Resolution
Advisors, Inc. 488 -
Merger with Rotman Auction, Inc. 9,864 -
Total cash provided by
Investing activities 10,352 -
Increase in cash 58,432 -
Cash and equivalents - beginning - -
Cash and equivalents - ending $58,432 $ -
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ - $ -
Income Taxes $ - $ -
The accompanying notes are an integral part
of these financial statements
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Sales OnLine Direct, Inc.
Consolidated Statement of Cash Flows (continued)
For the Three Months Ended March 31,
Supplemental Schedule of Non-cash Investing and Financing Activities
1999 1998
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:
Cash received in the transaction $ 488 -
Contribution of inventories $769,764 $ -
Contribution of the net assets of World Wide Collectors Digest 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
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Sales OnLine Direct, Inc.
Notes to Consolidated Financial Statements
For the Three Months Ended March 31, 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 $765,000 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 March 31, 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 will be included in the Company's Form 10-KSB/A. The
audited financial statement of IA will be 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.
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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.
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 principally of computers and display
equipment, is stated at cost and depreciated using the straight-line method over
estimated useful lives of five years. Renewals and betterments are capitalized
while repairs and maintenance are charged to operations as incurred.
Other assets:
Other assets are comprised principally of Goodwill that is being amortized over
its estimated useful life.
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 the 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. Subsequent event:
During April 1999 the Company assigned options it held to
acquire 502,500 shares of its own stock. The net cash proceeds totaling
approximately $2,450,000 will increase cash and paid in capital.
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5. Income taxes
The provision for income taxes consist of the following deferred tax items:
1999 1998
Federal $-24,000 -
State -7,800 -
Total -31,800 -
Valuation allowance 31,800 -
Total provision for
(benefit from) taxes $ - -
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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 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.
Overview
During the first quarter of 1999, the Company had four separate
divisions - AuctionInc., Rotman Auction, Inc., ("Rotman Auction"), World Wide
Collectors Digest, Inc. ("WWCD"), and Internet Collectibles the wholesale and
retail collectibles division which engages in the business of buying,
warehousing, distributing, marketing and selling collectibles and other
memorabilia--particularly sports related memorabilia--to dealers, collectors,
and consumers.
AuctionInc, is a person-to-person auction company enabling any online
customer to sell an item on the internet to other online customers using
state-of-the-art computer technology. This technology simplifies the process for
the seller and allows the buyer to track the items after the sale has been
completed. The second division is a consignment auction company Rotman Auction
which takes consignment of more expensive items and sells them to Internet and
phone customers. WWCD is engaged in E-commerce and Web Hosting for small and
medium size companies that have an inventory of merchandise for sale through
auctions, e-commerce or classified ads. These customer companies are able to
choose where and how they sell their merchandise, track all sales, and run
reports. The Internet Collectibles division involves the sales of the Company's
inventory through various avenues, as well as purchase and sales of other
collectibles.
Results of operations
Revenue. For the three months ended March 31, 1999, revenue was
$157,455, most of which is attributable to fees from buyers and sellers through
the Rotman Auction operations.
Sales, General, and Administrative Expenses. Sales, general and
administrative ("SG&A") expenses during the quarter ended March 31, 1999 include
significant professional fees of approximately $92,000 associated with the
Company's reverse acquisition of Securities Resolutions Advisors, Inc. and
include fees in connection with matters arising after the reverse merger. SG&A
also included marketing and advertising costs of approximately $28,000.
Marketing expenses were primarily attributable to print and online marketing and
advertising programs designed to create brand awareness for the Company's online
sites. Personnel salaries and recruitment expenses were approximately $40,000,
the majority of which were paid to engineers devoted to supporting, enhancing
and developing the Company's software systems and products. The
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Company believes that significant investments in product development are
required to remain competitive.
Loss. 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
$76,763, or approximately ($.002) per share.
Inflation. 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. Prior to, and in anticipation of the reverse merger, the
Company consolidated its operations and acquired substantial inventory valued at
approximately $787,000; the Company expects that sales of a portion of this
inventory, together with revenues of other divisions, will be a source of
liquidity from current operations. In addition, during the second quarter, 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. Management anticipates that as the Company
continues to grow and expand its operations, additional capital resources will
be required to fund such growth. Although there can be no assurances that
financing will be available, the Company believes that its current capital
resources are sufficient for these purposes through the current fiscal year.
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. To minimize the potential adverse
affects of the year 2000 problem, the Company has established an internal
project team. This project team has begun a process of identifying internal
systems (both information technology and non-information technology systems)
that are not year 2000 compliant, determining their significance in the
effective operation of the Company, and developing plans to resolve any issues.
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 are currently being 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 plans to complete
the year 2000 compliance assessment by the end of the second quarter 1999 and
implement corrective solutions before the end of the third quarter 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 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
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January 1, 2000, nor has it formulated a timetable to create such contingency
plan. If systems material to the Company's operations have not been made year
2000 compliant, or 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.
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PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) Reference is made to the information on issuance as a subsequent
event to the period covered by this report of the assignment by the Company of
certain options to purchase 502,500 shares of the Company's own stock, which
reference appears in Note 4 under the heading "Subsequent Event" in the Notes to
Consolidated Financial Statements" in Part I, Item 1 hereof, and which reference
is incorporated herein. Such transaction is exempt from registration under
Section 4(2) of the Securities Act of 1933. The transaction was privately
negotiated and the offeree and purchaser was an accredited investor that
represented that it acquired the option for its own account. No public offering
or public solicitation was used by the registrant in the placement of these
securities.
ITEM 5 OTHER INFORMATION
During the period covered by this report, and in anticipation of the
acquisition of Internet Auction, Inc., the former management of the Company,
holding 59.4% of the Company's common stock, consented in writing to an increase
in the number of authorized shares of common stock to 100,000,000 and a
reduction in the par value of the common stock to $.001 per share. An
information statement pursuant to Section 14(c) of the Securities Exchange Act
was filed by such persons on February 4, 1999 with respect to this action.
Additionally, such persons consented in writing to a change in the name of the
Company to Sales OnLine Direct Inc., to become effective on March 11, 1999. An
information statement pursuant to Section 14(c) of the Securities Exchange Act
was filed on February 25, 1999 with respect to this action.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No.
27 Financial Data Schedule
(b) Reports on Form 8-K:
On February 26, 1999, the Registrant filed a Current Report on
Form 8-K, dated February 24, 1999, reporting the disposition of the
Company's wholly owned subsidiary, Securities Resolution Advisors,
Inc., a New York corporation.
On March 10, 1999 the Registrant filed a Current Report on
Form 8-K, dated February 25, 1999, reporting the Company's acquisition
of Internet Auction Inc.
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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: May 24, 1999 SALES ONLINE DIRECT INC.
Registrant
/s/ Gregory Rotman
------------------
Gregory Rotman, President
/s/ Richard Rotman
------------------
Vice President, Treasurer and Principal
Financial Officer
c77726.634
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LIST OF EXHIBITS
Exhibit No. Description
- ----------- -----------
27.1 Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
This schedule contains summary financial information extracted from
Form 10-QSB and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0001017655
<NAME> SALES ONLINE DIRECT, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 58,432
<SECURITIES> 0
<RECEIVABLES> 7,452
<ALLOWANCES> 0
<INVENTORY> 787,212
<CURRENT-ASSETS> 880,945
<PP&E> 49,988
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,000,758
<CURRENT-LIABILITIES> 258,662
<BONDS> 0
0
0
<COMMON> 43,894
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,000,758
<SALES> 157,455
<TOTAL-REVENUES> 157,458
<CGS> 27,249
<TOTAL-COSTS> 206,969
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (76,763)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (76,763)
<EPS-BASIC> (.002)
<EPS-DILUTED> (.002)
</TABLE>
