Form 10-Q
U. S. Securities and Exchange Commission
Washington, D. C. 20549
[X] Quarterly report pursuant section 13 or 15(d) of the Securities Act
of 1934 For the quarterly period ended March 31, 2000
Commission file number: 000-28207
INTERNATIONAL BRANDS, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada 33-0652291
(State of Incorporation) (I.R.S. Employer
Identification
Number)
7729 Othello Ave.
San Diego, CA. 92111
(Address of Principal (Zip Code)
Executive Offices)
(858) 292-3380
Fax: (858) 292-1528
(Registrant's Executive Office Telephone Number)
Check whether the issuer:
[] 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
has been subject to such filing requirements for the past
90 days.
Yes_________ No___________-
Item 1. Financial Statements
The required financials are hereby attached as exhibit 99.1.
Item 2. Management's Discussion and Analysis or Plan of Operation
International Brands' Inc. is a diversified company whose current
emphasis has been on an e-commerce shopping mall. Our revenues are generated
by sales of products from this site as well as income we receive from notes
receivable from Z3 Capital Corporation.
Our operating expenses include rent, payments to independent
contractors and payment for merchandise sold on our website, various
professional expenses, such as audit, and legal.
We plan to enhance our website by acquiring new products and heighten
the products appeal to potential buyers with improved presentations.
We also plan to implement our acquisition in spin-off strategies. The
plan would increase investors equity through distribution of shares
in new companies. The company is currently in negotiations to acquire
three spin-off three "bricks-and-mortar" companies to enhance the
value of shareholder holdings and help insulate the company from wild
fluctuations in any one segment of the stock market. At this
particular time, it is important to remember that International
Brands is and always has been a diversified company with interests
outside-as well as inside the world of e-commerce. Currently, the
directors are negotiating with several companies to increase the
diversity of your portfolio by acquiring those companies and spinning
them off into independent enterprises in which all current IBI
stockholders would automatically be granted shares.
Possible uncertainties which may have an impact on the International
Brands, Inc short and long term liquidity include, market
conditions, competition from other dot com companies and Z3
Capital's ability to maintain its payments on the promissory notes
to IBI and possible legal challenges. A minor material commitment
for a capital expenditure exists in a pending agreement to purchase
an additional server/backup for our website.
Results of Operations
Three Months Ended March 31, 1999 and 2000
REVENUE: The Company generates the majority of its revenue from the
sale of household and office goods over the Internet through its d.b.a.
WorldBestBuy.com. Revenue for the three months ended March 31, 2000
increased $22,136 to $31,313. This increase is due to the fact that the
Company is experiencing an increase in its Internet traffic. This trend
is likely to continue, however, increases in sales will have to be
dramatic to offset the Company's significant operating costs.
OPERATING EXPENSES: The Company's primary expense categories include
the cost of goods shipped to customers and the administrative expenses
related to the maintenance of the Company's Website and its headquarter
offices. Cost of goods sold increased by $17,058 to $22,663 for the
three months ended March 317 2000 due to volume increases.
The maintenance of the Website includes a consulting contract with Z3
Capital Corporation which runs through June 30, 2000 with a monthly fee
of $650,000. General and administrative expenses increased by
$3,210,062 to $5,319,693 for the three months ended March 31, 2000. The
great majority of the general and administrative costs is the Website
maintenance fee which is $1,950,000 per quarter
Depreciation is primarily related to office furniture and computer
equipment. Furniture, fixtures and computers are almost fully
depreciated.
INTEREST INCOME and INTREST EXPENSES: Interest income is primarily
derived from the notes due the Company by Z3 Capital Corporation, a
related party entity. Interest income decreased by $10,315 to $0 for
the three month period ending March 31, 2000, due to the Z3 note
receivable being placed on zero interest accrual because of
uncertainties related to the realization of the Z3 note. Interest
expense is nominal.
LIQUIDITY AND CAPTTAL RESOURCES: The Company's principal capital and
liquidity needs historically have been met by Z3 Capital Corporation' a
related party entity, which raises capital for the Company by selling
Company stock. preferred stock warrants and rights to private and
public investors. The Company's fixture remains uncertain, since its
ability to continue as a going concern is dependent upon Z3's ability
to raise Capital.
EFFECTS OF NEW ACCOUNTING STANDARDS: In 1997, the Financial Accounting
Standards issued SFAS No. 130, "reporting Comprehensive Income" and
SFAS No. 131,
"l)Disclosure About Segments of an Enterprise and Related
Information", which are both effective for fiscal years beginning after
December 15, 1997. SFAS No. 130 addressed reporting amounts of other
comprehensive and SFAS No. 131 addresses reporting segment information.
In 1999, the Company implemented SFAS No. 130. There are no material
differences between net income and comprehensive income. As defined by SFAS
No. 130 for the periods presented. SPAS No. 131 uses a management approach to
report financial and descriptive information about a company's operating
segments Operating segments are revenue-producing components of the
enterprise for which separate financial information is produced
internally for the company's management. Under this definition, the
Company operated as a single segment for the periods presented.
In June, l99S, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities,
which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments imbedded in other
contracts, and for hedging activities. In June, 1999, FAS No. 133 was
amended by SFPS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of SFAS No. 133lf.
As a result of this amendment, SFAS No. 133 shall be effective for all
fiscal quarters of all fiscal years beginning after June 1 S, 2000. In
accordance with SFAS No. 133, an entity is required to recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. SFAS
No.. 133 requires that changes in the derivatives fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a
derivative's and losses to of set related results on the hedged item
in the income statement and requires that a company formally document,
designate and assess the effectiveness of transactions that receive
hedge accounting. The Company does not expect the adoption of this
standard to have a material effect on its financial position or results
of operations.
On December 3, 1999, the Securities and Exchange Commission staff
issued SAB No. 10, "Revenue Recognition in Financial Statements". The
SAB spells out four basic criteria that must be met before companies
can record revenue. There are: (a) persuasive evidence that an
arrangement exists; (b) delivery has occurred or services have been
rendered; 6: the seller's price to the buyer is fixed or determinable;
and (d) collectibility is reasonably assured.
Many of the examples in the SAB address situations that give rise to
the potential for recording revenue prematurely. They include
transactions subject to uncertainties regarding, customer acceptance,
including rights to refunds and extended payment terms' and require
continuing involvement by the seller.
In March, 2000, the SEC issued SAB 101A, '`Amendment: Revenue
Recognition in Financial Statements", that delays the implementation
date of certain provisions of SAB 101. Under the amendment, the Company
is not required to restate its prior financial statements provided that
the Company reports a change in accounting principle no later than the
second fiscal quarter (ending June 30, 0000) in accordance with FASB
Statement No. 3, "Reporting Accounting Changes In Interim Financial
Statement". In accordance with FAS No. 3, for companies that adopt SAB
101 in the second quarter, financial information for the first quarter
would be restated by including a cumulative effect adjustment in that
quarter (i.e., the first quarter). The Company does not believe the
adoption of SAB 101 would have a material impact on its continuing
operations.
INFLATION: The Company does not believe inflation has had a significant
impact on its operations.
LEGAL PROCEEDINGS: On May 9, 2000, the Company received a final
judgment against it as a result of litigation initiated by the State of
New Jersey against International Brands and several other defendants.
As a result, the Company is enjoined from selling any of its stock
within the State of New Jersey. In addition, International Brands shall
send a notice to all New Jersey residents who purchased stock, allowing
them a right of recision. International Brands, Z3 Capital Corporation
and its chief executive are liable to the State of New Jersey for
$7,770 in civil monetary penalties. This amount has been accrued on the
Company's books and is reflected as a liability at December 31, l999
sod March 31, 2000, since the source for payment of the penalty shall
come from the Company. The Company is currently appealing this
judgment, however the success of this appeal is in doubt.
NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS
This statement includes projections of future results and "forward-
looking statements" as that term is defined in Section 27A of the
Securities Act of 1933 as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934 as amended (the "Exchange
Act"). All statements that are included in this Registration Statement,
other than statements of historical fact, are forward-looking
statements. Although the management of INBR believes that the
expectations reflected in these forward-looking statements are
reasonable, it can give no assurance that such expectations will prove
to have been correct. There may be factors that could cause actual
results to differ materially from the expectations are disclosed in
this Statement, including, without limitation, in conjunction with
those forward-looking statements contained in this Statement.
Part II.
Item 1. Legal Proceedings.
On May 9, 2000, the Company received a final judgement against it as a
result of litigation initiated by the State of New Jersey against
International Brands and several other defendants. As a result, the
Company is enjoined from selling any of its stock within the State of
New Jersey. In addition, International Brands shall send a notice to
all New Jersey residents who purchased stock, allowing them a right of
recision. International Brands, Z3 Capital Corporation and its chief
executive are liable to the State of New Jersey for $7,770 in civil
monetary penalties. This amount has been accrued on the Company's books
and is reflected as a liability at December 31, 1999 and March 31, 2000
since the source for payment of the penalty shall come from the
Company. The Company is currently appealing this judgement, however the
success of this appeal is in doubt.
Item 2. Changes in Securities and Use of Proceeds.
During this quarter, 62,645 shares were issued pursuant to warrants
issued. The total amount received on these shares equals $108,438.50.
The following proceeds were used for the following expenses:
Website Expenses: $41,737.25
Independent Contractors: $66,701.05
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K
(a)
3.1 Certification of Incorporation filed as an exhibit to the
Company's registration statement on Form 10-SB filed on November
19, 1999, and incorporated herein by reference.
3.2 By-Laws filed as an exhibit to the Company's registration
statement on Form 10-SB filed on November 19, 1999, and
incorporated herein by reference.
99.1 March 31, 2000 Financials
99.2 1998, 1999 Year End Financials
(b)
The Corporation filed an 8-K on January 12, 2000, and an amended 8-K on
January 18th. Pursuant to an Acquisition Agreement and Plan of Merger
dated as of January 12, 2000 between International Brands, Inc
("IBI"), a Nevada corporation, and Tele Special.Com ("TSC"), a Nevada
corporation, all the outstanding shares of common stock of TSC were
exchanged for 25,000 shares of common stock of IBI in a transaction
in which IBI was the surviving corporation. All document relating to such
transaction are incorporated by reference.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
International Brands, Inc.
/s/__________________________
Dennis Hayes
CEO
