UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 2-94704-NY
INTELLIQUIS INTERNATIONAL, INC.
(Formerly Leesburg Land and Mining, Inc.)
(Exact name of Registrant as specified in its charter)
NEVADA 82-0379959
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
352 WEST 12300 SOUTH #300 DRAPER, UTAH 84020
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: (801) 990-2600
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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.
[ X ] YES [ ] NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
Revenue for the year ended December 31, 1998: $ 1,461,196
As of April 30, 1999 the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $30,558,237
As of April 30, 1999 the number of shares outstanding of the Registrant's
Common Stock was 10,549,140.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Intelliquis International, Inc. (formerly Leesburg Land and Mining
Inc.) ("the Company" or "Intelliquis") seeks to become a leading republisher,
marketer and supporter of Year 2000 utility, productivity and communication
software products for the computer software retail market. The Company was
incorporated as Leesburg Land and Mining Inc., in June 1983 in Colorado for
the purpose of seeking out and developing a business opportunity. Effective
December 31, 1998, the Company acquired all of the equity of Intelliquis LLC,
a Utah Limited Liability Company, which then became a wholly owned subsidiary
("the Subsidiary") of the Company. During this same period the Company
changed its corporate domicile to Nevada and changed its name to Intelliquis
International, Inc. The Subsidiary was founded in August 1997 and
incorporated in Utah in December 1997, as a Limited Liability Company. As a
result of the acquisition of the Subsidiary, the controlling shareholders of
the Subsidiary became controlling shareholders of the Company.
The Company seeks to build a leadership position in this market by
first licensing fully tested software applications from independent software
developers and then developing or acquiring a family of software applications.
The Company's main emphasis lies in PC Utilities titles, but will offer a
selection of Reference, Productivity and Communication titles both in the
North American and International market. The software products are being
marketed through traditional software distribution channels and the Internet's
World Wide Web. Since the release of the Company's first software title in
November 1997, the Company has grossed approximately $3 million in sales
to date.
The Company has licensed and released a total of five software
titles namely, INTELLIFIX2000 (FORMERLY FIX2000), TOTALFAX, WEBSITE TRAFFIC
BUILDER, CREDIT BUILDER, AND SPEED98. In the last quarter of 1997, the
Company republished and released the first three titles (NetFax, Speed98 and
Credit Builder). In the first quarter of 1998, Intelliquis released another
two titles (TotalFax and Fix2000). Intelliquis' most recent title (Website
Traffic Builder) was released in August 1998. With the availability of new and
quality titles to license, the Company intends to release new titles on a
regular basis in 1999 and beyond.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's headquarters are located at 352 West 12300 South,
Suite 300, Draper, Utah 84020. The main telephone number of the Company is
(801) 990-2600. The Company has a three year lease of 2,294 square feet of
office space and 3,570 square feet of warehouse space. The Company performs
its own warehousing and fulfillment of all its products. The Company has an
option to lease a larger space in the present facility in the near future for
office space, in-house warehousing and fulfillment, as the needs arise.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
On March 11, 1998, the shareholders voted to authorize the Board of
Directors to 1) effect a reverse split of the Company's common stock up to
one for thirty shares, 2) change the name of the Company at the discretion
of the Board and 3) change the domicile of the Company to Nevada. All three
actions were completed in 1998.
PART II
ITEM 5. MARKET PRICE FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock has been traded on the OTC Electronic
Bulletin Board under the symbol INTQ since February 5, 1999. Prior to
February 5, 1999, there was no known public trading in the Company's Common
Stock. In April 1999, the Company completed a forward stock split of
one for three shares through a stock dividend.
The following table reflects the high and low bid prices of the
Company's Common Stock as reported by the OTC Electronic Bulletin Board from
February 5, 1999 to April 30, 1999 (pre stock split). Such prices are inter-
dealer quotations without retail mark-ups, mark-downs or commissions, and may
not represent actual transactions.
HIGH LOW
1998 CALENDAR PERIOD:
1st Quarter N/A N/A
2nd Quarter N/A N/A
3rd Quarter N/A N/A
4th Quarter N/A N/A
1999 CALENDAR PERIOD:
1st Quarter (through April 30, 1999) 18 1/2 5 3/4
As of April 27, 1999, there were 1070 stockholders of record.
The Company does not presently pay cash dividends on its Common Stock
and anticipates that, for the foreseeable future, no cash dividends will be
paid on its Common Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BACKGROUND
The Company seeks to become a leading republisher, marketer and
supporter of Year 2000, Internet utility, productivity and communication
software products for the computer software retail market. The Company
was incorporated as Leesburg Land and Mining Inc. in Colorado for the purpose
of seeking out and developing a business opportunity. Effective December 31,
1998, the Company acquired all of the equity of Intelliquis LLC, which then
became a wholly owned subsidiary ("the Subsidiary") of the Company. During
this same period the Company changed its corporate domicile to Nevada and
changed its name to Intelliquis International, Inc. The Subsidiary was
founded in August 1997 and incorporated in December 1997, as a Utah Limited
Liability Company. As a result of the acquisition of the Subsidiary, the
controlling shareholders of the Subsidiary became controlling shareholders of
the Company.
The Company (hereafter "the Company" may be used to include the
activities of its newly acquired Subsidiary) seeks to build a leadership
position in this market by first licensing fully tested software applications
from independent software developers and then developing or acquiring a family
of software applications. The Company's main emphasis lies in PC Utilities
titles, but will offer a selection of Reference, Productivity and
Communication titles both in the North American and International market. The
software products are being marketed through traditional software
distribution channels and the Internet's World Wide Web. Since the release
of the Company's first software title in November 1997, the Company has
grossed less than $3 million in sales to date. The Company is currently
building distribution and financing capabilities worldwide, with particular
emphasis in Southeast Asia.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $132,126 and $85,938 for
fiscal 1998 and 1997, respectively. The Company's operating cash flows have
been insufficient to satisfy growing cash needs without the help of
additional short-term borrowings of $189,500 and $0 for fiscal 1998 and 1997,
respectively.
Liquidity is a significant concern for the Company until it can
generate adequate cash flows from operations, which are primarily dependent on
the development, marketing and distribution of the Company's products.
Management believes that continued financing from private investors through
the issuance of Common Stock must be obtained in order to meet the Company's
expected growth and capital needs for the coming year.
Following the December 31, 1998 year-end, the Company completed a
private placement of $1,000,000. The Company is now looking to raise equity
financing of $5,000,000 to 10,000,000 to provide additional working capital
to meet the Company's growth plans. With the additional infusion of capital
and the existing receivables, the Company is planning to build extra
inventory, hire additional staff, meet its budgeted marketing efforts and
acquire other products or businesses.
RESULTS OF OPERATIONS
The Company derives revenue from software products, which are
republished by Intelliquis. The Company sells its products in North America
primarily through retailers and distributors. The Company's international
sales represented less than 1% and 0% of sales during fiscal 1998 and 1997,
respectively.
The Company's sales increased $1,426,487 (4,110%) from $34,709 for
fiscal 1997 to $1,461,196 for fiscal 1998. The Company's increase in sales
and increases in other items from operations are due primarily to an entire
year of operations for fiscal 1998 while the Company was only operating for
five months in 1997 (the Subsidiary was incorporated in August 1997). In
addition, the Company released three new titles (Total Fax, Fix 2000 and
Website Traffic Builder) in fiscal 1998 while expanding its' distribution
channels.
Cost of sales includes cost of goods sold, royalties paid to developers
and the costs for maintaining technical support. The cost of sales totaled
$355,613 for fiscal 1998 and constituted 24% of total sales as compared
to $4,948 or 14% of total sales for fiscal 1997. The change in the percent of
sales is primarily due to an increase in royalty fees and cost of production
for the new titles released in fiscal 1998.
The total sales and marketing for fiscal 1998 amounted to $596,125
while fiscal 1997 amounted to $36,443. The increase of $559,682 in sales and
marketing expenses is primarily due to the Company's aggressive marketing of
its' products through a number of major retailers.
General and administrative expenses increased $382,463 during fiscal
1998 over fiscal 1997. The increase in costs can be attributed to the
continued growth of the Company. The growth of the Company has made it
necessary to hire more employees and to lease additional office and
warehouse space.
For 1999, the Company is expected to continue its exponential growth by
realizing overseas growth in its current product lines. The Company has
already exceeded 1998 sales in the first four months of 1999 and is expected
to experience dramatic growth in its sales of its IntelliFix 2000 product as
the year 2000 approaches and the Y2K problem becomes more prominent. The
Company has also established sales/fulfillment centers in Ireland and
Malaysia to handle sales in Europe and the Far East. International sales
are expected to be approximately 30% of total volume for 1999.
The Company is currently planning to use the proceeds of the private
placements for expanding its marketing budget and setting aside funds for
acquisition of subsidiaries for an expansion and diversification of its
products and/or other services to carry its revenue beyond 1999.
The Company does not anticipate any production and/or sales facilities
and personnel limitations to fulfill its goals for 1999 and beyond. The
Company is also expanding its sales potential and presence by selling
its products directly to consumers over the internet, thus eliminating a
significant overhead of wholesale and retail marketing through existing
channels.
ITEM 7. FINANCIAL STATEMENTS
(a)(1) The following financial statements of the Company and its subsidiaries
have been filed as part of this report (see Item 8 "Financial Statements and
Supplementary Data"):
Independent Auditors' Report
Balance Sheets as of December 31, 1998.
Statements of Operations for the years ended December 31, 1998 and
December 31, 1997.
Statement of Stockholders' Equity for the period from January 1, 1997
to December 31, 1998.
Statement of Cash Flows for the years ended December 31, 1998 and
December 31, 1997.
Notes to Financial Statements.
(2) Schedules are omitted because of the absence of conditions under which
they are required or because the required information is given in the
financial statements or notes thereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Gordon, Hughes, & Banks, LLP, CPAs was previously the principle
accountant for Intelliquis International, Inc. In January 1999, the Board of
Directors approved the engagement of the firm of Crouch, Bierwolf & Chisholm
to replace Gordon, Hughes, & Banks, LLP, CPAs who declined to stand for
reelection as the Certifying Accountants for the Company.
In connection with the audit of the previous fiscal year ended December
31, 1997, there were no disagreements with Gordon, Hughes, & Banks, LLP, CPAs
on any matter of accounting principle or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements; if not
resolved to their satisfaction, would have caused them to make reference in
connection with their opinion to subject matter of the disagreement. Said
firm has not advised the registrant of any reportable events.
The accountant's report of May 12, 1998 on the financial statements of
Intelliquis International, Inc. as of December 31, 1997 and for the year ended
did not contain any adverse opinion or disclaimer of opinion, nor were they
qualified as to uncertainty, audit scope, or accounting principles.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is furnished with respect to the Company's
Board of Directors and executive officers. There are no family relationship
between or among any of the Company's directors or executive officers.
DIRECTORS AND EXECUTIVE OFFICERS
The Company's management team consists of experienced professionals in
the area of software licensing, marketing, sales, operation and financial
strategies. The Company presently has a total of twenty-five full-time and
part-time contract workers as needs arise. In addition, there are contractual
relationships with third party distribution companies and Asian and European
partners to assist in software distribution and marketing. Messrs. Bernard Yaw,
Blair Barrett, Mark Tippets and Say Thean Lim are the majority shareholders of
the Company at this moment. Other directors will be added in the future.
Additionally, more personnel have been identified and shall be positioned to
join the Company to participate in the licensing and marketing of the
Company's software products as anticipated funds are made available.
The Board of Directors and executive officers of the Company as of date
of this report are as follows:
Age
Name (1998) Position with the Company
Bernard Yaw 38 Director, President and CEO
Dave Jones 35 Chief Financial Officer
Mark Tippets 46 Director, Vice President of Sales
and Marketing
Say Thean Lim 37 Director, Director of
Business Development
Blair Barrett 45 Director, Vice President of
Operation
Douglas D. Cole 43 Director
Following is a discussion of the business background of each director,
President and executive officer. Messrs. Bernard Yaw, Dave Jones, Blair
Barrett and Mark Tippets are full-time employees of the Company. Other
directors shall devote only such time as may be necessary to the Company's
business and affairs.
Bernard Yaw, was appointed to be Director, President and CEO of the Company
since the acquisition of Intelliquis LLC ("the Subsidiary"). Mr. Yaw served
as Manager of the Subsidiary since its inception in December 1997. He
joined the Subsidiary as Vice President of Strategic Business in May 1998 in
charge of International, Internet sales and Investment. Prior to joining the
Company, Mr. Yaw served as President and Director of IN2 Technologies, Inc.,
a developer of Internet Form Publishing software. Mr. Yaw also served as
President of Handwriting Imaging Systems Corp.; a company and developer of a
hand print recognition and document imaging software. In 1987, Mr. Yaw
founded the Goleta branch of Teltron Computer Systems, an early importer and
manufacturer of IBM PC compatible computers and system integrators located in
the bi-county area of Santa Barbara and Ventura, California. Mr. Yaw
graduated from Oral Roberts University in Tulsa, Oklahoma with a Bachelor of
Science in Computer Science in 1985.
Dave Jones, has served as Chief Financial Officer for the Company since the
acquisition of the Subsidiary. Mr. Jones has served as CFO of the Subsidiary
since November 1998 and is responsible for all the accounting functions and
financial planning of the Company. Prior to joining the Subsidiary, Mr. Jones
served as Chief Financial Officer of RC Management Corporation d.b.a. Video
III since 1993. From 1990 to 1993, he served as Assistant Controller at
Rocky Mountain Helicopters and an accountant at Deloitte and Touche from
1989-1990. Mr. Jones received his License for Certified Public Accountancy in
the State of Utah since 1991. He graduated from Brigham Young University
with a Bachelor of Science degree in Accounting in 1989.
Mark Tippets, was appointed as Director and Vice President of Marketing and
Sales of the Company since the acquisition of Intelliquis LLC. He has served
as Vice-President of Marketing and Business Development of the Subsidiary,
since its inception in December 1997. Prior to joining the Company, Mr.
Tippets has been associated with the computer industry for seven years.
Starting with Gazelle Systems as a customer service representative, Mark
worked his way into dealer sales. After a year, Mark was promoted to a
managerial position with the company's OEM and Government Sales. During his
final year at Gazelle in 1993, Mr. Tippets' work accounted for half of the
Company's sales. Mr. Tippets then started a company called Channel Marketing
in late 1993. Channel Marketing is a marketer and distributor representative
firm representing many computer hardware and software companies. Channel's
list of clients includes AIWA America, CyberMedia and MicroBlvd, just to
name a few. Mark graduated from Brigham Young University with a Bachelor of
Arts degree in Psychology and a minor in Accounting.
Say Thean Lim was appointed as member of the Board of Directors since its
acquisition of the Subsidiary. Mr. Lim, through his holding company Statmart
USA, was the initial start-up investor of the Subsidiary since its inception.
He joined the Subsidiary as a Manager in August 1998. Mr. Lim has been an
entrepreneur and business consultant since 1996 with strategic investments in
technology based companies in semiconductor, precision machining, multimedia
and software development, e-commerce, industrial and virtual training
industries in Malaysia and the United States of America. Some of the Malaysian
companies are in the process of obtaining listings on the Kuala Lumpur Stock
Exchange (KLSE) and the Malaysian Exchange of Securities Dealing and Automated
Quotation (MESDAQ). One of the multimedia development companies is in the
process of securing a Multimedia Super Corridor (MSC) status in Malaysia.
From 1984-1991, Mr. Lim worked in various capacities at a semiconductor
manufacturing plant in Penang, Malaysia. He started as an Industrial Engineer
and was eventually promoted to Operations Manager. From 1992- 1995, he was
the CEO of Unico Technology Sdn. Bhd., a PC manufacturing and exporting
company with approximately 1,500 employees and an annual turnover of RM 500
million. Mr. Lim received a Bachelor of Applied Science in Computers,
Industrial and Electrical Engineering degree and a Bachelor of Engineering in
Industrial Engineering degree from the Technical University, Nova Scotia,
Canada in 1984.
Blair Barrett was appointed as Director and Vice President of Operations of
the Company since the acquisition of the Subsidiary. He served as Manager and
President of the Subsidiary from its inception to January 1999. Mr. Barrett
has approximately 17 years of experience in sales and marketing with computer
hardware, software and high-tech companies. He has served as sales manager
with FORA Inc. a venture capital funded start-up hardware company. He also
helped manage a real estate VAR startup. Mr. Barret graduated from Brigham
Young University with a Bachelor of Science degree in Finance in 1980.
Douglas Cole was appointed as Director of the Company since February 1999.
For the past twenty-two years, Mr. Cole has worked in the information
technology industry, with a focus on sales and marketing. He has successfully
completed numerous acquisitions and strategic partnerships with various
companies. He is currently a Director and Chairman of NetAmerica, Inc., a
Delaware company currently listed in the OTC Bulletin Board (under the symbol
of "NAMI"). NetAmerica is a company engaged in the business of aggregating
and offering dial-up and dedicated Internet communication service access
throughout the United States and international centers. Mr. Cole is also a
current member of the Board of Directors of VR1, a privately-held Boulder,
Colorado company engaged in the business of Internet multi-player games, and
RedFish Telemetrix, a privately-held Irvine, California company engaged
in the business of long-distance optimization hardware. He has served as the
President and CEO of PolarCap, Inc., a privately held California company.
From 1995-1996 Mr. Cole served as President and CEO of Starpress Inc.
Starpress was acquired by Great Bear Technology Company, a publicly held
California company, where Mr. Cole was also the President and CEO from
1992-1996. From 1985-1991 he served as President, CEO and Executive Vice
President of Insight Development Corporation, a company engaged in the
business of network printing utilities for Hewlett Packard. From 1977-1978
he served as Vice President of Sales and Marketing of The David Jamison Carlyle
Corporation. Mr. Cole graduated from the University of California, Berkeley,
in 1978 with a Bachelor of Arts degree in Social Science.
ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
No executive officer was paid or accrued cash compensation, in the form
of salaries, in excess of $100,000 for the year ended December 31, 1998.
There were no cash bonus plans in effect at December 31, 1998. The
Company does not maintain or contribute to any pension or retirement plan in
which the directors or executive officers of the Company are participants or
are entitled to receive benefits, but the Board of Directors may recommend
one or more programs for adoption in the future.
It is the Company's intention to pay Directors, who are not also
officers, a cash compensation of up to $1,000 for each meeting, plus
reimbursement of reasonable expenses, (total amount not to exceed $1,500 per
quarter per director) for serving on the Board of Directors or its committees.
The Company intends to grant options to purchase Common Stock of the
Company to senior officers, directors and employees of the Company. The
purpose of the options is to attract and retain the services of key employees or
directors.
The Company reimburses Bernard Yaw for flight travel in connection with
business duties. In addition, the Company intends to pay the premiums on
group insurance in which executive officers may participate and reimburse
officers for certain other expenses (including entertainment, meals and
parking), a small portion of which may relate to personal expenses or use.
The Company believes that these items or related costs, if paid, are not
excessive or unusual, but rather are ordinary and necessary business expenses.
The aggregate amount of these personal expenses, which cannot be precisely
ascertained, is not expected to exceed 10% of the cash compensation received
by any executive officer or 10% of the aggregate cash compensation reported
for the group.
The Company has signed non-competing employment agreements with Messrs.
Bernard Yaw, Mark Tippets and Blair Barrett (jointly known as "Officers").
Pursuant to the employment agreement, Messrs. Yaw, Tippets and Barrett will
be paid a monthly employment salary to be negotiated between the Company and
the Officers. The term of the agreement is for a period of two years. The
Company may terminate the employment at any time for cause. In the event of a
termination or upon leaving the employment of the Company, the Officers may
not engage in any employment which is in direct competition with the Company
for one year after the termination or leave of employment. In addition, the
Company has the right to first refusal to purchase any or all of the shares
owned by Officers that were acquired directly from the Company.
The following table summarizes the compensation paid the named executive
officers during the 1998 fiscal year.
Name of Officers Compensation of Officers Any Benefits to Officers
Bernard Yaw, President &CEO $ 21,764.00 Travel Expenses,
Apartment Rental
Dave Jones, CFO 4,000.00 None
Mark Tippets, VP Marketing 47,537.00 None
Blair Barrett, VP Operations 47,373.00 None
All directors and officers as a group
(4 persons) $ 120,674.00
EMPLOYMENT AGREEMENTS AND OTHER COMPENSATION ARRANGEMENTS
The Company currently has employment agreements with all officers of the
Company including a non- compete clause after termination or resignation.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
There is currently no compensation paid to non-employment directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 13, 1999, with
respect to the number of shares of the Company's Common Stock beneficially
owned by the directors and officers of the Company, by all officers and
directors of the Company as a group, and by each shareholder known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock of the Company, the only class of voting securities outstanding.
Unless otherwise specified, each individual has sole voting and investment
power with respect to the shares beneficially owned.
Name and Address Shares
of Beneficial Owner Position Beneficially Owned
Say Thean Lim Director 3,477,936 32.97%
1 Lebuhraya Scott
Penang 10350
West Malaysia
Bernard Yaw Director, President 1,733,952 16.43%
100 Orr Road
Alameda, CA 94502
Mark Tippets Director, V. President 1,778,832 16.86%
876 South 725 West
Orem UT 84058
Blair Barrett Director, V. President 1,778,832 16.86%
2871 East Morningside
Drive
Salt Lake City UT
84124
Douglas Cole Director -0- -0-
Moraga CA
Dave Jones CFO 8,096 -0-
68 East 1450 North
Orem UT 84057
Officers and Directors
As a Group (4 persons) 8,777,648 83.12%
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than executive compensation, during the reported year the
Registrant did not enter into any transactions with management which are to be
reported under this Item.
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
(A) Exhibits
EXHIBIT
NO. DESCRIPTION
23.01 Consent of Crouch, Bierwolf & Chisholm
27.01 Financial Data Schedule
(b) The Registrant filed no current reports on Form 8-K during the last
quarter of the fiscal year ended December 31, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Intelliquis International, Inc.
By: Bernard Yaw
/s/ Bernard Yaw
Dated: May 3, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons of behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Bernard Yaw President and Director
(Principal Executive and
Financial Officer) May 3, 1999
/s/ Mark Tippets Vice President Marketing May 3, 1999
/s/ Blair Barrett Vice President Operations May 3, 1999
/s/ Dave Jones Chief Financial Officer May 3, 1999
INDEX TO FINANCIAL STATEMENTS
Report of Independent Certified Public Accountant
Financial Statements:
Balance Sheet - December 31, 1998.
Statements of Operations - For the years ended December 31, 1998 and
December 31, 1997.
Statement of Stockholders' Equity - For the period from January 1, 1997
to December 31, 1998.
Statement of Cash Flows - For the years ended December 31, 1998 and
December 31, 1997.
Notes to Consolidated Financial Statements
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Intelliquis International, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Intelliquis
International, Inc. (a Nevada corporation) and subsidiary, as of December
31, 1998 and 1997 and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Intelliquis
International, Inc. and subsidiary as of December 31, 1998 and 1997 and the
results of its operations and cash flows for the years then ended in
conformity with generally accepted accounting principles.
Salt Lake City, Utah
March 5, 1999
INTELLIQUIS INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
December 31,
1998 1997
Current assets
Cash $ 23,074 $52,455
Accounts receivable (Note 2) 619,966 28,067
Inventory (Note 2) 130,517 18,398
Prepaid expenses 6,838 8,253
Deposits 500 -
780,895 107,173
Property, Plant & Equipment (Note 2) 54,297 16,533
Other assets
Certificate of deposit (Note 2) 40,351 -
Intangibles (Note 2) 8,328 10,444
Total Assets $ 883,871 $134,150
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 502,973 $18,673
Short term notes (Note 3) 104,500 -
Short term notes - related party (Note 4) 85,000 -
692,473 18,673
Stockholders' Equity
Preferred Stock, 5,000,000 shares authorized,
par value $.001, no shares outstanding - -
Common Stock, 50,000,000 shares authorized,
$.001 par, 12,586,411 shares issued and
outstanding 12,586 -
Members equity (1997) (Note 6) - 170,000
Additional paid in capital 157,414 -
Retained earnings (deficit) 21,398 (54,523)
191,398 115,477
Total Liabilities and Stockholders' Equity $ 883,871 $134,150
INTELLIQUIS INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the
Year Ended
December 31,
1998 1997
Sales
$1,461,196 $ 34,709
Cost of Sales 355,613 4,948
Gross Margin 1,105,583 29,761
Expenses:
Sales & Marketing 596,125 36,443
General & Administrative 430,304 47,841
Total Expenses 1,026,429 84,284
Operating Income (Loss) 79,154 (54,523)
Other Income (Expense) (3,233) -
Net Income (Loss) before Taxes 75,921 (54,523)
Taxes (Note 1) - -
Net Income $ 75,921 $(54,523)
Net Income Per Share $ .006 $ -
Total average shares outstanding 12,586,411 -
INTELLIQUIS INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Common Stock Paid in Members' Retained
Shares Amount Capital Equity Deficit/Earnings
Balance, January 1, 1997 - $ - $- $ - $ -
Members contributions
(Note 6) - - - 170,000 -
Net loss - - - - (54,523)
Balance, December
31, 1997 - - - 170,000 (54,523)
Issuance of
Common Stock for
purchase
Of Intelliquis, Inc.
(Note 6) 12,586,411 12,586 157,414 (170,000) -
Net Income - - - - 75,921
Balance,
December 31, 1998 12,586,411 $12,586 $157,414 $ - $ 21,398
INTELLIQUIS INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statement of Cash FLows
For the
Year Ended
December 31,
1998 1997
Cash Flows form Operating
Activities:
Net loss (loss) $ 75,921 $ (54,523)
Non Cash Flow Items:
Depreciation & Amortization 10,756 4,630
Increase (decrease) in
Accounts receivable (591,899) (28,067)
Inventory (112,119) (18,398)
Prepaids & deposits 915 (8,253)
Accounts payable & accrued expenses 484,300 18,673
Net Cash Flows used in
Operating Activities (132,126) (85,938)
Cash Flows from Investing Activities:
Cash from stock sales / LLC units
- 170,000
Purchase of certificates of deposits
(40,000) -
Net Cash Flows used in
Investing Activities (40,000) 170,000
Cash Flows from Financing
Activities:
Purchase of fixed assets (46,404) (21,030)
Purchase of intangibles & other assets
(351) (10,577)
Cash from short term debt 189,500 -
Net Cash Flows from Financing Activities 142,745 (31,607)
Net increase (decrease) in cash (29,381) 52,455
Cash, beginning of year 52,455 -
Cash, end of year $ 23,074 $52,455
Supplemental Cash Flow Information
Cash Paid for:
Taxes $ - $ -
Interest $ 2,334 $ -
INTELLIQUIS INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Notes to The Financial Statements
December 31, 1998
NOTE 1 - Background and History
Intelliquis International, Inc. (the Company) (formerly Leesburg Land and
Mining, Inc.) was created on June 21, 1983 in the State of Colorado. The
Company was involved in mining activities until approximately 1987, when it
ceased all activities and began disposing of its assets. It has not had any
business activity since that time. The Company changed it's name in December
1998 to Intelliques International, Inc.
Also in December 1998, the Company created and later merged with a Nevada
subsidiary.
Intelliquis, LLC was created in 1997 as a corporation and later
reorganized as a limited liability company in the State of Utah. Intelliquis
was organized for the purpose of licensing and marketing computer software to
wholesale and private label customers.
Intelliquis International, Inc. acquired all of the outstanding units of
Intelliquis LLC effective December 31, 1998.
The acquisition is accounted for as a "reverse acquisition" where the
parent corporation is taken over by the owners of the subsidiary. All
activity of the financial reports is that of the subsidiary operation.
NOTE 2 - Significant Accounting Policies
Cash and Cash Equivalents The Company considers all short term, highly
liquid investments that are readily convertible to known amounts as cash
equivalents.
Intangible Assets Intangible assets consist of contract design work and
goodwill. Both intangibles are being amortized over 60 months on the straight
line method. Amortization expense for 1997 was $133 and $2115 for1998.
Use of Estimates The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. In these financial statements, assets, liabilities and earnings
involve extensive reliance on management's estimates. Actual results could
differ from those estimates.
Income Taxes The Company adopted Statement of Financial Standards No. 109
"Accounting for Income taxes" in the fiscal year ended December 31, 1998 and
was applied retroactively.
Statement of Financial Accounting Standards No. 109 " Accounting for
Income Taxes" requires an asset and liability approach for financial
accounting and reporting for income tax purposes. This statement recognizes
(a) the amount of taxes payable or refundable for the current year and
(b) deferred tax liabilities and assets for future tax consequences of
events that have been recognized in the financial statements or tax
returns.
Deferred income taxes result from temporary differences in the
recognition of accounting transactions for tax and financial reporting
purposes. There were no temporary differences at December 31, 1998 and
earlier years; accordingly, no deferred tax liabilities have been recognized
for all years.
INTELLIQUIS INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Notes to The Financial Statements
December 31, 1998
NOTE 2 - Significant Accounting Policies (continued)
The Company has cumulative net operating loss carryforwards of over
$4,000,000 at December 31, 1998. No effect has been shown in the financial
statements for the net operating loss carryforwards as the likelihood of
future tax benefit from such net operating loss carryforwards is highly
improbable. Accordingly, the potential tax benefits of the net operating loss
carryforwards, estimated based upon current tax rates at December 31, 1998
have been offset by valuation reserves of the same amount.
The subsidiary operation was a limited liability company (LLC) in 1997
and 1998. LLC's report their earnings on a partnership tax return and no tax
liability accrued at the company level. Taxable income is allocated to its
individual members and tax paid by each member.
Inventory consists of finished goods (assembled and unassembled computer
software) that is valued at lower of cost (FIFO) or market.
Certificate of Deposit The Company holds a Certificate of Deposit as
partial security for a short term loan at the Company's bank (see Note 3).
The certificate matures on March 10, 1999, the same day that the note is due.
Interest is stated at 4.91%
Fixed Assets
Fixed assets consist of the following:
December 31,
1998 1997
Computer Equipment & Software $32,886 $12,464
Office Equipment & Furniture 34,549 8,566
67,435 21,030
Less: Accumulated Depreciation (13,138) (4,497)
$ 54,297 $ 16,533
Computer equipment and software is being depreciated on the straight line
method over three to five years. Office equipment is being depreciated on the
straight line method over five years. Depreciation expense is $4,497 and
$8,641 for 1997 and 1998, respectively.
Principles of Consolidation The Company consists of the parent
corporation, Intelliquis International, Inc., and its subsidiary, Intelliquis
LLC. The two companies together report as a consolidated group known as The
Company. All intercompany accounts and transactions have been eliminated.
Accounts Receivable Accounts Receivable is shown net of allowance for
returns of $186,660 and $0 and allowance for bad debt of $150,000 and $0 for
1998 and 1997, respectively.
INTELLIQUIS INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Notes to The Financial Statements
December 31, 1998
NOTE 3 - Short Term Notes
The Company has acquired short term borrowing for working capital as
follows:
Note payable to a bank, secured by
$40,000 certificate of deposit, all
assets of the Company and personal
guarantees from the corporation
officers, interest stated at 10%,
due March 10, 1999 $ 79,500
Note payable to an individual, no
security, interest stated at 25%
payable in January 1999 25,000
$ 104,500
Interest expense for 1998 was $3,584.
NOTE 4 - Short Term Notes - Related Party
The Company has acquired short term financing from two officers of the
corporation. One loan was for $80,000 and the other for $5,000. These are
demand notes with no interest accruing. The $80,000 was paid in 1999.
NOTE 5 - Economic Dependency
The Company currently uses one major distributor for most of its sales.
That distributor accounted for 67% of all sales in 1998. The Company could
recognize significant declines in sales if the distributor or the Company
chooses to alter its current sales relationship.
NOTE 6 - Member Contributions/Common Stock Transactions
In 1997, the Company was organize as a Utah limited liability company
with $170,000 of member contributions for start up operations.
In 1998, the Company continued to operate as a limited liability company
until December 31, 1998 when Intelliquis International, Inc. acquired 100% of
the membership units in exchange for 10,837,200 shares of common stock.
Before the acquisition, the corporation had 1,749,211 shares outstanding with
no assets and no liabilities.
NOTE 7 - Subsequent Events
In 1999, the Company leased office space for a term of three years at
$4,000 per month.
In 1999, the Company repurchased 2,067,648 of the company shares for
$160,000.
We hereby consent to the use of our audit report of Intelliquis International,
Inc. dated March 5, 1999 for the year ended December 31, 1998 in the Form
10KSB Annual Report for the year 1998.
s/s Crouch, Bierwolf & Chisholm
Salt Lake City, UT
May 3, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 23,074
<SECURITIES> 0
<RECEIVABLES> 956,626
<ALLOWANCES> 336,660
<INVENTORY> 130,517
<CURRENT-ASSETS> 780,895
<PP&E> 67,435
<DEPRECIATION> 13,138
<TOTAL-ASSETS> 883,871
<CURRENT-LIABILITIES> 692,473
<BONDS> 0
0
0
<COMMON> 170,000
<OTHER-SE> 21,398
<TOTAL-LIABILITY-AND-EQUITY> 883,871
<SALES> 1,461,196
<TOTAL-REVENUES> 1,461,196
<CGS> 355,613
<TOTAL-COSTS> 1,026,429
<OTHER-EXPENSES> (3,233)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 75,921
<INCOME-TAX> 0
<INCOME-CONTINUING> 75,921
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,921
<EPS-PRIMARY> .006
<EPS-DILUTED> .006
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