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U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-16665
THE INTERNET ADVISORY CORPORATION
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(Name of Small Business Issuer in its Charter)
UTAH 87-0426358
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
2455 East Sunrise Blvd., Suite 401
Ft. Lauderdale, Florida 33304
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(Address of Principal Executive Offices)
Issuer's Telephone Number: (888) 522-0958
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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.
(1) Yes X No (2) Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
November 8, 2000
14,445,018*
* As of November 8, 2000, an additional 12,010,000 shares were
outstanding. These shares were issued to a potential funding
source in anticipation of such funding. The funding did not
materialize, and we have requested the return of these shares for
cancellation. We have been advised that the shares will be returned to
us for cancellation on November 15, 2000.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The consolidated financial statements of the Internet Advisory
Corporation, a Utah corporation (the "Company"), required to be filed with
this 10-QSB Quarterly Report were prepared by management, together with
related notes. In the opinion of management, the financial statements fairly
present the financial condition of the Company.
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The Internet Advisory Corporation
Including the accounts of its wholly-owned subsidiary
Sunrise Web Development, Inc.
Condensed Consolidated Financial Statements
September 30, 2000
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<TABLE>
The Internet Advisory Corporation
Condensed Consolidated Balance Sheet
(Unaudited)
<CAPTION>
ASSETS
September 30, 2000
<S> <C>
Current Assets
Cash $150,579
Receivables, net 1,828
Other current assets 2,600
Total Current Assets $155,007
Equipment, net 469,764
Other Assets 14,361
TOTAL ASSETS $639,132
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $187,601
Accrued liabilities 26,030
Unearned income 24,602
Loan payable 25,250
Total Current Liabilities 263,483
Stockholders' Equity
Common stock 14,444
Additional paid in capital 3,211,015
Accumulated deficit (2,849,810)
Total Stockholders' Equity 375,649
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $639,132
</TABLE>
<TABLE>
The Internet Advisory Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
<CAPTION>
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $121,168 $112,584 $480,211 $332,665
Sales, general and
administrative expense 493,137 384,572 1,612,492 1,224,126
Net Loss From
Operations (371,969) (271,988) (1,132,281) (891,461)
Other Income 433 6,136 1,111 6,732
Net Loss $(371,536) $(265,852) $(1,131,170) $(884,729)
Net Loss per Share $(0.03) $(0.03) $(0.08) $(0.11)
Weighted Average Number
of Shares Outstanding 14,094,017 8,249,017 13,605,128 8,010,350
</TABLE>
<TABLE>
The Internet Advisory Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Cash Flows from Operations
Net Loss $(371,536) $(265,852) $(1,131,170) $(884,729)
Adjustments to reconcile
net loss to net cash from
operations
Depreciation 30,220 24,311 98,948 68,228
Stock issued for
services 200,000
Change in other current
assets 19,716 (250) 16,300 (250)
Change in current
liabilities (19,369) (17,932) (17,699) (13,273)
Net Cash Flows Used for
Operating Activities (140,969) (259,723) (1,033,621) (830,024)
Cash Flows Used for
Investing Activities
Purchase of equipment (12,203) (5,047) (60,537) (512,663)
Purchase(sale) of
investments 54,697 50,000 (52,062)
Net Cash Flows Used for
Investing Activities (12,203) 49,650 (10,537) (564,725)
Cash Flows Provided by
Financing Activities
Principal collections (4,750) 20,000 637,650 20,000
Proceeds from sale of
securities 300,000 52,500 500,000 947,500
Net Cash Flows
Provided by Financing
Activities 295,250 72,500 1,137,650 967,500
Net Increase (Decrease) in
Cash 142,078 (137,573) 93,492 (427,249)
Beginning Cash Balance 8,501 95,258 57,087 384,934
Ending Cash Balance $150,579 $ (42,315) $150,579 $ (42,315)
</TABLE>
The Internet Advisory Corporation
Notes to Condensed Consolidated Financial Statements
September 30, 2000
PRELIMINARY NOTE
The accompanying condensed consolidated financial statements have been
prepared without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. It is
suggested that these condensed financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
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Plan of Operation.
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The disclosure herein contains certain forward-looking statements
that involve risks and uncertainties, including statements regarding the
Company's strategy, planned operations, financial performance and revenue
sources. The Company's actual results could differ materially from the
results anticipated in these forward-looking statements as a result of
certain factors.
Overview. The Company is a leading provider of comprehensive
Internet services. Focusing on e-commerce and business related data transfer,
we provide our clients with multiple, redundant DS3's. This bandwidth is
unified through BGP4 offering increased inbound and outbound routes. The
network operation center, or NOC, is a state of the art facility with an
advanced security system and conditioned power management. This makes us an
attractive solution for business requiring data warehousing and/or a data
fortress as well as e-commerce and Internet related businesses.
Since our incorporation in 1997, we have grown into a full service
Internet facility. Approximately half of our current revenue is derived from
co-location, hosting and other Internet-related services. With our large
customer base and strong presence in the Internet access and hosting market,
we are positioned to achieve increasing revenue and profitability.
Basic Internet access and web hosting constitute the predominant
services offered by the Company today. Businesses are looking for enhanced
value products and services for the Internet that allow them to expand
markets, increase productivity and reduce costs. As a result, we will be able
to derive increasing revenue from these customers and increase profitability
by selling an expanding array of enhanced value Internet services and
products.
We also offer enhanced value Internet security capabilities and
professional consulting serviced to support a variety of methods or processes
to resolve our customers' Internet problems. We expect to provide these
services through a combination of internal development and packaging,
acquisitions and new relationships with Internet hardware, software and
service companies.
The Company owns and operates a national network, providing high
capacity, reliable Internet data transmission, connecting our customers to the
Internet. The Company believes this network is adequate for the provision of
current and future planned access and service needs. By aggregating the
capacity of data transmission over the Internet and capacity requirements of
our operations onto one national network, we continue to increase our
operational control and efficiency, reduce costs, and provide redundancy and
higher quality service. In this way, we are able to address some of the most
significant challenges that an Internet service provider faces in supporting
its customers. The Company's infrastructure also incorporates several other
elements critical to maintaining the highest quality Internet service. The
most important elements include a high capacity and reliable national network,
joint ventures with other regional, national and international ISP's and
sophisticated network management tools and engineering support services. The
reliability of the national network is the result of many factors, including
redundant routers and other critical hardware, carrier class facilities at
point of presence locations such as back-up power, fire suppression and
climate control, and redundant telecommunications lines. The Company is
poised for "tier one" status as one of the top, full service ISP's.
The Company and its prospects must be considered in light of the
risks, expenses and difficulties frequently encountered by companies in an
early stage of development, particularly in new and rapidly evolving markets
such as the Internet and companies serving the Internet. Such risks for the
Company include but are not limited to a constantly evolving business model
and the management of both internal and acquisition-based growth. To address
these risks, the Company must among other things, continue to develop the
strength and quality of its web site design and hosting facility; maximize the
value delivered to its clientele; enhance the "Internet Advisory", "PUNK" and
"HostFacility.com" brand names; respond to competitive developments; acquire
financing for its expansion plan, and continue to attract, retain and motivate
qualified employees. There can be no assurance that the Company will be
successful in meeting these challenges and addressing such risks, and the
failure to do so could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company has
incurred net losses since its inception. Although the Company has experienced
revenue growth in recent months, such growth rates may not be sustainable or
indicative of future operating results.
Sources of Revenue. During the period covered by this Report, the
Company's revenues were derived from web site design, programming fees, web
site hosting, co-location, web site hosting fees and bandwidth sales.
Typically, these fees were recognized when received because all obligations
required of the Company by the customer were substantially performed
concurrently with the execution of a design and hosting agreement.
The services offered by the Company include Internet solutions such
as web site programming and design and web site hosting. Each engagement is
billed over the course of the engagement on either a time and materials basis
or a fixed-price basis. Billable rates vary by the services provided and by
the geographical region. The pricing, management and execution of individual
engagements are the sole responsibility of the Company's management.
Cost Structure. The Company recognizes revenues as they are earned,
not necessarily as they are collected. Direct costs such as hosting expense,
design cost and server expense are classified as cost of revenues. General
and Administrative expenses include accounting, advertising, contract labor,
bank charges, depreciation, entertainment, equipment rental, insurance, legal,
supplies, pay roll taxes, postage, professional fees, telephone and travel.
Results of Operations.
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Management has taken steps that will make the Company more efficient
and move it closer to profitability on its operations. It has reduced excess
bandwidth by 50% and local loop charges through implementation of the Bell
South Smartring program.
Management believes that the automation of customer support, online
transactions, in house operations and reduced overhead will set the tone for a
profitable future.
Traffic to websites has increased with the web portal, ThePunk.com,
which has greatly enhanced the awareness of the Company and its products. The
Company has implemented international advertising that management feels will
increase sales in the short term. The areas targeted by management are
Germany, England and Australia. Further, an overhaul of routing tables,
switches, and related facilities has also made our data center, network5.net,
much more efficient.
During the quarterly period ended September 30, 2000, the Company
received revenues of $121,168, and incurred expenses totaling $493,137. Of
these expenses, $200,000 related to the issuance of stock for services and
$30,200 was depreciation. Net loss during the period was $(371,536), equaling
$(0.03) per share. During the quarterly period ended September 30, 1999, the
Company received revenues of $112,584, with expenses of $384,572, for a net
loss of $(265,852), or ($0.03) per share.
Liquidity.
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As of September 30, 2000, the Company had total assets of
$639,132, of which $150,579 was cash. The Company had total current
liabilities of $263,483.
The Company currently has no material commitments. The Company will
continue to evaluate possible acquisitions of or investments in businesses,
products and technologies that are complimentary to those of the Company,
which may require the use of cash. The Company believes that existing cash,
investments and loans available under its present credit facilities will be
sufficient for at least the next nine months; however, the Company may sell
additional equity or debt securities or seek additional credit facilities if
it believes such actions would be a better way to fund acquisition-related or
other costs. Sales of additional equity or convertible debt securities would
result in additional dilution to the Company's stockholders. The Company may
need to raise additional funds sooner in order to support more rapid
expansion, develop new or enhanced services or products, respond to
competitive pressures, acquire complementary businesses or technologies or
take advantage of unanticipated opportunities. The Company's future liquidity
and capital requirements will depend upon numerous factors, including the
success of the Company's existing and new service offerings and competing
technological and market developments.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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On October 23, 2000, which is subsequent to the period covered by
this Report, the Third Judicial District Court in and for Salt Lake County,
Utah, entered its Order of Dismissal of Civil Action No. 000902397. In that
action, we sought recovery of 6,250,000 shares of our common stock
("restricted securities") which were issued for deposit into escrow, pending
the receipt of funding which was not paid. Pursuant to the Order of
Dismissal, all 6,250,000 such shares were returned to us and the action was
dismissed with prejudice. We returned these shares to our transfer agent on
October 30, 2000, and they were canceled on that date.
Item 2. Changes in Securities.
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On June 6, 2000, we issued 100,000 "unregistered" and "restricted"
shares of our common stock to Insidestock.com in exchange for advertising
services valued at $0.50 per share.
In July, 2000, we issued 300,000 such shares to two other entities
in exchange for advertising services also valued at $0.50 per share.
In August, 2000, the Company conducted a private placement pursuant
to Rule 506 of Regulation D of the Securities and Exchange Commission. Under
the private placement, we sold 200,000 "unregistered" and "restricted" shares
of our common stock to three investors at a price of $0.50 per share.
On August 25, 2000, we issued 500,000 "unregistered" and
"restricted" shares to two subscribers, at a price of $0.50 per share. We
received $50,000 of the proceeds from these sales after September 30, 2000.
Item 3. Defaults Upon Senior Securities.
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None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
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None; not applicable.
Item 5. Other Information.
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On November 1, 2000, which is subsequent to the period covered by
this Report, the Company's Board of Directors unanimously resolved to grant to
Jeffrey Olweean and Nicole Leigh Van Coller options to purchase a total of
600,000 "unregistered" and "restricted" shares of our common stock (300,000
shares each), at a price of $0.50 per share. The options are exercisable
until 5:00 p.m., Eastern Daylight Time, on November 1, 2005. The options
vested immediately upon the optionees' execution on November 1, 2000, of
Option Agreements with respect thereto.
Mr. Olweean and Ms. Van Coller abstained from voting on the granting
of options to himself or herself.
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
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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.
THE INTERNET ADVISORY CORPORATION
Date: 11/14/00 By /s/ Jeffrey A. Olweean
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Jeffrey A. Olweean
President and Director
Date: 11/14/00 By /s/ Nicole Leigh
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Nicole Leigh
Vice President and Director
