<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K-A1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
December 30, 1999
Date of Report
(Date of Earliest Event Reported)
The Internet Advisory Corp.
(Exact Name of Registrant as Specified in its Charter)
Utah 0-16665 87-0426358
(State or other (Commission File No.) (IRS Employer I.D. No.)
Jurisdiction)
2455 East Sunrise Blvd., Suite 401
Ft. Lauderdale, Florida 33304
(Address of Principal Executive Offices)
(888) 522-0958
Registrant's Telephone Number
N/A
(Former Name or Former Address if changed Since Last Report)
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
THE INTERNET ADVISORY CORPORATION
Including the accounts of its wholly-owned subsidiary
Sunrise Web Development, Inc.
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Consolidated Balance Sheet -- December 31, 1999 2
Consolidated Statements of Operations for the Years Ended December 31,
1999 and 1998 3
Consolidated Statements of Stockholders' Equity/(Deficit) for the Years
Ended December 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the Years Ended December 31,
1999 and 1998 5
Notes to Financial Statements 6-11
<PAGE>
INDEPENDENT AUDITORS'REPORT
The Board of Directors and Shareholders
The Internet Advisory Corporation
We have audited the accompanying consolidated balance sheets of The Internet
Advisory Corporation, (a Utah Corporation) and its wholly-owned subsidiary,
Sunrise Web Development, Inc., (a Florida corporation) as of December 31,
1999, and the related consolidated statements of operations, stockholders'
(deficit) equity, and cash flows for the years ended December 31, 1999 and
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of The Internet Advisory
Corporation as of December 31, 1999, and the results of operations and cash
flows for the years ended December 31, 1999 and 1998, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has accumulated losses from
operations and a net working capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/S/Mantyla McReynolds
Salt Lake City, Utah February 15, 2000
<PAGE>
<TABLE>
The Internet Advisory Corporation
Consolidated Balance Sheet
December 31, 1999
<CAPTION>
<S> <C>
ASSETS
Current Assets:
Cash $ 57,087
Accounts receivable-net of allowance for doubtful
accounts of $7,824. 11,429
Prepaid expenses 4,099
Receivable from related party - Note 4 615,000
Total Current Assets 687,615
Property and equipment - Note 6 609,856
Less: Accumulated depreciation (101,681)
Net Property and equipment 508,175
Other Assets:
Deposit 14,361
Other assets-related party - Note 4 52,600
Total Other Assets 66,961
Total Assets $1,262,751
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current Liabilities:
Accounts payable $ 211,125
Accrued liabilities 29,243
Unearned income - Note 1 15,564
Total Current Liabilities 255,932
Total Liabilities 255,932
Stockholders' Equity:
Common stock -- 50,000,000 shares authorized, $.001 par
value; 13,344,017 shares issued and outstanding 13,344
Additional Paid-In Capital 2,712,115
Accumulated Deficit (1,718,640)
Total Stockholders' Equity 1,006,819
Total Liabilities and Stockholders' Equity $ 1,262,751
</TABLE>
See accompanying notes to financial statements.
<TABLE>
The Internet Advisory Corporation
Consolidated Statements of Operations
For the Years Ended December 31, 1999 and 1998
<CAPTION> 1999 1998
<S> <C> <C>
Revenues 586,602 $ 415,085
Cost of Sales 278,174 56,802
Gross Profit 308,428 358,283
General and Administrative Expenses 1,890,470 451,025
Net Loss from Operations (1,582,042) (92,742)
Interest income 2,606
Interest expense (770) -0-
Net Loss Before Income Taxes (1,580,206) (92,742)
Provision for Income Taxes - Notes 1&3 -0- -0-
Net Loss $(1,580,206) $ (92,742)
Loss Per Share (.19) $ (.03)
Weighted Average Shares Outstanding 8,422,431 3,701,177
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
The Internet Advisory Corporation
Consolidated Statements of Stockholders' Equity/(Deficit)
For the Years Ended December 31, 1999 and 1998
<CAPTION>
Additional Total
Number Common Paid-in Accumulated Stockholders'
of Stock Capital Deficit Equity
Shares
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 902,017 902 3,055,039 (3,107,523) (51,582)
Issued Stock for debt, June,
1998 300,000 300 350 650
Issued Stock for Assets,
recapitalization, June,
1998 6,000,000 6,000 (3,048,382) 3,061,831 19,449
Issued stock for cash,
December, 1998 316,000 316 394,684 395,000
Issued stock for services,
December, 1998 15,000 15 18,735 18,750
Net loss for the year ended
December 31, 1998 (92,742) (92,742)
Balance, December 31, 1998 7,533,017 7,533 420,426 (138,434) 289,525
Issued stock for $895,000,
cash and services in private
placement, February, 1999 796,000 796 994,204 995,000
Issued stock for cash, August,
1999 15,000 15 52,485 52,500
Issued stock for cash, October,
1999 1,000,000 1,000 249,000 250,000
Issued stock for $385,000,
cash and $615,000
receivable, Sunrise Web
Development, Inc.,
December 30, 1999 4,000,000 4,000 996,000 1,000,000
Net loss for the year ended
December 31, 1999 (1,580,206)(1,580,206)
Balance, December 31, 1999 13,344,017 $13,344 2,712,115(1,718,640)1,006,819
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
The Internet Advisory Corporation
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1999 and 1998
<CAPTION>
<S> <C> <C>
Cash Flows Provided byaUsed for) Operating Activities 1999 1998
Net Loss (1,580,206) $(92,742)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 94,079 6,794
Bad debt expense 7,824
Issued stock for services 100,000 18,750
Increase in current assets (23,352)
Increase in current liabilities 115,234 31,741
Net Cash Provided by/(Used for) in
Operating Activities (1,286,421) (35,457)
Cash Flows Used for Investing Activities
Lease deposit (7,359) (7,002)
Advance to affiliates (52,600)
Purchases of property and equipment (563,967) (29,730)
Net Cash Used for Investing Activities (623,926) (36,732)
Cash Flows Provided by Financing Activities
Issued stock for cash 1,582,500 395,000
Net Cash Provided by Financing Activities 1,582,500 395,000
Net Increase(decrease) in Cash (327,847) 322,811
Beginning Cash Balance 384,934 62,123
Ending Cash Balance $ 57,087 $ 384,934
Supplemental Disclosure Information:
Issued stock for assets - Note 4 $ 615,000 $ -0-
Cash paid during the year for interest 770 -0-
Cash paid during the year for income taxes 289 100
</TABLE>
See accompanying notes to financial statements.
<PAGE>
The Internet Advisory Corporation
Notes to Consolidated Financial Statements
December 31, 1999
NOTE I ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
The Internet Advisory Corporation ("IAC"or "Company"), located in Ft.
Lauderdale, Florida, offers Internet web site programming, web hosting,
e-commerce, and Internet access to small and medium size companies. On June
22, 1998, IAC was acquired by Olympus M.T.M. Corporation (a previously dormant
Utah corporation) pursuant to an Agreement and Plan of Merger. The transaction
was accounted for as a "reverse" acquisition on a purchase basis.
Subsequent to the Agreement and Plan of Merger, the name of Olympus M.T.M.
Corporation was changed to The Internet Advisory Corporation.
The financial statements of the Company have been prepared in accordance with
generally accepted accounting principles. The consolidated financial
statements of the Company include the accounts of IAC and its subsidiary (see
Notes 4 & 5). All significant intercompany transactions have been eliminated.
The following summarizes the more significant of such policies:
(b) Income Taxes
Effective August 8, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 [the Statement], Accountingfor Income
Taxes. The Statement requires an asset and liability approach for financial
accounting and reporting for income taxes, and the recognition of deferred tax
assets and liabilities for the temporary differences between the financial
reporting bases and tax bases of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are
realized or settled. The cumulative effect of this change in accounting for
income taxes as of December 31, 1998 is $0 due to the valuation allowance
established as described below.
(c) Net Loss Per Common Share
Net loss per common share is based on the weighted-average number of shares
outstanding. In accordance with Financial Accounting Standards No. 128,
"Earnings Per Share," basic loss per common share is computed using the
weighted average number of common shares outstanding. Diluted earnings per
share is computed using weighted average number of common shares plus dilutive
common share equivalents outstanding during the period using the treasury
stock method. Common stock equivalents (common stock warrants) were not
included in the computation of loss per share for the periods presented
because their inclusion is antidilutive.
(d) Statement of Cash Flows
For purposes of the statements of cash flows, the Company considers cash and
cash equivalents as deposits in commercial banks. The Company had $57,087 cash
at December 31, 1999.
<PAGE>
The Internet Advisory Corporation
Notes to Consolidated Financial Statements
December 31, 1999
[Continued]
[continued]
NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(e) Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(f) Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using the
straight-line basis over the useful lives of the related assets. Expenditures
for maintenance and repairs are charged to expense as incurred.
(g) Revenue Recognition
Revenue is recognized when earned, as products are completed and delivered or
services are provided to customers. In prior years, revenue generally was
collected in advance and amortized over a six month period. Beginning in the
fourth quarter of 1999, the Company began billing customers on a
month-to-month basis, thus, eliminating the need to record significant amounts
of unearned revenue.
NOTE 2 LIQUIDITY/GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, the Company has accumulated losses through December 31, 1999,
amounting to $1,718,640, has a net working capital balance of $439,507, and a
cash balance of $57,087. These factors indicate that the Company may not be
able to continue as a going concern. Financing for the Company's operations
to date has been significantly augmented by the sale of common stock and
borrowing. The Company's ability to achieve a level of profitable operations
and/or additional financing may impact the Company's ability to continue as
presently organized. Resolution of these issues is dependent on the success
of management's plans to raise funds through the sale of its equity securities
in private placement or a public offering. The consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
NOTE 3 INCOME TAXES
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109 [the Statement], Accountingfor Income Taxes, as of August 8,
1997. No provision has been
<PAGE>
The Internet Advisory Corporation
Notes to Consolidated Financial Statements
December 31, 1999
[Continued]
made for income taxes in the consolidated financial statements because the
Company has accumulated losses since inception. The tax effects of temporary
differences that give rise to significant portions of the deferred tax asset
at December 31, 1999 are summarized below.
Deferred tax assets Balance Tax Rate
Loss carryforward(expires 2014) $1,718,640 $678,863 39.5%
Valuation allowance ($678,863)
Deferred tax asset $ 0
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. Because of the lack of
taxable earnings history, the Company has established a valuation allowance
for all future deductible temporary differences. This allowance has
increased $635,395 over the prior year amount of $43,468.
NOTE 4 RELATED-PARTY TRANSACTIONS
The Company has an agreement with an entity controlled by the Company's
president. The subject entity provides advertising for the Company at a cost
of $1,500 per month.
The Company has invested $50,000 for 20% of the total stock of Octapus, Inc.,
which is an entity controlled by a shareholder of the Company. IAC has not
used the equity method to account for this investment because a small group of
investors, other than the Company, exercises significant influence and
represents majority ownership of Octapus. Further, the Company is
anticipating return of this investment in the near term.
An additional $2,600 was advanced to develop a new business venture which will
expand Internet activity into other markets.
As part of the acquisition of Sunrise Web Development, Inc., ("Sunrise")
discussed in Note 5, the Company has recorded an amount due from a
shareholder at December 31, 1999, of $615,000. This is the remaining balance
of the original funding of Sunrise and was collected by the CoTpapy in four
installments received during January and February of 2000.
NOTE 5 STOCK ISSUANCE/RECAPITALIZATION
On June 22, 1998, IAC entered into an agreement and plan of merger with
Olympus , wherein IAC exchanged all of its assets and liabilities as of May
31, 1998 for 6,000,000 shares of Olympus. Immediately subsequent to the
exchange, the IAC's shareholders held approximately 83% of the outstanding
shares of Olympus. The Company continues its operations in the Olympus
structure but has changed the name of Olympus M.T.M. Corporation to The
Internet Advisory Corporation.
<PAGE>
The Internet Advisory Corporation
Notes to Consolidated Financial Statements
December 31, 1999
[Continued]
NOTE 5 STOCK ISSUANCE/RECAPITALIZATION[continued]
In December 1998, the Company issued stock in the following manner:
Price
Description per share Number of Shares Consideration
Issued shares for cash, 12/11/98 $ 1.25 16,000 $ 20,000
Issued shares for cash, 12/30/98 1.25 200,000 250,000
Issued shares for cash, 12/31/98 1.25 100,000 125,000
Issued shares for services, 12/31/98 1.25 15,000 18,750
Total for 1998 331,000 $413,750
The 1999 stock transactions are summarized as follows:
Price
Description per share Number of Shares Consideration
Issued shares for cash, private
placement 2/15/99 $ 1.25 716,000 $895,000
Issued shares for commission,
2/23/99 private placement 1.25 80,000 100,000
Issued shares for cash, 8/25/99 3.50 15,000 52,500
Issued shares for cash, Sep-Dec .25 1,000,000 250,000
Issued shares for assets, 12/30/99 .25 4,000,000 1,000,000
Total for 1998 5,811,000 $2,297,500
The private placement in August provided 15,000 shares plus warrants to
purchase 15,000 more shares at $4 per share. The warrants expire in 2004.
On December 31, 1999, the Company issued 4,000,000 "restricted" common shares
for 100% of the outstanding voting securities of Sunrise Web Development,
Inc., a startup, Florida corporation (Sunrise). On the date of the
combination, the fair value of the net assets of Sunrise was approximately
$860,000, consisting of an amount due from an investor. The transaction has
been accounted for as a purchase. Results of operations for have been
combined for all periods presented. Sunrise has developed an interactive
Internet web site and Internet Browser which the Company plans to use to
generate revenues from subscribers by providing a wide variety of content,
features, and tools.
<PAGE>
The Internet Advisory Corporation
Notes to Consolidated Financial Statements
December 31, 1999
[Continued]
NOTE 6 PROPERTY AND EQUIPMENT
The major classes of assets as of the balance sheet date are as follows:
Accumulated
Asset Class Cost Depreciation Method/Life
Equipment $591,739 $99,931 SL/5
Furniture & Fixtures 11,873 1,684 SL/5
Leasehold Improvements 6,244 66 SL/39
Total $609,856 $101,681
Current year depreciation expense was $94,079.
NOTE 7 OFFICE LEASE
In January, 1998 the Company entered into an operating lease with an unrelated
party for its facilities. The lease is for a period of five years.
On February 10, 1999 the Company signed an addendum to the original lease
agreement for additional space in the same building as the corporate offices.
The terms of this addendum increase the total rentable square feet to 4,674,
and the future minimum lease payments to the following:
2000 82,032
2001 85,313
2002 88,726
2003 14,883
Total rent paid for 1999 and 1998 on this facility was $65,317 and $29,926,
respectively.
NOTE 8 SIGNIFICANT CONCENTRATION OF CREDIT RISK
The Company has no single customer that represents a significant portion of
total revenues. The Company's activities are limited only by access to the
Internet and not to any geographic boundaries.
NOTE 9 CONTRACTS/COMMITMENTS
The Company has entered into various contracts for Intemet/telephone
connection services. Below is a summary of contracts outstanding as
of December 31, 1999:
<PAGE>
The Internet Advisory Corporation
Notes to Consolidated Financial Statements
December 31, 1999
[Continued]
Contract Monthly Remaining
Description Date Payment Commitment Vendor
T1 5/20/99 1,508 30 months AT&T
TI 3/l/99 4,000 2 months EMINET
TI 4/20/99 1,536 29 months ESPIRE
TI 4/14/99 1,871 27 months MCI
Lightgate 8/16/99 26,433 56 months BELLSOUTH
T3 11/4/99 8,730 34 months SPRINT
T3 4/9/99 4,641 27 months QWEST
T3 Pending 21,000 VaNDSTAR
T3 3/19/99 4,797 26 months DIGEX/INTERMEDIA
Frame relay 1/29/99 4,743 26 months BELLSOUTH
NOTE 10 OPERATING LEASES
The company has two operating leases for equipment which it acquired in 1999.
Remaining Monthly
Asset Description Months Payment
Copier/printer 34 $313
Fax machine 34 72
Total $385
Remaining minimum lease payments are as follows:
Year Minimum payments
2000 4,617
2001 4,617
2002 3,848
Total 13,082
(b) Pro Forma Financial Information.
<TABLE>
The Internet Advisory Corporation
Pro Forma Balance Sheet
(Unaudited)
<CAPTION>
Pro Forma
Giving Effect to
Internet Sunrise Web Reorganization
Advisory Development, as of December
ASSETS Corporation Inc. Adjustments 30, 1999
<S> <C> <C> <C> <C>
Current Assets:
Cash $ 57,087 $ -0- $ -0- $ 57,087
Accounts receivable-net 11,429 11,429
Prepaid expenses 4,099 4,099
Other receivables -0- 1,000,000 (385,000) 615,000
Total Current Assets 72,615 1,000,000 (385,000) 687,615
Property and Equipment-net 508,175 -0- -0- 508,175
Other assets 66,961 -0- -0- 66,961
TOTAL ASSETS $ 647,751 $ 1,000,000 $(385,000)$ 1,262,751
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 211,125 $ -0- $ -0- $ 211,125
Accrued liabilities 29,243 29,243
Unearned Income 15,564 15,564
Payable to Stockholder 245,000 140,000 (385,000) -0-
Total Current
Liabilities 500,932 140,000 (385,000) 255,932
Stockholders' Equity:
Capital Stock - Note 1 9,344 100 3,900 13,344
Additional Paid-in
Capital 1,716,115 999,900 (3,900) 2,712,115
Retained Earnings (1,578,640) (140,000) -0- (1,718,640)
Total Stockholders'
Equity 146,819 860,000 -0- 1,006,819
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 647,751 $1,000,000 $(385,000)$ 1,262,751
</TABLE>
See accompanying notes and Independent Accountants' Report
<TABLE>
The Internet Advisory Corporation
Pro Fon-na Statements of Operations
(Unaudited)
<CAPTION>
Pro Forma
Giving Effect to
Internet Sunrise Web Reorganization
Advisory Development, as of December
Corporation Inc. Adjustments 30, 1999
<S> <C> <C> <C> <C>
Revenues $ 586,602 $ -0- $ -0- $ 586,602
Cost of Sales 278,174 278,174
Gross Profit 308,428 -0- -0- 308,428
General and Administrative
Expenses 1,750,470 140,000 -0- 1,890,470
Net Loss from Operations (1,442,042) (140,000) (1,582,042)
Interest Income 2,606 2,606
Interest Expense (770) (770)
Net Loss Before Income (1,443,878) (140,000) (1,583,878)
Taxes
Current Year Provision for
Tneome Taxes -0- -0- -0- -0-
Net Loss $(1,443,878) $ (140,000) $ -0- $ (1,583,878)
Loss Per Share $ (.17) $ (1,402) $ (.19)
Average Shares Outstanding 8,408,910 100 8,422,431
</TABLE>
See accompanying notes and Independent Accountants' Report
The Internet Advisory Corporation
Notes to Pro Forma Financial Statements
December 30, 1999
Note I ORGANIZATION AND MERGER
The Internet Advisory Corporation ("IAC" )is a Florida corporation
incorporated on August 8, 1997 for the purpose of providing access to the
Internet for its customers, and Web design. On December 30, 1999, IAC entered
into a Reorganization Agreement (the "Agreement") with Sunrise Web
Development, Inc., a Florida startup corporation ("Sunrise"),whereby IAC
issued 4,000,000 shares of "restricted securities" (common stock)to Sunrise's
sole shareholder in consideration of the exchange of 100% of the outstanding
voting securities of Sunrise. Sunrise became a wholly-owned subsidiary of IAC
on the closing of the Agreement.
Sunrise owns an interactive Internet web site and Internet Browser. Its
products will generate revenues from subscriber membership fees and usage
fees, as well as from other sources, which will include advertising and
E-commerce sales. Sunrise will provide subscribers through its browser, a
global, interactive community offering a wide variety of content, features and
tools. The on-line community will have access to content such as electronic
mail services, public bulletin boards, the buddy list feature, instant message
services, public or private "meeting rooms/chat rooms" for interactive
conversations and live "auditorium" events. Sunrise will fold its operations
into that of IAC and both companies will operate out of the IAC's corporate
offices located at 2455 East Sunrise Boulevard, Ft. Lauderdale, Florida 33304.
The transaction is being accounted for as a purchase. The pro forma financial
statements reflect all of the transactions contemplated by the Agreement.
There were 9,344,017 shares of the common stock outstanding prior to the
completion of the Agreement, and 13,344,017 on the closing of the Agreement.
(c) Exhibits.
None.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
The Internet Advisory Corporation
Date: 3/20/2000 By/s/ Jeffrey Olweean
-----------------------------
Jeffrey Olweean
President and Director
