<PAGE>
U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the calendar year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File No. 0-16665
THE INTERNET ADVISORY CORPORATION
---------------------------------
(Name of Small Business Issuer in its Charter)
UTAH 87-0426358
---- ----------
(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
-----------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (954) 453-5000
N/A
---
(Former Name or Former Address, if changed since last Report)
Securities Registered under Section 12(b) of the Exchange Act: None
Name of Each Exchange on Which Registered: None
Securities Registered under Section 12(g) of the Exchange Act: $0.001 par
value common stock
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Company 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
--- --- --- ---
Check if there is no disclosure of delinquent files in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Company'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. [ ]
State Issuer's revenues for its most recent fiscal year: December 31, 1999 -
$586,602.
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date
within the past 60 days.
March 28, 2000 - $21,228,121. There are approximately 3,949,418 shares
of common voting stock of the Company held by non-affiliates. The Company has
valued these shares at $5.375 per share, which was the trading price for
the Company's common stock on the OTC Bulletin Board of the NASD on March 28,
2000.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Not Applicable.
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the Issuer's
classes of common equity, as of the latest practicable date:
March 29, 2000
13,345,018*
*See Part I, Item 3, regarding legal proceedings pursuant to which
6,250,000 shares have been attached and will be deposited in the Third
Judicial District Court in and for Salt Lake County, Utah, and
thereafter, canceled.
DOCUMENTS INCORPORATED BY REFERENCE
A description of "Documents Incorporated by Reference" is contained
in Part III, Item 13.
Transitional Small Business Issuer Format Yes X No ___
<PAGE>
PART I
Item 1. Description of Business.
------------------------
Business Development.
- ---------------------
Information regarding the historical operations and material
developments respecting The Internet Advisory Corporation (the "Company")
during the past two years is contained in 10-KSB Annual Reports of the Company
for the years ended December 31, 1998 and November 30, 1997 (during fiscal
1998, the Company changed its fiscal year end to a calendar year), and the
Company's 8-K Current Report dated June 22, 1998, all of which have been
previously filed with the Securities and Exchange Commission and are
incorporated herein by reference. See Part III, Item 13.
On December 30, 1999, the Company entered into a Reorganization
Agreement (the "Agreement") with Richard K. Goldring, the sole stockholder of
Sunrise Web Development, Inc., a Florida corporation (the "Sunrise
Stockholder" and "Sunrise, respectively), whereby the Company issued 4,000,000
shares of "restricted securities" (common stock) as follows: Interactive
Business Concepts, Inc., 2,900,000 shares; Richard K. Goldring, 500,000
shares; Irving Shlafman, 500,000 shares; and Irina Goldring, 100,000 shares,
in consideration of the exchange of 100% of the outstanding voting securities
of Sunrise. Sunrise became a wholly-owned subsidiary of the Company. Mr.
Goldring owned approximately 10.7% of the outstanding securities of the
Company prior to the completion of this Agreement. See the Company's 8-K and
8-KA Current Reports dated December 30, 1999, which have been previously filed
with the Securities and Exchange Commission and are incorporated herein by
reference. See Part III, Item 13.
Sunrise was a recently organized company that owned an interactive
Internet web site and Internet Browser. Its products were designed to
generate revenues from subscriber membership fees and usage fees, as well as
from other sources, including 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. This content will
provide the on-line community with access to 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.
Business.
- ---------
The Company presently offers web site programming and web hosting to
small and medium size companies. The Company offers a simple package that
contains everything that clients need, including web hosting, at an affordable
price. The Company controls costs using volume sales and a unique approach to
marketing web site programming. The volume sales are possible by centralizing
the sales force and conducting all sales via telephone, facsimile and the
Internet. The client is able to view a number of comparable sites, whether in
its industry or not, in a variety of graphical styles. The production side
must also keep up with the sales volume; a typical web site designer takes one
to two days per web site design. This is achieved by using a production line
approach to web site programming, together with automated web site development
procedures that the Company has devised to speed production.
Through Sunrise, the Company will generate revenues such as online
service revenues from subscribers, advertising revenues, E-commerce and
transaction fees associated with electronic commerce.
Sunrise's planned and intended operations have been consolidated
into the operations of the Company and both companies will operate out of the
Company's corporate offices located at 2455 East Sunrise Boulevard, Ft.
Lauderdale, Florida 33304.
The success of the Company's operations will depend on numerous
factors, some of which it can control and others which are beyond its control.
See the heading "Risk Factors," below.
Principal Products or Services and their Markets.
- -------------------------------------------------
The Company is an international Internet service provider and web
site designer, and provides web site programming and hosting. See the caption
"Management's Discussion and Analysis or Plan of Operation," Part II, Item 6.
Through Sunrise, the Company will provide the on-line community with
access to 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.
Distribution Methods of the Products or Services.
- -------------------------------------------------
The Company uses a centralized sales force that uses the Internet,
facsimile and telephone combined to market internationally.
Status of any Publicly Announced New Product or Service.
- --------------------------------------------------------
All new products or services that have been publically announced are
fully functional and creating revenue. These include for 1998:
Wholesale web site hosting;
automotive and insurance web site programming and hosting; and
real estate and travel web site programing and hosting.
And for 1999:
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.
And for 2000.
ThePUNK.com browser for searching data on the Internet.
Competition.
- ------------
As new as the Internet is, it is an extremely competitive market.
The Company faces competition from hundreds of entities, many of which have
substantially greater assets and experience than the Company. However, the
Company's marketing and programming have shown success, and management
believes that the Company will be able to compete successfully in its past
endeavors and those to encompass the planned and intended operations acquired
from Sunrise for the foreseeable future. See the Risk Factor "Competition,
Low Barriers to Entry."
Sources and Availability of Raw Materials.
- ------------------------------------------
None; not applicable.
Dependence on One or a Few Major Customers.
- -------------------------------------------
None; not applicable.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts.
- ----------------
The Company has licenses for its Internet domain names, "Internet
Academy" and "Hostfacility.com"; each license lasts for two years. The
licenses expire unless renewed for $70.
Governmental Approval of Principal Products or Services.
- --------------------------------------------------------
The Company is subject to Regulation 14A promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934,
as amended (the "1934 Act). Section 14(a) of the 1934 Act requires all
companies with securities registered pursuant to Section 12(g) thereof to
comply with the rules and regulations of the Securities and Exchange
Commission regarding proxy solicitations as outlined in Regulation 14A.
Matters submitted to stockholders of the Company at a special or annual
meeting thereof or pursuant to a written consent shall require the Company to
provide its stockholders with the information outlined in Schedules 14A or 14C
of Regulation 14; preliminary copies of this information must be submitted to
the Securities and Exchange Commission at least 10 days prior to the date that
definitive copies of this information are forwarded to stockholders. See the
Risk Factor "Government Regulation and Legal Uncertainties."
Effects of Existing or Probable Governmental Regulations.
- ---------------------------------------------------------
Other than maintaining its good standing in the State of Utah;
complying with applicable local business licensing requirements; preparing its
periodic reports under the 1934 Act; and complying with other applicable
securities laws, rules and regulations as set forth above, the Company does
not believe that existing or probable governmental regulations will have a
material adverse effect on its operations. However, the Internet is a rapidly
evolving commercial medium and may become subject to numerous types of
regulation in the future. Areas of potential regulation include user privacy,
advertising, information security, fees for use and taxation. Because
Internet commerce is developing so rapidly, it is impossible to predict the
type and extent of governmental regulation in the future. See the Risk Factor
"Government Regulation and Legal Uncertainties."
Cost and Effect of Compliance with Environmental Laws.
- ------------------------------------------------------
None; not applicable.
Research and Development Expenses.
- ----------------------------------
During fiscal 1998, the Company believes that 2,000 hours were spent
in each of the last two calendar years on research and development.
Management estimates that a total of $300,000 was spent on research and
development during that period, with virtually the entire amount taking the
form of salaries. Approximately $200,000 was expended on E-commerce research
and development in fiscal 1999. See the Risk Factors "Rapid Technology
Change" and "Future Capital Needs; Uncertainty of Additional Funding."
Number of Employees.
- --------------------
The Company currently has 24 employees, all of whom are employed
full time. Management believes that revenues will be
sufficient to pay for all necessary salaries and wages.
Risk Factors.
- -------------
Fluctuations in Quarterly Operating Results and Margins; Seasonality
of Business.
The Company's operating results have fluctuated in the past and
are likely to fluctuate in the future as a result of a variety of factors,
many of which will be outside the Company's control. Some of these factors
include material reduction or cancellation of major projects or the loss of a
major client; the amount and timing of the receipt of new business; timing of
hiring or loss of personnel; the amount and timing of the opening or closing
of an office; the amount and the relative mix of high-margin creative or
strategy consulting projects as compared to lower margin projects, capital
expenditures and other costs relating to the expansion of operations; the
level of demand for Intranet, Extranet and web site development; the ability
to maintain adequate staffing to service clients effectively; the cost of
advertising and related media; the amount and timing of expenditures by
clients for professional services; the introduction of new products or
services by competitors; pricing changes in the industry; relative mix of
lower cost full-time employees versus higher cost independent contractors;
technical difficulties with respect to the use of the Internet; economic
conditions specific to Internet technology usage; government regulation and
legal developments regarding the use of the Internet; and general economic
conditions. The Company may also experience seasonality in its business,
resulting in diminished revenues as a consequence of decreased demand for
professional services during summer and year-end vacation and holiday periods.
Due to all of the foregoing factors, the Company's operating results in any
given quarter may fall below the expectations of securities analysts and
investors. In such event, the trading price of the Company's common stock
would likely be materially and adversely affected.
The Company has experienced some seasonality in its business which
results from timing of product introductions and business cycles of the
Company's clients. The Company's revenues for the fiscal first and fourth
quarters tend to be somewhat lower than other quarters because many clients
have expended most of their marketing budgets prior to the end of the calendar
year and do not release funds from the next calendar year's marketing budget
until mid-to-late January. For the foregoing reasons and other factors, the
Company's historical revenues and operating results are not necessarily
meaningful and cannot be relied upon as indicators of the Company's future
performance.
The Company's historical financial data is of limited value in
planning future operating expenses. Accordingly, the Company's expense levels
will be based in part on its expectations concerning future revenues and will
be fixed to a large extent. The Company will be unable to adjust spending in
a timely manner to compensate for any unexpected shortfall in revenues.
Accordingly, a significant shortfall in demand for services could have an
immediate and material adverse effect on the Company's business, financial
condition, results of operations and prospects.
Limited Operating History; Accumulated Deficit; Evolving Business
Model.
The Company's operating predecessor was founded in August of 1997,
and has incurred net losses since inception; and Sunrise, which was acquired
effective December 30, 1999, had only recently been organized. Accordingly,
the Company will have only a limited operating history on which to base an
evaluation of its business and prospects.
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 companies in new and rapidly evolving
markets such as Internet solutions and services. Such risks for the Company
include, but are not limited to, an evolving business model. To address these
risks the Company must, among other things, strengthen its business
development and management activities while continuing to expand its network;
continue to develop the strength and quality of its operations; maximize the
value delivered to clients by the Company's Internet solutions; develop and
enhance the Company's brands; respond to competitive developments; 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, financial condition, results of operations
and prospects.
Risks Related to Future Acquisitions.
A key component of the Company's continued growth strategy is
expected to be the acquisition of firms that meet the Company's goals for
strategic growth and international expansion. The successful implementation
of this strategy will depend of the Company's ability to identify suitable
acquisition candidates, acquire such companies on acceptable terms and
integrate their operations successfully with those of the Company. There can
be no assurance that the Company will be able to identify additional suitable
acquisition candidates, or that the Company will be able to acquire such
candidates on acceptable terms. Moreover, in pursuing acquisition
opportunities, the Company may compete with other companies with similar
growth strategies, certain of which competitors may be larger and have greater
financial and other resources than the Company. Competition for these
acquisition targets may also result in increased prices of acquisition targets
and a diminished pool of companies available for acquisition. Acquisitions
also involve a number of other risks, including adverse effects on the
Company's reporting operating results from increases in goodwill amortization,
acquired in-process technology, stock compensation expense resulting from
newly hired employees, the diversion of management attention, potential
disputes with the sellers of one or more acquired entities and the possible
failure to retain key acquired personnel. Lack of client satisfaction or
performance problems with an acquired firm could also have a material adverse
impact on the reputation of the Company as a whole, and any acquired
subsidiary could significantly underperform relative to the Company's
expectations. For all of these reasons, the Company's pursuit of an overall
acquisition strategy or any individual pending or future acquisition may have
a material adverse effect on the Company's business, financial condition,
results of operations and prospects. To the extent that the Company chooses
to use cash consideration for acquisitions in the future, the Company may be
required to obtain additional financing, and there can be no assurance that
such financing will be available on favorable terms, if at all. As the
Company issues stock to complete future acquisitions, existing shareholders
will experience further ownership dilution.
Risks Associated with Failure to Manage Growth.
The Company's growth has placed, and any further expansion would
continue to place, a significant strain on its limited personnel, management
and other resources. In the future, the Company will be required to attract,
train, motivate and manage new employees successfully and to continue to
improve its operational, management and information systems and controls.
There can be no assurance that the Company's systems, procedures or controls
will be adequate to support its operations or that its management will be able
to achieve the rapid execution necessary to exploit the market for the
Company's business model. The failure to effectively manage any further growth
could have a material adverse effect on the Company's business, financial
condition, results of operations and prospects.
Competition, Low Barriers to Entry.
The market for Internet professional services is relatively new,
intensely competitive, rapidly evolving and subject to rapid technological
change. The Company expects competition to persist, intensify and increase in
the future. The Company's competitors can be divided into several groups:
computer hardware and service vendors such as IBM and Hewlett Packard;
advertising and media agencies such as Ogilvy & Mather, Young & Rubicam and
Foote, Cone & Belding; Internet integrators and web presence providers such as
Agency.com and iXL Holdings; large information consulting service providers
such as Anderson Consulting, Cambridge Technology Partners and Electronic Data
Systems Corporation; telecommunications companies such as AT&T and MCI;
Internet and online service providers such as America Online, Netcom Online,
and UUNet Technologies, and software vendors such as Microsoft, Netscape,
Novell and Oracle. Many of the Company's current and potential competitors
have longer operating histories, larger installed customer bases, longer
relationships with clients and significantly greater financial, technical,
marketing and public relation sources than the Company and could decide at any
time to increase their resource commitments to the Company's target markets.
In addition, the market for web site development is relatively new and subject
to continuing definition, and, as a result, may better position the Company's
competitors to compete in this market as it matures. As a strategic response
to changes in the competitive environment, the Company may from time to time
make certain pricing, service technology or marketing decisions or business or
technology acquisitions that could have a material adverse effect on the
Company's business, financial condition, results of operations and prospects.
Competition of the type described above could materially adversely affect the
Company's business, results of operations, financial conditions and prospects.
In addition, the Company's ability to maintain its existing client
relationships and generate new clients will depend to a significant degree on
the quality of its services and its reputation among its clients and potential
clients, compared with the quality of its services provided by, and the
reputations of, the Company's competitors. To the extent the Company loses
clients to its competitors because of dissatisfaction with the Company's
services or its reputation is adversely affected for any other reason, the
Company's business, result of operations, financial conditions and prospects
could be materially adversely affected.
There are relatively low barriers to entry into the Company's
business. Because firms such as the Company rely on the skill of their
personnel and the quality of their client service, they have no patented
technology that would preclude or inhibit competitors from entering their
markets. The Company is likely to face additional competition from new
entrants into the market in the future. There can be no assurance that
existing or future competitors will not develop or offer services that provide
significant performance, price, creative or other advantages over those
offered by the Company, which could have a material adverse effect on its
business, financial condition, results of operations and prospects.
Developing Internet Economy, Market for E-commerce Solutions;
Unproven Acceptance of the Company's Complete Media Solutions and Client
Outsourcing.
A substantial portion of the Company's revenue is expected to be
derived from services that depend upon the adoption of Internet solutions by
companies to improve their business positioning and processes, and the
continued development of the World Wide Web, the Internet and E-commerce.
The Internet may not prove to be a viable commercial marketplace because of
inadequate development of necessary infrastructure; lack of development of
complementary products; implementation of competing technology; delays in the
development or adoption of new standards and protocols required to handle
increased levels of Internet activity; government regulation; or other
reasons. The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and volume of traffic.
There can be no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it by this continuous growth. Moreover,
critical issues concerning the use of Internet and E-commerce solutions
(including security, reliability, cost ease of deployment and administration
and quality of service remain unresolved and may affect the growth of the use
of such technologies to maintain, manage and operate a business, expand
product marketing, improve corporate communications and increase business
efficiencies. The adoption of Internet solutions for these purposes,
particularly by those individuals and enterprises that have historically
relied on traditional means, can be capital intensive and generally require
the acceptance of a new way of conducting business and exchanging information.
If critical issues concerning the ability of Internet solutions to improve
business positioning and processes are not resolved or if the infrastructure
is not developed, the Company's business, financial condition, results of
operations and prospects will be materially adversely affected.
Volatility of Stock Price.
The trading prices of the Company's common stock have historically
been subject to wide fluctuations, due to a variety of factors including
announcements regarding financial results, acquisitions and significant
orders. Failure to achieve periodic revenue, earnings and other operating and
financial results as forecasted or anticipated by brokerage firms or industry
analysts could result in an immediate and adverse effect on the market price
of the Company's common stock. The Company may not discover, or be able to
confirm, revenue or earnings shortfalls until the end of a quarter, which
could result in a greater and immediate and adverse effect on the common stock
of the Company. In addition, the stock market, which has recently been at or
near historic highs, has experienced extreme price and volume fluctuations
that have particularly affected the market prices of equity securities of many
technology companies and that often have been unrelated to the operating
performance of such companies. In the past, following periods of volatility
in the market price of a company's securities, securities class action
litigation has often been instituted against such a company. Such litigation
could result in substantial costs and a diversion of management's attention
and resources, which would have a material adverse effect on the Company's
business, financial condition, results of operations and prospects.
Conflicts of Interest.
Conflicts of interest are inherent in certain segments of the
marketing communications industry, particularly in advertising. The Company
has in the past, and will likely in the future, be able to pursue potential
advertising and other opportunities because such opportunities will require
the Company to provide services to direct competitors of existing clients. In
addition, the Company risks alienating or straining relationships with
existing clients each time the Company agrees to provide services to even
indirect competitors of existing Company clients. Conflicts of interest may
jeopardize the stability of revenues generated from existing clients and
preclude access to business prospects, either of which developments could have
a material adverse effect on the Company's business, financial condition,
results of operations and prospects.
Rapid Technology Change.
The market for Internet solutions and marketing services is
characterized by rapid technological change, changes in user and client
requirements and preferences, frequent new product and service
introductions embodying new processes and technologies and evolving industry
standards and practices that could render the Company's existing service
practices and methodologies obsolete. The Company's success will depend, in
part, on its ability to improve its existing services, develop new services
and solutions that address the increasingly sophisticated and varies needs of
its current and prospective clients, and respond to technological advances,
emerging industry standards and practices and competitive service offerings.
Failure to do so could result in the loss of existing customers or the
inability to attract and retain new customers, either of which developments
could have a material adverse effect on the Company's business, financial
condition, results of operations and prospects. There can be no assurance
that the Company will be successful in responding quickly, cost-effectively
and sufficiently to these developments. If the Company is unable, for
technical, financial or other reasons, to adapt in a timely manner in response
to change in market conditions or client requirements, its business, financial
condition, result of operations and prospects would be materially adversely
affected.
Potential Liability to Clients.
Many of the Company's consulting engagements involve the
development, implementation and maintenance of applications that are critical
to the operations of their clients' businesses. Its failure or inability to
meet a client's expectations in the performance of its services could injure
the Company's business reputation or result in a claim for substantial
damages, regardless of its responsibility for such failure. In addition, the
Company possesses technologies and content that may include confidential or
proprietary client information. Although the Company has implemented policies
to prevent such client information from being disclosed to unauthorized
parties or used inappropriately, any such unauthorized disclosure or use could
result in a claim for substantial damages. The Company has attempted to limit
contractually its damages arising from negligent acts, errors, mistakes or
omissions in rendering professional services; however, there can be no
assurance that any contractual protections will be enforceable in all
instances or would otherwise protect the Company from liability for damages.
The successful assertion of one or more large claims against the Company that
are uninsured, exceed available insurance coverage or result in changes to the
Company's insurance policies, including premium increases or the imposition of
a large deductible or co-insurance requirements, could adversely affect the
Company's business, results of operations and financial condition.
Future Capital Needs; Uncertainty of Additional Financing.
The Company currently anticipates that its available cash resources
and credit facilities will be sufficient to meet its presently anticipated
working capital and capital expenditure requirements for the next 9 months.
However, the Company may need to raise additional funds in order to support
more rapid expansion, develop new or enhanced services and products, respond
to competitive pressures, acquire complimentary 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 its existing and new service offerings and competing
technological and market developments. The Company may be required to raise
additional funds through public or private financing, strategic relationships
or other arrangements, particularly as its acquisition strategy matures.
There can be no assurance that such additional funding, if needed, will be
available on terms acceptable to the Company, or at all. Furthermore, any
additional equity financing may be dilutive to stockholders, and debt
financing, if available, may involve restrictive covenants, which may limit
the Company's operating flexibility with respect to certain business matters.
Strategic arrangements, if necessary to raise additional funds, may require
the Company to relinquish its rights to certain of its intellectual property
or selected business opportunities. If additional funds are raised through
the issuance of equity securities, the percentage ownership of the
stockholders of the Company will be reduced, stockholders may experience
additional dilution in net book value per share and such equity securities
may have rights, preferences or privileges senior to those of the holders of
the Company's common stock. If adequate funds are not available on acceptable
terms, the Company may be unable to develop or enhance its services and
products, take advantage of future opportunities or respond to competitive
pressures, any of which could have a material adverse effect on its business,
financial condition, results of operations and prospects.
Government Regulation and Legal Uncertainties.
The Company is not currently subject to direct government
regulation, other than the securities laws and the regulations thereunder
applicable to all publicly owned companies, and laws and regulations
applicable to businesses generally, and there are currently few laws or
regulations directly applicable to access to or commerce on the Internet.
However, due to the increasing popularity and use of the Internet, it is
likely that a number of laws and regulations may be adopted at the local,
state, national and international levels with respect to the Internet covering
issues such as user privacy, freedom of expression, implementation of fees,
pricing of products and services, taxation, advertising, intellectual property
rights, information security or the convergence of traditional communication
services with Internet communications. For example, the Telecommunications
Act of 1996 (the "Telecommunications Act") imposes criminal penalties on
anyone who distributes obscene or indecent communications over the Internet.
Although the anti-indecency provisions of the Telecommunications Act have been
declared unconstitutional by the federal courts, the increased attention
focused upon these liability issues as a result of the Telecommunications Act
could adversely affect the growth of the Internet and therefore demand for the
Company's services. In addition, because the growth in the electronic
commerce market, Congress has held hearings on whether to regulate providers
of services and transactions in the electronic commerce market, which
regulations could negatively affect client demand for Internet solutions that
facilitate electronic commerce. Moreover, the adoption of any such laws or
regulations may decrease growth of the Internet, which could in turn decrease
the demand for the Company's services or increase cost of doing business or in
some other manner have a material adverse effect on the Company's business,
financial conditions, results of operations or prospects. In addition, the
applicability to the Internet of existing laws governing issues such as
property ownership, copyrights and other intellectual property issues,
taxation, libel and personal property is uncertain. The vast majority of such
laws were adopted prior to the advent of the Internet and related technologies
and, as a result, do not contemplate or address the unique issues of the
Internet and related technologies. Changes to such laws intended to address
these issues, including some recently proposed changes, could create
uncertainty in the marketplace which could reduce demand for the Company's
services or increase the cost of doing business as a result of costs of
litigation or increased service delivery costs, or could in some other manner
have a material adverse effect on the Company's business, financial condition,
results of operations and prospects.
Concentration of Stock Ownership.
The present directors, executive officers and their respective
affiliates beneficially own a majority of the outstanding common stock of the
Company. As a result, these stockholders will be able to exercise significant
influence over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions.
Such concentration of ownership may also have the effect of delaying or
preventing a change in control of the Company.
Susceptibility to General Economic Conditions.
The Company's revenues and results of operations are subject to
fluctuations based upon general economic conditions. If there were to be a
general economic downturn or a recession in the United States, then the
Company expects that business enterprises, including its clients and potential
clients, likely will substantially and immediately reduce their budgets.
Because certain clients of the Company have substantial overseas operations,
their budgets may also be adversely affected by economic conditions in
overseas markets, including the recent volatility in Asian and Russian
economies and Asian and Russian currency and securities markets. In the event
of such an economic downturn, the Company's business, financial condition,
results of operations and prospects may be materially and adversely affected.
Item 2. Description of Property.
------------------------
The Company currently leases 4674 square feet of office space in Ft.
Lauderdale, Florida. Total rent for this facility in 1999 and 1998 was
$65,317 and $29,926, respectively. The term of the lease is four years,
expiring February 28, 2003.
Item 3. Legal Proceedings.
------------------
Except as indicated below, the Company is not a party to any pending
legal proceeding. No federal, state or local governmental agency is presently
contemplating any proceeding against the Company. No director, executive
officer or affiliate of the Company or owner of record or beneficially of more
than five percent of the Company's common stock is a party adverse to the
Company or has a material interest adverse to the Company in any proceeding.
On March 23, 2000, the Third Judicial District Court in and for Salt
Lake County, Utah, entered a Temporary Restraining Order and Writ of
Attachment following the filing of a complaint by the Company, in Civil Action
No. 000902397. In its complaint, the Company was seeking recovery of
6,250,000 shares of its common stock ("restricted securities") which were
issued for deposit into escrow, pending the receipt of funding which was not
paid. The securities were removed from the escrow, without the consent of the
Company. The recipient of these securities had deposited them with a
registered broker/dealer, and had subsequently consented in writing to the
cancellation of the two stock certificates representing these securities,
immediately prior to the filing of the complaint. The broker/dealer that has
possession of these securities has advised the Company's counsel that these
securities will be deposited with the Clerk of this court. Once received, the
Company will seek the court's order to cancel these stock certificates and the
shares of common stock represented thereby in accordance with its complaint
and the consent of the record owner.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
On August 18, 1998, a majority of the Company's stockholders voted
to change the Company's name from "Olympus M.T.M Corporation" to "The Internet
Advisory Corporation." See the Definitive Information Statement filed with
the Securities and Exchange Commission on July 28, 1998, which is incorporated
herein by reference.
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this Report.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
---------------------------------------------------------
Market Information.
- -------------------
The Company's common stock is quoted on the OTC Bulletin Board of
the National Association of Securities Dealers, Inc. (the "NASD") under the
symbol "PUNK"; no assurance can be given that any market for the Company's
common stock will be maintained. The following stock quotations were provided
by the National Quotations Bureau, LLC, and do not represent actual
transactions; they also do not reflect mark-ups, mark-downs or sales
commissions.
STOCK QUOTATIONS
CLOSING BID
Quarter ended: High Low
- -------------- ---- ---
[S] [C] [C]
March 31, 1998 0.01 0.01
June 30, 1998 3.25 2.625
September 30, 1998 2.9375 .75
December 31, 1998 7.875 1.25
March 31, 1999 13.75 6.375
June 30, 1999 8.875 6.50
September 30, 1999 8.625 3.25
December 31, 1999 10.625 3.50
The Company anticipates filing for listing on NASDAQ Small Cap in
the near future; however, no assurance can be given that the NASD will allow
the Company's securities to be quoted on this medium.
Recent Sales of Unregistered Securities.
- ----------------------------------------
Date Number of Aggregate
Name Acquired Shares Consideration
---- -------- --------- -------------
Predecessor Stockholders 6/22/98 6,000,000 Exchange(1)
Santiago Alfonso 11/13/98 5,000 Services
Lourdes Alfonso 11/13/98 5,000 Services
Jason Todd Greenberg 11/13/98 5,000 Services
Shares for cash, 2/15/99
private placement 716,000 $895,000
Shares for services 2/23/99 80,000 $100,000
private placement
Shares for cash 8/25/99 15,000 $ 52,500
Shares issued for cash 9/01/99 1,000,000 $250,000
12/31/99
Goldring and others 12/30/99 4,000,000 Exchange(3)
(1) These shares were issued in connection with the acquisition of The
Internet Advisory Corporation, a Florida corporation, which was disclosed in
the Company's 8-K Current Report dated June 22, 1998, and amended September 3,
1998. See Part III, Item 13. Also see the heading "Business
Development" of Part I, Item 1.
(2) These shares were issued over a period of time ranging from
November 11, 1998, to February 15, 1999, pursuant to a private placement of
the Company's "unregistered" and "restricted" common stock at a price of $1.25
per share.
(3) These shares were issued under the Agreement with Sunrise, described
under the heading "Business Development" of Part I, Item 1. Also, see the 8-K
Current Report dated December 30, 1999, Part III, Item 13.
All of these securities were issued to persons who were either
"accredited investors," or "sophisticated investors," who, by reason of
education, business acumen, experience or other factors, were fully capable of
evaluating the risks and merits of an investment in the Company; and each had
prior access to all material information regarding the Company. The offer and
sale of these securities was believed to be exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Sections
4(2) and 4(6) thereof, and Regulation D of the Securities and Exchange
Commission; and from various similar state exemptions.
Sales of "restricted securities" by members of management and others
could have an adverse effect on any public market for the common stock of the
Company. With the exception of the last 5,015,000 shares of "restricted
securities" issued as outlined above, all of the remaining 8,380,060
outstanding shares of the Company's common stock have been held for a
sufficient period of time for resale under Rule 144 of the Securities and
Exchange Commission, subject to volume limitations of subparagraph (e) of this
Rule.
Holders.
- --------
The number of record holders of the Company's securities as of the
date of this Report is approximately 573.
Dividends.
- ----------
The Company has not declared any cash dividends with respect to its
common stock and does not intend to declare dividends in the foreseeable
future. The future dividend policy of the Company cannot be ascertained with
any certainty, and if and until the Company has substantial revenues which
result in net profits, no such policy will be formulated. There are no
material restrictions limiting, or that are likely to limit, the Company's
ability to pay dividends on its securities.
Item 6. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
Plan of Operation.
- ------------------
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 set forth under the heading "Risk Factors" above.
Overview. The Company is a leading global provider of Internet-
based solutions such as web site design, retail and wholesale web site hosting
and system co-location. The Company offers comprehensive solutions designed
to improve clients' business processes using Internet applications. The
Company's Internet services include strategic consulting; analysis and
design; technology development; implementation and integration; and
maintenance. The Company markets its services to small, medium and large
corporations. Through Sunrise, the Company provides the on-line community
with access to 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. The
Company has also recently launched ThePUNK.com Browser.
Through fiscal 1999, the Company has generated its revenues solely
from web site design and retail web hosting (known when unified as "full
service design and hosting"). It anticipates receiving revenues from web site
hosting, design, co-location and selling high-speed access in the year 2000.
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 exclusively from initial web site design and
programming fees and monthly retail web site hosting fees. 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.
- ----------------------
During the calendar year ended December 31, 1999 and 1998, the
Company received revenues of $586,602 and $415,085, respectively. After
deducting costs of sales, gross profits were $308,428 and $358,283,
respectively, in each of these periods.
Net losses in the calendar years ended December 31, 1999 and 1998,
were $(1,580,206) or $0.19 per share, and $(90,742) or $0.06 per share,
respectively. The substantial losses in fiscal 1999 were primarily due to the
increase in general and administrative expenses for $451,025 in fiscal 1998 to
$1,890,470 in fiscal 1999. The increase in band width from one to seven,
increases in numbers of employees (to a high of 30 at one time) and increases
of in-house projects and related expenses attributed to the substantial
increase in general and administrative expenses in fiscal 1999.
The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," in
the fiscal year ending December 31, 1998. SFAS No. 130 requires the Company
to report in its financial statements, in addition to its net income (loss),
comprehensive income (loss), which includes all changes in equity during a
period from non-owner sources including, as applicable, foreign currency
items, minimum pension liability adjustments and unrealized gains and losses
on certain investments in debt and equity securities. During the fiscal years
ended December 31, 1999 and 1998, such items were not significant, and the
Company's comprehensive loss approximated its net loss.
Liquidity and Capital Resources.
- --------------------------------
At December 31, 1999, the Company had approximately $57,087 in
cash compared to $384,934 in cash, cash equivalents and short-term investments
at December 31, 1998.
During fiscal 1999, the Company issued 796,000 shares for cash and
services valued at $895,000; and 1,115,000 shares for $262,500 in cash. Cash
provided by financing activities was $ 395,000 for the year
ending December 31, 1998, and was primarily due to a private placement of
"unregistered" and "restricted" common stock.
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 9 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 Companies existing and new service offerings and competing
technological and market developments. See the Risk Factor "Future Capital
Needs; Uncertainty of Additional Financing."
Item 7. Financial Statements.
---------------------
Audited Financial Statements for the Years Ended December 31, 1999
and 1998
Independent Auditors' Report
Consolidated Balance Sheet
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Financial Statements
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>
<PAGE>
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 inter-company 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], Accounting for 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 anti-dilutive.
(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.
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], Accounting for 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 Internet/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
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- ---------------------
None; not applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
- --------------------------------------------------
Identification of Directors and Executive Officers
- --------------------------------------------------
The following table sets forth the names of all current directors
and executive officers of the Company. These persons will serve until the
next annual meeting of the stockholders or until their successors are elected
or appointed and qualified, or their prior resignation or termination.
<TABLE>
<CAPTION>
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
- ---- ---- ----------- --------------
<S> <C> <C> <C>
Jeffrey Olweean President 6/98 *
Director 6/98 *
Nicole Leigh Vice President 6/98 *
Director 6/98 *
Barbara Fytton Director 6/98 12/99
</TABLE>
* These persons presently serve in the capacities
indicated.
Business Experience.
- --------------------
Jeffrey Olweean, Director and President. Mr. Olweean is 36 years of
age. Mr. Olweean has been involved in the securities and computer industries
for the past 12 years. His business experience includes raising financing for
various companies, both public and private, overseeing the implementation of
business plans for public companies and securities trading. Mr. Olweean is a
1986 graduate of Michigan State University.
Nicole Leigh, Director and Vice President. Ms. Leigh is 28 years of
age. In addition to her involvement with the Company, she has handled broker
and investor relations for various public corporations. Her responsibilities
have included the researching and production of newsletters, press releases
and general promotion of the investor relations firm Chez Inc. Ms. Leigh's
prior business experience also includes graphic design and Internet web site
design.
Significant Employees.
- ----------------------
None; not applicable.
Family Relationships.
- ---------------------
Jeffrey Olweean and Nicole Leigh are brother and sister.
Involvement in Certain Legal Proceedings.
- -----------------------------------------
During the past five years, no present or former director, executive
officer or person nominated to become a director or an executive officer of
the Company:
(1) was a general partner or executive officer of any business
against which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended or vacated.
Compliance with Section 16(a) of the Exchange Act.
- --------------------------------------------------
Each of the Company's directors and executive officers filed a Form
3 Initial Statement of Beneficial Ownership of Securities with the Securities
and Exchange Commission on or about May 19, 1998. To the best knowledge of
management, all reports required to be filed by members of management under
Section 16(a) of the 1934 Act have been filed.
Item 10. Executive Compensation.
-----------------------
Cash Compensation.
- ------------------
The following table sets forth the aggregate compensation paid by
the Company for services rendered during the periods indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
ities All
Name and Year or Other Rest- Under- LTIP Other
Principal Period Salary Bonus Annual rictedlying Pay- Comp-
Position Ended ($) ($) Compen-Stock Optionsouts ensat'n
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey
Olweean 12/31/99 $71,000 0 0 0 0 0 0
President, 12/31/98 $13,128 0 0 0 0 0 0
Director
Nicole
Leigh 12/31/99 $75,975 0 0 0 0 0 0
V.President 12/31/98 $14,391 0 0 0 0 0 0
Director
Barbara
Fytton 12/31/99 0 0 0 0 0 0 0
Director 12/31/98 0 0 0 0 0 0 0
</TABLE>
Except as stated below, no cash compensation, deferred compensation
or long-term incentive plan awards were issued or granted to the Company's
management during the calendar years ended December 31, 1999 and 1998.
Further, no member of the Company's management has been granted any option or
stock appreciation right; accordingly, no tables relating to such items have
been included within this Item.
The Company has an informal arrangement for issuance of
"unregistered" and "restricted" stock to employees whose performance is deemed
to have been particularly beneficial to the Company.
Compensation of Directors.
- --------------------------
There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as director. No
additional amounts are payable to the Company's directors for committee
participation or special assignments.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements.
- -------------
There are no employment contracts, compensatory plans or
arrangements, including payments to be received from the Company, with respect
to any director or executive officer of the Company which would in any way
result in payments to any such person because of his or her resignation,
retirement or other termination of employment with the Company or its
subsidiaries, any change in control of the Company, or a change in the
person's responsibilities following a change in control of the Company.
Nor are there any agreements or understandings for any director or
executive officer to resign at the request of another person; none of the
Company's directors or executive officers is acting on behalf of or will act
at the direction of any other person.
Bonuses and Deferred Compensation
- ---------------------------------
None.
Compensation Pursuant to Plans
- ------------------------------
None.
Pension Table
- -------------
None; not applicable.
Other Compensation
- ------------------
None.
Termination of Employment and Change of Control Arrangements
- ------------------------------------------------------------
None.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
Security Ownership of Certain Beneficial Owners.
- ------------------------------------------------
The following table sets forth the share holdings of those persons
who own more than five percent of the Company's common stock as of March 28,
2000. Each of these persons has sole investment and sole voting power over
the shares indicated.
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Shares Beneficially Owned of Class
- ---------------- ---------------------------- --------
<S> <C> <C>
Barbara Fytton 1,489,800 11.2%
4 Cavendish Court,
Cardigan Road
Richmond, Surrey
England TW106BL
Interactive Business
Concepts, Inc. 2,900,000* 21.7%
777 Bayshore Drive, #404
Ft. Lauderdale, FL 33304
Richard K. Goldring 1,600,000* 12.0%
5 Fox Chase Drive
Watchung, New Jersey 07060
Nicole Leigh 1,452,900 10.9%
215 NE 23rd Street W309
Wilton Manors, FL 33305
Jeffrey Olweean 1,452,900 10.9%
3850 Galt Ocean Drive 706
Ft. Lauderdale, FL 33308
--------- ------
TOTALS 8,895,600 66.7%
</TABLE>
* Richard K. Goldring is a minor stockholder of Interactive Business
Concepts, Inc. The share holdings of Richard K. Goldring include
100,000 shares owned by Irina Goldring, his wife.
Security Ownership of Management.
- ---------------------------------
The following table sets forth the share holdings of the Company's
directors and executive officers as of March 28, 2000. Each of these
persons has sole investment and sole voting power over the shares indicated.
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Shares Beneficially Owned of Class
- ---------------- ---------------------------- ----------
<S> <C> <C>
Nicole Leigh 1,452,900 7.4%
215 NE 23rd Street W309
Wilton Manors, FL 33305
Jeffrey Olweean 1,452,900 7.4%
3850 Galt Ocean Drive 706
Ft. Lauderdale, FL 33308
--------- ------
All directors and executive
officers as a group (2) 2,905,800 14.8%
</TABLE>
Changes in Control.
- -------------------
There are no present arrangements or pledges of the Company's
securities which may result in a change in control of the Company.
Item 12. Certain Relationships and Related Transactions.
-----------------------------------------------
Except for the following references, there have been no material
transactions between the Company and any director, executive officer, nominee
to become a director or executive officer, 5% stockholder, parent or promoter
during the last fiscal year; for information about transactions with current
members of management prior to their election to these capacities, see the
Company's 8-K and 8-KA Current Reports dated June 22, 1998. See Part III,
Item 13. Also see the heading "Business Development" of Part I, Item,
regarding the Sunrise transaction, which involved a 5% stockholder of the
Company.
Parents of the Issuer.
- ----------------------
The Company has no parents.
Item 13. Exhibits and Reports on Form 8-K.
---------------------------------
Reports on Form 8-K
8-K Current Report dated December 30, 1999.
Exhibits*
(i)
Where Incorporated
in this Report
--------------
10-KSB Annual Report for the year Part I
ended November 30, 1997
10-KSB Annual Report for the year Part I
ended December 31, 1998
8-K Current Report dated June 22, Part I
1998
8-K Current Report dated December Part I
30, 1999
8-KA Current Report dated December Part I
30, 1999
Articles of Amendment to Articles of Part I
Incorporation, filed August 20, 1998
Definitive Information Statement filed with Part I
the Securities and Exchange Commission on
July 28, 1998
(ii)
Exhibit
Number Description
- ------ -----------
21 Subsidiaries
27 Financial Data Schedule
* Summaries of all exhibits contained within this
Report are modified in their entirety by reference
to these Exhibits.
** These documents and related exhibits have been
previously filed with the Securities and Exchange
Commission and are incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.
THE INTERNET ADVISORY CORPORATION
Date: 3/29/2000 By /s/ Jeffrey Olweean
-------------- --------------------------------------
Jeffrey Olweean, Director and
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this Report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates indicated:
THE INTERNET ADVISORY CORPORATION
Date 3/29/2000 By /s/ Jeffrey Olweean
------------- ------------------------------------
Jeffrey Olweean, Director and
President
Date: 3/29/2000 By /s/ Nicole Leigh
------------- ------------------------------------
Nicole Leigh, Director and Vice
President
SUBSIDIARIES
The Company does not have any subsidiaries; however, it has registered
the use of the following business names, in addition to "The Internet Advisory
Corporation:"
Internet Academy
Hostfacility.com
Sunrise Web Development, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 57087
<SECURITIES> 0
<RECEIVABLES> 19253
<ALLOWANCES> 7824
<INVENTORY> 0
<CURRENT-ASSETS> 687615
<PP&E> 609856
<DEPRECIATION> 101681
<TOTAL-ASSETS> 1262751
<CURRENT-LIABILITIES> 255932
<BONDS> 0
0
0
<COMMON> 13344
<OTHER-SE> 993475
<TOTAL-LIABILITY-AND-EQUITY> 1262751
<SALES> 586602
<TOTAL-REVENUES> 586602
<CGS> 278174
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1890470
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 770
<INCOME-PRETAX> (1580206)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1580206)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1580206)
<EPS-BASIC> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
