Form 10-QSB
Amendment 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
[X] Quarterly report pursuant section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended August 31, 1999
[ ] Transition report pursuant section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from ______________ to _____________.
Commission file number: 33-21481-FW
Internet Stock Market Resources, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 76-0246940
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
405 Central Avenue, Lobby, St. Petersburg, Florida 33701
(Address of principal executive offices)
(727) 896-9696
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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 registrant was required to file such reports),
and
(2) has been subject to such filing requirements for the past 90
days. Yes..X... No.......
Applicable only to corporate issuers
State the number of shares outstanding of each of the issuer's classes of
common equity, as of latest practicable date, October 11, 1999: 719,778
Transitional Small Business Disclosure Format (check one): Yes_____ No___X___
Page 1 of 15 pages contained in sequential numbering system.
The Exhibit Index may be found on Page 21 of the sequential numbering system.
<PAGE>2
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Internet Stock Market Resources, Inc.
(hereinafter referred to as the "Registrant" or "Company")
Registrant prepared the accompanying unaudited financial statements from its
books and records. In Management's opinion, these financial statements
present fairly in all material respects Registrant's financial condition and
changes therein as of August 31, 1999, and the results of operations and
cash flows for the period, in conformity with generally accepted accounting
principles.
2
<PAGE>3
INTERNET STOCK MARKET RESOURCES, INC.
f/k/a Internet Stock Exchange Corp.
BALANCE SHEETS (unaudited)
As of
August 31, 1999
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash on hand $ -
Accounts receivable, less allowance for
doubtful accounts of $4,983 at August 31,
1999 76,649
Recoverable income taxes 5,928
-------
Total current assets 82,577
PROPERTY AND EQUIPMENT
Office equipment 57,104
Less: Accumulated depreciation (19,730)
-------
Total property and equipment 37,375
DEPOSITS 1,000
-------
TOTAL ASSETS $ 120,952
========
3
<PAGE>4
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
CURRENT LIABILITIES
Bank overdraft $ 2,820
Accounts payable 20,152
Accrued and other liabilities 4,454
Deferred revenue 76,235
-------
TOTAL CURRENT LIABILITIES $ 103,661
NOTE PAYABLE TO STOCKHOLDER, 6%, DUE
JUNE 1, 2000 $ 535,991
TOTAL LIABILITIES $ 639,652
DEFICIENCY IN ASSETS
Common stock, par value $0.0001 per
share, 50,000,000 shares
authorized, 719,777 shares
outstanding $ 72
Preferred stock, par value $0.01 per
share, 10,000,000 shares
authorized, 0 shares outstanding 0
Additional paid-in capital 560,074
Deficit (1,078,846)
----------
TOTAL DEFICIENCY IN ASSETS $ (518,700)
----------
Total liabilities and deficiency
in assets $ 120,952
==========
</TABLE>
See accompanying notes.
4
<PAGE>5
INTERNET STOCK MARKET RESOURCES, INC.
f/k/a Internet Stock Exchange Corp.
STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended
August 31,
1999 1998
<TABLE>
<S> <C> <C>
REVENUES $ 151,091 48,681
EXPENSES
Bad debts 4,893 -
Depreciation & amortization 2,870 2,791
Office rent 4,420 3,370
General and administrative 50,867 37,162
Interest 8,729 5,696
Professional fees 13,759 34,737
Telephone 7,575 5,319
------- -------
TOTAL EXPENSES 93,133 89,075
------- -------
INCOME (LOSS) FROM OPERATIONS BEFORE
TAXES 57,978 (40,394)
PROVISION FOR INCOME TAXES 19,368 (14,137)
------- -------
TAX BENEFIT FROM UTILIZATION
OF NET OPERATING LOSS
CARRYFORWARDS (19,368) -
NET INCOME (LOSS) $ 57,978 (26,257)
======== =========
BASIC NET INCOME (LOSS)
PER COMMON SHARE* 0.09 (.10)
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 563,111 275,333
======== =======
</TABLE>
*August 31, 1998 weighted average number of shares outstanding of 275,334 has
been adjusted for a one-for-nine reverse split) during the quarter ended
August 31, 1999.
See accompanying notes.
5
<PAGE>6
INTERNET STOCK MARKET RESOURCES, INC.
f/k/a Internet Stock Exchange Corp.
STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended
August 31,
1999 1998
<TABLE>
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) income $ 57,978 26,257
Adjustments to reconcile cash flow:
Depreciation and amortization 2,870 2,777
Changes in assets and liabilities
Decrease (increase) in current assets:
Accounts receivable (54,307) (205)
Other current assets - (13,612)
Increase (decrease) in current liabilities:
Accounts payable 8,956 13,513
Accrued and other liabilities (19,144) 3,200
Deferred income (35,848) -
Other liabilities (1,454) -
------- -------
NET CASH (USED) PROVIDED BY OPERATIONS (38,041) 6,654
------- -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (87,565) 40,000
------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of equipment (482)
------- -------
NET CASH USED BY INVESTING ACTIVITIES 0 (482)
------- -------
(DECREASE) INCREASE IN CASH (125,606) 46,172
CASH, BEGINNING 122,786 107,653
------ ------
CASH, ENDING $ (2,820) 153,825
======= =======
</TABLE>
See accompanying notes
6
<PAGE>7
NOTES TO FINANCIAL STATEMENTS (unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
BUSINESS ACTIVITY Internet Stock Market Resources, Inc., (the Company)
provides business and advertising information and design on behalf of our
clients (generally smaller, growing public companies) to end users using the
Internet. The Company's "portal" includes hyperlinks to other financial
Websites.
Effective September 1, 1998, Internet Stock Market Resources, Inc. (formerly,
Internet Stock Exchange Corp.) acquired 100% of the shares authorized, issued,
and outstanding, consisting of 1,000 shares of Common Stock, $1.00 par value
per share, of Internet Stock Market Corp., a closely-held Florida corporation,
under an Agreement and Plan of Merger. The shareholders of Internet Stock
Market Corp. were compensated with 222,222 restricted shares of the Company's
Common Stock and a promissory note in the amount of $1,000,000.
The Surviving Corporation is duly organized under General Corporation Law of
the State of Delaware, is in good standing, and is qualified to conduct
business in any lawful jurisdiction. The Surviving Corporation has completed
all aspects of our merger/acquisition with the Non-surviving Corporation.
ACCOUNTING BASIS These financial statements reflect the merger as if it were
a "pooling of interests" of the two entities under common control in
accordance with Accounting Interpretations of the Accounting Principles Board
Opinion No. 16, "Transfers and Exchanges Between Companies Under Common
Control," which requires the assets and liabilities so transferred to be
accounted for at historical cost in a manner similar to that used in pooling
of interests accounting. Accordingly, financial information for periods prior
to the merger reflect retroactive restatement of the companies' combined
financial position and operating results.
UNAUDITED FINANCIAL STATEMENTS The unaudited financial statements as of August
31, 1999 and for the three months ended August 31, 1999 and 1998 have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three-month
period ended August 31, 1999 are not necessarily indicative of the results
that may be expected for the year ending May 31, 2000.
7
<PAGE>8
RECLASSIFICATIONS AND RESTATEMENTS Amounts in the prior year financial
statements have been reclassified for comparative purposes to conform with the
presentation of the current year financial statements. Additionally, amounts
in the prior year financial statements have been restated to give retroactive
effect to the merger for purposes of comparative financial statement
presentation. Also, issued and outstanding Common stock shares reported for
prior periods have been adjusted for a June, 1999, one-for-nine reverse split
of all outstanding Common stock shares.
CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the
Company considers all highly liquid debt securities purchased with a maturity
of three months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK Financial instruments, which potentially subject
the Company to a concentration of credit risk, are cash and cash equivalents
and accounts receivable. The Company currently maintains our day-to-day
operating cash balances at a single financial institution. At times, cash
balances may be in excess of the FDIC insurance limits. The amounts in excess
were $21,851 and $8,672 at May 31, 1999 and 1998, respectively.
As of May 31, 1999 and 1998, the Company had outstanding trade receivables,
which carrying value of these receivables was reduced for estimated
uncollectibility to estimated fair market value by an allowance for doubtful
accounts. The Company's clients are typically smaller publicly-traded
organizations. Consequently, the Company's ability to collect the amounts due
from clients may be affected by economic fluctuations in their industries and
geographical location, as well as fluctuations in the financial and stock
markets in general.
PROPERTY AND EQUIPMENT Property and equipment, consisting of furnishings and
equipment used in our current operations, is stated at cost, less accumulated
depreciation. Depreciation is begun when the assets are placed in service and
computed using the straight-line method over the estimated useful lives of the
assets, which range from five to seven years.
LONG-LIVED ASSETS Long-lived assets to be held and used are reviewed for
impairment whenever events or changes in circumstances indicate that the
related carrying amount may not be recoverable. When required, impairment
losses on assets to be held and used are recognized based on the fair value of
the asset. Long-lived assets to be disposed of, if any, are reported at the
lower of carrying amount or fair value less cost to sell.
SALES REVENUE Revenues from sales are recorded as the services are rendered,
when the collection of sales proceeds is reasonably assured and all other
material conditions of the sales are met. Services paid in advance on
contracts in excess of one month are deferred and recognized monthly,
pro-rata, over the term of the agreement.
ADVERTISING Advertising and business development costs are charged to
operations in the period incurred.
8
<PAGE>9
BASIC NET LOSS PER SHARE Basic net loss per common share is computed by
dividing the net income or loss available to Common Stockholders by the
weighted average number of common shares outstanding during each period. There
were no Common Stock equivalents as of the years ended May 31, 1999 and May
31, 1998.
INCOME TAXES Income taxes are computed under the provisions of the Financial
Accounting Standards Board (FASB) Statement No. 109 (FAS No. 109), Accounting
for Income Taxes. SFAS 109 is an asset and liability approach that requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of the difference in events that have been recognized in the
Company's financial statements compared to the tax returns.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS In accordance with the requirements of
Statement of Financial Accounting Standards No. 107, the fair value amounts of
financial instruments have been determined based on available market
information and appropriate valuation methodology. The carrying amounts and
estimated fair values of the Company's financial assets and liabilities
approximate fair value due to the short maturity of the instruments. The fair
value of the note payable stockholder is estimated based on an annual interest
rate of 6% and the anticipated dates of payment and has not been increased
accordingly. Fair value estimates are subjective in nature and
involve uncertainties and matters of significant judgment; therefore, fair
value cannot be determined with precision.
2. RELATED PARTY TRANSACTIONS
COMPENSATION AND CONVERSION OF SHARES The compensation to a Non-surviving
Corporation (Internet Stock Market Corp.) shareholder for his equity in that
business was $1,000,000 in the form of a promissory note payable with 6%
interest per annum, issued by the Surviving Corporation (Internet Stock Market
Resources, Inc.) This note was due upon demand by the holder, but subsequently
changed to allow the Company to accumulate sufficient working
capital. The shareholder is an officer and director of the Company.
9
<PAGE>10
3. RESTRICTED CASH
In May 1998, the Board of Directors authorized the Company to offer and sell
shares of our Common Stock under a private placement, which was subsequently
canceled. Prior to the year end, May 31, 1998, the Company received $50,000
from an investor to purchase shares of our Common Stock, which was
subsequently returned to the investor.
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Office equipment $ 57,104 $ 55,526
Accumulated depreciation (16,860) (5,553)
-------- --------
Property and equipment, net $ 40,244 $ 49,973
</TABLE>
Total depreciation expense for the years ended May 31, 1999 and 1998, amounted
to $11,307 and $5,553, respectively.
5. ACCRUED AND OTHER LIABILITIES
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Professional fees $ 20,150 $ 6,900
Accrued compensation and related taxes 848 196
Deposit on potential purchase of stock - 50,000
-------- --------
$ 20,998 $ 57,096
</TABLE>
6. STOCKHOLDERS' EQUITY
The Company has authorized 50,000,000 shares of Common Stock with a par value
of $.0001 per share. At May 31, 1999 and 1998, 586,444 shares and 275,333
shares, respectively, were issued and outstanding.
The Company has authorized 1,000,000 shares of Preferred Stock with a par
value of $.01 per share, and convertible into two shares of Common Stock for
$2 within one year of the subscription date. No Preferred shares have been
issued. Any rights and preferences will be established by the Company's Board
of Directors upon issuance.
10
<PAGE>11
PRIVATE OFFERING In August 1998, the Board of Directors authorized the
Company to offer and sell to foreign investors up to 444,444 shares of our
Common Stock at a purchase price of $.25 per share under a private placement
to foreign investors, pursuant to an exemption available under the Securities
Act of 1933, as amended. Under this offering, which was prepared prior to the
Merger (although no stock was sold nor proceeds received before the Merger),
311,111 shares were issued at prices ranging from $1.08 to $2.25 generating
net proceeds of $504,937 prior to May 31, 1999. Additional shares of 133,333
were sold in June 1999 for $72,000, with payment expected in July 1999.
7. INCOME TAXES
For the year ended May 31, 1999, the Company generated for U.S. income tax
purposes a net operating loss of approximately $93,300. This loss carryforward
expires in the year 2018. The Company had a net operating loss carryforward of
approximately $2,850,000 as of May 31, 1998. However, as of September 1, 1998,
and subsequently, there were ownership changes in the Company as defined in
Section 382 of the Internal Revenue Code. Because of these changes, the
Company's ability to utilize net operating losses and capital losses available
before the ownership change were virtually eliminated. The utilization of the
remaining carryforward is dependent on the Company's ability to generate
sufficient taxable income during the carryforward periods and no further
significant changes in ownership.
The Company computes deferred income taxes under the provisions of Statement
of Financial Accounting Standards No. 109, which requires the use of an asset
and liability method of accounting for income taxes. Under FAS No. 109,
deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
These differences result primarily from the use of the accelerated cost
recovery method of depreciation and the write-off method for accounts
receivable as opposed to the allowance method. Statement No. 109 also provides
for the recognition and measurement of deferred income tax benefits based on
the likelihood of their realization in future years. A valuation allowance
must be established to reduce deferred income tax benefits if
it is more likely than not that a portion of the deferred income tax benefits
will not be realized. It is Management's opinion that the entire deferred tax
benefit may not be recognized in future years. Therefore, a valuation
allowance equal to the deferred tax benefit has been established, resulting
in no deferred tax benefits as of the balance sheet dates.
8. COMMITMENTS AND CONTINGENCIES
LEASED PREMISES The Company leases our facilities in St. Petersburg, Florida
under a three-year lease agreement dated July 24, 1997. The lease provides for
monthly payments of $1,124. Rent expense for the years ended May 31, 1999 and
1998, was $13,482 and $12,359, respectively.
11
<PAGE>12
Future minimum lease payments under the lease agreement for years ending May
31 are as follows:
<TABLE>
<S> <C>
2000 $13,488
2001 2,248
-------
$15,736
=======
</TABLE>
CONSULTING AGREEMENTS From time-to-time, the Company engages, retains and
dismisses various consultants. The consultants provide various services
including assisting with shareholder relations, responding to inquiries, short
and long-term strategic planning, marketing the Company to the investment
community and identification and negotiation of potential acquisitions.
YEAR 2000 The year 2000 issue results from certain computer systems and
software applications that use only two digits (rather than four) to define
the applicable year. As a result, such systems and applications may recognize
a date of "00" as 1900 instead of the intended year 2000, which could
result in data miscalculations and software failures. The Company has
conducted a preliminary assessment of our key computer systems and software
application and believes they are Year 2000 compliant. Based on the initial
assessment, the Company believes the cost of addressing the Year 2000 issue
should not have a material impact on the Company's financial position or
results of operations.
POTENTIAL ACQUISITIONS On May 25, 1999, the Board of Directors authorized
negotiations with PEP Equities, Inc. for the purpose of acquiring an interest
to the extent that it would become a subsidiary of the Company.
The Company is negotiating with Micro Bytes Computer Center, Inc. for the
purchase of business assets and inventory and has executed a Letter of Intent
dated June 16, 1999. The purchase would be accomplished in part by the
issuance of restricted Common Stock by the Company, which would be given
"piggy-back" registration rights.
On June 30, 1999, a letter of intent was signed by the Company and Delcor
Industries, Inc. (Delcor) to acquire 100% of Delcor for cash and debt. The
letter of intent gives the parties until August 1, 1999 to sign a purchase
agreement to finalize the acquisition. Delcor manufactures and assembles
electronic components, and employs approximately 75 people.
GOING CONCERN The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. The Company has
suffered recurring losses from operations and at May 31, 1999, had a working
capital deficit and a deficiency in assets. These and other factors raise
substantial doubt about the Company's ability to continue as a going concern,
without additional capitalization. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
12
<PAGE>13
MANAGEMENT'S PLANS Management has decided to address the Company's financial
situation by the following:
Sale of 133,333 additional shares of Common Stock for $72,000 as part of our
foreign private placement, expected to be received in July 1999.
The note payable stockholder has been restructured and will not be satisfied
until the Company has an acceptable working capital.
An SB-2 is expected to be filed with the United States Securities and Exchange
Commission, which would provide for the Company to raise up to $5,000,000 from
the general public.
Acquisition of at least two, possibly four, additional companies in the
computer and Internet fields for a better vertical integration and to spread
general and administrative costs over a broader base. In that regard, three
letters of intent have been signed and the Company is in the process of
drafting agreements before performing our due diligence. Before proceeding
with such due diligence, the Company must first raise the necessary capital.
The acquisitions would be significant to the Company, but they are improbable
if the Company is unable to fund them.
Increase promotional expenditures in an effort to increase revenues.
10. SUBSEQUENT EVENTS
REVERSE STOCK SPLIT During the first fiscal quarter of the Company's 1998
fiscal year, the Common Stock of the Company experienced a significant decline
in the trading per share price. In addition to the detrimental effect the
lower trading price had to the shareholders, it diminished the Company's
ability to make acquisitions using the Company's Common Stock. As a result of
the above, effective on June 30, 1999, the Company reverse split our common
stock at a ratio of one new share for each nine old shares issued and
outstanding. Retroactive recognition of the reverse stock split has been given
to all share amounts reported in the May 31, 1999, and 1998 financial
statements.
SALE OF COMMON STOCK On June 14, 1999, the Company sold the remaining 133,333
shares of our Common Stock from our private placement for $72,000; however,
the amount is unpaid.
13
<PAGE>14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
On August 17, 1998, the Company changed its name to Internet Stock Market
Resources, Inc. and subsequently announced that it had merged with the
private, close Florida corporation Internet Stock Market Corp. The financial
statements herewith presented of the Surviving Corporation reflect the effect
of the "pooling of interests" of the private corporation (the "Non-surviving
Corporation") with that of the Company (the "Surviving Corporation" of the
merger/acquisition). The effective date of the merger coincides with the
first day (September 1, 1998) of the second quarter of the Company's previous
fiscal year. The discussion that follows (and all future discussions) will
exclusively address the financial statements of the "pooled," Surviving
Corporation. The Company's fiscal year ends on May 31; as such, the financial
statements herein presented are for the Company's first quarter, ended August
31, of the current fiscal year. Care should be taken when comparing the
results of the just-ended first quarter with those of the previous year, as
latter information is presented herein on a pro forma basis as if the
merger/acquisition noted above occurred during the first quarter of last
year, rather than in the second quarter. As such, analyses below will be
weighted more substantially toward comparisons of the August 31, 1999 results
with those of the quarter ended May 31, 1999.
Revenues for the Company's first quarter were $151,091, constituting an
increase 210% over revenues for the first quarter of the previous fiscal year.
Management attributes the majority of this increase to its aggressive strategy
of acquiring new business for its core business as an Internet portal for
displaying information about client corporations. Significant additions to
its book of business have afforded the Company a number of opportunities to
provide news releases about clients; these, in turn, have brought the
Company's services to the attention of even more prospective clients.
While revenues increased by more than 200% over the prior-year's first
quarter, expenses grew by less than 4.5%, reflecting the previous dominance
of the Company's fixed costs of operation that have now been overcome by
increasing revenues and the relatively modest nature of the Company's
variable costs. It is the belief of Management that, provided revenues can be
sustained and increased quarter-over-quarter, concomitant increases in
expenses will not challenge increases in profitability for the foreseeable
future. Year-over-year, the most significant changes in expenses came in the
two distinguishable categories: the first includes bad debts, which rose
from no recognition to almost $4,900, and interest, which rose 53% on
service load to the note payable; the second includes variable costs typically
associated with increasing corporate activity. In this latter category,
commissions rose by almost 31%, payroll taxes rose by 236%, salaries and
wages rose by 145%, supplies rose by 1048%, and telephone expense rose by
42%. The component of these variable costs attributable to increased
compensation to Company personnel rose by $13,916; this was offset by a
decline of $20,978 in professional fees as the Company utilized internal
human resources to carry out some duties previously handled by outside
professionals. Management is mindful that this trade-off can be carried
only to a certain extent, but believes that this gives clear evidence of the
success of aggressive expense management policies being promoted internally.
14
<PAGE>15
Although net income for the fourth quarter of the Company's previous year was
positive, this was almost entirely the result of tax credit effects. The net
income for the period just ended is entirely the result of revenues exceeding
expenses, and may be viewed as a watershed for the Company. Whereas for the
year-previous first quarter, the Company had a net loss of more than $26,000,
the Company now has achieved a net income of almost $58,000. On an earnings-
per-share basis (and adjusting the year-previous earnings for the effect of a
recent one-for-nine reverse split of all Common stock shares), the Company
earned $0.089 cents per share for the quarter just ended against a loss of
$0.095 for the year-previous first quarter.
From the previous fiscal year's fourth quarter to the first quarter herewith
reported, total assets fell from $192,301 to $120,952, representing a decline
of 37%, this erosion almost entirely due to a precipitous decline in net
cash from more than $120,000 to slightly less than zero, offset to some
extent by a rise of about $44,000 in net accounts receivable. Management is
mindful of this significantly tight cash position, and is instituting cash
management policies to prevent such short-term liquidity situations from
arising again. Current liabilities declined from the previous quarter by 61%,
although a substantial portion of this decline, $113,550, is the result of
the previous quarter's recognition of the current portion of a note payable;
excluding this item, current liabilities declined by slightly less than 31%,
although accounts payable rose by almost 80% to more than $20,000.
As previously noted by Management, the Company's current ratio continues to
improve, rising to 0.80 from the quarter-previous value of 0.58.
Nevertheless, the slightly negative cash level at August 31, 1999 should be
considered a qualification on the otherwise-improving current ratio.
From the previous quarter, the Company's deficiency in assets declined by
almost 18%, confirming for the quarter Management's prior assertions that
the asset deficiency would be steadily decreased, quarter over quarter, until
gone. Although at the current rate, the deficiency would be eliminated in
approximately five quarters, Management cautions that a deficiency may remain
somewhat longer.
During the quarter ended August 31, 1999, Management continued to focus
attention on two areas of Company activity: the Internet business, as
described above, and the acquisition of other, related enterprises. The
Company has entered into a memorandum of understanding with one such
acquisition target, Delcor Industries, a closely-held, Florida corporation
that manufactures and assembles electronic components. The closing of this
deal is predicated on the availability of funds from an offering of the
Company's securities.
The Company is negotiating with Micro Bytes Computer Center, Inc. for the
purchase of business assets and inventory and has executed a Letter of Intent
dated June 16, 1999. The purchase would be accomplished in part by the
issuance of restricted common stock by the Company, which would be given
"piggy-back" registration rights.
15
<PAGE>16
On June 30, 1999, a letter of intent was signed by the Company and Delcor
Industries, Inc. (Delcor) to acquire 100% of Delcor for cash and debt. The
letter of intent gives the parties until August 1, 1999 to sign a purchase
agreement to finalize the acquisition. Delcor manufactures and assembles
electronic components, and employs approximately 75 people. This agreement
includes a requirement for cash payment that the Company will be able to
make only if the proceeds from a contemplated offering of Company securities
is successful (see the next paragraph).
In late September, 1999, the Company filed with the Securities and Exchange
Commission a registration statement on Form SB-2 pursuant to a contemplated
offering of securities. Management is obligated to restrict Company
activities to the normal course during this period, and to not discuss
certain matters related to the offering.
MANAGEMENT'S PLANS Management is addressing address the Company's financial
situation by the following:
Continuation of growth in revenues in its core business.
As anticipated by Management, the Company has demonstrated by the current
quarter's results that it can increase revenues through aggressive marketing
of its Internet-related services. Furthermore, this growth in quarter-over-
quarter revenues has been attended by a less-than commensurate increase in
expenditures, resulting in first-time-ever pre-tax positive net income.
Management does not anticipate expenses in the foreseeable future again
challenging the revenues' ability to create profitability. Moreover, any
extraordinary expenditures the Company anticipates incurring will only be
made when and if the funds from a contemplated offering (see above) are
available.
Sale of 133,334 additional shares of Common stock for $72,000 as part of its
foreign private placement was received in July 1999.
A note payable stockholder has been restructured and will not be satisfied
until the Company has an acceptable level of working capital. Further
restructuring of this obligation, including a debt-for-equity exchange, may
be instituted. Although Management has not made a final decision with regard
to this possibility, the result would be to substantially reduce the
long-term liabilities of the Company, as well as to remove the outflow of
cash required to service this debt.
In September, 1999, a registration statement on Form SB-2 was filed with the
United States Securities and Exchange Commission; the anticipated proceeds
would provide for the Company with as much as $5,000,000 from the general
public. Such proceeds would not only increase considerably the liquidity of
the Company, but they would also afford the Company to complete anticipated
acquisitions that would also provide long-term cash flow enhancements for the
Company.
16
<PAGE>17
Management believes that, even in the absence of the net proceeds from an
offering of its securities, the Company has the ability at this time to
continue operations, particularly in light of its growth in revenues. No
material, adverse contingencies are perceived at this time, other than those
arising from the intensely competitive environment in which the Company
operates. Provided the Company can stay abreast of the changes in technology,
and provided the Company can continue to offer its existing and prospective
clients a level of services they cannot find elsewhere, the Company can
remain a going concern and be a permanent part of the information technology
landscape in the 21st Century.
YEAR 2000 The year 2000 issue results from certain computer systems and
software applications that use only two digits (rather than four) to define
the applicable year. As a result, such systems and applications may recognize
a date of "00" as 1900 instead of the intended year 2000, which could result
in data miscalculations and software failures. The Company has conducted a
preliminary assessment of its key computer systems and software application
and believes they are Year 2000 compliant. Based on the initial assessment,
the Company believes the cost of addressing the Year 2000 issue should not
have a material impact on the Company's financial position or results of
operations.
17
<PAGE>18
PART II--OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) If the instruments defining the rights of the holders of any class of
registered securities have been materially modified, give the title of the
class of securities involved and state briefly the general effect of such
modification upon the rights of holders of such securities.
In June, 1999, the Board of Directors declared a one-for-nine reverse split
of all Common stock shares of the Company, effective June 30, 1999, for
shareholders of record as of June 17, 1999. The Company herewith reports this
action, although it is Management's judgment that the reverse split, in and
of itself, should have no material effect on the shareholders or any
securities of the Company.
During the period, the Company changed the designation of its Preferred
stock authorized (par value $0.001 per share) from "Preferred" to "Convertible
Preferred." At this time, no rights, designations, or privileges have been
assigned to this class of stock, but the material effect of this change will
be that, if Preferred shares are ultimately issued by the Company, their
conversion to Common shares would dilute the existing Common stock.
(c) Furnish the information required by Item 701 of Regulation S-B (Section
228.701 of this chapter) as to all equity securities of the Registrant sold by
the registrant during the period covered by the report that were not
registered under the Securities Act.
In July of 1999, the Company sold 133,334 shares of its Common stock for
$72,000 in a foreign private placement.
ITEM 5. OTHER INFORMATION
The Company is negotiating with Micro Bytes Computer Center, Inc. for the
purchase of business assets and inventory and has executed a Letter of Intent
dated June 16, 1999. The purchase would be accomplished in part by the
issuance of restricted common stock by the Company, which would be given
"piggy-back" registration rights.
On June 30, 1999, a letter of intent was signed by the Company and Delcor
Industries, Inc. (Delcor) to acquire 100% of Delcor for cash and debt. The
letter of intent gives the parties until August 1, 1999 to sign a purchase
agreement to finalize the acquisition. Delcor manufactures and assembles
electronic components, and employs approximately 75 people.
18
<PAGE>19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (Item 601 of Regulation S-B).
(1) Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K.
(1) Form 8-K, June 24, 1999: Press release concerning one-for-nine reverse
split of Company's Common stock (Item 5).
19
<PAGE>20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Internet Stock Market Resources, Inc.
(Registrant)
DATE: 12/07/99 By: /s/ Anastasios Kyriakides
----------------------------
Anastasios Kyriakides
Chairman/Secretary/Director
20
<PAGE>21
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
27 Financial Data Schedule
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE PERIOD ENDED AUGUST 31, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1999
<PERIOD-END> AUG-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 81,632
<ALLOWANCES> (4,983)
<INVENTORY> 0
<CURRENT-ASSETS> 82,577
<PP&E> 57,104
<DEPRECIATION> (19,730)
<TOTAL-ASSETS> 120,952
<CURRENT-LIABILITIES> 103,661
<BONDS> 535,991
0
0
<COMMON> 72
<OTHER-SE> (518,772)
<TOTAL-LIABILITY-AND-EQUITY> 120,952
<SALES> 151,091
<TOTAL-REVENUES> 151,091
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (84,404)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (8,729)
<INCOME-PRETAX> 57,978
<INCOME-TAX> 0
<INCOME-CONTINUING> 57,978
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,978
<EPS-BASIC> 0.089
<EPS-DILUTED> 0.089
</TABLE>
