<PAGE>1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended February 29, 2000
[ ] 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, 102 Lobby Level, 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)
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: 1,107,333 shares of Common
Stock, par value $0.0001 per share, as of March 31, 2000.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Page 1 of 23 pages contained in sequential numbering system.
The Exhibit Index may be found on Page 21 in the sequential page numbering.
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PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Internet Stock Market Resources, Inc.
(hereinafter referred to as the "Registrant" or "Company")
Registrant prepared the accompanying unaudited financial statements from its
books and records. In Management's opinion, these financial statements
present fairly in all material respects Registrant's financial condition and
changes therein as of February 29, 2000, and the results of operations and
cash flows for the period, in conformity with generally accepted accounting
principles (GAAP). The financial statements do not include all information
and footnotes required by GAAP.
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INTERNET STOCK MARKET RESOURCES, INC.
<TABLE>
<CAPTION>
BALANCE SHEETS
(unaudited)
As of
February 29, 2000
($)
<S> <C>
ASSETS
CURRENT ASSETS
Cash on hand -
Accounts receivable 47,355
Allowance for doubtful accounts (3,381)
Net accounts receivable 43,974
-------
Total current assets 43,974
-------
PROPERTY AND EQUIPMENT
Office equipment 57,104
Less: Accumulated depreciation (25,470)
-------
Total property and equipment 31,634
-------
OTHER ASSETS
Deferred offering costs 36,895
Recoverable income taxes 4,539
Recoverable state income taxes 1,389
Deposits 1,000
-------
Total other assets 43,823
-------
Total assets 119,431
========
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LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
Bank overdraft 1,695
Accounts payable 32,053
Accrued interest payable 8,345
Payroll liabilities 113
Accrued professional fees 2,600
Deferred revenue 23,249
-------
Total current liabilities 68,055
-------
LONG-TERM LIABILITIES
Shareholder advance 17,000
Note payable (6% interest) 556,464
-------
Total long-term liabilities 573,464
-------
Total liabilities 641,519
-------
DEFICIENCY IN ASSETS
Common stock, par value $0.0001 per
share, 50,000,000 shares
authorized, 719,778 shares
outstanding 72
Preferred stock, par value $0.01 per
share, 10,000,000 shares
authorized, 0 shares outstanding 0
Additional paid-in capital 560,861
Deficit (1,083,021)
----------
Deficiency in assets (522,088)
----------
Total liabilities and deficiency
in assets 119,431
========
</TABLE>
See accompanying notes.
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INTERNET STOCK MARKET RESOURCES, INC.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
February 29, February 29,
2000 1999 2000 1999
($) ($) ($) ($)
<S> <C> <C> <C> <C>
REVENUES 44,705 53,137 278,531 150,498
------ ------ ------- -------
EXPENSES
Bad debts - 51,413 9,081 51,413
Depreciation & amortization 2,870 2,821 8,610 8,374
Office rent 1,686 3,371 7,792 10,112
General and administrative 18,231 28,142 118,651 104,271
Interest 8,345 7,975 25,297 19,367
Professional fees 17,478 - 38,357 67,698
Telephone 7,843 4,171 20,136 14,808
------- ------- ------- -------
TOTAL EXPENSES 56,453 97,893 227,924 276,042
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS BEFORE
TAXES (11,730) (44,756) 50,607 (125,545)
PROVISION FOR INCOME TAXES (CREDITS) (3,988) (12,860) 16,839 (41,135)
TAX BENEFIT FROM UTILIZATION OF NET
OPERATING LOSS CARRYFORWARDS 3,988 - (16,839) -
NET INCOME (LOSS) (11,730) (31,896) 50,607 (84,410)
======= ======= ======= =======
BASIC NET INCOME (LOSS) PER COMMON
SHARE* (0.02) (0.06) 0.07 (0.20)
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
|------------Number of Shares----------|
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE SHARES OUTSTANDING* 719,778 496,089 697,556 422,504
======= ======= ======= =======
</TABLE>
*Common Stock shares outstanding have been retroactively adjusted to reflect
a one-for-nine reverse split of all Common shares that occurred on June 30,
1999.
See accompanying notes.
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INTERNET STOCK MARKET RESOURCES, INC.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
February 29,
2000 1999
($) ($)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) income 50,607 (84,410)
Adjustments to reconcile cash flow:
Depreciation and amortization 8,610 8,374
Changes in assets and liabilities
Decrease (increase) in current assets:
Accounts receivable 12,308 22,039
Other current assets - 60,440
Increase (decrease) in current liabilities:
Accounts payable 20,857 5,091
Accrued and other liabilities (51,526) (45,411)
Deferred income (79,139) -
------- -------
NET CASH (USED) PROVIDED BY OPERATIONS (38,283) (33,877)
------- -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (86,198) 73,975
------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of equipment - -
------- -------
NET CASH USED BY INVESTING ACTIVITIES 0 6,663
------- -------
(DECREASE) INCREASE IN CASH (124,481) 40,098
CASH, BEGINNING 122,786 -
------- -------
CASH (BANK OVERDRAFT), ENDING (1,695) 46,761
======= =======
</TABLE>
See accompanying notes.
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NOTES TO FINANCIAL STATEMENTS (unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
BUSINESS ACTIVITY Internet Stock Market Resources, Inc., provides business
and advertising information and design on behalf of its clients, which are
generally smaller, growing public companies, to end users using the Internet.
Internet Stock Market Resources' portal includes links 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 Internet Stock
Market Resources' 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 the 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 and
for the three and nine months ended February 29, 2000 and 1999 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- and
nine-month periods ended February 29, 2000 are not necessarily indicative of
the results that may be expected for the year ending May 31, 2000.
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
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of all outstanding common stock shares.
CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows,
Internet Stock Market Resources 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
Internet Stock Market Resources to a concentration of credit risk, are cash
and cash equivalents and accounts receivable. The Company currently maintains
its day-to-day operating cash balances at a single financial institution. At
times, cash balances may be in excess of the FDIC insurance limits.
As of February 29, 2000 and 1999, Internet Stock Market Resources 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. Internet Stock Market Resources' 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 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.
BASIC NET INCOME (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 periods ended February 29, 2000 and
February 28, 2000.
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
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tax consequences of the difference in events that have been recognized in
Internet Stock Market Resources' 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 Internet Stock Market Resources' 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 $1,000,000 in the form of a promissory note payable with 6%
interest per annum, issued by the Surviving Corporation (Internet Stock Market
Resources, Inc.) This note was due upon demand by the holder, but subsequently
changed to allow the Company to accumulate sufficient working capital. The
shareholder is an officer and director of Internet Stock Market Resources.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
February 29, May 31, May 31,
2000 1999 1998
($) ($) ($)
<S> <C> <C> <C>
Office equipment 57,104 57,104 55,526
Accumulated depreciation (25,470) (16,860) (5,553)
------ ------ ------
Property and equipment, net 31,634 40,244 49,973
====== ====== ======
</TABLE>
Total depreciation expense for the nine months ended February 29, 2000 and
February 28, 1999, amounted to $8,610 and $8,310, respectively.
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4. ACCRUED AND OTHER LIABILITIES
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
Current Year
to Date 1999 1998
($) ($) ($)
<S> <C> <C> <C>
Accrued compensation and related taxes 113 20,150 6,900
Professional fees 2,600 848 196
Deposit on potential purchase of stock - - 50,000
------ ------ ------
2,713 20,998 57,096
====== ====== ======
</TABLE>
5. STOCKHOLDERS' EQUITY
Internet Stock Market Resources has authorized 50,000,000 shares of common
stock with a par value of $.0001 per share. At February 29, 2000 and 1999,
719,778 shares and 496,089 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. The Board of Directors has designated 933,333 of
these shares of preferred stock as Class A. The primary features of the Class
A preferred shares are as follows: (a) Each issued and outstanding Class A
preferred stock share is exchangeable for two shares of Internet Stock Market
Resources common stock; (b) for one year from the issue date, the exchange
price is $2; (c) after one year, the exchange price is the market bid price
for two shares of Internet Stock Market Resources common stock; (d) the
market bid price to be used otherwise in calculation of exchange price is the
bid price at 4:00 p.m. on the previous business day on the national exchange
on which Internet Stock Market Resources common stock trades; (e) the
previous day will be the day prior to notification via United States Postal
Service; (f) Class A preferred stock has no voting rights; (g) other than
liquidation rights to the extent of par value, which is $0.01 per share
preferred, the Class A preferred stock has no preemptive or other special
rights unless granted by law or statute; (h) Class A preferred stock has no
rights to dividends of any kind; (i) the Board of Directors can declare a
Class A preferred stock dividend if it wishes to, but if it does declare such
a dividend, that does not mean the Class A preferred stock has any right to
dividends after that; (j) if any part of the designation of the Class A
preferred stock is held invalid, the rest of the class's designation is still
valid.
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PRIVATE OFFERING In August 1998, the Board of Directors authorized Internet
Stock Market Resources to offer and sell to foreign investors up to 444,444
shares of its 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, and the offering was neither legally binding nor probable
until such time after the merger as the offering was consummated), 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 $54,960, with payment in July 1999.
PUBLIC OFFERING On February 11, 2000, a Form SB-2 registration statement
pursuant to a public offering of securities of the Company was declared
effective by the United States Securities and Exchange Commission. From the
effective date to February 29, 2000, none of the securities so registered were
sold. (See Notes 7 and 9, below.)
6. INCOME TAXES
For the year ended May 31, 1999, Internet Stock Market Resources 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
Internet Stock Market Resources 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 Internet Stock Market Resources' ability to generate sufficient
taxable income during the carryforward periods and no further significant
changes in ownership.
Internet Stock Market Resources 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.
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7. COMMITMENTS AND CONTINGENCIES
LEASED PREMISES Internet Stock Market Resources leases its 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 expenses for the nine
months ended February 29, 2000 and February 28, 1999, were $7,792 and $9,789,
respectively. At February 29, 2000, future minimum lease payments under the
lease agreement totaled $12,364.
CONSULTING AGREEMENTS From time-to-time, Internet Stock Market Resources
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 of and negotiation with potential
sellers of assets.
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. Internet Stock Market Resources
has conducted a thorough assessment of its key computer systems and
software applications and has determined that they are Year 2000 compliant.
Based on review of its systems subsequent to January 1, 2000, Internet Stock
Market Resources has found no problems attributable to Year 2000 non-compliant
systems or components; as such the cost of addressing the Year 2000 issue did
not have, and will not likely have, a material impact on Internet Stock Market
Resources' financial position or results of operations.
On June 30, 1999, a letter of intent was signed by Internet Stock Market
Resources and Delcor Industries, Inc. (Delcor) to acquire 100% of Delcor for
cash and debt. The letter of intent has since expired, and Internet Stock
Market Resources is not currently in discussions with Delcor.
GOING CONCERN The accompanying financial statements have been prepared
assuming Internet Stock Market Resources will continue as a going concern.
Internet Stock Market Resources has suffered recurring losses from operations
and at February 29, 2000, had a working capital deficit and a deficiency in
assets. These and other factors raise substantial doubt about Internet Stock
Market Resources' 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.
MANAGEMENT'S PLANS Management has decided to address Internet Stock Market
Resources' financial situation by the following:
* The proceeds from sale of 133,333 additional shares of common stock for
$54,960 as part of its foreign private placement, was received in July 1999.
* The note payable stockholder has been restructured and will not be
satisfied until Internet Stock Market Resources has an acceptable working
capital.
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* On February 11, 2000, a public offering of the Company's securities was
declared effective by the United States Securities and Exchange Commission;
this offering provides for Internet Stock Market Resources to raise as much as
approximately $8,333,330 from the general public.
* Purchase of the operating assets 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. The procurement of such assets would be significant to Internet Stock
Market Resources but would be improbable if Internet Stock Market Resources is
unable to fund the purchases.
* Increase promotional expenditures in an effort to increase revenues.
8. OTHER EVENTS
REVERSE STOCK SPLIT During the first half of calendar year 1999, the common
stock of Internet Stock Market Resources 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 Internet Stock Market
Resources' ability to make acquisitions or asset purchases using Internet
Stock Market Resources' common stock. As a result of the above, effective on
June 30, 1999, Internet Stock Market Resources reverse split its 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 February 29, 2000 financial statements.
SALE OF COMMON STOCK On June 14, 1999, Internet Stock Market Resources sold
the remaining 133,333 shares of its common stock from its private placement
for $54,960; payment was received in July of 1999.
9. SUBSEQUENT EVENTS
Pursuant to a current public offering of the Company's securities (see Notes 5
and 7, above), from March 1 through March 31, 2000, the Company sold 83,000
Units of its securities, resulting in the issuance of 332,000 shares of the
Company's Common Stock and 83,000 shares of its Class A Preferred Stock.
Proceeds from these sales totaled $830,000.
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<PAGE>14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SAFE HARBOR -- The Private Securities Litigation Reform Act of l995 provides
a "safe harbor" for forward-looking statements. Certain information included
in this quarterly report on Form 10-QSB contain statements that are forward-
looking, such as statements relating to the future anticipated development
activities, plans for future expansion, various activities, planned capital
expenditures, future funding sources, anticipated sales growth and potential
contracts. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the
future, and accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of Internet Stock Market
Resources, Inc. These risks and uncertainties include, but are not limited
to, those relating to development and expansion activities, dependence on
existing management, financing activities, domestic and global economic
conditions, change in Federal or state laws, and market competition factors.
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
transaction as if it were a "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 six months
ended November 30 of the current fiscal year.
Revenues for the nine months were $278,531 against revenues for the year-
previous period of $150,498, marking a rise of 85%. For the third quarter of
the current fiscal year, revenues were $44,705, down 46% from the previous
three months of this fiscal year and down 16% from third-quarter results for
the previous fiscal year. Although substantially higher than last year's nine-
month results, revenues for the third quarter of this year were dramatically
weaker than last quarter's results, and lower than the year-earlier third
quarter's; this decline in revenues has occurred in two consecutive quarters,
and this quarter's revenues were weak enough to cause a net operating loss, as
fixed costs again became dominant in the Company's cost structure.
Expenses fell 42.3% from the year-previous quarter's, with much of this
reduction due to the internalization of costs of professional services now
handled by Company personnel, in addition to generally greater fiscal
discipline Management has been able to impose. From the second quarter to the
third quarter of the current fiscal year, total expenses declined 28.0%, this
decrease being largely due to variable costs that followed sales activity
downward, and substantial costs associated with the preparation of the
registration statement having to be capitalized rather than expensed. For the
year-previous nine months, total expenses were 183% of revenues, while they
are 82% of revenues for the current fiscal year to date, up from 73% of
revenues for the first half of the current fiscal year.
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At February 29, 2000, the Company's net cash position was negative: although
tighter cash management controls had been put into place because of previous
liquidity problems, the decline in cash caused by the drop in sales revenue,
coupled with the costs associated with the preparation of the registration
statement and the commencement of the offering described above, served to
cause an overdraft of almost $1,700 at February 29, 2000. The Company accepted
a shareholder advance of $17,000 during the quarter.
Current assets at February 29, 2000 were 42.4% less than they were one year
earlier, and they were 32.2% less than they were at November 30, 1999. Both of
these declines are largely attributable to declines in cash, although the
quarter-over-quarter fall in revenues also contributed to a greater-than 20%
decline in accounts receivable, as well, exacerbating the erosion of the base
of current assets.
The rise of more than 7.5% in total assets from the previous quarter, despite
the marked decline in current assets, is entirely due to the offering costs
that have been capitalized. Management anticipates that further offering costs
will be incurred as the offering progresses over the 180 days from February
11, 2000.
Current liabilities rose modestly from November 30, 1999 to February 29, 2000,
moving from $64,885 to $68,055, which represents an increase of less than 5%.
The Company's current ratio (current assets divided by current liabilities, a
measure of the Company's ability to meet short-term obligations with
relatively liquid resources) eroded significantly, falling to 0.65X from 1.14X
at November 30, 1999 and 2.8X at February 28, 1998. (Note that the
year-previous level of current liabilities discussed here does not include a
note payable that has, since year-previous results were reported, been
re-assigned to long-term liabilities.)
The Company's long-term liabilities - now consisting of a note payable to a
shareholder and a shareholder advance - have declined by 21.3% from February
28, 1999 (as long-term liabilities would have been stated with the assignment
of the note payable as it is now recognized), but has risen by $17,000 from
November 30, 1999, that rise being the amount of the shareholder's advance
received during the quarter. While Management is committed to the retirement
of the obligations constituting long-term liabilities, the Company's cash
situation has not warranted any recent payments on principle. Management
anticipates this situation changing with the proceeds from the
previously-described offering.
The Company's total liabilities rose by 3.2% since November 30, 1999, this
being mostly the result of the shareholder advance noted above. Year over
year, the Company's total liabilities fell by 15.2%, evidencing Management's
long-term effort to reduce total liabilities to lessen the financial risk
the Company bears; given that Management can successfully institute a recovery
of sales revenue to provide cash, and given that proceeds of the current
offering will also provide liquidity, Management believes such a planned
reduction in total liabilities is entirely feasible.
15
<PAGE>16
Due to the net loss the Company suffered for the quarter ended February 29,
2000, its deficiency in assets widened to about $522,000 from slightly more
than -$510,000 at November 30, 1999, but is still about 20% less than it was a
year ago. It is Management's judgment that, over the long term, the
contraction of the Company's deficiency in assets will continue, again
provided sales revenue can recover. This analysis does not take into account
the effect that a successful sale of the securities in the offering described
previously would have: in the event that some or all of the contemplated
proceeds of that offering are realized by the Company, the effect on the
deficiency in assets could range from narrowing it slightly to completely
eliminating it.
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 gave the parties until August 1, 1999 to sign a purchase
agreement to finalize the acquisition. Subsequent to the expiration of that
letter, by verbal agreement, the parties thereto had discussed the purchase of
the operating assets of Delcor. Those discussions have now ceased.
On September 25, 1999, the Company filed with the Securities and Exchange
Commission a registration statement on Form SB-2 pursuant to a contemplated
offering of securities. On February 11, 2000, the United States Securities and
Exchange Commission declared the registration statement, as amended,
effective. Through the offering, the Company plans to sell as many as 833,333
Units of its securities at $10 per Unit, where each Unit consists of four
shares of Common Stock of the Company and one share of Class A Preferred Stock
of the Company (see Part II, Item 2(a) of this Report for a description of the
Class A Preferred Stock).
MANAGEMENT'S PLANS Although this quarter's loss was narrow, being less than
$12,000, Management is now focusing much more heavily on the sales aspect of
its core business. As noted in last quarter's Management Discussion and
Analysis, the Company had been in the process of having a public offering
qualified by the United States Securities and Exchange Commission. Because the
Company has fewer than six employees, each had to take on a substantial burden
with respect to the preparation of the Form SB-2 registration statement and
the seven amendments thereto; these same individuals are responsible for all
sales revenue generated by the Company, so the time put into preparation of
the prospectus and other components of that registration statement directly
and adversely affected their time producing sales revenue. The registration
statement was declared effective on February 11, 2000, so Management has been
able, since that date, to return to its primary duties. Management is
optimistic that it can, over the next several quarters, regain not just the
level of, but also the growth in, sales that it had achieved during the Spring
and Summer of calendar year 1999.
With respect to the cash deficit at February 29, 2000, Management believes
that the original liquidity management plan was adequate for most normal
circumstances in which the Company would find itself, and proceeds from the
offering will be adequate for future operations.
Management's efforts to address the Company's financial situation have
included the following:
16
<PAGE>17
* The Company has demonstrated in the past that it can increase revenues
through aggressive marketing of its Internet-related services, and that this
growth can occur at diminishing marginal expenses; therefore, while Management
anticipates a successful offering of its securities (see above), the focus of
the Company's personnel will continue to be development of the core business
of Internet-based corporate profiling.
* In July of the current fiscal year, the Company received $54,960 from the
sale of 133,334 additional shares of Common stock as part of its foreign
private placement.
* During the current fiscal year, a note payable to a stockholder was
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.
* As noted above, on February 11, 2000, a registration statement on Form SB-2
filed by the Company was declared effective by the United States Securities
and Exchange Commission; the anticipated proceeds would provide for the
Company with as much as $8,333,330 from the general public. Such proceeds
would not only increase considerably the liquidity of the Company, but would
also allow it to buy other companies' operating assets to create subsidiaries
that would provide long-term sources of cash flow for the Company. Subsequent
to the end of the quarter that is the subject of this Report, the Company
commenced sales of securities in this offering: at March 31, 2000, the Company
had sold 83,000 Units, resulting in cash proceeds of $830,000 and the issuance
of 332,000 new shares of Common Stock and 83,000 shares of Class A Preferred
Stock.
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. Provided Management can regain its ability to sustain and
increase sales revenues quarter over quarter, Management anticipates no
material, impending, adverse contingencies 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
final assessment of its key computer systems and software application
and has found them to have been Year 2000 compliant. Management has determined
that the cost of addressing the Year 2000 did 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.
On November 24, 1999, the Board of Directors of the Company designated nine
hundred thirty-three thousand three hundred thirty-three (933,333) of its
authorized preferred shares as Class A Preferred Stock of the corporation.
The material features of this designation are as follows:
* Each Class A Preferred Stock share is convertible into two shares of ISMR
Common Stock.
* For one year from the issue date, the conversion price is $2.
* After one year, the conversion price is the market bid price for two shares
of ISMR Common Stock.
* The market bid price to be used otherwise in calculation of conversion
price is the bid price at 4:00 p.m. on the previous business day on the
national exchange on which ISMR Common Stock trades.
* The "previous day" will be the day prior to notification via United States
Postal Service.
* Class A Preferred Stock has no voting rights.
* Other than liquidation rights to the extent of par value, which is $0.01
per share Preferred, the Class A Preferred Stock has no preemptive or other
special rights unless granted by law or statute.
* Class A Preferred Stock has no rights to dividends of any kind.
* The Board of Directors can declare a Class A Preferred Stock dividend if it
wishes to, but if it does declare such a dividend, that does not mean the
Class A Preferred Stock has any right to dividends after that.
* If any part of the designation of the Class A Preferred Stock is held
invalid (by a court, for example), the rest of the class's designation is
still valid.
(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.
(1) In July of 1999, the Company sold 133,334 shares of its Common
stock for $54,960 in a foreign private placement.
18
<PAGE>19
(3) In February of 2000, the Company issued to certain of its officers a
total of 55,556 shares of Common Stock for aggregate par value.
These securities are restricted within the meaning of
17 CFR 230.144.
ITEM 5. Other Information
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 expired on August 1, 1999. Since the expiration of that
letter if intent, the Company has ceased negotiations to acquire the
operating assets of Delcor.
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.
None
19
<PAGE>20
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Internet Stock Market Resources, Inc.
(Registrant)
DATE: 4/14/00 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 THREE AND NINE MONTHS ENDED FEBRUARY 29, 2000 AND
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 9-MOS 9-MOS
<FISCAL-YEAR-END> MAY-31-2000 MAY-31-1999 MAY-31-2000 MAY-31-1999
<PERIOD-START> DEC-01-1999 DEC-01-1998 JUN-01-1999 JUN-01-1998
<PERIOD-END> FEB-29-2000 FEB-28-1999 FEB-29-2000 FEB-28-1999
<CASH> 0 46,761 0 46,761
<SECURITIES> 0 0 0 0
<RECEIVABLES> 43,355 31,145 43,355 31,145
<ALLOWANCES> 3,381 (1,157) 3,381 (1,157)
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 43,974 76,348 43,974 76,348
<PP&E> 57,104 56,489 57,104 56,489
<DEPRECIATION> (25,470) (13,882) (25,470) (13,882)
<TOTAL-ASSETS> 119,431 119,410 119,431 119,410
<CURRENT-LIABILITIES> 68,055 756,212 68,055 756,212
<BONDS> 573,464 0 573,464 0
0 0 0 0
0 0 0 0
<COMMON> 72 65 72 65
<OTHER-SE> (522,016) (636,867) (522,016) (636,867)
<TOTAL-LIABILITY-AND-EQUITY> 119,431 119,410 119,431 119,410
<SALES> 44,705 53,137 278,531 150,498
<TOTAL-REVENUES> 44,705 53,137 278,531 150,498
<CGS> 0 0 0 0
<TOTAL-COSTS> 0 0 0 0
<OTHER-EXPENSES> (48,090) (89,918) (202,627) (256,675)
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> (8,345) (7,975) (25,297) (19,367)
<INCOME-PRETAX> (11,750) (44,756) 50,607 (125,545)
<INCOME-TAX> 0 12,860 0 41,135
<INCOME-CONTINUING> (11,750) (31,896) 50,607 (84,410)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (11,750) (31,896) 50,607 (84,410)
<EPS-BASIC> (0.02) (0.06) 0.07 (0.20)
<EPS-DILUTED> (0.02) (0.06) 0.09 (0.20)
</TABLE>
