U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR
ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER: 33-43621
INTERNET BUSINESS'S INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware (1) 33-0845463
(State or jurisdiction of incorporation I.R.S. Employer
or organization) Identification No.)
3900 Birch Street, Suite 111, Newport 92660
Beach, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number: (949) 833-0261
Securities registered pursuant to Section 12(b) of the
Act: None
Securities registered pursuant to Section 12(g) of the
Act: None
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and
(2) been subject to such filing requirements for the
past 90 days. Yes X No .
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-
K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ]. Not Applicable.
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of September 15,
1999: Common Stock, par value $0.001 per share --
$6,908,358. As of September 15, 1999, the registrant
had 177,302,997 shares of common stock issued and
outstanding.
(1) Affective as of July 15, 1999, the registrant was
redomiciled to the State of Nevada.
TABLE OF CONTENTS PAGE
PART I
Item 1. Business 3
Item 2. Properties 16
Item 3. Legal Proceedings 16
Item 4. Submission to matters to vote
of security holders 16
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS 16
ITEM 6. SELECTED FINANCIAL DATA 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT 22
ITEM 11. EXECUTIVE COMPENSATION 22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT 23
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES
AND REPORTS ON FORM 8-K 24
SIGNATURES 25
PART I.
ITEM 1. BUSINESS.
Internet Business's International, Inc. (the
"Company"), was in the manufacturing business, these
operations ceased as of December 31, 1997. In December
1998 after new management was in place, a decision was
made to change the company into an Internet Company
offering E-commerce, internet access as an Internet
Service Provider, hosting through our own server and
other enhancements and service through and for the
Internet. It was also determined to change the
companies name to better reflect the companies
operation: Internet Business's International, Inc. The
management began after the first of the year looking
for ways to implement the Company's operations.
Introduction.
The Company, after January 1, 1999, has been engaged in
the development, operation and marketing of a number of
commercial internet web sites (as contrasted to the
pizza production business that the Company was
previously engaged in under former management). The
Company is an internet company that offers a branded
network of comprehensive information, communication and
shopping (auction) web sites, using technology which it
has either developed itself, or for which it has
acquired licenses.
The Company first announced its web sites in March of
1999. As of the date of this filing, the Company has
eight such internet web sites. Three of these web
sites act as subject-focused discussion forums on which
the web site visitor can exchange messages with other
visitors, thereby creating a community of interest
focused on a central, underlying theme. The discussion
themes for these three forums are sports, film, and
music. The license that the Company holds allows it to
quickly expand to as many different subject themes
necessary. The current discussion sites, known as
SportzFanz.com, FilmFanz.com, and TuneFanz.com derive
income from the sale of the advertising which is
displayed to the web site's visitors. The Company makes
these properties available without charge to users.
The Company's SportzFanz.com web site offers a
comprehensive, intuitive and user-friendly system to
access aggregated information content, communication
services, and user community services. The web site
includes a hierarchical, subject-based index of user-
contributed messages focused on its underlying theme of
sports discussion. Users can either browse the listings
by subject matter, or use a rapid keyword search
facility that scans the contents of the entire
directory or any subcategory within the web site.
Through sponsorship and advertising arrangements with
merchants, the Company offers its user-members the
opportunity to purchase goods and services.
Two of the other web sites, AuctionWinner.com and
U.S.Liquidators.com, provide a real-time auction
facility to its users, wherein, for a fee, the user can
list various items for public bidding and sale to the
bidder with the highest offer at the time of the
auction's closing. Two of the other web sites are
directories, MyDiner.com and CareDirectory.com, which
offer lists of restaurants and healthcare providers,
respectively. The final Company web site, L.A.
Internet offers web hosting and is an internet service
provider.
The Company believes that "User-Contributed Content,"
as embodied in the Company's internet offerings, will
allow a maximum of interesting, diverse, and
continuously-updated, web site content at minimum cost
and administrative overhead.
The following explanation will address the new business
line for the Company, as well as many of the risks
associated with this business.
Market.
The market for internet products and services is highly
competitive. There are no substantial barriers to entry
in these markets, and management expects that
competition will continue to intensify. Negative
competitive developments could have a material adverse
effect on the Company's business and on the trading
price of its stock. The Company competes with many
other providers of online navigation, information and
community services. As the Company expands the scope
of its internet services, it will compete directly with
a greater number of internet sites and other media
companies across a wide range of different online
services.
The Company also competes in vertical markets where
competitors may have advantages in expertise, brand
recognition, and other factors. Many companies offer
directly competitive products or services information
and community services, including, among others:
America Online, Inc.; Yahoo!; CNET, Inc. (Snap);
Excite, Inc.; Infoseek Corporation (including Go
network); Lycos, Inc. (including HotBot and Tripod);
Microsoft Corporation (msn.com); and Netscape
Communications Corporation (Netcenter). In the past
several months, there have been a number of significant
acquisitions and strategic plans announced among and
between these companies. These include: The Walt Disney
Company acquiring a significant interest in Infoseek;
AOL acquiring Netscape; @Home Networks, Inc., a
provider of high speed internet access serving the
cable television infrastructure and the largest
shareholder of which is AT&T, acquiring Excite, Inc.;
NBC acquiring an interest in Snap, a subsidiary of
CNET; USA Networks and Ticketmaster Online-Citysearch,
Inc. announcing that they intend to combine their
services with Lycos, Inc.
The effect of these completed and pending acquisitions
on the Company cannot be predicted with certainty, but
all of these competitors are aligned with companies
that are significantly larger or more well established
than the Company. As a result, each of them will have
access to significantly greater financial, marketing
and, in certain cases, technical resources than the
Company. For example, assuming that its acquisition by
@Home Networks is approved, Excite will significantly
enhance its access to knowledge about broadband
transmission technology.
These acquisitions, if consummated, will also result in
many of these companies gaining access to significantly
greater marketing resources. For example, the
combination of Lycos with USA Networks and Ticketmaster
Online-Citysearch, Inc. will permit Lycos to access
significant television resources for marketing and
other purposes. In addition, Infoseek and The Walt
Disney Company recently entered into an agreement
whereby Disney gains a significant interest in
Infoseek. The parties have introduced a portal and
navigation service entitled Go.com, which is supported
by Disney's substantial promotional and media
resources. Similarly, Snap, by virtue of its
relationship with NBC, has and will continue to be
supported by NBC's substantial promotional and media
resources. Several large media companies, including
both Time Warner, Inc. and CBS, have announced that
they are contemplating internet navigation services and
are attempting to become "gateway" sites for web users.
These and other competitors are expected to continue to
make substantial marketing expenditures to promote
their online properties. The Company may be required
to increase its sales and marketing expenditures
significantly in response to these efforts, which may
materially impair its operating results and may not be
successful.
The recent announcements of the proposed acquisitions
listed above will result in greater competition as they
consolidate more users of the internet on a single
service and incorporate communication and community
into their offerings. For example, Netscape announced
an agreement with Excite under which Excite will be the
most prominent navigational service within the
Netcenter web site and will therefore bring Excite's
communication and community features to the Netcenter's
users. In the future, Netscape, Microsoft and other
browser suppliers may also more tightly integrate
products and services similar to those offered by the
Company into their browsers or their browsers' pre-set
home pages. In addition, entities that sponsor or
maintain high-traffic web sites or that provide an
initial point of entry for internet users, such as the
Regional Bell Operating Companies, long-distance
providers and cable companies such as AT&T/TCI through
@Home Networks and Excite, Inc., or Internet Service
Providers ("ISPs") such as Microsoft and AOL, currently
offer and could further develop, acquire or license
internet community, communications and commerce
services that compete with those offered by the
Company. Any of these companies could take actions
that would make it more difficult for consumers to find
and use the Company's services.
A large number of web sites and online services, such
as the Microsoft Network, AOL, and Netscape
(Netcenter), other web navigation companies such as
Excite, Lycos, and Infoseek, and high-traffic e-
commerce merchants such as Amazon.com, Inc. also offer
or are expected to offer informational and community
features (such as auctions, chat services, message
boards, email and personal calendaring) that may be
competitive with the services the Company offers. A
number of companies, including Hotmail (acquired by
Microsoft) and WhoWhere? Inc. (acquired by Lycos),
offer web-based email service similar to those the
Company offers on its discussion web sites. These
companies are expected to continue to provide such
services in tandem with larger navigational sites and
online services. In order to effectively compete, the
Company may need to expend significant internal
engineering resources or acquire other technologies and
companies to provide such capabilities.
Competition for Advertising Expenditures.
The Company competes with online services, other web
site operators and advertising networks, as well as
traditional offline media such as television, radio and
print for a share of advertisers' total advertising
budgets. Management believes that the number of
companies selling web-based advertising and the
available inventory of advertising space has recently
increased substantially. Accordingly, the Company may
face increased pricing pressure for the sale of
advertisements, which could reduce its advertising
revenues. In addition, its sales may be adversely
affected to the extent that its competitors offer
superior advertising services that better target users
or provide better reporting of advertising results.
Principal Competitive Factors.
Management believes that the principal competitive
factors in its markets are: brand recognition; ease of
use; comprehensiveness; personalization; independence;
quality and responsiveness of search results and other
services; the availability of high-quality, targeted
content and focused value-added products and services;
access to end users; and with respect to advertisers
and sponsors, the number of users, duration and
frequency of visits, and user demographics.
Competition among current and future suppliers of
internet informational, communication, community and
commerce services, high-traffic web sites and ISPs, as
well as competition with other media for advertising
placements, could result in significantly lower prices
for advertising and reductions in advertising revenues.
The Company also faces competition with respect to the
acquisition of strategic businesses and technologies.
Many of its existing competitors, as well as a number
of potential new competitors, have significantly
greater financial, technical, marketing and
distribution resources than the Company does. In
addition, providers of internet tools and services may
be acquired by, receive investments from, or enter into
other commercial relationships with larger, well-
established and well-financed companies, such as
Microsoft and AOL. It is difficult to predict with
certainty what the effects will be of the proposed
acquisition of Netscape by AOL or Excite by @Home
Networks, but it will likely increase the Company's
competitive in several respects, including their
additional access to end users and the ability to
provide a more comprehensive offering to advertisers
and sponsors. In addition, well-established
traditional media companies may acquire, invest or
otherwise establish commercial relationships with its
competitors. These larger companies may use their
substantial media resources to promote and enhance
their own services. Greater competition resulting from
such relationships could have a material adverse effect
on the Company's business.
The Company regards its copyrights, trademarks, trade
dress, trade secrets, and similar intellectual property
as critical to its success. The Company relies upon
trademark and copyright law, trade secret protection
and confidentiality or license agreements with its
employees, customers, partners and others to protect
its proprietary rights. Effective trademark,
copyright, and trade secret protection may not be
available in every country in which its products and
media properties are distributed or made available
through the internet. The distinctive elements of the
Company's web sites may not be protectible under
copyright law. Management cannot guarantee that the
steps the Company has taken to protect its proprietary
rights will be adequate. Many parties are actively
developing communication, community, e-commerce, and
other web-related technologies. Management believes
that such parties will continue to take steps to
protect these technologies, including seeking patent
protection. As a result, management believes that
disputes regarding the ownership of such technologies
are likely to arise in the future. For example,
management is aware that a number of patents have been
issued in the areas of electronic commerce, online
auctions, web-based information, online direct
marketing, fantasy sports, common web graphics formats
and mapping technologies. Management anticipates that
additional third-party patents will be issued in the
future. From time to time these parties may assert
patent infringement claims against the Company.
Management cannot guarantee that it would be able to
license such patents on reasonable terms. The Company
may incur substantial expenses in defending against
third-party patent claims regardless of the merit of
such claims. In the event that there is a determination
that the Company has infringed such third-party patent
rights, the Company could incur substantial monetary
liability and be prevented from using the rights in the
future.
Employees.
As of the date of this filing, the Company had 5 full-
time employees. The Company's future success is
substantially dependent on the performance of its
senior management and key technical personnel, and its
continuing ability to attract and retain highly
qualified technical and managerial personnel.
Risk Factors.
In addition to the other information in this Report
(including under the captions "Competition" and
"Proprietary Rights"), the following factors may be
encountered in the operation of the Company under its
current plan of business:
a. Limited Operating History.
The Company has only begun operations as an internet
company since January 1, 1999. Therefore, the Company
has a limited operating history, and its prospects are
subject to the risks, expenses and uncertainties
frequently encountered by young companies that operate
exclusively in the new and rapidly evolving markets for
Internet products and services. Successfully achieving
its growth plan depends on, among other things, the
Company's: ability to continue to develop and extend
its brand; ability to develop new web site properties;
ability to maintain and increase the levels of traffic
on its internet properties; development or acquisition
of services or products equal or superior to those of
the Company's competitors; ability to effectively
generate revenues through sponsored services and
placements on the Company's internet web site
properties; ability to effectively integrate the
technology and operations of businesses or technologies
which the company may acquire; ability to successfully
develop and offer new personalized web-based services,
such as e-mail services, to consumers without errors or
interruptions in service; and ability to identify,
attract, retain and motivate qualified personnel.
Furthermore, the success of the Company's growth plan
depends on factors outside its control including, among
other things: the adoption by the market of the web as
an advertising medium; the successful sale of web-based
advertising by the Company's sales agents; and the
relative price stability for web-based advertising,
despite competition and other factors that could reduce
market prices for advertising. The Company may not be
successful in implementing its growth plan or
continuing to operate its business as anticipated.
b. Anticipation of Increased Operating Expenses.
Because of the Company's limited operating history and
the uncertain nature of the rapidly-changing markets it
serves, the accurate prediction of future results of
operations is difficult or impossible. The Company
currently expects that its operating expenses will
increase significantly as the sales and marketing
operations are expanded and as the Company continues to
develop and extend its brand. As a result, the Company
may experience significant losses on a quarterly and
annual basis.
c. Operating Results May Fluctuate.
The Company expects to derive the majority of its
revenues from the sale of advertisements under short-
term contracts, which are difficult to forecast
accurately. As noted above, the Company expects its
operating expenses to increase significantly over the
near term. To the extent its expenses increase but its
revenues do not, its business, operating results, and
financial condition will be materially and adversely
affected. Operating results may fluctuate
significantly in the future as a result of a variety of
factors, many of which are outside its control. These
factors include: the level of usage of the internet;
demand for internet advertising; the addition or loss
of advertisers; the level of user traffic on the
Company's online media properties; the advertising
budgeting cycles of individual advertisers; the mix of
types of advertising the Company sells (targeted
advertising generally has higher rates); the amount and
timing of capital expenditures and other costs relating
to the expansion of its operations; the introduction of
new products or services by the Company or its
competitors; pricing changes for internet-based
advertising; the timing of initial set-up, engineering
or development fees that may be paid in connection with
larger advertising and distribution arrangements;
technical difficulties with respect to the online web
site properties that the Company may develop; costs
incurred with respect to acquisitions; negative general
economic conditions and resulting effects on media
spending; and economic conditions specific to the
internet and online media.
A key element of the Company's strategy is to generate
advertising revenues through sponsored services and
placements by third parties in its online media
properties in addition to banner advertising. In
connection with these arrangements, the Company may
receive sponsorship fees as well as a portion of
transaction revenues received by the sponsor from
business originated through the Company placement, in
return for minimum levels of user impressions to be
provided by the Company. These arrangements expose the
Company to potentially significant financial risks,
including: the risk that the Company fails to deliver
required minimum levels of user impressions or "click
throughs" (in which case, these agreements typically
provide for adjustments to the fees payable thereunder
or "make good" periods); the risk that sponsors do not
renew the agreements at the end of their term or that
they renew at lower rates; and the risk that the
arrangements do not generate anticipated levels of
shared transaction revenue, or that sponsors default on
the payment commitments in such agreements (as has
occurred in the past).
As a result of these financial risks, the Company
cannot guarantee that it will achieve significant
revenue from these sponsorship arrangements. In
addition, because the Company has limited experience
with these arrangements, management is unable to
determine what effect they will have on gross margins
and results of operations.
d. Dependence on Continued Growth in Use of the
Internet; Technological Change.
The Company 's future success is dependent upon
continued growth in the use of the internet and the web
in order to support the sale of advertising on its
online web site properties. web-based advertising is
relatively new, and it is difficult to predict the
extent of further growth, if any, in web advertising
expenditures. The internet may not prove to be a
viable commercial marketplace for a number of reasons,
including lack of acceptable security technologies,
potentially inadequate development of the necessary
infrastructure, or timely development and
commercialization of performance improvements. To the
extent that the internet continues to experience
significant growth in the number of users and level of
use, the internet infrastructure may not be able to
support the demands placed upon it by such growth and
the performance or reliability of the web may be
adversely affected.
The market for internet products and services is
characterized by rapid technological developments,
evolving industry standards and customer demands, and
frequent new product introductions and enhancements.
To the extent that higher bandwidth internet access
becomes more widely available through cable modems or
other technologies, the Company may be required to make
significant changes to the design and content of its
online properties in order to compete effectively.
Failure to effectively adapt to these or any other
technological developments may adversely affect its
business, operating results, and financial condition.
The markets for the Company 's products and media
properties have only recently begun to develop, are
rapidly evolving, and are increasingly competitive.
Demand and market acceptance for recently introduced
products and services are subject to a high level of
uncertainty and risk. It is difficult for management to
predict whether, or how fast, these markets will grow.
the Company cannot guarantee either that the market for
its products and media properties will continue to
develop or that demand for its products or media
properties will be sustainable. If the market develops
more slowly than expected or becomes saturated with
competitors, or if its products and media properties do
not sustain market acceptance, its business, operating
results, and financial condition may be materially and
adversely affected.
e. Risks Associated with Brand Development.
The Company believes that establishing and maintaining
its brand is a critical aspect of its efforts to
attract and expand its user and advertiser base.
Management also believes that the importance of brand
recognition will increase due to the growing number of
Internet sites and the relatively low barriers to
entry. Promotion and enhancement of the Company's
brand will depend largely on its success in providing
high-quality products and services. In order to attract
and retain internet users and to promote and maintain
its brand, the Company may find it necessary to
increase expenditures devoted to creating and
maintaining brand loyalty. In the event of any breach
or alleged breach of security or privacy involving its
services, or if any third party undertakes illegal or
harmful actions utilizing its community, communications
or commerce services, the Company could suffer
substantial adverse publicity and impairment of its
brand and reputation. If the Company is unable to
provide high-quality products and services or otherwise
fails to promote and maintain its brand, or if it
incurs excessive expenses in an attempt to improve its
products and services or promote and maintain its
brand, its business, operating results, and financial
condition may be materially and adversely affected.
f. Reliance on Advertising Revenues.
The Company expects to derive a substantial portion of
its revenues from the sale of advertisements on its web
pages under short-term contracts. Most of its
advertising customers have limited experience with the
web as an advertising medium. The Company's continuing
ability to generate significant advertising revenues
will depend upon, among other things: advertisers'
acceptance of the web as an effective and sustainable
advertising medium; the development of a large base of
users of its services possessing demographic
characteristics attractive to advertisers; and its
ability to continue to develop and update effective
advertising delivery and measurement systems.
No standards have yet been widely accepted for the
measurement of the effectiveness of web-based
advertising. Management cannot be certain that such
standards will develop sufficiently to support web-
based advertising as a significant advertising medium.
In addition, adverse economic conditions can
significantly impact advertisers ability and
willingness to spend additional amounts on advertising
generally, and on web-based advertising specifically.
Management cannot be certain that the advertisers will
determine that banner advertising is an effective
advertising medium. Certain advertising filter
software programs are available that limit or remove
advertising from an internet user's desktop. Such
software, if generally adopted by users, may have a
materially adverse effect upon the viability of
advertising on the internet. The Company's advertising
customers may not accept the internal and third- party
measurements of impressions received by advertisements
on the Company's online web site properties and such
measurements may contain errors. The Company currently
relies on its external advertising sales agents for
advertising sales, which involves additional risks and
uncertainties. As a result of these factors, the
Company may not be able to sustain or increase current
advertising sales levels. Failure to do so may have a
material adverse effect on its business, operating
results, and financial position.
g. The Company Depends Substantially on Third Parties.
The Company depends substantially upon third parties
for several critical elements of its business
including, among others, technology and infrastructure,
distribution activities.
h. Possible Inability to Successfully Enhance or
Develop Properties.
To remain competitive, the Company must continue to
enhance and improve the functionality, features, and
content of its web site properties. The Company may not
be able to successfully maintain competitive user
response times or implement new features and functions,
which will involve the development of increasingly
complex technologies. Personalized information
services, such as its web-based email messaging
services, message boards, and other community features,
require significant expense. The Company cannot
guarantee that this additional expenses will be offset
by additional revenues from these services.
A key element of its business strategy is the
development and introduction of new particular
demographic characteristics, and geographic areas. The
Company may not be successful in developing,
introducing, and marketing such web site properties and
such properties may not achieve market acceptance,
enhance its brand name recognition, or increase user
traffic. Furthermore, enhancements of or improvements
to the Company's new properties may contain undetected
errors that require significant design modifications,
resulting in a loss of customer confidence and user
support and a decrease in the value of its brand name.
Its ability to successfully develop additional targeted
media properties depends on use of the Company to
promote such properties. If use of the Company's web
site properties does not continue to grow, its ability
to establish other targeted properties would be
adversely affected. If the Company fails to
effectively develop and introduce such new properties,
or such properties fail to achieve market acceptance,
its business, results of operations, and financial
condition may be adversely affected.
i. Risks of Equity Investments in Other Companies.
The Company may, from time to time, make equity
investments in affiliated companies that are involved
in complementary. Any investments in such companies may
not result in any return, nor can there be any
assurance as to the timing of any such return, or that
the Company may lose its entire investment. Losses
resulting from such investments may have a material
adverse effect on its operating results.
j. Management of Potential Growth and Integration of
Acquisitions.
The Company's growth may place substantial strains on
its financial systems and its systems to, train, and
manage its employee base. The process of managing
advertising within large, high traffic web is an
increasingly important and complex task. The relies on
both internal and licensed third-party advertising
inventory management and analysis systems. To the
extent that the Company does not have the appropriate
advertising inventory or any extended failure of its
advertising management system results in incorrect
advertising insertions, the Company may be exposed to
"make good" obligations with its advertising customers,
which, by displacing advertising inventory, could defer
advertising revenues. Failure of its advertising
management systems to effectively scale to higher
levels of use or to effectively track and provide
accurate and timely reports on advertising results also
could negatively affect its relationships with
advertisers. The Company's systems, procedures, or
controls may not be adequate to support its operations,
particularly with regard to support and service. Its
management may not be able to achieve the rapid
execution necessary to fully exploit its market
opportunity. Any inability to effectively manage
growth may have a material adverse effect on its
business, operating results, and financial condition.
As part of its business strategy, the Company may, from
time to time, make acquisitions or enter into other
forms of business combinations. These transactions are
accompanied by a number of risks, including: the
difficulty of assimilating the operations and personnel
of the acquired companies; the potential disruption of
its ongoing business and distraction of management; the
difficulty of incorporating acquired technology or
content and rights into its products and media
properties; he correct assessment of the relative
percentages of in-process research and development
expense which can be immediately written off as
compared to the amount which must be amortized over the
appropriate life of the asset; the failure to
successfully develop an acquired in-process technology
could result in the impairment of amounts currently
capitalized as intangible assets; unanticipated
expenses related to technology integration; the
maintenance of uniform standards, controls, procedures
and policies; the impairment of relationships with
employees and customers as a result of any integration
of new management personnel; and the potential unknown
liabilities associated with acquired businesses. The
Company may not be successful in addressing these risks
or any other problems encountered in connection with
such acquisitions.
k. Risk of Capacity Constraints and Systems Failures.
The Company is dependent on its ability to effectively
withstand a high volume of use of its online web site
properties. Accordingly, the performance of its online
web site properties is critical to its reputation, its
ability to attract advertisers to its web sites, and to
achieve market acceptance of its products and web site
properties. Any system failure that causes an
interruption or an increase in response time of its
products and media properties could result in less
traffic to its web sites and, if sustained or repeated,
could reduce the attractiveness of its products and
media properties to advertisers and licensees. An
increase in the volume of queries conducted through its
products and media properties could strain the capacity
of the software or hardware the Company has deployed,
which could lead to slower response time or system
failures. In addition, as the number of web pages and
users increase, its products and media properties and
infrastructure may not be able to scale accordingly.
Personalized information services, such as web-based
email-type messaging services and other community and
communication facilities, and the posting of
photographs on its auction properties, involve
increasingly complex technical and operational
challenges that may strain its development and
operational resources. The Company may not be able to
successfully implement and scale such services to the
extent required by any growth in the number of users of
such services. Failure to do so may affect the
goodwill of users of these services, or negatively
affect its brand and reputation.
The Company is dependent on third parties for much
of its technology and infrastructure (See "The Company
Depends Substantially on Third Parties" above). The
Company's operations are susceptible to outages due to
fire, floods, power loss, telecommunications failures,
break-ins, and similar events. In addition,
substantially all of its network infrastructure is
located in the State of Utah. The Company does not
have multiple site capacity in the event of any such
occurrence. Despite its implementation of network
security measures, its servers are vulnerable to
computer viruses, break-ins, and similar disruptions
from unauthorized tampering with its computer systems.
The Company does not carry business interruption
insurance to compensate for losses that may occur as a
result of any of these events. Such events may have a
material adverse effect on its business, operating
results, and financial condition.
l. Dependence on Key Personnel.
The Company is substantially dependent on the continued
services of its key personnel. The Company expects
that it will need to hire additional personnel in all
areas. The competition for such personnel in its
industry is intense. The Company may experience
difficulties in hiring personnel with the right
training or experience, particularly in technical
areas. The Company does not maintain key person life
insurance for any of its personnel. If the Company
does not succeed in attracting new personnel, or
retaining and motivating existing personnel, its
business will be adversely affected.
m. Government Regulation and Legal Uncertainties.
There are currently few laws or regulations directly
applicable to access to or commerce on the internet.
Due to the increasing popularity and use of the
internet, it is possible that laws and regulations may
be adopted, covering issues such as user privacy,
defamation, pricing, taxation, content regulation,
quality of products and services, and intellectual
property ownership and infringement. Such legislation
could expose the Company to substantial liability.
Such legislation could also dampen the growth in use of
the web, decrease the acceptance of the web as a
communications and commercial medium, or require the
Company to incur significant expense in complying with
any new regulations. In addition, several
telecommunications carriers, including America's
Carriers' Telecommunications Association, are seeking
to have telecommunications over the web regulated by
the FCC in the same manner as other telecommunications
services.
Because the growing popularity and use of the web has
burdened the existing telecommunications infrastructure
and many areas with high web use have begun to
experience interruptions in phone service, local
telephone carriers, such as Pacific Bell, have
petitioned the FCC to regulate ISPs and Sops and to
impose access fees. Increased regulation or the
imposition of access fees could substantially increase
the costs of communicating on the web, potentially
decreasing the demand for its products and media
properties. A number of proposals have been made at the
federal, state and local level that would impose
additional taxes on the sale of goods and services
through the internet. Such proposals, if adopted,
could substantially impair the growth of electronic
commerce, and could adversely affect the Company's
opportunity to derive financial benefit from such
activities.
Also, Congress recently passed (and the President has
signed into law) the Digital Millennium Copyright Act,
which is intended to reduce the liability of online
service providers for listing or linking to third-party
web sites that include materials that infringe
copyrights. Congress also recently passed (and the
President has signed into law) the Children's Online
Protection Act and the Children's Online Privacy Act,
which will restrict the distribution of certain
materials deemed harmful to children and impose
additional restrictions on the ability of online
services to collect user information from minors.
Further, Congress recently passed (and the President
has signed into law) the Protection of Children from
Sexual Predators Act, which mandates that electronic
communication service providers report facts or
circumstances from which a violation of child
pornography laws is apparent. The Company is currently
reviewing these pieces of legislation, and cannot
currently predict the effect, if any, that such
legislation will have on its business. There can be no
assurance that such legislation will not impose
significant additional costs on its business or subject
the Company to additional liabilities.
In addition, a number of other countries have announced
or are considering additional regulation. For example,
a recent European Commission privacy directive
restricts the use of personal information without the
consent of both the individual and that individual's
government. Such restrictions could jeopardize the
future of e-commerce in and with the European Union.
In addition, the European Commission is expected in the
near future to propose a directive concerning the
liability of online service providers for activities
that take place using their services. Such laws and
regulations could fundamentally impair the Company's
ability to provide internet services, or substantially
increase the cost of doing so. Moreover, the
applicability to the internet of existing laws
governing issues such as property ownership, copyright,
defamation, obscenity, and personal privacy is
uncertain. The Company may be subject to claims that
its services violate such laws. Any such new
legislation or regulation in the United States or
abroad or the application of existing laws and
regulations to the internet could have a material
adverse effect on its business, operating results, and
financial condition. Due to the global nature of the
web, it is possible that the governments of other
states and foreign countries might attempt to regulate
its transmissions or prosecute the Company for
violations of their laws. The Company might
unintentionally violate such laws. Such laws may be
modified, or new laws enacted, in the future. Any such
developments may have a material adverse effect on its
business, results of operations, and financial
condition.
n. Liability for the Company's Services.
The Company hosts a wide variety of information,
community, communications and commerce services that
enable individuals to exchange information, generate
content, conduct business and engage in various online
activities. The laws relating to the liability of
providers of these online services for activities of
their users is currently unsettled. Claims could be
made against the Company for defamation, negligence,
copyright or trademark infringement, personal injury or
other theories based on the nature and content of
information that may be posted online by its users.
Such claims have been brought, and sometimes
successfully pressed, against online service providers
in the past. In addition, the Company could be exposed
to liability through content and materials that may be
posted by users in auctions, message boards, clubs,
chat rooms, or other interactive community-building
services. Such claims might include, among others,
that by providing hypertext links to web sites operated
by third parties, the Company is liable for copyright
or trademark infringement or other wrongful actions by
such third parties through such web sites, or that the
Company is responsible for legal injury caused by
statements made to, actions taken by or content
generated by, participants in its message board
services, clubs, or other community building services.
It is also possible that if any information which may,
in the future, be provided through its services, such
as stock quotes, analyst estimates or other trading
information, contains errors, third parties could make
claims against the Company for losses incurred in
detrimental reliance on such information. The Company
offers web-based e-mail type messaging services, which
expose it to potential risks, such as liabilities or
claims resulting from lost or misdirected messages,
illegal or fraudulent use of messages, or interruptions
or delays in messaging services. Investigating and
defending such claims is expensive, even to the extent
such claims do not result in liability.
The Company may also, from time to time, enter into
arrangements to offer third-party products and services
under the Company's brand or via distribution on its
properties. While its agreements with these parties
would provide that the Company will be indemnified
against liabilities, such indemnification may not be
adequate. The Company may be subject to claims
concerning such services or content by virtue of its
involvement in marketing, branding or providing access
to such services. Any such claims may have a material
adverse effect on its business, results of operations,
and financial condition.
o. Potential Commerce-Related Liabilities and
Expenses.
As part of its business, the Company enters into
agreements with advertisers, sponsors, content
providers, service providers, and merchants under which
the Company is entitled to receive a share of revenue
from the purchase of goods and services by users of its
web site properties. Such arrangements may expose the
Company to additional legal risks and uncertainties,
including potential liabilities to consumers of such
products and services. These activities expose the
Company to a number of additional risks and
uncertainties, including: potential liabilities for
illegal activities that may be conducted by
participating merchants; products liability or other
tort claims relating to goods or services sold through
hosted commerce sites; consumer fraud and false or
deceptive advertising or sales practices; breach of
contract claims relating to merchant transactions;
claims that materials included in merchant sites or
sold by merchants through these sites infringe third-
party patents, copyrights, trademarks or other
intellectual property rights, or are libelous,
defamatory or in breach of third-party confidentiality
or privacy rights; claims relating to any failure of
merchants to appropriately collect and remit sales or
other taxes arising from e-commerce transactions; and
claims that may be brought by merchants as a result of
their exclusion from its commerce services or losses
resulting from any downtime or other performance
failures in its hosting services.
In March, 1999, the Company launched AuctionWinner.com,
a service that hosts online auctions for a wide variety
of goods and services. Auction services expose the
Company to a number of significant additional risks.
For example, the Company does not pre-screen the types
of goods offered on its auctions, it is aware that
certain goods, such as alcohol, tobacco, firearms,
adult material and other goods that may be subject to
regulation by local, state or federal authorities may
be traded on the auction web site. The Company might
not be able to prevent the unlawful exchange of goods
on its service, and may be subject to civil or criminal
liability for unlawful activities carried out by users
through its service. In addition, while the Company
takes no responsibility for delivery of payment or
goods to any user of its auctions, the Company
anticipates that users who did not receive the purchase
price or the goods that were to have been exchanged may
register complaints with the Company or seek to hold
the Company liable. The Company also anticipates that
it will receive complaints from buyers as to the
quality of the goods purchased through its auctions, as
well as complaints alleging that comments posted by
participants of the service concerning other
participants are unfair or defamatory. Any claims or
litigation arising from the Company's auction
activities could be costly. Any negative publicity
generated as a result of fraudulent or deceptive
conduct by users of these auctions could damage its
reputation and diminish the value of its brand name.
In addition, the Company anticipates that it will
receive in the future, communications alleging that
certain items sold through its auctions, or text and
images posted by users in auction listings, infringe
third-party copyrights, trademarks or other
intellectual property rights. While its user policies
prohibit the sale of goods and posting of materials
which may infringe third-party intellectual property
rights, an allegation of infringement may result in
costly litigation.
ITEM 2. PROPERTIES.
The Company has approximately $25,000 in general
office equipment and furniture.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material pending
legal proceedings and, to the best of its knowledge, no
such action by or against the company has been
threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
No matters were submitted to a vote of the Company's
stockholders during the fourth quarter of the fiscal
year covered by this report.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
(a) Market Information
The Common Stock is traded on the Over the Counter
Bulletin Board under the symbol "IBUI" (prior to the
symbol change in March 1999, the Company traded under
the symbol "IFDB") and the range of closing bid prices
shown below is as reported by the OTC Bulletin Board.
The quotations shown reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may
not necessarily represent actual transactions.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended June 30, 1999 *
High Low
First Quarter
Second Quarter 0.09 0
Third Quarter 1.00 0.125
Fourth Quarter 0.5625 0.09
* The Common Stock did not trade at all from May 21,
1998 to November 19, 1998.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended June 30, 1998 **
High Low
First Quarter 0.03 0
Second Quarter 0 0
Third Quarter 0.04 0
Fourth Quarter 0.04 0.04
** The Common Stock only traded sporadically during
this fiscal year (11 trading days).
(b) Holders of Common Equity
As of September 15, 1999, there were 614 shareholders
of record of the Company's Common Stock.
(c) Dividends
The Company has not declared or paid a cash dividend to
stockholders since it became a "C" corporation. The
Board of Directors presently intends to retain any
earnings to finance Company operations and does not
expect to authorize cash dividends in the foreseeable
future. Any payment of cash dividends in the future
will depend upon the Company's earnings, capital
requirements and other factors.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data for the years ended June
30, 1999, 1998, 1997, and 1996, and for the six months
ended June 30, 1995 and December 31, 1994 are derived
from the audited financial statements of the Company
and should be read in conjunction with the audited
financial statements included herein. The selected
financial data for the years ended June 30, 1997 and
1996, and the six months ended June 30, 1995 and
December 31, 1994 are derived from the audited
financial statements of the Company which are not
included herein.
Six Months Ended Years Ended
Dec 31 June 30 June 30
1994 1995 1996 1997 1998 1999
Statement of
Operations Data:
(In thousands,
except per share
data)
Revenues 3,580 2,718 6,572 7,358 2,378 141
Cost of sales 3,279 2,212 5,374 5,847 2,248 23
Gross profit 301 506 1,198 1,511 30 118
Six Months Ended (1) Years Ended
Dec 31 June 30 June 30
1994 1995 1996 1997 1998 1999
Statement of
Operations Data:
(In thousands,
except per share
data)
Selling and
distribution
expense 1,412 702 1,135 1,512 525 43
General and
administrative
expense 361 29 524 407 297 157
Interest expense
net 111 3 54 122 69
Net operating
income (loss) (1,583) (497) (515) (530)(1,160) (82)
Other income
and expense 2,250
Net income
(loss) (1,583) (497) (515) (530)(1,160)2,168
Net income
(loss)
per common
share (0.01) nil nil nil nil 0.01
Weighted
average shares
outstanding 153,924 153,924 154,145 154,763 158,060 164,550
June 30,
1995 1996 1997 1998 1999
Balance Sheet
Data:
(In thousands)
Current assets 922 1,175 711 1 395
Fixed assets 1,053 905 800 0 0
Total assets 1,975 2,080 1,511 1,102 4,015
Current
liabilities 1,711 1,941 1,947 1,819 28
Long-term debt 373 756 677 455 2
Shareholders'
equity
(deficiency) (109) (617) (1,113) (2,273) 3,985
(1) A change in control transaction occurred December
31, 1994 and was recorded in conformity with Accounting
Principles Board Opinion No. 16. Accordingly, assets
and liabilities as of January 1, 1995, and the results
of operations for the six months ended June 30, 1995,
reflect the "push-down" of the new controlling
shareholder's basis, minority interest at its
historical basis, and the consideration received from
BT Capital Corporation. See accompanying footnotes to
the audited financial statements for a description of
the transaction.
The Company has not paid dividends in any of the
periods presented.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction
with the financial statements of the Company and notes
thereto contained elsewhere in this report.
Results of Operations.
Fiscal 1999 Compared To Fiscal 1998
Revenues for the twelve month period ended June 30,
1999 of $140,641 decreased approximately 94% when
compared with revenues of $2,378,000 in the prior year.
This revenue decrease in due to the shut down of
Company operations and closing of the business on
January 18, 1998, and the reopening of the business
after the acquistion of the Company by the current
control group in November 1998.
The gross profit margin of 83.8% for the twelve months
ended June 30, 1999 is a significant increase from the
gross margin of 1.3% reported for twelve months ended
June 30, 1998. Current year margins in the past twelve
months reflect the reopening of the business as an
internet company after November 1998.
Selling, general and administrative expenses for the
1999 fiscal year were approximately 25% those of fiscal
year 1998 due to the slowdown of operations of the
Company approaching the close of operations as of
January 1, 1998 and the subsequent reopening of the
company in another industry.
The resulting loss for the twelve month period ended
June 30, 1999 was $81,836 versus a reported loss for
the year ended June 30, 1998 of $1,160,542.
Fiscal 1998 Compared To Fiscal 1997
Revenues for the twelve month period ended June 30,
1998 of $2,378,000 decreased approximately 68% when
compared with revenues of $7,358,000 in the prior year.
This revenue decrease in due to the shut down of
Company operations and closing of the business on
January 18, 1998.
The gross profit margin of 1.3% for the twelve months
ended June 30, 1998 is a significant decrease from the
gross margin of 20.5% reported for twelve months ended
June 30, 1997. Current year margins in the past twelve
months reflect decrease and shutdown of operations at
the end of calendar year 1997.
Selling, general and administrative expenses for the
1998 fiscal year were almost half those of fiscal year
1997 due to the slowdown of operations of the Company
approaching the close of operations as of January 1,
1998.
The resulting loss for the twelve month period ended
June 30, 1998 was $1,160,542 versus a reported loss for
the year ended June 30, 1997 of $530,000.
Inflation.
The moderate rate of inflation over the past few years
has had an insignificant impact on the Company's sales
and results of operations during the period.
Liquidity and Capital Resources.
Net cash provided by operating activities was $63,715
for the twelve month period ended June 30, 1999. This
cash results largely from the extrarodinary income of
$2,246,644 due to debt foregiveness, less (i) accounts
payable of $1,791,397 and (ii) prepaid expenses of
$308,120.
Capital Expenditures.
There were no material capital expenditures during
the 1999 fiscal year.
Net Operating Loss Carryforwards.
For the fiscal year ended June 30, 1999, the Company
had net operating loss carryforwards for federal and
state purposes of approximately $2,167,809 and
$1,119,034, respectively. These carryforwards begin to
expire in 2011 and 2001, respectively.
Year 2000 Issue.
The Year 2000 issue arises because many
computerized systems use two digits rather than four to
identify a year. Date sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in
errors when information using the year 2000 date is
processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to
represent something other than a date. The effects of
the Year 2000 issue may be experienced before, on, or
after January 1, 2000, and if not addressed, the impact
on operations and financial reporting may range from
minor errors to significant system failure which could
affect the Company's ability to conduct normal business
operations. This creates potential risk for all
companies, even if their own computer systems are Year
2000 compliant. It is not possible to be certain that
all aspects of the Year 2000 issue affecting the
Company, including those related to the efforts of
customers, suppliers, or other third parties, will be
fully resolved.
The Company was in the process of developing an
ongoing program of communication with suppliers and
vendors to determine the extent to which those
companies are addressing Year 2000 compliance issues.
Forward Looking Statements.
The foregoing Management's Discussion and Analysis
contains "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Act of
1934, as amended, and as contemplated under the Private
Securities Litigation Reform Act of 1995, including
statements regarding, among other items, the Company's
business strategies, continued growth in the Company's
markets, projections, and anticipated trends in the
Company's business and the industry in which it
operates. The words "believe," "expect," "anticipate,"
"intends," "forecast," "project," and similar
expressions identify forward-looking statements. These
forward-looking statements are based largely on the
Company's expectations and are subject to a number of
risks and uncertainties, certain of which are beyond
the Company's control. The Company cautions that these
statements are further qualified by important factors
that could cause actual results to differ materially
from those in the forward looking statements,
including, among others, the following: reduced or lack
of increase in demand for the Company's products,
competitive pricing pressures, changes in the market
price of ingredients used in the Company's products and
the level of expenses incurred in the Company's
operations. In light of these risks and uncertainties,
there can be no assurance that the forward-looking
information contained herein will in fact transpire or
prove to be accurate. The Company disclaims any intent
or obligation to update "forward looking statements".
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information with respect to this Item is set forth in
"Index to Financial Statements."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On March 15, 1998, the Company engaged the services of
Henry Schiffer C.P.A., a P.C., of Beverly Hills,
California to provide an audit of its financial
statements for the fiscal years ended June 30, 1998 and
1997. Mr. Schiffer is not associated with the June 30,
1995 audited financial statements nor any other
financial statements prior to the June 30, 1996
financial statements. The former accountants, Coopers
& Lybrand of Newport Beach, California, declined to
stand for re-election for the 1997 engagement. The
decision to change accountants was approved by the
Company's Board of Directors with the selection of the
successor accountant. The Company and its current
accountant had no disagreements during the fiscal year
ended June 30, 1998 or any prior periods.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT.
The directors and executive officers of the Company and
their ages as of September 15, 1999 are as follows:
Name Age Position
Albert R. Reda 53 Chief Executive Officer,
Secretary and Director
Louis Cherry 72 Treasurer and Chairman of
the Board
Each member of the Board of Directors of the Company is
elected for a one-year term and until his successor is
elected and qualified.
Albert R. Reda.
Mr. Reda, age 53, was appointed a Director, Chief
Executive Officer, and Secretary of the Company in
November 1998. Mr. Reda also currently serves as a
Director and Secretary of Detergents Resources, Inc. (a
laundry detergent manufacturing and distribution firm),
positions he has held since March 1999. From 1996 to
1998, he was employed with CRT Corporation as Vice
President in charge of production for manufacturing
frozen food products. For the period of 1994 to 1995,
Mr. Reda was self-employed in the financial lending
area, buying and selling loans between individuals and
institutions. Mr. Reda received his Bachelor of
Science Degree from California State University, Long
Beach, with a major in engineering.
Louis Cherry.
Mr. Cherry, age 72, was appointed Chariman of the
Board, and Treasurer of the Company in November 1998.
Mr. Cherry also currently serves as a Director of
Detergents Resources, Inc. (a laundry detergent
manufacturing and distribution firm), a position he has
held since March 1999. From 1995 to 1998, he was self-
employed as a consultant and food broker. For the
period of 1993 to 1994, Mr. Cherry served as Chariman
of the Board for two automobile dealerships, University
Oldsmobile & Pontiac of Costa Mesa, California, and San
Clemente Chrysler, Jeep & Eagle of San Clemente,
California. Previously, Mr. Cherry was Chariman of the
Board of a national bank and president of an investment
firm. Mr. Cherry has attended the University of
California at Los Angeles.
ITEM 11. EXECUTIVE COMPENSATION.
The corporate officers are due wages for the months of
November 1998 through June 1999. In lieu of cash
payments, the officers will take additional shares of
stock at the higher of $.02 per share or market price
of the stock at the end of each month. These shares
have not been issued to the current directors of the
Company. The wages are for $15,000.00 per month for
the current directors of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
The following table sets forth information regarding
the beneficial ownership of shares of the Company's
Common Stock as of September 15, 1999 (177,302,997
issued and outstanding) by (i) all stockholders known
to the Company to be beneficial owners of more than 5%
of the outstanding Common Stock; (ii) each director;
and (iii) all officers and directors of the Company as
a group (each person has sole voting power and sole
dispositive power as to all of the shares shown as
beneficially owned by them):
Title of Name and Address of Amount of Percent of
Class Beneficial owner Beneficial Class
Ownership
Common
Stock Reda Family Trust 29,600,000 16.70%
3338 Punta Alta #1E
Laguna Hills,
California 92653
Common
Stock Iron Horse Holdings 19,687,095 11.10%
Inc.,
8625 W. Sahara Avenue
Las Vegas, Nevada
89117
Common
Stock B.A.M.M.S. 16,792,037 9.47%
10785 Santa
Monica Blvd., #240
Los Angeles,
California 90025
Common
Stock Cherry Family Trust 15,916,086 8.98%
29245 Pompano Way
Laguna Niguel,
California 92677
Common
Stock Michael S. Cherry 13,600,000 7.67%
5 Washburn Terrace #1
Brookline,
Massachusetts 02446
Common
Stock Albert R. Reda 1,566,086 0.88%
2557 Oxford Avenue
Costa Mesa,
California 92626
Common
Stock Shares of all 1,675,000 0.88%
directors and
executive officers
as a group (2
persons)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
Not Applicable.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
(a) Index to Financial Statements and Schedules Page
Report of Independent Accountant F-1
Balance Sheets of the Company as
of June 30, 1999 and June 30, 1998 F-2
Statements of Operations for the year ended
June 30, 1999, the year ended June 30, 1998,
and the year ended June 30, 1997 F-3
Statement of Shareholders' Equity (Deficiency)
for the year ended June 30, 1999, the year
ended June 30, 1998, and the year ended
June 30, 1997 F-4
Statements of Cash Flows for the year ended
June 30, 1999, the year ended June 30, 1998,
and the year ended June 30, 1997 F-5
Notes to Financial Statements F-6
(b) Reports on Form 8-K. There are no reports on Form
8-K filed during the last quarter of the fiscal year
covered by this report.
(c) Exhibits included or incorporated by
reference herein: See Exhibit Index
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
INTERNET BUSINESS'S INTERNATIONAL, INC.
Dated: September 30, 1999
By: /s/ Albert R. Reda
Albert R. Reda
Chief Executive Officer, Secretary
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in
the capacities and on the date indicated.
/s/ Albert R. Reda
Albert R. Reda
Chief Executive Officer,
Secretary, and Director
September 30, 1999
/s/ Louis Cherry
Louis Cerry
Chairman of the Board,
President, and Treasurer
(Principal Financial and
Accounting Officer)
September 30, 1999
REPORT OF INDEPENDENT ACCOUNTANT
To the Board of Directors and Stockholders of
Internet Business's International, Inc.
I have audited the accompanying balance sheets of
International Food & Beverage, Inc. at June 30, 1999
and 1998, and the related statements of income,
stockholders' deficiency and cash flows for the years
then ended. These financial statements are the
responsibility of the Company's management. My
responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally
accepted auditing standards. Those standards require
that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement
presentation. I believe that my audit provides a
reasonable basis for my opinion.
The accompanying financial statement have been prepared
assuming that the Company will continue as a going
concern. The Company ceased operations on January 18,
1998 and will not resume until management has
successfully raised the funds needed to acquire the
necessary working capital.
In my opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Internet Business's
International, Inc. at June 30, 1999 and 1998, and the
results of its operations and its cash flows for the
years then ended in conformity with generally accepted
accounting principles.
/s/ Henry Schiffer C.P.A., a P.C.
Beverly Hills, California
September 22, 1999
INTERNET BUSINESS'S INTERNATIONAL, INC.
BALANCE SHEETS
June 30 June 30
1998 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 1,102 82,577
Accounts receivable 0 4,576
Inventories 0 0
Prepaid expenses 0 308,120
Total current asset 1,102 395,273
INVESTMENTS: 0 1,885,000
OTHER ASSETS:
Note Receivable 1,735,000 0
Total Assets 1,102 4,015,273
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICT)
CURRENT LIABILITIES:
Accounts payable 1,819,644 28,247
Total current liabilities 1,819,644 28,247
LONG TERM DEBT: 455,000 1,800
SHAREHOLDERS' EQUITY (DEFICT):
Preferred Stock, par value
$100.00 per share;1,000,000
shares authorized, 23,900 and 0
issued and outstanding at
June 30, 1999 and 1998,
respectively 0 2,390,000
Common Stock, par value $0.01
per share; 199,000,000 shares
authorized, 177,302,997, and
158,060,194 shares issued and
outstanding at June 30, 1999
and 1998, respectively 428,000 1,773,030
Additional paid-in capital 1,000 356,930
Retained earnings (deficit) (2,702,542) (534,734)
Total Shareholders' Equity
(Deficit) (2,273,542) 3,985,226
Total Liabilities &
Shareholders' Equity (Deficit) 1,102 4,015,273
See Accompanying Notes to Financial Statement
INTERNET BUSINESS'S INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
Year Ended Year Ended Year Ended
1997 1998 1999
REVENUES 7,358,000 2,378,000 140,641
COST OF SALES 5,847,000 2,247,839 22,724
GROSS PROFIT 1,511,000 30,161 117,917
OPERATING EXPENSES:
Selling and
distribution 1,512,000 524,998 42,605
General and
administration 407,000 297,002 157,148
Interest expense 122,000 69,000 0
Total operating
expenses 2,041,000 891,000 199,753
GAIN (LOSS) ON
DISPOSITION (299,703)
NET OPERATING INCOME
(LOSS) (530,000) (1,160,542) (81,836)
OTHER INCOME AND EXPENSE
Debt foregiveness 2,249,644
NET INCOME (LOSS) (530,000) (1,160,542) 2,167,808
NET INCOME (LOSS) PER
COMMON SHARE (nil) (nil) 0.01
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 154,763,438 158,060,194 164,550,320
See Accompanying Notes to Financial Statement
INTERNET BUSINESS'S INTERNATIONAL, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
Year Ended Year Ended Year Ended
JUNE 30 JUNE 30 JUNE 30
1997 1998 1999
Common Stock:
Balance, beginning of
year 394,000 428,000 428,000
Common stock issued and
capital contributions 34,000 0 1,354,030
Balance, end of year 394,000 428,000 1,773,030
Preferred Stock
Balance, beginning of year 0
Preferred stock issued and
capital contributions 2,390,000
Balance, end of year 2,390,000
Additional Paid In Capital
Balance, beginning of year 1,000 1,000 1,000
Common Stock issued and
capital contributions 0 0 355,930
Balance, end of year 1,000 1,000 356,930
Retained Earnings (Deficit)
Balance, beginning of year (1,012,000) (1,542,000) (2,702,542)
Net income (loss) (530,000) (1,160,542) 2,167,808)
Balance, end of year (1,542,000) (2,702,542) (534,734)
Total stockholders
equity (deficit) (1,113,000) (2,273,542) 3,985,226
See Accompanying Notes to Financial Statements
INTERNET BUSINESS'S INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
Year Ended Year Ended Year Ended
June 30 June 30 June 30
1997 1998 1999
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Income (Loss) (530,000) (1,160,542) 2,167,808
Adjustments to reconcile
net income (loss) to net
cash provided by (used
in) operating activities:
Depreciation and
amortization 166,000 0 0
Issuance of Common Stock
under distribution
agreement 34,000 0 0
Changes in assets and
liabilities:
Accounts receivable 251,000 254,000 (4,576)
Inventories 220,000 423,000 0
Prepaid expenses 1,000 6,000 (308,120)
Accounts payable 78,000 901,226 (1,791,397)
Accrued wages and
benefits (166,000) (207,000) 0
Accrued commissions
and marketing 80,000 (261,000) 0
Other accrued expenses 35,000 (153,000) 0
Net cash provided by
(used in) operating
activities 169,000 (197,316) 63,715
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to, and
reduction of,
fixed assets (61,000) 800,000 (1,885,000)
Net cash provided by
(used in) investing
investing activities (61,000) 800,000 (1,885,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance
ofpreferred and common
stock 3,735,030
Proceeds from notes
receivable (1,735,000)
Proceeds from issuance
of notes payable 0 (629,582) 0
Principal payments on
notes payable (100,000) 0 (453,200)
Paid in capital 355,930
Net cash provided by
(used in) financing
activities (100,000) (629,582) 1,902,760
NET INCREASE (DECREASE)
IN CASH 8,000 (26,898) 81,475
CASH AND CASH
EQUIVALENTS,
beginning of period 20,000 28,000 1,102
CASH AND CASH
EQUIVALENTS,
end of period 28,000 1,102 82,577
See Accompanying Notes to Financial Statement
INTERNET BUSINESS'S INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
Note 1. Descrintion of the Business.
Internet Business's International, Inc. (the "Company")
was in the manufacturing business, these operations
ceased as of December 31, 1997. In December 1998, after
new management was in place, a decision was made to
change the Company into an Internet Company offering
E-commerce, internet access as an Internet Service
Provider, hosting through our own server, web hosting,
directory services, auction sites and chat rooms. It
was also determined to change the Company's name to
better reflect the Company's operation, this name came
to be Internet Business's International. The management
will after the first of the year begin looking for ways
to implement the Company's operations.
Note 2. Change in Control.
In November 1998 new stockholders bought majority
control in a private transaction. Immediately after the
stock ownership changed, Michael W. Hogarty resigned as
the Chief Executive Officer and President of the
Company, and Michael W. Hogarty, who was also the solo
director, resigned after nominating and electing two
new directors from the group that bought controlling
shares of stock.
Note 3. Summary of Significant Accounting Policies.
Fiscal Year
The Company's fiscal year is June 30 year end.
Accounts Receivable and Revenues
With the new venture for the Company into E-commerce,
revenues will be generated though credit card sales
over the Internet, minimizing the risk of bad debt
Inventories
With this new line of business inventories will be kept
to a minimum.
Fixed Assets
All of the Company's fixed assets will be Internet
related. The exact extent of what this will consist of
will be determined with time.
Other Assets
Other assets will consist primarily of software for
Internet programs and other related assets.
Goodwill
Due to the change in the new nature of the business,
the Company will not include goodwill in its financial
reports at this time.
Income Taxes
The Company follows Statement of Financial Accounting
Standards ("SPAS") No. 109, "Accounting for Income
Taxes." Under this method, deferred income taxed was
recognized for the tax consequences in future years of
difference between the tax bases of assets and
liabilities, and their financial reporting amounts at
each year-end based on enacted tax laws and statutory
tax rates applicable to the periods in which the
differences were expected to affect taxable income.
Valuation allowances were established, when necessary
to reduce deferred tax assets to the amount expected to
be realized. Under this standard the provision for
income taxes represents the tax payable for the period
and the change during the period in deferred tax assets
and liabilities.
Stockholders' Equity Common Share
Stockholders' equity common share is based on the
reported net equity divided by the weighted average
number of common shares outstanding.
Cash Equivalents
The Company considered highly liquid debt instruments
purchased with a maturity of three months or less to be
cash equivalents.
Fair Value of Financial Instruments
The carrying value of the Company's cash and cash
equivalents, accounts receivable, accounts payable!
accrued expenses and notes payable approximates fair
value.
Manaqement Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles required
management to make estimates and assumptions that
affect the reported amounts of 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.
Additional Paid In Capital
The additional paid in capital represented on the
balance sheet is from the difference of the Preferred
Stock Issuance as noted in Note 5. Stock Issuance as
per the agreement and actual amount issued which is
$110,000.
Note 4. Commitments.
Leases
The Company has an operating lease for its internet
access operations. This lease is for three years and
ends on September 7, 2002; total rent liability of
$132,800 over the term of the lease.
Note 5 Stock Issuance
Current Stock Authorized
The Company is currently authorized to issue up to
199,000,000 shares of common stock and 1,000,000 of
preferred stock.
Issued and Outstandinq Stock
Common Stock. The Company by the end of this Quarter
had issued 177,302,997 common snares, of which
134,495,037 are restricted. Of the restricted,
8,004,005 will be come free trading on 7-21-99.
Preferred Stock. There were 23,900 shares of Preferred
Stock issued by the end of this Quarter.
Preferred Stock Issuance
On December 15, 1998 the Company entered into an
agreement with Iron Horse Holdings, Inc. ("IHHI") where
IHHI agreed to buy up to 25,000 of the Company's
preferred shares at the price of $100.00 per share.
Shares purchased under this agreement are to be issued
to IHHI or its designee. Payment for the shares sold
under this agreement is to be in the form of a
promissory note bearing interest at the rate of 9% per
annum, and the obligation created thereby is to be
secured by a "blanket," or ail inclusive security
agreement executed by IHHI and perfected by filings as
specified bylaw. Until such note is paid in full, IHHI
shall pay the 3% coupon on such shares as are issued
under this agreement directly ;o the shareholder(s) of
record at the time such payment becomes due.
By the end of the third quarter ending March 31, 1999,
23,900 shares were issued according to the agreement
with IHHI. The balance of the shares to be issued of
1,100 at a par value of $100.00 per share, or $110,000,
are being treated as additional paid in capital, and
are shown as such on the balance sheet. (See note on
Paid In Capital in Note 3.)
Common Stock Issuance
On December 15, 1998 the Company agreed to issue common
shares to IHH for IHHI to pay its bills in exchange for
the issuance of restricted common stock. Under the
terms to this agreement, the Company issued an
additional 9,154,999 shares by March 31, 1999.
On December 21, 1998 the Company agreed to acquire
several internet sites with issuance of common stock.
Under the terms of this agreement 8,000,00 shares were
issued.
By the end of this quarter the Company issued an
additional 2,087,791 shares for advertising and site
maintenance.
Note 6. Extraordinary Income.
After review by legal counsel about the collectability
of the previous company's unsecured prior debts, it was
determined by management to show those debts as
uncollectible. Therefore, management has decided to
write those debts off and according to IRS codes that
uncollectible debt has to be shown as extraordinary
income.
Note 7. Net Loss Carry Forward.
The Net Loss Carry Forward that was incurred due to the
prior company's operation will be used to offset the
impact of the extraordinary income as indicated above.
EXHIBIT INDEX
Exhibit No. Description
3.1 Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3.01
of the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 26, 1993).
3.2 Certificate of Amendment of International Food &
Beverage, Inc. changing its name to Internet
Business's International, Inc. (incorporated by
reference to Exhibit 3.2 of the Registrant's
Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999)
3.3 Bylaws (incorporated by reference to Exhibit 3.02
to the Company's registration statement on Form S-1
filed with the Securities and Exchange Commission
on October 29, 1991 - "Registration Statement").
4 Specimen Common Stock Certificate (incorporated by
reference to Exhibit 4.01 to the Registration
Statement).
22.1 Subsidiaries (incorporated by reference to Exhibit
22.1 to the Registration Statement).
27 Financial Data Schedule (see below).
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S FORM 10-K AND IS QUALIFIED
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