<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended January 31, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file No. 0-24332
The S.I.N.C.L.A.R.E. GROUP, INC.
--------------------------------
(Exact name of Registrant as specified in charter)
Delaware 23-2753253
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
636 Roslyn Avenue, Montreal, Quebec (Canada) H3Y 2T9
----------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: 514-990-8141
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act 1934 during the preceding 12 months (or for such period that
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
(1). YES NO X
------- -------
(2). YES X NO
------- -------
The number of shares outstanding of the issuer's one class of common
stock, as of January 31, 1996 is 15,205,542.
<PAGE> 2
THE S.I.N.C.L.A.R.E. GROUP, INC.
INDEX
Part I Financial Information
Item 1. Consolidated Balance Sheets at Jan. 31, 1996 (Unaudited) and
October 31, 1995
Consolidated Statements of Operations for the three months
ended Jan. 31, 1996 and 1995 (Unaudited)
Consolidated Statement of Cash Flows for the three months
ended Jan. 31, 1996 and 1995 (Unaudited)
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports and Form 8-K
<PAGE> 3
THE S.I.N.C.L.A.R.E. GROUP, INC.
FINANCIAL STATEMENTS
JANUARY 31, 1996 AND OCTOBER 31, 1995
<PAGE> 4
THE S.I.N.C.L.A.R.E. GROUP, INC.
BALANCE SHEETS
JANUARY 31, 1996 AND OCTOBER 31, 1995
<TABLE>
<CAPTION>
January 31, October 31,
1996 1995
------------- ---------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 4,404 $ 148,619
Accounts receivable 600,136 -
-------------- ------------
604,540 148,619
PROPERTY AND EQUIPMENT, net 276,337 263,991
OTHER ASSETS, net 302,513 -
-------------- ------------
TOTAL ASSETS $ 1,183,390 $ 412,610
============== ============
LIABILITIES
CURRENT LIABILITIES
Current portion of long-term debt $ 171,255 $ -
Accounts payable and accrued expenses 19,301 19,964
Other liabilities 158,947 148,453
Income taxes payable 202,651 119,000
-------------- ------------
552,154 287,417
LONG-TERM DEBT - Net of current portion 122,230 -
-------------- ------------
TOTAL LIABILITIES 674,384 287,417
-------------- ------------
STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK -
$1.00 Series A, $.001 par value; 1,300,000 shares
authorized, none issued and outstanding - -
$2.50 Series B, $.001 par value; 1,100,000 shares authorized, none
issued and outstanding at January 31, 1996 and 1,000,000 shares
issued and outstanding at October 31, 1995 - 1,000
COMMON STOCK - $.001 par value; 100,000,000
shares authorized; 15,208,542 shares issued at January 31, 1996
and 14,938,542 at October 31, 1995 15,209 14,939
ADDITIONAL PAID-IN CAPITAL 205,802 55,072
RETAINED EARNINGS 289,018 178,299
-------------- ------------
510,029 249,310
-------------- ------------
LESS: TREASURY STOCK
Common stock - 1,022,817 shares at par value 1,023 1,023
RECEIVABLE FROM STOCKHOLDER - 123,094
-------------- ------------
1,023 124,117
-------------- ------------
TOTAL STOCKHOLDERS' EQUITY 509,006 125,193
-------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,183,390 $ 412,610
============== ============
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 5
THE S.I.N.C.L.A.R.E. GROUP, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET REVENUES $ 497,841 $ 30,046
COST OF SALES 48,479 13,456
---------- ----------
GROSS PROFIT 449,362 16,590
OPERATING EXPENSES 254,992 -
---------- ----------
INCOME BEFORE INCOME TAXES 194,370 16,590
INCOME TAXES 83,651 6,600
---------- ----------
NET INCOME $ 110,719 $ 9,990
========== ==========
EARNINGS PER COMMON SHARE $ .01 $ -
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 15,138,764 11,773,000
========== ==========
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 6
THE S.I.N.C.L.A.R.E. GROUP, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 110,719 $ 9,990
Adjustments to reconcile net income to net cash provided
by (used in) operating activities
Depreciation and amortization 38,854 4,919
Changes in assets and liabilities
Accounts receivable (600,136) -
Accounts payable and accrued expenses (663) 295,049
Other liabilities 10,494 -
Income taxes payable 83,651 6,600
Long-term debt 293,485 -
---------- -----------
Net cash provided by (used in) operating activities (63,596) 316,558
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (27,103) (313,180)
Purchase of rights (144,000) -
----------- -----------
Net cash used in investing activities (171,103) (313,180)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Donated capital - 69,862
Principal payments on long-term debt (32,610) -
Satisfaction of stockholder receivable 123,094 -
---------- -----------
Net cash provided by financing activities 90,484 69,862
---------- -----------
NET INCREASE (DECREASE) IN CASH (144,215) 73,240
CASH - BEGINNING OF PERIOD 148,619 -
---------- -----------
CASH - END OF PERIOD $ 4,404 $ 73,240
========== ===========
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Purchase of rights and database $ 302,513 $ -
========== ===========
Issuance of preferred stock for rights $ 144,000 $ -
========== ===========
Issuance of common stock for legal fees $ 6,000 $ -
========== ===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 7
THE S.I.N.C.L.A.R.E. GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 1 - BASIS OF PRESENTATION
The unaudited interim financial statements presented herein have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended October 31, 1995.
The accompanying interim financial statements have not been audited by
independent certified public accountants, but in the opinion of management,
such financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary to summarize fairly the results of operations,
and are not necessarily indicative of the results to be expected for the full
year.
NOTE 2 - CAPITAL STOCK
On November 27, 1995, the company issued 1,300,000 of Series A $1.00
convertible preferred stock and 1,100,000 shares of Series B $2.50 convertible
preferred stock, both with a par value of $0.001, in exchange for exclusive
rights to sell and service software known as Federation On-Line Membership Kit
for Windows ("Kit's). The Kit's were valued at $144,000 and charged to
operations.
On February 7, 1996, the company, by authorization from the Board of Directors,
approved a 20 for 1 reverse split of the two series of preferred stock, Series
A and Series B and to allow a conversion into common stock on a one to one
basis. The split was retroactive to October 31, 1995.
NOTE 3 - AGREEMENTS
On November 27, 1995, the company entered into an agreement to obtain the
database and supporting software from The New Industrialist for the United
States public companies in exchange for 40% of the net profits generated from
the database. In addition, a license agreement related to the publication of
The New Industrialist - Strictly Canadian requires the company to pay the
licensor a royalty of 15% of the gross profits from the publication which was
first published in February 1996.
On December 29, 1995, the company was granted the right to use certain
commercial marks and acquired a database of all public companies trading in
Canada and software for a total amount of $326,095 which is included in other
assets. Upon execution of the agreement, the company paid $32,610, with the
balance of $293,485 payable over three years in quarterly installments, at an
interest rate of 8.5%.
NOTE 4 - SUBSEQUENT EVENTS
On February 15, 1996, the company entered into a one year agreement for
consulting services for the development of computer systems in exchange for the
issuance of 100,000 shares of common stock payable at the discretion of the
consultant.
On May 3, 1996, the company formed Cyberlinx Corporation ("Cyberlinx") as a
wholly-owned subsidiary as a means of segregating non-financial Internet
services. In May 1996, Cyberlinx acquired Trackers Sports Network, Inc.
("Trackers") in exchange for providing $550,000 in development costs associated
with the underdeveloped software technology which provides computerized
handicapping information for thoroughbred horse races. On May 7, 1996,
Trackers entered into two Executive Employment Agreements with two unaffiliated
individuals to pay a base salary of $62,500 per year for a period of two years
and an incentive salary equal to half of 1% of the adjusted net profit of
Trackers for the two year period. On a related transaction, the two employees
of the May 7, 1996 Executive Employment Agreement received 250,000 shares each,
$0.001 par value common stock of Cyberlinx in exchange for the transfer of
proprietary software and related source codes for a program called the Daily
Racing Form Reader. On May 9, 1996, Cyberlinx sold 30%, or 9,000,000 shares,
of the 30,000,000 total shares issued and outstanding shares of Trackers to two
unaffiliated third parties for a total consideration of $500,000. The proceeds
will be used for software development.
<PAGE> 8
THE S.I.N.C.L.A.R.E. GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 4 - SUBSEQUENT EVENTS (Continued)
On May 14, 1996, the company entered into a licensing agreement to offer access
to its FlexQuote product for a monthly application fee. Through July 1996, no
fee revenue has been received from this license agreement.
On May 29, 1996, the company acquired certain rights to a software system and
database application known as Internet News Network ("INN") in exchange for
740,000 shares of the company's common stock, valued at $1,866,000. In
addition, royalty payments are required at the rate of 10% of gross income up
to $5 million, with decreasing rates from 8% to 2% of gross income between $5
million and $50 million and over. On May 31, 1996, the rights to the
non-financial reporting functions of INN were transformed to the company's
wholly-owned subsidiary, Cyberlinx. On June 6, 1996, the Board of Directors
authorized the spin-off of Cyberlinx to the company's stockholders of record as
of June 26, 1996 and payable July 29, 1996. The issuance of common shares has
been deferred until a later date.
On July 30, 1996, the company acquired certain operating systems and software
applications known as FlexQuote for the North American market of a stock
quoting system. Under the agreement, the company may be required to pay
$500,000, payable at the rate of 5% of gross revenues with the first payment
deferred until $1 million in gross revenues are generated from FlexQuote
operating systems. In addition, royalty payments are required at the rate of
10% of gross revenues up to $5 million, with decreasing rates from 8% to 2% of
gross revenues between $5 million and $50 million and over, payable monthly.
<PAGE> 9
ITEM 2
Management's Discussion and Analysis of Financial Condition and Results of
Operation
General
The Company's principal business is the development of financial services and
the management of financial databases for third parties. It's source of income
has derived primarily from this area, including the design of Internet
websites, processing Internet inquiries and acting as a provider of source
information. These services were developed in conjunction with the Company's
research and development efforts to provide a new financial service system
called FlexQuote(TM). By the end of the January 31, 1996, the architecture for
the new financial service system was the Internet access of part of the
database with an update each Friday after the stock market closed and various
inter-week pronouncements. The income derived from these services were applied
to the research and development activities to bring FlexQuote(TM) to the
commercial market.
FINANCIAL SERVICES - FlexQuote(TM) SOFTWARE AND DATABASE. For purposes of
this report and management discussion, subsequent events after January 31, 1996
are discussed. The Company's proposed business will be primarily as a content
provider offering its services on Internet and through print media. These
activities were finally realized in the second quarter with the publishing on
February 20, 1996 of The New Industrialist...Strictly Canadian, a 68-page
monthly financial journal which included the FlexQuote(TM) architecture. The
basis of the FlexQuote(TM) system was not commercially available until
mid-August 1996.
Basis of Presentation
The results of operation includes: (i) data processing and financial services,
and (ii) pre-FlexQuote(TM) services offered on Internet.
Results of Operation
For the three months ending January 31, 1996, representing the first quarter,
the Company had gross revenue of $497,841 and an operating gain of $209,127
before taxes, representing a net after taxes of $125,476. The Company's
overhead was $240,235 which comprised mainly of software development, and
administrative expenses. The Company policy is to expense the purchase of any
software and databases it acquires. The net income for the period was
attributed to systems development, management of databases, and related income
from Internet access and content activities.
<PAGE> 10
The results reflect a change of business activities to Internet related
services from the Company's former principal business of identifying
acquisition candidates that require financial reorganization and related
services. These activities have been completely eliminated. During the
transition period which the first quarter represents, the Company derived all
of its income from Internet related services and as a content provider.
However, certain overhead of $11,500 was charged against the reduction or
elimination of the Company's prior activities.
As reported in our news release March 26, 1996, the Company declared unaudited
first quarter results of $617,603 instead of the adjusted unaudited of
$497,841, with earnings of $417,471 instead of $110,719. The difference
represents the reconciliation of our certified financial statements for the
year ending October 31, 1995. The audited year end report was not completed
until August 27, 1996.
Liquidity and Capital Resources
The Company has changed focus during fiscal 1995 and has continued to date,
providing financial services and the management of financial databases for
third parties. Prior to this period, the Company was engaged as a merger
acquisition entity. Liquidity has materially improved with current assets as
of January 31, 1996 of $604,540 versus $148,619 for the audited year end of
October 31, 1995. Current liabilities are $552,154 as of January 31, 1996
versus October 31, 1995 of $284,417. Long term debt of $122,230 as January 31,
1996. The Company had no long term debt as of October 31, 1995. Stockholder
equity increased to $509,006 as January 31, 1996 versus $125,193 as of October
31, 1995.
The current trend based on demand and commitment for capital requirements will
be intensive in the foreseeable future. The Company may not be able to fully
implement its business plans and the capital requirements may be difficult to
obtain. Therefore, the Company is concentrating on supplying financial
databases and developing services in this area to be offered as a content
provider on Internet. Additionally, the Company is exploring methods to
increase its cash position by supplementing its activities as a publisher. The
results of operations take into consideration the transitional nature of the
Company's business.
Other Transactions
On November 21, 1995, the Company entered into an agreement to obtain the
database and supporting software from the New Industrialist for the United
States public companies in exchange for 40% of the net profits generated from
the database. In addition, on November 28, 1995, a license agreement related to
the publication of The New Industrialist - Strictly Canadian, requires the
Company to pay licensor a royalty of 15% of the gross profits from the
publication. The first commercial issue was published in February, 1996.
<PAGE> 11
On November 27, 1995, the Company entered into a Preferred Stock Purchase
Agreement with Federation On Line International, LLC ("Federation"), a company
not affiliated with Federation On-Line Services, a division of the Company.
Under the terms of the agreement, Federation received 1,300,000 shares of Class
A $1.00 convertible preferred stock, $0.001 par value and 1,100,000 of Class B
$2.50 convertible preferred stock, $0.001 par value. On February 7, 1996, it
was authorized that the preferred shareholders of record as of February 29,
1996 shall be entitled to receive common shares representing the 20 for 1
reverse split of preferred shares and the conversion of the post-preferred
shares into 1 share of the Company's $0.001 par value common stock. Payable
date of the common shares was set as of June 1, 1996. The issuance of the
common shares has been deferred until a later date.
On November 28, 1995, the Company entered into an agreement with Mr. Daniel H.
Luciano, Attorney at Law, to perform certain legal services on behalf of the
Company and to receive as part of compensation $ 2,000 and 100,000 shares
$0.001 par value common stock. Mr. Luciano acknowledged that the common stock
was restricted and to the extent each certificate carried the appropriate
legend. Additionally, the Company agreed that Mr. Luciano shall be entitled to
register the common stock under form S-8 (or such shares can otherwise be
included in any registration statement filed by the Company) or receive the
shares pursuant to Rule 701 of the Securities Act 0f 1993, as amended.
On January 1, 1996, the Company entered into a licensing agreement with the New
Industrialist Company to use various proprietary rights as a means to publish a
financial journal in Canada. The Company agreed to pay a 15% royalty on gross
profits. In conjunction with this agreement, reference is made to a December
29, 1995 agreement for the assignment of the database and related requirements
to cause the publishing of the New Industrialist...Strictly Canadian.
<PAGE> 12
Part II. OTHER INFORMATION
ITEM 1
Legal proceedings
NONE
ITEM 2
Changes in Securities
NONE
ITEM 3
Defaults Upon Senior Securities
NONE
ITEM 4
Submission of Matters to a Vote of Security Holders
NONE
ITEM 5
Other Information
NONE
ITEM 6
Exhibits and Reports on Form 8-K
NONE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-QSB
QUARTERLY FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 4,404
<SECURITIES> 0
<RECEIVABLES> 600,136
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 604,540
<PP&E> 340,283
<DEPRECIATION> 63,946
<TOTAL-ASSETS> 1,183,390
<CURRENT-LIABILITIES> 552,154
<BONDS> 122,230
0
0
<COMMON> 15,209
<OTHER-SE> 493,797
<TOTAL-LIABILITY-AND-EQUITY> 1,183,390
<SALES> 497,841
<TOTAL-REVENUES> 497,841
<CGS> 48,479
<TOTAL-COSTS> 48,479
<OTHER-EXPENSES> 254,992
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 194,370
<INCOME-TAX> 83,651
<INCOME-CONTINUING> 110,719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110,719
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
