SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
[X] ANNUAL REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________________ to _______________________
Commission file number 0-25276
QUIKBIZ INTERNET GROUP, INC.
Exact name of small business issuer as specified in its charter
Nevada 88-0320364
-------- ----------
(State or other jurisdiction I.R.S. Employer Identification No.
of incorporation)
5310 NW 33rd Drive, Suite 212, Ft. Lauderdale, FL 33309
(Address of principal executive offices and zip code)
(954) 739-7005
(Issuer's telephone number, including area code)
The Registrant hereby amends the following items, financial statements,
exhibits or other portions of its Annual Report on Form 10-KSB for the year
ended December 31, 1997 as set forth in the pages attached hereto:
Item 6. Management's Discussion and Analysis or Plan of Operation
Item 7. Financial Statements
Item 13. Exhibits and Reports on Form 8-K
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Overview
We provide businesses with communications services and products,
including Internet, Intranet, Extranet, website and electronic media solutions,
advertising, marketing and branding services, and related services. We offer a
comprehensive range of communications solutions designed to improve clients'
business processes. We provide professional services including strategic
consulting, analysis and design, technology development, systems implementation
and integration and audio and visual materials, including audio, video, CD and
DVD-Rom. We also provide advertising, marketing and consulting services in the
areas of strategic corporate and product positioning, corporate identity and
product branding, new media, packaging, collateral systems, direct marketing,
consumer and trade promotions and media placement services.
QuikBIZ is a Nevada corporation. It was originally incorporated in 1984
in Utah under the name Sunwest Industries Inc. In 1994 it merged with
International Training & Education Corp., changed its name to International
Training & Education Corp. and became a Nevada corporation. In 1996 it changed
its name to DigiMedia USA, Inc. In May 1997 it merged with Nitros Franchise
Corporation and changed its name to Nitros Franchise Corporation. In July 1997
QuikBIZ changed its name to Algorhythm Technologies Corporation. In July 1998
its name was changed to QuikBIZ Internet Group, Inc.
As a result of QuikBIZ's merger with Nitros Franchise Corporation in
May 1997 and the change in management that accompanied the merger, QuikBIZ
changed the focus of its business to the acquisition and development of
Internet-related businesses. QuikBIZ phased out its prior business, which
consisted of developing computer based training courses for the law enforcement
industry. In November 1997, QuikBIZ acquired A.D.S. Advertising Corporation,
doing business as The Smith Agency (now SmithAgency.com).
Since the merger with Nitros Franchise Corporation in May 1997, our
operations have related primarily to recruiting personnel, raising capital, and
completing the acquisition of SmithAgency.com (November 1997), QuikLAB
Multimedia Centers (July 1998) and G & L Group (September 1999).
Results of Operations
Our revenues grew from zero in 1996 to $ 140,355 in 1997 on an actual
basis, giving effect to our acquisition of Nitros Franchise Corporation in May
1997 and SmithAgency.com in November 1997.
The consolidated December 31, 1997 financial statements included a net
loss of $190,278 as compared to a net loss of $173,635 for the year ended
December 31, 1996. The increase in losses was due to the costs associated with
the acquisitions of Nitros Franchise Corporation and SmithAgency.com, legal
costs and the write-off of certain assets associated with phasing out our
previous business of CD-Rom training programs.
Comparison of the Fiscal Years 1996 and 1997
The following discussion relates to our actual operating results for
the periods noted. The operating results discussed include the operations of
acquired companies from the effective dates of their acquisitions. Given that
1997 includes revenues and expenses from new acquisitions, we believe that the
operating results for 1997 are not directly comparable to the operating results
for 1996.
Revenues. There were no revenues in 1996 versus revenues of $140,355
in 1997. The increase in revenues reflected the acquisition of SmithAgency.com
in November 1997.
Direct Costs. Direct salaries and costs were zero in 1996 and $126,703
in 1997. The increase in direct costs was primarily due to our acquisitions in
1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $124,467 in 1996 and $127,635 in 1997. The increase
in selling, general and administrative expenses in 1997 compared to 1996 was the
result of our acquisitions and increases in many other types of general and
administrative expenses in anticipation of future growth, including rent and
other expenses incurred in offices acquired through our acquisition of
SmithAgency.com.
Depreciation and Amortization of Goodwill. Amortization of goodwill was
$49,168 in 1996 and grew to $74,687 in 1997. The increase in amortization of
goodwill was due to the goodwill resulting from the acquisitions effected in
1997.
2
<PAGE>
Liquidity and Capital Resources
Since inception, we have funded our operations and investments in
property and equipment through cash from operations, equity financings,
borrowings from commercial banks and capital leases.
Our cash and cash equivalents were $32,079 at December 31, 1996 and
$2,310 at December 31, 1997. Cash used in operating activities of $198,143 in
1996 and $78,747 in 1997 was augmented by net proceeds of financing activities
of $175,419 in 1996 and $41,916 in 1997 and net cash provided by investing
activities of $54,695 in 1996 and $7,062 in 1997.
We have incurred recurring operating losses and negative cash flows
from operating activities and have negative working capital. We have initiated
actions to generate working capital and improve operating performance, including
private issuance of stock, generation of additional revenue and entering into an
investment agreement to raise up to $20,000,000 through a series of sales of
common stock.
Factors Affecting Operating Results
Our operating results may fluctuate significantly in the future as a
result of a variety of factors, many of which are outside our control. These
factors include:
o the level of demand for intranet, extranet, website and electronic media
development;
o the level of demand for advertising and marketing services;
o the productivity of our consulting offices;
o our success in finding and acquiring suitable acquisition candidates;
o our ability to attract and retain personnel with the necessary strategic,
technical and creative skills required to service clients effectively;
o the cost of advertising and related media;
o client budgetary cycles;
o the amount and timing of capital expenditures and other costs relating to
the expansion of our operations;
o the introduction of new products or services by us or our competitors;
o pricing changes in the industry;
o technical difficulties with respect to the use of the Internet;
o economic conditions specific to Internet technology usage; and
o general economic conditions.
As a strategic response to changes in the competitive environment, we
may from time to time make certain pricing, service, technology or marketing
decisions or business or technology acquisitions that could have a material
adverse effect on our business, results of operations and financial condition.
As a result of these factors, in future periods our operating results may fall
below the expectations of securities analysts and investors. Our stock price
would then be likely to decline significantly and rapidly.
3
<PAGE>
Item 7. Financial Statements.
--------------------
Report of Want & Ender CPA, P.C............................................5
Consolidated Balance Sheets, December 31, 1996 and 1997....................6
Consolidated Statements of Operations, Years Ended
December 31, 1996 and 1997..............................................7
Consolidated Statements of Shareholders' Equity, Years
Ended December 31, 1996 and 1997........................................8
Consolidated Statements of Cash Flows, Years Ended
December 31, 1996 and 1997..............................................9
Notes to the Financial Statements.........................................11
4
<PAGE>
Want & Ender
CPA, P.C.
Certified Public Accountants
Martin Ender CPA
Stanley Z. Want CPA, CFP
Independent Auditor's Report
To the Shareholders and Board of Directors
QuikBIZ Internet Group, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of QuikBIZ Internet
Group, Inc. and Subsidiaries at December 31, 1997 and related consolidated
statements of operations, shareholders' equity and cash flows for the years
ended December 31, 1997 and 1996. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We have conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of QuikBIZ
Internet Group, Inc. and Subsidiaries at December 31, 1997 and the consolidated
results of operations and cash flows of QuikBIZ Internet Group, Inc. and
Subsidiaries for each of the two years in the period ended December 31, 1997 and
1996, in conformity with generally accepted accounting principles.
/s/ Martin Ender CPA
Want & Ender CPA, P.C.
Certified Public Accountants
New York, NY
September 7, 1999
5
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
Assets
December 31,
--------------------------------------
1997 1996
------------------ ------------
<S> <C> <C>
Current Assets
Cash $ 2,310 $ 32,079
Accounts receivable 85,857 --
Other 37,827 1,075
----------------- ---------------
Total current assets 125,994 33,154
Property and equipment
Furniture and equipment 45,847 2,350
Less accumulated depreciation 4,819 1,515
----------------- --------------
Depreciated cost 41,028 835
Intangible assets
1,296,515 59,538
----------------- --------------
Total assets $ 1,463,537 $ 93,527
================= ==============
Liabilities and Shareholders' Equity
December 31,
-----------------------------------------
1997 - 1996
--------------------------- --------------
Current liabilities
Notes payable $ -- $ 16,667
Accounts payable and accrued expenses 545,165 --
Current maturities of long-term debt 95,845 --
----------------- --------------
Total liabilities 641,010 16,667
Shareholders' equity
Preferred stock; $.001 par value, 5,000 shares
authorized; 261 and 441 shares issued and
outstanding, respectively 10,208 17,248
Common stock; $.002 par value; 25,000,000 shares
authorized; 12,784,372 and 1,722,322 shares
issued and outstanding, respectively 25,569 3,445
Additional paid-in capital 2,547,276 1,496,676
Accumulated deficit (1,609,359) (1,419,081)
Subscriptions receivable (151,167) (21,428)
----------------- --------------
Total shareholders' equity 822,527 76,860
----------------- --------------
Total liabilities and shareholders' equity $ 1,463,537 $ 93,527
================= ===============
</TABLE>
6
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
Years Ended December 31,
-------------------------------------------
1997 1996
----------------- ----------------
<S> <C> <C>
Revenue
Advertising $ 140,355 $ -
----------------- ---------------
Total revenue 140,355 -
----------------- ----------------
Operating expenses
Direct costs 126,703 --
Selling, general and administrative 127,635 124,467
Depreciation and amortization 74,687 49,168
---------------- -----------------
Total operating expenses 329,025 173,635
---------------- ----------------
Loss from operations (188,670) (173,635)
Interest expense 1,608 -
---------------- -----------------
Net loss $ (190,278) $ (173,635)
---------------- ------------------
Weighted average number of common
shares outstanding 6,841,017 850,870
Basic (loss) per common share $ (0.028) $ (0.204)
</TABLE>
7
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
<TABLE>
Unearned Subscrip-
Additional Compensation tions
Common Stock Preferred Stock Paid-in Accumulated on Common Receiv-
Shares Amount Shares Amount Capital Deficit Stock able Total
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1995 6,897,814 $ 4,620 597 $ 23,348 $ 1,313,983 $ (1,245,446) $ - $ - $ 96,505
Issuance of
common stock 5,018,099 3,249 - - 150,716 - - - 153,865
Conversion of
preferred stock 54,600 37 (156) (6,100) 6,088 - - - 25
Subscription
receivable issued 85,712 171 - - 21,257 - - (21,428) -
Net loss - - - - - (173,635) - - (173,635)
----------- ---------- ------ ------- ----------- ------------- ----- ------- ---------
Balance,
December 31, 1996 12,056,225 $ 8,077 441 $17,248 $ 1,492,044 $ (1,419,081) $ - $(21,428) $ 76,860
Effect of 1997
7-for-1 reverse
stock split (10,333,903) (4,632) - - 4,632 - - - -
Conversion of
preferred stock 9,000 18 (180) (7,040) 7,022 - - - -
Acquisitions 10,002,667 20,005 - - 894,650 - - - 914,665
Issuance of common
stock 531,428 1,063 - - 20,227 - - - 21,290
Subscription
receivable issued 518,955 1,038 - - 128,701 - - (129,739) -
Net loss - - - - - (190,278) - - (190,278)
----------- ---------- ------ ------- ----------- ------------- ----- ------- ---------
Balance,
December 31, 1997 12,784,372 25,569 261 10,208 2,547,276 (1,609,359) - (151,167) 822,527
</TABLE>
8
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
Years Ended December 31,
-----------------------------------
1997 1996
--------------- -------------
<S> <C> <C>
Operating activities
Net (loss) $ (190,278) $ (173,635)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Depreciation and amortization 74,687 49,168
Changes in operating assets and liabilities,
net of effects of acquisition:
(Increase) decrease in accounts receivable 33,005 54,256
(Increase) decrease in other current assets 10,103 (21,428)
Increase (decrease) in accounts payable and
accrued expenses (6,264) (106,504)
--------------- -------------
Net cash (used in) provided by operating
activities (78,747) (198,143)
--------------- -------------
Investing activities
Cash received from acquisition 7,062 -
Release of debt for purchase of property - 54,695
--------------- -------------
Net cash (used in) provided by investing
activities 7,062 54,695
--------------- -------------
Financing activities
Payment on notes payable (3,084) -
Issuance of common stock 45,000 175,419
--------------- -------------
Net cash provided by financing activities
41,916 175,419
--------------- -------------
Net increase (decrease) in cash (29,769) 31,971
Cash, beginning of period 32,079 108
--------------- -------------
Cash, end of period 2,310 32,079
=============== =============
</TABLE>
9
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
continued
<TABLE>
Years Ended December 31,
-----------------------------------
1997 1996
--------------- -------------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid for interest $ 1,608 $ -
Supplemental schedule of noncash investing and
financing activities:
Issuance of common stock and options related to
acquisitions $ 914,655 $ -
Subscription receivable issued in exchange for
common stock $ 129,739 $ 21,428
</TABLE>
10
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 1 - NATURE OF OPERATIONS
QuikBiz Internet Group, Inc. (the "Company") is a Nevada corporation.
It was originally incorporated in 1984 in Utah under the name Sunwest
Industries, Inc. In 1994 the Company merged with International Training
Education Corp. ("ITEC"), changed its name to ITEC and became a Nevada
corporation. In 1996 the Company changed its name to DigiMedia USA, Inc. In May
1997 the Company merged with Nitros Franchise Corporation and changed its name
to Nitros Franchise Corporation. In July 1998 the Company changed its name to
QuikBiz Internet Group, Inc.
As a result of the Company's merger with Nitros Franchise Corporation
in July 1997 and the change in management that accompanied the merger, the
Company changed the focus of its business to the acquisition and development of
Internet-related businesses. The Company phased out its prior business, which
consisted of developing computer-based training courses for the law enforcement
industry.
The Company implemented its new business strategy by acquiring, in
November 1997, A.D.S. Advertising Corporation d/b/a The Smith Agency of Ft.
Lauderdale, Florida (now SmithAgency.com), a fully integrated marketing and
advertising company specializing in electronic media including Internet
websites.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany balances have been eliminated in consolidation.
Property and Equipment. Property and equipment are stated at cost and
depreciated, using the straight-line method, over the estimated useful lives of
the assets as follows: three to seven years for furniture and equipment and the
lease term for leasehold improvements.
Intangible Assets. Intangible assets are being amortized on the
straight-line basis over ten years.
Long-Lived Assets. The Company reviews long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reported
period. Actual results could differ from those estimates.
Fair Value of Financial Instruments. The carrying amount of cash,
accounts receivable, accounts payable and accrued expenses approximate fair
value because of their short duration. The carrying amount of short and
long-term debt approximates fair value because the interest rates are similar to
the interest rates currently available to the Company.
Income Taxes. The Company accounts for income taxes under Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
Under SFAS 109, deferred income tax assets and liabilities are determined based
upon differences between financial reporting and tax bases of assets and
liabilities and are measured using currently enacted tax rates.
Revenue Recognition. Revenue is recognized from sales when a product
is delivered and from services when performed. Revenue is reduced for estimated
customer returns and allowances.
Earnings Per Share. In 1997, the Financial Accounting Standards Board
issued SFAS No. 128, "Earnings Per Share". SFAS No. 128 requires two
presentations of earnings per share - basic and diluted. Basic earnings per
share is computed by dividing income available to common stockholders by the
weighted-average number of common shares for the period. The computation of
11
<PAGE>
diluted earnings per share is similar to basic earnings per share, except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potentially dilutive common shares, such
as options, had been issued. Diluted earnings per share are not presented
because the effects would be anti-dilutive. The restated loss per share to be
reported under SFAS No. 128 does not differ from amounts reported under existing
accounting rules for all periods reported by the Company through December 31,
1997.
Reclassification. Certain prior period amounts have been reclassified
to conform to the current year presentation.
Year 2000. The Company developed and implemented a plan to deal with
the Year 2000 problem and converted its computer systems to be Year 2000
compliant. The conversion efforts were completed by mid 1999. The Year 2000
problem is the result of computer programs being written using two digits rather
than four to define the applicable year. In addition, the Company is working
with its suppliers and customers to ensure their compliance with Year 2000
issues in order to avoid any interruptions in its business.
Note 3 - INTANGIBLE ASSETS
December 31, 1997
------------------------
Intangible assets
Goodwill, net of accumulated amortization
of $11,062 $ 662,672
Tradename, net of accumulated amortization
of $21,875 415,625
Franchise rights, net of accumulated
amortization of $15,587 218,218
------------------------
Total $ 1,296,515
Note 4 - LONG-TERM DEBT
December 31, 1997
-------------------------
$100,000 line-of-credit; interest at prime
plus one and one-half percent (10% at
December 31, 1997); collateralized by accounts
receivable, inventory and property and
equipment; guaranteed by a director/shareholder; $ 95,845
matures in March, 2000 ------------------------
Total $ 95,845
The aggregate maturities of long-term debt for the years ended December
31 are as follows:
Year Amount
-------------------------------------------------
1998 $ 95,845
------------
$ 95,845
12
<PAGE>
Note 5 - PREFERRED STOCK
The preferred stock calls for the payment of dividends of $120 per
share per annum, when and as declared by the Board of Directors, payable
quarterly. The Board of Directors has not declared any dividends as of December
31, 1997. Each share of preferred stock is convertible into 71.43 shares of
common stock, at the option of the holder. In the event of liquidation, the
holders of preferred stock are entitled to receive $1,000 per share prior to any
distributions to holders of common stock. The preferred is also callable, at the
option of the Company, at $1,100 per share plus unpaid dividends.
Note 6 - COMMON STOCK
In May 1997, the Company's Board of Directors authorized a
seven-for-one reverse stock split. Outstanding shares and per share data
contained in these financial statements have been restated to reflect the impact
of the split.
On July 18, 1997, the Company issued 1,000,000 shares of common stock
to acquire the rights to the name "Algorythm Technologies International, Inc."
During 1998, the Company returned the rights to the use of the name and
1,000,000 shares of common stock were returned to the Company. Separately,
during 1998 David Bawarsky donated 1,300,000 shares of common stock to the
Company. These transactions resulted in a reduction to shareholder's equity of
$401,045 in 1998.
Note 7 - ACQUISITIONS
On May 14, 1997, the Company entered into an agreement with Nitros
Franchise Corporation ("Nitros") for a tax-free merger. In connection with this
transaction, the Company issued 6,702,667 shares of common stock and options to
purchase 300,000 shares of common stock at $0.15 per share to the shareholders
of Nitros in return for all of their shares. The Company also issued options to
purchase 300,000 shares of common stock at $0.15 per share to officers of the
Company. Of the options so issued, options for 400,000 shares remain exercisable
until May 2000, options for 100,000 shares expired in 1998 and options to
purchase 100,000 shares were exercised in February 1999. This transaction was
accounted for in a manner similar to a pooling of interests, accordingly, the
Company's consolidated financial statements have been restated for all periods
to the business combination to include the combined financial results of Nitros.
Nitros had no revenues or expenses prior to the merger.
On November 7, 1997, the Company acquired the outstanding stock of The
Smith Agency. The Company issued 2,300,000 shares of common stock and 200,000
options, at par, exercisable over a period of two years to the former
shareholder of The Smith Agency, for an aggregate purchase price of $468,000.
The acquisition was accounted for by the purchase method of accounting and
accordingly the results of operations of The Smith Agency for the period from
November 7, 1997 are included in the accompanying consolidated financial
statements. Assets acquired and liabilities assumed have been recorded at their
estimated fair values. The excess of the purchase price over the fair value of
the net assets acquired (goodwill) was approximately $674,000.
The following unaudited proforma consolidated results of operations are
presented as if the business combination of The Smith Agency had been made at
the beginning of the periods presented:
Years Ended December 31, 1 9 9 7 1 9 9 6
- -------------------------------------------- ----------------- -----------------
Sales $ 1,645,554 $ 1,491,229
Net loss (81,977) (319,031)
Net loss per share:
Basic diluted (0.008) (0.031)
The unaudited proforma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
that would have actually resulted had the combination been in effect on January
1, 1996, or of future results of operations.
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<PAGE>
Note 8 - LEASES
The Company has entered into several long-term leases for offices,
retail locations and equipment. At December 31, 1997, future minimum rental
payments required under noncancellable lease obligations during the years ended
December 31 are approximately as follows:
Year Amount
---------- ----------
1998 46,404
1999 46,404
2000 40,738
2001 2,898
2002 -
Thereafter -
---------- ---------
$ 136,444
Rent expense was $36,000 and $0 for the years ended December 31, 1997
and 1996, respectively.
Note 9 - DEFERRED INCOME TAXES
At December 31, 1997, the Company has available net operating loss
carryforwards of $1,609,000, which will expire through 2013.
SFAS 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
After consideration of all the evidence, both positive and negative, management
has determined that a valuation allowance is necessary to reduce the deferred
tax assets to the amount that will more likely than not be realized.
Significant components of the Company's net deferred income taxes are
as follows:
At December 31, 1997
-----------------------
Deferred tax assets:
Net operating loss carryforwards $ 628,000
Valuation allowance for deferred tax asset (628,000)
--------------------------
Total $ -
Note 10 - EMPLOYMENT AGREEMENTS
The Company has employment agreements with its executive officers and
certain other key employees. The agreements are for periods ranging from two to
five years, provide for performance incentive bonuses and severance payments
under certain circumstances, and provide for minimum annual base compensation of
$335,000 in 1998, $396,000 in 1999, $448,000 in 2000, $410,000 in 2001, $455,000
in 2002 and $350,000 in 2003. If the employment contract with the Chief
Executive Officer were to be cancelled or should the employer change the
employee's position without employee's consent, the Company's liability would be
$2,000,000.
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<PAGE>
Note 11 - SUBSEQUENT EVENTS
During 1998, the Company issued 2,394,868 shares of common stock as
compensation to certain key salaried employees. Sale of these shares is
restricted prior to the date of vesting, which ranges from one to two years from
the date of issuance. Shares issued were recorded at their fair market value on
the date of the issuance, with a corresponding charge to shareholders' equity.
The unearned portion is being amortized as compensation expense on a
straight-line basis over the related vesting period. By December 31, 1998, three
officers of one of the Company's subsidiaries entered into an agreement in
principle to terminate their employment agreements with the Company.
During June 1998, the Company issued options to purchase an aggregate
of 60,000 shares at par to two of its directors as compensation for their
services as directors during 1998. These options were valued at $10,000 and this
expense has been included in selling, general and administrative expense.
On July 1, 1998, the Company acquired the outstanding stock of QuikLAB
Multimedia Centers, Inc. ("QuikLAB"), a company owned by a director/shareholder
of the Company. The acquisition was accounted for as a purchase and the results
of QuikLAB's operations were included in the Company's 1998 consolidated
statements of operations from the date of acquisition. Consideration was the
issuance of 200,000 stock options, at par, exercisable over a period of two
years, valued at $42,000. The Company will issue an additional 2,800,000 stock
options, at par, exercisable over a period of five years from the date of
acquisition if QuikLAB achieves an annual net profit of $200,000 by July 2001.
Franchise rights were eliminated as part of the combination. The fair value of
the net assets acquired exceeded the purchase price by $87,000 which has been
recorded as a reduction to property and equipment.
On September 29, 1998, the Company entered into an agreement with two
of its shareholders to return 604,669 shares of common stock issued by the
Company in December 1996 and September 1997. In exchange, the Company rescinded
the debt owed by the two shareholders, in the amount of $151,167.
In addition to options issued in connection with acquisitions (Notes 7
and 11) and those issued to directors, the Company issued warrants and options
to purchase the Company's common stock as follows:
During June 1998, the Company issued a warrant to purchase 25,000
shares of common stock at an exercise price of $0.17 per share. The
warrant was exercised in June 1999.
During July 1998, the Company issued 600,000 options for investment
banking services. The options expire in five years and have an exercise
price of $0.25 per share.
During May 1999, the Company issued a warrant to purchase 500,000
shares of common stock at an initial exercise price of $1.4625 per
share. The warrant expires in May 2004.
Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation",
the Company has determined that, other than the options issued in connection
with acquisitions and to directors, there was only minimal value to the warrants
and options described above at the date of issuance.
During 1999, the Company issued 420,923 shares of common stock for
$240,000. The Company also received $15,000 when a shareholder exercised options
for 100,000 shares of common stock.
On July 9, 1999, the Company entered into an investment agreement to
raise up to $20 million through a series of sales of common stock. The dollar
amount of each sale is limited by the trading volume and a minimum period of
time must occur between sales. The agreement is for a three-year period ending
July 9, 2002.
On September 1, 1999, the Company acquired the assets and assumed
certain of the liabilities of an advertising agency for $610,000 payable in the
form of 488,000 shares of common stock, of which 366,000 shares were issued and
122,000 shares are to be issued. In connection with this transaction, the
Company entered into a three-year employment agreement with the acquiree's
president. The acquisition will be accounted for as a purchase in 1999. The
unaudited sales of the acquired company during 1998 were approximately
$4,700,000.
15
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
Number Description
- ------ -------------
2.1 Agreement and Plan of Merger Between DigiMedia USA, Inc. and Nitros
Franchise Corporation, dated May 14, 1997, incorporated by reference
to the Registrant's Report on Form 10-QSB for the period ended June
30, 1997.
2.2 Acquisition Agreement Between Algorhythm Technologies Corporation and
ADS Advertising Corporation, dated October 30, 1997, incorporated by
reference to the Registrant's Report on Form 10-QSB for the period
ended September 30, 1997.
3.1 Registrant's Articles of Incorporation, as amended, incorporated by
reference to the Registrant's Report on Form 10-QSB for the period
ended March 31, 1998, except for the July 1998 amendment, which is
incorporated by reference to the Registrant's Report on Form 10-QSB
for the year ended December 31, 1997.
3.2 Registrant's Bylaws, incorporated by reference to the Registrant's
Report on Form 10-QSB for the period ended March 31, 1998.
3.3 Certificate of correction of certificate of amendment to the
Registrant's Articles of Incorporation, filed in Nevada on November
10, 1999.
10.1 Employment agreement between ADS Advertising Corporation and Andrew
Smith, dated October 30, 1997, incorporated by reference to the
Registrant's Report on Form 10-QSB for the period ended March 31,
1998.
10.2 Employment agreement between Capital Network of America, Corp. and
Kirk J. Girrbach, dated April 13, 1998, incorporated by reference to
the Registrant's Report on Form 10-QSB for the period ended March 31,
1998.
10.3 Employment agreement between Capital Network of America, Corp. and
Douglas A. Stepelton, dated April 13, 1998, incorporated by reference
to the Registrant's Report on Form 10-QSB for the period ended March
31, 1998.
10.4 Employment agreement between Capital Network of America, Corp. and
Anthony J. Ard, dated April 13, 1998, incorporated by reference to the
Registrant's Report on Form 10-QSB for the period ended March 31,
1998.
16 Letter of Want & Ender, CPA PC, dated February 9, 1998, incorporated
by reference to the Registrant's Report on Form 8-K/A dated March 3,
1998.
16.1 Letter of M.A. Cabrerra & Company P.A. dated June 11, 1998,
incorporated by reference to the Registrant's Report on Form 8-K dated
June 11, 1998.
21 Subsidiaries of the Registrant, incorporated by reference to the
Registrant's Report on Form 10-KSB for the year ended December 31,
1997.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
During the last quarter of 1997 the Registrant did not file any reports on
Form 8-K.
16
<PAGE>
SIGNATURES
In compliance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this Amendment to be signed on its behalf by the undersigned
duly authorized.
QUIKBIZ INTERNET GROUP, INC.,
by:/s/ David B. Bawarsky
---------------------------
DAVID B. BAWARSKY, Chief Executive Officer
Date: January 25, 2000
17
<PAGE>
Index to Exhibits
Number Description
- ------ -------------
2.1 Agreement and Plan of Merger Between DigiMedia USA, Inc. and Nitros
Franchise Corporation, dated May 14, 1997, incorporated by reference
to the Registrant's Report on Form 10-QSB for the period ended June
30, 1997.
2.2 Acquisition Agreement Between Algorhythm Technologies Corporation and
ADS Advertising Corporation, dated October 30, 1997, incorporated by
reference to the Registrant's Report on Form 10-QSB for the period
ended September 30, 1997.
3.1 Registrant's Articles of Incorporation, as amended, incorporated by
reference to the Registrant's Report on Form 10-QSB for the period
ended March 31, 1998, except for the July 1998 amendment, which is
incorporated by reference to the Registrant's Report on Form 10-QSB
for the year ended December 31, 1997.
3.2 Registrant's Bylaws, incorporated by reference to the Registrant's
Report on Form 10-QSB for the period ended March 31, 1998.
3.3 Certificate of correction of certificate of amendment to the
Registrant's Articles of Incorporation, filed in Nevada on November
10, 1999.
10.1 Employment agreement between ADS Advertising Corporation and Andrew
Smith, dated October 30, 1997, incorporated by reference to the
Registrant's Report on Form 10-QSB for the period ended March 31,
1998.
10.2 Employment agreement between Capital Network of America, Corp. and
Kirk J. Girrbach, dated April 13, 1998, incorporated by reference to
the Registrant's Report on Form 10-QSB for the period ended March 31,
1998.
10.3 Employment agreement between Capital Network of America, Corp. and
Douglas A. Stepelton, dated April 13, 1998, incorporated by reference
to the Registrant's Report on Form 10-QSB for the period ended March
31, 1998.
10.4 Employment agreement between Capital Network of America, Corp. and
Anthony J. Ard, dated April 13, 1998, incorporated by reference to the
Registrant's Report on Form 10-QSB for the period ended March 31,
1998.
16 Letter of Want & Ender, CPA PC, dated February 9, 1998, incorporated
by reference to the Registrant's Report on Form 8-K/A dated March 3,
1998.
16.1 Letter of M.A. Cabrerra & Company P.A. dated June 11, 1998,
incorporated by reference to the Registrant's Report on Form 8-K dated
June 11, 1998.
21 Subsidiaries of the Registrant, incorporated by reference to the
Registrant's Report on Form 10-KSB for the year ended December 31,
1997.
27 Financial Data Schedule.
18
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