U.S. 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 quarterly period ended September 30, 1999
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( ) 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 1-13478
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QUIKBIZ INTERNET GROUP, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0320364
- ------------------------------------ --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6801 Powerline Road, Ft. Lauderdale, Florida 33309
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(Address of principal executive offices)
(954) 970-3553
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(Issuer's telephone number including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes No X
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The issuer has not filed (i) a report on Form 8-K/A containing the financial
statements required by Item 7 of Form 8-K with respect to the acquisition by the
issuer of QuikLAB Multimedia Centers, Inc. on July 9, 1998; (ii) an annual
report on Form 10-KSB for the year ended December 31, 1998; and (iii) a current
report on Form 8-K with respect to the acquisition by the issuer of
substantially all of the assets of Gallaspy & Lobel, Inc. on August 31, 1999.
The issuer intends to file such reports in the near future.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of February 28, 2000, the issuer
had outstanding 14,273,736 shares of Common Stock, par value $.002 per share.
<PAGE>
QUIKBIZ INTERNET GROUP, INC. AND SUBSIDIARIES
Page
Part I. Financial Information
Item I. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - December 31, 1998 and
June 30, 1999......................................................3
Condensed Consolidated Statements of Operations - Three Months
Ended September 30, 1998 and 1999 and Nine Months
Ended September 30, 1998 and 1999..................................4
Condensed Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 1998 and 1999..................................5
Notes to Condensed Consolidated Financial Statements...............7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................8
Part II. Other Information
Item 1. Legal Proceedings...............................................10
Item 2. Changes in Securities and Use of Proceeds......................10
Item 3. Defaults Upon Senior Securities................................10
Item 6. Exhibits and Reports on Form 8-K...............................10
Signatures..............................................................11
2
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
Assets
December 31, 19981 September 30, 1999
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(Unaudited)
<S> <C> <C>
Current Assets
Cash $ 18,059 $ 82,290
Accounts receivable 136,340 849,545
Other 38,969 36,389
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Total current assets 193,368 968,224
Property and equipment
Furniture and equipment 68,647 159,268
Leasehold improvements 44,862 44,862
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113,509 204,130
Less accumulated depreciation (40,706) (66,139)
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Depreciated cost 72,803 137,991
Intangible assets 595,300 1,072,987
Other assets 0 196,150
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Total assets $ 861,471 $ 2,375,352
=========================== ===========================
Liabilities and Shareholders' Equity
December 31, 1998 September 30, 1999
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Current liabilities
Accounts payable and accrued expenses $ 483,291 $ 1,302,055
Current maturities of long-term debt 59,397 180,000
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Total current liabilities 542,688 1,482,055
Long-term debt 242,685 154,287
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Total liabilities 785,373 1,636,342
Shareholders' equity
Preferred stock; $.001 par value, 3,000 shares
authorized; 261 shares issued and
outstanding 10,208 10,208
Common stock; $.002 par value; 25,000,000
shares authorized; 13,090,571 and
14,011,426 shares issued and outstanding,
respectively 26,179 28,247
Additional paid-in capital 2,692,419 3,437,601
Accumulated deficit (2,392,723) (2,593,752)
Unearned compensation on restricted stock (259,985) (143,294)
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Total shareholders' equity 76,098 739,010
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Total liabilities and shareholders' equity $ 861,471 $ 2,375,352
========================== ==========================
</TABLE>
See accompanying notes
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1 The balance sheet at December 31, 1998 has been derived from the audited
consolidated financial statements at that date.
3
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended
September 30, - September 30,
---------------------------------------- ---------------------------------------
1998 1999 - 1998 - 1999
------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenue
Advertising $ 626,922 $ 1,146,884 $ 1,335,058 $ 2,241,081
Multimedia services and products 365,226 320,527 365,226 1,016,975
------------------ --------------------- ------------------- -------------------
Total revenue 992,148 1,467,411 1,700,284 3,258,056
------------------ --------------------- ------------------- -------------------
Operating expenses
Direct costs 999,381 967,457 1,430,252 2,048,058
Selling, general and
administrative expenses 313,233 483,141 700,398 1,312,344
Depreciation and amortization 36,001 33,282 110,663 88,302
------------------ --------------------- ------------------- -------------------
Total operating expenses 1,348,615 1,483,880 2,241,313 3,448,704
------------------ --------------------- ------------------- -------------------
(Loss) from operations (356,467) (16,469) (541,029) (190,648)
Interest expense 3,304 1,765 8,715 10,381
------------------ --------------------- ------------------- -------------------
Net loss $ (359,771)$ (18,234) $ (549,744) $ (201,029)
------------------ --------------------- ------------------- -------------------
Weighted average number of
common shares outstanding 13,048,088 13,728,842 12,893,958 13,466,661
Basic (loss) per common share $ (0.028)$ (0.001) $ (0.043)$ (0.015)
</TABLE>
See accompanying notes
4
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
Nine Months Ended September 30,
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1998 1999
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<S> <C> <C>
Operating activities
Net (loss) $ (549,744) $ (201,029)
Adjustments to reconcile net (loss) to net cash
used in operating activities:
Depreciation and amortization 110,663 88,302
Amortization of unearned compensation 234,278 116,691
Changes in operating assets and liabilities,
net of effects of acquisition:
(Increase) in accounts receivable (262,429) (278,672)
(Increase) decrease in other current assets 4,388 (1,072)
(Increase) in other assets - (48,813)
(Increase in accounts payable and
accrued expenses 348,518 112,240
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Net cash (used in) operating activities (114,326) (212,353)
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Investing activities
Purchases of property and equipment - (10,621)
Cash received from acquisition
76,312 -
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Net cash (used in) provided by investing
activities 76,312 (10,621)
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Financing activities
Proceeds from notes payable, including $15,900
from a director in 1998 65,970 127,032
Payment on notes payable - (94,827)
Issuance of common stock 66,600 255,000
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Net cash provided by financing activities 132,570 287,205
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Net increase in cash 94,556 64,231
Cash, beginning of period 2,310 18,059
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Cash, end of period $ 96,866 $ 82,290
=========================== ===========================
</TABLE>
5
<PAGE>
<TABLE>
Nine Months Ended September 30,
-------------------------------------------------------
1998 1999
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<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid for interest $ 8,715 $ 10,381
Supplemental schedule of noncash investing and
financing activities:
Common stock issued in connection with
compensation, net of amortization 63,270 -
Issuance of common stock and options related
to acquisitions 42,000 488,000
Tradename returned in exchange for common
stock 401,045 -
Issuance of common stock related to exercise of - 4,250
warrants, cash not yet received
</TABLE>
See accompanying notes
6
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note A - Business
QuikBiz Internet Group, Inc. and subsidiaries (formerly Algorithm Technologies
Corporation)(the "Company") have two reportable segments, both of which sell
their products and services in the Southeastern United States. One segment
provides its clients with internet site design, television commercial and radio
commercial development and production, print advertisement development and
production, public relations and promotions. The other segment offers audio,
video, multimedia and Internet services and products. It also produces and
assists companies in creative content for corporate communications including
sales, training, public relations and promotion.
During 1999, the Company commenced development of the QuikBiz Mall, a virtual
mall on the Internet that offers corporate communications products, services and
supplies online. Start-up costs with regards to this are expensed as incurred.
Note B - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB.
Forward-Looking Statements
This report contains, in addition to historical information, forward-looking
statements regarding the Company that involve risks and uncertainties. The
Company's actual results could differ materially. For this purpose, any
statements contained in this report that are not statements of historical fact
may be deemed to be forward-looking statements. Without limiting the generality
of the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "intend," "could," "estimate," or "continue" or the negative or
other variations thereof or comparable terminology are intended to identify
forward-looking statements. Factors that could cause or contribute to such
difference include, but are not limited to, history of operating losses and
accumulated deficit; possible need for additional financing; competition;
dependence on management; risks related to proprietary rights; government
regulation; and other factors discussed in this report and the Company's other
filings with the Securities and Exchange Commission.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Nine Months ended September 30, 1999 Compared to Nine Months ended
September 30, 1998.
Revenues.
Revenues were $1,700,284 for the nine months ended September 30, 1998 and
grew to $3,258,056 for the nine months ended September 30, 1999, an increase of
92%. The increase in revenues reflected our acquisitions over the period,
growing demand for Internet professional services and the introduction of new
strategy, creative and technology services to the marketplace.
Direct Costs.
Direct costs were $1,430,252 for the nine months ended September 30, 1998
and grew to $2,048,058 for the nine months ended September 30, 1999, an increase
of 43%. As a percentage of revenues, direct costs decreased from 84% for the
nine months ended September 30, 1998 to 63% for the nine months ended September
30, 1999. The decrease in percentage terms was primarily attributable to
improved economies of scale. The increase in direct costs in absolute dollar
terms resulted from higher costs relating to acquired businesses.
Selling General and Administrative Expenses.
Selling, general and administrative expenses were $700,398 for the nine
months ended September 30, 1998 and grew to $1,312,344 for the nine months ended
September 30, 1999, an increase of 87%. As a percentage of revenues, selling,
general and administrative expenses decreased from 41% for the nine months ended
September 30, 1998 to 40% for the nine months ended September 30, 1999. The
decrease in percentage terms was primarily attributable to improved economies of
scale. The increase in selling, general and administrative expenses in absolute
dollar terms was the result of the expansion of our infrastructure to support
growth.
Amortization of Goodwill.
Amortization of goodwill was $50,529 for the nine months ended September
30, 1998 and $54,969 for the nine months ended September 30, 1999. As a
percentage of revenues, amortization of goodwill represented 3% of revenues in
the first nine months of 1998 and 2% of revenues in the first nine months of
1999.
Depreciation and Amortization.
Depreciation and amortization expenses were $110,663 for the nine months
ended September 30, 1998 and decreased to $88,302 for the nine months ended
September 30, 1999, a decrease of 20%. As a percentage of revenues, depreciation
and amortization represented 7% of revenues in the nine months ended September
30, 1998 and 3% of revenues in the nine months ended September 30, 1999. The
decrease in absolute dollar terms from year to year resulted from the
revaluation of acquired assets.
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 $96,866 at September 30, 1998 and
$82,290 at September 30, 1999. Cash used in operating activities of $114,326 in
the nine months ended September 30, 1998 was offset by net cash provided by
investing activities of $76,312 and net proceeds of financing activities of
8
<PAGE>
$132,570 in the nine months ended September 30, 1998. Cash used in operating
activities of $212,353 in the nine months ended September 30, 1999 was augmented
by net cash used in investing activities of $10,621 but offset by net proceeds
from financing activities of $287,205 in the nine months ended September 30,
1999.
On July 9, 1999 we entered into an investment agreement with Swartz Private
Equity, LLC 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. In order to sell shares to
Swartz, there must be an effective registration statement on file with the SEC
covering the resale of the shares by Swartz and we must meet certain other
conditions. The agreement is for a three-year period ending July 9, 2002.
We have incurred recurring operating losses and negative cash flows from
operating activities and have negative working capital. We believe that our
available equity financing arrangement with Swartz will be sufficient to meet
our working capital and capital expenditure requirements for at least the next
two years. However, there can be no assurance that we will receive financing
from Swartz, that we will not require additional financing within this time
frame or that such additional financing, if needed, will be available on terms
acceptable to us, if at all.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
(c) Recent Sales of Unregistered Securities
During the three months ended September 30, 1999, we made the sales of
unregistered securities listed below. We relied on Section 4(2) of the
Securities Act of 1933 as the basis for an exemption from registration for all
of the transactions below, because none of the transactions involved any public
offering.
In August 1999 we sold an aggregate of 172,000 shares of common stock at a
price of $.50 per share to two individuals.
In September 1999 we issued 366,000 shares of common stock to Gallaspy &
Lobel, Inc. in consideration for substantially all of the assets of Gallaspy &
Lobel, Inc.
Item 3. Defaults Upon Senior Securities
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (September 30, 1999)
(b) Reports on Form 8-K
We did not file any reports on Form 8-K during the third quarter of 1999.
10
<PAGE>
SIGNATURES
In accordance with requirements of the Exchange Act, the Registrant caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: March 8, 2000
QUIKBIZ INTERNET GROUP, INC.
By: /s/ David B. Bawarsky
---------------------------------------
David B. Bawarsky, Chief Executive Officer
11
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Page
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27 Financial Data Schedule 13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> SEP-30-1999
<CASH> 82,290
<SECURITIES> 0
<RECEIVABLES> 849,545
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 968,224
<PP&E> 204,130
<DEPRECIATION> 66,139
<TOTAL-ASSETS> 2,375,352
<CURRENT-LIABILITIES> 1,482,055
<BONDS> 0
<COMMON> 28,247
0
10,208
<OTHER-SE> 700,555
<TOTAL-LIABILITY-AND-EQUITY> 2,375,352
<SALES> 3,258,056
<TOTAL-REVENUES> 3,258,056
<CGS> 2,048,058
<TOTAL-COSTS> 2,048,058
<OTHER-EXPENSES> 1,400,646
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,381
<INCOME-PRETAX> (201,029)
<INCOME-TAX> 0
<INCOME-CONTINUING> (201,029)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (201,029)
<EPS-BASIC> (0.015)
<EPS-DILUTED> (0.015)
</TABLE>
