UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
May 14, 1996
(Mark one)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: March 31, 1996
_ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number _________________
IAC, Inc.
_________________________________________________________________
(Exact name of small business issuer as specified in its charter
Nevada 88-0303769
______________________________________________________________________________
(State or other jurisdiction of incorporation or organization) (IRS
Employer Identification No.)
714 C Street, San Rafael, California 94901
_______________________________________________________________________________
(address of principal executive offices)
(800) 554-1250
________________________________________________________________________________
(Issuers telephone number)
________________________________________________________________________________
(Former name, former address and former fiscal year, if changed)
Check whether 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 _X__ No __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under the plan confirmed by the court. Yes ____ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers classes of common
equity, as of the latest practicable date:
3,693,578 shares.
Transitional Small Business Disclosure Format (Check one): Yes ___ No _X_
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
IAC, Inc.
Consolidated Balance Sheet
March 31, 1996
(Unaudited)
ASSETS
CURRENT ASSETS
Cash in bank
$33,752
Note from related party
22,809
Account receivable from related party
5,393
TOTAL CURRENT ASSETS
61,954
OTHER ASSETS
Investment in equity securities
10,000
Organizational costs, net of amortization
2,689
12,689
TOTAL ASSETS
$74,643
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable
5,248
Accrued liabilities
176
TOTAL CURRENT LIABILITIES
5,424
STOCKHOLDERS EQUITY
Preferred stock, no par value, 5,000,000 shares
authorized; 630,000 outstanding
2,500
Capital stock, $.001 par value, 25,000,000 shares
authorized; 3,693,578 shares outstanding
3,694
Additional paid in capital
284,204
Accumulated deficit
(221,179)
69,219
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
$74,643
See notes to unaudited consolidated financial
statements
IAC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(Unaudited)
Three Months Ended
March 31, 1996
March 31, 1995
REVENUES
$30,655
$44,183
OPERATING AND GENERAL EXPENSES
Compensation and employee benefits
15,912
19,388
Promotion and trade shows
5,314
16,251
Administrative expenses
13,841
15,018
35,067
50,657
LOSS FROM OPERATIONS
(4,412)
(6,474)
INCOME TAXES
(800)
(800)
NET LOSS
(5,212)
(7,274)
DEFICIT-beginning of period
(215,967)
(166,797)
DEFICIT- end of period
($221,179)
($174,071)
Loss Per Share
($0.00)
($0.00)
See notes to unaudited consolidated
financial statements.
IAC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31, 1996
March 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss
($5,212)
($7,274)
Adjustment to reconcile net loss to net
cash provided
by (used in) operating activities:
Amortization
180
Increase in note receivable from
related party
(5,393)
Decrease in refundable payroll taxes
3,973
Increase in organizational expense
(2,588)
Increase in accounts payable and
accrued liabilities
1,637
2,693
Increase in deferred revenues
9,222
Net Cash Used In Operating Activities
(4,815)
2,053
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in equity securities
(10,000)
Net Cash Used In Investing Activities
(10,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock, net of expenses
600
39,766
Net Cash Provided By Financing
Activities
600
39,766
Net Increase (Decrease) In Cash
(4,215)
31,819
Cash At Beginning Of Period
37,967
55,202
Cash At End Of Period
$33,752
$87,021
See notes to unaudited consolidated
financial statements
IAC, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
Note 1 - Business of the Company:
The Companys business is the management of the malpractice insurance
contract between International Associations' Coalition, Inc.
(Coalition), a related party, and two unrelated insurance companies,
United International, Inc. (United) and effective October 1, 1995,
Pacific Rim Insurance Company (Pacific Rim). Under the management
contract, IAC is entitled to receive 27.5% of the premiums paid by the
podiatrists to United and Pacific Rim each month.
The term of the insurance contracts between the podiatrists and the
insurance carrier is one year and is generally renewable if both
parties have performed satisfactorily. The management contract with
Coalition also has a term concurrent with the insurance contract.
Coalition is wholly-owned by IACs Chairman and majority shareholder.
On December 8, 1995, IAC formed a subsidiary, Mt. Tam Re, Inc. in
Nevis (in the West Indies) with initial capital of $25,000 which is on
deposit in the Channel Islands. Mt. Tam Re was formed to provide
reinsurance coverage for other insurance companies (See Note 9).
Note 2 - Accounting Policies:
The process of preparing financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions regarding certain types of assets,
liabilities, revenues and expenses. Such estimates primarily relate to
unsettled transactions and events as of the date of the financial
statements. Accordingly, upon settlement, actual results may differ
from the estimated amounts.
Revenues are recorded by IAC when insurance premiums are collected by
Coalition.
Expenses are recorded on the accrual basis of accounting.
The carrying value of cash, marketable equity securities, note
receivable, accounts payable and accrued liabilities is a reasonable
estimate of fair value of these financial instruments.
In the opinion of management, all necessary adjustments have been
recorded in order to make the interim financial statements not
misleading.
IAC, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
Note 3 - Receivables from Related Party:
At December 31, 1995, Coalition was obligated to IAC for $22,809. To
effect payment of this receivable, the Board of Directors of IAC
accepted a note from Coalition which requires a payment of $3,000 per
quarter with the balance due in full on December 31, 1996. The
unsecured note bears interest at the rate of 10%.
The account receivable from Coalition represents the unpaid balance of
management fees earned by IAC during the first quarter of 1996.
Note 4 - Investment in Equity Security:
During the quarter ended June 30, 1995, the Company invested $10,000
in 10,000 shares of Triden Telecom, Inc., a SEC registrant. Such
shares represented less than 1% of Triden's outstanding shares. In
May, 1996, all 10,000 shares were sold for a pretax profit of
approximately $7,000.
Note 5 - Issuance and sales of stock:
On October 20, 1994, as consideration for assignment to IAC of the
Chairman's Podiatric Consulting Agreement with International
Associations' Coalition, Inc., 210,000 shares of convertible preferred
stock and 2,100,000 shares of common shares were issued to the
Company's Chairman and President. Such preferred stock is convertible
into 10 shares of common stock. Such assignment was effective January
1, 1995.
The preferred stock has no dividend nor preference in liquidation.
On November 8, 1994, the Company initiated a private placement of
common stock at a price of $1 per share. During the three month
period March 31, 1995, proceeds of $39,766 were received. The
foregoing proceeds included the sale of 28,500 shares of common stock
at $1 per share to the IAC Risk Retention Group, Inc.
Note 6 - Mt. Tam Re Trust:
In December, 1995, a shareholder of IAC deposited common stock of an
OTC Bulletin Board company in a trust account which is held by a
domestic stock brokerage firm. These securities are to serve as
additional capital, for reinsurance underwriting purposes, for Mt. Tam
Re, Inc. Under the terms of the trust agreement, the trustee can
require this shareholder to add sufficient securities into the trust
to maintain an aggregate value of $500,000 as of the end of each
calendar quarter.
IAC, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
Note 6 - continued
As of March 31, 1996, Mt. Tam Re had not entered into any reinsurance
contracts.
Note 7 - Income Taxes:
The Companys net operating loss (NOL) for federal income tax purposes
amounted to approximately $52,000 at December 31, 1995. This NOL will
expire in 2010. For California franchise tax purposes, the NOL is
approximately $25,000 and expires in 2010.
Item 2. Managements Discussion and Analysis or Plan of Operation.
As related in Item 5 below, the Company has recently signed an
agreement to acquire an association and its management which provide
insurance and other services to restaurants in California.
Management believes the earnings of this acquisition will be
significant.
The following discussion relates to the unaudited financial
statements of IAC, Inc. for the interim three month period ended
March 31, 1996 and the comparable period ended March 31, 1995.
The Company has continued to experience a decline in revenues
versus the comparable period in 1995 due to the delays in forming a
RRG as well as from losing older members whose premiums are high.
Very often, since insurance premiums normally rise 50% in each year
for the first five years of malpractice coverage, doctors will rotate
their insurance coverage to manage their costs. This is not expected
to happen when coverage is provided by a RRG because the insurance
carrier is owned exclusively by the insureds and any overage is
returned in the form of dividends. (By definition, a Risk Retention
Group can only be owned by the persons it insures). Membership
levels have remained steady, however, and therefore reflect the
Companys ability to attract new members to the group of insureds in
spite of the continued utilization of off-shore carriers. Management
fees declined from $44,183 in the 1995 period to $30,655 in the 1996
period. This is a reflection of management fee rates on the
declining base of gross premiums. The continued reduction in
expenses has occurred to off-set the decline in revenues.
Liquidity: Since the Companys overhead consists primarily of
compensation to Dr. Wener and the variable costs of promotion,
expenses can be reduced to accommodate a significant downturn in
revenues. Sources of liquidity are from the generation of fees
associated with the Companys management contract and other insurance
referrals and from stock sales. IAC, Inc. distributed a private
placement which was closed on March 31, 1995. Proceeds were $129,500
from 19 investors, most of whom were participating podiatrists of the
Coalition. The Companys current cash on hand is deemed to provide
sufficient liquidity for the foreseeable future. The only demand for
capital will be to form RRGs for groups of insureds, and management
intends to raise those funds on an as-needed basis. If the Company
is successful in raising such funds, it would lend them to the RRG.
The RRG would then repay the Company from earnings and from the sale
of stock to members. A long term management contract would be a
condition to the loan to the RRG. Once this funding is secured,
management is confident that the number of participants in the RRG
and thus its management fees can be expanded significantly. To date,
the doctor group has experienced approximately a 5% claims history.
This level of claims is a direct result of Dr. Weners proficiency as
a risk manager. In a program which has very low claims, the
profitability to the insurer is significant. This is why a RRG is so
desirable to well managed insureds. In an RRG, the insureds are the
only stockholders and may enjoy dividends. With a record such as
that established by Dr. Wener, new participants should be readily
accessible. Dr. Wener, furthermore, enjoys a considerable reputation
through his participation in The Academy of Ambulatory Foot Surgery,
a national organization of podiatrists.
Cash Flow: IAC purchased 10,000 shares of common stock in Triden
Telecom, Inc. at a cost of $1 per share. The stock is currently
listed on the OTC Bulletin Board and trades under the symbol TRIT.
The stock was recently sold at an average price of $1.75
The Net Decrease in Cash is the result of the above activities
in the current period. IAC had $33,752 in cash at the end of the
March 31, 1996 three month period.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
NA.
Item 2. Changes in Securities.
NA.
Item 3. Defaults Upon Senior Securities.
NA.
Item 4. Submission of Matters to a Vote of Security Holders.
NA.
Item 5. Other Information.
On March 20, 1996, the Company announced the signing of a letter
of intent to acquire a controlling interest from Dr. Leon Hooten in
Reserve Credit and Trust, PLC and its interests in the subsidiaries,
Lifeguard Insurance and Pan American Leasing.
On April 3, 1996, the Company received notice from Dr. Hooten
that there were unforeseen difficulties in structuring the
transaction to his satisfaction. Subsequent discussions to resolve
the impasse were unsuccessful and IACs Board of Directors terminated
negotiations at a meeting on May 6, 1996.
Also, at the May 6th meeting, the Board of Directors approved
the acquisition of California Restaurant Specialties Co-operative,
Inc. and the signing of a contract with Richard Peterson to manage
the group. Both transactions will close after the settlement of
outstanding liabilities.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K.
No reports have been filed on Form 8-K during this quarter.
/S/ Dr. Michael Wener, President
May 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF IAC, INC. FOR THE PERIOD ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> MAR-31-1996 MAR-31-1995
<CASH> 33,752 87,021
<SECURITIES> 10,000 10,000
<RECEIVABLES> 28,202 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
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<DEPRECIATION> 0 0
<TOTAL-ASSETS> 74,643 100,610
<CURRENT-LIABILITIES> 5,424 13,116
<BONDS> 0 0
0 0
2,500 2,500
<COMMON> 3,694 3,653
<OTHER-SE> 284,204 174,071
<TOTAL-LIABILITY-AND-EQUITY> 74,643 100,610
<SALES> 30,655 44,183
<TOTAL-REVENUES> 30,655 44,183
<CGS> 0 0
<TOTAL-COSTS> 35,067 50,657
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<INCOME-TAX> 800 800
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<CHANGES> 0 0
<NET-INCOME> (5,212) (7,274)
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