UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
May 14, 1998
For the quarter ended: March 31, 1998
Commission file number: 0-26322
IAC, Inc.
a Nevada corporation
IRS Number 88-0303769
714 "C" Street, San Rafael, California 94901
(800) 554-1250
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 CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 4,401,578 shares.
Transitional Small Business Disclosure Format (Check one): Yes ___ No _X_
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
IAC, Inc.
BALANCE SHEET
March 31, 1998
(Unaudited)
ASSETS
CURRENT ASSETS
Cash in bank
Prepaid expense --------------------
TOTAL CURRENT ASSETS --------------------
OTHER ASSETS
Organizational costs, net of amortization $ 1,429
--------------------
1,429
--------------------
TOTAL ASSETS $ 1,429
====================
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,982
--------------------
TOTAL CURRENT LIABILITIES $ 4,982
--------------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 5,000,000 2,500
shares authorized; 630,000 outstanding
Capital stock, $.001 par value, 25,000,000 4,402
shares authorized; 4,401,578 shares outstanding
Additional paid in capital 699,027
Accumulated deficit (709,482)
--------------------
(3,553)
--------------------
LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,429
====================
See notes to unaudited financial statements.
<PAGE>
IAC, INC.
STATEMENT OF OPERATIONS
AND ACCUMULATED DEFICIT
(Unaudited)
Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
REVENUES
Management fees $28,356
Other income 26
------------------ ----------------------
$28,382
------------------- ----------------------
OPERATING AND GENERAL EXPENSES
Compensation and employee benefits 33,870
Promotion and advertising 3,224
Administrative expenses 42,699
---------------------- ----------------------
79,793
---------------------- ----------------------
LOSS FROM OPERATIONS (51,411)
--------------------- ----------------------
INCOME TAXES (800) (800)
---------------------- ----------------------
NET LOSS (800) (52,211)
DEFICIT-beginning of period (731,989) (679,778)
---------------------- ----------------------
DEFICIT- end of period $ (732,789) $ (731,989)
====================== ======================
Loss Per Share $ 0.0 $ (0.01)
====================== ======================
.
See notes to unaudited financial statements
<PAGE>
IAC, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31, 1998 March 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($52,211)
Adjustment to reconcile net loss to net cash provided
by (used in) operating activities:
Amortization 4,317
Increase in receivable from related party
Decrease in refundable payroll taxes
Increase in accounts payable and other liabilities 38,310
----------------------
Net Cash Used In Operating Activities (9,584)
----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
----------------------
Net Cash Used In Investing Activities 0
----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock, net of expenses 0
----------------------
----------------------
Net Cash Provided By Financing Activities 0
----------------------
Net Increase (Decrease) In Cash (9,584)
Cash At Beginning Of Period $ 0 11,713
======================
Cash At End Of Period $ 0 $2,129
=============== =====================
See notes to unaudited financial statements.
<PAGE>
IAC, INC
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997
Note 1 - Organization, operations and summary of significant accounting
policies:
Organization:
IAC, Inc. ("IAC") is a Nevada corporation engaged in the business of
managing a malpractice insurance contract between International Associations'
Coalition, Inc. ("Coalitions"), a related party, and an unrelated insurance
company, United International, Inc. ("United"). Effective October 1, 1996, the
insurance contract was assumed by Pacific Rim Insurance Company ("Pacific Rim"),
a minority stockholder of IAC. The members of Coalitions and its successor,
Health Professionals Coalitions, Inc. ("Health") are podiatrists seeking
affordable malpractice insurance. 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 contract between the Coalitions/Health and
the insurance carriers is one year and is generally renewable if both parties
have performed satisfactorily. The management contract between IAC and Coalition
also has a term concurrent with the insurance contract. The management contract
between IAC and Coalitions/Health was terminated effective December 31, 1997.
Coalitions was wholly owned by IAC's Chairman and majority shareholder.
In September 1996, the business of Coalitions' was transferred to a newly
created company, Health Professionals Coalition, Inc., which is also wholly
owned by IAC's 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. Mt. Tam Re was formed to
provide reinsurance coverage for other insurance companies. Mt Tam Re, Inc. was
dissolved in 1997.
Basis of Presentation
The consolidated financial statements have been prepared on the going
concern basis. IAC has reported a net loss during the past two years. IAC has a
$4,182 working capital deficit and stockholders' deficit of $2,753, and has
effectively ceased operations as a result of terminating its management contract
with Health Professionals, Inc.
effective December 31, 1997.
In addition, pursuant to a Cease and Desist Order issued by the Texas
Insurance Commissioner effective April 21, 1997, IAC and Health could not
provide insurance for podiatrists residing in Texas, since Pacific Rim is not
licensed in Texas and was ordered to pay a $10,000 fine. The Order provided that
IAC could in the future accept payment of premiums if they became authorized to
conduct business in Texas by either forming a risk retention group or retaining
an insurance broker and insurer licensed in Texas. Management was unable either
to form a risk retention group or retain an insurer licensed in Texas.
The foregoing raises substantial doubt about the Company's ability to
continue as a going concern. Management is planning to refocus the business as a
result of terminating its agreement with Health Professionals, Inc. and is
searching for an acquisition candidate.
IAC, INC
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997
Note 2 - Summary of significant 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
Coalitions or Health. 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.
Note 3 - Preferred stock:
Each share of preferred stock is entitled to one vote per share and is
convertible into 10 shares of common stock; the preferred stock has neither
dividend rights nor preference in liquidation.
Note 4 - Income taxes:
At December 31, 1997, a valuation allowance of approximately $110,000
was provided for deferred tax assets relating primarily to the future tax
benefit of IAC's net operating loss carryforwards. As a result, the future tax
benefit of IAC's net operating losses has not been recognized in the
accompanying financial statements.
At December 31, 1997, IAC's consolidated net operating loss carry
forwards (NOL's) amounted to approximately $545,000 for federal tax purposes.
These NOL's will expire from 1999 through 2012. For California franchise tax
purposes, the NOL is approximately $287,000 and expires in 2002.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion relates to the unaudited financial statements
for the three month periods ended March 31, 1998 and 1997 which are included in
Item 1 above.
Basis of presentation:
The consolidated financial statements as of March 31, 1998 have been
prepared on the going concern basis. IAC has reported a loss during the last two
years and the quarter ended March 31, 1998. In addition, its current liabilities
substantially exceed its available cash. The Company currently has no operating
business and is searching for an appropriate acquisition.
On March 5, 1997, the Company and Health Professionals Coalition, Inc.
signed a Consent Cease and Desist Order (Cease and Desist Order) issued by the
Texas Insurance Commissioner that insurance coverage for podiatrists resident in
Texas must be terminated effective April 21, 1997. In 1996, Health & Coalition,
in the aggregate, collected insurance premiums of $95,000 from podiatrists
residing in Texas. IAC received related management fees of approximately $26,000
(20% of its revenue) in 1996. The Cease and Desist Order also requires payment
of a $10,000 fine which was recognized as an expense in the quarter ended March
31, 1997.
Liquidity:
IAC has used all of its cash in its operations with the result that
cash reserves were depleted at December 31, 1997. As of March 31, 1998, IAC's
current liabilities of $4,982 substantially exceed its cash resources.
Discussion of quarterly results:
The Company ceased operations effective December 31, 1997.
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.
NA.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
NA
b. Reports on Form 8-K.
No reports have been filed on Form 8-K during this quarter.
/S/ Jeffrey E. Ferries, President
May 14, 1998
