UNITED STATES SECURITIES AND EXCHANGE COMMISSION |
WASHINGTON, D.C. 20549 |
FORM 10-K |
(Mark One) | |
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended March 31, 2006 | |
OR | |
o | 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 0-15596 |
SITI-SITES.COM, INC. |
(Exact name of registrant as specified in its charter) |
Delaware | 75-1940923 |
(State of incorporation) | (I.R.S. Employer Identification No.) |
47 Beech Road, Englewood, New Jersey | 07631 |
(Address of Chairman and Chief Executive Officer) | (Zip Code) |
111 Lake Avenue, Tuckahoe, New York | 10707 |
(Address of Chief Financial Officer) | (Zip Code) |
(212) 925-1181 |
(Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o The aggregate market value of the voting Common Stock (par value $0.001 per share) held by non-affiliates as of June 22, 2006 was approximately $495,891 based on the last price at which the Common Stock was sold on June 22, 2006 of $.065 as reported by the National Quotation Bureau. 30,028,261 shares of Common Stock were outstanding as of June 22, 2006. The following documents are incorporated herein by reference: |
(1) | Quarterly Report to security holders on Form 10-Q for the quarter ended December, 2005 (the “Form 10-Q for 12/31/05”); | |
(2) | Annual Report to security holders on Form 10-K for the year ended March 31, 2004 (the “Form 10-K for 2005”); | |
(3) | Annual Report to security holders on Form 10-K for the year ended March 31, 2004 (the “Form 10-K for 2004”); | |
(4) | Annual Report to security holders on Form 10-K for the year ended March 31, 2003 (the “Form 10-K for 2003”); |
Such documents are referred to in Parts I, II, III and IV of this Annual Report on Form 10-K in several places. The registrant is now aninactive entity and its reports on Form 10-K for the years ended March 31, 2006, 2005 and 2004 areunaudited. (See Item 1. Business) |
ANNUAL REPORT ON FORM 10-K |
MARCH 31, 2006 |
PART I | PAGE | ||
ITEM 1. | BUSINESS | 1 | |
ITEM 2. | PROPERTIES | 5 | |
ITEM 3. | LEGAL PROCEEDINGS | 5 | |
ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 7 | |
PART II | |||
ITEM 5. | MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS | 7 | |
ITEM 6. | SELECTED FINANCIAL DATA | 8 | |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND STATUS OF LIQUIDATION | 9 | |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 10 | |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 11 | |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 11 | |
PART III | |||
ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT | 11 | |
ITEM 11. | EXECUTIVE COMPENSATION | 12 | |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 14 | |
PART IV | |||
ITEM 14. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K | 15 |
Forward-Looking Statements This Annual Report on Form 10-K contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to statements related to pending discussions, business objectives and strategy of the Company. Such forward-looking statements are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by the Company’s management. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed, forecasted, or contemplated by any such forward-looking statements. Factors that could cause actual events or results to differ materially include, among others, those set forth in “Risk Factors.” Given these uncertainties, investors are cautioned not to place undue reliance on any such forward-looking statements. Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, readers should carefully review the risk factors set forth in other reports or documents the Company files from time to time with the Securities and Exchange Commission (the “SEC”), particularly the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K. PART I Introduction Siti-Sites.com, Inc., a Delaware corporation (referred to as “SITI” or the “Company”) previously operated as an Internet media company with three websites for the marketing of news and services. The Company’s websites related entirely to the music industry. SITI incurred losses continuously since their inception in 1999. As a result, the Company commenced procedures to prepare to liquidate its assets effective January 1, 2002. Asset Liquidation. For a full discussion on Management’s plan for liquidation, refer to the Form 10-K for 2005, incorporated herein by reference. A liquidating dividend was paid to shareholders in April, 2006 as a result of certain litigation described at Item 3 hereof, amounting to $4.5 million at $.15 per share to each shareholder. Financing. For a full discussion on the Company’s financing up to and including the fiscal year ended March 31, 2005, refer to the Form 10-K for 2005, incorporated herein by reference. The Company continues to seek merger or sale possibilities with operating businesses who perceive value in a merger with the Company as a publicly traded corporate shell with approximately 5,400 shareholders. Several such transactions have been discussed in 2002 - 2006, but none of them have gone to completion. The format the Company now plans to use is to form a subsidiary, “reverse merge” a suitable candidate into such subsidiary and then distribute the Company’s shares retained therein (ranging from 10% to 5%, depending on the business involved) to all of the Company’s shareholders under a full S-1 Registration Statement filed with the SEC. The candidates so far have not had the capital base, or lacked other factors justifying this type of transaction. But the format enables the Company to handle such transactions more than once, if their business merit justifies “going public” in this manner. Effective May 10, 2005 the Company completed another round of financing by the major investors of the Company in order to finance its operating and litigation costs. Certain investors including Chairman Lawrence Powers purchased a total of 3,500,000 shares at $.05 per share. The shares purchased by the major investors were not registered under the Securities Act of 1933, were purchased for investment and are not readily marketable, which factors generally |
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result in discounts in purchase value. However, no discounts were taken and, at the time of the investment, the stock was trading at approximately $.03 per share for seven days preceding this transaction. |
The following is a list of the participants: | |||||||
Name | Shares Purchased | Amount | |||||
Lawrence M. Powers | 1,300,000 | $ | 65,000 | ||||
Robert Ingenito | 550,000 | $ | 27,500 | ||||
John DiNozzi | 550,000 | $ | 27,500 | ||||
John Iannitto | 550,000 | $ | 27,500 | ||||
Steven Gross | 550,000 | $ | 27,500 |
Chairman/CEO Powers continued to advance the Company funding for its legal costs. In addition to the $50,000 advanced to the Company in June, 2005, an additional $60,000 was advanced to the Company during the quarter ended September 30, 2005. Additional advances were made after September 30, 2005, joined in by other large equity investors in the Company and treated as an Additional Financing by Loans. This financing for a total of $220,352 was completed in November, 2005. The loans to the Company did not bear any interest. The investors were not to receive repayment of principal, until after substantial net financial results, exceeding at least $2 million in cash were achieved by Siti in the pending litigation, or from some equivalent revenue source to the Company, with repayment at that time to be shared pro-rata among these investors. The investor-lenders were: |
Lawrence M. Powers | $ | 122,232 | (total advances) | |||
Robert Ingenito | 24,420 | |||||
John DiNozzi | 24,420 | |||||
John Iannitto | 24,640 | |||||
Steven Gross | 24,640 |
The litigation was settled in early 2006, and these loans were repaid in full in March 2006. (See Item 3 below) On August 4, 2005, in connection with her services as a Director, Ms. Tantillo purchased 100,000 shares of SITI common stock at $.05 per share. An initial payment of $3,000 was made with the agreement and the balance was paid on September 15, 2005. The shares purchased by Ms. Tantillo were not registered under the Securities Act of 1933, were purchased for investment and are not readily marketable, which factors generally result in discounts in purchase value. However, no discounts were taken and, at the time of the investment, the stock was trading at approximately $.03 per share for seven days preceding this transaction. The several other business risks to the purchasers described in all prior filings, are also continuing. Those risks were increased by the ongoing cash costs of the patent recovery litigation, which were paid in full from settlement proceeds and prior financings. Some legal expenses will continue for a substantial period to monitor the settlement, and to cover legal costs of special corporate activity and attempts to create additional value in the patent rights where the Company has become a creditor under the settlement. The future risks to all shareholders further include a “one-third contingent fee agreement”, based solely on results achieved, with Special Litigation Counsel, Green, Schaaf & Jacobson for handling the litigation through trial and appeal. This arrangement, while currently advantageous to the Company, will necessarily reduce any net proceeds to the Company from the settlement. (See Item 3 below). The Company’s Chairman/CEO Powers, who is also General Counsel to the Company, was active in the lengthy investigation in the suit. He spent substantial time working closely with litigation counsel as this matter continued into motions, trial preparation and settlement. Mr. Powers decided that he would not seek or receive any attorneys’ fees for his |
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work in the litigation at its conclusion by a settlement in January 2006, although entitled to do so. He concluded this waiver of any attorney fees through such date would serve the best interests of the corporation. He will be charging reasonable attorney fees for his legal work since the settlement. Audited Financial Statements.As a result of the asset liquidation and reasons discussed below, the Company’s management has determined that it is an “inactive entity” under SEC accounting rules (See also “Form 10-K for 2004, Item 1. Business – Inactive Entity”), and is not therefore required to file audited financial statements. This step conserves working capital. The Company meets all of the criteria as set forth below except as noted: (a) Gross receipts from all sources for the fiscal years ended March 31, 2006, 2005 and 2004 were not in excess of $100,000, except for a one-time settlement of litigation described at Item 3 below resulting in a liquidating dividend; (b) For fiscal 2006, 2005 and 2004, the registrant has not purchased or sold any of its own stock, granted options therefore, or levied assessments upon outstanding stock; (1) (c) Expenditures for all purposes for the fiscal years ended March 31, 2006, 2005 and 2004 were not in excess of $100,000, except for litigation expenses recovered in the litigation settlement described in Item 3 below.; (2) (d) No material change in the business has occurred during the 2006, 2005 and 2004 fiscal years, including any bankruptcy, reorganization, readjustment or succession or any material acquisition or disposition of plants, mines, mining equipment, mine rights or leases; and (e) No exchange upon which the shares are listed, or governmental authority having jurisdiction, requires the furnishing to it or the publication of audited financial statements. (1) During the last two fiscal years, the Company had no source of funding to cover its expenses which were almost entirely audit, stock transfer expenses and litigation expenses. Chairman/CEO Powers, who may be deemed to beneficially own approximately 46% of the Company’s outstanding stock, and other existing investors provided funding to the Company. All of the shares issued are legended and none of the investors, has any intention of selling the stock publicly in the foreseeable future. (See also “Form 10-K for 2004, Item 1. Business – Inactive Entity”) (2) For fiscal 2004, operating expenses of approximately $216,000 included approximately $155,000 of contributed services and rent. The Company recorded such $155,000 as a contribution of capital because there was no cash outlay for such expenses. For fiscal 2005, operating expenses of approximately $295,000 included approximately $155,000 of contributed services and rent which were recorded as contributions of capital because there was no cash outlay for such expenses. Litigation expenses were offset against recovery in the recent settlement. Audited financial statements are planned to be resumed when events or transactions justify the expense. The Company expects to continue filing unaudited quarterly and annual financial statements with the SEC. Management Background - 2005 Lawrence M. Powers, Investor and Chairman/CEO of the Company, is a businessman and securities lawyer who helped build several large public companies as a lawyer, director and financial adviser, and later as a chairman/chief executive officer. Most recently, he founded and built Spartech Corporation (NYSE), now a $1.5 billion plastics manufacturing group assembled from many small businesses, starting as Chairman of a previously bankrupt shell corporation (1978) with few assets, which he reorganized with other investors, becoming CEO in 1984. Raising some $200 million during his tenure, he, together with the management team he assembled, built one of the largest plastic processing companies in the U.S. by 1992 (12 plants). Spartech has now become a world leader (45 plants) since his retirement. He remained on the board until 1995. The core management team he previously assembled at Spartech |
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Corporation remained in place, building it to its present value. Mr. Powers was educated at Yale Law School, and senior executive programs at Harvard Business School (between 1980-1998) and most recently, in its Information Technology management program. His specialty has, for decades, been developing strategies and financing, combined with acquisitions and strategic partnerships. He and his family have invested over $3 million in SITI equity. Toni Ann Tantillo was elected a Director of the Company in May, 2004. Ms. Tantillo is a Certified Public Accountant in New York, and has been effectively handling accounting, regulatory filings and other business matters for the Company for the past eight years. She has been its Chief Financial Officer since 1999; is also its Vice-President, Secretary and Treasurer; and she worked as an independent consultant to SITI after its change of control in December, 1998. She was also the Controller of SITI from 1995 to December, 1998 under its prior management. Ms. Tantillo age 39 has conducted her own private accounting practice since 1998. Her client base and experience includes an international public relations firm, an importer/exporter of steel, a publication firm and many small businesses. Gladys Powers was elected as a Director of the Company in August, 2004. She has been married to the Chairman/CEO for 50 years. She is 78 years old and is generally familiar with all of the Company’s activities as a result of regular briefings by Mr. Powers, and her occasional help in reviewing drafts of many Company materials and published articles for Siti over the past six years. She is a trained author, having earlier written several television dramatic plays, documentaries and stage plays, with several New York workshops and a substantial Off-Broadway production. She received her B.A. at the University of Washington in Seattle, attended graduate literature and writing programs at Oxford, the Sorbonne, at Columbia University and in a fellowship at the Yale Drama School. She is currently working on screen plays at her home offices. Mrs. Powers is an active participant in the business of the Board of Directors because of her substantial stock interest in Siti through Lawrence Powers and her son, Barclay. Her shareholder interest is coupled with her knowledge of all present Company activity, and her experience in reviewing with Mr. Powers his various business ventures, and knowing his partners and associates, over a lengthy career since 1956. Employees As of June 22, 2006, the Company had 1 employee in operations and general administration (Ms. Tantillo). SITI executive, Mr. Powers, has been working without cash compensation since 1998. The Company has recorded an administrative expense and a capital contribution of $125,000 to account for the value of services provided by executive management (Mr. Powers) of the Company during the year ended March 31, 2006, as in prior fiscal years. None of the Company’s employees were represented by any collective bargaining unit, 1998-2006. The Company believes that its relations with its past and present employees are good. Risk Factors The Company’s plan is the continued cessation of its past business activities, to pursue additional collections on the settlement of the patent litigation (See Item 3. below) and to seek reverse mergers to acquire stock in other companies (followed by spin-off of the shares to SITI shareholders), that perceive value in thereby becoming a publicly traded corporation. Risk factors may affect the Company’s opportunities to merge with or sell to other operating businesses. In addition to the other information in this Annual Report on Form10-K, and the risk factors listed in the Forms10-K for 2003, 2004 and 2005, new and different risk factors can be anticipated within any operating business which the Company acquires, or becomes part of, through merger or sale. It is not possible to identify these new and different risk factors until such transactions are negotiated and completed, because the operating businesses will be in different areas from the Internet music business described in prior Forms10-K. Reference is made to Risk Factors in the Company’s Form 10-K for 2002, incorporated herein by reference. |
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Future Mergers or Sales Will Cause Dilution or Adversely Affect Results As part of the Company’s business strategy, the Company is seeking by merger or sale to acquire other operating businesses which perceive value in becoming a publicly traded corporation. The Company has no current agreements or commitments with respect to any merger or acquisition transactions and there can be no assurance that the Company will enter into any such agreements or commitments. In the event of such future transactions, the Company could (i) issue equity securities that would dilute current stockholders’ percentage ownership in the Company or otherwise impact upon it, very substantially because the owners of the operating business will require full control of the Company or its subsidiary used in the transaction; (ii) could directly or in the spin-off subsidiary incur substantial debt; or (iii) assume contingent liabilities. Such actions could cause the Company’s operating results or the price of the Company’s common stock to decline. In addition, the Company or subsidiary may not be able to successfully integrate any businesses, products, technologies or personnel that may thus be acquired or be part of the subsidiary in the future. The only certainty in any such transaction is that the shareholders of the Company will own only a minor portion of the operating business thus acquired, new management will operate such business and it will be an entirely different operation from that described in prior Forms10-K filed by SITI. The Company May Need to Obtain Additional Financing Management believes that current cash and cash equivalents may not be sufficient to meet the Company’s anticipated cash needs for working capital and capital expenditures for the twelve months ended March 31, 2007. If shareholder Powers remains satisfied with the search for mergers or sales transactions described above, and now in process, he presently intends to invest the amounts necessary to continue such efforts in fiscal 2007. Market Listing; Volatility of Stock Price The Company’s common stock has been traded on the OTC Bulletin Board and there are approximately 3.5 million shares in the “public float” for trading purposes. The market for the Company’s common stock has been relatively illiquid and subject to wide fluctuations. There can be no assurance that an active public market for the common stock will develop or be sustained particularly with the Company’s future direction by merger or sale, with an as yet unknown operating business, remaining uncertain. Further, the market price of the Company’s common stock may be highly volatile based on quarterly variations in operating results, acquisitions by the Company, investment or other losses, announcements of technological innovations or new products by the Company or its competitors, or other events or factors. (See Item 5 below) During the fiscal year 2006, the Company’s management has operated the Company’s administrative business out of their personal offices, and finds the present arrangements sufficient. As a result of the use of personal offices, the Company recorded a charge of $30,000 as rental expense and increased paid in capital by that amount for the fiscal year ended March 31, 2006 thereby showing no cash outlay of these funds. Siti had a civil suit pending since April, 2004 through March, 2006 in New York State Supreme Court in New York County, described in earlier filings under the Securities Exchange Act of 1934 on Forms 10-K and 10-Q. The case was settled on the eve of trial on January 20, 2006 and settlement documents completed by March, 2006. A summary of the terms of settlement follows: Siti’s 2004 complaint alleged that certain defendants wrongfully purchased its portfolio of patents on cell-phone and vehicular wireless technology. In response, each defendant denied all liability to Siti as to all claims, and there has |
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been no admission of liability by any defendant. The settlement is a relinquishment of all claims by Siti in exchange for cash in the amount of $7,750,000, and an assignment of a percentage of future gross proceeds, if any, derived from Siti’s former patent portfolio, as enhanced since the purchase. These amounts were reduced by one-third to cover the contingent fees earned by Siti’s Special Litigation Counsel, Green, Bush and Jacobson of Clayton, Missouri. Siti’s initial net cash recovery was approximately $5,150,000. This net sum was received upon closing of the settlement agreement in March 2006. Loan advances by certain shareholders of $225,000 were repaid, taking the net sum down to $4.9 million. All proceeds from the settlement are “non-recurring” in nature. Siti has remained in liquidation since 2002, has no other business and completed a liquidating dividend distribution to shareholders on 87% of the initial cash proceeds as soon as practicable. The net amount available was $4.5 million, after a provision for remaining litigation costs and working capital. The dividend was allocated pro-rata among shareholders holding approximately 30 million shares, for $.15 per share distributed in this continuing liquidation of Siti. Future Proceeds. The assignment to Siti of future Gross Proceeds (if any, and as defined), that are received by the defendant patent holding company (the “Patent Holding Company”) after January 19, 2006, will consist of 15% of the first $10 million in Gross Proceeds, 20% of the next $10 million, and 25% of all Gross Proceeds in excess of $20 million. “Gross Proceeds” means all proceeds received by defendant Patent Holding Company from the entire patent portfolio, before any deduction for defendants’ own counsel fees, costs and expenses of operations, salaries or other distributions to members of defendant Patent Holding Company. Siti is a senior creditor thereof, and claims no ownership interest in the patent portfolio or such Patent Holding Company. The portfolio consists of 19 patents and pending applications that cover data and voice connections between computers and cell phones, and roaming across the U.S. and elsewhere with cell phones, personal digital assistants and wireless equipment in vehicles. The latest patents in the portfolio also cover spectrum sharing among various wireless communication networks. The Company’s senior creditor position in future proceeds is documented in filings in the Patent and Trademark Office and in several states under the Uniform Commercial Code. The Company is monitoring its creditor position and endeavoring to work cooperatively with the Patent Holding Company to maximize future proceeds from the portfolio Risk Factors *Siti does not know how much, if any, in future Gross Proceeds are still obtainable from this patent portfolio, and ultimate results are very speculative. *Current or future changes in technology may affect the patent properties adversely. * Infringement litigation is costly, involves risk to the patent portfolio, and such Patent Holding Company must obtain its own financing. *Siti’s share of future Gross Proceeds is subject to these and other business risks in such Patent Holding Company. *The settlement has been reached after protracted litigation, and requires ongoing monitoring under its disclosure terms by Siti as a creditor. *Under the settlement, Siti cannot exercise any control over licensing or other decisions that could generate or otherwise impact Gross Proceeds. *No assurance can be given that anything more than the initial net cash value in this settlement will be received by Siti. *Future proceeds to Siti are also subject to one-third fees payable to Siti’s Special Litigation Counsel. *There will be accounting, legal collection and shareholder distribution costs in the future. Reserves will be established as Siti’s liquidation continues. As of the date of this report the Company knows of no pending or threatened legal actions against the Company that would have a material impact on the operations or financial condition of the Company. Defaults by EZCD.com as to its investment representations, and its content and technology sharing agreement with the Company in 2000 have been resolved in the EZCD.com bankruptcy liquidation, and the Company in May 2004, recovered approximately $30,000. There is no further recovery expected. From time to time since 1998, the Company had been a party to other legal disputes incidental and not material to its business. |
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HIGH AND LOW BID PRICES | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | ||||||||||||||
Low | High | Low | High | ||||||||||||
First Quarter (6/05) | $ | 0.03 | $ | 0.03 | First Quarter (6/04) | $ | 0.03 | $ | 0.03 | ||||||
Second Quarter (9/05) | 0.03 | 0.03 | Second Quarter (9/04) | 0.02 | 0.03 | ||||||||||
Third Quarter (12/05) | 0.01 | 0.04 | Third Quarter (12/04) | 0.02 | 0.03 | ||||||||||
Fourth Quarter (3/06) | 0.03 | 0.25 | Fourth Quarter (3/05) | 0.03 | 0.05 |
On June 23, 2006, the last reported bid and ask prices of the Common Stock (after the dividend) were $.065 and $.075, respectively. As of June 23, 2006 there were approximately 5,400 holders of record of the Company’s Common Stock (which amounts do not include the number of shareholders whose shares are held of record by brokerage houses but include each brokerage house as one shareholder). The Company has paid no dividends for the fiscal years ended March 31, 2005, 2004. However, for the 2006 year the Company accrued payment of approximately $4,504,000 for dividends to shareholders of record at the close of business on March 28, 2006. Such dividends were paid on and after April 12, 2006. The Company plans to retain earnings, if any, to finance the Company’s operations. |
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STATEMENT OF CHANGES IN NET ASSETS DATA (LIQUIDATION BASIS OF ACCOUNTING) | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
For the year ended March 31, 2006 | For the year ended March 31, 2005 | For the year ended March 31, 2004 | For the year ended March 31, 2003 | For the three months ended March 31, 2002 | |||||||||||
(Amounts in thousands, except per share amounts) | |||||||||||||||
Net assets in liquidation at beginning of period | 8 | 29 | 28 | 11 | 64 | ||||||||||
Reduction to net assets in liquidation: | |||||||||||||||
Operating expenses and accrual of estimated costs | (3,256 | ) | (295 | ) | (217 | ) | (260 | ) | (110 | ) | |||||
Dividend | (4,504 | ) | — | — | — | — | |||||||||
Addition to net assets in liquidation: | |||||||||||||||
Issuance of common stock | 180 | 88 | 63 | 75 | 3 | ||||||||||
Litigation proceeds | 7,750 | — | — | — | — | ||||||||||
Interest Income | 19 | — | — | — | — | ||||||||||
Refund of charges | — | 31 | — | 17 | — | ||||||||||
Contribution of management’s services and rent | 155 | 155 | 155 | 185 | 46 | ||||||||||
Insurance recovery from World Trade Center attack | — | — | — | — | 8 | ||||||||||
Net assets in liquidation at end of period | 352 | 8 | 29 | 28 | 11 |
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Name | Age | Position with the Company | |
---|---|---|---|
Lawrence M. Powers | 74 | Chairman of the Board, Chief Executive Officer | |
Gladys Powers | 78 | Director | |
Toni Ann Tantillo | 39 | Director, Chief Financial Officer, Vice President, Secretary and Treasurer |
Business Experience of Directors and Executive Officers Lawrence M. Powers, 74, has served as the Company’s Chairman of the Board and Chief Executive Officer since the change of control transaction in December, 1998. Mr. Powers has been a private investor since 1992. Beginning in 1978 and continuing to his retirement in 1992, he built Spartech Corporation (NYSE), from a previously bankrupt corporation with few assets, into what has become a $1.5 billion plastics manufacturing group operating 45 plants. Raising some $200 million during his tenure, he and Spartech’s key managers built one of the largest plastic processing companies in the U.S. by 1992 (12 plants at the time). The management team he assembled has continued successfully. He remained on the board of Spartech until 1995. Mr. Powers, a securities lawyer in New York from 1957 through 1981, was educated at Yale Law School and senior executive programs at Harvard Business School. Gladys Powers was elected as a Director of the Company in August, 2004. She has been married to the Chairman/CEO for 50 years. She is 78 years old and is generally familiar with all of the Company’s activities as a result of regular briefings by Mr. Powers, and her occasional help in reviewing drafts of many Company materials and published articles for Siti over the past five years. She is a trained author, having earlier written several television dramatic plays, documentaries and stage plays, with several New York workshops and a substantial Off-Broadway |
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Summary Compensation Table | |||||||||||||||||||||||||
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Long-Term Compensation Payouts | |||||||||||||||||||||||||
Annual Compensation | |||||||||||||||||||||||||
Grants & Awards | |||||||||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus | Other Annual Comp. | Restricted Stock Awards | Shares Underlying Options | LTIP Payouts | All other Comp | |||||||||||||||||
Lawrence M. Powers | 2006 | 125,000 | (1) | -0- | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||
Chairman and Chief | 2005 | 125,000 | (1) | -0- | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||
Executive Officer | 2004 | 125,000 | (1) | -0- | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||
Toni Ann Tantillo (3) | 2006 | 18,000 | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||
Director, | 2005 | 17,000 | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||
Chief Financial Officer | 2004 | 12,000 | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||
Vice-President, Secretary and Treasurer |
(1) Amounts include Mr. Powers’, contribution of services charged against earnings. Mr. Powers did not receive any compensation for his services during fiscal 2004, 2005 and 2006. Option Grants in Last Year There were no options granted during the fiscal years ended March 31, 2004 and March 31, 2005 and March 31, 2006. Option Exercises and Year-End Values There were no options exercised by the Named Executive Officers during the 2006 fiscal year. Any options held by such individuals were purchased in connection with stock purchase agreements. (See “Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters.”) Compensation of Directors At present, the Board does not award compensation to its directors. Employment Agreements At present the Company does not maintain employment agreements or other arrangements with its executive officers. Mr. Powers continues to work without compensation except for ongoing charges for certain legal invoices in 2006 and expects to continue in such a manner in fiscal 2007. At present, the Company does not have a Compensation Committee. |
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Name of Owner | Shares of Common Stock Number | Beneficially Owned Percent of Class | |||
---|---|---|---|---|---|
Lawrence M. Powers | 13,836,666 | (1) | 46.2 | % | |
47 Beech Road | |||||
Englewood, NJ 07631 | |||||
Robert Ingenito (former director) | 5,526,667 | (2) | 18.4 | % | |
80 Ruland Road | |||||
Melville, NY 11747-6200 | |||||
Barclay V. Powers (former director) | 4,818,333 | 19.4 | % | ||
P.O. Box 365 | |||||
Mendocino, CA 95460 | |||||
John Iannitto (former officer) | 2,780,000 | (3) | 9.3 | % | |
D/B/A RSI Marketing | |||||
171 Madison Avenue | |||||
New York, NY 10016 | |||||
Toni Ann Tantillo | 155,834 | (4) | * | ||
115 Whitman Road | |||||
Yonkers, NY 10710 | |||||
Current Directors and | 13,992,500 | (4) | 46.7 | % | |
Executive Officers as a | |||||
Group (2 persons): |
———————————— * Less than 1% (1) Consists solely of shares. All options were cancelled pursuant to the November 28, 2001 offer to key investors. Shares and options held by Mr. Lawrence Powers also include 4,818,333 shares held by his son, Barclay V. Powers, as to which Lawrence Powers disclaims voting or investment power therein. (2) Consists solely of shares. All options were cancelled pursuant to the November 28, 2001 offer to key investors. Shares held by Mr. Ingenito also include 2,596,667 shares held by John DiNozzi. (3) Consists solely of shares held by RSI Marketing, a sole proprietorship owned by John Iannitto. All options were cancelled pursuant to the November 28, 2001 offer to key investors. (4) Consists solely of shares. |
14 |
PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Annual Report on Form 10-K: |
1. | Consolidated Financial Statements: | ||
The consolidated financial statements filed as a part of this report are listed in the “Index to Consolidated Financial Statements” at Item 8. | |||
2. | Consolidated Financial Statement Schedules: | ||
The consolidated financial statement schedule filed as part of this report is listed in the “Index to Consolidated Financial Statements ” at Item 8. | |||
Schedules other than that listed on the accompanying Index to Consolidated Financial Statements are omitted for the reason that they are either not required, not applicable, or the required information is included in the consolidated financial statements or notes thereto. | |||
3. | Exhibits | ||
2.1 | Acquisition Agreement Between the Company and Tropia, Inc. (4) | ||
3.1 | Certificate of Incorporation of SITI-Sites.com, Inc. as amended. (3) | ||
3.2 | Amended and Restated Bylaws of SITI-Sites.com, Inc., as amended (3) | ||
3.3 | Restated Certificate of Incorporation of the Company (3) | ||
3.4 | Restated Bylaws of the Company. (3) | ||
10.1 | Investment and Business Development Agreement Among the Company, Minutemeals.com, Inc., Joseph Langhan and Donald Moore, dated March 19, 1999 (5) | ||
10.2 | Stock Purchase Agreement Between the Company and Powers & Co. dated December 11, 1998 (5) | ||
10.3 | Stock Purchase Agreement Between the Company and Robert Ingenito dated December 12, 1998 (5) | ||
10.4 | Stock Purchase Agreement Between the Company and Steven Gross dated December 12, 1998 (5) | ||
10.5 | Option Agreement Entered Into Between the Company and Maurice W. Schonfeld (5) | ||
10.6 | Termination Agreement Dated as of May 28, 1999 Among the Company, Minutemeals.com, Inc., Joseph Langhan, and Donald Moore (5) | ||
10.7 | Stock Purchase Agreement dated July 26, 1999 (Powers) (3) | ||
10.8 | Content and Technology Sharing Agreement dated December 23, 1999, between the Company and Volatile Media, Inc. (6) | ||
10.9 | Stock Purchase Agreement dated December 23, 1999 (Powers and Ingenito) (2) | ||
10.10 | Option Agreement dated December 23, 1999 Entered Into Between the Company and Lawrence M. Powers (2) | ||
10.11 | Option Agreement dated December 23, 1999 Entered Into Between the Company and Robert Ingenito (2) | ||
10.12 | Subscription Agreement dated February 8, 2000 Between the Company and Volatile Media, Inc. (6) | ||
10.13 | SITI-Sites.com, Inc. 1999 Stock Option Plan (6) | ||
10.14 | Purchase Agreement dated January 3, 2000, between the Company and Theodore Mazola (7) | ||
10.15 | Purchase Agreement-2 dated January 3, 2000, among the Company and Theodore Mazola and Steven Zuckerman(7) | ||
10.16 | Letter Agreement dated January 3, 2000, executed by New York Music Expo, Inc. in favor of the Company(7) |
15 |
10.17 | Settlement Agreement Dated May 1, 2000 Among the Company and Jonathan Blank, Ari Blank and Arjun Nayyer (2) | |
10.18 | Stock Purchase Agreement dated June 8, 2000 (Powers, Ingenito and Iannitto) (2) | |
10.19 | Employment Arrangements Agreement dated June 12, 2000 Entered Into Between the Company and Messrs. Robert Ingenito and John Iannitto (2) | |
10.20 | Stock Option Agreement Dated June 8, 2000, Entered Into Between the Company and Lawrence Powers (2) | |
10.21 | Stock Option Agreement Dated June 8, 2000, Entered Into Between the Company and Robert Ingenito (2) | |
10.22 | Stock Option Agreement Dated June 8, 2000, Entered Into Between the Company and John Iannitto (2) | |
10.23 | Stock Purchase Agreement dated June 13, 2000 (Colvil Investments, LLC purchase) (2) | |
10.24 | Stock Option Agreement Dated June 13, 2000, Entered Into Between the Company and Colvil Investments, LLC (2) | |
10.25 | Stock Purchase Agreement dated June 16, 2000 (Steven Gross purchase) (2) | |
10.26 | Stock Option Agreement Dated June 16, 2000, Entered Into Between the Company and Steven Gross (2) | |
31 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32 | Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002 |
Notes: |
(1) | Filed Herewith. | |
(2) | Previously Filed as an Exhibit to the Company’s Annual Report on Form 10-K for the Fiscal Year ended March 31, 2000, and incorporated herein by reference | |
(3) | Previously Filed as an Exhibit to the Company’s Definitive Proxy Statement Effective December 14, 1999, and incorporated herein by reference. | |
(4) | Previously Filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 1999, and incorporated herein by reference. | |
(5) | Previously Filed as an Exhibit to the Company’s Annual Report on Form 10-K for the Fiscal Year ended March 31, 1999, and incorporated herein by reference. | |
(6) | Previously Filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1999. | |
(7) | Previously Filed as an Exhibit to the Company’s Current Report on Form 8-K dated January 18, 2000. |
(b) Reports on Form 8-K: |
On January 26, 2006, The Company filed Form 8-K announcing at “Item 1.01 Legal Proceedings”, Siti’s Patent Settlement Agreement. | |
On March 21, 2006, The Company filed Form 8-K announcing at “Item 1.01 Material Agreements”, the Patent Settlement Agreement and liquidating dividend. |
16 |
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
SITI-SITES.COM, INC. | |||
Dated: June 30, 2006 | By | /s/Toni Ann Tantillo | |
Toni Ann Tantillo | |||
(Director, Chief Financial Officer, Vice President, Secretary and Treasurer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. |
Dated: June 30, 2006 | By | /s/ Lawrence M. Powers |
Lawrence M. Powers | ||
(Chief Executive Officer and Chairman of the Board of Directors) |
Dated: June 30, 2006 | By | /s/ Gladys Powers |
Gladys Powers | ||
(Director) |
17 |
SITI-Sites.com, Inc. and Subsidiary Unaudited Financial Statements for the Fiscal Years Ended March 31, 2006 and March 31, 2005: |
Statement of Net Assets in Liquidation as of March 31, 2006 and March 31, 2005 (Unaudited) | F-2 | ||
Statement of Changes in Net Assets in Liquidation for the Twelve Months Ended March 31, 2006 and March 31, 2005 (Unaudited) | F-3 | ||
Notes to Consolidated Financial Statements for the Twelve Months Ended March 31, 2006 and March 31, 2005 (Unaudited) | F-4 – F-11 |
F-1 |
SITI-Sites.com, Inc. Statement of Net Assets in Liquidation (Amounts in thousands) | March 31, 2006 | March 31, 2005 | ||||
---|---|---|---|---|---|---|
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 4,925 | $ | 27 | ||
Receivables and other assets | 1 | — | ||||
Total current assets | 4,926 | 27 | ||||
Property and Equipment, net | — | — | ||||
Total assets | $ | 4,926 | $ | 27 | ||
Liabilities: | ||||||
Current Liabilities | ||||||
Dividend Payable | $ | 4,504 | $ | 19 | ||
Accounts payable and accrued liabilities | 20 | $ | 19 | |||
Total current liabilities | 4,574 | 19 | ||||
Total liabilities | 4,574 | 19 | ||||
Net Assets in Liquidation | $ | 352 | $ | 8 | ||
See accompanying notes to consolidated financial statements. |
F-2 |
SITI-Sites.com, Inc. Statement of Changes in Net Assets in Liquidation (Amounts in thousands) | Twelve Months Ended March 31, 2006 (Unaudited) | Twelve Months Ended March 31, 2005 (Unaudited) | ||||
---|---|---|---|---|---|---|
Net assets in liquidation at beginning of period | $ | 8 | $ | 29 | ||
Reductions to net assets in liquidation: | ||||||
Dividends | (4,504 | ) | — | |||
Operating expenses and accrual of estimated costs | (3,256 | ) | (295 | ) | ||
Increases to net assets in liquidation: | ||||||
Refund of charges | — | 31 | ||||
Issuance of common stock | — | 88 | ||||
Litigation proceeds | 7,750 | — | ||||
Interest Income | 19 | 88 | ||||
Issuance of common stock | 180 | 88 | ||||
Contribution of management’s services and rent | 155 | 155 | ||||
Net assets in liquidation at end of period | $ | 352 | $ | 8 | ||
See accompanying notes to consolidated financial statements. |
F-3 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWELVE MONTHS ENDED MARCH 31, 2006 and MARCH 31, 2005 (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) MANAGEMENT’S PLAN FOR LIQUIDATION Siti-Sites.com, Inc., a Delaware corporation (referred to as “SITI” or the “Company”) previously operated as an Internet media company with three websites for the marketing of news and services. The Company’s websites related entirely to the music industry. SITI incurred losses continuously since their inception in 1999. As a result, the Company commenced procedures to prepare to liquidate its assets effective January 1, 2002. Asset Liquidation. For a full discussion on Management’s plan for liquidation, refer to the Form 10-K for 2005, incorporated herein by reference. A liquidating dividend was paid to shareholders in April, 2006 as a result of certain litigation described at Item 3 hereof, amounting to $4.5 million at $.15 per share to each shareholder. Financing. For a full discussion on the Company’s financing up to and including the fiscal year ended March 31, 2005, refer to the Form 10-K for 2005, incorporated herein by reference. The Company continues to seek merger or sale possibilities with operating businesses who perceive value in a merger with the Company as a publicly traded corporate shell with approximately 5,400 shareholders. Several such transactions have been discussed in 2002 - 2006, but none of them have gone to completion. The format the Company now plans to use is to form a subsidiary, “reverse merge” a suitable candidate into such subsidiary and then distribute the Company’s shares retained therein (ranging from 10% to 5%, depending on the business involved) to all of the Company’s shareholders under a full S-1 Registration Statement filed with the SEC. The candidates so far have not had the capital base, or lacked other factors justifying this type of transaction. But the format enables the Company to handle such transactions more than once, if their business merit justifies “going public” in this manner. |
F-4 |
Effective May 10, 2005 the Company completed another round of financing by the major investors of the Company in order to finance its operating and litigation costs. Certain investors including Chairman Lawrence Powers purchased a total of 3,500,000 shares at $.05 per share. The shares purchased by the major investors were not registered under the Securities Act of 1933, were purchased for investment and are not readily marketable, which factors generally result in discounts in purchase value. However, no discounts were taken and, at the time of the investment, the stock was trading at approximately $.03 per share for seven days preceding this transaction. The following is a list of the participants: |
Name | Shares Purchased | Amount | |||||
---|---|---|---|---|---|---|---|
Lawrence M. Powers | 1,300,000 | $ | 65,000 | ||||
Robert Ingenito | 550,000 | $ | 27,500 | ||||
John DiNozzi | 550,000 | $ | 27,500 | ||||
John Iannitto | 550,000 | $ | 27,500 | ||||
Steven Gross | 550,000 | $ | 27,500 |
Chairman/CEO Powers continued to advance the Company funding for its legal costs. In addition to the $50,000 advanced to the Company in June, 2005, an additional $60,000 was advanced to the Company during the quarter ended September 30, 2005. Additional advances were made after September 30, 2005, joined in by other large equity investors in the Company and treated as an Additional Financing by Loans. This financing for a total of $220,352 was completed in November, 2005. The loans to the Company did not bear any interest. The investors were not to receive repayment of principal, until after substantial net financial results, exceeding at least $2 million in cash were achieved by Siti in the pending litigation, or from some equivalent revenue source to the Company, with repayment at that time to be shared pro-rata among these investors. The investor-lenders were: |
Lawrence M. Powers | $ | 122,232 | (total advances) | |||
Robert Ingenito | 24,420 | |||||
John DiNozzi | 24,420 | |||||
John Iannitto | 24,640 | |||||
Steven Gross | 24,640 |
The litigation was settled in early 2006, and these loans were repaid in full in March 2006. On August 4, 2005, in connection with her services as a Director, Ms. Tantillo purchased 100,000 shares of SITI common stock at $.05 per share. An initial payment of $3,000 was made with the agreement and the balance was paid on September 15, 2005. The shares purchased by Ms. Tantillo were not registered under the Securities Act of 1933, were purchased for investment and are not readily marketable, which factors generally result in discounts in purchase value. However, no discounts were taken and, at the time of the investment, the stock was trading at approximately $.03 per share for seven days preceding this transaction. The several other business risks to the purchasers described in all prior filings, are also continuing. Those risks were increased by the ongoing cash costs of the patent recovery litigation, which were paid in full from settlement proceeds and prior financings. Some legal expenses will continue for a substantial period to monitor the settlement, and to cover legal costs of special corporate activity and attempts to create additional value in the patent rights where the Company has become a creditor under the settlement. See Item 3. below. The future risks to all shareholders further include a “one-third contingent fee agreement”, based solely on results achieved, with Special Litigation Counsel, Green, Schaaf & Jacobson for handling the litigation through trial and appeal. This arrangement, while currently advantageous to the Company, will necessarily reduce any net proceeds to the Company from the litigation. See “Litigation” and “Subsequent Event” regarding recent settlement. The Company’s Chairman/CEO Powers, who is also General Counsel to the Company, was active in the lengthy investigation in the suit. He spent substantial time working closely with litigation counsel as this matter continued into |
F-5 |
motions, trial preparation and settlement. Mr. Powers decided that he would not seek or receive any attorneys’ fees for his work in the litigation at its conclusion by a settlement in January 2006, although entitled to do so. He concluded this waiver of any attorney fees through such date would serve the best interests of the corporation. He will be charging reasonable attorney fees for his legal work since the settlement. Audited Financial Statements.As a result of the asset liquidation and reasons discussed below, the Company’s management has determined that it is an “inactive entity” under SEC accounting rules (See also “Form 10-K for 2004, Item 1. Business – Inactive Entity”), and is not therefore required to file audited financial statements. This step conserves working capital. The Company meets all of the criteria as set forth below except as noted: (a) Gross receipts from all sources for the fiscal years ended March 31, 2006, 2005 and 2004 were not in excess of $100,000, except for a one-time settlement of litigation described at Item 3 below resulting in a liquidating dividend; (b) For fiscal 2006, 2005 and 2004, the registrant has not purchased or sold any of its own stock, granted options therefore, or levied assessments upon outstanding stock; (1) (c) Expenditures for all purposes for the fiscal years ended March 31, 2006, 2005 and 2004 were not in excess of $100,000, except for litigation expenses recovered in the litigation settlement described in Item 3 below.; (2) (d) No material change in the business has occurred during the 2006, 2005 and 2004 fiscal years, including any bankruptcy, reorganization, readjustment or succession or any material acquisition or disposition of plants, mines, mining equipment, mine rights or leases; and (e) No exchange upon which the shares are listed, or governmental authority having jurisdiction, requires the furnishing to it or the publication of audited financial statements. (1) During the last two fiscal years, the Company had no source of funding to cover its expenses which were almost entirely audit, stock transfer expenses and litigation expenses. Chairman/CEO Powers, who may be deemed to beneficially own approximately 46% of the Company’s outstanding stock, and other existing investors provided funding to the Company. All of the shares issued are legended and none of the investors, has any intention of selling the stock publicly in the foreseeable future. (See also “Form 10-K for 2004, Item 1. Business – Inactive Entity”) (2) For fiscal 2004, operating expenses of approximately $216,000 included approximately $155,000 of contributed services and rent. The Company recorded such $155,000 as a contribution of capital because there was no cash outlay for such expenses. For fiscal 2005, operating expenses of approximately $295,000 included approximately $155,000 of contributed services and rent which were recorded as contributions of capital because there was no cash outlay for such expenses. Litigation expenses were offset against recovery in the recent settlement. Audited financial statements are planned to be resumed when events or transactions justify the expense. The Company expects to continue filing unaudited quarterly and annual financial statements with the SEC. (b) CHANGE TO LIQUIDATION BASIS OF ACCOUNTING During the quarter ended December 31, 2001, the Company decided to liquidate its operations and adopted the liquidation basis of accounting effective January 1, 2002. Under the liquidation basis of accounting, assets are stated at their estimated net realizable values and liabilities are stated at their estimated settlement amounts, which estimates will be periodically reviewed and adjusted. Since the Company is in liquidation without continuing operations, the need to present quarterly Statements of Operations and Comprehensive Loss as well as a Statement of Cash Flows, is eliminated. However, the prior year’s financial statements for the comparable quarter are presented, since the Company did not adopt this method of accounting until January 1, 2002. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amounts necessarily requires many estimates and assumptions. In addition, there are substantial risks and uncertainties associated |
F-6 |
with carrying out the liquidation of the Corporation’s existing operations. The valuations presented in the accompanying Statement of Net Assets in Liquidation represent estimates, based on present facts and circumstances, of the net realizable values of assets and costs associated with carrying out the dissolution and liquidation plan based on the assumptions set forth below. The actual values and costs are expected to differ from the amounts shown herein and could be greater or lesser than the amounts recorded. Accordingly, it is not possible to predict the aggregate amount that will ultimately be distributable to shareholders and no assurance can be given that the amount to be received in liquidation will equal or exceed the net assets in liquidation per share in the accompanying Statement of Net assets in Liquidation or the price or prices at which the Common Stock has generally traded or is expected to trade in the future. The cautionary statements regarding estimates of net assets in liquidation set forth in the Forward-Looking Statements portion of this report are incorporated herein by reference. (c) RECENT HISTORY The accompanying financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results of operations for the periods shown. (d) USE OF ESTIMATES In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. (e) CASH AND CASH EQUIVALENTS Cash and cash equivalents include the Company’s cash balances and short-term investments that mature in 90 days or less from the original date of maturity. Cash and cash equivalents are carried at cost plus accrued interest, which approximates market. 2. STOCKHOLDERS’ EQUITY (a) STOCK AND OPTION ISSUANCES The Company has issued common stock and options under the provisions of: (i) 1996 STOCK INCENTIVE PLAN The 1996 Stock Incentive Plan authorized the issuance of 276,079 shares of Reorganized SITI Common Stock, or options to purchase such common stock, to employees, officers, and directors of the Company. Pursuant to this Plan, the three non-executive directors who were in the employ of the Company on the Effective Date were specifically allocated an aggregate of 34,077 shares to be distributed as follows: 300 shares on the Effective Date, 11,259 during June 1998, 11,259 during November 1998 and 11,259 during June 1999. During fiscal 1998, 7,400 shares with a fair market value of $9,250 were distributed to employees and directors of the Company as additional compensation. Total options, under the plan, granted to employees and officers of the Company with various vesting periods and performance criteria totaled 209,815, and such Plan is no longer in operation. Additional information as follows: |
Shares Subject to Options | Weighted Average Exercise Price | ||||||
---|---|---|---|---|---|---|---|
Outstanding at March 31, 2004 at $1.69-$2.15 per share | 41,500 | $ | 2.13 | ||||
Granted, exercised and extinguished | — | $ | — | ||||
Outstanding at March 31, 2005 at $1.69-$2.15 per share | 41,500 | $ | 2.13 | ||||
Granted, exercised and extinguished | — | $ | — | ||||
Outstanding at March 31, 2006 at $1.69-$2.15 per share | 41,500 | $ | 2.13 | ||||
F-7 |
The following table summarizes information about stock options outstanding and exercisable at March 31, 2006: | |
Range of Exercise Prices | Outstanding and Exercisable at March 31, 2005 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | ||||||
---|---|---|---|---|---|---|---|---|---|
$1.69 to $2.15 | 41,500 | 1.38 | $2.13 |
(ii)1998 CONSULTANT STOCK INCENTIVE PLAN The 1998 Consultant Stock Incentive Plan authorizes the issuance of 100,000 shares of Reorganized SITI Common Stock, or options to purchase such Common Stock, to non-employees and consultants of the Company. There were no options granted during fiscal 2004 and 2005. |
Shares Subject to Options | Weighted Average Exercise Price | ||||||
---|---|---|---|---|---|---|---|
Outstanding at March 31, 2004 at $0.875 -$2.15 per share | 40,000 | $ | 1.19 | ||||
Granted, exercised and extinguished | — | $ | — | ||||
Outstanding at March 31, 2005 at $0.875 -$2.15 per share | 40,000 | $ | 1.19 | ||||
Granted, exercised and extinguished | — | $ | — | ||||
Outstanding at March 31, 2006 at $0.875 -$2.15 per share | 40,000 | $ | 1.19 | ||||
The following table summarizes information about non-employee and consultant stock options outstanding and exercisable at March 31, 2006: | |
Range of Exercise Prices | Outstanding and Exercisable at March 31, 2005 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | ||||||
---|---|---|---|---|---|---|---|---|---|
$0.875 to $2.15 | 40,000 | 2.14 | $1.19 |
3. COMMITMENTS AND CONTINGENCIES Management uses its personal offices to conduct business for the Company. As a result, no rent has been paid during the fiscal years ended March 31, 2005 and March 31, 2006. However, as a result of the contribution of rent, a charge was recorded to rent and paid in capital of approximately $30,000 for each fiscal year. 4. LITIGATION Siti had a civil suit pending since April, 2004 through March, 2006 in New York State Supreme Court in New York County, described in earlier filings under the Securities Exchange Act of 1934 on Forms 10-K and 10-Q. The case was settled on the eve of trial on January 20, 2006 and settlement documents completed by March, 2006. A summary of the terms of settlement follows: Siti’s 2004 complaint alleged that certain defendants wrongfully purchased its portfolio of patents on cell-phone and vehicular wireless technology. In response, each defendant denied all liability to Siti as to all claims, and there has been no admission of liability by any defendant. The settlement is a relinquishment of all claims by Siti in exchange for cash in the amount of $7,750,000, and an assignment of a percentage of future gross proceeds, if any, derived from Siti’s former patent portfolio, as enhanced since the purchase. These amounts were reduced by one-third to cover the |
F-8 |
contingent fees earned by Siti’s Special Litigation Counsel, Green, Bush and Jacobson of Clayton, Missouri. Siti’s initial net cash recovery was approximately $5,150,000. This net sum was received upon closing of the settlement agreement in March 2006. Loan advances by certain shareholders of $225,000 were repaid, taking the net sum down to $4.9 million. All proceeds from the settlement are “non-recurring” in nature. Siti has remained in liquidation since 2002, has no other business and completed a liquidating dividend distribution to shareholders on 87% of the initial cash proceeds as soon as practicable. The net amount available was $4.5 million, after a provision for remaining litigation costs and working capital. The dividend was allocated pro-rata among shareholders holding approximately 30 million shares, for $.15 per share distributed in this continuing liquidation of Siti. Future Proceeds. The assignment to Siti of future Gross Proceeds (if any, and as defined), that are received by the defendant patent holding company (the “Patent Holding Company”) after January 19, 2006, will consist of 15% of the first $10 million in Gross Proceeds, 20% of the next $10 million, and 25% of all Gross Proceeds in excess of $20 million. “Gross Proceeds” means all proceeds received by defendant Patent Holding Company from the entire patent portfolio, before any deduction for defendants’ own counsel fees, costs and expenses of operations, salaries or other distributions to members of defendant Patent Holding Company. Siti is a senior creditor thereof, and claims no ownership interest in the patent portfolio or such Patent Holding Company. The portfolio consists of 19 patents and pending applications that cover data and voice connections between computers and cell phones, and roaming across the U.S. and elsewhere with cell phones, personal digital assistants and wireless equipment in vehicles. The latest patents in the portfolio also cover spectrum sharing among various wireless communication networks. The Company’s senior creditor position in future proceeds is documented in filings in the Patent and Trademark Office and in several states under the Uniform Commercial Code. The Company is monitoring its creditor position and endeavoring to work cooperatively with the Patent Holding Company to maximize future proceeds from the portfolio Risk Factors *Siti does not know how much, if any, in future Gross Proceeds are still obtainable from this patent portfolio, and ultimate results are very speculative. *Current or future changes in technology may affect the patent properties adversely. * Infringement litigation is costly, involves risk to the patent portfolio, and such Patent Holding Company must obtain its own financing. *Siti’s share of future Gross Proceeds is subject to these and other business risks in such Patent Holding Company. *The settlement has been reached after protracted litigation, and requires ongoing monitoring under its disclosure terms by Siti as a creditor. *Under the settlement, Siti cannot exercise any control over licensing or other decisions that could generate or otherwise impact Gross Proceeds. *No assurance can be given that anything more than the initial net cash value in this settlement will be received by Siti. *Future proceeds to Siti are also subject to one-third fees payable to Siti’s Special Litigation Counsel. *There will be accounting, legal collection and shareholder distribution costs in the future. Reserves will be established as Siti’s liquidation continues. As of the date of this report the Company knows of no pending or threatened legal actions against the Company that would have a material impact on the operations or financial condition of the Company. Defaults by EZCD.com as to its investment representations, and its content and technology sharing agreement with the Company in 2000 have been resolved in the EZCD.com bankruptcy liquidation, and the Company in May 2004, recovered approximately $30,000. There is no further recovery expected. From time to time since 1998, the Company had been a party to other legal disputes incidental and not material to its business. |
F-9 |
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES As of March 31, 2006 and 2005, accounts payable and accrued liabilities were comprised of the following: |
2006 | 2005 | ||||||
---|---|---|---|---|---|---|---|
(Amounts in thousands) | |||||||
Accrued professional fees | $ | 50 | $ | 14 | |||
Accounts payable | 20 | 5 | |||||
$ | 70 | $ | 19 | ||||
6. DIVIDEND PAYABLE Siti declared a $0.15 per share dividend to shareholders of record as of March 28, 2006. At such time Siti’s outstanding stock was 30,028,261 shares resulting in a payable of $4,504,239.15 which was paid on or after April 12, 2006. |
F-10 |