UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
November 6, 1996
_X_ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
____TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number 0-26322
IAC, Inc.
Incorporated pursuant to the Laws of the State of Nevada
Internal Revenue Service Employer Identification No. 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 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 issuer's classes of common
equity, as of the latest practicable date:
4,172,578 shares
Transitional Small Business Disclosure Format (Check one): Yes ___ No _X_
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
IAC, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(Unaudited)
ASSETS
CURRENT ASSETS
Cash in bank $32,723
Note from related party 19,376
Account receivable from related party 92
Prepaid expense 62,500
-------------
TOTAL CURRENT ASSETS 114,691
-------------
OTHER ASSETS
Organizational costs, net of amortization 2,329
-------------
2,329
-------------
TOTAL ASSETS $117,020
=============
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable $5,912
Accrued liabilities (106)
-------------
TOTAL CURRENT LIABILITIES 5,806
-------------
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; 4,172,578 outstanding 4,173
Additional paid in capital 635,225
Accumulated deficit (530,683)
-------------
111,215
-------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $117,021
=============
See notes to unaudited consolidated financial statements.
IAC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(Unaudited)
Three Months Ended
September 30
1996 1995
------------- -----------
REVENUES
Management fees $41,827 $34,700
Other income 782
------------ ------------
42,609 34,700
OPERATING AND GENERAL EXPENSES
Compensation and employee benefits 28,496 13,184
Promotion and trade shows 68,145 3,302
Administrative expenses 29,213 27,534
----------- -----------
125,854 44,020
------------- -----------
LOSS FROM OPERATIONS (83,245) (9,320)
------------- -----------
INCOME TAXES 0 0
------------- -----------
NET LOSS (83,245) (9,320)
DEFICIT- beginning of period (447,438) (182,014)
------------- -----------
DEFICIT- end of period ($530,683) ($191,334)
============= ===========
Loss Per Share ($0.02) 0.00
============= ===========
See notes to unaudited consolidated financial statements.
IAC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(Unaudited)
Nine Months Ended
September 30
1996 1995
------------- -----------
REVENUES
Management fees $62,016 $81,822
Other income 9,146
------------- -----------
71,162 81,822
OPERATING AND GENERAL EXPENSES
Compensation and employee benefits 31,547 38,913
Promotion and trade shows 186,489 21,466
Administrative expenses 82,997 33,360
------------- -----------
301,033 93,739
------------- -----------
LOSS FROM OPERATIONS (229,871) (11,917)
INCOME TAXES -1600 -800
------------- -----------
NET LOSS -231,471 -12,717
DEFICIT-beginning of period -215,967 -166,797
------------- -----------
DEFICIT- end of period ($447,438) ($179,514)
============= ===========
Loss Per Share ($0.08) ($0.01)
============= ===========
See notes to unaudited consolidated financial statements.
IAC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
1996 1995
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($314,716) ($22,037)
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization 540 540
Decrease (increase) in note receivable
from related party 3,433 (15,693)
Decrease in refundable payroll taxes 3,973 (2,300)
Increase in organizational expense (2,589)
Increase in accounts payable and
accrued liabilities 2,018 (668)
Issuance of shares of common stock
for services 288,000 1,500
Increase in advances on future
commissions (6,000)
Increase in account receivable (92)
----------------------------
Net Cash Used In Operating Activities (16,844) (47,247)
----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in equity securities 10,000 (10,000)
----------------------------
Net Cash Used In Investing Activities 10,000 (10,000)
----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock, net of expenses 1,600 63,399
----------------------------
Net Cash Provided By Financing Activities 1,600 63,399
----------------------------
Net Increase (Decrease) In Cash (5,244) 6,152
Cash At Beginning Of Period 37,967 55,202
----------------------------
Cash At End Of Period $32,723 $61,354
============================
See notes to unaudited consolidated financial statements.
IAC, INC.
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS EQUITY
For the Nine Months Ended September 30, 1996
Preferred Stock Capital Stock
Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
Balances at
December 31,
1995 630,000 $2,500 3,693,578 $3,694 $283,604 ($215,967) $73,831
Sale of common stock 1,600 1,600
Stock issued for services:
Legal fees 20,000 20 7,980 8,000
Corp. comm. 305,000 305 304,695 305,000
Insurance Coverage 100,000 100 37,400 37,500
Consulting 50,000 50 (50) 0
Other stock issued 4,000 4 (4) 0
Net loss for period (314,716) (314,716)
----------------------------------------------------------------------
Balances at
September 30,
1996 630,000 $2,500 4,172,578 $4,173 $635,225 ($530,683) $111,215
======================================================================
See notes to unaudited consolidated financial statements.
IAC, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
Note 1 - Business of the Company:
The Company's 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 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 Chairman.
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 6).
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
NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 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 payment of $3,000 per quarter with the balance due in
full on December 31, 1996. Payments were made in accordance with the terms of
the note during the nine monthe ended September 30, 1996. The unsecured note
bears interest at the rate of 10%.
Note 4 - Investment in Equity Security:
During the quarter ended June 30, 1996, the Company sold its entire investment
in Triden Telecom, Inc., a SEC registrant, for $17,500 which resulted in a
pretax profit of approximately $7,500.
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.
On January 2, 1996, IAC entered into a one year contract with North American
Corporate Consultants (NACC). NACC is to develop and implement an ongoing stock
market informational system for the company. As consideration, NACC was issued
250,000 shares of common stock at a fair market value of $1 per share. The cost
of this contract is being recognized pro rata in 1996.
Other consultants were also issued an aggregate of 55,000 shares of free trading
stock for their services during the second quarter. These services were valued
at $1 per share and were recorded as expense in the three months ended June 30,
1996.
In June, 1996, the company's legal counsel was issued 20,000 shares of
restricted common stock valued at 40% of the fair market value of $1 and the
legal expense has been recorded in the second quarter.
IAC, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
Note 5 (continued):
In addition, 100,000 shares of IAC restricted stock were issued to Pacific Rim
to provide insurance coverage for podiatrists for certain time periods. These
shares were valued at $0.375 per share and have been recorded as expense in the
second quarter.
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 to the trust to maintain an aggregate value of $500,000 as of the end
of each calendar quarter.
Mt Tam Re began providing reinsurance on August 1, 1996. Based on the premium
levels of the three months ended September 30, it should realize revenues of
approximately $73,000 over the next twelve months. Based on the premium levels
on August 1 when the policy was written, Mt Tam Re is entitled to a minimum
payment of $12,500 per quarter with adjustments annually. The first such payment
is scheduled to be received on November 15, 1996. Mt Tam Re has agreed to pay a
5% rate on its capital of $500,000.
Note 7 - Income Taxes:
The Company's 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.
Note 8 - Subsequent Event:
On October 22, 1996, the Company announced the signing of a financing agreement
for $1.25 million to complete its application to the Arizona Department of
Insurance for a Risk Rentention Group for podiatrists. Upon final approval from
the DOI, the Company will begin aggressively marketing to podiatrists around the
country. The Company expects to significantly expand its business in the twelve
months following the approval.
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion relates to the unaudited financial statements
of IAC, Inc. for the interim nine month period ended September 30, 1996 and the
comparable period ended September 30, 1995.
For the first time, the Company had, in the third quarter, an increase
in revenues versus the comparable period in 1995. This was due to an increase in
premiums written to the podiatry group under management. Insurance premiums
normally rise 50% in each year for the first five years of malpractice coverage,
and this increase has begun to have an impact on the company. Membership levels
have remained steady, and therefore reflect the Company's ability to attract new
members to the group of insureds in spite of the continued utilization of
off-shore carriers. Management fees increased from $34,700 to $41,827 in the
third quarter of 1996.
During the third quarter, the Board authorized an increase in the salary
of the CEO from $5,000 to $10,000 per month reflecting the increased time
required to conduct the company's affairs. Promotion and advertising costs
increased from $3,302 in the 1995 period to $68,145. In the 1995 period, these
costs were paid in cash, while in the current period they were paid primarily in
stock. The cost of the company's contract with North American Corporate
Consultants (NACC) (see Note 5 to the interim financial statements) is being
recognized ratably in 1996. This expense amounted to $62,500 in each of the
first three quarters of 1996.
The company's reinsurance subsidiary, Mt Tam Re, began providing
reinsurance on August 1, 1996. Based on the premium levels of the three months
ended September 30, it should realize revenues of approximately $73,000 over the
next twelve months. Based on the premium levels on August 1 when the policy was
written, Mt Tam Re is entitled to a minimum payment of $12,500 per quarter with
adjustments annually. The first such payment is scheduled to be received on
November 15, 1996. Mt Tam Re has agreed to pay a 5% rate on its capital of
$500,000.
On October 22, 1996, the Company announced the signing of a financing
agreement for $1.25 million to complete its application to the Arizona
Department of Insurance for a Risk Retention Group for podiatrists. Upon final
approval from the DOI, the Company will begin aggressively marketing to
podiatrists around the country. The Company expects to significantly expand its
business in the twelve months following the approval.
Liquidity: Since the Company's 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 Company's management contract and
other insurance referrals. The Company's current cash on hand is deemed to
provide sufficient liquidity for the foreseeable future. The only demand for
capital will be to form Risk Retention Group's 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 Risk Retention Group.
The Risk Retention Group 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 Risk Retention Group. Once this funding is secured,
management is confident that the number of participants in the Risk Retention
Group 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. Wener's proficiency as a risk manager. In a
program which has very low claims, the profitability to the insurer is
significant. This is why a Risk Retention Group is so desirable to well managed
insureds. In an Risk Retention Group, 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: A negative cash flow of $5,244 was the result of the increase in the
compensation of the CEO. Increased premium and revenues from Mt Tam Re should
neutralize this increase. The company continues to have adequate cash reserves.
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
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K.
No reports have been filed on Form 8-K during this quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchnage Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IAC, Inc.
By: /S/ Dr. Michael Wener
Dr. Michael Wener, President
November 6, 1996