UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
October 15, 1997
For the quarter ended: June 30, 1997
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:
4,272,578 shares.
Transitional Small Business Disclosure Format (Check one): Yes ___ No _X_
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
IAC, Inc.
CONSOLIDATED BALANCE SHEET
June 30, 1997
(Unaudited)
ASSETS
CURRENT ASSETS
Prepaid expense 6,205
-----------------
TOTAL CURRENT ASSETS 6,205
-----------------
Organizational costs, net of amortization 1,789
-----------------
1,789
-----------------
TOTAL ASSETS $7,994
=================
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable (including overdraft) $28,830
Other liabilities 25,414
-----------------
TOTAL CURRENT LIABILITIES $54,244
-----------------
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 5,000,000 2,500
shares authorized; 630,000 shares outstanding
Capital stock, $.001 par value, 25,000,000 4,273
shares authorized; 4,272,578 shares outstanding
Additional paid in capital 695,126
Accumulated deficit (748,149)
-----------------
(46,250)
-----------------
LIABILITIES AND STOCKHOLDERS' EQUITY $7,994
=================
See notes to unaudited consolidated financial statements.
IAC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
AND ACCUMULATED DEFICIT
(Unaudited)
Three Months Ended
June 30, 1997 June 30, 1996
------------- -------------
REVENUES
Management fees $29,074 $32,045
Other income 0 8,462
------------------ ----------------------
$29,074 $40,507
------------------ ----------------------
OPERATING AND GENERAL EXPENSES
Compensation and employee benefits 9,711 15,635
Promotion and advertising 0 118,675
Administrative expenses 35,523 69,156
------------------ ----------------------
45,234 203,466
------------------ ----------------------
LOSS FROM OPERATIONS (16,160) (162,959)
------------------ ----------------------
INCOME TAXES 0 (800)
------------------ ----------------------
NET LOSS (16,160) (163,759)
Accumulated Deficit-
beginning of period (731,989) (283,679)
------------------ ----------------------
Accumulated Deficit-
end of period ($748,149) ($447,438)
================== ======================
Loss Per Share ($0.00) ($0.04)
================== ======================
.
See notes to unaudited consolidated financial statements
IAC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
AND ACCUMULATED DEFICIT
(Unaudited)
Six Months Ended
June 30, 1997 June 30, 1996
------------- -------------
REVENUES
Management fees $57,430 $62,016
Other income 26 9,146
---------------- ----------------------
$57,456 $71,162
---------------- ----------------------
OPERATING AND GENERAL EXPENSES
Compensation and employee benefits 43,981 31,547
Promotion and advertising 3,224 186,489
Administrative expenses 78,222 82,997
-------------- ----------------------
125,027 301,033
--------------- ----------------------
LOSS FROM OPERATIONS (67,571) (229,871)
--------------- ----------------------
INCOME TAXES (800) (1,600)
--------------- ----------------------
NET LOSS (68,371) (231,471)
DEFICIT-beginning of period (679,778) (215,967)
--------------- ----------------------
DEFICIT- end of period ($748,149) ($447,438)
=============== ======================
Loss Per Share ($0.02) ($0.06)
=============== ======================
.
See notes to unaudited consolidated financial statements
IAC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30, 1997 June 30, 1996
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($68,371) ($231,471)
Adjustment to reconcile net loss to
net cash provided by (used in)
operating activities:
Amortization 8,635 360
Increase in receivable from
related party (13,834)
Decrease in refundable payroll taxes 3,973
Increase in accounts payable and
other liabilities 47,623 6,310
Decrease in note receivable from
related party 3,000
Issuance of shares of common
stock for services 225,500
----------------- ----------------------
----------------- ----------------------
Net Cash Provided by
Operating Activities (12,113) (6,162)
----------------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of investment securities 10,000
----------------- ----------------------
Net Cash Used In Investing Activities 10,000
----------------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock, net of expenses 1,000
---------------- ----------------------
---------------- ----------------------
Net Cash Provided By Financing Activities 1,000
---------------- ----------------------
Net Increase (Decrease) In Cash (12,113) 4,838
Cash At Beginning Of Period 11,713 37,967
================= ======================
Cash (Overdraft) At End Of Period ($400) $42,805
================= ======================
Income taxes paid during period $800
================= ======================
See notes to unaudited consolidated financial statements.
IAC, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1997 AND 1996
Note 1 - Organization, operations and basis of presentation:
Organization:
IAC, Inc.(IAC) is a Nevada corporation engaged in the business of managing a
malpractice insurance contract between International Associations' Coalitions',
Inc., (Coalitions) a related party, and an insurance company, Pacific Rim
Insurance Company, a minority stockholder of IAC. The members of Coalitions' and
its successor, Health Professionals Coalition, Inc. (Health), are podiatrists
seeking affordable malpractice insurance. Under the management contract, IAC,
Inc. is entitled to receive 27.5% of the premiums paid by the podiatrists to
United and Pacific Rim.
The term of the insurance contract between Coalitions' and the insurance
carriers is one year and is generally renewable if both parties have performed
satisfactorily. The management contract with Coalitions' also has a term
concurrent with the insurance contract.
Coalitions' is a wholly owned by the Company'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. Mt. Tam Re was formed to
provide reinsurance coverage for other insurance companies.
Basis of presentation:
The consolidated financial statements have been prepared on the going concern
basis. IAC has reported a loss during the last two years and for the six month
period ended June 30, 1997. In addition, its current liabilities substantially
exceed its available cash. Losses are expected to continue.
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.
IAC, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED JUNE 30, 1997 AND 1996
Note 1 - Organization, operations and basis of presentation (continued):
The Cease and Desist Order provides that IAC and Health can in the future,
accept payment of premiums only if first authorized to conduct business in
Texas. Such authorization will be dependent upon formation of a risk retention
group (RRG), or retention of an insurance broker and insurer licensed in Texas.
Pacific Rim is not licensed in Texas. Management was unable to retain a broker
licensed in Texas, or an insurer licensed in Texas by April 21, 1997. Retention
in the future of some or all of the revenues from Texas based podiatrists is
dependent upon formation of an RRG. During the quarter ended June 30, 1997, IAC
refunded $3,079 of premiums received from podiatrists located in Texas.
In 1996, the Company received revenues of approximately $19,000 from Mt.
Tam Re reinsurance premiums and a gain from sale of a security, which will not
reoccur in 1997.
The Company has been seeking funding for the initial capitalization of a
Risk Retention Group (RRG) for podiatrists. The Company entered into a contract
in October of 1996 to provide $600,000 but such funding has yet to be received.
This agreement, as amended, provides that upon funding by the investor, the
Company must pledge 500,000 shares of convertible preferred stock. Such pledged
shares can, at the Company's option, either be from those currently outstanding
or be newly issued shares. The agreement provides for a success fee of $47,500.
Without a RRG, IAC is unable to substantially expand its marketing efforts to
podiatrists around the country and reduce its dependence upon the limited number
of members of Health.
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 assets, liabilities, revenue 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.
Revenues are recorded by IAC when insurance premiums are collected by
Coalitions or by Health. Expenses are recorded on the accrual method of
accounting. The carrying value of cash, note receivable, accounts payable
and accrued liabilities is a reasonable estimate of
fair value of these financial instruments.
Note 3 - Authorized stock:
The Company's authorized capital consists of 25,000,000 shares of $.001 par
value common stock and 5,000,000 shares of no par 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 no dividend rights or preference
in liquidation.
Note 4 - Income Taxes:
At December 31, 1996, IAC's consolidated net operating loss carry forwards
(NOL's) amounted to approximately $516,000 for federal tax purposes. These NOLs
will expire from 1999 through 2011. For California franchise tax purposes, the
NOL is approximately $258,000 and expires in 2001.
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 June 30, 1997 and 1996 which are included in Item 1
above.
Basis of presentation:
The consolidated financial statements as of June 30, 1997 have been prepared on
the going concern basis. IAC has reported a loss during the last two years and
the quarter ended June 30, 1997. In addition, its current liabilities
substantially exceed its available cash. Losses are expected to continue in the
foreseeable future.
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 June 30, 1997.
The Cease and Desist Order provides that IAC and Health can in the future,
accept payment of premiums only if first authorized to conduct business in
Texas. Such authorization will be dependent upon formation of a risk retention
group (RRG), or retention of an insurance broker and insurer licensed in Texas.
Pacific Rim is not licensed in Texas. Management was unable to retain a broker
licensed in Texas, or an insurer licensed in Texas by April 21, 1997. Retention
in the future of some or all of the revenues from Texas based podiatrists is
dependent upon formation of an RRG.
In 1996, the Company received revenues of approximately $19,000 from Mt. Tam Re
reinsurance premiums and a gain from sale of a security, which will not reoccur
in 1997.
The Company has been seeking funding for the initial capitalization of a Risk
Retention Group (RRG) for podiatrists. The Company entered into a contract in
October of 1996 to provide $600,000 but such funding has yet to be received.
This agreement, as amended, provides that upon funding by the investor, the
Company must pledge 500,000 shares of convertible preferred stock. Such pledged
shares can, at the Company's option, be either from those currently outstanding
or be newly issued shares. The agreement provides for a success fee of $47,500.
Without a RRG, IAC is unable to substantially expand its marketing efforts to
podiatrists around the country and reduce its dependence upon the limited number
of members of Health.
Liquidity:
IAC has used all of its available cash in its operations as of June 30, 1997. As
of June 30, 1997, IAC's current liabilities were $54,244. Negotiations with
suppliers are ongoing and the company believes it will be able to restructure
most of these obligations.
Discussion of quarterly results:
Management fees in the second quarter of 1997 declined $2,971 or 9% from the
preceding year. This was due to a decrease in premiums written to the
podiatrists group under management, primarily as a result of the loss of the
participants in Texas.
Employee compensation decreased $5,924 and administrative expenses decreased
$33,623 largely due to lower legal expenses. Promotional expenses declined from
the previous year's $118,675 to zero.
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/ Dr. Michael Wener, President
October 15, 1997