UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
November 17, 1997
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1997
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
Tel: (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 __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
September 30, 1997
(Unaudited)
ASSETS
CURRENT ASSETS
Cash in bank $89
Accounts receivable from related party 811
Prepaid expense 2,068
----------------
----------------
TOTAL CURRENT ASSETS 2,968
----------------
OTHER ASSETS
Organizational costs, net of amortization 1,609
----------------
1,609
----------------
TOTAL ASSETS $4,577
================
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable $17,984
Accrued liabilities 0
----------------
TOTAL CURRENT LIABILITIES 17,984
----------------
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 4,273
authorized; 4,172,578 shares outstanding
Additional paid in capital 695,126
Accumulated deficit (715,306)
----------------
(13,407)
----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$4,577
================
See notes to unaudited consolidated financial statements.
IAC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(Unaudited)
Three Months Ended
September 30
1997 1996
---- ----
REVENUES
Management fees $30,244 $41,827
Other income 0 782
-------------- -------------------
30,244 42,609
-------------- -------------------
OPERATING AND GENERAL EXPENSES
Compensation and employee benefits 0 28,496
Promotion and trade shows 0 68,145
Administrative expenses (2,599) 29,213
---------------------------------------
(2,599) 125,854
---------------------------------------
Income (Loss) from operations 32,843 (83,245)
---------------------------------------
Income taxes 0 0
---------------------------------------
Net income (loss) 32,843 (83,245)
Accumulated deficit-beginning of period (748,149) (447,438)
---------------------------------------
Accumulated deficit-end of period ($715,306) ($530,683)
=======================================
Income (Loss) per share $0.01 ($0.02)
=======================================
See notes to unaudited consolidated financial statements.
IAC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(Unaudited)
Nine Months Ended
September 30
1997 1996
---- ----
Management fees $87,674 $103,843
Other income 26 9,928
---------------------------------------
$87,700 $113,771
---------------------------------------
OPERATING AND GENERAL EXPENSES
Compensation and employee benefits 43,581 60,043
Promotion and advertising 3,224 254,634
Administrative expenses 75,623 112,210
---------------------------------------
122,428 426,887
---------------------------------------
Income (Loss) from operations (34,728) (313,116)
---------------------------------------
Income taxes (800) (1,600)
---------------------------------------
Net income (loss) (35,528) (314,716)
Accumulated deficit-beginning of period (679,778) (215,967)
---------------------------------------
Accumulated deficit-end of period ($715,306) ($530,683)
=======================================
Income (Loss) per share ($0.01) ($0.08)
=======================================
See notes to unaudited consolidated financial statements.
IAC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($35,528) ($314,716)
Adjustment to reconcile net loss to net cash provided
by (used in) operating activities:
Amortization 12,953 540
Increase in receivable from related party (811) (92)
Decrease in refundable payroll taxes 3,973
Increase in accounts payable and
other liabilities 11,762 2,018
Decrease in receivable from related party 3,433
Issuance of shares of common stock for services 288,000
----------------------------------
----------------------------------
Net Cash Used In Operating Activities (11,624) (16,844)
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of investment securities 10,000
-----------------------------------
Net Cash Used In Investing Activities 0 10,000
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock, net of expenses 1,600
------------------------------------
Net Cash Provided By Financing Activities 0 1,600
------------------------------------
Net Increase (Decrease) In Cash (11,624) (5,244)
Cash At Beginning Of Period 11,713 37,967
=====================================
Cash At End Of Period $89 $32,723
=====================================
Income taxes paid during period $800 $800
=====================================
See notes to unaudited consolidated financial statements
IAC, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 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.
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
IAC, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
Note 1 (continued):
$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 are 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
nine-month periods ended September 30, 1997 and 1996, which are included in Item
1 above.
Basis of presentation:
The consolidated financial statements as of September 30, 1997 have been
prepared on the going concern basis. IAC has reported a loss during the last two
years. In addition, its current liabilities substantially exceed its available
cash. In its current configuration, the Company could become current in the next
quarter.
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 virtually all of its available cash in its operations as of
September 30, 1997. As of September 30, 1997, IAC's current liabilities were
$17,984 versus $54,244 at the end of the June quarter. 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 third quarter of 1997 declined $11,583 or 27.7% 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 $28,496 and administrative expenses decreased
$31,812 largely due to lower legal expenses and a small reversal of charges
incurred in the second quarter. Promotional expenses declined from the previous
year's $68,145 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
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 Exchange 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/ Harry Walsh
Harry Walsh, President
November 17, 1997