U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
DECEMBER 31, 1999
OR
[ ] 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: 33-43621
INTERNET BUSINESS'S INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Nevada 33-0845463
(State or jurisdiction of incorporation I.R.S. Employer
or organization) Identification No.)
3900 Birch Street, Suite 111, Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (949) 833-0261
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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) been subject to such filing
requirements for the past 90 days. Yes X No .
As of December 31, 1999, the Registrant had 189,116,953
shares of common stock issued and outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AS OF DECEMBER 31, 1999
AND JUNE 30, 1999 3
STATEMENTS OF OPERATIONS FOR THE THREE
AND SIX MONTHS ENDED DECEMBER 31, 1999
AND DECEMBER 31, 1998 4
STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED DECEMBER 31, 1999 AND
DECEMBER 31, 1998 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
PART II
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 12
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURE 12
PART I.
ITEM 1. FINANCAL STATEMENTS.
INTERNET BUSINESS'S INTERNATIONAL, INC.
BALANCE SHEETS (Unaudited)
June 30, 1999 December 31, 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 82,577 $ 121,322
Accounts Receivable 4,576 290,120
Inventories 0 84,286
Prepaid expenses 308,120 18,320
Total current assets 395,273 514,048
FIXED ASSETS:
Equipment 0 199,978
Accumulated Depreciation 0 (167,997)
INVESTMENTS: 1,885,000 2,268,562
OTHER ASSETS
Note Receivable:
Iron Horse Holdings 1,735,000 1,735,000
Total Assets $4,015,273 $4,549,591
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable 28,247 279,108
Taxes Payable 0 227,282
Current Portion of Long-Term Debt 0 1,321
Total current liabilities 28,247 507,711
LONG TERM DEBT: 1,800 21,008
SHAREHOLDERS' EQUITY:
Preferred Stock Issued 2,390,000 2,390,000
Common Stock Issued 1,773,030 1,891,117
Additional paid-in capital 356,930 249,924
Retained earnings (deficit) (534,734) (534,734)
Current earnings 0 24,565
Total Shareholders' Equity 3,985,226 4,020,872
Total Liabilities &
Shareholders' Equity $4,015,273 $4,549,591
See Accompanying Notes to Financial Statement
INTERNET BUSINESS'S INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
1998 1999 1998 1999
REVENUES $ 0 $ 540,102 $ 0 $ 835,548
COST OF SALES 0 199,102 0 404,950
GROSS PROFIT 0 341,000 0 430,598
EXTRAORDINARY
INCOME 2,274,644 2,274,644
OPERATING EXPENSES:
Selling and
distribution 0 26,501 0 26,501
General and
administration 34,224 292,813 37,712 379,532
Total Operating
Expenses 34,224 319,314 37,712 406,033
OTHER INCOME 0 0 2,386 0
NET INCOME
(LOSS) $2,240,420 21,686 $2,239,318 $ 24,565
NET INCOME
(LOSS) $.01 $nil $.01 $nil
PER COMMON
SHARE
WEIGHTED
AVERAGE
NUMBER OF
COMMON
SHARES
OUTSTANDING 158,060,194 181,737,364 158,060,194 181,737,364
See Accompanying Notes to Financial Statements
INTERNET BUSINESS'S INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
December 31, 1998 December 31, 1999
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (Loss) $2,239,318 $ 24,565
Adjustments for non-cash
items:
From Extra Ordinary
Income ($2,274,644)
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Changes in assets and
liabilities:
Accounts receivable 0 (290,120)
Inventories 0 ( 84,286)
Equipment 0 (199,978)
Accumulated Depreciation 0 167,977
Accrued Taxes 0 227,282
Prepaid expenses 0 ( 18,320)
Accounts payable 34,224 279,108
Net cash provided by
(used in) operating
activities (1,102) 106,228
CASH FLOWS FROM INVESTING
ACTIVITIES:
Internet Investments 0 (49,402)
Net cash provided by
(used in) investing
activities 0 (49,402)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Common Stock Issued 0 (118,087)
Additional Paid-In Capital 0 100,006
Net cash provided by
(used in) financing
activities 0 ( 18,081)
NET INCREASE (DECREASE)
IN CASH
(1,102) ( 38,745)
CASH AND CASH
EQUIVALENTS,
beginning of period 1,102 82,577
CASH AND CASH
EQUIVALENTS,
end of period 0 121,322
See Accompanying Notes to Financial Statement
Internet Business's International, Inc.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1 Description of the Business
Internet Business's International, Inc. (the "Registrant") was in
the manufacturing business, these operations ceased as of
December 31, l997. In December 1998, after new management was in
place, a decision was made to change the company into an Internet
firm offering e-commerce, internet access as an Internet Service
Provider, hosting through our own server, web hosting, directory
services, auction sites and chat rooms. It was also determined to
change the Registrant's name to better reflect the Registrant's
operations, this name came to be Internet Business's
International. During 1999, the management began to implement
the Registrant's new direction and operations.
Note 2 Change in Control
In November 1998 new stockholders bought majority control a
private transaction. Immediately after the stock. ownership
changed, the former majority stock holder resigned as the Chief
Executive Officer and President of the Registrant, and then the
former majority stockholder was also the sole director, resigned
after nominating and electing two new directors from the group
that bought controlling shares of stock.
Note 3 Summary of Significant Accounting Policies
Fiscal Year
The Registrant's fiscal year is June 30 year end.
Accounts Receivable and Revenues
With the new venture for the Registrant into e-commerce, revenues
will be generated through credit card sales over the Internet,
minimizing the risk of bad debts.
Inventories
With this new line of business, inventories will bc kept to a
minimum.
Fixed Assets
All of the Registrant's fixed assets will be Internet related.
The exact extent of what this will consist of will be determined
with time.
Other Assets
Other assets will consist primarily of software for Internet
programs and other related assets.
Goodwill
Due to the change in the new nature of the business the
Registrant will not include goodwill in its financial reports.
Income Taxes
The Registrant follows Statement of Financial Accounting
Standards ("SPAS") No. 109, "Accounting for Income Taxes. " Under
this method, deferred income taxed was recognized for the tax
consequences in future years of difference between the taxes of
assets and liabilities, and their financial reporting amounts at
each year-end based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences were expected
to affect taxable income. Valuation allowances were established,
when necessary to reduce deferred tax assets to the amount
expected to be realized. Under this standard the provision for
income taxes represents the tax payable for the period and the
change during the period in deferred tax assets and liabilities.
Stockholders' Equity Common Shares
Stockholders' equity common shares is based on the reported net
equity divided by the weighted average number of common shares
outstanding.
Cash Equivalents
The Registrant considered highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
Fair Value of Financial Instruments
The carrying value of the Registrant's cash and cash
equivalents, accounts receivable, accounts payable, accrued
expenses and notes payable approximates fair value.
Management Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles required management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Additional Paid In Capital
The additional paid in capital represented on the balance sheet
is from the difference of the Preferred Stock Issuance's as
noted in Note 5-Stock Issuance as per the agreement and actual
amount issued which is $110,000.
Note 4 Commitments
Leases
The Registrant has an operating leases for its facilities.
Note 5 Stock Issuance
Current Stock Authorized
The Registrant is currently authorized to issue up to
199,000,000 shares of common stock and 1,000,000 of preferred
stock.
Issued and Outstanding Stock
Common Stock. The Registrant by the end of this Quarter had
issued 189,116,953 common shares, of which 132,304,968 are
restricted.
Preferred Stock. There were 23,900 shares of Preferred Stock
issued by the end of this Quarter.
Preferred Stock Issuance
On December 15, 1998 the Registrant entered into an agreement
with Iron Horse Holdings, Inc. (IHHI) where IHHI agreed to buy up
to 25,000 of the Registrant's preferred shares at the price of
$100.00 per share. Shares purchased under this agreement are to
be issued to IHHI or its designee. Payment for the shares sold
under this agreement is to be in the form of a promissory note
bearing interest at the rate of 9% per annum, and the obligation
created thereby is to be secured by a "blanket,'' or all
inclusive security agreement executed by IHHI and perfected by
filings as specified bylaw. Until such note is paid in full, IHHI
shall pay, the 3% coupon on such shares as are issued under this
agreement directly to the shareholder(s) of record at the time
such payment becomes due.
By the end of the third quarter ending March 31, 1999, 23,900
shares were issued according to the agreement with IHHI. The
balance of the shares to be issued of 1,100 at. a par value of
$100.00 per share, or $110,000, are being treated as additional
paid in capital, and are shown as such on the balance sheet. (See
note on Paid In Capital in Note 3.)
Common Stock Issuance On December 15, 1998 the Registrant agreed
to issue common shares to Iron Horse holdings, Inc. (IHHI) for
IHHI to pay its bills in exchange for the issuance of restricted
common stock. Under the terms to this agreement, the Registrant
issued and additional 9,154,999 shares by March 31, 1999.
On December 21, 1998 the Registrant agreed to acquire several
internet sites with issuance of common stock.. Under the terms of
this agreement 8,000,000 shares were issued.
By June 30, 1999 the Registrant issued an additional 2,087,791
shares for advertising and site maintenance.
By the end of September 30,1999, the Registrant issued an
additional 112,667 restricted shares for acquiring additional e-
commerce sites for the Registrant, and issuing shares to the
former President during his tenure of 251,289 for a total of
363,956.
The Registrant acquired the sites using the purchase method of
accounting, 100% of LA Internet, Inc. in June of 1999 for
$525,000.00 from IHHI which was credited towards the note that is
owed by IHHI to the Registrant. The Registrant acquired 100% of
the assets of MBM Capital Group, Inc in July of 1999, for
$72,000.00 in cash and 112,667 in restricted shares.
Following are the unaudited pro forma revenues and net income
(loss) for the above companies and assets:
Twelve Months Ended June 30, 2000
Revenue Operating & Expenses Net Income
LA Internet, Inc . $2,500,000 $1,920,000 $ 580,000
MBM Capital Group,
Inc. $1,200,000 $ 960,000 $ 240,000
By the end of December 31, 1999, the Registrant issued an
additional 11,450,000 shares. Of which 6,000,000 were issued for
services these services allowed the Registrant to obtain the
services of a contract with MSN, obtain e-commerce site and
acquire the Real Estate Mortgage site. The 5,450,000 shares that
were issued for the Net 2 Loan site and for the Optical Brigade
Site of which 5,000,000 are held in an escrow pending performance
of the sites.
The Registrant acquired the sites using the purchase method of
accounting for 100% of Net 2 Loan and the Optical Brigade sites.
Following are the unaudited proforma revenues and net income
(loss) for the above Registrant sites.
Twelve Months Ended December 31, 2000
Revenue Operating & Expenses Net Income
Net 2 Loan $ 630,000 $ 310,000 $ 320,000
Optical Brigade $ 360,000 $ 150,000 $ 210,000
Note 6 Extraordinary Income
After review by legal counsel about the collect ability of the
previous Registrant's unsecured prior debts, it was determined by
management to show those debts as uncollectible. Therefore,
management has decided to write those debts off and according to
IRS codes that uncollectible debt has to be shown as
extraordinary income.
Note 7 Net Loss Carry Forward
The Net Loss Carry Forward that was incurred due to the prior
Registrant's operation will be used to offset the impact of the
extraordinary income as indicated above.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
financial statements of the Registrant and notes thereto
contained elsewhere in this report.
Results of Operations.
Revenues for the six month period ended December 31, 1999 of
$835,548 increased 100% when compared with revenues of $0 in the
prior year comparable period due to the start up of operations of
the Registrant in its new business line in the first calendar
quarter of 1999.
The gross profits margin of 51.53% for the six months ended
December 31, 1999 is a significant increase from the gross profit
margin of 0% for the same three month period of the previous
fiscal year. Current year margins in the past six months reflect
the reopening of the business as an internet company.
Selling, general, and administrative expenses for the six months
ended December 31, 1999 were $379,532 when compared with the
$37,712 for the prior year comparable period, again due to the
reopening of the new business of the Registrant.
The resulting profit for the six months ended December 31, 1999
was $24,565 when compared with a profit of $2,239,318 due to the
write-off of previous unsecured debts as uncollectible for the
same six month period of the previous fiscal year.
Liquidity and Capital Resources.
Net cash provided by the operations of the Registrant was
$106,228 for the six months ended December 31, 1999 versus cash
used in operating activities of $1,102 in the comparable prior
year period.
Capital Expenditures.
No material capital expenditures were made during the quarter
ended on December 31, 1999.
Year 2000 Issue.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using the year
2000 date is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced before, on, or after January 1, 2000, and if
not addressed, the impact on operations and financial reporting
may range from minor errors to significant system failure which
could affect the Registrant's ability to conduct normal business
operations. This creates potential risk for all companies, even
if their own computer systems are Year 2000 compliant. It is not
possible to be certain that all aspects of the Year 2000 issue
affecting the Registrant, including those related to the efforts
of customers, suppliers, or other third parties, will be fully
resolved.
The Registrant currently believes that its systems are Year 2000
compliant in all material respects. Although management is not
aware of any material operational issues or costs associated with
preparing its internal systems for the Year 2000, the Registrant
may experience serious unanticipated negative consequences (such
as significant downtime for one or more of its web site
properties) or material costs caused by undetected errors or
defects in the technology used in its internal systems.
Furthermore, the purchasing patterns of advertisers may be
affected by Year 2000 issues as companies expend significant
resources to correct their current systems for Year 2000
compliance. The Registrant does not currently have any
information about the Year 2000 status of its advertising
customers. However, these expenditures may result in reduced
funds available for web advertising or sponsorship of web
services, which could have a material adverse effect on its
business, results of operations, and financial condition. The
Registrant's Year 2000 plans are based on management's best
estimates.
Forward Looking Statements.
The foregoing Management's Discussion and Analysis contains
"forward looking statements" within the meaning of Rule 175 of
the Securities Act of 1933, as amended, and Rule 3b-6 of the
Securities Act of 1934, as amended, including statements
regarding, among other items, the Registrant's business
strategies, continued growth in the Registrant's markets,
projections, and anticipated trends in the Registrant's business
and the industry in which it operates. The words "believe,"
"expect," "anticipate," "intends," "forecast," "project," and
similar expressions identify forward-looking statements. These
forward-looking statements are based largely on the Registrant's
expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Registrant's
control. The Registrant cautions that these statements are
further qualified by important factors that could cause actual
results to differ materially from those in the forward looking
statements, including, among others, the following: reduced or
lack of increase in demand for the Registrant's products,
competitive pricing pressures, changes in the market price of
ingredients used in the Registrant's products and the level of
expenses incurred in the Registrant's operations. In light of
these risks and uncertainties, there can be no assurance that the
forward-looking information contained herein will in fact
transpire or prove to be accurate. The Registrant disclaims any
intent or obligation to update "forward looking statements".
PART II.
ITEM 1. LEGAL PROCEEDINGS.
The Registrant is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Registrant has been threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. A report on Form 8-K was filed during the
second quarter of the fiscal year covered by this Form 10-Q as
follows: A Form 8-K filed on November 22, 1999 to reflect an
amendment to the Form 8-K filed on July 16, 1999 to show the
Agreement and Plan of Merger as an Exhibit thereto.
(b) Exhibits included or incorporated by reference herein:
See Exhibit Index.
SIGNATURE
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.
Internet Business's International, Inc.
Dated: February 21, 2000 By: /s/ Albert R. Reda
Albert R. Reda,
Chief Executive Officer
EXHIBIT INDEX
Exhibit
No. Description
2 Agreement and Plan of Merger (incorporated by reference to
Exhibit 2 to the Form 8-K/A filed on November 22, 1999)
3.1 Articles of Incorporation (incorporated by reference to
Exhibit 3.1 to the Form 10-Q filed on December 1, 1999).
3.2 Certificate of Amendment of Articles of Incorporation
(incorporated by reference to Exhibit 3.2 to the Form 10-Q filed
on December 1, 1999).
3.3 Bylaws (incorporated by reference to Exhibit 3.3 to the
Form 10-Q filed on December 1, 1999).
10.1 Consulting Agreement between the Registrant and Mark Crist
(incorporated by reference to Exhibit 4.2 to Form S-8 filed
on October 8, 1999)
10.2 Purchase Agreement (LA Internet) between the Registrant and
Iron Horse Holdings, Incorporated, dated June 10, 1999
(incorporated by reference to Exhibit 10.2 to the Form 10-Q
filed on December 1, 1999).
10.3 Purchase Agreement between the Registrant and the
Stockholders of MBM Capital Group Inc., dated July 1, 1999
(incorporated by reference to Exhibit 10.3 to the Form 10-Q
filed on December 1, 1999).
10.4 Acquisition Agreement (Net 2 Loan) between the Registrant
and Lifestyle Mortgage Partners (see below).
10.5 Purchase Agreement (license) between the Registrant and
Stockholders of California Land & Home Sale, Inc. (see below).
10.6 Acquisition Agreement (Optical Brigade) between the
Registrant and Wade Whitley (see below).
21 Subsidiaries of the Registrant (incorporated by
reference to Exhibit 21 to the Form 10-Q filed on
December 1, 1999).
27 Financial Data Schedule (see below).