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
SEPTEMBER 30, 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 September 30, 1999, the Registrant had 177,666,953
shares of common stock issued and outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AS OF SEPTEBMER 30, 1999
AND JUNE 30, 1999 3
STATEMENTS OF OPERATIONS FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 1999
AND SEPTEMBER 30, 1998 4
STATEMENTS OF CASH FLOWS FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 1999 AND
SEPTEMBER 30, 1998 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 24
SIGNATURE 25
PART I.
ITEM 1. FINANCAL STATEMENTS.
Internet Business's International, Inc.
BALANCE SHEETS (Unaudited)
June 30, 1999 September 30, 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 82,577 $ 4,059
Accounts Receivable 4,576 187,928
Inventories 0 73,771
Prepaid expenses 308,120 20,875
Total current assets 395,273 286,633
FIXED ASSETS:
Equipment 0 196,664
Accumulated Depreciation 0 (163,587)
INVESTMENTS: 1,885,000 2,449,562
OTHER ASSETS
Note Receivable:
Iron Horse Holdings 1,735,000 1,735,000
Total Assets $4,015,273 $4,504,272
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable 28,247 236,004
Taxes Payable 0 201,253
Current Portion of Long-Term Debt 0 54,034
Total current liabilities 28,247 491,561
LONG TERM DEBT: 1,800 25,042
SHAREHOLDERS' EQUITY:
Preferred Stock Issued 2,390,000 2,390,000
Common Stock Issued 1,773,030 1,773,394
Additional paid-in capital 356,930 356,930
Retained earnings (deficit) (534,734) (534,734)
Current earnings 2,079
Total Shareholders' Equity 3,985,226 3,987,669
Total Liabilities & Shareholders'
Equity $4,015,273 $4,504,272
See Accompanying Notes to Financial Statement
Internet Business's International, Inc.
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1999
REVENUES
Sales $ 0 $261,581
Interest Income 0 36,521
Discounts and Allowances 0 (2,656)
Total Revenues 0 285,446
COST OF SALES 0 205,848
GROSS PROFIT 0 89,598
OPERATING EXPENSES:
Selling and distribution 0 0
General and administration 3,488 86,719
Total Operating Expenses 3,488 86,719
OTHER INCOME 2,386 0
NET INCOME (LOSS) $ (1,102) $ 2,879
NET INCOME (LOSS) PER
COMMON SHARE $(nil) $ nil
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 158,060,194 177,444,535
See Accompanying Notes to Financial Statement
Internet Business's International, Inc.
STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended
September 30, 1998 September 30, 1999
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (Loss) $(1,102) $ 2,079
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Changes in assets and
liabilities:
Accounts receivable 0 (187,928)
Inventories 0 (73,771)
Equipment 0 (196,664)
Accumulated Depreciation 0 163,587
Accrued Taxes 0 135,819
Prepaid expenses 0 (20,875)
Accounts payable 0 301,706
Net cash provided by (used in)
operating activities (1,102) 123,953
CASH FLOWS FROM INVESTING
ACTIVITIES:
Internet Investments 0 (231,333)
Net cash provided by (used in)
investing activities 0 (231,333)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Common Stock Issued 0 (394)
Additional Paid-In Capital 0 (185,503)
Net cash provided by (used in)
financing activities 0 (185,897)
NET INCREASE (DECREASE) IN CASH (1,102) (78,517)
CASH AND CASH EQUIVALENTS,
beginning of period 1,102 82,577
CASH AND CASH EQUIVALENTS,
end of period $ 0 $ 4,059
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 "Company") 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
Company 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 Company's name to better reflect the
Company's operations, this name came to be Internet Business's
International. During 1999, the management began to implement
the Company'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 Company, 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 Company's fiscal year is June 30 year end.
Accounts Receivable and Revenues
With the new venture for the Company 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 Company'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 Company
will not include goodwill in its financial reports.
Income Taxes
The Company 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 Company 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 Company'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 Company has an operating leases for its facilities.
Note 5 Stock Issuance
Current Stock Authorized
The Company 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 Company by the end of this Quarter had issued
177,666,953 common shares, of which 126,854,968 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 Company entered into an agreement with
Iron Horse Holdings, Inc. (IHHI) where IHHI agreed to buy up to
25,000 of the Company'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 Company 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 Company
issued and additional 9,154,999 shares by March 31, 1999.
On December 21, 1998 the Company 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 company issued an additional 2,087,791
shares for advertising and site maintenance.
By the end of this quarter the company issued an additional
112,667 restricted shares for acquiring additional e-commerce
sites for the company, and issuing shares to the former President
during his tenure of 251,289 for a total of 363,956.
The Company acquired 100% of LA Internet, Inc. in June of 1999
and 100% of the assets of MBM Capital Group, Inc in July of 1999.
Following are the unaudited pro forma revenues and net income
(loss) for the above company and assets:
Twelve Months Ended June 30, 1999
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
Note 6 Extraordinary Income
After review by legal counsel about the collect ability of the
previous company'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
company'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 Company and notes thereto contained
elsewhere in this report.
Results of Operations.
Revenues for the three month period ended September 30, 1999 of
$261,581 increased 100% when compared with revenues of $0 in the
prior year comparable period due to the start up of operations of
the Company in its new business line in the first calendar
quarter of 1999.
The gross profits margin of 34.25% for the three months ended
September 30, 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 three
months reflect the reopening of the business as an internet
company.
Selling, general, and administrative expenses for the three month
ended September 30, 1999 were $86,719 when compared with the
$3,488 for the prior year comparable period, again due to the
reopening of the new business of the Company.
The resulting profit for the three months ended September 30,
1999 was $2,979 when compared with a loss of $1,102 for the same
three month period of the previous fiscal year.
Liquidity and Capital Resources.
Net cash provided by the operations of the Company was $123,953
for the three months ended September 30, 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 September 30, 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 Company'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 Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully
resolved.
The Company currently believes that its systems are Year 2000
compliant in all material respects, its current systems and
products may contain undetected errors or defects with Year 2000
date functions that may result in material costs. Although
management is not aware of any material operational issues or
costs associated with preparing its internal systems for the Year
2000, the Company 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 Company 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 Company's Year 2000 plans are based
on management's best estimates.
Forward Looking Statements.
The foregoing Management's Discussion and Analysis, and the
discussion set forth under "Item 5 Other Information," contain
"forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended, and as contemplated under the
Private Securities Litigation Reform Act of 1995, including
statements regarding, among other items, the Company's business
strategies, continued growth in the Company's markets,
projections, and anticipated trends in the Company'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 Company's
expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control.
The Company 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 Company's products, competitive
pricing pressures, changes in the market price of ingredients
used in the Company's products and the level of expenses incurred
in the Company'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 Company disclaims any intent or obligation to
update "forward looking statements".
PART II.
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Company 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.
The following matters were submitted to a vote of the Company's
stockholders during the first quarter of the fiscal year covered
by this report:
The Annual Meeting of the shareholders of the Company was held on
July 9, 1999. The following matters were approved at this
meeting:
Election of the three nominated directors;
An increase in the number of authorized directors of the Company
from four to five;
The selection of the independent accountant for the current
fiscal year;
A reduction in the amount of outstanding shares of common stock
of the Company by a one-for-two reverse split of common stock, if
the closing trading price of the common stock of the Company
reaches or exceeds $1.00 per share on any trading day not later
than 180 days from the date of the shareholders meeting; and
An Agreement and Plan of Merger of Internet Business's
International, Inc., a Delaware corporation, into Internet
Business's International, Inc., a Nevada corporation, for the
purpose of redomiciling the Company to the State of Nevada. The
Agreement and Plan of Merger was approved by a majority of the of
the shareholders entitled to vote (appearing either in person or
by proxy). This merger was evidenced by the filing of Articles
of Merger with the Nevada Secretary of State (effective on June
15, 1999).
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Reports on Form 8-K. Reports on Form 8-K were filed during the
first quarter of the fiscal year covered by this Form 10-Q, as
follows:
(1) Form 8-K filed on July 15, 1999 reflecting the merger
described in Item 4 above.
(2) Form 8-K filed on August 16, 1999 reflecting the new
transfer agent for the Company, and the address for this firm.
(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: November 29, 1999 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 (see below).
3.2 Certificate of Amendment of Articles of Incorporation (see
below).
3.3 Bylaws (see below).
10.1 Consulting Agreement between the Company and Mark Crist
(incorporated by reference to Exhibit 4.2 to Form S-8 filed on
October 8, 1999)
10.2 Purchase Agreement between the Company and Iron Horse
Holdings, Incorporated, dated June 10, 1999 (see below).
10.3 Purchase Agreement between the Company and the Stockholders
of MBM Capital Group Inc., dated July 1, 1999 (see below).
21 Subsidiaries of the Company (see below).
27 Financial Data Schedule (see below).