U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
-------------
( ) 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 1-13478
-------
QUIKBIZ INTERNET GROUP, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 88-0320364
------------------------------ ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6801 Powerline Road, Ft. Lauderdale, Florida 33309
--------------------------------------------------
(Address of principal executive offices)
(954) 970-3553
---------------------------------------------
(Issuer's telephone number including area code)
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the 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 _____
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of August 2, 2000, the issuer had
outstanding 15,598,298 shares of Common Stock, par value $.002 per share.
QUIKBIZ INTERNET GROUP, INC. AND SUBSIDIARIES
Page
-----
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1999 and June 30, 2000..........................3
Condensed Consolidated Statements of
Operations - Three and Six Months Ended
June 30, 1999 and 2000.......................................4
Condensed Consolidated Statements of
Cash Flows - Six Months Ended June 30, 1999 and 2000.........5
Notes to Condensed Consolidated Financial
Statements...................................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................7
Part II. Other Information
Item 1. Legal Proceedings............................................9
Item 2. Changes in Securities........................................9
Item 6. Exhibits and Reports on Form 8-K............................10
Signatures...........................................................11
2
Item 1. Condensed Consolidated Financial Statements
QuikBIZ Internet Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June December
30, 2000 31, 1999
-------------- -------------
Assets (Unaudited) (Note)
Current Assets
Cash $ 7,486 $ 35,957
Accounts receivable 785,736 620,501
Other 30,137 26,786
-------------- -------------
Total current assets 823,359 683,244
Property and equipment
Furniture and equipment 298,684 176,937
Leasehold improvements 44,862 44,862
-------------- -------------
343,546 221,799
Less accumulated depreciation (107,237) (73,880)
-------------- -------------
Depreciated cost 236,309 147,919
Note receivable from stockholder 158,028 151,586
Intangible assets 973,611 924,894
-------------- -------------
Total assets $ 2,191,307 $ 1,907,643
============== =============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $ 1,633,975 $ 1,461,580
Current maturities of long-term debt 456,233 337,909
-------------- -------------
Total current liabilities 2,090,208 1,799,489
Long-term debt 41,603 7,769
-------------- -------------
Total liabilities 2,131,811 1,807,258
============== =============
Stockholders' equity
Preferred stock; $.001 par value, 3,000 shares
authorized; 261 shares issued and outstanding 10,208 10,208
Common stock; $.002 par value; 25,000,000 shares
authorized; 15,518,298 and 14,061,426 shares
issued and outstanding, respectively 31,035 28,121
Additional paid-in capital 3,764,228 3,358,227
Accumulated deficit (3,527,264) (3,182,150)
Unearned compensation on restricted stock (218,711) (114,021)
--------------- ------------
Total stockholders' equity 59,496 100,385
--------------- ------------
Total liabilities and stockholders' equity $ 2,191,307 $ 1,907,643
============== ============
Note: The balance sheet at December 31, 1999 has been derived from the audited
consolidated financial statements at that date.
3
QuikBIZ Internet Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- ------------------------------
1999 2000 1999 2000
--------------- --------------- --------------- --------------
Revenue
Advertising $ 727,108 $ 956,591 $ 1,094,197 $ 2,302,809
Multimedia services and products 378,911 427,000 696,448 807,306
--------------- --------------- --------------- --------------
Total revenue 1,106,019 1,383,591 1,790,645 3,110,115
Operating expenses
Direct costs 672,270 1,106,720 1,080,601 2,542,441
Selling, general and administrative 450,329 501,230 829,203 813,183
Depreciation and amortization 27,510 46,518 55,020 88,441
--------------- --------------- --------------- --------------
Total operating expenses 1,150,109 1,654,468 1,964,824 3,444,065
--------------- --------------- --------------- --------------
(Loss) from operations (44,090) 270,877 (174,179) (333,950)
Interest expense 3,407 6,571 8,618 11,164
--------------- --------------- --------------- --------------
Net loss $ (47,497) $ (277,448) $ (182,797) $ (345,114)
=============== =============== =============== ==============
Weighted average number of common
shares outstanding 13,422,329 14,923,914 13,350,676 14,555,807
Basic (loss) per common share $ (0.004) $ (0.019) $ (0.014) $ (0.024)
4
QuikBIZ Internet Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
1999 2000
----------- ----------
Operating activities
Net (loss) $ (182,797) $ (345,114)
Adjustments to reconcile net
(loss) to net cash used
in operating activities
Depreciation and amortization 55,020 88,441
Amortization of unearned compensation 77,794 78,628
Amortization of note receivable - (6,442)
Non-cash compensation and consulting expense - 36,550
Changes in operating assets and
liabilities, net of effects of acquisition:
(Increase) in accounts receivable (166,920) (41,294)
(Increase) decrease in other current assets (1,097) 397
(Increase) in accounts payable 81,999 137,347
and accrued expenses -------- --------
Net cash (used in) operating activities (136,001) (51,487)
-------- --------
Investing activities
Purchases of property and equipment (7,672) (14,000)
Financing activities
Proceeds from notes payable - 3,654
Payments of notes payable (11,628) -
Issuance of common stock 173,000 33,362
-------- --------
Net cash provided by financing activities 161,372 37,016
-------- --------
Net increase (decrease) in cash 17,699 (28,471)
Cash, beginning of period 18,059 35,957
-------- --------
Cash, end of period $ 35,758 $ 7,486
======== ========
Supplemental disclosures of cash flow information
Cash paid for interest $ 8,618 $ -
======== ========
Supplemental schedule of noncash
investing and financing transactions:
Issuance of common stock related to
exercise of warrants - cash not yet received $ 4,250 $ -
======== ========
Issuance of common stock and options
related to acquisitions $ - $118,200
======== ========
Common stock issued in connection
with compensation, net of
amortization - 104,690
======== ========
Common stock issued for compensation - 36,000
======== ========
Common stock issued for consulting - 550
======== ========
Accounts payable paid by issuance of
common stock - 147,485
======== ========
Debt incurred for the purchase of equipment - 71,603
======== ========
Unpaid stock issuance costs - 110,000
======== ========
5
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note A - Business
QuikBIZ Internet Group, Inc. and subsidiaries (the "Company") have two
reportable segments, both of which sell their products and services throughout
the United States. One segment provides its clients with internet site design,
television commercial and radio commercial development and production, print
advertising development and production, public relations and promotions. The
other segment offers audio, video, multimedia and Internet design services and
products. It also produces and assists companies in creative content for
corporate communications including sales, training, public relations and
promotion.
Note B - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-KSB/A.
Note C - Going Concern - Uncertainty
As shown in the accompanying financial statements, the Company has incurred
recurring operating losses and negative cash flows from operating activities and
has negative working capital. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
There can be no assurance that the Company will be able to successfully
implement its plans, or if such plans are successfully implemented, that the
Company will achieve its goals.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern and do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that might result from
the outcome of this uncertainty.
6
Item 2. Management's Discussion and Analysis Of Financial Condition and
Results of Operations
Overview
Through our principal subsidiaries, QuikBIZ Media and SmithAgency.com,
we produce content for business communications, with an emphasis on electronic
media and the internet. We also provide media services including duplication,
packaging and media placement. We are striving to develop a "one-stop"
environment for development and delivery of business communications content.
In May 2000, we completed the acquisition of Mason Strategic
Communications, Inc. a full service public relations and strategic consulting
firm. The acquisition was accounted for using the purchase method of accounting
with the results of the acquisition included in the consolidated financial
statements from the acquisition date.
Results of Operations
Three Months Ended June 30, 2000 Compared to Three Months Ended June
30, 1999.
Revenues.
Revenues were $1,106,019 for the three months ended June 30, 1999 and
grew to $1,383,591 for the three months ended June 30, 2000, an increase of
approximately 25%. The increase in revenues reflected our acquisitions of G&L
Group in August 1999, growing demand for Internet professional services and the
introduction of new strategy, creative and technology services to the
marketplace.
Direct Costs.
Direct costs were $672,270 for the three months ended June 30, 1999 and
grew to $1,106,720 for the three months ended June 30, 2000, an increase of
approximately 65%. As a percentage of revenues, direct costs increased from
approximately 61% for the three months ended June 30, 1999 to approximately 80%
for the three months ended June 30, 2000. The increase in absolute dollars and
percentage terms was primarily attributable to increased infrastructure expenses
incurred to enhance our web presence and interactive capability and higher
direct costs relating to acquired businesses.
Selling General and Administrative Expenses.
Selling, general and administrative expenses were $450,329 for the
three months ended June 30, 1999 and increased to $501,230 for the three months
ended June 30, 2000, an increase of approximately 11%. As a percentage of
revenues, selling, general and administrative expenses decreased from
approximately 41% for the three months ended June 30, 1999 to approximately 36%
for the three months ended June 30, 2000. The decrease in percentage terms was
primarily attributable to improved economies of scale.
Amortization of Goodwill.
Amortization of goodwill was $16,843 for the three months ended June
30, 1999 and $27,975 for the three months ended June 30, 2000. As a percentage
of revenues, amortization of goodwill represented 2% of revenues for the first
three months ended June 30, 1999 and 2% of revenues for the three months ended
June 30, 2000.
7
Depreciation and Amortization.
Depreciation and amortization expenses, net of amortization of
goodwill, were $10,667 for the three months ended June 30, 1999 and increased to
$18,543 for the three months ended June 30, 2000, an increase of approximately
74%. Depreciation and amortization, net of amortization of goodwill, represented
approximately 1% of revenues in the three months ended June 30, 1999 and
approximately 1% of revenues in the three months ended June 30, 2000. The
increase in absolute dollar terms from year to year resulted from our
acquisitions of G&L Group and Mason Strategic Communications, Inc.
Net Loss
Primarily as a result of the increase in direct costs, we had a net
loss of $277,448 for the three months ended June 30, 2000 compared to a net loss
of $47,497 for the three months ended June 30, 1999.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30,
1999.
Revenues.
Revenues were $1,790,645 for the six months ended June 30, 1999 and
grew to $3,110,115 for the six months ended June 30, 2000, an increase of
approximately 74%. The increase in revenues reflected our acquisition of G&L
Group in August 1999, growing demand for Internet professional services and the
introduction of new strategy, creative and technology services to the
marketplace.
Direct Costs.
Direct costs were $1,080,601 for the six months ended June 30, 1999 and
grew to $2,542,441 for the six months ended June 30, 2000, an increase of
approximately 135%. As a percentage of revenues, direct costs increased from
approximately 60% for the six months ended June 30, 1999 to approximately 82%
for the six months ended June 30, 2000. The increase in absolute dollars and
percentage terms was primarily attributable to increased infrastructure expenses
incurred to enhance our web presence and interactive capability and higher
direct costs relating to acquired businesses.
Selling General and Administrative Expenses.
Selling, general and administrative expenses were $829,203 for the six
months ended June 30, 1999 and decreased to $813,183 for the six months ended
June 30, 2000, a decrease of less than 1%. As a percentage of revenues, selling,
general and administrative expenses decreased from approximately 46% for the six
months ended June 30, 1999 to approximately 26% for the six months ended June
30, 2000. The decrease in percentage terms was primarily attributable to
improved economies of scale.
Amortization of Goodwill.
Amortization of goodwill was $33,686 for the six months ended June 30,
1999 and $55,083 for the six months ended June 30, 2000. As a percentage of
revenues, amortization of goodwill represented 2% of revenues in the first six
months of 1999 and 2% of revenues in the first six months of 2000.
Depreciation and Amortization.
Depreciation and amortization expenses, net of amortization of
goodwill, were $21,334 for the six months ended June 30, 1999 and increased to
$33,358 for the six months ended June 30, 2000, an increase of approximately
56%. Depreciation and amortization, net of amortization of goodwill, represented
approximately 1% of revenues in the six months ended June 30, 1999 and
approximately 1% of revenues in the six months ended June 30, 2000. The increase
in absolute dollar terms from year to year resulted from our acquisition of G&L
Group.
Net Loss
Primarily as a result of the increase in direct costs, we had a net
loss of $345,114 for the six months ended June 30, 2000 compared to a net loss
of $182,797 for the six months ended June 30, 1999.
8
Liquidity and Capital Resources
Since inception, we have funded our operations and investments in
property and equipment through cash from operations, equity financings,
borrowings from commercial banks and capital leases.
Our cash and cash equivalents were $35,758 at June 30, 1999 and $7,486
at June 30, 2000. Cash used in operating activities of $136,001 in the six
months ended June 30, 1999 and $51,487 in the six months ended June 30, 2000 was
augmented by net cash used in investing activities of $7,672 in the six months
ended June 30, 1999 and $14,000 in the six months ended June 30, 2000, but
offset by net proceeds of financing activities of $161,372 in the six months
ended June 30, 1999 and $37,016 in the six months ended June 30, 2000.
On July 9, 1999 we entered into an investment agreement with Swartz
Private Equity, LLC to raise up to $20 million through a series of sales of
common stock. The dollar amount of each sale is limited by the trading volume
and a minimum period of time must occur between sales. In order to sell shares
to Swartz, there must be an effective registration statement on file with the
SEC covering the resale of the shares by Swartz and we must meet certain other
conditions. The agreement is for a three-year period ending July 9, 2002.
On June 26, 2000, we sold 44,910 shares of common stock to Swartz
Private Equity, LLC pursuant to investment agreement and received gross proceeds
of $17,964 from the sale. In connection with the sale of shares, we issued five
year warrants to purchase 4,491 shares of common stock at an exercise price of
$.55 per share to Swartz.
We have incurred recurring operating losses and negative cash flows
from operating activities and have negative working capital. We believe that our
available equity financing arrangement with Swartz will be sufficient to meet
our working capital and capital expenditure requirements for at least the next
two years if each sale of common stock to Swartz under the investment agreement
is successful. However, there can be no assurance that we will receive financing
from Swartz, that we will not require additional financing within this time
frame or that such additional financing, if needed, will be available on terms
acceptable to us, if at all.
Forward-Looking Statements
This report contains, in addition to historical information,
forward-looking statements regarding the Company that involve risks and
uncertainties. The Company's actual results could differ materially. For this
purpose, any statements contained in this report that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the generality of the foregoing, words such as "may," "will," "expect,"
"believe," "anticipate," "intend," "could," "estimate," or "continue" or the
negative or other variations thereof or comparable terminology are intended to
identify forward-looking statements. Factors that could cause or contribute to
such difference include, but are not limited to, history of operating losses and
accumulated deficit; possible need for additional financing; competition;
dependence on management; risks related to proprietary rights; government
regulation; and other factors discussed in this report and the Company's other
filings with the Securities and Exchange Commission.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Please see the our report on Form 10-QSB filed on May 15, 2000, for the
period ending March 31, 2000.
Item 2. Changes in Securities
(c) Recent Sales of Unregistered Securities
During the three months ended June 30, 2000, we made the sales of
unregistered securities described below. We relied on Section 4(2) of the
Securities Act of 1933 as the basis for an exemption from registration for the
transaction below, because the transaction did not involve any public offering.
On May 2, 2000, we issued to Selly Isaacs, an employee of our
SmithAgency.com subsidiary, options to purchase 30,000 shares of common stock
for $.90 per share, exercisable at any time commencing December 1, 2000 and
expiring December 1, 2002.
On May 2, 2000, we issued 240,000 shares of common stock to David
Bawarsky upon his cashless exercise of options to purchase 300,000 shares of
common stock at a price of $.15 per share.
On May 12, 2000, we issued 100,000 shares of common stock to Kirk J.
Girrbach upon his exercise of options to purchase 100,000 shares of common stock
at a price of $.15 per share.
On May 16, 2000, we issued 122,000 shares of common stock to James Lobel
pursuant to the asset purchase agreement for the purchase in August 1999 of
substantially all of the assets of Gallaspy & Lobel, Inc.
On May 16, 2000, we issued 55,454 shares of common stock to James Lobel
pursuant to an employment agreement between our SmithAgency.com subsidiary and
Mr. Lobel dated August 31, 1999.
On May 16, 2000, we issued 20,000 shares of common stock to John Kiminas
in consideration for substantially all of the assets of Dream Outloud, Inc.
On May 16, 2000, we issued 15,000 shares of common stock to Chuck
Krblich in consideration for services rendered.
On May 30, 2000, we issued options to purchase an aggregate of 362,500
shares of common stock at a price of $.75 per share to nine of our employees and
directors pursuant to our 2000 Performance Equity Plan.
On June 9, 2000, we issued 173,000 shares of common stock to Debra A.
Mason in consideration for all of the outstanding securities of Mason Strategic
Communications, Inc.
On June 9, 2000, we issued 96,610 shares of common stock to Debra A.
Mason and 148,305 shares of common stock to John Pace pursuant to employment
agreements between our SmithAgency.com, Inc. subsidiary and such individuals.
On June 15, 2000, we issued 200,000 shares of our common stock to David
Bawarsky upon his exercise of options to purchase 200,000 shares at a price of
$.002 per share.
On June 23, 2000, we issued options to purchase up to 180,000 shares of
common stock at an initial exercise price of $.75 per share to our securities
counsel, Graubard Mollen & Miller, in consideration for services rendered.
9
On June 26, 2000, we sold 44,910 shares of common stock at a price of
$.40 per share and issued warrant to purchase 4,491 shares of common stock at a
price of $.55 per share, exercisable until June 25, 2005, to Swartz Private
Equity LLC in connection with a put effected under the Amended and Restated
Investment Agreement between us and Swartz dated as of July 9, 1999.
On July 18, 2000, we issued 32,000 shares of common stock, valued at
$.625 per share, to Kenneth Darrow, P.A, in consideration for $20,000 of
services to be rendered pursuant to a retainer agreement dated July 12, 2000.
On July 24, 2000, we issued 40,000 shares of common stock, valued at
$.625 per share, to Sea-Cam, Inc. in consideration for $25,000 of services
rendered.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Form of 2000 Performance Equity Plan.
10.2 Forms of option agreements for options issued under
2000 Performance Equity Plan.
27 Financial Data Schedule (June 30, 2000).
(b) Reports on Form 8-K
None.
10
SIGNATURES
In accordance with requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: August 14, 2000
QUIKBIZ INTERNET GROUP, INC.
By: /s/ David B. Bawarsky
-----------------------------------
David B. Bawarsky, Chief Executive
Officer and Chief Financial Officer
11