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 September 30, 2000
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(_) 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
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QUIKBIZ INTERNET GROUP, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0320364
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6801 Powerline Road, Ft. Lauderdale, Florida 33309
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(Address of principal executive offices)
(954) 970-3553
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(Issuer's telephone number including area code)
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(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
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of November 16, 2000, the issuer
had outstanding 16,356,382 shares of Common Stock, par value $.002 per share.
QUIKBIZ INTERNET GROUP, INC. AND SUBSIDIARIES
Page
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Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1999 and September 30, 2000....................3
Condensed Consolidated Statements of
Operations - Three and Nine Months
Ended September 30, 1999 and 2000...........................4
Condensed Consolidated Statements of Cash
Flows - Nine Months Ended September 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.........................8
Part II. Other Information
Item 1. Legal Proceedings..........................................12
Item 2. Changes in Securities......................................12
Item 6. Exhibits and Reports on Form 8-K...........................12
Signatures..........................................................13
2
Item 1. Condensed Consolidated Financial Statements
QuikBIZ Internet Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Assets December 31, September 30,
1999 2000
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Current Assets
Cash $ 35,957 $ 159
Accounts receivable 620,501 159,012
Other 26,786 24,858
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Total current assets 683,244 184,029
Property and equipment
Furniture and equipment 176,937 234,744
Leasehold improvements 44,862 44,862
----------- -----------
221,799 279,606
Less accumulated depreciation (73,880) (79,960)
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Depreciated cost 147,919 199,646
Intangible assets 924,894 100,340
Note receivable from stockholder 151,586 161,249
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Total assets 1,907,643 $ 645,264
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses 1,461,580 555,601
Current maturities of long-term debt 337,909 374,730
Net liabilities of discontinued operations - 1,059,171
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Total current liabilities 1,799,489 1,989,502
Long-term debt 7,769 87,049
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Total liabilities 1,807,258 2,076,551
Stockholders' equity (deficit)
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; 14,061,416 and
15,598,328 shares issued and
outstanding, respectively 28,121 31,195
Additional paid-in capital 3,358,227 3,816,188
Accumulated deficit (3,182,150) (5,133,890)
Unearned compensation on restricted stock (114,021) (154,988)
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Total stockholders' equity (deficit) 100,385 (1,431,287)
----------- -----------
Total liabilities and stockholders' equity
(deficit) $ 1,907,643 $ 645,264
=========== ===========
Note: The balance sheet at December 31, 1999 has been derived from the
audited consolidated financial statements at that date.
See accompanying notes to condensed consolidated financial statements.
3
QuikBIZ Internet Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 2000 1999 2000
------------------ ----------------- --------------- ------------------
Revenue 320,527 449,774 1,016,975 1,283,569
Operating expenses
Direct costs 106,064 225,367 388,601 778,366
Selling, general and administrative 298,259 407,097 921,902 838,272
Depreciation and amortization 29,632 43,000 79,852 125,505
------------------ ----------------- --------------- ------------------
Total operating expenses 433,955 675,464 1,390,355 1,742,143
------------------ ----------------- --------------- ------------------
(Loss) from operations (113,428) (225,690) (373,380) (458,574)
Interest expense - 4,458 3,219 8,534
------------------ ----------------- --------------- ------------------
Net loss from continuing operations (113,428) (230,148) (376,599) (467,108)
(Loss) income from discontinued
operations 95,194 (1,376,478) 175,570 (1,484,632)
------------------ ----------------- --------------- ------------------
Net Loss $ (18,234) $ (1,606,626) $ (201,029) $ (1,951,740)
================== ================= =============== ==================
Weighted average number of common
shares outstanding 13,728,842 15,578,829 13,478,562 14,899,303
(Loss) per common share from
continuing operations $ (0.008) $ (0.015) $ (0.028) $ (0.031)
(Loss) income per common share from
discontinued operations $ 0.007 $ (0.088) $ 0.013 $ (0.100)
------------------ ----------------- --------------- ------------------
Basic (loss) per common share $ (0.001) $ (0.103) $ (0.015) $ (0.131)
================== ================= =============== ==================
See accompanying notes to condensed consolidated financial statements.
4
QuikBIZ Internet Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
1999 2000
Operating activities
Net (loss) $ (201,029) $(1,951,740)
Adjustments to reconcile net (loss) to net cash
used in operating activities
Loss (income) from discontinued operations (175,570) 1,484,632
Depreciation and amortization 79,852 125,505
Amortization of unearned compensation 116,691 142,351
Accrued interest on note receivable (9,937) (9,663)
Bad debt expense 72,584 --
Non-cash compensation and consulting expense -- 88,550
Changes in operating assets and liabilities, net
of effects of acquisition:
(Increase) decrease in accounts receivable 39,995 (1,777)
(Increase) decrease in other current assets 30,302 (2,850)
Increase (decrease) in accounts payable and
accrued expenses (154,756) 47,052
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Net cash (used in) continuing operations (201,868) (77,940)
Net cash (used in) discontinued operations (10,485) (121,504)
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Net cash (used in) operating activities (212,353) (199,444)
Investing activities
Purchases of property and equipment (10,621) (15,471)
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Financing activities
Proceeds from notes payable 127,032 145,635
Payments of notes payable (94,827) --
Issuance of common stock 255,000 33,482
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Net cash provided by financing activities 287,205 179,117
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Net increase (decrease) in cash 64,231 (35,798)
Cash, beginning of period 18,059 35,957
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Cash, end of period $ 82,290 $ 159
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Supplemental disclosures of cash flow information:
Cash paid for interest $ 10,381 $ -
========== ==========
Supplemental Schedule of Noncash Investing and Financing
Transactions:
Common stock issued in connection with compensation,
net of amortization $ - $ 40,967
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Issuance of common stock and options related to
acquisitions $ 488,000 $ 118,200
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Tradename returned in exchange for common stock $ - $ 401,045
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Issuance of common stock related to exercise of
warrants cash not yet received $ 4,250 $ -
=========== ============
Common stock issued for compensation $ - $ 36,000
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Common stock issued for consulting and other services $ - $ 52,550
=========== ============
Accounts payable satisfied by issuance of common stock $ - $ 147,485
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Debts incurred for the purchase of equipment $ - $ 71,603
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Unpaid stock issuance costs $ - $ 110,000
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See accompanying notes to condensed consolidated financial statements
5
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note A - Business
QuikBIZ Internet Group, Inc. and subsidiaries (the "Company") has one
reportable segment which sells their products and services throughout the
United States. This 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 nine month period ended September 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.
Note D - Discontinued Operations
In November 2000, the Company ceased operating its advertising segment. The
operations of its segment has been accounted for as a discontinued operation in
the accompanying financial statements.
6
September 30,
Net Assets of Discontinued Operations 2000
- ------------------------------------- --------------
Assets:
Accounts Receivable 171,001
Other current assets 4,006
Property and equipment, net 21,252
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Total Assets 196,259
Liabilities
Accounts payable and accrued expenses 1,077,003
Current maturities of long term debt 178,427
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Total Liabilities 1,255,430
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Net Liabilities of Discontinued Operations $ 1,059,171
============
Summary of Operating Results September 30, September 30,
of Discontinued Operations: 1999 2000
- -------------------------- ------------- ---------------
Advertising revenues $ 2,241,081 $ 2,925,677
Direct costs 1,659,457 2,616,727
Selling, general and administrative 390,442 927,463
Depreciation and amortization 8,450 9,522
Write off of impaired goodwill - 843,567
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Operating (loss) income 182,732 (1,471,602)
Interest expense 7,162 13,030
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(Loss) income from discontinued operations $ 175,570 $ (1,484,632)
============= ==============
Due to the preliminary nature of this matter, management is unable to
estimate the gain, if any, which may result from the settlement of the net
liabilities of discontinued operations.
7
Item 2. Management's Discussion and Analysis Of Financial Condition and
Results of Operations
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Overview
Through our principal subsidiaries, QuikBIZ Media Centers, Inc. and
Mason Strategic Communications, Inc., we provide strategic consulting and
produce and distribute content for business communications, with an emphasis on
electronic media and the internet. Our production services include websites,
audio/video, print and animation. Our distribution services include electronic
media duplication, videotape conversion, digital encoding and packaging. 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, 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.
In November 2000, we ceased operating our subsidiary SmithAgency.com,
Inc. SmithAgency.com often competed with our other production clients and
consolidation in the advertising industry has made it difficult for
SmithAgency.com to compete for business. We are now concentrated on delivering
business communication services to corporate clients and other advertising and
marketing firms. Our focus has switched to the profitability and growth of our
principal subsidiary QuikBIZ Media. This reorganization reduces our overhead,
makes us more competitive and provides for more effective delivery of services.
We are changing our business model to a franchise organization. QuikBIZ Media
plans to franchise its operations to provide communication services and products
and content development to all types of businesses.
We believe this franchise strategy will increase the value of our Media
Center. The Media Center has provided bulk duplication and packaging of video
and audio tapes, CD's, DVD's, etc. for corporate, nonprofit and agency clients
to over 9,000 clients during the past nine years. We believe that our franchise
program coupled with the internet and other technological advances in the field
of media services will provide us with an opportunity to expand nationally.
Results of Operations
Three Months Ended Sept. 30, 2000 Compared to Three Months Ended
Sept. 30, 1999.
Revenues
Revenues from continuing operations were $320,527 for the three months
ended Sept. 30, 1999 and grew to $449,774 for the three months ended Sept. 30,
2000, an increase of approximately 40%. The increase in revenues reflected our
acquisition of Mason Strategic in May 2000.
In November 2000, the Company ceased operations its wholly owned
subsidiary SmithAgency.com. The operations of SmithAgency.com have been
accounted for as a discontinued operations in the financial statements for the
three months ended September 30, 2000. SmithAgency.com operations, net of income
taxes, generated a net loss of $1,376,478. SmithAgency net sales during the
three months ended September 30, 2000 were approximately $600,000.
Direct Costs
Direct costs from continuing operations were $106,064 for the three
months ended Sept. 30, 1999 and grew to $225,367 for the three months ended
Sept. 30, 2000, an increase of approximately 112%. As a percentage of revenues,
direct costs increased from approximately 33% for the three months ended Sept.
30, 1999 to approximately 50% for the three months ended Sept. 30, 2000. The
increase in absolute dollars and percentage terms was primarily attributable to
higher direct costs relating to an acquired business.
8
Selling General and Administrative Expenses
Selling, general and administrative expenses from continuing operations
were $298,259 for the three months ended Sept. 30, 1999 and increased to
$407,097 for the three months ended Sept. 30, 2000, an increase of approximately
36%. As a percentage of revenues, selling, general and administrative expenses
decreased from approximately 93% for the three months ended Sept. 30, 1999 to
approximately 91% for the three months ended Sept. 30, 2000. The decrease in
percentage terms was primarily attributable to improved economies of scale.
Amortization of Goodwill
Amortization of goodwill from continuing operations was $21,283 for
the three months ended Sept. 30, 1999 and $29,704 for the three months ended
Sept. 30, 2000. As a percentage of revenues, amortization of goodwill
represented 7% of revenues for the first three months ended Sept. 30, 1999 and
7% of revenues for the three months ended Sept. 30, 2000.
Depreciation and Amortization
Depreciation and amortization expenses from continuing operations, net
of amortization of goodwill, were $8,349 for the three months ended Sept. 30,
1999 and increased to $13,296 for the three months ended Sept. 30, 2000, an
increase of approximately 59%. Depreciation and amortization, net of
amortization of goodwill, represented approximately 3% of revenues in the three
months ended Sept. 30, 1999 and approximately 3% of revenues in the three months
ended Sept. 30, 2000. The increase in absolute dollar terms from year to year
resulted from our acquisitions of Mason Strategic Communications, Inc.
Net Loss
Primarily as a result of the increase in direct costs, we had a net
loss from continuing operations of $230,148 for the three months ended Sept. 30,
2000 compared to a net loss of $113,428 for the three months ended Sept. 30,
1999.
Nine Months Ended Sept. 30, 2000 Compared to Nine Months Ended Sept.
30, 1999.
Revenues
Revenues from continuing operations were $1,016,975 for the nine months
ended Sept. 30, 1999 and grew to $1,283,569 for the nine months ended Sept. 30,
2000, an increase of approximately 26%. The increase in revenues reflected our
acquisition of Mason Strategic in May 2000.
In November 2000, the Company ceased operations its wholly owned
subsidiary SmithAgency.com. The operations of SmithAgency.com have been
accounted for as a discontinued operations in the financial statements for the
nine months ended September 30, 2000. SmithAgency.com operations, net of income
taxes, generated a net loss of $1,484,632. SmithAgency net sales during the nine
months ended September 30, 2000 were approximately $2,900,000.
Direct Costs
Direct costs from continuing operations were $388,601 for the nine
months ended Sept. 30, 1999 and grew to $778,366 for the nine months ended Sept.
30, 2000, an increase of approximately 100%. As a percentage of revenues, direct
costs increased from approximately 38% for the nine months ended Sept. 30, 1999
to approximately 61% for the nine months ended Sept. 30, 2000. The increase in
absolute dollars and percentage terms was primarily attributable to payroll
costs being reclassified from selling, general and administrative expenses.
9
Selling General and Administrative Expenses
Selling, general and administrative expenses from continuing operations
were $921,902 for the nine months ended Sept. 30, 1999 and decreased to $838,272
for the nine months ended Sept. 30, 2000, a decrease of 9%. As a percentage of
revenues, selling, general and administrative expenses decreased from
approximately 91% for the nine months ended Sept. 30, 1999 to approximately 65%
for the nine months ended Sept. 30, 2000. The decrease in percentage terms was
primarily attributable to payroll costs being reclassified to direct costs.
Amortization of Goodwill
Amortization of goodwill was $54,969 for the nine months ended Sept.
30, 1999 and $84,787 for the nine months ended Sept. 30, 2000. As a percentage
of revenues, amortization of goodwill represented 5% of revenues in the first
nine months of 1999 and 7% of revenues in the first nine months of 2000.
Depreciation and Amortization
Depreciation and amortization expenses, net of amortization of
goodwill, were $24,883 for the nine months ended Sept. 30, 1999 and increased to
$40,718 for the nine months ended Sept. 30, 2000, an increase of approximately
64%. Depreciation and amortization, net of amortization of goodwill, represented
approximately 2% of revenues in the nine months ended Sept. 30, 1999 and
approximately 3% of revenues in the nine months ended Sept. 30, 2000. The
increase in absolute dollar terms resulted from our acquisition of Mason
Strategic and other fixed asset acquisitions.
Net Loss
We had a net loss from continuing operations of $376,599 for the nine
months ended Sept. 30, 1999 compared to a net loss of $467,108 for the nine
months ended Sept. 30, 2000.
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 $82,290 at Sept. 30, 1999 and $159
at Sept. 30, 2000. Cash used in operating activities of $212,353 in the nine
months ended Sept. 30, 1999 and $199,444 in the nine months ended Sept. 30, 2000
was augmented by net cash used in investing activities of $10,621 in the nine
months ended Sept. 30, 1999 and $15,471 in the nine months ended Sept. 30, 2000,
but offset by net proceeds of financing activities of $287,205 in the nine
months ended Sept. 30, 1999 and $179,117 in the nine months ended Sept. 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 July 28, 2000, we sold 300 shares of common stock to Swartz Private
Equity, LLC pursuant to investment agreement and received gross proceeds of $120
from the sale. In connection with the sale of shares, we issued five year
warrants to purchase 30 shares of common stock at an exercise price of $.34 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
10
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.
11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 24, 2000, we commenced an action in the Circuit Court of the
17th Judicial Circuit, in Broward County, Florida against Andrew D. Smith, a
principal stockholder and former officer of QuikBIZ Internet Group, Inc. and
former officer and employee of our subsidiary SmithAgency.com, Inc.
("SmithAgency"), Charles Robb, a former employee of SmithAgency and Random
House, Inc. Our complaint alleges that Messrs. Smith and Robb breached their
employment and non-competition agreements with SmithAgency and violated their
fiduciary duties to SmithAgency by wrongfully taking confidential information
relating to an advertising campaign developed for one of our clients and put
that information into a manuscript for publication as a book by Random House,
Inc. Our complaint further alleges that Messrs. Smith and Robb created a
competing advertising agency after their employment with SmithAgency was
terminated, in violation of their non-competition agreements. We are seeking
damages from Messrs. Smith and Robb and an injunction against further violation
of their agreements. Our action against Random House, Inc. was settled amicably
in May 2000. On October 17, 2000, Messrs. Smith and Robb filed a counterclaim
for breach of contract, unpaid wages, an accounting, money lent, conversion and
a declaratory judgment.
Item 2. Changes in Securities
(c) Recent Sales of Unregistered Securities
During the three months ended September 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 July 18, 2000 we issued 32,000 shares of common stock, valued at
$0.594 per share, to Kenneth Darrow, P.A., in consideration for $19,000 of
services to be rendered pursuant to a retainer agreement dated July 12, 2000.
On July 24, 2000 we issued 48,000 shares of common stock, valued at
$0.6875 per share, to SeaCam, Inc. in consideration for $33,000 of services
rendered.
On July 28, 2000 we sold 300 shares of common stock at a price of $.40
per share and issued a warrant to purchase 30 shares of common stock at a price
of $.34 per share exercisable until July 27, 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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (September 30, 2000).
(b) Reports on Form 8-K
None.
12
SIGNATURES
In accordance with requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, hereunto duly
authorized.
Dated: November 20, 2000
QUIKBIZ INTERNET GROUP, INC.
By: /s/ David B. Bawarsky
--------------------------------------------
David B. Bawarsky, Chief Executive Officer
and Chief Financial Officer
13