U.S. Securities and Exchange Commission
Washington, DC 20549
Form 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
[ ] 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 0-7693
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INTERNATIONAL MERCANTILE CORPORATION
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(Exact name of small business issuer as specified in its charter)
Missouri 43-0970243
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(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P.O. Box 340, Olney, MD 20830
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(Address of principal executive offices)
(301) 774-6913
---------------------------
(Issuer's telephone number)
1625 Knecht Ave, Baltimore, MD 21227
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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 [__]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
As of September 30, 2001, there were outstanding 1,960,028 shares of Class A
Common Stock, $0.10 par value, and 1,142,857 shares of Class B Common Stock,
$0.10 par value.
Transitional Small Business Disclosure Format (check one);
Yes [__] No [ X ]
INTERNATIONAL MERCANTILE CORPORATION
Form 10-QSB/A Index
September 30, 2001
Page
----
Part I: Financial Information ..................................... 3
Item 1. Financial Statements ................................ 3
Balance Sheets as of June 30, 2000
and September 30, 2001 (unaudited)........................... 6-7
Statement of Operations for the quarters ended
June 30, 2000 and September 30, 2001 ........................ 8
Statement of Changes in Stockholder's Equity
for the quarters ended June 30, 2000 and September 30, 2001.. 9
Statement of Cash Flows for the quarters ended June 30,
2001 and September 30, 2001 ................................. 10
Notes to Financial Statements................................ 11-13
Item 2. Management's Discussion and Analysis
or Plan of Operation ................................. 14
Part II: Other Information ...................................... 15
Item 1. Legal Proceedings ................................. 15
Item 2. Changes in Securities ............................. 15
Item 3. Defaults Upon Senior Securities ................... 15
Item 4. Submission of Matters to a Vote of
Security Holders .................................. 15
Item 5. Other Information ................................. 15
Signatures ........................................................ 16
2
INTERNATIONAL MERCANTILE CORPORATION
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
INTERNATIONAL MERCANTILE CORPORATION
TABLE OF CONTENTS
SEPTEMBER 30, 2001
Page
Accountants' Review Report 1
Balance Sheets 2-3
Statements of Operations 4
Statements of Changes in Stockholders' Equity 5
Statements of Cash Flows 6
Notes to the Financial Statements 7-13
To the Board of Directors and Stockholders
International Mercantile Corporation, a Missouri corporation
We have reviewed the accompanying balance sheet of International Mercantile
Corporation (a Missouri Corporation) as of June 30, 2000 and September 30, 2001,
and the related statements of operations, changes in stockholders' equity and
cash flows for the periods then ended. Our review was performed in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All the information included
in these financial statements is the representation of the management of
International Mercantile Corporation.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The financial statements for the year ended December 31, 2000 presented in the
financial statements were audited by Caruso and Caruso of Boca Raton, Florida
and they expressed an unqualified opinion on them in our report dated April,
2001, but we have not performed any auditing procedures on International
Mercantile Corporation.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 12 to the
financial statements, the Company has incurred significant operating losses.
Although the Company is negotiating financing arrangements that will provide
additional working capital until revenues from full scale operations are
sufficient, the Company cannot predict what the outcome of the negotiations will
be. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Craig W. Conners, C.P.A.
San Diego, CA
November 14, 2001
1
INTERNATIONAL MERCANTILE CORPORATION
BALANCE SHEETS
ASSETS
Unaudited Unaudited
December 31 June 30, September 30
2000 2000 2001
----------- ------------ ------------
Current Assets
- --------------
Cash and Cash Equivalents $ 63,157 $ (61,840) $ 577
Marketable Securities - Trading - - -
Accounts Receivable Net of
Allowance for Doubtful Accounts 1,036,458 1,306,594 -
Inventory 276,391 565,151 -
Prepaids & Other Assets 64,585 21,418 -
Due From Related Party 51,404 - -
------------ ------------ ------------
Total Current Assets 1,491,995 1,955,003 577
Investments
- -----------
Investment in Equity
Securities-Available-For-Sale 80,000 3,000,000 18,000
Fixed Assets
- ------------
Fixed Assets, net of
Accumulated Depreciation 225,967 221,574 -
Other Assets
- ------------
Organization Costs,
Net of Amortization 169,625 191,415 -
Deposits 32,604 36,042 -
Capitalized Loan Costs,
Net of Amortization 130,468 - -
------------ ------------ ------------
Total Other Assets 332,697 227,457 18,000
------------ ------------ ------------
Total Assets $ 2,130,659 $ 5,404,034 $ 18, 577
============ ============ ============
See Accountants' Review Report and Accompanying Notes to Financial Statements
2
INTERNATIONAL MERCANTILE CORPORATION
BALANCE SHEETS
LIABILITIES & STOCKHOLDERS' EQUITY
Unaudited Unaudited
December 31 June 30, September30,
2000 2000 2001
----------- ------------ ------------
Current Liabilities
- -------------------
Accounts Payable and
Accrued Expenses $ 1,097,194 $1,011,136 $ 29,000
Cash Overdraft - - -
Accrued Interest Payable 130,182 47,214 -
Due to Related Party - 39,573 -
Warranty Reserve - Current Portion 12,442 2,442 -
Convertible Debentures -
Current Portion - - -
Note Payable - Related Parties,
Current Portion 455,209 596,609 -
Line of Credit 588,908 698,946 -
Loans Payable 247,500 247,500 -
Capitalized Lease Payable -
Current Portion 13,915 10,221 -
------------ ------------ ------------
Total Current Liabilities 2,545,350 2,653,641 29,000
Long Term Liabilities
- ---------------------
Committments and Contingencies
Warranty Reserve, Net
of Current Portion 5,171 11,884 -
Capitalized Lease Payable Net
of Current Portion 12,126 17,987 -
Note Payable - Related Party
Net of Current Portion 75,000 75,000 9,000
Convertible Debentures 500,000 - -
------------ ------------ ------------
Total Long Term Liabilities 592,297 104,871 38,000
------------ ------------ ------------
Total Liabilities 3,137,647 2,758,512 38,000
------------ ------------ ------------
Stockholders' Equity
- --------------------
Common stock-Class A -
31,000,000 authorized
@ $.10 Par 9,333,536,
@ .01 Par 16,534,847
and @ $.10 Par 11,960,028
shares respectively 933,354 271,902 1,196,003
Common stock-Class B - $.01 Par,
2,000,000 shares authorized,
1,000,000 and 2,000,000
shares outstanding 20,000 20,000 20,000
Preferred stock - Series 1 -
$1.00 Par, 2,000,000
authorized, -0- and -0- shares
outstanding - - -
Preferred stock - Series 2 -
$1.00 Par, 2,000,000 authorized,
-0- and 285,714 shares
outstanding 285,714 200,000 285,714
Preferred stock - Series 3 - $1.00
Par, 5,000,000 authorized, -0-
shares outstanding - - -
Additional Paid in Capital 3,364,530 3,252,577 3,094,732
Accumulated Deficit (5,610,586) (1,373,315) (4,615,902)
-------------- ------------ ------------
Total Stockholders' Equity (1,006,988) 2,645,522 ( 19,423)
-------------- ------------ ------------
Total Liabilities &
Stockholders' Equity $ 2,130,659 $ 5,404,034 $ 18,577
============== ============ ============
See Accountants' Review Report and Accompanying Notes to Financial Statements
3
INTERNATIONAL MERCANTILE CORPORATION
STATEMENTS OF OPERATIONS
For the Year For the Six For the Nine
Ended Months Ended Months Ended
December 31, June 30, September 30,
2000 2000 2001
Unaudited Unaudited
---------------- ---------------- --------------
Revenues
Sales $ 7,064,025 $ 4,045,914 $ -
Cost of Merchandise
Sold 6,463,249 3,697,212 -
---------------- ---------------- --------------
Gross Profit 600,776 202,898 -
Operating Expenses
Amortization 109,796 20,384 -
Auto and Truck - 15,993 -
Bad Debts 410,870 34,625 -
Bank Charges - 18,470
Donations - 1,817
Depreciation 50,713 22,494 -
Interest Expense 249,932 88,454 -
Marketing, Advertising
Expense & Sales Expense 432,765 8,622
Other General &
Administrative Expense 2,057,519 1,204,713 9,016
Warranty Reserve 10,037 7,000 -
---------------- ---------------- --------------
Total Operating
Expenses 3,321,632 1,422,573 9,016
---------------- ---------------- --------------
Net (Loss)
From Operations (2,720,856) (1,073,871) (9,016)
Other Revenues and (Expenses)
Loss on Securities (2,645,642) - -
Finance Charge Income 55,356 - -
---------------- ---------------- --------------
Net (Loss) From
Operations and
Other Revenues $ (5,311,142) $ (374,374) $ (9,016)
================ ================ ==============
Earnings (Loss)
per share of
common Stock
- Basic $ (1.4461) $ (0.0368) $ (0.0000)
================ ================ ==============
Weighted Average
Shares - Basic 3,672,698 9,190,183 10,470,467
================ ================ ==============
Earnings (Loss)
per share of Common
Stock - Diluted $ (0.9392) $ (0.0368) $ (0.0000)
================ ================ ==============
Weighted Average
Shares - Diluted 5,655,036 9,190,183 20,454,753
================ ================ ==============
See Accountants' Review Report and Accompanying Notes to Financial Statements
4
INTERNATIONAL MERCANTILE CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR JANUARY 1, 2000 THROUGH DECEMBER 31, 2000
AND THE SIX MONTHS ENDED SEPTEMBER 30, 2001
COMMON STOCK PREFERRED STOCK
SHARES AMOUNT SHARES AMOUNT
------- ------ ------ ------
Balance, Janaury 1, 2000, as adjusted for
August 8, 2000 1:7 reverse stock split $ 1,728,920 $ 82,892 $ 2,945,874 $ (299,444)
Issuance of Common Stock of International
Mercantile Corporation a Missouri corp to
owners of Micromatix.com, Inc., a Delaware
corporation, as adjusted for August 8,
2000 1:7 reverse stock split
Class A Common Stock 214,286 21,429 - -
Class B Common Stock 1,000,000 10,000 - -
Issuance of Common Stock of International
Mercantile Corporation a Missouri
corporation, as adjusted for August 8,
2000 1:7 reverse stock split
Class A Common Stock 8,390,330 839,033 418,656 -
Class B Common Stock
Series 2 Preferred Stock - - 285,714
Balance, December 31, 2000 11,619,250 953,354 285,714 3,364,530
Issuance of Common Stock of International
Mercantile Corporation a Missouri
Corporation, as adjusted for August 8,
2000 1:7 reverse stock split
Class A Common Stock 2,626,492 262,649 - (269,798)
Class B Common Stock
Series 2 Preferred Stock
----------------------------------------------------
Balance, September 30, 2001 $ 14,245,742 $ 1,216,003 $ 285,714
See Accountants' Review Report and Accompanying Notes to Financial Statements
5
INTERNATIONAL MERCANTILE CORPORATION
STATEMENTS OF CASH FLOWS
Year Ended For 9 Months
12/31/01 9/30/01
----------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net (Loss) $ (5,311,142) $ (8,363)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Bad Debts 410,870
Depreciation & Amortization 160,509
(Increase)Decrease in
Marketable Securities - Trading 715,075
Accounts Receivable (712,457)
Inventory 199,235
Prepaids & Other Assets (50,287)
Deposits (14,274)
Organization Costs & Loan Costs (70,199)
Due From Related Party (51,404)
Increase(Decrease)
Accounts Payable & Accrued Expenses 473,106
Cash Overdraft
Due to Related Party (261,322)
Accrued Interest 121,130
Warranty Reserve 10,287
------------ -----------
NET CASH PROV. BY OPERATING ACTIVITIES (4,380,873) (8,363)
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Acquisition of Fixed Assets (87,127)
Permanent Impairment of Equity Securities
Available-for-Sale 2,645,642
------------ -----------
NET CASH (USED) IN INVESTING ACTIVITIES 2,558,515
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Proceeds from Loans, Notes Payable, Capital
Leases and Line of Credit 1,695,000 9,000
Payments on Loans, Notes and Line of Credit (1,413,591)
Payments on Capital Lease (8,422)
Issuance of Capital Stock & Capital Contributions Thereon 1,574,829
Reverse Merger of Macromatix per Unwind Provision (31,788)
------------ -----------
NET CASH (USED) IN FINANCING ACTIVITIES+B15 1,847,816 (31,788)
------------ -----------
NET INCREASE (DECREASE) IN CASH 25,458 31,151
CASH - BEGINNING 37,699 32,371
------------ -----------
CASH - ENDING $ 63,157 1,220
============ ===========
See Accountants' Review Report and Accompanying Notes to Financial Statements
6
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
ORGANIZATION
International Mercantile Corporation (The Company) is a profit corporation
organized under the laws of the State of Missouri on March 10, 1971 as
International Mercantile Corporation (IMTL). On July 31, 1999, the Company
liquidated its' majority interest holdings in its' subsidiary, University
Mortgage, Inc., which represented the Company's operations, through a new
issuance of University Mortgage, Inc. stock to a related third party investor in
consideration of their capital investment in University Mortgage, Inc. The
result of this action left an OTC Bulletin Board publicly traded company with no
substantial assets or liabilities. On September 6, 1999, the Company merged with
Micromatix.com, Inc. (the predecessor company), a newly formed Delaware
corporation which maintained an Internet based personal computer manufacturing
business that sells build-to-order unbranded or "white box" PC systems and PC
related hardware throughout the United States to value added retailers and other
marketers of micro computer systems. Shareholders of the predecessor company
received 2,500 shares of the Company's stock for each share of the predecessor
company; a total of 2,500,000 shares issued, in exchange for 100% of the
outstanding stock of the predecessor company. The merger was accounted for as a
capital transaction with no recognition of goodwill or other intangible assets.
The Company, however, has not completed the requisite articles of merger and
related documents, which are required to be filed with the applicable state
authorities. Immediately subsequent to the transaction, the owners of the
predecessor company assumed the management of the Company doing business as
Micromatix.net and owned approximately 26.92% of the outstanding stock of the
Company representing 48.32% of the voting rights. Since this transaction was, in
substance, a recapitalization of Micromatix.com, Inc. (the predecessor company)
and not a business combination, pro forma information is not presented.
Accordingly, the historical data contained in the financial statements is that
of the predecessor company. An unwind provision existed as part of the merger
agreement, whereby the merger agreement could be rendered void. On September 2,
2000 this provision was extended until March 30, 2001. On March 31, 2001 the
Board of Directors elected exercise their put option and unwind the merger with
Micromatix.com. The net effect of this was to return each corporation to their
status pro ante prior to their merger. The unwinding returned all assets and
liabilities to Micromatix so they could continue to operate independently. Each
has agreed to hold each other harmless.
The Company has then changed its direction and sought to acquire a new business
in either the form of a merger, acquisition or some type of pooling of shares.
As of September 30, 2001 the company made preliminary agreement which was
formalized on or about October 17, 2001 to acquire a wholly owned subsidiary
called Solutions Technology Inc. The agreement calls for exchange of the total
shares outstanding of Solutions Technology, A Nevada Corporation. The total
number of shares outstanding for Solutions Technology, Inc. is 20,511,365 common
stock and the exchange will be on a 1 for 1 basis of the company Class A Common
Stock. In order to facilitate this the board has issued an additional 20,511,365
shares thus the original capital structure will remain the same. The stock
certificates were issued on October 19, 2001 by approval of the board. Further
aspects of the exchange include the purchase of the Class B shares by two
entities, David A. Facciani and Integrated Capital Corp at 50 percent each in
return for $1.00.
REVENUE RECOGNITION
Revenues will be recognized when earned based on the accrual method.
INVENTORY
There currently is no inventory nor is there any plans to have inventory at any
time in the near future.
7
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
ADVERTISING EXPENSE
The Company recognizes advertising expenses in accordance with Statement of
Position ("SOP") 93-7 "Reporting on Advertising Costs." As such, the Company
expenses the costs of producing advertisements at the time production occurs,
and expenses the cost of communicating advertising in the period in which the
advertising space or airtime is used.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method based on the estimated useful lives of the assets, which
range from three to five years. Costs for routine repairs and maintenance are
expensed as incurred and gains and losses on the disposal of assets are
recognized in the period such disposals occur.
SOFTWARE DEVELOPMENT COSTS
Internal and external costs incurred to develop internal-use software are
capitalized during the application development stage and are being amortized
over three years.
INTANGIBLE ASSETS
Costs incurred to organize the Company are capitalized and reported on the
balance sheet as other assets. The costs are being amortized over a period of 5
years using the straight-line method. Costs associated with the procurement of
loans and lines of credit are capitalized and reported on the balance sheet as
other assets. The costs are amortized over the term of the related debt
instrument.
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements at June 30, 2000 and
September 30, 2001 and for the quarters then ended do not include all
disclosures provided in the annual financial statements. These interim financial
statements are the representation of management and should be read in
conjunction with the Company's annual audited financial statements and the
footnotes thereto. However, the accompanying interim financial statements
reflect all adjustments which are, in the opinion of management, of a normal and
recurring nature necessary for a fair presentation of the financial position and
results of operations of the Company. Unless otherwise stated, all information
other than that related to December 31, 2000 and the year then ended is
unaudited, and no other form of assurance is provided.
8
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARKETABLE SECURITIES AND INVESTMENT IN EQUITIES AVAILABLE-FOR-SALE
The Company's marketable securities are comprised of equity and debt securities
and are classified as trading securities. Trading securities are recorded at
fair value, with the change in fair value during the period included in net
earnings. In the first quarter of the year 2000 the Company liquidated its
entire marketable trading securities portfolio. The Company's Investment in
Equities Available-For-Sale is comprised of securities that management has not
demonstrated are being held for trading. The investment is recorded at fair
market value on the balance sheet with any permanent decline in value recognized
in the statement of operations in accordance with SFAS 115. Currently, the only
securities being held by the company are 200,000 of GLTK and 4,000,000 of PCLO
currently traded on the OTCBB.
WARRANTY RESERVE
The Company maintains a depot warranty on components sold and manufactured
systems for three years; the equivalent period of time that substantially all
components from supplier manufacturers are warranted. As the Company has not
established a history of warranty service, a warranty reserve of one quarter of
1% of sales has been recorded at March 31, 2000, December 31, 2000, and at March
31, 2001. This potential warranty should not affect the company as it would
become the responsibility of Micromatix.
INCOME TAXES
The Company files its tax return with the Internal Revenue Service as a C
Corporation. Applying statutory tax rates to future year's differences between
the tax bases and financial reporting amounts of assets and liabilities
recognizes deferred income taxes. No deferred tax asset/valuation allowance has
been recognized for the losses incurred to date, as it is not determinable that
the Company will realize any tax benefit from such losses. Loss carryforwards,
if any, expire fifteen years following the tax year-end in which they occur.
Micromatix will be responsible for the filing of the operations through March
30, 2001. To the extent of the operations for the company's activities from
March 31, 2001 through the end of their fiscal period is what will be reflected
on their tax return.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles requires that management make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the respective reporting
period. Actual results could vary from these estimates and assumptions.
9
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
CONCENTRATIONS OF RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash, cash equivalents and marketable
securities. The Company maintains its cash and cash equivalents in bank deposit
accounts, the balances of which, at times, may exceed federally insured limits.
Additionally, the Company assumes that computer chip and memory availability
will remain constant. This assumption subjects the Company to concentrations of
risk should the availability of these items become uncertain in the future
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. The Company does not anticipate
the impact of this pronouncement will be material. Further, the Company does not
believe that any recently issued, but not yet effective accounting standards
will have a material effect on the Company's financial position, results of
operations or cash flows.
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
No. 101), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB No. 101 does not impact the
Company's revenue recognition.
EARNINGS PER SHARE
As per Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 128 (SFAS 128), Earnings Per Share, standards for computing and
presenting earnings per share (EPS) applies to publicly held common stock or
potential common stock. It requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with complex capital
structures. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. In computing EPS for the
year ended December 31, 2000 and the quarters ended June 30, 2000 and September
30, 2001 the number of shares considered to be outstanding is computed as the
average actual number of shares of the Company outstanding during the period.
10
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
EARNINGS PER SHARE CONT'D
Other appropriate adjustments have been made to deal with changes in numbers of
shares issued during the period. Diluted EPS for the period ended June 30, 2000
were computed as a result of the Company's complex capital structure including
1,000,000 shares of Class B Common stock (see reverse split) which were
authorized and unissued as of June 30, 2000. These shares were subsequently
issued by April 12, 2000. Diluted EPS for the year 2000 were computed as a
result of the Company's complex capital structure; including 285,714 shares of
Series 2 Preferred stock, 20,000 shares of Class B Common stock, and 1,250,000
equivalent converted shares represented by the $500,000 Convertible Debenture.
Diluted EPS for the quarter ended September 30, 2001 were computed as a result
of the Company's complex capital structure; including 285,714 shares of Series 2
Preferred stock, 20,000 shares of Class B Common stock, and 5,714,286 equivalent
converted shares represented by the $500,000 Convertible Debenture. The actual
conversion may be reduced given the reverse merger and relinquishment of the
debentures.
DEVELOPMENT STAGE
11
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Officers' Compensation
Prior to the reverse acquisition, the Company's day-to-day activities were
managed by certain officer/shareholders, who contributed their time on the
Company's behalf without compensation in either cash or stock. No value for
these services has been determined or recorded on the accompanying financial
statements. Subsequent to the merger one of these officer/shareholders is
compensated as a consultant through a wholly owned corporation of the officer/
shareholder and another officer is being compensated through the Company's
payroll. Given there are no current operations other than the acquisition of a
new company and the financing thereof there are currently no officer salaries.
Notes Payable consisted of the following at December 31, 2000:
Note Payable - related party dated September 6, 1999 $ 9,000
In July 1999 Bowne & Co, Inc., a financial corporate printer filed suit against
the Company in New York seeking approximately $18,000 for claims of outstanding
printed invoices. As of March 31, 2001 the suit is still pending and the outcome
is not yet determinable. This is a liability of the Company as well as
Micromatix as a judgment has been procured.
In August 2000 Interim Atlantic Enterprises, LLC filed suit against IMTL for
$11,038 This suit concerns a claim that an employee did not work the minimum
number of days required under the terms of a contract between IMTL and Interim
Atlantic Enterprises, LLC. As of September 30, 2001 the is a default judgment
against the company as well as Micromatix. This liability is still shown on the
Company's balance sheet. On March 28, 2000, Microsoft Corporation filed a
complaint against the Company and an employee for alleged copyright and
trademark infringement and related causes of action. On November 7, 2000 the
Company filed an answer denying all of Microsoft's claims. As of the date of
these financial statements the suit is still pending and the outcome is not yet
determinable however it would be a liability of Micromatix.
Going Concern
The Company's financing has been provided by related party loans, capital
contributions from shareholders and third party loans. The Company anticipates
that through the rest of the year ended December 31, 2001 the Company will be
able to locate, finance and acquire a new viable business. Currently, the
Company is merely a shell for a new viable business opportunity. There are no
operations and accordingly the losses are considerably less. The company has
much less capital requirements as the operations have changed from manufacturing
of computers to the acquisition of a new business.
12
Reverse Stock Split
On August 8, 2000 the Company, through a Board action, authorized a 1:7 reverse
split of the Company's outstanding Class A Common Stock, and outstanding Series
1, Series 2 and Series 3 Preferred Stock. The Board approved the rounding up of
every fractional shareholder to a full share, with all shareholders equally
affected. Coinciding with the reverse split, the Company increased the par value
of its Class A Common Stock from $.01 to $.10 per share, and increased the par
value of its Preferred Stock from $.10 to $1.00 per share. The purpose of the
reverse split was to facilitate raising additional capital for the Company and
allow management to find possible merger and acquisition candidates. Because of
the Linuxone deal and the need to find another acquisition candidate the Board
approved another reverse stock split of 11 to 1. The Board and Management
believe this is one of several necessary steps that must be taken to insure the
viability of the Company.
Subsequent Events
13
Item 2. Management's Discussion and Analysis or Plan of Operation.
- -----------------------------------------------------------------
CAUTIONARY STATEMENT FOR PURPOSE OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The following discussion regarding International Mercantile Corp ("the Company"
or "IMTE") and its business and operations contains "forward-looking" statements
within the meaning of Private Securities Litigation Reform Act of 1995. These
statements consist of any statement other than a recitation of historical fact
and can be identified by the use of forward-looking terminology such as "may,"
"except," "anticipate," "estimate," or "continue" or the negative or other
variations thereof or comparable terminology. The reader is cautioned that all
forward-looking statements are necessarily speculative and there are risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements, including no history
of profitable operations, competition, risks related to acquisitions,
difficulties in managing growth, dependence on key personnel and other factors
discussed under the section titled "Management's Discussion and Analysis or plan
of Operations-Factors That May Affect Future Results" in the Company's quarterly
report on the form 10-Q for the quarter ended September 30, 2001. The Company
does not have a policy of updating or revising forward-looking statements and
thus it should not be assumed that silence of management over time means that
actual events are occurring as estimated in such forward-looking statements.
The following discussion and analysis should be read in conjunction with the
financial statements appearing as Item {1} to this Report. These financial
statements reflect the operations of the Company for the quarters ended
September 30, 2001 and June 30, 2000.
Plan of Operation
The Company now intends to search for a acquisition candidate to merge into it's
existing shell. The financing of the new candidate will likely be through
private placement memorandum or existing companies willing to pay for the
corporate shell because it is a fully reporting company. There are no guarantees
this will occur and the Company is current in all it's filing's with the SEC.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
There are two default judgments against the Company for a total of $29,000.
Item 2. Change in Securities
Xxxxxx insert later
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports
Not Applicable
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTERNATIONAL MERCANTILE CORPORATION
By: /s/ C. Fredric Richardson
--------------------------
C. Frederic Richardson
Chief Exec. Officer
President, Director
Date: November 14, 2001
By: /s/ C. Fredric Richardson
--------------------------
C. Timothy Jewell,
Chief Exec. Officer
President, Director
By: /s/ Edward Hutya
--------------------------
Edward Hutya,
Director
By: /s/ Max W. Apple
--------------------------
Max W. Apple,
Chairman
Date: November 14, 2001
---------------------------------------------------------------
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