UNITED STATES 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 June 30, 2002 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 0-15596 SITI-SITES.COM, INC. (Exact name of registrant as specified in its charter) Delaware 75-1940923 (State of incorporation) (I.R.S. Employer Identification No.) 115 Whitman Road, Yonkers, New York 10710 (Address of principal executive offices) (Zip Code) (212) 925-1181 (Registrant's telephone number, including area code) 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) has been subject to such filing requirements for the past 90 days. YES _X_ NO ___ Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES _X_ NO ___ As of August 5, 2002, the registrant had outstanding 21,918,178 shares of its Common Stock, par value $.001 per share. The following documents are incorporated herein by reference: (1) Annual Report to security holders on Form 10-K for the year ended March 31, 2002 (the "Form 10-K for 2002"); (2) Annual Report to security holders on Form 10-K for the year ended March 31, 2001 (the "Form 10-K for 2001"); (3) Annual Report to security holders on Form 10-K for the year ended March 31, 2000 (the "Form 10-K for 2000"); (4) Annual Report to security holders on Form 10-K for the year ended March 31, 1999, as amended by Amendment No. 1 on Form 10-K/A (collectively, the "Form 10-K for 1999"); (5) Quarterly Report to security holders on Form 10-Q for the quarter ended June 30, 2001 ("June 30, 2001 10-Q") SITI-SITES.COM, INC. FORM 10-Q JUNE 30, 2002 INDEX PART I. FINANCIAL INFORMATION Page No. -------- Item 1. Financial Information Statement of Net Assets (Liabilities) in Liquidation at June 30, 2002 and March 31, 2002......... 1 Statement of Changes in Net Assets (Liabilities) in Liquidation for the three months ended June 30, 2002................................................................................... 2 Statement of Operations for the three months ended June 30, 2001 (Going Concern Basis)........... 3 Statement of Cash Flows for the three months ended June 30, 2001 (Going Concern Basis)........... 4 Notes to Financial Statements.................................................................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Status of Liquidation........................................................................ 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk............................... 12 PART II. OTHER INFORMATION...................................................................... 12 Item 1. Legal Proceedings ....................................................................... 12 Item 6. Exhibits and Reports on Form 8-K......................................................... 13 PART I. FINANCIAL INFORMATION SITI-Sites.com, Inc. Statement of Net Assets (Liabilities) in Liquidation (Amounts in thousands) June 30, 2002 (Unaudited) March 31, 2002 - -------------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 27 $ 39 Receivables and other assets 1 4 ------- ------ Total current assets 28 43 ------- ------ Total assets $ 28 $ 43 ------- ------ Liabilities Current Liabilities Accounts payable and accrued liabilities $ 33 $ 32 ------- ------ Total current liabilities 33 32 ------- ------ Total liabilities 33 32 ------- ------ Commitments and contingencies -- -- ------- ------ Net Assets (Liabilities) in Liquidation $ (5) $ 11 ======= ====== See accompanying notes to consolidated financial statements. 1 SITI-Sites.com, Inc. Statement of Changes in Net Assets (Liabilities) in Liquidation Three months ended June 30, 2002 (Unaudited) (Amounts in thousands) Net assets in liquidation at March 31, 2002 $ 11 Additions to net assets in liquidation: Contribution of management's services and rent 46 Reductions to net assets in liquidation: Operating expenses and accrual of estimated costs (62) ------- Net assets (liabilities) in liquidation at June 30, 2002 $ (5) ======= See accompanying notes to consolidated financial statements. 2 SITI-Sites.com, Inc. Statements of Operations and Comprehensive Loss (Going Concern Basis) For the three months ended June 30, 2001 (Amounts in thousands, except per share amounts) June 30, 2001 (Unaudited) - -------------------------------------------------------------------------------- Revenues $ -- -------- Operating costs and expenses: Selling, general and administrative expenses 385 -------- Total operating costs and expenses 385 -------- Operating loss (385) -------- Other income: Interest income 4 Gain on sale of marketable securities 5 -------- Total other income 9 -------- Loss from continuing operations (376) -------- Discontinued operations: Loss from discontinued operations (44) -------- Loss from discontinued operations (44) -------- Net loss (420) Other comprehensive gain (loss), net of tax and reclassification adjustment for realized gains (3) -------- Comprehensive loss $ (423) ======== Basic and diluted loss per common share: Loss from continuing operations $ (.024) Loss from discontinued operations (.003) -------- Net loss per common share $ (.027) ======== Weighted average number of Common Shares used in basic and diluted calculations 15,517 ======== See accompanying notes to consolidated financial statements. 3 SITI-Sites.com, Inc. and Subsidiary Consolidated Statement of Cash Flows (Going Concern Basis) Three months ended June 30, 2001 (Amounts in thousands) Three months ended June 30, 2001 (Unaudited) - -------------------------------------------------------------------------------- Cash flow from operating activities: Net loss $ (420) Adjustments to reconcile net loss to net cash (used in) provided by continuing activities: Gain on sale of marketable securities (5) Depreciation and amortization 11 Contribution of services by management 75 Loss on discontinued operations 44 (Increase) decrease in: Receivables (5) Increase (decrease) in: Accounts payable (4) Accrued liabilities (26) ------- Net cash used in continuing operations (330) Net cash used in discontinued operations (142) - -------------------------------------------------------------------------- Net cash used in operating activities (472) - -------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from sale of marketable securities 626 Purchase of property and equipment (1) - -------------------------------------------------------------------------- Net cash (used in) provided by investing activities 625 - -------------------------------------------------------------------------- Cash flow from financing activities: Proceeds from the issuance of common stock -- - -------------------------------------------------------------------------- Net cash provided by financing activities -- - -------------------------------------------------------------------------- Net increase in cash and cash equivalents 153 Cash and cash equivalents, beginning of quarter 326 - -------------------------------------------------------------------------- Total cash and cash equivalents, end of quarter (including cash amounts in net liabilities of discontinued operations) $ 479 ======= See accompanying notes to consolidated financial statements. 4 NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) MANAGEMENT'S PLAN FOR LIQUIDATION Siti-Sites.com, Inc., a Delaware corporation (referred to as "SITI" or the "Company") previously operated as an Internet media company with three websites for the marketing of news and services. The Company's websites related entirely to the music industry. SITI incurred losses continuously since its inception in 1999. Following conclusion of the second fiscal quarter ended September 30, 2001, management who were its primary investors (investing approximately $4.1 million 1998-2002), intended to continue operations by investing approximately $600,000 in further equity capital in the Company. But on November 13, 2001 they determined that such limited funding would not accomplish a meaningful result for the investors or the Company and terminated discussions of such financing plan. The Company commenced procedures to prepare to liquidate its assets effective January 1, 2002. Liquidation. The Company's only substantial liability, consisted of the remaining nine months on its lease for office premises at 594 Broadway in New York City, was amicably settled, and terminated as of December 31, 2001. Concurrently office furniture and unnecessary computers were sold, and all employees were terminated in November, 2001. A team of two software consultants were paid in December, 2001 and January, 2002, to complete the Company's Artist Promotion System. Attempts were to be made to license portions thereof, working with a marketing consultant. However, complications in completing the software resulted in management terminating these consulting relationships, with a view to restarting them, if possible, when specific marketing or sale opportunities present themselves. The Company shut down all of its websites effective February 1, 2002. Certain former employees and directors purchased excess furniture and equipment from the Company for a total of approximately $19,000 . The balance of the furniture was sold to an unrelated third party for approximately $5,000. Financing. The Company required a small financing to complete its employee terminations, asset liquidation and provide for ongoing corporate expenses. Major investors in the Company provided $110,000 in equity funds, purchasing 4,400,000 shares of common stock at $.025 per share, in a private offering as of December 7, 2001 in varying amounts parallel to their respective option holdings. Each purchasing investor was further required to surrender all of his outstanding options to purchase common stock of the Company, acquired in making each previous investment. These consisted of options for a total of 4,400,000 shares, previously exercisable at prices ranging from $.15 to $2.50 per share, and expiring between 2003 and 2006. All of such options are now cancelled and terminated, reducing all outstanding stock options by over 90%. This surrender and cancellation was intended to make future merger, sale or other business possibilities for the Company easier to achieve. The Company has options, previously held by employees in 1998 (before current major investors purchased control), which still remain outstanding, for the purchase of 415,577 shares, exercisable at prices ranging from $.35 to $2.15 per share, expiring between 2004 and 2006. There were 20,118,178 shares of common stock outstanding as of June 30, 2002 as a result of the financing described above. (See Note 5. Subsequent Event (Unaudited).) The Company's stock was trading at $.03 per share with nominal volume, during the seven-day offer/closing period in December, 2001. The shares sold to major investors were not registered under the Securities Act of 1933, were purchased for investment and are not readily marketable, which factors generally result in discounts in purchase value. There was also substantial business risk to the purchasers because the Company has no continuing operations and was being liquidated. The Company has been seeking merger or sale possibilities with operating businesses who perceive value in a merger with the Company as a publicly traded corporate shell with approximately 5,400 shareholders. (See Note 5. Subsequent Event (Unaudited).) (b) CHANGE TO LIQUIDATION BASIS OF ACCOUNTING During the quarter ended December 31, 2001, the Company decided to liquidate its operations and adopted the liquidation basis of accounting effective January 1, 2002. Under the liquidation basis of accounting, assets are stated at 5 their estimated net realizable values and liabilities are stated at their estimated settlement amounts, which estimates will be periodically reviewed and adjusted. Since the Company is in liquidation without continuing operations, the need to present quarterly Statements of Operations and Comprehensive Loss as well as a Statement of Cash Flows, is eliminated. However, the prior year's financial statements for the comparable quarter are presented, since the Company did not adopt this method of accounting until January 1, 2002. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amounts necessarily requires many estimates and assumptions. In addition, there are substantial risks and uncertainties associated with carrying out the liquidation of the Corporation's existing operations. The valuations presented in the accompanying Statement of Net Assets in Liquidation represent estimates, based on present facts and circumstances, of the net realizable values of assets and costs associated with carrying out the dissolution and liquidation plan based on the assumptions set forth below. The actual values and costs are expected to differ from the amounts shown herein and could be greater or lesser than the amounts recorded. Accordingly, it is not possible to predict the aggregate amount that will ultimately be distributable to shareholders and no assurance can be given that the amount to be received in liquidation will equal or exceed the net assets in liquidation per share in the accompanying Statement of Net assets in Liquidation or the price or prices at which the Common Stock has generally traded or is expected to trade in the future. The cautionary statements regarding estimates of net assets in liquidation set forth in the Forward-Looking Statements portion of this report are incorporated herein by reference. (c) RECENT HISTORY The accompanying financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results of operations for the periods shown. (d) DISCONTINUED OPERATIONS In the year ended March 31, 2001, the Company discontinued the operations of the New York Expo due to the continuing losses associated with the April 21-22, 2001 Music and Internet Expo, resulting in a loss of approximately $44,000 for the three months ended June 30, 2001. In accordance with Accounting Principles Board, ("APB") Statement #30, "Reporting the Effects of the Disposal of a Segment of a Business," the prior periods' financial statements have been restated to reflect such discontinuation. All assets and liabilities of the discontinued segment have been reflected as net assets of discontinued operations. The following tables reflect the net assets as of June 30, 2001: New York Expo: As of June 30, 2001 ------ (Amounts in thousands) Cash 17 Receivables 18 Accrued expenses (16) ---- Total 19 ==== Operating results from discontinued operations are as follows: New York Expo: Three months ended June 30, Amounts in thousands 2001 -------------- Revenues $ -- ------ Operating costs and expenses: Cost of Sales 44 Selling, general and administrative expenses -- ------ Total operating costs and expenses 44 ------ Operating Loss (44) Other income and (expenses) -- ------ Income (loss) from discontinued operations $ (44) ====== 6 (e) USE OF ESTIMATES In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. (f) CASH AND CASH EQUIVALENTS Cash and cash equivalents include the Company's cash balances and short-term investments that mature in 90 days or less from the original date of maturity. Cash and cash equivalents are carried at cost plus accrued interest, which approximates market. (g) REVENUE RECOGNITION Revenues from CD sales were recognized upon shipment to the customer. (h) LOSS PER COMMON SHARE Loss per share for the three months ended June 30, 2001 was based on the weighted average number of common shares and common stock equivalents (convertible preferred shares, stock options and warrants), if applicable, assumed to be outstanding during the year. The weighted average number of shares used in the computation of loss per share for the three months ended June 30, 2001 are approximately 15,517,000. Common stock equivalents were not included in the computation of weighted average shares outstanding for all periods presented because such inclusion would be anti-dilutive. (i) COMPREHENSIVE LOSS Comprehensive loss is comprised of net loss and all changes to stockholders' equity, except those resulting from investments by owners (changes in paid in capital) and distributions to owners (dividends). For all periods presented, comprehensive loss is comprised of unrealized holding gains or losses on marketable securities. (j) WEBSITE EXPENSES In March 2000, the Emerging Issues Task Force of the Financial Accounting Standards Board issued consensuses on an emerging accounting issue entitled "Accounting for Web Site Development Costs" (Issue 00-2). These consensuses addressed costs incurred in the planning stage, the application and infrastructure development stage, graphics development stage, the content development stage, and the operating stage. The consensuses call for capitalization or expense treatment of various costs depending on certain criteria. The consensuses are applicable for costs incurred for fiscal quarters beginning after June 30, 2000 and allows a company to adopt the consensuses as a cumulative effect of a change in accounting principles. The web site development costs incurred during the three months ended June 30, 2001 that were associated with the testing stage were capitalized and subsequently expensed as a result of management's liquidation plan in the amount of approximately $157,000. The expenses associated with operating the website were expensed. (k) SIGNIFICANT ESTIMATES The Company has adjusted all assets to their expected net realizable value on a liquidation basis based on management's best estimate. In addition, all liabilities expected to be incurred with respect to the discontinued operations have been accrued by management based on its estimates. 2. LITIGATION As of the date of this report the Company knows of no pending or threatened legal actions against the Company that would have a material impact on the operations or financial condition of the Company. 7 From time to time in previous years, the Company had been a party to other legal actions and proceedings incidental to its business. As of the date of this report, however, the Company knows of no other pending or threatened legal actions that could have a material impact on the operations or financial condition of the Company. 3. STATEMENTS OF CASH FLOWS ---------------- Three months ended June 30, 2001 ---------------- (Amounts in thousands) Supplemental disclosures of cash flow information: Cash paid during the year for income taxes $ 1 Non-cash transactions: Contribution by management $ 75 4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities were comprised of the following: June 30, March 31, 2002 2002 ---------------------- (Amounts in thousands) Accrued audit and tax fees $ 14 $ 25 Accounts payable and accrued Expenses 19 7 ---- ---- $ 33 $ 32 ==== ==== 5. SUBSEQUENT EVENT (UNAUDITED) The Company Chairman/CEO Lawrence M. Powers and another investor, in order to finance ongoing corporate expenses, purchased an additional 1,800,000 shares of common stock of the Company (1,200,000 and 600,000 shares, respectively) as of July 26, 2002, at $.025 per share. (This was the same price paid by six shareholder investors in December, 2001, to finance ongoing corporate expenses at that time.) The Company's stock was trading at $.05 per share during the week ending July 26, 2002 with nominal volume. The shares recently sold to these two existing investors were not registered under the Securities Act of 1933, were purchased for investment requiring "legended" certificates and are not readily marketable because of such legending and the nominal trading volume in SITI stock, which factors generally result in substantial discounts in purchase value. There are also several other business risks to the purchasers, because the Company has no ongoing operations, is in liquidation, and is seeking merger or sale possibilities with operating businesses, to make use of the Company's publicly traded status with approximately 5,400 shareholders. But current depressed stock market conditions for "going public" increase the difficulties in arranging any such transactions. As a result of this stock purchase transaction completed August 5, 2002, the Company's outstanding common stock increased as of such date from 20,118,178 shares to 21,918,178 shares. 8 The following table reflects the Proforma Effect of this financing transaction on the Statement of Net Assets (Liabilities) in Liquidation as of June 30, 2002: SITI-Sites.com, Inc. Statement of Net Proforma Effect on (Amounts in thousands) Assets Statement of Net (Liabilities) in Assets in Liquidation Liquidation June June 30, 2002 30, 2002 (Unaudited) (Unaudited) - -------------------------------------------------------------------------------- Assets Total assets $ 28 $ 73 ------- ------ Liabilities Total liabilities 33 33 ------- ------ Net Assets (Liabilities) in Liquidation $ (5) $ 40 ======= ====== 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND STATUS OF LIQUIDATION THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, INCLUDING, BUT NOT LIMITED TO STATEMENTS RELATED TO BUSINESS OBJECTIVES AND STRATEGY OF THE COMPANY. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS ABOUT THE COMPANY'S INDUSTRY, MANAGEMENT'S BELIEFS AND CERTAIN ASSUMPTIONS MADE BY THE COMPANY'S MANAGEMENT. WORDS SUCH AS "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS," "BELIEVES," "SEEKS," "ESTIMATES," VARIATIONS OF SUCH WORDS AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT; THEREFORE, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED, FORECASTED, OR CONTEMPLATED BY ANY SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY INCLUDE, AMONG OTHERS, THOSE RISK FACTORS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH 31, 2002. GIVEN THESE UNCERTAINTIES, INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS. UNLESS REQUIRED BY LAW, THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. HOWEVER, READERS SHOULD CAREFULLY REVIEW THE RISK FACTORS SET FORTH IN OTHER REPORTS OR DOCUMENTS THE COMPANY FILES FROM TIME TO TIME WITH THE SECURITIES AND EXCHANGE COMMISSION, PARTICULARLY THE ANNUAL REPORTS ON FORM 10-K, OTHER QUARTERLY REPORTS ON FORM 10-Q AND ANY CURRENT REPORTS ON FORM 8-K. Overview SITI has been seeking merger or sale possibilities with operating businesses who perceive value in a merger with the Company as a publicly traded corporate shell. The Company was an Internet media company with three websites for the marketing of news and services. The Company's websites related entirely to the music industry. The Company intended to develop these websites further by entering into strategic partnerships and affiliations. As part of this strategy, in June, 1999 the Company acquired Tropia, which promoted and marketed the music of selected independent artists on its website www.Tropia.com. The Company next acquired three music-related websites, HungryBands.com (an e-commerce website and business promoting and selling music by independent artists), NewMediaMusic.com (an e-news/magazine business), and NewYorkExpo.com (a music and Internet conference business), all in January, 2000. As of December 31, 2001, the Company discontinued the operations of its New Media Music and HungryBands divisions because they were not viable businesses. As of March 31, 2001, the Company discontinued the operations of the New York Expo as a result of increased losses associated with the production of the Expo. In addition, during fiscal 2000, the Company made and wrote-off a $500,000 investment in a music CD custom compilation and promotion company, Volatile Media, Inc., which did business as EZCD.com, now in bankruptcy liquidation. Such investment was written off at March 31, 2000 because of uncertainties in EZCD's financing plans and ability to continue operations. SITI's history under former management and control persons goes back to 1984 when it was incorporated in Delaware. As a result of a change of control of the Company in December, 1998, the Company's senior management and Board of Directors were replaced. The current senior management and Board of Directors changed the strategic direction of the Company from being a developer of patented communication technologies to that of an Internet media company. All prior business operations of the Company were discontinued. The Company changed its corporate name to SITI-Sites.com, Inc. from Spectrum Information Technologies, Inc. after its Annual Meeting of Stockholders on December 14, 1999, and its former stock symbol "SITI" is now "SITN.OB". In view of the Company's determination to seek other business opportunities to create shareholder value, the following information relating to the results of the Company's prior discontinued operations should not be relied upon as an indication of future performance. All of the Company's operations prior to January 1, 2002 are discontinued operations and the Company adopted the liquidation basis of accounting, effective January 1, 2002. (See Status of Liquidation). 10 LIQUIDITY AND CAPITAL RESOURCES The Company's primary objective is to conserve its cash while it is seeking merger or sale possibilities. As of June 30, 2002 the Company had net liabilities of $5,000. As a result, Chairman/CEO Powers invested $30,000 and another existing investor invested $15,000 in the Company as of July 26, 2002, resulting in the issuance of 1,800,000 shares of common stock. As of June 30, 2002, the Company's total assets were $28,000, of which $27,000 is represented by cash. During the three months ended June 30, 2002, the Company paid approximately $61,000 in operating expenses consisting primarily of its stock transfer agent fees and salary to one employee of approximately $15,000 as well as management's contribution of their services of approximately $46,000. As of June 30, 2002, the Company's liabilities were $33,000 consisting primarily of its obligations for professional fees associated with its fiscal 2002 year end audit. Management, primarily the Chairman/CEO, continues to work without any cash compensation. Management further continues to use personal offices to continue its plan. As a result, of this contribution, the Company charged-off approximately $46,000 to compensation and rent. LIQUIDATION BASIS OF ACCOUNTING The condensed consolidated financial statements for the three months ended June 30, 2001 were prepared on the going concern basis of accounting, which contemplates realization of assets and satisfaction of liabilities in the normal course of business. As a result of Management's Plan for Liquidation and the imminent nature of the liquidation, the Company adopted the liquidation basis of accounting effective January 1, 2002. Under the liquidation basis of accounting, assets are stated at their estimated net realizable values and liabilities are stated at their estimated settlement amounts, which estimates will be periodically reviewed and adjusted. Since the Company is in liquidation without continuing operations, the need to present quarterly Statements of Operations and Comprehensive Loss as well as a Statement of Cash Flows is eliminated. However, the prior year's financial statements for the comparable quarter are presented since the Company did not adopt this method of accounting until January 1, 2002. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amounts necessarily requires many estimates and assumptions. In addition, there are substantial risks and uncertainties associated with carrying out the liquidation of the Corporation's existing operations. The valuations presented in the accompanying Statement of Net Assets in Liquidation represent estimates, based on present facts and circumstances, of the net realizable values of assets and costs associated with carrying out the dissolution and liquidation plan based on the assumptions set forth below. The actual values and costs are expected to differ from the amounts shown herein and could be greater or lesser than the amounts recorded. Accordingly, it is not possible to predict the aggregate amount that will ultimately be distributable to shareholders and no assurance can be given that the amount to be received in liquidation will equal or exceed the net assets in liquidation per share in the accompanying Statement of Net assets in Liquidation or the price or prices at which the Common Stock has generally traded or is expected to trade in the future. The cautionary statements regarding estimates of net assets in liquidation set forth in the Forward-Looking Statements portion of this report are incorporated herein by reference. RISK FACTORS See the Company's Annual Report on Form 10-K (filed with the SEC on June 28, 2002), "Item 1 - Risk Factors That May Affect the Company's Business, Future Operating Results and Financial Condition." and "Status of Liquidation" set forth herein. STATUS OF LIQUIDATION The Company Chairman/CEO Lawrence M. Powers and another investor, in order to finance ongoing corporate expenses, purchased an additional 1,800,000 shares of common stock of the Company (1,200,000 and 600,000 shares, respectively) as of July 26, 2002, at $.025 per share. (This was the same price paid by six shareholder investors in December, 2001, to finance ongoing corporate expenses at that time.) The Company's stock was trading at $.05 per share during the week ending July 26, 2002 with nominal volume. The shares recently sold to these two existing investors were not registered under the Securities Act of 1933, were purchased for investment requiring "legended" certificates and are not readily marketable because of such legending and the nominal trading volume in SITI stock, which factors generally result in substantial discounts in purchase value. There are also several other business risks to the purchasers, because the Company has no ongoing operations, is in liquidation, and is seeking merger or sale possibilities with operating businesses, to make use of the Company's publicly traded status with approximately 5,400 11 shareholders. But current depressed stock market conditions for "going public" increase the difficulties in arranging any such transactions. As a result of this stock purchase transaction completed August 5, 2002, the Company's outstanding common stock increased as of such date from 20,118,178 shares to 21,918,178. The following table reflects the Proforma Effect of this financing transaction on the Statement of Net Assets (Liabilities) in Liquidation as of June 30, 2002: SITI-Sites.com, Inc. Statement of Net Proforma Effect (Amounts in thousands) Assets on Statement of (Liabilities) in Net Assets in Liquidation Liquidation June 30, 2002 June 30, 2002 (Unaudited) (Unaudited) - -------------------------------------------------------------------------------- Assets Total assets $ 28 $ 73 ------- ------ Liabilities Total liabilities 33 33 ------- ------ Net Assets (Liabilities) in Liquidation $ (5) $ 40 ======= ====== RESULTS OF OPERATIONS Three months ended June 30, 2001. Total Company revenues for the three months ended June 30, 2001 were nominal. Operating expenses in the three months ended June 30, 2001 totaled approximately $385,000 which primarily included personnel and related expenses of $241,000 and outside services of $58,000. Accounting and insurance fees for the three months ended June 30, 2001 were $15,000 each. The remaining costs of approximately $56,000 represented ongoing office expenses while the Company maintained its New York City facility. Other income totaled approximately $9,000 for the three months ended June 30, 2001 which included $4,000 attributable to interest income and $5,000 related to a gain on the sale of marketable securities. Discontinued operations for the three months ended June 30, 2001 were approximately $44,000 which pertained to additional costs associated with the April, 2001 New York Expo. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's market risk disclosures set forth in its fiscal 2002 Annual Report filed on Form 10-K have not changed significantly. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As of the date of this report the Company knows of no pending or threatened legal actions against the Company that would have a material impact on the operations or financial condition of the Company. 12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits Exhibit 99 - Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002 B. Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended June 30, 2002. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. Dated: August 13, 2002 SITI-SITES.COM, INC. By /s/ Lawrence M. Powers ---------------------- Lawrence M. Powers Chief Executive Officer and Chairman of the Board of Directors By /s/ Toni Ann Tantillo --------------------- Toni Ann Tantillo Chief Financial Officer, Vice President, Secretary and Treasurer 14 EXHIBIT INDEX Exhibit 99 - Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002 15