-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LUNueTCO0wePsKJwIKMszhPaKUpIKRV/buMqZYZcjrUr6GwAZuQnRD4IBmaskNO+ vAw533fzMbW9/zUh9O8KeA== 0001014100-99-000172.txt : 19991117 0001014100-99-000172.hdr.sgml : 19991117 ACCESSION NUMBER: 0001014100-99-000172 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SALES ONLINE DIRECT INC CENTRAL INDEX KEY: 0001017655 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 731479833 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-28720 FILM NUMBER: 99756438 BUSINESS ADDRESS: STREET 1: 4 BRUSSELS STREET STREET 2: SUITE 220 CITY: WORCESTER STATE: MA ZIP: 01610 BUSINESS PHONE: 5166254040 MAIL ADDRESS: STREET 1: 7633 EAST 63RD PL STREET 2: SUITE 220 CITY: TULSA STATE: OK ZIP: 74133 FORMER COMPANY: FORMER CONFORMED NAME: SECURITIES RESOLUTION ADVISORS INC DATE OF NAME CHANGE: 19980814 FORMER COMPANY: FORMER CONFORMED NAME: ROSE INTERNATIONAL LTD DATE OF NAME CHANGE: 19960627 10QSB 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1999. Commission File No. 0-28720. SALES ONLINE DIRECT INC. (Exact name of small business issuer in its charter) Delaware 73-1479833 (State or Other Jurisdiction (I.R.S. Employer Identification No.) of Incorporation or Organization) 4 Brussels Street, Worcester, Massachusetts 01610 (Address of principal executive office)(Zip Code) Issuer's Telephone Number, Including Area Code: (508) 753-0945 Securities Resolution Advisors, Inc. (Former Name) (Securities registered pursuant to Section 12(b) of the Act) Common Stock, $0.001 Par Value (Title of each class) 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 __ Transitional Small Business Disclosure Format (check one): Yes ___ No X As of October 31, 1999, the registrant had outstanding 43,893,912 shares of its Common Stock, par value of $0.001, its only class of voting securities. TABLE OF CONTENTS Part I - Financial Information Page Item 1. Financial Statements: 1 ------- Consolidated Balance Sheets - September 30, 1999 (unaudited) and December 31, 1998 1 Consolidated Statement of Operations - Three and Six-months ended September 30, 1998 2 Consolidated Statement of Shareholders' Equity - 3 Six-months ended September 30, 1999 and 1998 Consolidated Statement of Cash Flows - Six-months ended September 30, 1998 and 1999 4 Notes to Consolidated Financial Statements - Six-months ended September 30, 1999 and 1998 6 Item 2. Management's Discussion and Analysis or Plan of Operations 9 ------- Part II - Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 ------- Signatures 14 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Sales OnLine Direct, Inc. Consolidated Balance Sheets
September 30, December 31, 1999 1998 Assets Current Assets: Cash and equivalents $ 563,701 $ - Accounts receivable 93,783 - Marketable securities 374,436 - Merchandise inventories 772,479 - Due from affiliates 5,674 7,164 Due from Shareholders 3,075 - Other current assets 59,377 - Total current assets 1,872,525 7,164 Property and equipment, net 263,493 20,479 Other assets 125,145 - Total assets $2,261,163 $27,643 Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $114,366 $ - Accrued liabilities 124,457 7,160 Due to affiliates - 8,245 Total current liabilities 238,823 15,405 Shareholders' equity: Common stock 43,894 1,000 Paid in capital 3,210,587 - Accumulated earnings (deficit) (1,232,141) 12,238 2,022,340 13,238 Less stock subscriptions receivable - (1,000) Total shareholders' equity 2,022,340 12,238 Total liabilities and shareholders' equity $2,261,163 $27,643
The accompanying notes are an integral part of these financial statements 1 Sales OnLine Direct, Inc. Consolidated Statement of Operations
September 30, 1999 September 30, 1998 For The Three For The Nine For The Three For The Nine Months Ended Months Ended Months Ended Months Ended Revenues $ 380,148 $ 692,792 $ - $ - Cost of revenues 363,232 437,063 - - Gross profit 16,916 255,729 - - Sales, general and administrative expenses 665,520 1,456,714 - - Loss from operations (648,604) (1,200,985) - - Other expense 89,927 43,394 - - Provision for taxes on income - - - - Net loss $ (738,531) $ (1,244,379) $ - $ - Earnings per share: Basic and diluted $ (.017) $ (.028) $ - $ -
The accompanying notes are an integral part of these financial statements 2 Sales OnLine Direct, Inc. Consolidated Statement of Shareholders' Equity For the Nine Months Ended September 30, 1999
Stock Common Stock Paid in Retained Subscription Shares Par value Capital Earnings Receivable Total Balance - January 1, 1999 40,000 $ 1,000 $ -- $ 12,238 $(1,000) $ 12,238 Contribution of Assets of World Wide Collectors Digest -- -- 33,229 -- -- 33,229 Contribution of Merchandise Inventories -- -- 769,764 -- -- 769,764 Subtotal 40,000 1,000 802,993 12,238 (1,000) 815,231 Recapitalization 6,525,000 5,565 (5,565) -- -- -- Subtotal 6,565,000 6,565 797,428 12,238 (1,000) 815,231 Acquire Securities Resolution Advisers, Inc. 37,328,912 37,329 (36,841) -- -- 488 Assignment of Options -- -- 2,450,000 -- -- 2,450,000 Collection of Stock Subscription Receivable -- -- -- -- 1,000 1,000 Net loss -- -- -- (1,244,379) -- (1,244,379) Balance-September 30, 1999 43,893,912 $ 43,894 $ 3,210,587 $(1,232,141) $ -- $ 2,022,340
The accompanying notes are an integral part of these financial statements 3 Sales OnLine Direct, Inc. Consolidated Statement of Cash Flows For the Nine Months Ended September 30, 1999 1998 Operating activities: Net loss $ (1,244,379) $ -- Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 33,314 -- Realized loss on marketable securities 15,069 -- Unrealized loss on marketable securities 49,912 -- Changes in assets and liabilities: Accounts receivable (81,942) -- Merchandise inventories 28,739 -- Due from affiliates 4,164 -- Due from shareholder (158) -- Other current assets (51,262) -- Accounts payable 11,351 -- Accrued liabilities 89,952 -- Total cash used in Operating activities (1,145,240) -- Investing Activities: Acquisition of property and equipment (230,994) -- Acquisition of marketable securities (2,149,446) -- Sale of marketable securities 1,710,029 -- Acquisition of Securities Resolution Advisors, Inc. 488 -- Merger with Rotman Auction, Inc. 9,864 -- Other assets (70,000) -- Total cash used in Investing activities (730,059) -- Financing Activities: Assignment of options 2,450,000 -- Stock subscription receivable 1,000 -- Repayment of officer loan (12,000) -- Total cash provided by Financing activities 2,439,000 -- Increase in cash 563,701 -- Cash and equivalents - beginning -- -- Cash and equivalents - ending $ 563,701 $ -- The accompanying notes are an integral part of these financial statements 4 Sales OnLine Direct, Inc. Consolidated Statement of Cash Flows (continued) For the Nine Months Ended September 30, Supplemental disclosures of cash flow information: Cash paid during the period for: 1999 1998 ---- ---- Interest $ -- $ -- Income taxes $ -- $ -- Supplemental Schedule of Non-cash Investing and Financing Activities The acquisition of Internet Auction, Inc. was accounted for as a reverse acquisition utilizing the purchase method of accounting. The assets of Securities Resolution Advisors, Inc. were recorded at their fair value as follows: 1999 1998 ---- ---- Cash received in the transaction $ 488 $ -- Contributions of inventories $ 769,764 $ -- Contribution of the net assets of World Wide Collectors Digest, Inc. accounted for utilizing the purchase method of accounting. The assets were recorded at their fair values as follows: Due from shareholder $ 2,737 $ -- Other current assets 1,000 -- Property and equipment 29,877 -- Liabilities assumed (385) -- Paid in capital $ 33,229 $ -- Merger of Rotman Auction, Inc. accounted for utilizing the purchase method of accounting. The assets were recorded at their fair values as follows: Accounts receivable $ 11,841 $ -- Merchandise inventories 31,454 -- Due from affiliate 10,919 -- Other current assets 7,115 -- Goodwill 68,905 -- Property and equipment 1,697 -- Due to Shareholder (11,820) -- Other liabilities assumed (129,975) -- Cash Received in the transaction 9,864 -- Common stock subscribed $ -- $ 1,000 The accompanying notes are an integral part of these financial statements 5 Sales OnLine Direct, Inc. Notes to Consolidated Financial Statements For the Nine Months Ended September 30, 1999 and 1998 (1) ORGANIZATION On February 1, 1999 Internet Auction, Inc. (IA), and Rotman Auction Inc. (RA), both Massachusetts corporations, effectuated a statutory merger whereby the surviving company was IA. Prior to February 25, 1999 IA received approximately $770,000 of inventories of sports memorabilia from family members of its shareholders. In addition, IA received the net assets of World Wide Collectors Digest, Inc., a company owned by a shareholder. On February 25, 1999, Securities Resolution Advisors, Inc. (SRAD), a Delaware corporation, acquired all the outstanding common shares of IA in exchange for 37,368,912 shares of SRAD. The acquisition was accounted for utilizing the purchase method of accounting as a reverse acquisition with IA being the survivor for accounting purposes. As a result of this transaction the former IA shareholders hold approximately 80% of the outstanding shares of SRAD. The consolidated financial statements include the accounts of IA for the period January 1, 1999 through September 30, 1999 and RA and SRAD since their acquisitions on February 1, 1999 and February 25, 1999, respectively. All material intercompany transactions have been eliminated. IA, SRAD, and RA collectively are hereinafter referred to as the Company. On March 18, 1999 SRAD changed its name to Sales OnLine Direct Inc. (SOLD). (2) SIGNIFICANT ACCOUNING POLICIES General: The financial statements included in this report have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission for interim reporting and include all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation. These financial statements have not been audited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations for interim reporting. The Company believes that the disclosures contained herein are adequate to make the information presented not misleading. However, these financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report for the year ended December 31, 1998, which is included in the Company's Form 10-KSB/A. The audited financial statement of IA was included in the Company's Form 8-K/A. The financial data for the interim periods presented may not necessarily reflect the results to be anticipated for the complete year. Line of business: The Company currently has four main divisions under its corporate umbrella. The Company offers consumers a branded network of comprehensive shopping services, a person to person auction site, a full service consignment auction house and a collectible site. The Company is developing an Internet community that specializes in e-commerce sales. Through the Internet websites of its operating divisions, the Company brings buyers and sellers together to buy and sell items including collectibles such as antiques, coins, computers, memorabilia, stamps and toys. The Company, through its four divisions, maintains a person-to-person trading community in a variety of formats consisting of auctions, e-commerce, classifieds, and store front web design and hosting. These services permit sellers to list items for sale, buyers to bid on them, and all users to browse for items in a fully-automated online service that is available 24 hours a day, seven days a week. 6 Cash equivalents: The Company considers all liquid investments purchased with maturities of three months or less to be cash equivalents. Inventories: Inventories are valued at the lower of cost, first in first out (FIFO) basis, or market. When collectibles are purchased in bulk, specific values are assigned to the significant components and nominal values to the remainder of the goods. Property and equipment: Property and equipment, comprised of computers, furniture and fixtures and display equipment, is stated at cost and depreciated using the straight-line method over estimated useful lives of five to ten years. Renewals and betterments are capitalized while repairs and maintenance are charged to operations as incurred. Other assets: Included in other assets are Goodwill and other intangible assets that are being amortized over their estimated useful lives. Income taxes: Taxes are provided for items entering into the determination of net income for financial reporting purposes, irrespective of when such items are reported for income tax purposes. Valuation allowances are recorded when realization of any deferred tax assets is uncertain. Accordingly, deferred income taxes have been provided for all temporary differences. Revenue recognition: Revenues from consignment auctions are recognized when the related auction closes and bids are finalized. Revenues related to sales of goods through auctions are recognized when the auction closes and the bidding is finalized. Website hosting and advertising revenues are recognized in the month that the hosting and advertising services are rendered. Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Although these estimates are based upon management's knowledge of current events and actions to be undertaken in the future, they may differ from actual results. (3) DISCONTINUED OPERATIONS On February 24, 1999 the former management of SRAD completed its planned exchange of the its wholly owned subsidiary, Securities Resolution Advisors, Inc., a New York corporation, for eight million (8,000,000) shares of the issued and outstanding common shares of the Company held by its former President, Richard Singer. (4) ASSIGNMENT OF OPTIONS During April 1999 the Company assigned and surrendered options it held to acquire 502,500 shares of its own stock. The net cash proceeds totaling approximately $2,450,000 have been recorded in cash and paid in capital. 7 (5) INCOME TAXES The provision for income taxes consist of the following deferred tax items: 1999 1998 Federal $ (423,100) $ -- State (124,500) -- Total (547,600) -- Valuation allowance 547,600 -- Total provision for (benefit from) taxes $ -- $ -- (6) RELATED PARTY TRANSACTION Included in Property and Equipment is approximately $70,000 of equipment and software acquired from a company that is owned by officers of SOLD. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-QSB contains certain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Sales OnLine Direct, Inc. (the "Company") and its business, financial condition, results of operations and prospects. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements in this Report. Additionally, statements concerning future matters such as the development of new services, technology enhancements, purchase of equipment, credit arrangements, possible changes in legislation and other statements regarding matters that are not historical are forward-looking statements. Although forward-looking statements in this Report reflect the good faith judgment of the Company's management, such statements can only be based on facts and factors currently known by the Company. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed below as well as those discussed elsewhere in this Report. Readers are urged to carefully review and consider the various disclosures made by the Company in this Report, which attempts to advise interested parties of the risks and factors that may affect the Company's business, financial condition, results of operations and prospects. For a more complete discussion of these and other risk factors, please see "RISK FACTORS" in Item 1 of the Company's Form 10-KSB for the fiscal year ended December 31, 1998 filed with the Securities and Exchange Commission on April 15, 1999. Overview The Company has developed its web site as a new portal site for the collectibles industry. While it is still in the process of development, the site is intended to become the premier collectibles portal on the Internet. Because of the Company's web site technology, online auctions and knowledge of the collectibles industry, the Company is focused on developing its site as a new hub for collectors. This hub will consist of a collector's portal, a global auction search and a research site found on the Company's web site. These three distinct components of the web site will be integrated on the portal and will appear seamless to the public. The Company's search engine will provide a global auction search for all collectibles. This search engine, scheduled to become operational in February 2000, will bring unlimited items to bidders' desktops. It will also notify bidders when auction items become available and will enable the viewer to place bids. The unique advantage of the Company's proposed new research site, scheduled to be launched by June 2000, is the research engine that will capture and retrieve unlimited information for collectors. Visitors will be able to educate themselves about specific collectible items. As a comprehensive research center, collectors will be able to: 9 o view items of interest o obtain realized pricing histories o make inquiries of authentication and appraisal experts o read the latest articles on particular collectibles o chat with individuals with common interests As a search engine for the collectibles industry, the Company's web site is intended to provide its visitors with information with which to make educated decisions regarding collectibles. The advanced architectural technology of the search engine will allow for the collection of information about collectible items. Buyers and sellers will have access to historical pricing information based on realized prices, authentication, expert opinions, articles and other publications, appraisal services, feedback opportunities and community discussions. Because fraudulently sold items are the largest concern facing the industry and its consumers, the Company will provide visitors with the research tools to complete transactions based on the most accurate, verified material available. Buyers and sellers will also benefit from direct linkage to auctions, storefronts, and classifieds, thus reducing the buyer's search time for desired items while accelerating the sale cycle for the seller. As a "collectibles community", the site will not only meet the collectibles needs of its visitors but their other service needs as well. The web site's user friendly approach will personalize the Web by providing visitors with a wide range of the more typical search engine services, e.g., news, email, stock quotes, travel, etc. Results of operations For the quarter ended September 30, 1999, the Company continued to experience rapid growth in its online traffic. To support this new level of activity, the Company made significant investment in personnel, infrastructure and marketing programs during the third quarter. For the three months ended September 30, 1999, revenue was $380,148, most of which is primarily attributable to an increase in sales of the Company's own inventory and a decrease in consignment sales, as well as fees from buyers and sellers through the operations of Rotman Auction. This represents a 250% increase over revenues for the second quarter ended June 30, 1999 of $155,189. Costs of revenues increased from $46,582 in the second quarter to $363,323 in the third quarter. This increase is due to the fact that most of the revenues for the third quarter were derived from sales of the Company's own inventory rather than fee based income primarily from consignment sales generated for the second quarter. As a result, gross proft decreased from $108,607 in the second quarter to $16,916 in the current quarter. Sales, general and administrative ("SG&A") expenses for the quarter ended September 30, 1999, was $665,520 compared to $583,458 for the quarter ended June 30, 1999. This increase in SG&A expenses include higher personnel costs and consulting fees attributable primarily to the Company's engineering and product development. These costs and fees were offset by a decrease in advertising costs of $32,000. 10 As a result of the significant SG&A expenses and the relatively brief period of combined operations, the Company had a loss for the quarter of $738,531, or approximately ($.017) compared to a loss of ($.010) per share for the three months ended June 30, 1999. The loss for the three months ended September 30, 1999 was due in part to investments in infrastructure, expansion of operations and development of the Company's software systems and products. The Company expects to continue to experience losses for the next two quarters as it continues to make significant investments the Company's software systems and online offerings. The Company believes that inflation has not had a material effect of its results of operations. Liquidity and Capital Resources Management believes that the Company has sufficient liquidity and capital resources to finance the Company's operations through the end of the current fiscal year. In April 1999 the Company assigned certain options it held for approximately $2,450,000; it is not anticipated that this will be a significant or recurring source of capital in the future. Cash and cash equivalents decreased from $1,587,797 at June 30, 1999 to $563,701 at September 30, 1999. This decrease is attributable to the investments in infrastructure, expansion of operations and development of the Company's software systems and products. Management anticipates that as the Company continues to grow and expand its operations into the next fiscal year, additional capital resources may be required to fund such growth. The Company currently has no commitments for capital. Year 2000 Systems Readiness Disclosure Computer systems, software packages, and microprocessor dependent equipment may cease to function or generate erroneous data when the year 2000 arrives. The problem affects those systems or products that are programmed to accept a two-digit code in date code fields. To correctly identify the year 2000, a four-digit date code field will be required to be what is commonly termed "year 2000 compliant." The Company may realize exposure and risk if the systems for which it is dependent to conduct day-to-day operations are not year 2000 compliant. The potential areas of exposure include electronic data exchange systems operated by third parties with which the Company transacts business, certain products purchased from third parties for resale, and computers, software, telephone systems and other equipment used internally. The Company has been communicating with the suppliers and others with whom it does business to coordinate year 2000 readiness. The responses received by the Company to date have indicated that steps have been undertaken to address this concern. However, if such third parties are not able to make all systems year 2000 compliant, there could be a material adverse impact on the Company. The Company has determined that its principal transaction processing software is year 2000 compliant. Accordingly, the Company does not anticipate any material adverse operational issues to arise. The Company completed its year 2000 compliance assessment during the second quarter of 1999. Because the principal transaction processing software was already year 2000 compliant, when it was acquired, management expects that the Company's present and future costs 11 in connection with its year 2000 compliance project are and will be minimal; however, future anticipated costs are difficult to estimate with any certainty and may differ materially from those currently projected. The estimated costs do not include time and costs that may be incurred as a result of any potential failure of third parties to become year 2000 compliant or costs to implement the Company's future contingency plans. The Company has not yet developed a contingency plan in the event that any non-compliant critical systems are not remedied by January 1, 2000, nor has it formulated a timetable to create such contingency plan. If third parties with whom the Company does business fail to make their systems year 2000 compliant in a timely manner, the year 2000 issue could have a material adverse effect on the Company's business, financial condition and results of operations. 12 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit No. 27 Financial Data Schedule (b) Reports on Form 8-K: On August 16, 1999, the Registrant filed a Current Report on Form 8-K/A, dated February 25, 1999, to amend Item 7 to include the necessary financial statements and pro forma financial information with regard to the Registrant's acquisition of Internet Auction, Inc. 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 thereunto duly authorized. Dated: November 15, 1999 SALES ONLINE DIRECT INC. Registrant /s/ Gregory Rotman ------------------ Gregory Rotman, President /s/ Richard Rotman ------------------ Richard Rotman Vice President, Treasurer and Principal Financial Officer 14 LIST OF EXHIBITS Exhibit No. Description 27 Financial Data Schedule EX-27 2 FDS -- FINANCIAL DATA SCHEDULE
5 (Replace this text with the legend) 0001017655 Sales Online Direct Inc. 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 563,701 374,436 93,783 0 772,479 1,872,525 263,493 0 2,261,163 238,823 0 0 0 43,894 1,978,446 2,261,163 692,792 692,792 437,063 1,456,714 43,394 0 0 (1,244,379) 0 (1,244,379) 0 0 0 (1,244,379) (.028) (.028)
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