8-K/A 1 y61082e8vkza.txt THE INTERNET ADVISORY CORPORATION SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) MARCH 11, 2002 THE INTERNET ADVISORY CORPORATION (Exact name of registrant as specified in its charter) UTAH 0-16665 87-042635 State or other jurisdiction (Commission File Number) (IRS Employer of incorporation or Identification No.) organization) 150 E. 58TH STREET, NEW YORK, NY 10022 (Address of principal executive offices)(Zip Code) (212) 421-8480 (Registrant's Telephone Number, Including Area Code) N/A (Former Name or Former Address, If Changed since Last Report.) ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Go West Entertainment, Inc. (b) Pro Forma Financial Information. (c) Exhibits 2.1 Acquisition Agreement dated March 11, 2002 by and among Registrant, Go West Entertainment Inc. and the shareholders of Go West Entertainment Inc. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly cause this Report to be signed on its behalf by the undersigned hereunto duly authorized. THE INTERNET ADVISORY CORPORATION Dated: May 28, 2002 By: /s/Richard Goldring -------------------------------------- Richard Goldring President & Chief Executive Officer 2 ITEM 7(a) FINANCIAL STATEMENT OF GO WEST ENTERTAINMENT, INC. Index to Financial Statements
PAGE ---- Independent Auditor's Report - Radin, Glass & Co., LLP ......................... 4 Balance Sheet as of December 31, 2001........................................... 5 Statement of Operations for the period May 11, 2001 (inception) to December 31, 2001................................................... 6 Statement of Shareholder's Deficiency for the period May 11, 2001 (inception) to December 31, 2001.......................... 7 Statement of Cash Flows for the period May 11, 2001 (inception) to December 31, 2001................................................... 8 Notes to Financial Statements................................................... 9
3 INDEPENDENT AUDITOR'S REPORT May 14, 2002 To the Board of Directors and Shareholders Go West Entertainment, Inc. We have audited the accompanying balance sheet of Go West Entertainment, Inc. as of December 31, 2001, and the related statement of operations, stockholders' deficiency and cash flows for period ended May 11, 2001 (inception) to December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Go West Entertainment, Inc. as of December 31, 2001 and the results of its operations and its cash flows for the period ended May 11, 2001 (inception) to December 31, 2001 in conformity with accounting principles generally accepted in the United States. Radin Glass & Co., LLP ---------------------------- Radin Glass & Co., LLP Certified Public Accountants New York, New York 4 GO WEST ENTERTAINMENT, INC. BALANCE SHEET DECEMBER 31, 2001
ASSETS ------ CURRENT ASSETS: Cash $- --------- Total Current Assets -- LEASEHOLD IMPROVEMENTS 17,338 SECURITY DEPOSIT 250,000 --------- $ 267,338 ========= LIABILITIES AND STOCKHOLDERS' DEFICIENCY ---------------------------------------- CURRENT LIABILITIES: Accounts payable 111,232 Loan payable - related party 263,255 --------- Total Current Liabilities 374,487 STOCKHOLDERS' DEFICIENCY Preferred stock, $.001 par value, 5,000,000 shares authorized -0- shares issued and outstanding -- Common stock, $.001 par value; 25,000,000 shares authorized, 7,500,000 issued and outstanding 7,500 Additional paid-in capital -- Deficit accumulated during development stage (114,649) --------- Total Stockholder's deficiency (107,149) --------- $ 267,338 =========
See notes to financial statements 5 GO WEST ENTERTAINMENT, INC. STATEMENT OF OPERATIONS
May 11, 2001 (inception) to December 31, 2001 NET SALES $- COST OF GOODS SOLD -- --------- GROSS PROFIT -- GENERAL AND ADMINISTRATIVE EXPENSES 114,638 --------- NET LOSS FROM OPERATIONS (114,638) INTEREST EXPENSE (11) --------- NET LOSS BEFORE INCOME TAXES (114,649) PROVISION FOR INCOME TAXES -- --------- NET LOSS $(114,649) =========
See notes to financial statements. 6 GO WEST ENTERTAINMENT, INC. STATEMENT OF STOCKHOLDER'S DEFICIENCY
Preferred Stock Common Stock Additional Total ---------------- ------------------- Paid in Accumulated Stockholders Shares Amount Shares Amount Capital Deficit Deficit ------ ------ --------- ------ ---------- --------- --------- Balance as of May 11, 2001 (inception) $ - - $ - $ - $ - $ - - Common stock issued to shareholders - 7,500,000 7,500 - - 7,500 - Net loss - - - - - (114,649) (114,649) ------ ------ --------- ------ ---------- --------- --------- Balance as of December 31, 2001 - $ - 7,500,000 $7,500 - $(114,649) $(107,149) ====== ====== ========= ====== ========== ========= =========
See notes to financial statements. 7 GO WEST ENTERTAINMENT, INC STATEMENT OF CASH FLOWS
May 11, 2001 (inception) to December 31, 2001 ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(114,649) Adjustments to reconcile net loss to net cash used in operating activities: Accounts payable 111,231 --------- NET CASH PROVIDED BY (USED) IN OPERATIONS (3,418) --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of capital expenditures (17,338) Security deposits (250,000) --------- NET CASH USED IN INVESTING ACTIVITIES (267,338) --------- CASH PROVIDED BY FINANCING ACTIVITIES: Common stock issued to shareholders 7,500 Loan payable - related party 263,255 --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 270,755 --------- NET INCREASE IN CASH (1) CASH, beginning of the period -- --------- CASH, end of the period $ (1) ========= Supplemental disclosures of cash flow information: Interest paid $ 11 Taxes paid --
8 GO WEST ENTERTAINMENT, INC. NOTES TO FINANCIAL STATEMENTS MAY 11, 2001 (INCEPTION) TO DECEMBER 31, 2001 NOTE 1. ORGANIZATION The Go West Entertainment, Inc. (the "Company") is a New York State corporation, formed in May 2001 and is located in New York, NY. The Company was established to own and operate upscale adult entertainment nightclubs. NOTE 2. CAPITALIZATION The Company has authorized 30,000,000 shares of stock of which 25,000,000 shares are designated as common stock and 5,000,000 shares as preferred stock. The preferred stock may be issued from time to time when expressly authorized by the Board of Directors. NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES Leasehold Improvements Leasehold improvements are stated at cost. Maintenance and repairs are charged to expenses as incurred. Depreciation is provided for over the estimated useful lives of the individual assets using straight-line methods. Income Taxes The Company utilizes the liability method of accounting for income taxes as set forth in SFAS 109, "Accounting for Income Taxes." Under the liability method, deferred taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Accounting Estimates and Assumptions The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to 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 9 GO WEST ENTERTAINMENT, INC. NOTES TO FINANCIAL STATEMENTS MAY 11, 2001 (INCEPTION) TO DECEMBER 31, 2001 amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments The carrying amounts reported in the balance sheet for cash, receivables, and accrued expenses approximate fair value based on the short-term maturity of these instruments. NOTE 4 LEASEHOLD IMPROVEMENTS At December 31, 2001, leasehold improvements consist of the following:
2001 Leasehold improvements $17,338 Less: accumulated depreciation - $17,338 -------
Leasehold improvements are depreciated over the life of the lease, which is 20 years. There was no depreciation expense for the year ended December 31, 2001. Note 5. Related-Party Transactions The Company entered into a License Agreement ("Agreement") dated August 15, 2001 and amended as of March 3, 2002 with a related party Heir Holding Co., Inc. ("Heir"). Heir is the owner of the property rights respecting the name "Scores" which is a recognized name in the adult entertainment industry. According to the terms of the Agreement, the Company has the right and license to use certain "Scores" trademarks in New York city in connection with the operation of up to three adult entertainment nightclubs and the retail sale of commercial merchandise. The Company is also obligated to pay annual royalty fee of $520,000 to Heir. As of December 31, 2001, the Company borrowed $263,255 from the related entities. The loan is payable on demand. 10 GO WEST ENTERTAINMENT, INC. NOTES TO FINANCIAL STATEMENTS MAY 11, 2001 (INCEPTION) TO DECEMBER 31, 2001 NOTE 6. INCOME TAXES As a result of the Company's net losses in 2001, no federal income taxes were paid. NOTE 7. OPERATING LEASES The Company is leasing office space pursuant to a lease agreement dated October 3, 2001 and commences June 1, 2002 for a twenty-year term with an option to buy the premises at any time prior to December 2003. The lease expires in February 2007. Go West is entitled to 50% base rental deferral in the first year or the period commencing on June 1, 2002 and ending the day operations begin if no default occurs. The amount deferred shall be payable as additional rent during the second year of operations. The future minimum annual lease commitments are as follows: 2002 $408,333 2003 728,000 2004 757,120 2005 787,405 2006 818,904
There was no rent expense for the year ended December 31, 2001. Pursuant to the terms of the lease, the Company is obligated to fund another $750,000 of security deposits by May 15, 2002. NOTE 8. SUBSEQUENT EVENT On March 11, 2002, the Company and its shareholders entered into an Acquisition Agreement ("Acquisition") with The Internet Advisory Corporation ("TIAC"). Pursuant to the Acquisition, TIAC acquires 7,500,000 shares of common stock owned by the shareholders of the Company in exchange for 10,000,000 shares of TIAC's common stock, making the Company a wholly owned subsidiary of TIAC. 11 ITEM 7(b) Pro Forma financial Statements (Unaudited) Index to Financial Statements
Page ---- Balance Sheet as of December 31, 2001 ......................... 13 Statement of Operations for the year ended December 31, 2001 .................................... 14 Notes to Financial Statements ................................. 15
12 PRO FORMA FINANCIAL INFORMATION (UNAUDITED) THE INTERNET ADVISORY CORPORATION AND SUBSIDIARIES PRO FORMA BALANCE SHEET DECEMBER 31, 2001
Pro-forma The Internet The Internet Advisory Go West Advisory Corporation Entertainment, Inc. Debits Credits Corporation ASSETS CURRENT ASSETS: Cash $ 18,626 $ - $ 18,626 Notes receivable 10,000 10,000 ---------- ----------- ----------- Total current assets 28,626 - 28,626 LEASEHOLD IMPROVEMENTS, FURNITURE AND EQUIPMENT, NET 48,763 17,338 66,101 REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS 9,814 - 9,814 SECURITY DEPOSITS 2,667 250,000 252,667 ---------- ----------- ----------- $ 89,870 $ 267,338 $ 357,208 ========== =========== =========== LIABILITIES AND DEFICIENCY IN ASSETS CURRENT LIABILITIES: Accounts payable $ - $ 111,232 $ 111,232 Related party payable 35,000 263,255 298,255 Current portion of prepetition debt 14,991 - 14,991 Current portion of prepetition debt-related party 6,875 - 6,875 Accrued expenses 94,124 - 94,124 ---------- ----------- ----------- Total current liabilities 150,990 374,487 525,477 PREPETITION LONG TERM DEBT 22,178 - 22,178 DEFICIENCY IN ASSETS Common stock 4,602 7,500 7,500 10,000 14,602 Additional paid in capital - - 7,500 7,500 - Deficit (87,900) (114,649) 2,500 (205,049) ---------- ----------- ----------- Total deficiency in assets (83,298) (107,149) (190,447) ---------- ----------- ----------- $ 89,870 $ 267,338 $ 357,208 ========== =========== ===========
See notes to Pro Forma Financial Statements for the acquisition of Go West Entertainment, Inc. 13 PRO FORMA FINANCIAL INFORMATION (UNAUDITED) THE INTERNET ADVISORY CORPORATION AND SUBSIDIARIES PRO FORM STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001
Pro-forma The Internet The Internet Advisory Go West Advisory Corporation Entertainment, Inc. Debits Credits Corporation NET SALES $ 300,026 $- $ 300,026 COST OF GOODS SOLD 89,290 -- 89,290 --------- --------- ---------- GROSS PROFIT 210,736 -- 210,736 GENERAL AND ADMINISTRATIVE EXPENSES 403,715 114,638 518,353 REORGANIZATION EXPENSES 73,231 -- 73,231 --------- --------- ---------- NET LOSS FROM OPERATIONS (266,210) (114,638) (380,848) OTHER INCOME (EXPENSE): Interest expense 257 11 268 --------- --------- ---------- NET LOSS BEFORE INCOME TAXES (266,467) (114,649) (381,116) PROVISION FOR INCOME TAXES 0 -- 0 --------- --------- ---------- NET LOSS BEFORE EXTRAORDINARY GAIN (266,467) (114,649) (381,116) EXTRAORDINARY GAIN ON BANKRUPTCY RESTRUCTURING NET OF $0 IN INCOME TAXES 443,195 -- 443,195 --------- --------- ---------- NET INCOME (LOSS) $ 176,728 $(114,649) $ 62,079 ========= ========= ========== Net loss per share before extraordinary gain $ (0.03) Net gain per share extraordinary gain $ 0.03 ---------- Net income per share $ 0.00 ========== Weighted average of common shares used in computation 14,601,794 ==========
See notes to Pro Forma Financial Statements for the acquisition of Go West Entertainment, Inc. 14 INTERNET ADVISORY CORPORATION AND SUBSIDIARIES NOTES TO PRO FORMA FINANCIAL STATEMENTS FOR THE ACQUISITION OF GO WEST ENTERTAINMENT, INC. (UNAUDITED) The accompanying unaudited pro forma financial statements have been in accordance with generally accepted accounting principles for pro-forma information and with the instructions to Form 8-K. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended December 31, 2001. 1. Business Transaction On March 11, 2002 the Company exchanged 10,000,000 shares of capital stock for all of the outstanding stock of Go West Entertainment, Inc. (Go West) whose primary asset is a lease on New York City retail space with a deposit of $750,000. Go West has had no operations. 2. Accounting Policy Due to related management and ownership of both Internet Advisory and Go West, for accounting purposes the transaction has been treated as a transaction between entities under common control as described in paragraphs D11 to D18 of Financial Accounting Standard 141 - Business Combinations. 3. Adjustments to Pro Forma financial statements The adjustments recorded for the pro forma financial statements are the elimination of the par value of the common stock of Go West for $7,500 and the par value of the common stock issued by Internet Advisory Corporation for $10,000. 4. Pro Forma financial statements for the stub period The pro forma financial statements for the stub period January 1, 2002 to March 31, 2002 have not been present since such financial data has been filed as the financial statements for the quarter ended March 31, 2002 with Form 10-QSB of Internet Advisory Corporation on May 20, 2002. The acquisition for the quarter ended March 31, 2002 for the Form 10-QSB has been recorded as of January 1, 2002 using the carrying values of the assets of each company as of that date due to the common control of the registrant and Go West. 15