Back to GetFilings.com
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 September 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 October 31, 2002, the registrant had outstanding 23,418,178 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 September 30, 2001 ("September 30, 2001 10-Q")
SITI-SITES.COM, INC.
FORM 10-Q
SEPTEMBER 30, 2002
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Information
Statement of Net Assets in Liquidation at September 30, 2002 (Unaudited)
and March 31, 2002............................................................................... 1
Statement of Changes in Net Assets in Liquidation (Unaudited) for the Three and Six Months Ended
September 30, 2002............................................................................... 2
Statement of Operations and Comprehensive Loss (Going Concern Basis) (Unaudited) for the Three
and Six Months Ended September 30, 2001.......................................................... 3
Statement of Cash Flows (Going Concern Basis) (Unaudited) for the Six Months Ended
September 30, 2001............................................................................... 4
Notes to Condensed Financial Statements (Unaudited).............................................. 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............................... 13
Item 4. Controls and Procedures.................................................................. 13
PART II. OTHER INFORMATION...................................................................... 13
Item 1. Legal Proceedings ....................................................................... 13
Item 6. Exhibits and Reports on Form 8-K......................................................... 14
PART I. FINANCIAL INFORMATION
SITI-Sites.com, Inc.
Statement of Net Assets in Liquidation
(Amounts in thousands)
September 30,
2002 March 31,
(Unaudited) 2002
- --------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 33 $ 39
Receivables and other assets 5 4
----------- -----------
Total current assets 38 43
----------- -----------
Total assets $ 38 $ 43
=========== ===========
Liabilities
Current Liabilities
Accounts payable and accrued liabilities $ 12 $ 32
----------- -----------
Total current liabilities 12 32
----------- -----------
Total liabilities 12 32
----------- -----------
Commitments and contingencies -- --
----------- -----------
Net Assets in Liquidation $ 26 $ 11
=========== ===========
See accompanying notes to consolidated financial statements
1
SITI-Sites.com, Inc.
Statement of Changes in Net Assets in Liquidation
Three and Six Months Ended September 30, 2002
(Amounts in thousands)
Three Months Ended Six Months Ended
September 30, 2002 September 30, 2002
(Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------
Net assets in liquidation at beginning of period $ (5) $ 11
Additions to net assets in liquidation:
Contribution of management's services and rent 46 92
Increase in receivables 4 4
Issuance of common stock 45 45
Reductions to net assets in liquidation:
Operating expenses and accrual of estimated
costs (64) (126)
---------------------------------
Net assets in liquidation at September 30, 2002 $ 26 $ 26
=================================
See accompanying notes to consolidated financial statements.
2
SITI-Sites.com, Inc.
Statement of Operations and Comprehensive Loss (Going Concern Basis)
Three and Six Months Ended September 30, 2001
(Amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended
September 30, 2001 September 30, 2001
(Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------
Revenues $ 1 $ 1
-------- --------
Operating costs and expenses:
Selling, general and administrative 207 592
-------- --------
Total operating costs and expenses 207 592
-------- --------
Operating loss (206) (591)
-------- --------
Other income, net 9 18
-------- --------
Loss from continuing operations (197) (573)
Loss from discontinued operations -- (44)
-------- --------
Net loss (197) (617)
Other comprehensive loss, net of tax -- (3)
-------- --------
Comprehensive loss $ (197) $ (620)
======== ========
Basic and diluted loss per common share:
Loss from continuing operations $ (.013) $ (.037)
Loss from discontinued operations .000 (.003)
-------- --------
Net loss per common share $ (.013) $ (.040)
======== ========
Weighted average number of Common Shares
used in basic and diluted calculation 15,517 15,517
======== ========
Interim results are not indicative of the results expected for a full year.
See accompanying notes to condensed financial statements.
3
SITI-Sites.com, Inc
Statement of Cash Flows (Going Concern Basis)
Six Months Ended September 30, 2001
(Amounts in thousands)
Six Months Ended
September 30, 2001
(Unaudited)
- ------------------------------------------------------------------------------------------
Cash flow from operating activities:
Net loss $(617)
Adjustments to reconcile net loss to net cash (used in) provided by
continuing activities:
Gain on sale of marketable securities (5)
Depreciation and amortization 21
Contribution of services by management 150
Loss on discontinued operations 44
(Increase) decrease in:
Receivables 3
Increase (decrease) in:
Accounts payable (5)
Accrued liabilities (50)
-----
Net cash used in continuing operations (459)
Net cash used in discontinued operations (123)
- ------------------------------------------------------------------------------------------
Net cash used in operating activities (582)
- ------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capitalization of Artist Promotion System (157)
Proceeds from sale of marketable securities 626
Purchase of property and equipment (2)
- ------------------------------------------------------------------------------------------
Net cash provided by investing activities 467
- ------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (115)
Cash and cash equivalents, beginning of year 326
- ------------------------------------------------------------------------------------------
Total cash and cash equivalents, end of quarter (including cash
amounts in net liabilities of discontinued operations) $ 211
=====
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, consisting 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.
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.
Other Financing. 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
5
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.
The Company Chairman/CEO Lawrence M. Powers, in order to finance ongoing
corporate expenses, purchased an additional 1,500,000 shares of common stock of
the Company as of October 23, 2002, at $.02 per share. (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 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 six months ended September 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. There were no net assets or liablilities as of
September 30, 2001.
6
Operating results from discontinued operations are as follows:
New York Expo:
Six months ended
Amounts in thousands September 30, 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)
============
(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 and six months ended September 30, 2001 were
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 and six
months ended September 30, 2001 were approximately 15,517,000, respectively.
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
7
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 and six months
ended September 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.
(l) TERRORIST ATTACK OF SEPTEMBER 11, 2001
Due to the Company's proximity to the terrorist attack on September
11, 2001 on the World Trade Center in New York City, the office was closed for
one week. All costs related to this attack were paid or accrued and were
included in operating costs and expenses for the six months ended September 30,
2001. The Company filed an insurance claim and the amount of the expense
recovery was approximately $8,000.
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.
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
------------------
Six months ended
September 30, 2001
------------------
(Amounts in thousands)
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 1
Non-cash transactions:
Contribution of salaries by management $ 150
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities were comprised of the following:
September 30, March 31,
2002 2002
-----------------------
(Amounts in thousands)
Accrued audit and tax fees $ 8 $ 25
Accounts payable and accrued
Expenses 4 7
-------- -------
$ 12 $ 32
======== =======
8
5. SUBSEQUENT EVENT (UNAUDITED)
The Company Chairman/CEO Lawrence M. Powers, in order to finance ongoing
corporate expenses, purchased an additional 1,500,000 shares of common stock of
the Company as of October 23, 2002, at $.02 per share. The Company's stock was
trading at $.02 per share for most of the three weeks preceding October 23, 2002
with nominal volume. The shares recently sold to Mr. Powers 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 purchaser, 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 October 28, 2002, the
Company's outstanding common stock increased as of such date from 21,918,178
shares to 23,418,178 shares.
The following table reflects the Proforma Effect of this financing transaction
on the Statement of Net Assets in Liquidation as of September 30, 2002:
Proforma Effect
on Statement of
Statement of Net Net Assets in
Assets in Liquidation
Liquidation September 30,
September 30, 2002 2002
(Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 33 $ 63
Receivables and other assets 5 5
-------- --------
Total current assets 38 68
-------- --------
Total assets $ 38 $ 68
======== ========
Liabilities
Current Liabilities
Accounts payable and accrued liabilities $ 12 $ 12
-------- --------
Total current liabilities 12 12
-------- --------
Total liabilities 12 12
-------- --------
Commitments and contingencies -- --
-------- --------
Net Assets in Liquidation $ 26 $ 56
======== ========
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 September 30, 2002 the Company had
net assets of approximately $26,000. 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 October 23,
2002, Chairman/CEO Powers invested an additional $30,000 in the Company,
resulting in the issuance of an additional 1,500,000 shares of common stock.
As of September 30, 2002, the Company's total assets were approximately
$38,000, represented primarily by cash. During the six months ended September
30, 2002, the Company paid approximately $126,000 in operating expenses
consisting primarily of management's contribution of their services and rent of
approximately $92,000. Accounting fees totaled $11,000 for the six months ended
September 30, 2002. Stock transfer agent fees totaled approximately $12,000 for
the six months ended September 30, 2002. Salary and related expenses to one
employee for the six months ended September 30, 2002 were approximately $7,000.
The remaining $4,000 in operating expenses paid during the six months ended
September 30, 2002 related primarily to general office expenses. As of September
30, 2002, the Company's liabilities were $12,000 consisting primarily of its
obligations for professional fees associated with its fiscal 2002 tax return.
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 $92,000 to compensation and rent.
LIQUIDATION BASIS OF ACCOUNTING
The condensed consolidated financial statements for the three and six
months ended September 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"
11
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.
The Company Chairman/CEO Lawrence M. Powers, in order to finance ongoing
corporate expenses, purchased an additional 1,500,000 shares of common stock of
the Company as of October 23, 2002, at $.02 per share. The Company's stock was
trading at $.02 per share for most of the three weeks preceding October 23, 2002
with nominal volume. The shares recently sold to Mr. Powers 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. The several other business risks to the
purchaser described above are continuing. As a result of this stock purchase
transaction completed October 28, 2002, the Company's outstanding common stock
increased as of such date from 21,918,178 shares to 23,418,178 shares.
The following table reflects the Proforma Effect of this financing transaction
on the Statement of Net Assets in Liquidation as of September 30, 2002:
Proforma Effect
on Statement of
Statement of Net Net Assets in
Assets in Liquidation
Liquidation September 30,
September 30, 2002 2002
(Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 33 $ 63
Receivables and other assets 5 5
--------- ---------
Total current assets 38 68
--------- ---------
Total assets $ 38 $ 68
========= =========
Liabilities
Current Liabilities
Accounts payable and accrued liabilities $ 12 $ 12
--------- ---------
Total current liabilities 12 12
--------- ---------
Total liabilities 12 12
--------- ---------
Commitments and contingencies -- --
--------- ---------
Net Assets in Liquidation $ 26 $ 56
========= =========
12
RESULTS OF OPERATIONS
Three months ended September 30, 2001.
For the three months ended September 30, 2001, the Company's revenues were
nominal.
Operating expenses in the three months ended September 30, 2001 totaled
approximately $207,000 which primarily included personnel and related expenses
of approximately $133,000 rent of approximately $23,000. Accounting and
insurance fees for the three months ended September 30, 2001 were approximately
$4,000 and $9,000, respectively. The remaining costs of approximately $38,000
represented ongoing office expenses while the Company maintained its New York
City facility.
Other income totaled approximately $9,000 for the three months ended
September 30, 2001 which included $1,000 attributable to interest income and
$8,000 related to a write-off of a previously accrued expense.
Six months ended September 30, 2001.
For the six months ended September 30, 2001, the Company's revenues were
nominal.
Operating expenses in the six months ended September 30, 2001 totaled
approximately $592,000 which primarily included personnel and related expenses
of approximately $374,000 and outside services of approximately $49,000. Rent
for the six months ended September 30, 2001 was approximately $44,000.
Accounting and insurance fees for the six months ended September 30, 2001 were
approximately $19,000 and $24,000, respectively. The remaining costs of
approximately $82,000 represented ongoing office expenses while the Company
maintained its New York City facility.
Other income totaled approximately $18,000 for the six months ended
September 30, 2001 which included $5,000 attributable to interest income; $5,000
related to a gain on the sale of marketable securities and $8,000 related to a
write-off of a previously accrued expense.
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.
ITEM 4. CONTROLS AND PROCEDURES
(a) The Company's principal executive officer and its principal financial
officer, based on their evaluation of the Company's disclosure controls and
procedures (as defined in Exchange Act Rules 13a -14 (c)) as of a date within 90
days prior to the filing of this Quarterly Report on Form 10-Q, have concluded
that the Company's disclosure controls and procedures are adequate and effective
for the purposes set forth in the definition in Exchange Act rules.
(b) There were no significant changes in the Company's internal controls
or in other factors that could significantly affect the Company's internal
controls subsequent to the date of their evaluation.
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.
13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit 99 Certification Purt 6 12 12 suant 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 six months ended
September 30, 2002.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
14
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: November 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
15
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
16