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, 2003
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.)
47 Beech Road, Englewood, New Jersey 07631
(Address of principal executive offices) (Zip Code)
111 Lake Avenue, Suite #7, Tuckahoe, New York 10707
(Address of Chief Financial Officer) (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 November 14, 2003, the registrant had outstanding 23,418,178 shares of its
Common Stock, par value $.001 per share, and trades under the symbol SITN.PK.
The following documents filed with the Securities and Exchange Commission
("SEC") are incorporated herein by reference:
(1) Annual Report to security holders on Form 10-K for the year ended
March 31, 2003 (the "Form 10-K for 2003");
(2) Annual Report to security holders on Form 10-K for the year ended
March 31, 2002 (the "Form 10-K for 2002");
(3) Annual Report to security holders on Form 10-K for the year ended
March 31, 2001 (the "Form 10-K for 2001");
(4) Annual Report to security holders on Form 10-K for the year ended
March 31, 2000 (the "Form 10-K for 2000");
(5) Quarterly Report to security holders on Form 10-Q for the quarter
ended September 30, 2002 ("September 30, 2002 Form 10-Q")
SITI-SITES.COM, INC.
FORM 10-Q
SEPTEMBER 30, 2003
PART I. FINANCIAL INFORMATION Page No.
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Item 1. Financial Information
Statement of Net Assets in Liquidation at September 30, 2003 (Unaudited) and March 31, 2003...... 1
Statement of Changes in Net Assets (Liabilities) in Liquidation (Unaudited) for the Three and Six
Months Ended September 30, 2003 and September 30, 2002........................................... 2
Notes to Condensed Financial Statements (Unaudited).............................................. 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Status of Liquidation........................................................................ 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................... 9
Item 4. Controls and Procedures.................................................................. 9
PART II. OTHER INFORMATION...................................................................... 9
Item 1. Legal Proceedings ....................................................................... 9
Item 5. Other Information ....................................................................... 9
Item 6. Exhibits and Reports on Form 8-K......................................................... 10
PART I. FINANCIAL INFORMATION
SITI-Sites.com, Inc.
Statement of Net Assets in Liquidation
(Amounts in thousands)
September 30, March 31,
2003 2003
(Unaudited)
- ----------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 12 $ 36
Receivables and other assets -- 5
-------- --------
Total current assets 12 41
======== ========
Total assets $ 12 $ 41
-------- --------
Liabilities
Current Liabilities
Accounts payable and accrued liabilities $ 9 $ 13
-------- --------
Total current liabilities 9 13
-------- --------
Total liabilities 9 13
-------- --------
Commitments and contingencies -- --
-------- --------
Net Assets in Liquidation
$ 3 $ 28
======== ========
See accompanying notes to consolidated financial statements.
1
SITI-Sites.com, Inc.
Statement of Changes in Net Assets in Liquidation
September September
30, 2003 30, 2002
Three months ended (Unaudited) (Unaudited)
-------------- --------------
(Amounts in thousands)
Net assets (liabilities) in liquidation beginning of period $ 17 $ (5)
Additions to net assets in liquidation:
Contribution of management's services and rent 38 46
Increase in receivables 4
Issuance of common stock 45
Reductions to net assets in liquidation:
Operating expenses and accrual of estimated costs (52) (64)
-------------- --------------
Net assets in liquidation at end of period 3 $ 26
============== ==============
SITI-Sites.com, Inc.
Statement of Changes in Net Assets in Liquidation
September September
30, 2003 30, 2002
Six months ended (Unaudited) (Unaudited)
-------------- --------------
(Amounts in thousands)
Net assets in liquidation beginning of period $ 28 $ 11
Additions to net assets in liquidation:
Contribution of management's services and rent 76 92
Increase in receivables 4
Issuance of common stock 45
Reductions to net assets in liquidation:
Operating expenses and accrual of estimated costs (101) (126)
-------------- --------------
Net assets in liquidation at end of period $ 3 $ 26
============== ==============
See accompanying notes to consolidated financial statements.
2
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.
Asset 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 continues to seek 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. Several
such transactions have been discussed in 2002 and 2003, but none of them have
gone to completion. The format the Company now plans to use is to form a
subsidiary, "reverse merge" a suitable candidate into such subsidiary and then
distribute the Company's shares retained therein (ranging from 15% to 5%,
depending on the business involved) to all of the
3
Company's shareholders under a full S-1 Registration Statement filed with the
SEC. The candidates so far have not had the capital base, or lacked other
factors justifying this type of transaction. But the format enables the Company
to handle several such transactions if their business merit justifies "going
public" in this manner.
In October and November, 2003 Lawrence M. Powers, Chairman/CEO made
two loans to the Company for a total of $22,000, maturing October 30, 2004, at
6% interest per annum, payable with principal at maturity. The funding is to
finance ongoing activity of the Company.
Other 2002-2003 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 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, 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 smaller companies "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. 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 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.
As a result of the asset liquidation and reasons discussed below, the
Company's management has determined that it is an "inactive entity" under SEC
accounting rules (See "Form 10-K for 2003, Item 1. Business - Inactive Entity"),
and is not therefore required to file audited financial statements. This step
conserves working capital. The Company meets all of the criteria as set forth
below except as noted:
(a) Gross receipts from all sources for the fiscal year ended March
31, 2003 were not in excess of $100,000;
(b) The registrant has not purchased or sold any of its own stock,
granted options therefore, or levied assessments upon outstanding stock; (1)
(c) Expenditures for all purposes for the fiscal year ended March
31, 2003 were not in excess of $100,000; (2)
(d) No material change in the business has occurred during the
fiscal year, including any bankruptcy, reorganization, readjustment or
succession or any material acquisition or disposition of plants, mines, mining
equipment, mine rights or leases; and
(e) No exchange upon which the shares are listed, or governmental
authority having jurisdiction, requires the furnishing to it or the publication
of audited financial statements.
(1) During the last fiscal year, the Company had no source of funding to
cover its expenses which were almost entirely audit and stock transfer expenses,
Chairman/CEO Powers, who may be deemed to beneficially own approximately 48% of
the Company's outstanding stock, and another investor provided funding to the
Company. All of
4
the shares issued are legended and neither investor, has any intention of
selling the stock publicly in the foreseeable future. (See "Form 10-K for 2003,
Item 1. Business - Inactive Entity")
(2) Operating expenses of approximately $260,000 include approximately
$185,000 of contributed services and rent. The Company recorded such $185,000 as
a contribution of capital because there was no cash outlay for such expenses.
Audited financial statements are planned to be resumed when an appropriate
"reverse merger" transaction justifies the expense. The Company expects to
continue filing unaudited quarterly and annual financial statements with the
SEC.
(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 were 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 asset 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
For a full discussion of the Company's recent history refer to Form
10-K for 2003, Form 10-K for 2002 and Form 10-K for 2001, incorporated herein by
reference.
(d) 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.
(e) 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.
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. In December,
5
2002 the Company was sued for $3,750 in Civil Court, New York City by MetTel, a
former supplier of Internet access service. In the opinion of the Company's
general counsel (Lawrence M. Powers) the claim lacks merit and substance, and
the Company should prevail in this litigation, without material adverse effect.
Nine months after "pro-forma" service of a summons, the claimant has still not
pursued its claim by docketing it in Court or replying to the Company's
counterclaim showing payment in full in November, 2001.
Defaults by EZCD.com as to its investment representations, and its
content and technology sharing agreement with the Company in 2000 have been
resolved in the EZCD.com bankruptcy liquidation, and the Company expects only a
$35,000 recovery. There is little likelihood of any further recovery.
From time to time since 1998, the Company had been a party to other
legal disputes incidental and not material to its business. Counsel have also
been investigating a substantial claim on behalf of the Company, which could
result in its starting litigation, which will be disclosed in subsequent SEC
filings as the initial legal work is completed.
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities were comprised of the
following:
September 30, March 31,
2003 2003
----------------------------
(Amounts in thousands)
Accrued professional fees $ 2 $ 11
Accounts payable and accrued
Expenses 7 2
-------- ------
$ 9 $ 13
======== ======
4. SUBSEQUENT EVENT
In October and November, 2003 Lawrence M. Powers, Chairman/CEO made
two loans to the Company for a total of $22,000, maturing October 30, 2004, at
6% interest per annum, payable with principal at maturity. The funding is to
finance ongoing activity of the Company.
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, 2003. 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
6
TO TIME WITH THE SEC, 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. (See "Financing") The Company was an Internet media company
from 1999 through 2001, 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 (which had a substantial
public audience for its daily news and articles) and its HungryBands divisions,
because they were still 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 its second 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.PK".
In view of the Company's determination to seek other business
opportunities to create shareholder value, the following information 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 Asset Liquidation).
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, 2003 and 2002, the
Company had net assets of $3,000 and $26,000, respectively.
As of September 30, 2003, the Company's total assets were $12,000,
represented entirely by cash. During the three and six months ended September
30, 2003, the Company paid approximately $49,000 and $52,000, respectively, in
operating expenses consisting primarily of its stock transfer agent fees and
salary to one employee of approximately $12,000 and $6,000, respectively, as
well as management's contribution of their services of approximately $62,000.
As of September 30, 2003, the Company's liabilities were $9,000 consisting
primarily of its obligations for professional fees associated with its fiscal
2003 year end "agreed upon accounting procedures". 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 $77,000 to compensation
and rent for the six months ended September 30, 2003.
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
7
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 months ended
June 30, 2002 were prepared on the liquidation basis of accounting. 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 asset 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.
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 were 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
asset 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 could ultimately be distributable to
shareholders and no assurance can be given that the amount to be received in
asset liquidation will equal or exceed the net assets in liquidation per share
in the accompanying Statement of Net Assets in Liquidation, or the 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 , "Item 1 - Risk Factors That
May Affect the Company's Business, Future Operating Results and Financial
Condition." and "Status of Asset Liquidation" set forth herein.
8
STATUS OF ASSET LIQUIDATION
SITI continues to seek merger or sale possibilities with operating
businesses who perceive value in a merger with the Company as a publicly traded
corporate shell. There can be no assurance these of any merger or sale occurring
or such transaction will be viable for the Company. There are also several other
business risks to the purchasers, because the Company has no ongoing operations,
has liquidated its assets, 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.(See "Financing")
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk disclosures set forth in its fiscal 2003 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 Securities 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
Securities Exchange Act of 1934 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. In December, 2002 the
Company was sued for $3,750 in Civil Court, New York City by MetTel, a former
supplier of Internet access service. In the opinion of the Company's general
counsel (Lawrence M. Powers) the claim lacks merit and substance, and the
Company should prevail in this litigation, without material adverse effect. Nine
months after "pro-forma" service of a summons, the claimant has still not
pursued its claim by docketing it in Court or replying to the Company's
counterclaim showing payment in full in November, 2001.
Defaults by EZCD.com as to its investment representations, and its
content and technology sharing agreement with the Company in 2000 have been
resolved in the EZCD.com bankruptcy liquidation, and the Company expects only a
$35,000 recovery. There is little likelihood of any further recovery.
From time to time since 1998, the Company had been a party to other
legal disputes incidental and not material to its business. Counsel have also
been investigating a substantial claim on behalf of the Company, which could
result in its starting litigation, which will be disclosed in subsequent SEC
filings as the initial legal work is completed.
9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit 31 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 32 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
On July 15,2003, the Company filed Form 8-K announcing at "Item 4.
Change in the Registrant's Certifying Accountant", the Company's
termination of McGladrey & Pullen, LLP as its auditors as a result
of the Company's "inactive" status under SEC accounting rules. The
Company presently intends to continue filing interim, quarterly and
annual statements, under SEC rules, but without audit, until such
time as it enters into any business transaction which justifies
resumption of audited financial statements.
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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, 2003
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
11