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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, 2004
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 8, 2004, the registrant had outstanding 24,778,178 shares of its
Common Stock, par value $.001 per share.
The following documents are incorporated herein by reference:
(1) Quarterly Report to security holders on Form 10-Q for the quarter
ended June 30, 2004 ("June 2004 10-Q");
(2) Annual Report to security holders on Form 10-K for the year ended
March 31, 2004 (the "Form 10-K for 2004");
(3) Annual Report to security holders on Form 10-K for the year ended
March 31, 2003 (the "Form 10-K for 2003");
(4) Annual Report to security holders on Form 10-K for the year ended
March 31, 2002 (the "Form 10-K for 2002");
(5) Annual Report to security holders on Form 10-K for the year ended
March 31, 2001 (the "Form 10-K for 2001");
SITI-SITES.COM, INC.
FORM 10-Q
SEPTEMBER 30, 2004
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Information
Statement of Net Assets in Liquidation at September 30, 2004 (Unaudited) and March 31, 2004...... 1
Statement of Changes in Net Assets (Liabilities) in Liquidation (Unaudited) for the Three and Six
Months Ended September 30, 2004 and September 30, 2003........................................... 2
Notes to Condensed Financial Statements (Unaudited).............................................. 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Status of Liquidation........................................................................ 7
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 ....................................................................... 10
Item 6. Exhibits and Reports on Form 8-K......................................................... 11
PART I. FINANCIAL INFORMATION
SITI-Sites.com, Inc.
Statement of Net Assets in Liquidation
(Amounts in thousands)
September 30, March 31,
2004 2004
(Unaudited)
- ------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 28 $ 34
Receivables and other assets 2 --
------ ------
Total current assets 30 34
------ ------
Total assets $ 30 $ 35
------ ------
Liabilities
Current Liabilities
Accounts payable and accrued liabilities $ 7 $ 5
------ ------
Total current liabilities 7 5
------ ------
Total liabilities 7 5
------ ------
Commitments and contingencies -- --
------ ------
Net Assets in Liquidation $ 23 $ 29
====== ======
See accompanying notes to consolidated financial statements.
1
SITI-Sites.com, Inc.
Statement of Changes in Net Assets in Liquidation
September September
30, 2004 30, 2003
Three months ended (Unaudited) (Unaudited)
--------------------------
(Amounts in thousands)
Net assets in liquidation beginning of period $ 50 $ 17
Additions to net assets in liquidation:
Contribution of management's services and rent 38 38
Collection of a claim 30
Issuance of common stock 3
Reductions to net assets in liquidation:
Operating expenses and accrual of estimated costs (66) (52)
-------------------
Net assets in liquidation at end of period $ 23 $ 3
===================
SITI-Sites.com, Inc.
Statement of Changes in Net Assets in Liquidation
September September
30, 2004 30, 2003
Six months ended (Unaudited) (Unaudited)
--------------------------
(Amounts in thousands)
Net assets in liquidation beginning of period $ 29 $ 28
Additions to net assets in liquidation:
Contribution of management's services and rent 76 76
Increase in receivables 31
Issuance of common stock 3
Reductions to net assets in liquidation:
Operating expenses and accrual of estimated costs (116) (101)
-------------------
Net assets in liquidation at end of period $ 23 $ 3
===================
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 their inception
in 1999. Following conclusion of the second fiscal quarter ended September 30,
2001, management of the Company commenced procedures 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. 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 41,500 shares,
exercisable at prices ranging from $1.69 to $2.15 per share, expiring in 2007.
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. Other financings of this type followed 2002-2004 described below.
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 - 2004, 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 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 such transactions more than once, if their
business merit justifies "going public" in this manner.
3
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 was to
finance ongoing activity of the Company.
The most recent financing occurred in January-February, 2004. The major
investors in the Company agreed to provide an additional $63,000 in equity
funds, consisting of $41,000 in cash, and the cancellation and conversion to
common stock of the Chairman/CEO's recent loans of $22,000. The total financing
was applied to the purchase of 1,260,000 shares of common stock at $.05 per
share by these major investors. This stock purchase transaction did not complete
until June, 2004.
The financing was to cover ongoing corporate expenses, including major
litigation filed by the Company in November, 2003 against former attorneys and
executives to recover proceeds from its former cell-phone patents. See
"Litigation". There were 24,778,178 shares of common stock outstanding as of
June 30, 2004 as a result of all financings completed through such date. A
similar financing is planned in November - December of 2004.
Previous 2002-2004 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.
Depressed stock market conditions for smaller companies "going public" in 2002 -
2004 increased 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.
The most recent $63,000 equity financing in January-February, 2004,
described above, was negotiated when the common stock of the Company had been
trading ( at nominal volume) for several months at $.07 per share, but as of
February 6, 2004 the common stock was trading at $.05 per share, and that price
was used to complete the financing, resulting in the 1,260,000 new shares being
issued. The shares being sold to major 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. As earlier stated, such factors generally
result in substantial discounts in purchase value.
The several other business risks to the purchasers described in all
earlier financings above, are also continuing. Those risks are increased by the
ongoing cash costs of the patent recovery litigation, which will continue for a
substantial period and require more major investor financing. The future risks
to all shareholders further include a "one-third contingent fee agreement",
based solely on results achieved, with Special Litigation Counsel, Green, Schaaf
& Jacobson for handling the litigation through trial and appeal. This
arrangement, while currently advantageous to the Company, will necessarily
reduce any net proceeds to the Company from the litigation. See "Litigation".
The Company's Chairman/CEO Powers, who is also General Counsel to the
Company, has been active in the lengthy investigation in the suit. He will
continue to spend substantial time working closely with litigation counsel as
this matter continues, without charging any current cash fees for his own time
and commitment. At the conclusion of the
4
matter, he will review the results achieved with the Company's other major
investors and the board of directors, and make reasonable charges for his legal
services.
Audited Financial Statements. 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 also "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 years ended March 31,
2004 and 2003 were not in excess of $100,000;
(b) For fiscal 2003 and 2004, 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 years ended March 31,
2004 and 2003 were not in excess of $100,000; (2)
(d) No material change in the business has occurred during the 2003 and
2004 fiscal years, 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 two fiscal years, 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 other existing
investors provided funding to the Company. All of the shares issued are legended
and none of the investors, has any intention of selling the stock publicly in
the foreseeable future. (See also "Form 10-K for 2004, Item 1. Business -
Inactive Entity")
(2) For fiscal 2003, operating expenses of approximately $260,000 included
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. For fiscal 2004, operating expenses of approximately $216,000
included approximately $155,000 of contributed services and rent which were
recorded as contributions of capital because there was no cash outlay for such
expenses.
Audited financial statements are planned to be resumed when events or
transactions justify 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 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
5
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
For a full discussion of the Company's recent history refer to Form 10-K
for 2004, Form 10-K for 2003 and Form 10-K for 2002, 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
The Company filed a civil suit in the United States District Court for the
Southern District of New York on November 12, 2003, withdrawn in April, 2004 and
re-filed in New York State Supreme Court in New York County, Commercial
Division. The Company's Complaint alleges that its patent attorneys and
departing patent licensing executives, in late 1998 and thereafter, purchased
its valuable patents on cell-phone technology for $24,000 by concealing their
nature and value. The defendants have realized at least $10 million in gross
proceeds therefrom, to date.
The Company's claims arise from a period when it was previously named
Spectrum Information Technologies, Inc. The claims all stem from the alleged
breach of fiduciary duties by the defendants. The claims were under
investigation by the Company under counsel's supervision, in the second half of
2003. The Company is seeking damages in excess of $10 million, a court-ordered
trust on future proceeds from its former patents and return of the patents.
This is complex litigation, expected to be contested vigorously by several
defense firms and to continue for several years. No assurance can be given as to
the ultimate outcome thereof. Martin M. Green, Esq. and his firm of Green,
Schaaf & Jacobson, P.C. based in Clayton, Missouri, have been retained as the
Company's Special Counsel, for the litigation and ultimate trial of this matter.
The Company has retained Gary Cooper, Esq. and Cooper & McCann, LLP. as its New
York Counsel.
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.
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 in May 2004, recovered
approximately $30,000. There is no further recovery expected.
6
From time to time since 1998, the Company had been a party to other legal
disputes incidental and not material to its business.
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities were comprised of the following:
September 30, March 31,
2004 2004
------------------------
(Amounts in thousands)
Accrued professional fees $ 4 $ 2
Accounts payable and accrued
Expenses 3 3
------- ------
$ 7 $ 5
======= ======
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, 2004. 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
7
did business as EZCD.com, which thereafter went into a 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 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, 2004 and 2003, the
Company had net assets of approximately $23,000 and $3,000, respectively.
As of September 30, 2004 the Company's total assets were $30,000,
represented primarily by cash and a receivable of $1,800 from the Company's
Chief Financial officer as part of a payment plan for the purchase of stock.
During the six months ended September 30, 2004, the Company paid approximately
$116,000 in operating expenses consisting primarily of its stock transfer agent
fees and salary to one employee of approximately $12,000 and $7,500,
respectively, as well as management's contribution of their services of
approximately $60,000. Furthermore, the company incurred approximately $15,000
in legal fees for the six months ended September 30, 2004.
As of September 30, 2004, the Company's had approximately $7,000 in
liabilities. Such liabilities were to the Company's attorney as well as transfer
agent. 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 $76,000 to compensation and rent for the six months ended
September 30, 2004.
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, continued to work without any cash compensation. Management
further continued 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
LIQUIDATION BASIS OF ACCOUNTING
The condensed consolidated financial statements for the three months ended
June 30, 2004 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 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 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
8
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 , "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
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 any purchasers of Company stock, 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 stock market
conditions for "going public" increase the difficulties in arranging any such
transactions.
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 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
The Company filed a civil suit in the United States District Court for the
Southern District of New York on November 12, 2003, withdrawn in April, 2004 and
re-filed in New York State Supreme Court in New York County, Commercial
Division. The Company's Complaint alleges that its patent attorneys and
departing patent licensing executives, in late 1998 and thereafter, purchased
its valuable patents on cell-phone technology for $24,000 by concealing their
nature and value. The defendants have realized at least $10 million in gross
proceeds therefrom, to date.
The Company's claims arise from a period when it was previously named
Spectrum Information Technologies, Inc. The claims all stem from the alleged
breach of fiduciary duties by the defendants. The claims were under
investigation by the Company under counsel's supervision, in the second half of
2003. The Company is seeking damages in excess of $10 million, a court-ordered
trust on future proceeds from its former patents and return of the patents.
This is complex litigation, expected to be contested vigorously by several
defense firms and to continue for several years. No assurance can be given as to
the ultimate outcome thereof. Martin M. Green, Esq. and his firm of Green,
Schaaf & Jacobson, P.C. based in Clayton, Missouri, have been retained as the
Company's Special Counsel, for the litigation and ultimate trial of this matter.
The Company has retained Gary Cooper, Esq. and Cooper & McCann, LLP. as its New
York Counsel.
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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.
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 in May 2004, recovered
approximately $30,000. There is no further recovery expected.
From time to time since 1998, the Company had been a party to other legal
disputes incidental and not material to its business.
ITEM 2. CHANGES IN SECURITIES AND ITEM 5. OTHER INFORMATION
Effective May 5, 2004, Robert Ingenito resigned from the Board of
Directors of SITI. He stated that his resignation was due to other commitments,
and that he felt he could not devote the proper amount of time needed for the
activities of SITI. His services to the Company over the past five years were
substantial, and the remaining officers and directors expressed their gratitude
for his commitment and his efforts. The two remaining members of the Board
elected Toni Ann Tantillo as a Director of the Company. Ms. Tantillo is a
Certified Public Accountant in New York, and has been effectively handling
accounting, regulatory filings and other business matters for the Company for
the past eight years. She has been its Chief Financial Officer since 1999; is
also its Vice-President, Secretary and Treasurer; and she worked as an
independent consultant to SITI after its change of control in December, 1998.
She was also the controller of SITI from 1995 to December, 1998 under its prior
management. Ms. Tantillo age 37 has conducted her own private accounting
practice since 1998. Her client base and experience includes an international
public relations firm, an importer/exporter of steel, a publication firm and
many small businesses.
In connection with her services as a Director, Ms. Tantillo purchased
100,000 shares of SITI common stock at $.03 per share, its current trading
price, payable over ten months.
Effective August 11, 2004, Barclay V. Powers resigned from the Board of
Directors of Siti. He informed Chairman/CEO Lawrence Powers that he had other
career commitments and interests that made it difficult for him to commit the
time needed for briefing and interaction on Siti's future business activities.
His services to the Company since October, 1999 were substantial, and the two
remaining members of the Board of Directors expressed their gratitude for his
commitment and efforts over these years.
The remaining directors elected Gladys Powers a director as of August 11,
2004. Gladys Powers has been married to the Chairman/CEO 49 years. She is 77
years old and is generally familiar with all of the Company's activities as a
result of regular briefings by Mr. Powers, and her occasional help in reviewing
drafts of many Company materials and his published articles for Siti over the
past five years. She is a trained author, having earlier written several
television dramatic plays, documentaries and stage plays, with several New York
workshops and a substantial Off-Broadway production. She received her B.A. at
the University of Washington in Seattle, attended graduate literature and
writing programs at Oxford, the Sorbonne, at Columbia University and in a
fellowship at the Yale Drama School. She is currently working on screen plays at
her home offices. Mrs. Powers is expected to be an active participant in the
business of the Board of Directors because of her substantial stock interest in
Siti through Lawrence Powers and her son, Barclay. Her shareholder interest is
coupled with her knowledge of all present Company activity, and her experience
in reviewing with Mr. Powers his various business ventures, and knowing his
partners and associates, over a lengthy career since 1956.
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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 August 11, 2004, the Company filed Form 8-K announcing at "Item
10. Directors and Officers of the Registrant", the resignation of
Barclay Powers from the Board and the appointment of Gladys Powers
to the Board.
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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 12, 2004
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
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