UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] Quarterly Report Pursuant to Section 13 or 15(d)
Securities Exchange Act of 1934
for Quarterly Period Ended March 31, 2003
-OR-
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities And Exchange Act of 1934
for the transaction period from ___________ to _________
Commission File Number 333-70663
CONNECTIVCORP
(formerly known as Spinrocket.com, Inc.)
(Exact name of registrant as specified in its charter)
Delaware 06-1529524
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
750 Lexington Avenue, 24th Floor, New York, New York 10022
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(Address of principal executive offices, Zip Code)
(212) 750-5858
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(Registrant's telephone number, including area code)
Check whether the issuer (1) 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 [ ]
The number of outstanding shares of the registrant's common stock, par value
$.001 as of May 15, 2003 is 11,077,061.
CONNECTIVCORP AND SUBSIDIARIES
FORM 10-QSB
THREE MONTHS ENDED MARCH 31, 2003
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet ...................................................................3
Consolidated Statements of Operations.........................................................4
Consolidated Statements of Cash Flows.........................................................5
Notes To Consolidated Financial Statements ...................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................9
Item 3. Controls and Procedures................................................................................11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ............................................................................11
Item 2. Changes in Securities and Use of Proceeds..............................................................11
Item 3. Defaults Upon Senior Securities........................................................................11
Item 4. Submission of Matters to a Vote of Security Holders....................................................11
Item 5. Other Information ............................................................................11
Item 6. Exhibits and Reports on Form 8-K.......................................................................12
Signatures.............................................................................................12
Certifications.........................................................................................13
2
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
CONNECTIVCORP
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31,
2003
----------------------------
ASSETS
--------
CURRENT ASSETS:
Cash and cash equivalents $ 131,443
Prepaid expenses 4,954
----------------------------
Total Assets $ 136,397
============================
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 460,245
Loans payable 175,000
Loans payable - officers 20,134
----------------------------
Total Current Liabilities 655,379
----------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Preferred Stock, $.001 par value
10,000,000 shares authorized, Series D , none issued -
Common Stock, $.001 per value
40,000,000 shares authorized, 11,077,061 issued and outstanding 11,077
Additional paid in capital 19,598,628
Accumulated deficit (20,088,687)
----------------------------
(478,982)
Less: stock subscription receivable (40,000)
----------------------------
Total Stockholders' Deficit 518,982
----------------------------
Total Liabilities and Stockholders' Deficit $ 136,397
============================
The accompanying notes are an integral part of these consolidated statements.
3
CONNECTIVCORP
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
2003 2002
------------------------------- -------------------------------
Revenues $ - $ 3,500
General and administrative expenses (144,155) (290,658)
------------------------------- -------------------------------
Operating loss (144,155) (287,158)
Interest income - 153
------------------------------- -------------------------------
Net loss $ (144,155) $ (287,005)
=============================== ===============================
Net loss per common share- basic and diluted $ (0.01) $ (0.07)
=============================== ===============================
Weighted average shares outstanding:
basic and diluted 11,077,061 4,252,350
=============================== ===============================
The accompanying notes are an integral part of these consolidated statements.
All share and per share amounts have been adjusted to reflect the 1 for 10
reverse stock split in March 2002.
4
CONNECTIVCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
2003 2002
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(144,155) $(287,005)
Adjustments to reconcile net loss
to net cash used in operating activities:
Stock-based compensation - 153,872
Changes in assets and liabilities:
Prepaid expenses (4,954) (3,067)
Accounts payable and accrued expenses 92,175 (6,557)
----------------- ------------------
Net cash used in operating activities (56,934) (142,757)
----------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 95,000
Proceeds from loans payable 150,000 -
Proceeds from loans payable - officers 20,134 -
----------------- -------------------
Net cash provided by financing activities 170,134 95,000
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NET CHANGE IN CASH AND CASH EQUIVALENTS 113,200 (47,757)
CASH AND CASH EQUIVALENTS, beginning of period 18,243 89,861
----------------- -------------------
CASH AND CASH EQUIVALENTS, end of period $ 131,443 $ 42,104
================= ===================
NON-CASH INVESTING AND FINANCING ACTIVITIES
Stock issued in satisfaction of accounts payable $ - $42,292
================= ===================
The accompanying notes are an integral part of these consolidated statements.
All share and per share amounts have been adjusted to reflect the 1 for 10
reverse stock split in March 2002.
5
CONNECTIVCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
Note 1 - Basis of Presentation
As used in these financial statements, the term the "Company" refers to
ConnectivCorp and its consolidated subsidiaries.
The accompanying unaudited and unreviewed consolidated financial statements
of the Company have been prepared pursuant to the rules of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with U.S.
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Form 10-KSB. In the
opinion of management, the accompanying consolidated financial statements
reflect all adjustments, which are of a normal recurring nature, necessary
for a fair presentation of the results for the periods presented.
The results of operations presented for the three months ended March 31,
2003, are not necessarily indicative of the results to be expected for the
year ending December 31, 2003.
Note 2 - Net Loss Per Common Share
Basic net loss per common share ("Basic EPS") is computed by dividing net
loss by the weighted average number of common shares outstanding. Diluted
net income per common share ("Diluted EPS") is computed by dividing net
income by the weighted average number of common shares and dilutive common
share equivalents then outstanding.
Basic and Diluted EPS are the same for the three months ended March 31,
2003 and 2002, as Diluted EPS does not include the impact of stock options
and warrants then outstanding, as the effect of their inclusion would be
antidilutive.
The following table summarizes the equivalent number of common shares
assuming the related options and warrants that were outstanding as of March
31, 2003 and 2002 had been converted. These were not included in the
calculation of diluted loss per share, as such shares are antidilutive:
2003 2002
------------------ -------------------
Stock options - -
Warrants 146,608 146,608
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Common Stock Equivalents 146,608 146,608
================== ===================
Options to purchase 10,333 and 479,613 shares of common stock, and warrants
to purchase 26,863 and 387,911 shares of common stock for the three months
ended March 31, 2003 and 2002, respectively, were not included in the above
table because the exercise price of those options and warrants were greater
than the average market price of the common shares. The options and
warrants were still outstanding at the end of the period.
6
CONNECTIVCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
Note 3 - Loans payable - shareholders
During the three months ended March 31, 2003, officers of the Company have
advanced $20,134. The loans bear interest at 6%.
Note 4 - Loans payable
During March 2003, the Company entered into a loan agreement of $150,000.
The loan is convertible under certain conditions into common stock of the
Company at $0.10 per share. The Company is in the process of continuing to
raise capital either through the private placement of equity or debt.
Note 5 - Accounting for Stock Based Compensation
Effective January 1, 2003, the Company adopted the fair value recognition
provisions of Statement of Financial Accounting Standards ("FAS") No. 123,
"Accounting for Stock-Based Compensation" prospectively to all employee
awards granted, modified, or settled after January 1, 2003. Prior to 2003,
the Company accounted for stock-based employee compensation under the
recognition and measurement provisions of APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. No stock-based
employee compensation cost is reflected in 2003 and 2002 net income, as no
awards were granted during the three month periods ended March 31, 2003 and
2002. The following table illustrates the effect on net loss and loss per
share as if the fair value based method had been applied to all outstanding
and unvested awards in each period.
2003 2002
------------- ----------------
Net loss - as reported ($144,155) (287,005)
Net loss - Pro-forma ($144,155) (222,501)
Basic and diluted loss
Per common share
As reported $(0.01) $(0.07)
Pro-forma $(0.01) $(0.07)
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's Financial Statements and the notes thereto appearing
elsewhere in this report. This report contains statements that constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company cautions that forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from the
statements that constitute forward-looking statements as a result of
various factors.
The Company was incorporated in Delaware on May 8, 1998 under the name "SMD
Group, Inc." In January 1999, the Company changed its name to "CDbeat.com,
Inc." On April 19, 2000, the Company's name was changed to "Spinrocket.com,
Inc." On September 11, 2000, the Company changed its name from
Spinrocket.com, Inc. to "ConnectivCorp" because this new name better
described the Company's then strategic direction. The Company's business
model was to facilitate the online connection between targeted, profiled
consumers and marketers desiring to reach those consumers. As its initial
focus, the Company formed a new wholly-owned subsidiary, ConnectivHealth,
in order to facilitate its connectivity model in the healthcare field.
UNCERTAINTY
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has a limited
operating history, and since its inception in 1998 has incurred substantial
losses. The Company's accumulated deficit as of March 31, 2003 is
approximately $20 million. To date, the Company has not generated any
revenue from its previously proposed business model, which contemplated
selling pharmaceutical and other healthcare companies access to the
Company's aggregated users. The Company incurred a net loss of
approximately $144 thousand and $287 thousand for the three months ended
March 31, 2003 and 2002, respectively, while cash and cash equivalents at
March 31, 2003 totaled approximately $131,000. These matters raise
substantial doubt about the Company's ability to continue as a going
concern. The Company's continued existence is dependent upon several
factors including the Company's ability to raise additional equity or
locate a merger or business partner.
The following discussion and analysis compares the results of the Company's
continuing operations for the Three Months ended March 31, 2003 and March
31, 2002.
ACCOUNTING POLICIES
The following accounting policies are important to an understanding of the
operating results and financial condition of the Company and should be
considered as an integral part of the financial review. For additional
accounting policies, see Note 1 to the consolidated financial statements,
"Significant Accounting Policies."
ESTIMATES AND ASSUMPTIONS
-------------------------
In preparing the financial information, the Company used some estimates and
assumptions that may affect reported amounts and disclosures. Estimates are
used when accounting for depreciation, amortization, impairment of assets
and asset valuation allowances. We are also subject to risks and
9
uncertainties that may cause actual results to differ from estimated
results, such as legislation, regulation and the ability to obtain
financing. Certain of these risks and uncertainties are discussed elsewhere
in Management's Discussion and Analysis.
THREE MONTHS ENDED MARCH 31, 2003
---------------------------------
The Company generated no revenues from operation during the three months
ended March 31, 2003.
For the three months ended March 31, 2003 and 2002, the Company reported
the following:
Net loss $ (144,155) $ (287,005)
========================= =========================
Net loss per common share- basic and diluted $ (0.01) $ (0.07)
========================= =========================
For the three months ended March 31,2003, the Company reported a net loss
of $144,155. General and administrative expenses include expenses of
approximately $26,400 for professional fees; $80,600 for salary and related
expenses, $1,000 for insurance, $7,500 for rent, $800 for interest and
$27,900 of office expenses.
For the three months ended March 31,2002, the Company reported a net loss
of $287,005. General and administrative expenses include expenses of
approximately $8,300 for professional fees; $60,500 for salary and related
expenses, $94,000 for consultants, $26,000 for insurance, $7,500 for rent
and $64,000 for compensation costs recognized in connection with stock
options.
THREE MONTHS ENDED MARCH 31, 2002
--------------------------------
The Company generated $3,500 in revenues from operations during the three
months ended March 31, 2002.
For the three months ended March 31, 2002 and 2001, the Company reported
the following:
Net loss $ $
(287,005) (1,074,340)
========================= =========================
Net loss per common share- basic and diluted $ (0.07) $ (0.50)
========================= =========================
For the three months ended March 31,2002, the Company reported a net loss
of $287,005. General and administrative expenses include expenses of
approximately $8,300 for professional fees; $60,500 for salary and related
expenses, $94,000 for consultants, $26,000 for insurance, $7,500 for rent
and $64,000 for compensation costs recognized in connection with stock
options.
For the three months ended March 31, 2001, the Company reported a loss from
continuing operations of $1,074,340. General and administrative expenses
include expenses of which approximately $59,000 for professional fees;
$120,000 for salary-related expenses, $274,000 for consultants, $250,000
for amortization of acquired software, magazines and goodwill, and $234,000
for compensation costs recognized in connection with stock options issued.
10
LIQUIDITY AND CAPITAL RESOURCES
In the three months ended March 31, 2003, $56,934 of cash was used in
operating activities. Funds were used to pay the Company's operating
expenses. $170,134 of cash was generated from the proceeds loans from an
outside third party and officers of the Company.
ITEM 3 - CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
------------------------------------------------
Our chief executive officer and chief financial officer have
reviewed and evaluated the effectiveness of our disclosure controls
and procedures (as defined in Rules 13a-14 and 15d-14 under the
Securities Exchange Act of 1934 (the "Exchange Act")), as of a date
within ninety days before the filing of this quarterly report.
Based on that evaluation, the chief executive officer and chief
financial officer have concluded that our current disclosure
controls and procedures are effective to ensure that information
required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the Commission's
rules and forms.
CHANGES IN INTERNAL CONTROLS.
----------------------------
There have not been any significant changes in our internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation. There were no
significant deficiencies or material weakness in the internal
controls, and therefore no corrective actions were taken.
PART II -- OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5 - OTHER INFORMATION
None
11
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Not applicable
(b) Reports on Form 8-K
On April 11, 2003, the Company filed a report on Form 8-K
regarding the appointment of Israeloff, Trattner & Co.
P.C. as its independent certified public accountants for
the resignation of Patrusky, Mintz & Semel.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
CONNECTIVCORP
Dated: May 15, 2003 by: /S/ ELLIOT GOLDMAN
------------------
Elliot Goldman
President and Chief Executive Officer
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CERTIFICATION
-------------
I, Elliot Goldman, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of ConnectivCorp;
2.Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3.Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the period presented in this
quarterly report;
4.The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b)evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusion about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5.The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the
registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b)any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6.The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: May 15, 2003
/S/ ELLIOT GOLDMAN
--------------------
Elliot Goldman
President and Chief Operating Officer
13
CERTIFICATION
I, Robert Ellin, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of ConnectivCorp;
2.Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3.Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the period presented in this
quarterly report;
4.The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b)evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusion about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5.The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the
registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b)any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6.The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: May 15, 2003
/S/ ROBERT ELLIN
------------------
Robert Ellin
Chairman
14