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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2006
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File Number: 0-21419
clickNsettle.com, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 23-2753988
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
990 Stewart Avenue, First Floor
GARDEN CITY, NEW YORK 11530
(Address of Principal Executive Offices)
(516) 794-8950
(Issuer'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 past 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 is a shell company (as defined in
Rule 12b-2 of the Exchange Act) . Yes |X| No |_|
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of November 9, 2006, 9,929,212
shares of common stock of the issuer were outstanding.
Transitional Small Business Disclosure Format Yes |_| No |X|
1
CLICKNSETTLE.COM, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
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ITEM 1. FINANCIAL STATEMENTS
Balance Sheets at September 30, 2006 (unaudited)
and June 30, 2006 3
Statements of Operations for the three month periods
ended September 30, 2006 and 2005 (unaudited) 4
Statements of Changes in Stockholders' Equity
for the three month periods ended September 30,
2006 and 2005 (unaudited) 5
Statements of Cash Flows for the three month periods
ended September 30, 2006 and 2005 (unaudited) 6
Notes to Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 8
ITEM 3. CONTROLS AND PROCEDURES 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 15
2
clickNsettle.com, Inc.
BALANCE SHEETS
September 30, June 30,
2006 2006
------------- -----------------
(derived from
audited financial
statements)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 108,003 $ 129,220
Prepaid expenses and other current assets 6,999 12,278
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$ 115,002 $ 141,498
============= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,831 $ 8,073
Accrued expenses and other liabilities 12,520 16,500
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Total current liabilities 15,351 24,573
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COMMITMENTS AND CONTINGENCIES (See Notes)
STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value; 5,000,000 shares authorized;
0 shares issued
Common stock - $.001 par value; 25,000,000 shares authorized;
10,181,704 shares issued 10,182 10,182
Additional paid-in capital 10,220,557 10,212,757
Accumulated deficit (10,047,170) (10,022,096)
Common stock in treasury at cost, 252,492 shares (83,918) (83,918)
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Total stockholders' equity 99,651 116,925
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$ 115,002 $ 141,498
============= =================
The accompanying notes are an integral part of these statements.
3
clickNsettle.com, Inc.
STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended September 30,
2006 2005
----------- -----------
Net revenues -- --
General and administrative expenses $ 26,392 40,853
Interest income, net 1,318 1,398
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NET LOSS $ (25,074) $ (39,455)
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Net loss per common share - basic and diluted $ (0.00) $ (0.00)
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Weighted-average shares outstanding - basic and diluted 9,929,212 9,929,056
=========== ===========
The accompanying notes are an integral part of these statements.
4
clickNsettle.com, Inc.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Three months ended September 30, 2006 and 2005 (unaudited)
Common stock Additional Common Total
--------------------- paid-in Accumulated stock in stockholders'
Shares Amount capital deficit treasury equity
---------- -------- ------------ ------------ --------- -------------
Balances at July 1, 2005 10,181,554 $ 10,182 $ 10,179,757 $ (9,929,292) $ (83,918) $ 176,729
Imputed contribution to capital for
accounting services provided by Buyer 20,000 20,000
Net loss (39,455) (39,455)
---------- -------- ------------ ------------ --------- -------------
Balances at September 30, 2005 10,181,554 $ 10,182 $ 10,199,757 $ (9,968,747) $ (83,918) $ 157,274
========== ======== ============ ============ ========= =============
Balances at July 1, 2006 10,181,554 $ 10,182 $ 10,212,757 $(10,022,096) $ (83,918) $ 116,925
Increase in shares issued due to
reconciliation with transfer agent 150
Imputed contribution to capital for
accounting services provided by Buyer 7,800 7,800
Net loss (25,074) (25,074)
---------- -------- ------------ ------------ --------- -------------
Balances at September 30, 2006 10,181,704 $ 10,182 $ 10,220,557 $(10,047,170) $ (83,918) $ 99,651
========== ======== ============ ============ ========= =============
The accompanying notes are an integral part of these statements.
5
clickNsettle.com, Inc.
STATEMENTS OF CASH FLOWS (unaudited)
Three months ended September 30,
2006 2005
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Cash flows from operating activities
Net loss $ (25,074) $ (39,455)
Adjustments to reconcile net loss to net cash used in operating
activities
Imputed contribution to capital for accounting services provided by Buyer 7,800 20,000
Changes in operating assets and liabilities
Decrease in prepaid expenses and other current assets 5,279 16,996
(Decrease) in amount due to related party buyer of discontinued operations -- (429,100)
(Decrease) in accounts payable, accrued expenses and other liabilities (9,222) (50,630)
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Net cash used in operating activities (21,217) (482,189)
Cash flows from investing activities
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Net cash provided by investing activities -- --
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Cash flows from financing activities
--------- ---------
Net cash provided by financing activities -- --
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NET DECREASE IN CASH AND CASH EQUIVALENTS (21,217) (482,189)
Cash and cash equivalents at beginning of period 129,220 870,684
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Cash and cash equivalents at end of period $ 108,003 $ 388,495
========= =========
The accompanying notes are an integral part of these statements.
6
CLICKNSETTLE.COM, INC.
Notes to Financial Statements
Three months ended September 30, 2006 and 2005 (Unaudited)
1. The balance sheet as of September 30, 2006 and the related statements of
operations for the three month periods ended September 30, 2006 and 2005 have
been prepared by clickNsettle.com, Inc. without audit. In the opinion of
management, all adjustments necessary to present fairly the financial statements
as of September 30, 2006 and for the periods presented, consisting of normal
recurring adjustments, have been made. Results of operations for the three month
period ended September 30, 2006 are not necessarily indicative of the operating
results expected for the full year.
These financial statements should be read in conjunction with the financial
statements and notes thereto for the year ended June 30, 2006 included in the
Company's Annual Report on Form 10-KSB. The accounting policies used in
preparing these financial statements are the same as those described in the June
30, 2006 financial statements.
As a result of continued losses, limited cash and other resources and the
uncertainty as to the Company's ability to effect a merger or a similar
transaction with the intent to acquire a different operating business (see Note
2), there is substantial doubt about the Company's ability to continue as a
going concern. The Company's independent auditors have included a going concern
paragraph in their report on the June 30, 2006 and 2005 financial statements
which have been prepared assuming the Company will continue as a going concern.
The accompanying financial statements do not include any adjustments that may
result should the Company be unable to continue as a going concern.
2. On January 13, 2005, the Company sold the assets of its dispute resolution
business (the "ADR business") to National Arbitration and Mediation, Inc. (the
"Buyer"), a company owned by the Company's Chief Executive Officer, Roy Israel.
In consideration, the Buyer assumed all current and future liabilities and
commitments of the ADR business. Specifically, the Company was released from its
lease agreements for office space in Great Neck and Brooklyn, New York and from
its employment agreements with its President and Chief Financial Officer.
Additionally, the Buyer has guaranteed the payments due on the remainder of the
Company's automobile lease and paid all the remaining payments on the lease of a
postage meter. The Company remained contingently liable for payables and other
obligations assumed by the Buyer of approximately $115,200 as of September 30,
2006.
Since the consummation of the sale, the Company has no operating business.
Currently, the Company is actively searching for a new operating business to
acquire or to enter into a merger transaction. There can be no assurances that
an operating entity will be acquired or that a merger transaction will be
consummated.
3. Basic earnings (loss) per share are based on the weighted average number of
common shares outstanding without consideration of potential common stock.
Diluted earnings (loss) per share are based on the weighted-average number of
common and potential common shares outstanding. The calculation takes into
account the shares that may be issued upon exercise of stock options and
warrants, reduced by the shares that may be repurchased with the funds received
from the exercise, based on the average price during the period. Diluted
earnings (loss) per share is the same as basic earnings (loss) per share as
potential common shares of 433,974 and 448,974 at September 30, 2006 and 2005,
respectively, would be antidilutive, as the Company incurred net losses for the
three month periods ended September 30, 2006 and 2005.
7
4. In December 2004, the FASB issued Statement of Financial Accounting Standard
No. 123 (R), "Share-based Payment" ("SFAS No. 123R"). SFAS No. 123 (R)
establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. This statement focuses
primarily on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. SFAS No. 123 (R) requires that the
fair value of such equity instruments be recognized as an expense in the
historical financial statements as services are performed. Prior to SFAS No. 123
(R), only certain pro forma disclosures of fair value were required. The Company
adopted SFAS No. 123 (R) as of July 1, 2006. The adoption of this statement did
not have a material impact on the financial statements of the Company as the
Company has not issued any stock options since June 30, 2004. Additionally, the
Company's Incentive and Nonqualified Stock Option Plan automatically terminated
on April 1, 2006 and therefore no additional options may be issued pursuant to
this Plan.
5. There are no items of comprehensive income (loss) other than net income
(loss).
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
From time to time, including in this quarterly report on Form 10-QSB,
clickNsettle.com, Inc. (the "Company" or "we") may publish forward-looking
statements relating to such matters as anticipated financial performance,
business prospects, future operations, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, we note that a variety of factors could cause
our actual results to differ materially from the anticipated results or other
expectations expressed in our forward-looking statements.
RISK FACTORS
We face risks. These risks include those described below and may
include additional risks of which we are not currently aware or which we
currently do not believe are material. If any of the events or circumstances
described in the following risks actually occur, our financial condition or
results of operations could be adversely affected. These risks should be read in
conjunction with the other information set forth in this report.
We do Not have an Operating Business and if the Company Acquires a New Business,
the Shareholders will Suffer Significant Dilution
On January 13, 2005, the Company sold its ADR business. The Company is
searching for an operating entity to acquire or to enter into a merger
transaction. There can be no assurances that an operating entity will be
acquired or that a merger transaction will be consummated. Also, the cash
retained by the Company may not be sufficient to pay for the costs associated
with continued public reporting obligations and to acquire a new operating
business or to enter into a merger transaction. In addition, if the Company
acquires a new operating business or enters into a merger transaction, it is
expected that such transaction will be accomplished by the issuance of stock of
the Company, resulting in significant dilution.
8
We have No Revenues but we Continue to have Costs and Expenses and we have Going
Concern Considerations
There has not been any revenue since January 13, 2005. If we do not
acquire another operating business, no future revenues will be generated.
Moreover, the Company will continue to incur costs for continued public
reporting obligations. It is likely that in order to acquire a new operating
business or to enter into a merger transaction, costs will be incurred. There
can be no assurances that the cash on hand will be sufficient to cover such
costs. Therefore, the results of our operations and our financial condition may
be materially and adversely affected.
The Company's independent auditors have included a going concern
paragraph in their report on the June 30, 2006 and 2005 consolidated financial
statements which have been prepared assuming the Company will continue as a
going concern. As a result of continued losses, limited cash and other resources
and the uncertainty as to the Company's ability to effect a merger or a similar
transaction with the intent to acquire a different operating business, there is
substantial doubt about the Company's ability to continue as a going concern.
Our Current Stockholders Have the Ability to Exert Significant Control
Our executive officers, directors, and their affiliates beneficially
own 5,148,646 shares or approximately 51.85% of the common stock outstanding
based on 9,929,212 shares of common stock outstanding as of November 9, 2006. Of
that number, Mr. Israel, our CEO, beneficially owns 3,525,788 shares or
approximately 35.5% of the common stock. As a result, these stockholders acting
in concert may have significant influence on votes to elect or remove any or all
of our directors and to control substantially all corporate activities in which
we are involved, including tender offers, mergers, proxy contests or other
purchases of common stock.
Our Common Stock is Traded on the NASD OTC Electronic Bulletin Board and is
subject to the Penny Stock Rules
Trading in our securities has been conducted in the
over-the-counter market in the NASD's OTC Electronic Bulletin Board. As a
result, an investor may find it more difficult to purchase, dispose of and
obtain accurate quotations as to the value of our securities.
In addition, as the trading price of our common stock has been
less than $5.00 per share, trading in our common stock is also subject to the
requirements of Rule 15g-9 under the Securities Exchange Act of 1934. Under that
rule, broker/dealers who recommend such low-priced securities to persons other
than established customers and accredited investors must satisfy special sales
practice requirements, including (a) a requirement that they make an
individualized written suitability determination for the purchaser and (b)
receive the purchaser's written consent prior to the transaction.
The Securities Enforcement Remedies and Penny Stock Reform Act
of 1990 also requires additional disclosure in connection with any trades
involving a stock defined as a penny stock (generally, any equity security not
traded on an exchange or quoted on The NASDAQ SmallCap Market that has a market
price of less than $5.00 per share), including the delivery, prior to any penny
stock transaction, of a disclosure schedule explaining the penny stock market
and the risks associated therewith. Such requirements could severely limit the
market liquidity of our securities and the ability of stockholders to sell their
securities in the secondary market.
9
RESULTS OF OPERATIONS
Overview
Since the consummation of the sale, the Company has no operating
business. Currently, the Company is actively searching for a different operating
business to acquire or to enter into a merger transaction. There can be no
assurances that an operating entity will be acquired or that a merger
transaction will be consummated.
Selection of a Business
The Company is now considering business opportunities either through
merger or merger transactions that might create value for our stockholders. We
have no day-to-day operations at the present time. The officers and directors of
the Company devote limited time and attention to the affairs of the Company. The
Company may have to wait some time before consummating a suitable transaction.
The Company does not intend to restrict its consideration to any particular
business or industry segment.
However, due to the Company's limited financial resources, the scope
and number of suitable business venture candidates available is limited. The
decision to participate in a specific business opportunity will be made upon
management's analysis of the quality of the other firm's management and
personnel, the anticipated acceptability of its products or marketing concepts,
the merits of its technology and numerous other factors. Since the Company may
participate in a business opportunity with a newly organized business or with a
business which is entering a new phase of growth, the Company may incur risk due
to the failure of the target's management to be effective or the failure to
establish a market for the target's products or services or the failure to
realize profits.
Acquisition of a Business
With respect to any mergers or acquisitions, negotiations with target
company management will be expected to focus on the percentage of the Company
that target company stockholders would acquire in exchange for their
stockholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, the Company's stockholders will in all
likelihood hold a substantially lesser percentage ownership interest in the
Company following any merger or acquisition. The percentage ownership may be
subject to significant reduction in the event that the Company acquires a target
company with substantial assets. Typically, in these transactions, which are
commonly called reverse merger acquisitions, voting control of the merged
company changes from the stockholders of the pre-existing public company to
those of the previously privately owned company. Any merger or acquisition
effected by the Company can be expected to have a significant dilutive effect on
the percentage of shares held by the Company's stockholders immediately
preceding the transaction.
First Quarter Ended September 30, 2006 Compared to First Quarter Ended September
30, 2005
General and administrative expenses. General and administrative
expenses declined to $26,392 for the three months ended September 30, 2006 from
$40,853 for the three months ended September 30, 2005. In general, the Company
incurred such expenses in order to maintain its existence as a publicly traded
entity including its public reporting obligations even though no revenues are
being generated. Such expenses include insurance, audit, legal fees and the cost
of accounting services that were contributed by National Arbitration and
Mediation, Inc. ("the Buyer") pursuant to the purchase agreement. Such
accounting services, valued at $7,800 for the quarter ended September 30, 2006
and $20,000 for the quarter ended September 30, 2005, were performed from July 1
through September 30 of each respective year and included the preparation of the
annual financial statements and related Securities and Exchange Commission (the
"SEC") filings. Such value has been recorded as an imputed charge on the
statement of operations with an equivalent offset to additional paid-in capital.
The cost of the accounting services declined as less time was spent in the
current year period as the Company had pure shell operations as opposed to in
the prior year period when the financial statements being issued at that time
included operations and the sale of the ADR business.
10
Interest income, net. Net interest income remained relatively unchanged
at $1,318 for the quarter ended September 30, 2006 from $1,398 for the quarter
ended September 30, 2005.
Income Taxes. Tax benefits resulting from net losses incurred for the
three months ended September 30, 2006 and 2005 were not recognized as the
Company's annual effective tax rate was estimated to be 0%.
Net Loss. For the three months ended September 30, 2006, we had a net
loss of $25,074 as compared to a net loss of $39,455 for the three months ended
September 30, 2005. The loss decreased as the Company was able to secure reduced
fees for professional services, etc., and reduced its insurance coverage as it
no longer has an operating business.
Liquidity and Capital Resources
At September 30, 2006, the Company had a working capital surplus of
$99,651 as compared to $116,925 at June 30, 2006. The decrease in working
capital occurred primarily as a result of the net loss. The Company has no
operating business.
Net cash used in operating activities was $21,217 for the three months
ended September 30, 2006 versus $482,189 for the three months ended September
30, 2005. Cash used in operations decreased by $460,972 principally because, in
the prior period, the Company paid down a large portion of the amount due to the
Buyer of the ADR operations in August 2005.
In both periods, there was no net cash provided by/used by investing
activities nor was there any net cash provided by/used by financing activities.
Since the consummation of the sale, the Company has no operating
business. Currently, the Company is actively searching for a different operating
business to acquire or to enter into a merger transaction. There can be no
assurances that an operating entity will be acquired or that a merger
transaction will be consummated.
As a result of continued losses, limited cash and other resources and
the uncertainty as to the Company's ability to effect a merger or a similar
transaction with the intent to acquire a different operating business, there is
substantial doubt about the Company's ability to continue as a going concern.
The Company's independent auditors have included a going concern paragraph in
their report on the June 30, 2006 and 2005 consolidated financial statements
which have been prepared assuming the Company will continue as a going concern.
The accompanying consolidated financial statements do not include any
adjustments that may result should the Company be unable to continue as a going
concern.
11
Item 3. CONTROLS AND PROCEDURES
Our disclosure controls and procedures are designed to ensure
that material information relating to the Company are made known to our Chief
Executive Officer ("CEO"), Chief Financial Officer ("CFO") and others in the
Company involved in the preparation of this quarterly report, by others within
the Company. Our CEO and CFO have reviewed our disclosure controls and
procedures within 90 days prior to the filing of this quarterly report and have
concluded that they are effective. There were no significant changes in our
internal controls or other factors that could significantly affect our internal
controls subsequent to the last date they were reviewed by our CEO and CFO.
12
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
Number Description of Document
3.1 (a) Certificate of Incorporation, as amended (1)
3.1 (d) Certificate of Amendment of Certificate of Incorporation (3)
3.1 (e) Certificate of Amendment of Certificate of Incorporation, as
amended (4)
3.1 (f) Certificate of Amendment of Certificate of Incorporation,
second amendment (5)
3.2 By-Laws of the Company, as amended (2)
10.1 1996 Stock Option Plan, amended and restated (2)
31.1 Rule 13a-14(a)/15d-14(a) Certification (CEO)**
31.2 Rule 13a-14(a)/15d-14(a) Certification (CFO)**
32.1 Section 1350 Certification (CEO)**
32.2 Section 1350 Certification (CFO)**
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(1) Incorporated herein in its entirety by reference to the Company's
Registration Statement on Form SB-2, Registration No. 333-9493, as filed
with the Securities and Exchange Commission on August 2, 1996.
(2) Incorporated herein in its entirety by reference to the Company's 1998
Annual Report on Form 10-KSB.
(3) Incorporated herein in its entirety by reference to the Company's Form
8-K filed on June 21, 2000.
(4) Incorporated herein in its entirety by reference to the Company's 2001
Annual Report on Form 10-KSB.
13
(5) Incorporated herein in its entirety by reference to the Company's 2004
Annual Report on Form 10-KSB.
** Filed herewith.
B. Reports on Form 8-K:
None.
14
SIGNATURES
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.
clickNsettle.com, Inc.
Date: November 9, 2006 By: /s/_Roy Israel
------------------------------------------
Roy Israel, Chairman of the
Board, CEO and President
Date: November 9, 2006 By: /s/ Patricia Giuliani-Rheaume
------------------------------------------
Patricia Giuliani-Rheaume, Vice President,
Chief Financial Officer and Treasurer
15