UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
AMENDMENT NO. 1
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities exchange Act of 1934
For the quarterly period ended June 30, 2004
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to ___________.
Commission File Number: 33-23473
CORDIA CORPORATION
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Nevada 11-2917728
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(State or Other Jurisdiction of
(I.R.S. Employer Identification No.)
Incorporation or Organization)
2500 Silverstar Road, Suite 500, Orlando, Florida 32804
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(Address of Principal Executive Offices)
866-777-7777
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(Issuer's Telephone Number, Including Area Code)
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of Aug 6, 2004, there were 4,541,210 shares of the issuer's common stock outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
Item 1. Financial Statements.
CORDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2004 2003
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(unaudited)
ASSETS
Current Assets
Cash $ 104,424 $ 111,288
Accounts receivable, less allowance for doubtful accounts of
$153,251 (2004) and $111,167 (2003) 1,051,504 600,840
Prepaid expenses and other current assets 282,341
193,157
Loans receivable from affiliates - 30,000
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TOTAL CURRENT ASSETS 1,438,269
935,285
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Property and equipment at cost
Office equipment 128,403 39,759
Less: Accumulated depreciation 28,273 10,241
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NET PROPERTY AND EQUIPMENT 100,130 29,518
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Other Assets
Notes Receivable - 595,000
Security Deposits 49,064 77,414
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TOTAL OTHER ASSETS 49,064 672,414
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TOTAL ASSETS $1,587,463 $ 1,637,217
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued expenses $2,097,091 $ 1,427,576
Unearned income 206,363 181,763
Loans payable to affiliates 28,074 8,074
Loans payable-other 57,000 57,000
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TOTAL CURRENT LIABILITIES 2,388,528 1,674,413
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Commitments and Contingencies
Stockholders' Equity (Deficit)
Preferred stock, $.001 par value; 5,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $.001 par value; <R>100,000,000</R> shares authorized,
4,541,210 (2004) and 6,156,211 (2003) shares issued and outstanding 4,541 6,156
Additional paid-in capital 3,660,087 4,271,622
Accumulated deficit (4,440,693) (4,289,974)
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(776,065) (12,196)
Less Treasury stock, 10,000 common shares at cost (25,000) (25,000)
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TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (801,065) (37,196)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 1,587,463 $ 1,637,217
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See notes to condensed consolidated financial statements.
#
CORDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Six Months Ended For the Three Months Ended
June 30, June 30,
2004 2003 2004 2003
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Revenues
Telecommunications Revenue $ 3,397,671 $ 1,380,817 $ 1,818,242 $ 776,243
Other 315,716 58,593 126,713 40,575
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3,713,387 1,439,410 1,944,955 816,818
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Operating Expenses
Resale and wholesale line charges 1,598,381 664,141 802,611 366,950
Payroll and payroll taxes 946,267 346,509 473,283 185,393
Advertising and promotion 648,331 310,506 342,016 239,342
Professional and consulting fees 81,352 183,061 34,856 70,299
Depreciation 18,032 2,779 9,012 1,531
Insurance 80,131 34,331 37,815 16,265
Office expense 39,907 20,427 20,115 11,849
Telephone 43,596 29,834 27,179 16,065
Rent and building maintenance 78,715 27,883 41,570 14,113
Other selling, general and administrative 322,393 212,999 166,286 118,295
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3,857,105 1,832,470 1,954,743 1,040,102
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Operating Loss (143,718) (393,060) (9,788) (223,284)
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Other Income (Expenses)
Gain on investments - 3,750 - 950
Interest income (expense) (5,746) 6,767 (2,705) 3,471
Other expenses (1,255) - (1,100) -
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(7,001) 10,517 (3,805) 4,421
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Loss From Continuing Operations (150,719) (382,543) (13,593) (218,863)
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Income (Loss) from Discontinued Operations
Gain on Disposal of subsidiary - 1,554,306 - -
Loss from operations of discontinued
Segments - (140,726) - -
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- 1,413,580 - -
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Net (Loss) Income $ (150,719) $ 1,031,037 $ (13,593) $ (218,863)
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Basic and diluted Income(Loss) per Share $ (0.03) $ 0.18 $ (0.003) $ (0.04)
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Weighted Average Shares Outstanding 4,968,577 5,792,747 4,534,512 5,811,973
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See notes to condensed consolidated financial statements.
#
CORDIA CORPORAT1ION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended
June 30,
2004 2003
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Cash Flows From Operating Activities
Net(loss) from continuing operations $ (150,719) $ (382,543)
Adjustments to reconcile net(loss) to net cash
provided (used) by operations:
(Gain)on investments - (3,750)
Compensatory stock expense 45,600 104,704
Provision for bad debts 42,084 43,974
Depreciation expense 18,032 2,779
(Increase) decrease in assets:
Accounts receivable (492,748) (318,063)
Other receivables - 76,082
Prepaid expenses and other current assets (122,934) (67,047)
Security deposits 28,350 (28,173)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 669,515 420,457
Unearned income 24,600 130,963
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Net cash provided by continuing operations 61,780 20,617
Net cash (used) by discontinued operations - (79,029)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 61,780 (99,646)
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Cash Flows From Investing Activities
Decrease in other loans receivable - 1,750
Proceeds from sale of investments - 6,550
Purchase of property and equipment (88,644) -
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NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (88,644) 8,300
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Cash Flows From Financing Activities
Net Proceeds from issuance and subscription of common stock - 38,500
Proceeds from loans payable to affiliates 20,000 48,372
Payment of loans payable to affiliates - (10,248)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 20,000 76,624
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(Decrease) in Cash (6,864) (14,722)
Cash, Beginning 111,288 70,243
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Cash, Ending $ 104,424 $ 55,521
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Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest $ 5,746 $ 2,705
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Non Cash Items:
Stock received by Company to satisfy:
Note receivable due of $595,000;
Accrued interest on note receivable of $33,750; License fee payments due of $30,000 $ 658,750
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See notes to condensed consolidated financial statements.
#
Note 1: Basis of Presentation
Our unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-QSB and do not include all of the information and disclosures required by accounting principals generally accepted in the United States of America. Therefore, these financial statements should be read in conjunction with the financial statements and related footnotes included in our Annual Report on Form 10-KSB for the most recent year-end. These financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly state the results for the interim periods reported. The results of operations for the three and six month periods ended June 30, 2004 are not necessarily indicative of the results to be expected for the full year.
The consolidated financial statements include the accounts of Cordia Corporation (“Cordia”) and the accounts of our wholly owned subsidiaries Cordia Communications Corp. (“CCC”), My Tel Co, Inc (“My Tel”), and CordiaIP Corp. for the six months and three months ended June 30, 2004. The consolidated financial statements include the accounts of Cordia and CCC for the six and three months ended June 30, 2003 and Cordia’s discontinued business ISG Group, Inc (“ISG”) and its subsidiaries (Universal Recoveries, Inc. and U.L.A.E., Inc., both wholly-owned) for the period January 1, 2003 through March 3, 2003 (date of disposal). Cordia Corporation and its subsidiaries are collectively referred to herein as the “Company.” All material intercompany balances and transactions have been eliminated.
These consolidated financial statements have been prepared assuming that Cordia and its subsidiaries (“the Company”) will continue as a going concern. The company has incurred substantial losses since its inception and also has a negative working capital and deficiency in stockholders’ equity as of June 30, 2004. These conditions raise substantial doubt about the company’s ability to continue as a going concern. As discussed in Note 3, during 2003, the company sold its interest in ISG. As a result of this transaction, the Company’s stockholders’ equity increased by approximately $1,556,000. The company disposed of business segments that historically generated net losses and working capital deficiencies. In addition the company’s remaining business segment, CCC, was profitable in 2003 and for the three and six months ended June 30, 2004. Accordingly, management believes that the Company will be able to generate sufficient cashflows to meet its obligations as they come due during 2004. Management of the Company also intends to seek additional sources of capital, which sources may include public or private sales of the Company’s securities and additional borrowings from affiliates and non-affiliates. Given current market conditions, there is no guarantee that the Company will be able to obtain such funding when needed, or that such funding, if available, will be obtainable on acceptable terms. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2: Investments
Cordia did not have any investments to report at June 30, 2004. Cordia did, however, hold common shares of eLEC Communications Corp. (“eLEC”) during fiscal year 2003 which were sold prior to December 31, 2003. All investments were classified as trading securities and accordingly, stated at fair value, which is based on market quotes. Adjustments to fair value of the equity securities are recorded as an increase or decrease in investment income in the accompanying statement of operations.
The cost of securities sold is based on the specific identification method. The realized gain on investments from continuing operations during the six-month period ended June 30, 2003 was $3,750.
NOTE 3 – Sale of Business Segments
On March 3, 2003, Cordia sold its equity interests in Insurance Subrogation Group, Inc. (“ISG”) to West Lane Group Inc., a company owned by the then current management of ISG for a purchase price of $750,000. The purchase price was represented by a two-year promissory note, which bore interest at a rate of 6% per annum and was secured by 700,000 shares of Cordia’s stock owned by West Lane. Cordia also entered into a licensing and services agreement, whereby ISG purchased an unlimited license to SubroAGS software. Upon execution of the licensing and services agreement, ISG paid Cordia $100,000 and pursuant to the terms of the agreement, agreed to make monthly payments of $6,000 (including interest) for a twenty-five (25) month period in exchange for Cordia’s agreement to provide software updates and maintenance as necessary during this period.
The following is a summary of the sale transaction of ISG:
Assets sold $ (872,726)
Liabilities sold 1,615,335
Note received 750,000
Write-off of inter-company receivables and payables 61,697
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Gain on sale, before income taxes $1,554,306
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As a result of the sale of ISG, employee stock options to purchase 83,000 common shares of the Company at $7.50 per share expired.
The following is a summary of the revenues and loss from operations of the discontinued business segments:
Six months ended Three months ended
June 30, June 30,
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2004 2003 2004 2003
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Revenues:
Subrogation Service Revenue,net $ - $ 631,361 $ - $ -
Claims Administration income - 197,667 - -
Other - - - -
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Total Revenues: $ - $ 829,028 $ - $ -
Loss before income taxes $ - $(140,726) $ - $ -
On February 6, 2004, Cordia entered into a Mutual Release and Satisfaction of Promissory Note and License Agreement whereby Cordia agreed to release West Lane of its payment obligations under the promissory note and licensing agreement in exchange for the return of 1,412,500 shares of Cordia’s Common Stock, a fifteen (15) month option to purchase 100,000 shares at a price of forty cents ($0.40) per share and the release of Cordia’s service obligations under the License Agreement. In addition to Cordia’s release of West Lane, Cordia transferred all ownership interest to the technology and source code of SUBRO AGS software to West Lane. The 1,412,500 shares were cancelled upon transfer to Cordia. As a result, on that date, Cordia’s outstanding shares were reduced to 4,431,210.
Note 4: Stockholders' Equity
On May 23, 2003, Cordia’s shareholders voted to amend the 2001 Equity Incentive Plan (the “Plan”) by authorizing an additional 1,000,000 shares. The total number of shares of Cordia’s common stock authorized for issuance under the Plan is 2,000,000, subject to adjustment for events such as stock dividends and stock splits.
A committee of the board of directors having full and final authority and discretion to determine when and to whom awards should be granted administers the Plan. The committee will also determine the terms, conditions and restrictions applicable to each award. Transactions under the Plan are summarized as follows:
Stock Options Exercise Price
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Balance, December 31, 2003 928,000 $ .60 to 11.25
Granted with 5 year vesting 200,000 $ .40
Exercised - $
Expired - $
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Balance, June 30, 2004 1,128,000 $ .40 to 11.25
In electing to follow APB 25 for expense recognition purposes, the Company is obliged to provide the expanded disclosures required under FAS No. 123 for stock-based compensation granted in 1996 and thereafter. The fair value of the employee stock options granted for the six months ended June 30, 2004 and 2003 was approximately $80,000 and $407,000, respectively, based on the Black-Scholes option valuation model. For purposes of pro forma disclosures, stock-based compensation is recognized over the vesting period as vesting requirements are fulfilled.
The following table compares the six months ended June 2004 and 2003 results as reported to the results had the Company adopted the expense recognition provisions of FAS No. 123:
As reported
Pro Forma
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2004
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Net loss
$(150,719) $(179,462)
Loss per share $(0.03) $ (0.04)
2003
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Net Income $1,031,037 $950,410
Income per share $0.18 $0.16
The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for 2004 and 2003 respectivily, expected volatility of 300% and 328%; risk-free rate of 3.33% and 2.5%; and expected life of 4 and 2.5 years.
The effects of applying SFAS 123 in the above pro forma disclosures are not indicative of future amounts as future amounts are likely to be affected by the number of grants awarded and since additional awards are generally expected to be made at varying prices.
On June 1, 2004 we issued a total of 10,000 shares of Cordia’s stock, to a current employee, when the market value was $0.36. As a result we recognized $3,600 as compensatory stock expense.
Note 5: Commitments
As of June 30, 2004, the Company leased property at the following two locations: (1) approximately 2,840 square feet of office space for our offices in White Plains, New York at a rental price of $4,970 per month plus utilities for a term of five years, expiring December 31, 2008, with an increase in rent in years three and four and (2) approximately 4,000 square feet at our executive offices in Orlando, Florida at a rental price of $3,302 per month plus utilities on a month to month basis. We anticipate leasing additional space during the third quarter of this fiscal year to house an inbound/outbound call center, development team, and technical support for our Voice over Internet Protocol business.
Note 6: Subsequent Events
On January 7, 2004, the Board of Directors of Cordia Corporation unanimously authorized Cordia’s management to spend an aggregate of $100,000 during 2004 to re-purchase Cordia’s common stock when market conditions are favorable for that purpose. As of June 30, 2004 Cordia had not re-purchased any of its stock. However, on July 14, 2004, Cordia’s management exercised the Board’s authority and purchased 15,800 shares of Cordia common stock at a purchase price of $0.30 per share.