UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
OMB APPROVAL
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Form 10-QSB
Quarterly Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the
quarterly period ended September 30, 2000
Commission file number 000-03718
AmeriNet Group.com, Inc.
(Name of small business issuer in its charter)
Delaware
(State of incorporation or organization)
11-2050317
(I.R.S. Employer Identification No.)
2500 North Military Trail Suite 225, Boca Raton, Florida 33431
(Address of principal executive offices)
33431
(Zip Code)
Issuer's telephone number: (561) 998-3435
State the number of shares outstanding of each of the small business
issuer's classes of common equity, as of the latest practicable date. As of
September 30,2000, there were 12,465,192 shares of the small business issuer's
common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes No x
Page 1
Available Information.
The public may read and copy any materials filed by our company with
the Commission at the Commission's Public Reference Room at 450 Fifth Street,
Northwest, Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains an Internet site that contains reports,
proxy and information statements, and other information regarding our company
and other issuers that file reports electronically with the Commission, at
http://www.sec.gov. The Registrant's wholly owned operating subsidiary, Trilogy
International, Inc, maintains a web site at http://www.trilogyonline.com.;
Caveat Pertaining to Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain of the statements contained
herein, which are not historical facts, are forward-looking statements with
respect to events, the occurrence of which involve risks and uncertainties.
These forward-looking statements may be impacted, either positively or
negatively, by various factors. Information concerning potential factors that
could affect our company is detailed from time to time in our company's reports
filed with the Commission. This Report contains "forward looking statements"
relating to our company's current expectations and beliefs. These include
statements concerning operations, performance, financial condition, anticipated
acquisitions and anticipated growth. For this purpose, any statements contained
in this Report or the Form 10-KSB, Forms 10QSB, Forms 8-K, and the Information
Statement referred to herein that are not statements of historical fact are
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may", "will", "would", "expect", "believe", "anticipate",
"intend", "could", "estimate", or "continue", or the negative or other variation
thereof or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties which are beyond our company's control. Should one or more of
these risks or uncertainties materialize or should our company's underlying
assumptions prove incorrect, actual outcomes and results could differ materially
from those indicated in the forward looking statements.
The information in this Report is qualified in its entirety by
reference to the entire Report; consequently, this Report must be read in its
entirety. Information may not be considered or quoted out of context or without
referencing other information contained in this Report necessary to make the
information considered, not misleading.
Table of Contents & Cross Reference Sheet
Part Item Page
Number Number Number Caption
I 1 Financial Statements
3 Condensed Consolidated Financial Statements
4 Condensed Consolidated Balance Sheet (Unaudited) as of
September 30, 2000
5 Condensed Consolidated Statements of Operations
(Unaudited),for the Three Months Ended September 30,2000
and 1999
6 Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Three Months Ended September 30, 2000
and 1999
7-12 Notes to Condensed Consolidated Financial Statements
Page 2
2 Management's Discussion and Analysis or Plan of Operation
13 Recent Developments Pertaining to Plan of Operation
13 Results of Operations
15 Liquidity and Capital Resources
II 1 15 Legal Proceedings
2 15 Changes in Securities
3 * Defaults Upon Senior Securities
4 * Submission of Matters to Vote of Securities Holders
5 16 Other Information
6 17 Exhibits and Reports on Form 8-K
- - - -------------
* Not Applicable
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
AMERINET GROUP.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
Page 3
AMERINET GROUP.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash $ 7,610
Accounts receivable, net 60,017
Note receivable 211,515
Costs and estimated earnings in excess of
billings on uncompleted contracts 172
Prepaid expenses 2,612
-------
Total current assets 281,926
-------
Property and equipment, net 346,971
--------
Other assets:
Investment in subsidiary - WRIwebs.com, Inc. 644,986
Goodwill, net 666,663
Deposits 400
--------
Total other assets 1,312,049
--------
Total assets $ 1,940,946
================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 220,446
Accrued expenses 31,005
Billings in excess of costs and estimated
earnings on uncompleted contracts 32,289
Loans payable - related parties 320,800
Current maturities of loans payable 177,033
Current maturities of capital leases 29,641
--------
Total current liabilities 811,214
--------
Long term liabilities:
Loans payable, net of current portion 238,882
Capital leases, net of current portion 21,619
--------
Total long term liabilities 260,501
--------
Equity subject to potential redemptions 640,987
--------
Stockholders' equity:
Preferred stock, no par value,
5,000,000 shares authorized, 78,203
issued and outstanding 782
Common stock, $0.01 par value, 20,000,000 shares
authorized, 12,465,192 shares issued and outstanding 124,652
Outstanding stock options 17,270
Additional paid in capital 11,945,862
Accumulated deficit (11,860,322)
------------
Total stockholders' equity 228,244
---------
Total liabilities and stockholders' equity $ 1,940,946
==============
Page 4
AMERINET GROUP.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Three months Three months
ended ended
September 30, 2000 September 30, 1999
Revenues earned $ 216,636 $ 168,169
Cost of goods sold 192,640 69,109
-------------- -------------------
Gross profit 23,996 99,060
Selling, general and
administrative expenses 844,281 412,501
Depreciation and amortization 50,063 63,840
-------------- --------------------
Total operating expenses 894,344 476,341
-------------- --------------------
Loss from operations (870,348) (377,281)
-------------- --------------------
Other expense:
Interest expense 22,505 -
Equity in losses of subsidiary 16,832 -
-------------- --------------------
Total other expense 39,337 -
-------------- --------------------
Provision for income taxes - -
-------------- --------------------
Net loss (909,685) (377,281)
-------------- --------------------
Discount attributable to beneficial
conversion privilege of
preferred stock (314,246) -
-------------- --------------------
Net loss applicable to
common stock $ (1,223,931) $ (377,281)
=============== ====================
Basic loss per share $ (0.10) $ (0.05)
====================
Fully diluted loss per share $ (0.10) $ (0.05)
====================
Weighted average shares
outstanding 12,465,192 8,148,308
=============== ====================
Fully diluted average shares
outstanding 12,465,192 8,148,308
================= ====================
Page 5
AMERINET GROUP.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Three months Three months
ended ended
September 30, 2000 September 30, 1999
Net cash used in operations (426,637) $ (132,029)
------------------ --------------------
Cash flows from investing
activities:
Purchase of property and equipment (23,179) (16,774)
------------------- --------------------
Cash flows from financing activities:
Preferred stock issued for cash,
net of cost 303,424 -
Common stock issued for cash,
net of costs - 27,500
Payments on capital leases (21,371) -
Proceeds from loans payable 159,101 75,000
Payments on loans payable (22,154) -
------------------ --------------------
Net cash provided by financing
activities 419,000 102,500
------------------ --------------------
Net decrease in cash (30,816) (46,303)
Cash at beginning of period 38,426 79,021
------------------ --------------------
Cash at end of period $ 7,610 $ 32,718
=================== ===================
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 22,505 $ -
=================== ===================
Non-cash transactions affecting investing and financing activities:
Common stock issued for equipment $ - $ 7,500
=================== ===================
Contribution of professional
services $ 112,530 $ 192,115
==================== ===================
Conversion of debt to equity $ 375,387 $ -
==================== ===================
Page 6
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required for complete financial
statements. In the opinion of management, all adjustments consisting of normal
recurring accruals considered necessary for a fair presentation of the results
for the interim periods presented have been included.
These results have been determined on the basis of generally accepted accounting
principles and practices applied consistently with those used in the preparation
of the Company's Annual Financial Statements for the year ended June 30, 2000.
Operating results for the three months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 2001.
It is recommended that the accompanying condensed financial statements be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K.
NOTE 2 - AMORTIZATION OF GOODWILL
Goodwill represents the amount by which the purchase price of businesses
acquired exceeds the fair market value of the net assets acquired under the
purchase method of accounting.
The excess of the fair value of the net assets of Lorilei acquired was $717,450
and was recorded as goodwill. Goodwill is being amortized on a straight-line
method over five years. The accumulated amortization of the excess fair value of
net assets of the Company acquired over cost is $50,786 at September 30, 2000.
The excess of the fair value of the net assets of WRI acquired was $943,365 and
was recorded as goodwill. Goodwill is being amortized on a straight-line method
over three years. The accumulated amortization of the excess fair value of net
assets of the Company acquired over cost is $262,046 at September 30, 2000.
NOTE 3 - ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are recorded net of an allowance for doubtful accounts of
$5,000 at September 30, 2000.
NOTE 4 - STOCKHOLDERS' EQUITY
On June 29, 2000 the Company's Board of Directors adopted a resolution creating
and designating the initial series of the Company's Preferred Stock. The shares
are designated Class A Preferred Stock and the number of shares authorized to be
issued is 500,000 shares. Each share of Class A Preferred Stock is convertible
into a minimum of 20 shares of the Company's common stock.
During the three months ended September 30, 2000, the Company issued its Class A
Preferred Stock for cash, for conversion of debt and in exchange for services as
follows:
Page 7
NOTE 4 - STOCKHOLDERS' EQUITY, continued
(a) The Company issued 23,520 shares of Class A Preferred Stock for cash at
$5.00 per share through a private placement. The net amount obtained
was $117,600.
(b) The Company converted $16,965 of debt to 3,393 shares of Class A
Preferred Stock at $5.00 per share.
(c) The Company converted $115,000 of Yankee's debt to 46,000 shares of
Class A Preferred Stock at $2.50 per share in accordance with Yankee's
preferred subscription rights.
(d) The Company issued 5,290 shares of Class A Preferred Stock to certain
officers and consultants as compensation for services. The Company
recorded a total compensation expense of $26,450.
(e) The Company issued 223,440 stock options to Yankee during the three
month period ended September 30, 2000. The Company recorded
compensation expense of $151,939.
(f) Yankee contributed professional services of $112,530 to the Company
during the three month period ended September 30, 2000.
NOTE 5 - COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
The following schedule presents the status of costs and estimated earnings on
uncompleted contracts at September 30, 2000:
Costs incurred on uncompleted contracts $ 47,764
Estimated earnings 34,051
-------------------
Total 81,815
Less: billings to date (113,932)
-------------------
Total $ (32,117)
====================
Included in accompanying balance sheet under the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 172
Billings in excess of cost and estimated
earnings on uncompleted contracts (32,289)
-------------------
Total $ (32,117)
====================
Page 8
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at September 30, 2000:
Land $ 25,000
Building 197,483
Vehicles 49,220
Furniture and fixtures 13,633
Machinery and equipment 83,695
Less: accumulated depreciation
(22,060)
----------------
Property and equipment, net $ 346,971
=================
Depreciation expense for the three months ended September 30, 2000 was $14,190.
NOTE 7 - NOTES PAYABLE
The Company's borrowings consisted of the following at September 30, 2000:
Working Capital Revolving Line of Credit
with Am-South Bank. Interest accrues at 11.5%. $ 28,110
Loan payable to Small Business Loan Source
requiring monthly payments of $2,094 through March 18, 2022.
The loan accrues interest at 12.25% and
is collateralized by the building. 188,841
Loans payable for vehicles with varying terms
and maturities. Interest rates range from 6% to 10%. 53,274
Loans payable to outside parties with varying terms
and maturities. Interest rates range from 8.5% to 12%. 145,690
----------------
Total 415,915
Less: current portion (177,033)
---------
$ 238,882
================
Maturities of borrowings are as follows:
Year Ended September 30,
2001 $ 177,033
2002 19,892
2003 15,543
2004 12,479
2005 8,818
Thereafter 182,150
----------------
Total 415,915
Less: current portion (177,033)
----------------
$ 238,882
===============
Page 9
NOTE 8- LEASE COMMITMENTS
Certain non-cancelable leases are classified as capital leases, and the leased
assets are included as part of property and equipment. Other leases are
classified as operating leases and are not capitalized. The obligations under
capital leases are at fixed rates ranging from 6.5% to 15.0% and are
collateralized by property and equipment.
Property under capital leases at September 30, 2000 consisted of the following:
Machinery and equipment $ 50,145
Less: accumulated depreciation (5,853)
----------------
Total $ 44,292
================
Future minimum rentals for property under capital leases at September 30, 2000
are as follows:
Year Ended September 30,
2001 $ 46,858
2002 14,723
2003 3,052
2004 -
----------------
Total minimum lease obligation 64,633
Less: interest (13,373)
----------------
Present value of total minimum 51,260
Less: current portion (29,641)
----------------
$ 21,619
================
NOTE 9 - RELATED PARTY TRANSACTIONS
At September 30, 2000 the Company had outstanding payables to its stockholders
in the amount of $320,800. The transactions are summarized as follows:
Balance at beginning of period $ 276,800
Advances during the period 159,000
Conversions to equity (115,000)
------------------
Balance at end of period $ 320,800
==================
During the three months ended September 30, 2000, Yankee contributed
professional services valued at $112,530 to the Company. The Company recognized
the $112,530 as management fees and consulting fees expense and the entire
amount was contributed to the Company as additional paid in capital.
The Company shares office space in Boca Raton, Florida with a related party.
Rent expense for the three months ended September 30, 2000 was $3,618.
Page 10
NOTE 10 - INCOME TAXES
The following table reconciles the income tax benefit at the US statutory rate
to that in the financial statements at September 30, 2000:
Taxes computed at 34% $ (309,293)
Goodwill amortization 12,197
Compensation on stock option grants 483,304
Net operating losses and other losses (1,761,539)
-----------
Income tax benefit $ (1,575,331)
================
As of September 30, 2000, AmeriNet Group.com, Inc. had an unused net operating
loss carryforward of $3,186,843 available for use on its future corporate
federal income tax returns. This amount includes the net operating losses of its
subsidiary, Lorilei, since the date of acquisition. The Company's evaluation of
the tax benefit of its net operating loss carryforward is presented in the
following table. The tax amounts have been calculated using the 34% federal
income tax rate.
Taxes currently payable $ -
Deferred income tax benefit 1,575,331
Change in beginning valuation allowance (1,575,331)
--------------
Provision (benefit) for income $ -
==================
The components of deferred tax assets at September 30, 2000 were as follows:
Deferred tax asset:
Net operating loss carryfoward $ 1,083,527
Stock options granted 483,304
Provision for doubtful accounts 1,700
Accrued interest 6,800
-------------------
Net deferred tax asset 1,575,331
Valuation allowance:
Beginning of period (1,212,679)
Increase during the period (362,652)
------------------
Ending balance (1,575,331)
------------------
Net deferred taxes $ -
======================
Year Loss Originated Year Expiring Amount
December 31, 1997 2012 $ 74,043
December 31, 1998 2013 399,415
June 30, 1999 2014 97,646
June 30, 2000 2015 1,706,054
September 30, 2000 2016 909,685
-------------------
Total available net operating loss $ 3,186,843
=====================
Page 11
NOTE 11 - STOCK OPTIONS
The Company adopted an Incentive Stock Option Plan and amended its Non-Qualified
Stock Option Plan on March 8, 2000. The objectives of these plans include
attracting and retaining the best personnel and promoting the success of the
Company by providing employees the opportunity to acquire common stock. The
incentive Stock Option Plan authorizes the Company to grant up to 2,000,000
common shares of which 365,000 have been granted at September 30, 2000.
The Company has elected to account for the stock options under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. Accordingly, no compensation expense has been
recognized on the employee stock options. The Company accounts for stock options
granted to consultants under Financial Accounting Standards Board Statement No.
123, "Accounting For Stock-Based Compensation". The Company recognized $151,939
in compensation expense for the three months ended September 30, 2000 in
connection with an increase of 223,440 shares of common stock underlying the
Yankee option to purchase up to 12 1/2% of the outstanding common shares of the
Company. With this increase in the underlying shares, Yankee now has the option
to purchase 2,381,173 shares of the Company's common stock for an aggregate
price of $90,000.
Had compensation expense for the Incentive Stock Option Plan been determined
based on the fair market value of the options at the grant date consistent with
the methodology prescribed under Statement of Financial Standards No. 123
"Accounting for Stock Based Compensation", the Company's net loss for the three
months ended September 30, 2000 would have increased by $74,513 to $984,198.
The fair value of each option is estimated on the date of grant using the fair
market option-pricing model with the assumption:
Risk-free interest rate 6.5 %
Expected life (years) various
Expected volatility 1.688
Expected dividends None
A summary of the option transactions during the three months ended September 30,
2000 is shown below:
Number of Weighted-Average
Shares Exercise Price
Outstanding at June 30, 2000 3,061,675 $ 0.43
Granted 223,400 $ 0.04
Exercised -
Forfeited (99,337)
Outstanding at September 30, 2000 3,185,738
----------------
Exercisable at September 30, 2000 2,820,778
----------------
Available for issuance at
September 30, 2000 2,514,733
=================
NOTE 12 - SUBSEQUENT EVENTS
In October 2000, AmeriNet Group.com, Inc. informed Michael Caputa, President of
WRI, that the Company elects to rescind the Agreement of Merger and Plan of
Reorganization previously entered into by and among AmeriNet, American Internet
Technical Center, Inc. n/k/a WRIwebs.com, Inc. and WRIwebs.com, Inc., including
the return of 531,000 shares of the Company's common stock issued at the time of
the acquisition and the return of the $211,515 advanced to WRI. Attorneys for
WRI and Mr. Caputa have denied all allegations and claims made by the Company.
Both parties have agreed to abide by the provision in the Agreement providing
for mediation to resolve any disputes between the parties. Management expects
that the issues will be presented to mediation in mid-December, 2000.
Page 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Recent Developments Pertaining to Implementation of Plan of Operation
Our company's ability to continue as a going concern is dependent upon
its ability to attain a satisfactory level of profitability and to continue to
have access to suitable financing. Management believes that divesting our
company of it's unprofitable subsidiaries, Trilogy International, Inc. and Vista
Vacations, Inc. at June 30, 2000, was a significant step towards accomplishing
this goal.
Since acquiring WRIwebs.com, Inc. ("WRI") in December 1999, our company
has endeavored to work with the management of WRI in order assist them in
attaining the performance goalsprojected by WRI management. WRI has continued to
perform below expectations and to provide materially innacurate information. As
a result, on October 16, 2000 attorneys for our company informed Michael Caputa,
President of WRI, that our company elects to rescind the Agreement of Merger and
Plan of Reorganization. Our Company has demanded the return of the 531,000
shares of our company's common stock issued to Mr. Caputa and former WRI
stockholders at the time of the acquisition and the $211,515 advanced to WRI by
our company. Attorneys for WRI and Mr. Caputa have denied all allegations and
claims made by our company. Both parties have agreed to abide by the provision
in the Agreement providing for mediation and arbitration to resolve any disputes
between the parties. It is expected that the issues will be presented to
mediation in mid-December, 2000.
Upon the resignation of its founders and executive officers Gerald and
Leigh Cunningham, our company's President, Larry Van Etten assumed the role of
acting president of Lorilei. Sales information proved materially inaccuarte and
unprofitable segments of Lorilei's previous business have been eliminated
resulting in operating losses for the three month period ended September 30,
2000.
On September 12, 2000, in order to assure that our company's continuing
investments in Lorilei were not subjected to claims based on undisclosed
liabilities and to clarify unequivocally that the performance based shares and
incentive stock options originally allocated to Mr. and Mrs. Cunningham were no
longer applicable, our company organized a new Florida subsidiary, AmeriNet
Communications, Inc. ("AmeriCom"), and assigned most of Lorilei's assets,
personnel and operations. AmeriCom's target markets have been redirected and
expanded. As a result, it is expected that by the end of the three month period
ended December 31, 2000 AmeriCom will produce net operating income and that by
the end of its fiscal year on June 30, 2001 AmeriCom will significantly
contribute to the earnings of our company.
The assignment of assets and the conduct of all business of The Firm
Multimedia by AmeriCom was not finalized until October 17, 2000. For accounting
purposes and reporting of our company's consolidated financial statements the
transfer of assets had no effect for the three months ended September 30, 2000
because both entities are wholly owned by our company.
Results of Operations
The consolidated income statement for our company for the three months
ended September 30, 2000 includes operations of our company at the holding level
and its wholly owned subsidiary Lorilei Communications, Inc. In addition, 20% of
the operating losses of our company's affiliate WRI are included in our
company's financials. For the three months ended September 30, 1999 the
consolidated income statement included our company and its then wholly owned
subsidiary AITC.
Effective December 1, 1999, AITC was merged with WRI. Because WRI's
former principal stockholder has an option to acquire between 70% and 80% of
WRI's common stock until November 11, 2001, generally accepted accounting
principals do not permit consolidation of WRI's financial statements with those
of our company. Rather, the WRI affiliate is accounted for as though we had
acquired between 20% and 30% of WRI's common stock as an investment. Therefore,
20% of WRI's profits or losses are reported by our company as losses of WRI for
the three months ended September 30, 2000.
Page 13
For the three months ended September 30, 2000 our company reported
revenues of $216,636 all of which were generated by Lorilei. Revenues for the
three months ended September 30, 1999 were $168,169 and were all generated by
our former subsidiary AITC.
Cost of revenues for the three months ended September 30, 2000 were
$192,640 yielding a gross profit of $23,996 while cost of revenues for the three
month period ended September 30, 1999 were $69,109 for a gross profit for that
period of $99,060.
Our company as a whole reported a net loss for the three months ended
September 30, 2000 of $1,223,931 as compared to a net loss of $377,281 for the
three months ended September 30, 1999. These losses were comprised of equity in
the losses of WRI (20%), $ 16,832; net loss of Lorilei of $295,123 and a net
loss for the holding company of $911,976. For the three months ended September
30, 1999 our company's losses were $377,281.
Our company had selling, general and administrative expenses of
$844,281 for the three months ended September 30,2000 as compared with $412,501
for the three months ended September 30, 1999. Of the $844,281 in expense for
the current period, $256,277 was attributable to the operations of Lorilei as
incurred in the normal course of operating its business. The remaining $588,004
of expense was incurred at the holding company level. $208,535 of this amount
was expended in the normal course of conducting our company's business. The
remaining $379,469 represents expenses incurred due to the required accounting
treatment of preferred subscription rights exercised by Yankees during the
period; options granted to Yankees during the period and consulting services
provided to our company by Yankees. All of these charges are non-cash items and
the additional paid in capital of our company has increased in an amount equal
to these charges.
Our company had depreciation expense of $14,190 and $3,179 for the
three months ended September 30, 2000 and 1999 respectively. Virtually all of
the depreciation for this period was attributable to the fixed assets of
Lorilei, while the expense during the same period in 1999 was attributable to
the fixed assets of AITC.
Expense for the amortization of goodwill in connection with the
acquisition of Lorilei was $35,873 for the three months ended September 30,
2000. For the three months ended September 1999, our company had an amortization
of goodwill expense of $58,145 attributable to the acquisition of AITC.
Interest expense for the three months ended September 30, 2000 was
$22,505. No interest expenses was recorded by our company for the three months
ended September 30, 1999.
In addition to the losses from operations incurred for the period, our
company's loss attributable to common stockholders was increased by $314,246 as
a result of purchases made through a private placement of our company's Class A
Preferred Stock. Because each share of the Preferred Stock is convertible into a
minimum of 20 shares of our company's common stock, a discount attributable to
the beneficial conversion of preferred stock must be taken in an amount equal to
the difference between the conversion price of $.25 per share and the then
market price of our company's common stock at the time of the preferred stock
purchase.
Page 14
LIQUIDITY AND CAPITAL RESOURCES
Our Company had cash on hand in the amount of $7,610 at September 30,
2000, compared to $32,718 on September 30, 1999. At September 30, 2000, we had a
working capital deficit of $529,288 compared to a working capital deficit on
September 30, 1999 of $142,872. The decrease in working capital was related
principally to a decrease in cash on hand; an increase in accounts payable in
excess of accounts receivable at the subsidiary level; the current portion of
capital leases payable at the subsidiary level and the current portion of loans
payable which were incurred in funding the operation of our company's
subsidiaries during the year ended June 30, 2000.
Our company and its subsidiaries have accumulated a net deficit of
$11,860,322 since their inception. This gives rise to questions regarding the
ability of our Company to continue as a going concern. The deficit for the three
month period ended September 30, 2000 is $1,223,931. Management has implemented
significant cost reductions through is discontinuance of unprofitable
operations. With the assistance of Yankee, we are actively exploring
acquisitions of operating companies and related infusions of capital which would
materially improve its cash flow, liquidity and profitability, if successfully
implemented.
Our company relies on Yankees for capital required to fund operating
cash deficits and has a financing agreement with Yankees pursuant to which
Yankees has granted our company a conditional $1,000,000 revolving line of
credit. As of November 13, 2000, Yankees had loaned our company an aggregate of
$576,400. The loans are secured by all of our company's assets, including the
capital stock in its subsidiaries. At our request,Yankees has converted most of
its loans to date into shares of our company's common stock and shares of our
company's Class A Preferred Stock. As of November 13, 2000, Yankees had
converted $298,000 of its aggregate loans to our company into equity. Our
company's continuing liquidity and access to capital is currently totally
reliant on Yankees and investors introduced to our company by Yankees.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither our company nor its subsidiaries have been involved in any
material legal proceedings, except as disclosed in our company's report on Form
10-KSB for the fiscal year ended June 30, 2000 other than the pending mediation
in connection with our company's election to rescind the WRI Merger and
Reorganization Agreement as discussed previously in this report under
"Managements Discussion and Analysis".
ITEM 2. CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
Since June 30, 2000, our company sold the securities listed in the
table below without registration under the Securities Act in reliance on the
exemption from registration requirements cited. All footnotes follow the last
table.
Class A Preferred Stock
Amount of Total Total Registration
Securities Offering Discounts Exemption
Date Sold Subscriber Consideration or Commissions Relied on
- ---- ----- ---------- ------------- -------------- ---------
July 3 6,000 Bolina Trading Corp. $30,000 None (2)
July 7 3,600 Bolina Trading Corp. $18,000 None (2)
July 27 8,000 Bolina Trading Corp. $40,000 None (2)
July 31 1,500 Lawrence R. Van Etten (7) (7) (2)
August 15 46,000 Yankees $115,000(4) (3) (2)
August 15 3,393 K. Walker LTD $16,965 (5) None (2)
August 15 1,500 Coast to Coast Realty (6) (6) (2)
August 30 5,920 Palmair, Inc. $29,600 None (2)
August 31 500 Lawrence R Van Etten (7) (7) (2)
August 31 415 George Franjola (8) (8) (2)
September 15 500 Coast to Coast Realty (6) (6) (2)
September 30 500 Lawrence R. Van Etten (7) (7) (2)
September 30 375 George Franjola (8) (8) (2)
Notes to All Tables
(1) Section 4(2) of the Securities Act. In each case, the subscriber was
required to represent that the shares were purchased for investment purposes,
the certificates were legended to prevent transfer except in compliance with
applicable laws and the transfer agent was instructed not to permit transfers
unless directed to do so by our company, after approval by its legal counsel. In
addition, each subscriber was directed to review our company's filings with the
Commission under the Exchange Act and was provided with access to our company's
officers, directors, books and records, in order to obtain required information.
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(2) Section 4(6) of the Securities Act. In each case, the subscriber was
required to represent that the shares were purchased for investment purposes,
the certificates were legended to prevent transfer except in compliance with
applicable laws and the transfer agent was instructed not to permit transfers
unless directed to do so by our company, after approval by its legal counsel.
Each subscriber was directed to review our company's filings with the Commission
under the Exchange Act and was provided with access to our company's officers,
directors, books and records, in order to obtain required information; and, a
Form D reporting the transaction was filed with the Commission.
(3) No commissions or discounts were paid to anyone in conjunction with the sale
of the foregoing securities, except that Yankees exercised preferential
subscription rights granted by our company in Yankees' consulting agreement or
that it may be entitled to compensation based on the terms of its consulting
agreement with our company.
(4) At the issuers request, Yankees converted $115,000 of debt to equity ( a
total of 46,000 shares of preferred stock).
(5) At the issuers request, K. Walker converted $16,965 of debt to equity ( a
total of 3,393 shares of preferred stock).
(6) Our company issued 2,000 shares of class a preferred stock to Charles J.
Scimeca, owner of Coast to Coast Realty, Inc., for his compensation as our
company's corporate spokesperson. Compensation expense to our company was
$24,800 based on the average closing price of our company's common stock during
the period
(7) Our company issued 2,500 shares of class a preferred stock to Lawrence R.
Van Etten as compensation. Compensation expense to our company, based on the
average closing price of our company's common stock for the period was $32,552.
(8) Our company issued 790 shares of class a preferred stock to George Franjola
as compensation for services provided to Lorilei for the months of August and
September, 2000. Compensation expense to Lorilei was $10,000 based on the
average closing price of our company's common stock for the two month period.
Consequently, as of September 30, 2000, 12,465,192 shares of our company's
common stock were outstanding and 78,203 shares of our company's class a
preferred stock were outstanding.
AMOUNT OF COMMON EQUITY SUBJECT TO OUTSTANDING OPTIONS OR WARRANTS TO PURCHASE,
OR SECURITIES CONVERTIBLE INTO, COMMON EQUITY OF OUR COMPANY
As of September 30, 2000, our company had 5,034,675 shares of its common stock
reserved for issuance in conjunction with current obligations to issue
additional shares and in the event that currently outstanding options and
warrants are exercised.
ITEM 5. OTHER INFORMATION
Material Subsequent Events
Termination of Acquisition Negotiations with WeCU, Ltd.
On November 16, 2000, Mr. Shawn Okun, a representative of WeCU, Ltd. a
Panamanian corporation ("WeCU"), advised Lawrence R. Van Etten, as president of
AmeriNet, that its attorneys believed the proposed sale of WeCU's United States
Internet and communications operations and assets to an AmeriNet subsidiary
would result in a current taxable event requiring immediate payments
unacceptable to WeCU and a majority of its stockholders.
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Consequently, WeCU will not enter into the contemplated acquisition agreement
with AmeriNet. However, Mr. Okun requested that AmeriNet consider a strategic
alliance with WeCU for joint marketing of products and services. AmeriNet is
agreeable to such arrangements subject to preparation and execution of
definitive agreements detailing the nature, extent and terms of the proposed
strategic alliance.
A copy of the letter from WeCU's attorneys advising AmeriNet of the termination
of acquisition negotiations is filed as an exhibit to this report, see Part II,
Item 6, "Exhibits & Reports on Form 8-K".)
Resignation of Chief Financial Officer and Vice President
On February 17, 2000, David K. Cantley was elected as our company's vice
president, treasurer and chief financial officer. He serves at the pleasure of
the board of directors in such roles. However, due to economic and personal
reasons, Mr. Cantley felt it is in the best interest of our company for him to
resign from those capacities, and did so on November 7, 2000, effective November
17, 2000. Mr. Cantley will stay on as a member of our company's board of
directors for a term expiring after its next annual meeting of stockholders. He
will be nominated for re-election to our company's board of directors at the
next annual stockholders meeting, and for appointment as the chair of its audit
committee.
Withdrawl of Resignation from our Acting President
On October 23, 2000, Lawrence R. Van Etten, our company's current acting
president and chief operating officer, submitted his resignation as acting
president. Mr. Van Etten felt he could better serve our company as a full time
chief operating officer. His resignation was effective as of November 15, 2000
in order to give our company an opportunity to interview new candidates for a
the full-time position as president. On November 10, 2000, Mr. Van Etten
withdrew his resignation as acting president and will remain acting president
until such time as several issues are resolved with potential mergers and ample
time is allotted to find a suitable person as a replacement on a permanent
basis.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Required by Item 601 of Regulation S-B
The exhibits listed below and designated as filed herewith (rather than
incorporated by reference) follow the
signature page in sequential order.
Designation Page
of Exhibit Number
as Set Forth or Source of
in Item 601 of Incorporation Description
Regulation S-B
(99) Additional Exhibits:
.53 20 Letter from WeCU's attorney.
.54 21 David Cantley's resignation letter.
.55 22-23 Resignation letter of Lawrence R. Van Etten and
Withdraw of his resignation.
(b) Reports on Form 8-K Filed During Quarter Ended September 30, 2000
During the calendar quarter ended September 30, 2000, our company filed the
following reports on Form 8-K with
the Commission:
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Financial
Items Reported Date Filed Statements Included
2 and 7 July 17, 2000 None
2 and 7 August 15, 2000 None
As a material subsequent event, our company filed the following reports on Form
8-K with the Commission:
Items Reported Date Filed Financial Statements Included
5 and 7 November 2, 2000 None
Signatures
In accordance with the requirements of the Exchange Act, our company has
duly caused this report to be In accordance with the requirements of the
Exchange Act, our company has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
AmeriNet Group.com, Inc.
November 20, 2000
By: /s/David K. Cantley /s/
David K. Cantley
Vice-President, Chief Financial Officer & Director
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ADDITIONAL INFORMATION
AmeriNet Group.com, Inc.
Crystal Corporate Center
2500 North Military Trail, Suite 225-C; Boca Raton, Florida 33431
Telephone (561) 998-3435; Fax (561) 998-4635
web-site, amerinetgroup.com; e-mail larry@amerinetgroup.com
Corporate Headquarters:
Lawrence R. Van Etten, President; David K. Cantley, Vice President, Treasurer &
Chief Financial Officer; Vanessa H. Lindsey, Secretary
------
Officers
Lawrence R. Van Etten; David K. Cantley; Vanessa H. Lindsey; Michael Jordan;
G. Richard Chamberlin; Anthony Q. Joffe; Saul B. Lipson; Edward C. Dmytryk;
J. Bruce Gleason; and, Michael A. Caputa
------
Board of Directors
Current Subsidiaries (Florida corporations)
Wriwebs.com, Inc.
100 East Sample Road, Suite 210;
Pompano Beach, Florida 33064
Telephone (954) 569-0200; Fax (954) 569-0300
Web site and e-mail www.wriwebs.com
AmeriNet Communications, Inc.
"Doing Business as The Firm MultiMedia"
7325 Southwest 32nd Street; Ocala, Florida 34474
Post Office Box 770787; Ocala, Florida 34477
Telephone (352) 861-1350; Fax (352) 861-1339
Web site and e-mail www.callthefirm.com
Independent Public Accountants:
Daszkal, Bolton & Manela, P.A.
240 West Palmetto Park Road, Suite 300; Boca Raton, Florida 33432
Telephone (561) 367-1040; Facsimile Transmission (561) 750-3236
Transfer Agent:
Liberty Transfer Company
191 New York Avenue, Huntington, New York 11743
Telephone (516)-385-1616; Facsimile Transmission (516) 385-1619
Our company's report on Commission Form 10-QSB for the quarter year ended
September 30, 2000 will be furnished free of charge without exhibits to any
beneficial owner of our company's common stock eligible to vote at our company's
annual stockholders' meeting and will furnish the exhibits thereto to any such
person specifically requesting them, subject to payment of our company's actual
reproduction, handling and delivery costs associated therewith. Our company's
report on Commission Form 10-QSB for the quarter ended September 30, 2000,
including exhibits, is available without charge on the Securities and Exchange
Commission's web-site located at www.sec.gov in the EDGAR archives. Requests for
our company's report on Commission Form 10-QSB for the quarter year ended
September 30, 2000, with or without exhibits, should be addressed to Lawrence R.
Van Etten, President; AmeriNet Group.com, Inc.; Crystal Corporate Center; 2500
North Military Trail, Suite 225-C; Boca Raton, Florida 33431, or faxed to Mr.
Van Etten at (561) 998-4635.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THIS REPORT NOR HAS IT PASSED UPON ITS ACCURACY OR ADEQUACY.
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