UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1999
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.)
902 CLINT MOORE ROAD, SUITE 136-C; BOCA RATON, FLORIDA
(Address of principal executive offices)
33487
(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
November 12, 1999, there were 8,354,126 shares of the small business issuer's
common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes No x
This report combines the quarterly report to security holders with the
required information of form 10-QSB.
Page 1
AVAILABLE INFORMATION.
The public may read and copy any materials filed by the Registrant 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 the Registrant and
other issuers that file reports electronically with the Commission, at
http://www.sec.gov. The Registrant's wholly owned operating subsidiary,
Wriwebs.com, Inc., maintains a web site at http://www.wriwebs.com.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents previously filed by the Registrant with
the Commission are incorporated by reference in this report:
(1) Form 10-KSB for the year ended June 30, 1999, exhibits 3(i),
3(ii),4.11, 4.12, 10.34, 10.36, 10.38 and 10.39 from Part III, Item
13(a) thereof incorporated into Item 6(a) hereof.
(2) Form 8-K filed with the Commission on July 12, 1999, exhibits from
"Item 7(c), Exhibits," thereof incorporated into Item 6(a) hereof.
(3) Form 8-K filed with the Commission on August 24, 1999 exhibits from
"Item 7(c), Exhibits," thereof incorporated into Item 6(a) hereof.
CAVEAT PERTAINING TO FORWARD LOOKING STATEMENTS
The Private Securities Litigate 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 the
Registrant is detailed from time to time in the Registrant's reports filed with
the Commission. This report contains "forward looking statements" relating to
the Registrant's current expectations and beliefs. These include statements
concerning operations, performance, financial condition and anticipated growth.
For this purpose, any statements contained in this Annual Report and Form 10-KSB
that are not statements of historical fact are forward-looking statements.
Without limiting the generality of the foregoing, words such as "may", "will",
"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 the
Registrant's control. Should one or more of these risks or uncertainties
materialize or should the Registrant's underlying assumptions prove incorrect,
actual outcomes and results could differ materially from those indicated in the
forward looking statements.
Page 2
TABLE OF CONTENTS & CROSS REFERENCE SHEET
Part Item Page
NUMBER NUMBER NUMBER CAPTION
I 1 Financial Statements:
4 Condensed Consolidated Financial Statements
5 Condensed Consolidated Balance Sheet(Unaudited) as
of September 30, 1999
6 Condensed Consolidated Statements of Operations
(Unaudited), for the Three Months Ended September
30,1999 and 1998
7 Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Three Months Ended September
30, 1999 and 1998
8 - 10 Notes to Condensed Consolidated Financial
Statements
2 11 Management's Discussion and Analysis or Plan of
Operation
11 Plan of Operation
11 General
12 Recent Developments Pertaining to Plan of
Operation
13 Results of Operations
14 Liquidity and Capital Resources
14 Material Subsequent Event
II 1 14 Legal Proceedings
2 16 Changes in Securities
3 * Defaults Upon Senior Securities
4 * Submission of Matters to Vote of Securities
Holders
5 19 Other Information
(a) 19 Election of New Directors, Committee Assignments
19 Biographies
20 Family Relationships
21 Involvement in Certain Legal Proceedings
21 Compensation of Directors
(b) 22 Second Restructuring of American Internet
Acquisition
(c) 23 Acquisition of Wriwebs.com, Inc.
24 Selected WRI Unaudited Financial Data
6 25 Exhibits and Reports on Form 8-K
28 Signatures
29 Additional Information
- --------
* Not Applicable
Page 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
(See following pages)
Page 4
AMERINET GROUP.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999
(UNAUDITED)
ASSETS
Current assets:
Cash $ 32,718
Accounts receivable, net 49,093
------------
Total current assets $ 81,811
------------
Property and equipment, net 53,326
Other assets:
Goodwill, net $ 639,589
Deposits 14,492
-------------
Total other assets $ 654,081
Total assets $ 789,218
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 65,370
Accrued expenses 15,010
Billings in excess of costs and estimated
earnings on uncompleted contracts 39,970
Loan payable - stockholder 29,333
Loan payable - Xcel Associates 75,000
--------------
Total current liabilities $ 224,683
Stockholders' equity:
Preferred stock, no par value, 5,000,000
shares authorized, -0- issued and outstanding $ 0
Common stock, $0.01 par value, 20,000,000
shares authorized, 8,192,384 shares issued
and outstanding 81,924
Common stock to be retired, 932, 756 shares ( 9,328)
Additional paid in capital 4,254,223
Accumulated deficit (3,762,284)
----------------
Total stockholders' equity $ 564,535
Total liabilities and stockholders equity 789,218
See accompanying notes to condensed consolidated financial statements
Page 5
AMERINET GROUP.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
UNAUDITED
1999 1998
---- ----
Revenues earned $ 168,169 $ 40,677
Cost of revenues earned 69,109 -
------------ -----------
Gross profit $ 99,060 $ 40,677
Selling, general and administrative expenses 476,341 40,226
------------ ------------
Income (loss) from operations (377,281) 451
------------ ------------
Provision for income taxes - -
Net income (loss) $ (377,281) 451
------------- -------------
Basic loss per share $ (0.05) $
Weighted average shared outstanding 8,148,308 4,116,148
------------- ------------
Fully diluted loss per share $ (0.05) $
------------- --------------
Fully diluted average shares outstanding 8,148,308 4,116,148
------------- -------------
See accompanying notes to condensed consolidated financial statements
Page 6
AMERINET GROUP.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
1999 1998
Cash flows from operating activities:
Net cash provided (used) by operations $ (132,029) $ 34
----------- ----------
Cash flows from investing activities:
Purchase of property and equipment (16,774) 0
Cash flows from financing activities:
Common stock issued for cash 27,500 0
Proceeds from increase in notes payable 75,000 0
---------- ----------
Net cash provided by financial activities 102,500 0
----------- ----------
Net increase (decrease) in cash (46,303) 34
Cash at beginning of period 79,021 (28)
----------- ----------
Cash at end of period $ 32,718 $ 6
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 0 $ 0
=========== ==========
Non-cash transactions affecting investing and financing activities:
Common stock issued for equipment 7,500 0
============ ==========
Contribution and professional services $ 192,115 $ 0
============ ==========
See accompanying notes to condensed consolidated financial statements
Page 7
AMERINET GROUP.COM, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED 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 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 Registrant's Annual Financial Statements for the year ended
June 30, 1999. Operating results for the three months ended September 30, 1999
are not necessarily indicative of the results that may be expected for the year
ending June 30, 2000.
It is recommended that the accompanying condensed financial statements be
read in conjunction with the consolidated financial statements and notes thereto
included in the Registrant's 1999 Annual Report on Form 10-KSB.
NOTE 2: ACQUISITION
During October, 1999, the Registrant renegotiated its agreement with
American Internet's former principal stockholders, who agreed to return 932,756,
of the 1,486,736 AmeriNet shares originally issued to them in exchange for
release from their multi-year employment agreements and $48,000, payable in six
monthly installments of $8,000 each, beginning October, 1999, and agreed to the
cancellation of all rights to receipt of additional, performance-based shares.
The Registrant plans to retire these shares of common stock.
Unaudited pro forma financial information for the Registrant is presented
as if the Registrant's acquisition of American Internet had taken place on July
1, 1998, for the three months ended September 30, 1998.
Revenue $ 317,140
- -------
Net income $ 51,451
- --------
Net income per share $ 0.01
- --------
On November 12, 1999, American Internet acquired all of the outstanding
common stock of Wriwebs.com, Inc. ("WRI"). As consideration, the Registrant
issued an aggregate of 531,000 shares of common stock to the stockholders of
WRI. The acquisition will be recorded using the purchase method of accounting,
and any resulting goodwill recorded in this transaction will be amortized over a
period of 15 years using the straight line method.
Page 8
AMERINET GROUP.COM, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: 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.
At September 30, 1999, the excess of the fair value of the net assets of
American Internet acquired is $697,734, and is recorded as Goodwill, and is
being amortized on a straight-line method over 3 years. The accumulated
amortization of the excess fair value of net assets of the Registrant acquired
over cost is $58,145 for the three months ended September 30, 1999.
NOTE 4: STOCKHOLDERS' EQUITY
During the three months ended September 30, 1999, the Registrant issued its
common stock for cash and in exchange for equipment as follows:
(a) On July 22, 1999, 7,5000 shares common stock were issued for equipment
purchased. This transaction resulted in $6,075 of fixed assets expense,
which was capitalized.
(b) The Registrant issued 90,000 shares of common stock for cash during
the three months ended September 30, 1999. The total amount obtained
from the issuance was $27,500.
(c) On September 8, 1999, Xcel Associates purchased a warrant for $10,000
to purchase up to 1,000,000 shares of the Registrant's common stock at
$0.75 per share. As required under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Corporations" (FASB No.
123), this option is to be valued under the Fair Value Based Method,
and results in stock issuance costs of $174,570.
(d) Additional paid-in capital of the Registrant increased by $192,115.
This increase was due to capital contribution of professional services
provided to the Registrant during the three month period of July 1,
1999 through September 30, 1999.
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, 1999:
Costs incurred on uncompleted contracts $ 356
Estimated earnings 1,113
Total $ 1,469
Less billings to date (41,439)
Total $ (39,970)
Page 9
AMERINET GROUP.COM, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (CONTINUED)
Included in accompanying balance sheet under the following captions:
Costs and estimated earnings in excess of billings on
uncompleted contracts
Billings in excess of cost and estimated earnings on
uncompleted contracts $ (39,970)
TOTAL $ (39,970)
---------------
NOTE 6: PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at September 30,
1999:
Machinery and equipment $ 63,560
Less: accumulated depreciation $ (10,234)
--------------
Property and equipment, net $ 53,326
Depreciation expense for the period ended September 30, 1999 was
$3,179.
NOTE 7: BORROWINGS
On September 27, 1999, Xcel Associates ("Xcel") loaned American Internet
$75,000. The loan is evidenced by a note that is due on December 31, 1999. In
lieu of interest, Xcel received 15,000 shares of the Registrant's common stock
in November, 1999. Yankees has pledged 35,000 shares of the Registrant's common
stock held by Yankees as collateral for the note and the Registrant has agreed
to indemnify Yankees in the event that Xcel retains the collateral for
non-payment of the note by American Internet. Additionally, the Registrant
agreed, at Yankees' election, to either issue 3,500 shares of its common stock
or to pay the value of 3,000 shares of common stock to Yankees, as compensation
for the pledge of such collateral.
NOTE 8: COMPUTATION OF PER SHARE EARNINGS
Basic earnings or loss per share are computed by dividing the net
earnings or loss by the weighted average number of shares of common stock
outstanding during the report period. Fully diluted earnings or loss per share
are computed by dividing the net earnings or loss by the weighted average number
of shares of common stock outstanding plus the shares that would be outstanding
if all common stock options were exercised.
Page 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATION
GENERAL
The Registrant is currently a holding company with one operating
subsidiary, Wriwebs.com, Inc. (formerly known as American Internet Technical
Center, Inc.). Through current officers and directors, the Registrant provides
consulting to client companies that desire to attain public trading status in
exchange for the issuance of a percentage of the client's securities directly to
the Registrant's stockholders after such securities have been registered with
the Commission as required by the Securities Act. In addition to obtaining a
benefit for the Registrant's stockholders directly through their receipt of
securities of the client companies, the Registrant hopes to develop
relationships with its consulting clients that, in appropriate instances, will
lead to their acquisition by the Registrant or to the establishment of ongoing
business relationships with subsidiaries of the Registrant. In no instance,
however, does the Registrant intend to become involved with any control over the
business operations of such clients unless they are acquired by the Registrant.
The Registrant seeks to acquire operating companies that could benefit from
the Registrant's public trading status, from the experience of the Registrant's
directors, from synergy resulting from consolidation of non-operating aspects of
the subsidiaries' business at the holding company level and from the related
operations of the Registrant's subsidiaries, and, from the ability to
concentrate on the continued development of their core businesses without the
distractions required to operate in an independent regulatory environment. As a
holding company, the Registrant will endeavor to provide centralized functions
such as capital raising, borrowing, equipment purchases, accounting, legal
matters, personnel recruitment, and regulatory compliance.
Over the next fiscal year, the Registrant plans to acquire additional
companies and recruit operating and research and development personnel that are
complementary to WRI, its current operating subsidiary (for more specific
details, see "Part II, Item 5").
The Registrant intends to recruit management personnel who can guide and
assist its operating subsidiaries, including: administrative specialists;
accounting and bookkeeping personnel; human resources managers; marketing
professionals; public, investor and media relations personnel; and regulatory
compliance managers. However, it is not currently possible to conclusively
determine what the Registrant holding company level management requirements will
be over the coming fiscal year. As businesses are added, additional holding
company personnel will be required but because they will provide their services
to all of the subsidiaries, such personnel should actually reduce the personnel
required at the subsidiary level, resulting in net reductions in the personnel
required. Management believes that one of its principal and most important tasks
will be recruitment of talented, motivated and ethical personnel, especially in
light of its limited resources when compared to many of its competitors. It
intends to accomplish such task through use of equity based incentives and by
stressing the opportunities for personal development and advancement in a
business field that is making fundamental changes throughout the business and
social spectra.
The Registrant, through the assistance of corporate advisors, has conducted
negotiations with a number of potential acquisition candidates, involved in
Internet-related operations. However, no transactions other than the acquisition
of American Internet and WRI and related capital raising activities, have been
concluded as of the date of this filing. The Registrant anticipates that it will
be required to arrange for infusions of capital in conjunction with most, if not
all, of the acquisitions that it may undertake in the foreseeable future. The
Registrant has funded operations over the last two fiscal years through cash
flows from financing activities, capital infusions by the Yankee Companies,
Inc., the Registrant's strategic consultants ("Yankees)" and third party loans.
It intends to meet anticipated capital requirements through proceeds derived
from exercise of the Xcel Warrant, pending private placements of its common
stock and through a public offering of up to $6,000,000 in its securities during
the year 2000. This situation is expected to continue until profitable
subsidiaries can be acquired and integrated into the holding company structure,
which the Registrant hopes will occur prior to December 31, 2001.
Page 11
Yankees, the Registrant's strategic planning consultant, has suggested
that the Registrant operate on a federated model, with authority over
operational matters concentrated at the subsidiary level, subject to oversight
by holding company level personnel. The role suggested for the Registrant is
similar to that of a central government with enumerated powers designed to
provide synergistic support and coordination to the subsidiaries coupled with
oversight responsibilities designed to provide early detection of and solutions
to problems. Yankees believes that such an operating structure would encourage
desirable entrepreneurial businesses to become associated with the Registrant
and its other subsidiaries because they would be assured of a significant level
of independence, as long as they were meeting performance targets, would not
have to spend valuable business times developing new skills based on the public
regulatory environment, and would benefit from owning an equity stake in a
diversified family of companies featuring mutually supporting capabilities
designed to reduce operating costs and maximize business opportunities. Yankees
has advised the Registrant that the most difficult aspects of its suggested plan
will involve recruitment and retention of competent, dedicated personnel and
development of a method of describing the combined operations of its
subsidiaries that can be easily understood, analyzed and evaluated by the
investment community.
The Registrant's management agrees with the Yankees' proposal and is
endeavoring to implement it, with the assistance of Yankees.
RECENT DEVELOPMENTS PERTAINING TO IMPLEMENTATION OF PLAN OF OPERATION
The Registrant's ability to continue as a going concern is dependent upon
its ability to attain a satisfactory level of profitability and to obtain
suitable and adequate financing during the this fiscal year. As stated in the
10-KSB for the period ended June 30, 1999, in order for the Registrant to
re-attain profitable operations, management will have to re-establish internal
service and capabilities, diversify the services offered, focus on new
challenges and take advantage of new opportunities.
In order to achieve these results, the Registrant restructured its
transaction with American Internet, recovering most of the securities issued in
exchange for American Internet's capital stock and terminating all rights to
additional consideration. It then acquired Wriwebs.com, Inc., a Florida
corporation ("WRI") through a merger with American Internet which became
effective on November 12, 1999 (see Part II, Item 5). The acquisition of WRI
should provide the internal operational requirements that the Registrant has
been seeking in order to better compete in the marketplace. The acquisition was
effected in exchange for 531,000 shares of the Registrant's common stock, with
up to an additional 150,000 shares of common stock issuable based on WRI's
operational results over the next three years. WRI was merged with and into
American Internet and WRI's officers and directors assumed control over all of
the merged companies' (hereinafter referred to as the "Merged Subsidiary")
assets and operations. The Registrant provided the Merged Subsidiary with
$100,000 in expansion capital at closing on the merger and expects to invest up
to an additional $200,000 during the following 120 days based on the Merged
Subsidiary's performance. Like American Internet, WRI was engaged in the design,
sale and hosting of Internet web sites. Unlike American Internet, it performed
almost all functions in house.
Yankees has recommended that the Merged Subsidiary shift the focus of its
web design and hosting services from the low end consumer and small business
market to the more lucrative higher end business market, where the expertise of
the Merged Subsidiary's current staff can develop complex, interactive web
designs that justify materially higher prices. The management of the Merged
Subsidiary agrees with Yankees and will use a portion of the funds provided by
the Registrant to develop and market increasingly sophisticated web design
products. While the Registrant expects such shift in business emphasis to
increase operating costs and to reduce profits over the short term, it believes
that the increased potential earnings will quickly reverse such losses and
result in materially increased profits within the calendar year ending December
31, 2000.
Page 12
In addition to the acquisition of WRI, the Registrant has entered into a
letter of intent to acquire Trilogy International, Inc., a Florida corporation,
which it expects to complete prior to December 1, 1999. The proposed acquisition
would involve an exchange of a minimum of 1,817,273 shares of the Registrant's
common stock with Trilogy's current stockholders and assumption of options to
purchase common stock which will allow the holders to purchase an aggregate of
338,940 additional shares of the Registrant common stock at $0.75 per share. It
would also require the Registrant to provide up to $900,000 in expansion and
development capital during a 180 day period following the acquisition, needed by
Trilogy to implement its operating plans. Trilogy recently initiated marketing
of a proprietary line of wholesome, clinically tested non-toxic pet care
products under the label "Trilogy's Best Friends." Trilogy's Best Friends
products are formulated by Trilogy's Executive Director of New Product
Development, Dr. Jane Bicks. Dr. Bicks is a pioneer of natural medicine and a
nationally recognized veterinarian. She has authored three books and appeared as
a veterinary expert on CBS' 48 Hours, ABC'S Good Morning Show, Animal Planet's
Petsburgh, QVC's Pet Shops and the Home Shopping Network's Pet Solutions.
Trilogy has also entered the thriving consumer health care market with the
introduction of its "Essence of Life Colostrum Formula" with Astragalus, a
nutritional supplement that supports a healthy immune system.
Trilogy is an e-commerce direct sales company that markets its products
through independent multi-level distributors. Distributors purchase an initial
starter kit for $34.95 and will soon be able to purchase their own web site
(cross-linked to Trilogy's), permitting them to own and operate their own
Internet e-commerce business for $10.95 a month. Detailed information concerning
Trilogy can be found at its Internet web site at www.trilogyonline.com. The
proposed acquisition is subject to negotiation and approval of a definitive
agreement by the boards of directors of the Registrant and Trilogy, ratification
of such agreement by Trilogy's stockholders, and customary closing conditions.
RESULTS OF OPERATIONS
During the three months ended September 30, 1999 the Registrant reported
revenue of approximately $168,169 as compared to revenue from all sources of
$40,677 during the comparable three month period in 1998.
During the three months ended September 30, 1999 the Registrant's cost of
revenues was approximately $69,109 as compared to no cost of revenue during the
comparable three month period in 1998. The increase was attributed to
discontinued operations in the prior year and a change of business in the
current year.
During the three months ended September 30, 1999 the Registrant reported a
net loss of approximately $(377,281) or $(0.05) loss per share, compared to $451
profit or nil per share in the comparable three month period in 1998. Most of
the loss ($192,115 of the $377,281 loss) was attributable to the accounting
treatment required for services provided to the Registrant on a non-cash basis
by Yankees, the Registrant's strategic consultant. The loss of $192,115
attributable to the services provided by Yankees on a cashless basis was offset
by a corresponding presumed capital contribution by Yankees of $192,115 to the
capital of the Registrant, resulting in a net offset to stockholders' equity. If
such $192,115 item were not expensed and then treated as a capital contribution,
the Registrant's loss for the quarter would have been $(185,166) rather than
$(377,281) and the loss per share would have been $(0.02) rather than $(0.05).
Page 13
The Yankees' consulting agreement is in the process of renegotiation for
the period that starts on November 24, 1999, and both the Registrant and Yankees
are seeking a method of providing Yankees with non-cash compensation for an
additional year of services under an arrangement that will not be so distortive
of the Registrant's operational results. However, no assurances can be provided
that generally accepted accounting principals will permit such an arrangement.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant had cash on hand in the amount of $32,718 at September 30,
1999 compared to $6 at September 30, 1998. The working capital deficit decreased
from $(213,340) at September 30, 1998 to $(142,872) at the end of the current
period. The working capital increase was related principally to the structural
difference between the prior business of the Registrant and the current business
activities. The Registrant and its subsidiary have accumulated a net deficit of
$(3,762,284) since their inception in 1964 and 1998 respectively. This gives
rise to questions regarding the ability of the Registrant to continue as a going
concern.
The current three month deficit is $(377,281). A major component of such
deficit is a charge that the Registrant is required to take under generally
accepted accounting principals for the services provided by its strategic
consultant, Yankees. Although Yankees does not charge the Registrant for its
services, other than through receipt of an option to purchase 10% of the
Registrant's common stock for $60,000 granted during November of 1998, the
amount of work that Yankees performs for the Registrant, valued at Yankees
standard hourly rates, is charged as an expense of the Registrant and then
treated as a contribution of an identical sum by Yankees to the capital of the
Registrant. Of the current three month deficit of $(377,281), $(192,115) is
attributable to the accounting procedure required for services provided by
Yankees. Were it not for that item, the deficit would have been $(185,166).
MATERIAL SUBSEQUENT EVENT
As a material subsequent event, on November 12, 1999, the Registrant
acquired Wriwebs.com, Inc., a Florida corporation engaged in the web design,
sale and hosting businesses ("WRI") which was merged into American Internet. The
financial results of its operations would have had a material impact on the
foregoing results had it been a subsidiary of the Registrant during the relevant
periods (see discussion above under caption "Recent Developments Pertaining to
Implementation of Plan of Operation" concerning the terms of the WRI acquisition
and Part II, Item 5 for summary financial information concerning WRI's unaudited
financial performance for the year ended June 30, 1999 and the three month
periods ended September 30, 1999 and 1998.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Registrant nor its subsidiaries have been involved in any
material legal proceedings, except as disclosed in the Registrant's report on
Form 10-KSB for the fiscal year ended June 30, 1999, or as disclosed below:
Page 14
WRI:
WRI, like American Interent, has used a third party lead generation service
which used broadcast faxing as the principal lead generation method. In certain
instances such faxes may have violated the provisions of the Telephone Consumer
Protection Act of 1991 and comparable state legislation and consumer complaints
have been filed by a small number of people with state regulatory authorities,
which in certain instances initiated investigative proceedings. In other
instances (in each case involving faxes received by law firms) litigation was
threatened unless WRI agreed to pay compensation involving damages due to the
inconvenience of having received the faxes sent. While WRI believes that it did
nothing wrong and that any violations involved its third party lead generation
service, it has determined that it would be less costly to settle such matters
than to litigate them. Specific details concerning such matters are as follows:
* KATHLEEN M. WOOD, ET. AL. V. WEB RESULTS INSTITUTE F/K/A WRIWEBS.COM,
INC., ET. AL, SUPERIOR COURT OF CALIFORNIA, LOS ANGELES COUNTY, CASE
NO. BC199397. In this matter WRI was included as a member of a class
of defendants in a civil law suit by Kathleen M. Wood and others
residing in the State of California (the "Wood Case"). The Wood Case
was filed on behalf of an unidentifiable class of plaintiffs against
an unidentifiable class of defendants seeking damages and injunctive
relief. WRI filed defensive pleadings, with numerous affirmative
defenses. The parties are negotiating a possible settlement. WRI has
made an offer of settlement in this case that does not include the
entering of injunctive relief sought by the plaintiff. Such decision
to settle is based on the nuisance value of the suit when compared
to the potential legal fees of a successful defense, and on the
Registrant's desire that WRI be litigation free. WRI's management,
based on the analysis of its general counsel, does not expect this
matter to materially adversely effect WRI's financial condition,
liquidity or results of operations.
* Complaints involving unsolicited facsimile advertising have been filed
by the following persons with regulatory authorities in the following
states: A single complaint to the State of Washington by Mr. George R.
Nickum; a single complaint to the State of Connecticut by Mr. Ted
Kausel; a single complaint to the State of Ohio by Mr. Kobiak; a
single complaint to the State of New Mexico by Mr. Bill Vandergriff; a
single complaint to the State of Florida by Mr. Bhlindan Keyport.
While the outcome of the foregoing matters cannot be predicted with
absolute certainty, it appears that WRI has appropriately responded to
each state official involved and that no further action in any of
these matters is anticipated. In addition to the foregoing, during the
past two years there have been other complaints regarding unsolicited
faxes communicated by the recipient directly to WRI which its general
counsel has responded directly and there may be other complaints
regarding unsolicited faxes that may be asserted in the future. WRI's
management does not believe that such complaints, either individually
or in the aggregate, will cause a materially adverse effect on its
business.
Page 15
ITEM 2. CHANGES IN SECURITIES
C. RECENT SALES OF UNREGISTERED SECURITIES
Since July 1, 1999, the Registrant sold the securities listed in the tables
below without registration under the Securities Act in reliance on the exemption
from registration requirements cited. All footnotes follow the last table.
COMMON EQUITY
NUMBER OF TOTAL REGISTRATION
SHARES OFFERING TOTAL (3) Exemption
DATE SOLD SUBSCRIBER CONSIDERATION DISCOUNTS RELIED ON
- ---- ----- ---------- ------------- --------- ---------
September 3 30,000 Yankees $7,500 None (2)
September 8 20,000 Debra Elenson $10,000 None (2)
October 7 15,000 Xcel (7) None (2)
September 30 (7[B]) Yankees (7[B]) None (1)
October 26 190,000 Bolena (6) $95,000 (11) None (2)
October 26 110,000 K. Walker (6) $55,000 None (2)
November 12 100,000 Vanessa Radcliffe (6) $50,000 None (2)
November 12 531,000 (5) (5) None (1)
November 12 53,100 Yankees (11) None (1)
Consequently, as of November 12, 1999, 8,354,126 shares of the Registrant's
common stock was outstanding.
COMMON EQUITY SUBJECT TO OUTSTANDING OPTIONS OR WARRANTS TO PURCHASE, OR
SECURITIES CONVERTIBLE INTO, COMMON EQUITY OF THE REGISTRANT
During the period starting on July 1, 1999 and ending on November 11, 1999,
the Registrant reserved 2,165,000 additional shares of its common stock for
issuance in conjunction with obligations incurred during such period. The
following table provides summary data concerning such obligations, options and
warrants:
DESIGNATION NATURE OF EXERCISE OR NUMBER OF SHARES
OR HOLDER THE SECURITY CONVERSION PRICE CURRENTLY RESERVED
Registrant's Stock Option Plan (8) (8) 1,000,000
Xcel Associates, Inc. (7[A]) $0.75 per share 1,000,000
Former WRI Stockholders (10) (10) 150,000
Yankee Companies (11) (11) 15,000
- -------
(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 the Registrant,
after approval by its legal counsel. In addition, each subscriber was
directed to review the Registrant's filings with the Commission under
the Exchange Act and was provided with access to the Registrant's
officers, directors, books and records, in order to obtain required
information.
(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
Page 16
except in compliance with applicable laws and the transfer agent was
instructed not to permit transfers unless directed to do so by the
Registrant, after approval by its legal counsel. Each subscriber was
directed to review the Registrant's filings with the Commission under
the Exchange Act and was provided with access to the Registrant'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 the Registrant in its
consulting agreement, or Yankees may be entitled to compensation based
on the terms of its consulting Agreement with the Registrant.
(4) Xcel Associates, Inc., a New Jersey corporation.
(5) The 531,000 shares of the Registrant's common stock were issued to the
capital stockholders of WRI in consideration for the merger of WRI into
American Internet and the cancellation of all of WRI's capital stock.
(6) Part of a private placement of up to 900,000 shares of the Registrant's
common stock for up to $700,000, the initial 400,000 shares being
placed at $0.50 per share and the remaining 500,000 shares to be placed
for $1.00 per share. As of November 12, 1999, only the initial 200,000
shares have been subscribed for.
(7) A. On September 8, 1999, the Registrant's sold Xcel Associates,
Inc., for $10,000, a warrant to purchase 1,000,000 shares of the
Registrant's common stock at $0.75 per share. The warrant is
exercisable on or before December 31, 2000, but the exercise
period is subject to acceleration as to the initial 500,000
shares, to the 60th day following the effective date of a
registration statement filed with the Commission registering the
shares of common stock underlying the warrant (the "effective
date"), and as to the balance of the shares, to the 120th day
following the effective date. The Registrant has agreed, at its
expense to file a registration statement with the Commission
registering the shares of common stock underlying the warrant
within 45 days following the filing of this report. The
Registrant expects to use up to $200,000 of the proceeds from
such exercise, in the event of such exercise, to fund expansion
of WRI's operations, and the balance to provide expansion capital
to Trilogy International, Inc., if the proposed merger is
completed (see Part I, Item 2 and part II, Item 5), or to other
as yet undetermined acquisitions.
Page 17
B. At the request of the Registrant, on September 23, 1999, Xcel
loaned American Internet $75,000, a portion of which ($23,000)
was used to repay the Registrant for certain recent advances,
pending exercise of the Xcel Warrant on an interest free basis.
The Registrant issued Xcel 15,000 shares of its common stock in
lieu of interest and Yankees pledges 35,000 shares of its common
stock in the Registrant as collateral. The Registrant and
American Internet agreed to indemnify Yankees in the event that
the pledged collateral is retained by Xcel as a result of
American Internet's failure to comply with its obligations under
the note or for any other reason, indemnification to be at the
election of Yankees either in securities of the Registrant
selected by Yankees and reflecting Yankees' rights to discounts
under its consulting agreement with the Registrant or in cash. In
addition, the Registrant agreed to pay an amount as consideration
for the use of the collateral in a sum equal to the closing offer
price of the Registrant's common stock on the date of the note
multiplied by 3,500 (representing 10% of the value of the
transaction) in cash or the Registrant's securities, at Yankees
option.
C. In order to induce Xcel to purchase the Xcel Warrant, three of
the Registrant's stockholders sold an aggregate of 400,000 shares
of the Registrant's common stock held by them to Xcel or its
designees at a price of $0.38 per share. Because such shares were
subject to a lock-up and voting agreement with the Registrant,
the parties to such agreement executed the required amendment on
or about September 7, 1999. A copy of the amendment is filed as
an exhibit to this report (see "Part II, Item 6(a), Exhibits
required by Item 601 of Regulation S-B, exhibit number 9.3").
(8) Non-qualified stock options and incentive stock options, the terms of
which, including price, will be determined prior to issuance. It is
anticipated that the exercise price will be 85% or greater of the last
transaction price reported on the OTC Bulletin Board or other
designated quotation medium on the date of grant.
(9) Stock purchase warrant.
(10 Rights to receive additional shares of the Registrant's common stock
based on the post merger performance of WRI and American Internet as a
single corporate entity. The shares will constitute a potential
additional component of the consideration for all of the capital stock
of WRI (see Part II, Item 5).
(11) The 53,100 shares of the Registrant's common stock were issued to
Yankees as compensation, pursuant to its consulting agreement with the
Registrant, for arranging and negotiating the merger of WRI into
American Internet. The 15,000 shares are reserved in conjunction with
rights to receive additional shares of the Registrant's common stock
based on the post merger performance of WRI and American Internet as a
single corporate entity.
Consequently, as of November 12, 1999, 4,368,980 shares of the Registrant's
common stock was reserved for future issuance.
Page 18
ITEM 5. OTHER INFORMATION
(A) ELECTION OF NEW DIRECTORS AND OFFICER; COMMITTEE ASSIGNMENTS
On November 4, 1999, at the suggestion of the Yankee Companies, Inc., a
Florida corporation that serves as the Registrant's strategic planning
consultant ("Yankees"), the Registrant's board of directors voted to increase
its membership to seven persons and to add an executive committee and a
regulatory affairs committee. In conjunction therewith the Registrant's board of
directors elected Messrs. Saul B. Lipson and Edward Carl Dmytryk as members of
the board of directors and of its audit committee, to serve until the next
annual meeting of the Registrant's stockholders (expected to be held during
December of 1999) and elected Messrs. G. Richard Chamberlin, Esquire; Saul B.
Lipson and Michael Harris Jordan to the regulatory affairs committee. In
addition, in conjunction with the Registrant's acquisition of WRI described
below, Michael A. Caputa, WRI's controlling stockholder, a member of WRI's board
of directors and its president and chief executive officer is expected to be
elected to the Registrant's board of directors at its next monthly meeting.
Mr. Lipson, an accountant, was elected to cure the deficiency in the
Registrant's audit committee caused by the inability of Mrs. Penny Adams Field
to dedicate the time required to assure timely filing of the Registrant's
periodic reports with the Commission. He was also designated as its chair. In
that role he will be responsible for coordinating the flow of information from
the Registrant and its subsidiaries to its auditor, on a timely basis; for
coordinating the timely preparation of financial statements with the
Registrant's auditor and for preparation with the Registrant's management of the
management discussion and analysis section of the Registrant's periodic reports.
Mr. Dmytryk has a management background and currently serves as an operating
consultant to businesses that are experiencing operating problems. Anthony Q.
Joffe also serves on the audit committee, now comprised of three independent
members of the Registrant's board of directors.
The members of the Registrant's board of directors elected to its executive
committee were Michael Harris Jordan, the Registrant's president; G. Richard
Chamberlin, Esquire, the Registrant's general counsel; and Messrs. Saul B.
Lipson and Anthony Q. Joffe, independent directors. The executive committee, as
authorized by the Registrant's bylaws, will exercise all the authority of the
board of directors between regular board meetings, except that it will not have
the authority to: (i) approve or recommend to stockholders actions or proposals
required by the Delaware General Corporation Law to be approved by stockholders;
(ii) designate candidates for the office of director for purposes of proxy
solicitation or otherwise; (iii) fill vacancies on the board of directors or any
committee thereof; (iv) amend the bylaws; (v) authorize or approve the
re-acquisition of shares unless pursuant to a general formula or method
specified by the board of directors; or (vi) authorize or approve the issuance
or sale of, or any contract to issue or sell, shares or designate the terms of a
series of a class of shares. The executive committee was formed as a result of
the difficulty in calling frequent board of directors meetings due to the
conflicting schedules of its members and the requirement for frequent board of
directors' action in conjunction with implementation of the Registrant's
strategic plan.
In addition G. Richard Chamberlin, Esq, resigned as secretary and Vanessa
H. Lindsey was elected on November 11, 1999 to replace him as secretary.
BIOGRAPHIES
The following biographies disclose information concerning the business and
professional activities of Messrs. Lipson, Dmytryk, Caputa and Mrs. Lindsey
during the past five years:
Saul B. Lipson:
Mr. Lipson, age 51, serves as a member of the Registrant's board of
directors and as chair of its audit committee. Mr. Lipson is the founder and
President of The Lipson Professional Group, Inc., a Financial Consulting and
Accounting Firm. Mr. Lipson has expertise in the fields of Accounting and
Financial Consulting. He has represented hundreds of public and private
Page 19
companies, as well as individuals. The depth of Mr. Lipson's expertise ranges
from basic accounting and taxes to SEC compliance consulting for over the
counter companies. Prior to establishing The Lipson Professional Group, Mr.
Lipson was involved in marketing and financial and management consulting for
various businesses such as Ross Todd Productions, a concert promoting firm in
Cincinnati, Ohio; Reimer & Associates, a management consulting firm in Fort
Lauderdale, Florida; and World Wide Consultants, Inc., a multi-faceted business
with offices in the United States and Sweden. Mr. Lipson earned a bachelor of
professional arts degree at the Brooks Institute in Santa Barbara, California in
1971, after completing his undergraduate accounting requirements at Florida
Atlantic University in Boca Raton, Florida in 1985. Mr. Lipson earned his Master
of Accounting degree with honors from Nova Southeastern University in Davie,
Florida in 1988. Mr. Lipson is also enrolled as an agent to practice before the
United States Internal Revenue Service and has received a Certified Financial
Planner designation from the College for Financial Planning in Denver, Colorado.
Edward Carl Dmytryk
Mr. Dmytryk, age 53, serves as a member of the Registrant's board of
directors and as a member of its audit committee. He graduated Summa Cum Laude
from the Citadel, the Military College of South Carolina, in 1968 with a
bachelor of science degree. From 1968 until 1973, Mr. Dmytryk served in the
United States Air Force (including a tour in the Viet Nam conflict as a fighter
pilot), where he attained the rank of captain. From 1973 until 1975, he served
as a sales manager for Wulfsberg Electronics, Inc., a national avionics firm
specializing in airborne radio telephone systems and headquartered in Overland
Park, Kansas. From 1976 until 1981, he served as a regional sales manager for
Polaroid Corporation a multi faceted imaging company headquartered in Cambridge,
Massachusetts. From 1981 until 1985, he served as vice president of sales for
West Chemical, Inc., a company involved in the manufacture of animal health feed
additives, pharmaceutical products, iodophor concentrates and specialty
chemicals, headquartered in Princeton, New Jersey. From 1985 until 1986, he
served as vice president for sales and marketing at Animed, Inc., a veterinary
products manufacturing company specializing in sales to veterinarians,
headquartered in Roslyn, New York. From 1987 until 1988, he served as president
of Mac's Snacks, Inc., the world's largest processor of pork rinds,
headquartered in Grand Prairie, Texas. From 1988 until 1995, he served as the
chief operating officer for Bollinger Industries, Inc., a fitness products
manufacturer headquartered in Irvine, Texas. Since June of 1990, he has been the
owner and chief executive officer of Benchmark Industries, Inc., a metal
fabrications company headquartered in Fort Worth, Texas. Since September of
1999, he has also served as the acting president of GNR Health Systems, Inc., a
physical therapy products sales company headquartered in Ocala, Florida.
Michael A. Caputa
Mr. Caputa, age 29, serves as the president of its subsidiary, WRI, and is
expected to be elected to the Registrant's board of directors at its next
meeting. He founded WRI in 1998 and was its principal stockholder prior to the
merger with American Internet. He continues to serve as a member of its board of
directors and as its president and chief executive officer. From July of 1996
until May of 1998, he served as director of sales for GCI Marketing, Inc., a
Florida corporation engaged in web design and hosting. Mr. Caputa graduated from
Florida Atlantic University in 1996 with a degree in psychology.
Vanessa H. Lindsey, Secretary
Vanessa H. Lindsey, age 28, was elected as the Registrant's secretary on
November 11, 1999. From 1993 to 1995 she was employed by Accell Plumbing
Systems, Inc., an Ohio corporation, as that company's office manager and
bookkeeper. Since 1995 she has been employed by Diversified Corporate Consulting
Group, L.L.C., a Delaware limited liability company, engaged in providing
diversified consulting services and in filing EDGARIZED documents for clients
with the Commission, as that company's chief administrative officer. Since 1996
she has been employed by the Southeast Companies, Inc., a Florida corporation,
involved in the entertainment industry, in business and political consulting and
as a licensed mortgage brokerage company, as its chief administrative officer
and currently serves as its vice president. She is also the secretary and chief
administrative officer for Southern Capital Group, Inc, a Florida retail finance
corporation and licensed mortgage brokerage business. She currently holds the
position of secretary of The Marion County Libertarian Party and was the
Campaign Treasurer for the Cyndi Calvo for State Senate, District 8 campaign.
Since January of 1999, she has served as the secretary of Colmena Corp., a
publicly held Delaware corporation.
FAMILY RELATIONSHIPS
There are no family relationships among the current officers and directors
of the Registrant or Messrs. Lipson, Dmytryk, Caputa or Mrs. Lindsey.
Page 20
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Based on information provided to the Registrant's legal counsel, during the
five year period ending on November 14, 1999 (the date this quarterly report on
Form 10-QSB was filed with the Commission), no current director, person
nominated to become a director, executive officer, promoter or control person of
the Registrant has been a party to or the subject of:
(1) Any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of
the bankruptcy or within two years prior to that time;
(2) Any conviction in a criminal proceeding or pending criminal proceeding
(excluding traffic violations and other minor offenses);
(3) Any order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities;
or,
(4) Been found by a court of competent jurisdiction (in a civil action),
the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.
COMPENSATION OF DIRECTORS
The Registrant does not currently have any standard compensation
arrangements for its directors. However, the Registrant has agreed to compensate
Mr. Lipson for his services as a director and member of the audit and executive
committees until December 31, 2000, by granting him a non-qualified stock option
pursuant to the Registrant's Stock Option Plan (described in the Registrant's
report on Form 10-KSB for the fiscal year ended June 30, 1999) to purchase
50,000 shares of the Registrant's common stock at an exercise price of $1.4375
per share (the closing transaction price for the Registrant's common stock on
the date Mr. Lipson agreed to serve in such capacities) during the period
starting on January 1, 2001 and ending on December 31, 2002.
Yankees has proposed that, subject to ratification by the Registrant's
stockholders at their annual meeting (expected to be held during December of
1999), the other members of the Registrant's board of directors be compensated
for their services during the period ending on December 31, 2000, using
non-qualified stock options from the Registrant's Stock Option Plan, as follows:
* For basic service as a member of the Registrant's board of directors,
an option to purchase 15,000 shares of the Registrant's common stock
during the twelve month period commencing on January 1, 2001 and ending
on December 31, 2002, at an exercise price based on the last reported
transaction price for the Registrant's common stock reported on the OTC
Bulletin Board on an appropriate measuring date, possibly the first
business day following the next annual meeting of the Registrant's
stockholders. The options would vest as to 1,000 shares of the
underlying common stock per month.
* For service on the audit or executive committee, the option would be
increased by an additional 10,000 shares which would vest at the rate
of 800 shares per month; and
* For service as the chair of the audit or executive committee, the
option would be increased by an additional 5,000 shares which would
vest at the rate of 400 shares per month.
Page 21
All of the foregoing options would require that the recipient comply on a
timely basis with all personal reporting obligations to the Commission
pertaining to his or her role with the Registrant and that the recipient serve
in the designated position providing all of the services required thereby
prudently and in good faith until December 31, 2000 (unless such person was not
elected to such position by the Registrant's stockholders despite a willingness
and ability to serve).
Yankees has also recommended that at such time as the Registrant has, on a
consolidated basis, earned a net, after tax profit of at least $100,000 per
quarter for four calendar quarters, the Registrant provide the following
standard compensation to each director:
* Insurance to cover the Registrant's indemnification obligations, if
available on terms deemed economically reasonable under the
circumstances, which do not materially, detrimentally affect the
Registrant's liquidity at the time.
* Health and life insurance coverage, if available on terms deemed
economically reasonable under the circumstances, which do not
materially, detrimentally affect the Registrant's liquidity at the
time.
* Options under the Registrant's Stock Option Plan similar to those
currently under consideration, in a basic set amount for all directors,
with additional options for service on committees and as chairs of
committees, as consideration for their agreement to serve in such roles
for a period of one year, subject to forfeiture if they fail to remain
as members of the Registrant's board of directors for such period.
* A $500 per diem cash allowance for all meetings or functions attended
in person rather than by telephone or similar means at the request of
the Registrant for all directors who were not also officers or
employees of the Registrant or its subsidiaries.
COMPENSATION OF CORPORATE SECRETARY
The Registrant has agreed to compensate Mrs. Lindsey for her services as
secretary until December 31, 2000, by granting her a non-qualified stock option
pursuant to the Registrant's Stock Option Plan (described in the Registrant's
report on Form 10-KSB for the fiscal year ended June 30, 1999) to purchase
15,000 shares of the Registrant's common stock at a price of $1.28 per share
(the closing transaction price for the Registrant's common stock on the date
Mrs. Lindsey agreed to serve in such capacity) during the period starting on
January 1, 2001 and ending on December 31, 2002.
(B) SECOND RESTRUCTURING OF AMERICAN INTERNET TECHNICAL CENTER, INC.
("AMERICAN INTERNET") ACQUISITION
At the recommendation of Yankees, the Registrant again renegotiated its
acquisition agreement with American Internet based on the failure of American
Internet to meet the Registrant's operating criteria. With the assistance of
Yankees, the Registrant has arranged for the merger of WRI (see discussion
below) into American Internet, with WRI's personnel, facilities and resources
assuming control of American Internet's operations. Messrs. Gleason and Umile,
American Internet's former controlling stockholders and who served as its
president and vice president of American Internet, and as members of its board
of directors, agreed to resign from all positions with American Internet, to
return 932,756 of the 1,232,756 shares of the Registrant's common stock that
they received (as adjusted after the first amendment to the American Internet
reorganization agreement) in exchange for their capital stock in American
Internet in consideration for $48,000 to be paid over a six month period, and to
terminate all rights to receive future shares of the Registrant's common stock
based on American Internet's future performance. In conjunction with such
renegotiation, Yankees also returned 119,602 of the 150,000 shares of the
Registrant's common stock that it received in conjunction with the American
Internet acquisition, in consideration for a payment of $4,800 payable over a
six month period. As a result of such restructuring, the Registrant's
outstanding shares of common stock were reduced to 8,354,126 and the shares of
common stock reserved for currently identifiable future issuance (e.g., pursuant
to currently outstanding options, warrants or current agreements) were reduced
to 4,368,980.
Page 22
The second amendment to the reorganization agreement with American Internet
is filed as an exhibit to this report and the foregoing discussion is qualified
in its entirety by reference to the specific terms of such agreement (see Part
II, Item 6(a), "Exhibits required by Item 601 of Regulation S-B, exhibit number
2.14").
(C) ACQUISITION OF WRIWEBS.COM, INC. ("WRI")
In order to reverse American Internet's declining business performance,
Yankees recommended to the Registrant that it acquire WRI, a Florida corporation
also engaged in the design and hosting of web sites, with the facilities and
personnel to conduct almost all required functions in house, and with the
ability to incorporate materially all of American Internet's business operations
into its existing business structure. Based on the terms negotiated by Yankees
with Messrs. Gleason and Umile, the Registrant was able to acquire WRI using a
portion of the Registrant's common stock returned by Messrs. Gleason and Umile.
The WRI acquisition was effected through a merger of WRI into American
Internet (American Internet, as the surviving corporation after its merger with
WRI is sometimes hereinafter referred to as either the "Surviving Corporation"
or as the "Merged Subsidiaries") as a result of which, the former WRI
stockholders received 531,000 shares of the Registrant's common stock, with the
ability to receive an additional 150,000 shares based on WRI's performance
during the next three years. The performance shares can be earned as follows:
o If during the calendar year ended December 31, 2000, the Merged
Subsidiaries earn net pre-tax profits of at least $100,000, the
Registrant will issue an additional 50,000 shares of its common stock
to the former WRI stockholders, allocated among them on a pro rata
basis based on their holdings of WRI common stock immediately prior to
the merger;
o If during the calendar year ended December 31, 2001, the Merged
Subsidiaries earn net pre-tax profits of at least $200,000, the
Registrant will issue an additional 50,000 shares of its common stock
to the former WRI stockholders, allocated among them on a pro rata
basis based on their holdings of WRI common stock immediately prior to
the merger; and
o If during the calendar year ended December 31, 2002, the Merged
Subsidiaries earns net pre-tax profits of at least $300,000, the
Registrant will issue an additional 50,000 shares of its common stock
to the former WRI stockholders, allocated among them on a pro rata
basis based on their holdings of WRI common stock immediately prior to
the merger.
While American Internet was the Surviving Corporation, its name was changed
to Wriwebs.com, Inc., and WRI's officers and directors became the officers and
directors of the Surviving Corporation. In conjunction with the acquisition, the
Registrant invested $100,000 in the Surviving Corporation immediately following
the merger and intends to invest an additional $100,000 within 60 days after
WRI's audited financial statements are filed with the Commission and a final
$100,000 within 60 days thereafter.
In the event that during eighteen fiscal month period commencing on the
91st day following the merger and ending at the close of business on the 730th
day following the merger, Michael A. Caputa, the controlling stockholder of WRI
immediately prior to the merger ("Mr. Caputa") is not satisfied with its
association with the Registrant, then, he will have the right to acquire control
of the Merged Subsidiaries by returning to the Registrant, without any liens or
encumbrances, all of the Registrant's common stock received as a result of the
merger by Mr. Caputa and his successors in interest and all other distributions
of securities, cash or other assets or rights received by Mr. Caputa and his
successors in interest as a result of their status as stockholders of the
Registrant; provided that the Merged Subsidiaries:
Page 23
o Repay the Registrant all funds advanced to them or their affiliates or
designees directly or indirectly by or through the Registrant, with
interest; and
o Register between 20% and 30% of their capital securities with the
Commission and state securities' regulatory authorities for
distribution to the Registrant or its designees (e.g., the Registrant's
stockholders).
The amount of the Merged Subsidiaries' common stock which Mr. Caputa can
acquire will be based on when the option is exercised. If the election to
exercise the Caputa Option is made within 365 days after the merger, then 80% of
the Merged Subsidiaries' authorized common stock will be issued to Mr. Caputa
and the balance will be issued and distributed to persons designated by the
Registrant. If the election to exercise the Caputa option is made after the
365th day following the merger, then 70% of the Merged Subsidiaries' authorized
common stock will be issued to Mr. Caputa and the balance will be issued
distributed to persons designated by the Registrant. In the event the Caputa
Option is exercised, then all rights to additional shares based on the
performance of the Merged Subsidiaries would be forfeited, the AmeriNet
designees to whom shares of the Merged Subsidiaries common stock was distributed
would have certain antidilutive rights and AmeriNet would have a right of first
refusal to provide financing to the Merged Subsidiaries for a period of two
years.
The agreement and plan of merger between the Registrant, American Internet
and WRI, together with all schedules and exhibits thereto, is filed as an
exhibit to this report and the foregoing discussion is qualified in its entirety
by reference to the specific terms of such agreement (see Part II, Item 6(a),
"Exhibits Required by Item 601 of Regulation S-B, exhibit number 2.15"). In
addition, background information provided by WRI to the Registrant for use in
future filings with the Commission is also filed as an exhibit to this report
(see Part II, Item 6(a), "Exhibits required by Item 601 of Regulation S-B,
exhibit number 99.49").
SELECTED WRI UNAUDITED FINANCIAL DATA
The following summary financial data concerning WRI was provided by WRI to
the Registrant based on its current accounting system. However, it was based on
unaudited information that could change materially when subjected to generally
accepted auditing standards and generally accepted accounting principals,
consistently applied.
Three Months
Ended September 30 1999
(Unaudited)
BALANCE SHEET DATA
ASSETS
Current assets $ 136,109.71
Fixed assets $ 250,447.92
Other assets $ 3,507.23
------------ --------------
Total assets $ 392,094.86
LIABILITIES
Current liabilities $ 83,498.11
Long term liabilities $ 6,185.94
Total Liabilities $ 89,684.05
Stockholders' equity $ 302,430.81
------------
Total liabilities &
stockholders' equity $ 392,094.86
OPERATING DATA
Revenue $ 251,497.29
Expenses * $(285,990.99)
Net income $( 34,493.70)
Page 24
* Audited statements for WRI and pro forma financial information for the
operations of WRI and the Registrant complying with the requirements of
Regulation S-B will be filed by the Registrant with the Commission on
or before January 26, 2000 (the 75th day after the merger) in a current
report on Form 8-K. The foregoing information is subject to
modification based on normal audit adjustments.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-B
As permitted by Exchange Act Rule 12b-23, the exhibits filed in the
Registrant's report on Form 10- KSB for the fiscal year ended June 30, 1999, are
hereby incorporated by reference. In addition, 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
REGULATION S-B BY REFERENCE DESCRIPTION
(1) * Underwriting Agreement
(2) Plan of acquisition, reorganization,
arrangement, liquidation or succession:
.14 30 Second Amendment to American Internet
Reorganization Agreement.
.15 38 Plan and agreement of merger between
American Internet Technical Center, Inc.,
and Wriwebs.com, Inc.
(3) (i) (3)(i) Articles of incorporation:
(ii) (3)(ii) Bylaws:
(4) (4)-1 Instruments defining the rights of holders,
including indentures:
(5) * Opinion re: legality
(8) * Opinion re: tax matters
(9) Voting trust agreement
.3 217 Second Amendment to Lock-up and Voting
Agreement.
.4 221 Third Amendment to Lock-up and Voting
Agreement.
(10) Material Contracts [since July 1, 1999]
.32 (10)-1 Registrant's engagement agreement with
Daszkal, Bolton & Manela, P.A., certified
public accountants, dated July 9, 1999.
.35 (10)-2 Registrant's employment agreement with Carmen
Piccolo.
Page 25
DESIGNATION PAGE
OF EXHIBIT NUMBER
AS SET FORTH OR SOURCE OF
IN ITEM 601 OF INCORPORATION
REGULATION S-B BY REFERENCE DESCRIPTION
.37 (10)-3 Michael Harris Jordan Employment Agreement
.38 (10)-4 Xcel and American Internet Promissory Note
.39 (10)-4 Loan Guarantee and Indemnification Agreement
between Xcel Associates, Inc. and The Yankee
Companies, Inc.
(11) 10 Statement re computation of per share
earnings
(13) * Annual or quarterly reports, Form 10-QSB:
(15) * Letter on unaudited interim financial
information
(16) * Letter on change in certifying accountant
(17) * Letter on director resignation:
(18) * Letter re change in accounting principals
(19) * Reports furnished to security holders
(20) * Other documents or statements to security
holders or any document incorporated by
reference
(21) 29 Subsidiaries of the Registrant
(22) * Published report regarding matters submitted
to vote
(23) * Consent of experts and counsel
(24) * Power of attorney
(25) * Statement re eligibility of trustee
(26) * Invitation for competitive bids
(27) 242 Financial data schedule
(99) Additional Exhibits
.49 224 Background information provided by WRI for
use by the Registrant in future Commission
filings.
- -------
* Not applicable
Page 26
DESIGNATION PAGE
OF EXHIBIT NUMBER
AS SET FORTH OR SOURCE OF
IN ITEM 601 OF INCORPORATION
REGULATION S-B BY REFERENCE DESCRIPTION
(3)(i) Incorporated by reference, as permitted by Exchange Act Rule 12b-23,
from "Item 13, Exhibits," from exhibit 3 (i) filed with the
Registrant's report on Form 10-KSB for the year ended June 30, 1999.
(3)(ii) Incorporated by reference, as permitted by Exchange Act Rule 12b-23,
from "Item 13, Exhibits," from exhibit 3 (ii) filed with the
Registrant's report on Form 10-KSB for the year ended June 30, 1999.
(4)-1 Incorporated by reference, as permitted by Exchange Act Rule 12b-23,
from "Item 13, Exhibits," from exhibit 4.11 and 4.12 filed with the
Registrant's report on Form 10-KSB for the year ended June 30, 1999.
(10)-1 Incorporated by reference, as permitted by Exchange Act Rule 12b-23,
from "Item 7(c), Exhibits," from exhibit 10.34 filed with the
Registrant's report on Form 8-K filed with the Commission on July 12,
1999.
(10)-2 Incorporated by reference, as permitted by Exchange Act Rule 12b-23,
from "Item 7(c), Exhibits," from exhibit 10.36 filed with the
Registrant's report on Form 8-K filed with the Commission on July 12,
1999.
(10)-3 Incorporated by reference, as permitted by Exchange Act Rule 12b-23,
from "Item 7(c), Exhibits," from exhibit 10.39 filed with the
Registrant's report on Form 8-K filed with the Commission on August 24,
1999.
(10)-4 Incorporated by reference, as permitted by Exchange Act Rule 12b-23,
from "Item 13, Exhibits," from exhibit 10.38 and 10.39 filed with the
Registrant's report on Form 10-KSB for the year ended June 30, 1999.
(B) REPORTS ON FORM 8-K FILED DURING QUARTER ENDED JUNE 30, 1999
During the calendar quarter ended September 30, 1999, the Registrant filed
the following reports on Form 8-K with the Commission:
FINANCIAL
ITEMS REPORTED DATE FILED STATEMENTS INCLUDED
1, 2, 4, 5, 7 and 8 July 12, 1999 None
4 and 7 (amended) August 18,1999 None
5, 6 and 7 August 24, 1999 None
5, 6 and 7 (amended) September 9, 1999 None
4 and 7 (amended) September 9, 1999 None
2 and 7 (amended) September 9, 1999 Audited financial statements and
unaudited pro forma financial
information for American Internet
covering the period from inception
on April 15, 1998 until December
31, 1998 (audited) as required by
Regulation S-B in conjunction with
the acquisition of American
Internet on July 25, 1999.
Page 27
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
AMERINET GROUP.COM, INC.
November 16, 1999
BY: /S/ MICHAEL HARRIS JORDAN /s/
Michael Harris Jordan
President & Director
Page 28
ADDITIONAL INFORMATION
REGISTRANT:
AMERINET GROUP.COM, INC.
Corporate Headquarters:
902 Clint Moore Road, Suite 136-C; Boca Raton, Florida 33487
Telephone Number: (561) 998-3435; Facsimile Transmission (561) 998-3425
E-mail webmaster@amerinetgroup.com
OFFICERS:
President, Michael Harris Jordan; Secretary, Vanessa H. Lindsey
General Counsel, G. Richard Chamberlin, Esquire
BOARD OF DIRECTORS:
Michael Harris Jordan * +
G. Richard Chamberlin, Esquire *
Edward Carl Dmytryk **
Saul B. Lipson ** +
Anthony Q. Joffe * **
Penny Adams Field
J. Bruce Gleason
Michael A. Caputa ++
SUBSIDIARY:
WRIWEBS.COM, INC.
A Florida corporation
245 North Ocean Boulevard, Suite 201; Deerfield Beach,
Florida 33441 Telephone (954) 360-0636, Fax (954) 360-0377;
and, web site www.wriwebs.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;
E-mail patrick@dbmsys.usa.com
TRANSFER AGENT:
LIBERTY TRANSFER COMPANY
191 New York Avenue, Huntington, New York 11743
Telephone (516)-385-1616: Facsimile Transmission (516) 385-1619
Exhibits to the Form 10-QSB are available on the Securities and Exchange
Commission's web site located at www.sec.gov in the EDGAR archives, on the
Registrant's website located at www.amerinetgroup.com and will be provided
subject to payment of copying and transport charges to stockholders of the
Registrant upon written request addressed to Michael Harris Jordan, President;
AmeriNet Group.com, Inc.; 902 Clint Moore Road, Suite 136-C; Boca Raton, Florida
33487.
The Securities and Exchange Commission has not approved or disapproved of
this Form 10-QSB and Quarterly Report to Stockholders nor has it passed upon its
accuracy or adequacy.
- --------
+ Committee chairperson
* Executive Committee Member
** Audit Committee Member
++ Nominee
Page 29