SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the quarterly period ended: September 30th, 2002
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act.
Commission file number: 0-09358
SHOWINTEL NETWORKS, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0441388
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
554 Greentree Cove, Suite 102. Collierville, TN 38017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901)-854-3574
Multinet International Corporation
----------------------------------
(Former name since last report
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date: 20,489,001 as of November 8th.
TABLE OF CONTENTS
Item Page
- ---- ----
PART I - FINANCIAL STATEMENTS
1. Financial Statements................................................ 1
2. Management's Discussion and Analysis or Plan of Operation........... 9
PART II - OTHER INFORMATION
1. Legal Proceedings................................................... 14
2. Changes in Securities and Use of Proceeds........................... 14
3. Defaults Upon Senior Securities..................................... 15
4. Submission of Matters to a Vote of Security Holders................. 15
5. Other Information .................................................. 15
6. Exhibits and Reports on Form 8-K.................................... 17
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SHOWINTEL NETWORKS, INC.
FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
SEPTEMBER 30, 2002
(Unaudited)
ASSETS
Current assets
Interest receivable $ 3,025
-----------
Total current assets 3,025
Fixed assets, net 114,425
Note receivable 86,500
Deposit 25,000
-----------
Total assets $ 228,950
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued expenses $ 83,728
Due to stockholder 323,302
Stock payable-related party 535,950
Loan payable 75,000
-----------
Total current liabilities 1,017,980
Total liabilities 1,017,980
Commitments and contingencies --
Stockholders' deficit
Common stock - $.001 par value, 50,000,000 shares
authorized, 24,651,000 shares issued and outstanding 24,651
Additional paid-in capital 1,449,005
Prepaid consulting services paid common stock and warrants (213,481)
Note receivable related to issuance of common stock (20,000)
Accumulated deficit (2,029,205)
-----------
Total stockholders' deficit (789,030)
-----------
Total liabilities and stockholders' deficit $ 228,950
===========
See Accompanying Notes to Financial Statements
1
SHOWINTEL NETWORKS, INC.
FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
For the period For the period
from April 19, from April 19,
2001 2001
(Date of (Date of
For the three For the three For the six Inception) Inception)
months ended months ended months ended through through
September 30, September 30, September 30, September 30, September 30,
2002 2001 2002 2001 2002
------------ ------------ ------------ ------------ ------------
Revenues
Interest income $ 807 $ -- $ 1,651 $ -- $ 3,025
------------ ------------ ------------ ------------ ------------
Total revenues 807 -- 1,651 -- 3,025
General and administrative expenses
Consulting fees 443,004 103,500 1,218,135 218,500 1,669,140
Depreciation 5,512 1,444 10,107 4,299 16,987
Other general and administrative expenses 73,691 59,726 103,847 154,739 346,103
------------ ------------ ------------ ------------ ------------
Total general and administrative expenses 522,207 164,670 1,332,089 377,538 2,032,230
------------ ------------ ------------ ------------ ------------
Loss before provision for income taxes (521,400) (164,670) (1,330,438) (377,538) (2,029,205)
Income tax provisions -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss $ (521,400) $ (164,670) $ (1,330,438) $ (377,538) $ (2,029,205)
============ ============ ============ ============ ============
Basic and diluted loss per common share $ (0.02) $ (0.01) $ (0.06) $ (0.02) $ (0.10)
============ ============ ============ ============ ============
Basic and diluted weighted average
common shares outstanding 23,260,783 18,196,933 21,674,260 18,134,273 20,337,509
============ ============ ============ ============ ============
See Accompanying Notes to Financial Statements
2
SHOWINTEL NETWORKS, INC.
FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM APRIL 19, 2001
(DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 2002
Prepaid
Consulting Note
Services Receivable
Common stock Paid Related to
------------------- Additional with Common Issuance of Total
Number Paid-in Stock and Common Accumulated Stockholders'
of Shares Amount capital Warrants Stock Deficit Equity
---------- ------- ---------- ----------- -------- ----------- -----------
Balance, April 19, 2001 (Date
of Inception of Showintel
Networks, Inc.) -- $ -- $ -- $ -- $ -- $ -- $ --
Common stock issued to the
founder for cash, $0.0165
per share 15,000,000 15,000 232,725 -- -- -- 247,725
Common stock issued to the
founder for services, $0.0165
per share 3,000,000 3,000 46,500 -- -- -- 49,500
Common stock issued for the
acquisition of Multinet
International Corporation,
Inc., $0.001 per share 2,431,000 2,431 -- -- -- -- 2,431
Issuance of warrants for
1,000,000 shares of common
stock to a consultant with
a weighted average exercise
price of $1.00 -- -- 350,000 (291,666) -- -- 58,334
Net loss -- -- -- -- -- (698,767) (698,767)
---------- ------- ---------- ----------- -------- ----------- -----------
Balance, December 31, 2001 20,431,000 20,431 629,225 (291,666) -- (698,767) (340,777)
Common stock issued for consulting
services, $0.65 per share 760,000 760 493,240 (494,000) -- -- --
600,000 shares of common stock given
to various consultants by the
President/stockholder to satisfy
consulting agreements, valued at
$0.65 per share, in exchange for
stock payable -- -- -- (535,950) -- -- (535,950)
Issuance of 1,100,000 shares of
common stock to various consultants
with a weighted average exercise
price of $0.08 per share 1,100,000 1,100 83,900 (85,000) -- -- --
Issuance of warrants for 500,000
shares of common stock to a
consultant with a weighted average
exercise price of $0.65 -- -- 25,000 (25,000) -- -- --
Expensed portion of prepaid
consulting services -- -- -- 1,218,135 -- -- 1,218,135
Issuance of 10,000 shares of
common stock related to exercise
of warrants at $0.50 per share 10,000 10 4,990 -- -- -- 5,000
Issuance of 150,000 shares of
common stock for cash, $0.10
per share 150,000 150 14,850 -- -- -- 15,000
Issuance of 2,000,000 shares of
common stock for cash, $0.10
per share, net of offering expense
of $20,000 2,000,000 2,000 178,000 -- -- -- 180,000
Issuance of 200,000 shares of
common stock for promissory
note receivable, $0.10 per share 200,000 200 19,800 -- (20,000) -- --
Net loss -- -- -- -- -- (1,330,438) (1,330,438)
---------- ------- ---------- ----------- -------- ----------- -----------
Balance, September 30, 2002
(Unaudited) 24,651,000 $24,651 $1,449,005 $ (213,481) $(20,000) $(2,029,205) $ (789,030)
========== ======= ========== =========== ======== =========== ===========
See Accompanying Notes to Financial Statements
3
SHOWINTEL NETWORKS, INC.
FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the period from For the period from
For the nine April 19, 2001 (Date of April 19, 2001 (Date
months ended Inception) through of Inception) through
September 30, 2002 September 30, 2001 September 30, 2002
------------------ ------------------ ------------------
Cash flows from operating activities:
Net loss $(1,330,438) $(377,538) $(2,029,205)
Adjustments to reconcile net loss to
net cash used by operating activities:
Stock based compensation 1,218,135 53,931 1,328,400
Depreciation 10,107 4,299 16,987
Changes in operating assets and liabilities:
Increase in interest receivable (1,651) (4,100) (3,025)
Decrease in prepaid expenses 2,827 -- --
Increase in deposit (23,565) (11,360) (25,000)
Increase in accounts payable and accrued expenses 48,240 46,440 83,728
Increase in due to stockholder 63,000 -- 85,104
Decrease in stock payable to consultants (119,156) -- --
----------- --------- -----------
Net cash used by operating activities (132,501) (288,328) (543,011)
Cash flows from investing activities:
Loan related to note receivable (46,500) (10,000) (86,500)
Purchase of fixed assets (84,136) (37,276) (131,412)
----------- --------- -----------
Net cash used by investing activities (130,636) (47,276) (217,912)
Cash flows from financing activities:
Advances from stockholder 49,024 75,281 299,085
Advances from related parties -- 13,300 --
Payments on stockholder payable (60,887) -- (60,887)
Proceeds from loan payable 75,000 -- 75,000
Proceeds from issuance of common stock 200,000 247,725 447,725
----------- --------- -----------
Net cash provided by financing activities 263,137 336,306 760,923
----------- --------- -----------
Net change in cash -- 702 --
Cash, beginning of period -- -- --
----------- --------- -----------
Cash, end of period $ -- $ 702 $ --
=========== ========= ===========
Supplementary cash flow information:
Cash payments for interest $ -- $ -- $ --
=========== ========= ===========
Non-cash financing activities:
Prepaid portion of consulting agreement
related to issuance of warrants to
purchase 1,000,000 shares of common stock $ -- $ -- $ 291,666
=========== ========= ===========
Prepaid portion of consulting agreement
related to issuance of 760,000 shares
of common stock $ 494,000 $ -- $ 494,000
=========== ========= ===========
Prepaid portion of consulting agreement
related to 600,000 shares of common stock
given by President/shareholder to satisfy
consulting agreement in exchange for stock
payable $ 535,950 $ -- $ 535,950
=========== ========= ===========
Issuance of 4,431,000 shares of common stock
for the acquisition of Multinet International
Corporation, Inc. $ -- $ 4,431 $ 4,431
=========== ========= ===========
See Accompanying Notes to Financial Statements
4
SHOWINTEL NETWORKS, INC.
FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
Securities and Exchange Commission requirements for interim financial
statements. Therefore, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The financial statements should be read in conjunction with the
Forms 10-KSB and 10-KSB/A for the year ended December 31, 2001 of Multinet
International Corporation, Inc. (the "Company").
The interim financial information is unaudited. In the opinion of management,
all adjustments necessary to present fairly the financial position as of
September 30, 2002 and the results of operations and cash flows presented herein
have been included in the financial statements. Interim results are not
necessarily indicative of results of operations for the full year.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
In October 2002, the Company changed its name from Multinet Intenational
Corporation, Inc. to Showintel Networks, Inc.
NOTE 2 - GOING CONCERN
The Company incurred a net loss of approximately $2,029,000 for the period from
April 19, 2001 (Date of Inception) through September 30, 2002. The Company's
current liabilities exceed its current assets by approximately $1,015,000 as of
September 30, 2002. The Company's net cash used from operating activities
approximated $543,000 for the period from April 19, 2001 (Date of Inception for
Showintel Networks, Inc.) through September 30, 2002. These factors create an
uncertainty about the Company's ability to continue as a going concern. The
Company's management plans to complete the development of the infrastructure
necessary to deliver the video-streaming technology in order to fully commence
its operations and therewith generate future revenues. The Company will also
seek additional sources of capital through the issuance of debt and equity
financing, but there can be no assurance that the Company will be successful in
accomplishing its objectives.
The ability of the Company to continue as a going concern is dependent on
additional sources of capital and the success of the Company's plan. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
NOTE 3 - NOTE RECEIVABLE
On July 16, 2001, the Company entered into an agreement to loan a principal sum,
with a maximum of $500,000, to See/Saw Communications, Inc., in exchange for a
convertible promissory note, which is convertible to a 10-15% membership
interest in the entity. The President of See/Saw Communications, Inc. serves as
an Advisory Board Member for the Company, see Note 8. The percentage of
membership interest would be determined by the exercise date based upon the loan
amount outstanding, with conversion rights executed before February 22, 2003,
resulting up to a 10% interest and execution after the said date would result up
to a 15% interest. The note is due in yearly anniversary payments of interest at
8% per annum with the outstanding principal due on August 22, 2006. As of
September 30, 2002, the Company had loaned $86,500 to this entity and recorded
interest receivable of $3,025.
5
SHOWINTEL NETWORKS, INC.
FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - DUE TO STOCKHOLDER
Due to stockholder totaling $323,302 as of September 30, 2002 consisted of the
following:
Loans payable from the Company's President
and majority stockholder, unsecured, interest
rate of 10%, and accrued interest and principal
due on demand $ 196,198
Accrued interest related to loans
payable from the Company's
President and majority stockholder 22,104
Accrued wages for the Company's
President and majority stockholder 105,000
---------
$ 323,302
=========
NOTE 5 - NOTE RECEIVABLE RELATED TO ISSUANCE OF COMMON STOCK
In August 2002, the Company issued 200,000 shares of its common stock in
consideration of a note receivable maturing December 15, 2002, interest rate at
10% and principal and interest due at maturity.
NOTE 6 - DEPOSIT
In September 2002, the Company entered into an asset purchase agreement to
acquire all the outstanding capital of Uniguest of Tennessee, Inc. in exchange
for 400,000 shares of its common stock; 300,000 shares of its common stock for
the installation completion of public internet access terminals in ten separate
hotels; and 300,000 shares of its common stock for the development and
successful testing of a beta system for in-room entertainment for the
hospitality industry. As of September 30, 2002, the Company had not completed
the transaction and no shares have been issued but has given a deposit of
$25,000.
NOTE 7 - LOAN PAYABLE
In September 2002, the Company borrowed funds from a company totaling $75,000
maturing October 25, 2002, collateralized with 600,000 shares of its common
stock, and no interest. In lieu of this loan payable, the Company paid $15,000
as a brokerage fee to an individual for locating this funding source which has
recorded as an expense as of September 30, 2002.
NOTE 8 - RELATED PARTY TRANSACTIONS
On January 18, 2002, the Company entered into a management consulting agreement
with several officers of See/Saw Communications, Inc. The President of See/Saw
Communications, Inc. serves as a Advisory Board Member for the Company, see Note
3. The agreement provides for strategic planning and general business services
for a period of one year in consideration of 760,000 shares of the Company's
common stock, to include 330,000 shares to the President of See/Saw
Communications, Inc. The Company has valued this transaction at $494,000 or
$0.65 per share which will be expensed over a period one year. As of September
30, 2002, the Company issued 760,000 shares and recorded $370,500 as consulting
expenses and the remaining portion of $123,500 has been included as part of
prepaid consulting services totaling $213,481 as of September 30, 2002, and will
be expensed over the remaining life of the agreement.
6
SHOWINTEL NETWORKS, INC.
FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 - RELATED PARTY TRANSACTIONS (continued)
During the six month period ended June 30, 2002, the Company's
President/stockholder had given 600,000 shares of the Company's common stock
owned by him to various consultants for payment on consulting agreements entered
into during 2001. The value of the shares at the consummation of these
agreements were $0.65 per share which the Company has recorded a stock
payable-related party totaling $535,950 for these shares to be issued in the
future to the Company's President/stockholder as replacement. The Company has
expensed $401,963 for the nine months period ended September 30, 2002 and
$119,156 for the year ended December 31, 2001 for a total accumulated expense of
$521,119 as of September 30, 2002. The remaining portion totaling $14,821 has
been included as part of prepaid consulting services totaling $213,481 as of
September 30, 2002, and will be expensed over the remaining life of the
agreement.
NOTE 9 - CONSULTING SERVICES
In November 2001, the Company entered into a consulting agreement with a company
to provide corporate finance and advisory services for a period of twelve months
in consideration for warrants to purchase 1,000,000 shares of it's common stock
with an weighted average exercise price of $1.00. The Company has valued this
transaction at $350,000 under SFAS No. 123. The Company has recorded consulting
expenses for $262,500 for the nine month period ended September 30, 2002 and
$58,334 for the year ended December 31, 2001 for a cumulative total of $320,834
as of September 30, 2002. The remaining amount of $29,166 has been included as
part prepaid consulting services totaling $213,481 as of September 30, 2002, and
will be expensed over the remaining life of the agreement.
In July 2002, the Company entered into a consulting agreement with a company
("Consulting Company") to provide marketing and consulting services in
consideration of $30,000 per month renewable each month. In September 2002, the
Company did not renew the consulting agreement. However, the Company had
compensated the Consulting Company for two months of consulting services with
the issuance of 600,000 shares of the Company's common stock in satisfaction of
$60,000 of services for the two months.
In September 2002, the Company entered into a consulting agreement with a
company to provide investor relations for a period of twelve months in
consideration of 300,000 shares of the Company's common stock and warrants to
purchase 200,000 shares of common stock with an weighted average exercise price
of $0.75. The Company has valued this transaction at $25,000 under SFAS No. 123.
The Company has issued both the common stocks and warrants as of September 30,
2002. The Company has recorded expenses for $2,083 for the nine months ended
September 30, 2002. The remaining amount of $22,917 has been included as part of
prepaid consulting services totaling $213,481 as of September 30, 2002 and will
be expenses over the remaining life of the agreement.
In September 2002, the Company entered into a consulting agreement with a
company to provide consulting and public relations for a period of thirteen
months in consideration of 200,000 shares of the Company's common stock and
warrants to purchase 300,000 shares of common stock with an weighted average
exercise price of $0.75. The Company has valued this transaction at $25,000
under SFAS No. 123. The Company has issued both the common stocks and warrants
as of September 30, 2002. The Company has recorded expenses for $2,083 for the
nine months ended September 30, 2002. The remaining amount of $23,077 has been
included as part of prepaid consulting services totaling $213,481 as of
September 30, 2002 and will be expenses over the remaining life of the
agreement.
7
SHOWINTEL NETWORKS, INC.
FORMERLY MULTINET INTERNATIONAL CORPORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 10 - COMMON STOCK
In June 2002, the Company issued 10,000 shares of its common stock related to
the exercise of warrants at $0.50 per share.
In July 2002, the Company issued 150,000 shares of its common stock for cash at
$0.10 per share.
In July 2002, the Company issued 2,000,000 shares of its common stock for cash
at $0.10 per share, net of offering cost of $20,000, through a common stock
purchase agreement ("Stock Purchase Agreement"). Pursuant to the Stock Purchase
Agreement, a provision provides for a put and call right. The put right gives
the purchaser the right to sell all or portion of the common stock for a cash
price of $0.19 per share during the period from April 3, 2003 through July 3,
2003. The call right gives the Company the right to purchase all or portion of
the common stock for a cash price of $0.20 during the period from the date of
the agreement through April 3, 2003. The Company's President and majority
shareholder has personally guaranteed the provisions of the put right within the
agreement in the event the Company's stock value is less than the required
purchase price.
In May 2002, the Company mistakenly issued 300,000 shares of unrestricted common
stock to two individuals. Accordingly, these 300,000 shares are not included as
outstanding shares of common stock as of June 30, 2002. The Company has notified
the appropriate agencies of this transaction in an effort to obtain these shares
from these individuals. The Company believes it will obtain these shares,
however, if these shares are not returned then an expense will be recorded based
upon the fair value of such shares, $0.35 per share, at the date of issuance
totaling $105,000.
NOTE 11 - SUBSEQUENT EVENT
In November 2002, the Company increased its authorized shares of common stock to
100,000,000 shares.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results and events could differ materially from those projected,
anticipated, or implicit, in the forward-looking statements as a result of the
risk factors set forth below and elsewhere in this report. With the exception of
historical matters, the matters discussed herein are forward looking statements
that involve risks and uncertainties. Forward-looking statements include, but
are not limited to, the date of introduction or completion of our products,
projections concerning operations and available cash flow. Our actual results
could differ materially from the results discussed in such forward-looking
statements. The following discussion of our financial condition and results of
operations should be read in conjunction with our financial statements and the
related notes thereto appearing elsewhere herein.
THE COMPANY
Showintel Networks, Inc. was incorporated on May 17, 1996 in the State of Nevada
as Multinet International Corporation. On September 26, 2001, the Company
consummated an agreement to acquire all of the outstanding capital stock of
Showintel Networks, Inc., a Nevada Corporation, in exchange for 18,000,000
shares of Multinet's common stock ("Showintel Transaction"). Prior to the
Showintel Transaction, Multinet was a non-operating public company with no
operations or assets; and 2,431,000 shares of common stock issued and
outstanding; and Showintel Networks, Inc. was a privately held company with
assets being used for the development of its video-streaming technology.
Prior to the Showintel Transaction, the Company operated a convenience store
through Nikky D Corporation, a wholly owned subsidiary. In September 2001, the
Company divested itself of Nikky D. Corporation. The Company has accounted for
this divestiture as a spin-off in accordance with Accounting Principles Board
Statement No. 29. As a result of this divestiture, the Company became a
non-operational public company.
Showintel Networks, Inc. ("Showintel") increases consumption of entertainment by
creating a system that interacts with the "entertainment life-cycle." Combining
theater-based advertising, innovative loyalty programs, and video-on-demand
(VOD) access to pay-per-view (PPV) and subscription services, Showintel can
increase loyalty and revenue to a chain of theaters, increase purchases of
ancillary products (soundtracks, DVDs, videos, merchandise), and create a
pinpoint targeted direct marketing connection with entertainment consumers to
stimulate rentals and PPV. In addition, some of the infrastructure investment
can generate incremental revenue through strategic relationships with local ISP
and wireless network operators.
IN-THEATER ADVERTISING SYSTEM: Showintel is placing interactive displays in
theaters that will offer advertising and coming attractions that theater patron
9
can watch passively or interactively. We have an exclusive agreement with
See/Saw Communications, LLC. See/Saw was created in part by the principals of
Toolbox Productions, Inc., to sell the advertising space on our displays.
Toolbox is a full service company, uniquely qualified to sell, produce, write,
edit and mix audio/video promotional campaigns and sales presentations. Toolbox
was founded in 1995 as the exclusive on-air promotion facility for the United
Paramount Network (UPN). Clients include MGM, ABC, Sony, Paramount and Studios
USA.
LOYALTY PROGRAM: As a reward for interacting with the advertising displays,
theater patrons will be offered the opportunity to sign up for a loyalty program
that offers them discounts on future tickets as well as discounted or free
offers from sponsors of the loyalty program.
E-MAIL MARKETING: Once a part of the loyalty program, Showintel will
collect data on the movies seen. This will allow us to market merchandise
directly related to the films seen as well as creating offers for entertainment
of a similar genre.
VOD INFRASTRUCTURE: As entertainment properties continue along the
entertainment lifecycle, Showintel will offer PPV and subscription services to
the residential and hospitality markets.
INFORMATION: Once Showintel knows which films a theater patron has seen, we
will create online conversations with them designed to obtain feedback on the
shows they have seen. This will be valuable to film producers and advertisers.
It will give us an advantage in targeting future entertainment opportunities to
the consumer.
Currently the company has under contract with two theater chains and one single
operator representing a total of 45 sites under contract to install the
company's IN THEATER ADVERTISING SYSTEM. 16 sites have the systems installed.
The sites are located in Memphis TN; Jonesboro, Fort Smith and Rogers AR; Cape
Giradeaux, Springfield and St. Louis MO; and Southhaven MS All the sites have
high-speed (DSL) broadband lines installed, with the exception of Rogers AR and
are currently operating on the Showintel network system. The central VOD server
has been purchased and configured with custom designed media management
software. The company has interest from a number of media buyers to purchase the
available interactive advertisement space. Advertising space was sold to two
sponsors from Oct 15 to Nov 15. The company is awaiting 5 sponsor slots for the
current time period. The company has delayed marketing activity while it was
negotiating a co-marketing agreement with Channel M of Los Angeles, CA. Channel
M currently provides video content via VHS or DVD presentation to over 400
theater sites nationwide, 5400 retail sites and 130 video arcades. The
co-marketing agreement was initiated on Nov 19, 2002. The proposed agreement
will allow both companies to market advertising space to each company's
respective clients. Showintel will provide the equipment and network services to
Channel M clients upon approval by the various clients. Showintel hopes to begin
networking to the Channel M theaters in the top 10 largest cities shortly. The
cooperative effort between Showintel and Channel M is to create a joint effort
to become the largest provider of in-lobby theater advertising.
10
NO ASSURANCES THAT WE WILL BE ABLE TO ESTABLISH OUR SYSTEM
There are no assurances, however, that we will ever be successful in
establishing our System or penetrating our target markets. Due to the company's
low cash reserves, additional funds are required within the next few months to
complete the installation of equipment needs at the sites under contract and to
proceed with the company's business plan. The company currently holds a
commitment letter from a venture capital firm in St. Louis to provide the
necessary capital to install the system in all of Channel M sites. The Company
intends to raise other funds through various financial arrangements including
debt or equity. The company is negotiating with a number of sources of funding
to provide for equipment expense and operational expenses. There is no assurance
that such additional financing will be available when required, or available at
all, in order to proceed with the business plan. If the company is unsuccessful
in securing the additional capital investments needed to continue operations
within the time required, the company will not be in a position to continue
operations and the stockholders may lose their entire investment.
Showintel has had limited operations since its organization and is a "start-up"
or "development stage" company. We have no history of operations you can use to
evaluate our business experience.
EMPLOYEES
As of September 30th, 2002, the Company has one employee, David V. Lott,
President, has worked full-time since the Company's founding. The Company
intends to hire additional employees immediately upon securing the necessary
operational and equipment financing. The Company currently retains two outside
consultants to assist with business development, financial development and
business strategy.
11
RESULTS OF OPERATIONS
A. RESULTS OF OPERATIONS:
EXPENSES
Total expenses from continuing operations increase to $522,207 for third
quarter 2002. Most of the expenses were for consultant fees in the amount of
$443,004, which have been paid by the issuance of common restricted stock in the
company. The company booked depreciation of $5,512. General and administrative
expenses increased to $73,691 during third quarter 2002. Large portions of the
general expenses were related to the development of the network media management
operations of Showintel Networks, Inc. The company still maintains a tight
control on expenditures that are not capital related
OPERATING LOSS
We had a net loss of $521,400 for the quarter ending September 30, 2002
from continuing operations. Loss per common share from continuing operations,
basic and diluted, was $.02 per share.
B. LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred substantial losses from continuing operations,
sustained substantial operating cash outflows, has a working capital deficit and
at September 30, 2002 Management believes that such losses and negative
operating cash flows will continue for the balance of the fiscal year 2002
unless adequate capital funding is obtained. The above factors raise substantial
doubt about the Company's ability to continue as a going concern. The Company's
continued existence is dependent on its ability to obtain additional equity
and/or debt financing to fund its operations and ultimately to achieve
profitable operations. The Company is attempting to raise additional financing.
There is no assurance that the Company will obtain additional financing or
achieve profitable operations or cash flow.
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Historically, the Company has sustained its operations primarily from the use of
management's personal financial resources. We are seeking sources of financing,
from several public or private equity or debt offerings. The current state of
sources of funding is as follows:
On April 1, 2002, Multinet received a term sheet from International Forex
Finance Group, LTD. ("IFF") representing a line of credit equal to 20% of the
market value of restricted 144 stock the company placed in escrow for collateral
for the arrangement. The twenty five million shares placed in escrow for
collateral have been cancelled due to the fact that the total authorized number
of shares of the Company would not allow the transaction. The Board has since
resolved to increase the authorized number of shares and has filed an amendment
to the articles of incorporation with the State of Nevada to effectuate the
increase. Upon authorization form the State of Nevada, the Company plans on
reissuing these shares for the transaction. The term of the line of credit is
for 7 years at 11% interest. There is no provision for prepayment during the
initial three years. The collateral may be substituted and payments may be made
in equity of the Company. The line of credit hoped to be established is a
minimum of $1.5 million based upon 31 million shares of the Company's restricted
stock. As of this filing, the company is awaiting the closing of the escrow
account. There are no assurances, however, that the transaction will close until
a final agreement is reached and consumated.
On July 25, 2002, the company entered into stock purchase with LaJolla Cove
Investors in the amount of $200,000. Mr. David V. Lott, President of the Company
provided his home, a mortgage note and 2 million shares of restricted stock as
collateral. Mr. Lott holds a call provision to buy the stock back at $.20 per
share no later than July 25, 2003. LaJolla Cove Investors holds a put provision
that allows to force sell the stock to Mr. Lott for $.19 at that date.
On Sept 25, 2002, the company arranged a short term loan from Mattamy, Ltd in
the amount of $75,000. This loan is to be paid off with the release of the funds
for the IFF line of credit.
On August 1, 2002, the company arranged for the acquisition of MNIL Acquisition,
Inc. The Company has reason to believe, however, that the acquisition was never
consumated. MNIL Acquisition had arranged the placement of convertible
debentures into free trading stock of the Company under Rule 504 with exemptions
pursuant to Colorado Security Laws. The Company has reason to believe that this
transaction may have been completed incorrectly. The Company has contacted the
SEC and is waiting from the SEC on how to proceed.
Sept 2002, the company entered into negotiations to acquire Uniguest of
Tennessee, Inc. As of this filing, the final transfer of stock pursuant to the
asset purchase has not been completed and there are no assurances that a final
agreement will be reached. However, the company has provided $25,000 to Uniguest
to begin installations of its systems in 10 hotels in the Memphis, TN market. As
of this filing, 4 sites are completed and starting to generate revenue. The
company may advance another $25,000 for equipping another 15 sites upon
settlement of the asset purchase agreement. Uniguest is expected to have
sufficient revenue from operations to be self sufficient at the end of fiscal
year 2002.
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On Sept 9, 2002, the company entered into an investor relations contract with
LKS Consulting for one year. The company issued 200,000 shares of restricted
stock for the contract. The company also entered into a one-year contract with
Internet PR Group for investor relations in exchange for 300,000 shares of
restricted stock.
The Company and Channel M have been in negotiations with the intent to pursue a
long form agreement whereby the companies will co-market advertising in theater
lobbies. Channel M will provide access to their theater contracts. Showintel
will provide network administration for selected sites of Channel M's. Both
companies will market for advertising revenue and share in the revenue. There
are no assurances, however, that an agreement will occur.
ITEM II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
INTEL TRADEMARK LAWSUIT
On October 15th, 2002, Intel Corporation, a Delaware Corporation, filed suit in
the U.S. District for the Northern District of Illinois, Eastern Division,
alleging trademark infringement, false designation of origin, federal trademark
dilution, Illinois anti-dilution, and unfair competition. The Company believes
the allegations are baseless and plans to rigorously defend the lawsuit.
D & D Management
On Sept 9, 2002, D&D Management, Inc., a Georgia Corporation, filed a Civil
Action in the State Court of Cherokee County, State of Georgia, alleging that
the company owes D&D Management $58,500.00 plus 45,000 shares of common stock.
D&D Management advanced the company $45,000 in February of 2002 to be paid back
upon the closing of the International Finance Forex Group line of credit. D&D
Management received 89,000 shares of common stock in May 2002 as full settlement
of the transaction. The company will defend the lawsuit if the matter is
continued, however, at this time the company believes the claims will be
dropped.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In July 2002, the Company entered into a consulting agreement with OTC Success
Partners, L.L.C to provide consulting services in consideration of $30,000 per
month. The cost included email campaigns, fax campaigns, analyst reports and
retail and market maker information dissemination. The contract was in place for
a period of 2 months. 600,000 restricted shares were issued at $.10 per share
pursuant to Section 4(2) of the Securities Act of 1933.
On July 25, 2002, the company entered into a Stock Purchase Agreement with
LaJolla Cove Investors in the amount of $200,000. Mr. David V. Lott, President
of the Company provided his home, a mortgage note and 2 million shares of
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restricted stock as collateral pursuant to Section 4(2) of the Securities Act of
1933. Mr. Lott holds a call provision to buy the stock back at $.20 per share no
later than July 25, 2003. LaJolla Cove Investors holds a put provision that
allows to force sell the stock to Mr. Lott for $.19 at that date
In July of 2002, a total of 150,000 shares were sold to 2 individuals for $0.10
per share pursuant to Section 4(2) of the Securities Act of 1933. The monies
were used to further develop the Company's business plan.
New Age Media issued a promissory note to MNIL Acquisition for the issuance of
200,000 shares of the Company's Stock. The consideration is $20,000 worth of
development to the Company website. The Company believes the issuance of the
shares to New Age Media may have been invalid and has asked the SEC for
direction on how to proceed.
On September 9th, 2002, the Company issued 200,000 shares of restricted stock to
LKS Corporation for investor relation services pursuant to Section 4(2) of the
Securities Act of 1933.
On September 9th, 2002, the Company issued a Warrant for the purchase of 300,000
shares of common stock at an exercise price of $.50 per share to LKS Consulting
Services for investor relation services. The warrant expires on November 12th,
2005. The warrant was issued pursuant to Section 4(2) of the Securities Act of
1933.
On September 9th, 2002, the Company issued a Warrant for the purchase of 100,000
shares of common stock at an exercise price of $1.00 per share to Internet PR
Group, Inc. for investor relation services. The warrant expires on November
12th, 2005. The warrant was issued pursuant to Section 4(2) of the Securities
Act of 1933.
On September 9th, 2002, the Company issued a Warrant for the purchase of 100,000
shares of common stock at an exercise price of $.50 per share to Internet PR
Group Inc. for investor relation services. The warrant expires on November 12th,
2005. The warrant was issued pursuant to Section 4(2) of the Securities Act of
1933.
On September 15th, 2002, the Company issued 300,000 shares of restricted stock
to Internet PR Group for investor relation services pursuant to Section 4(2) of
the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N/A
ITEM 5. OTHER INFORMATION
We have been in negotiations with Uniguest of Tennessee (www.uniguest.com)
regarding the potential acquisition of Uniguest by a newly created subsidiary of
our Company. Uniguest is a sales integration organization that provides
technology services to the travel and hospitality industry. No final agreements
have been reached and there are no assurances that such an agreement will be
finalized.
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During the registration of an S-8, filed on May 7th, 2002, a delay after the
execution of an original filing document to re-evaluate several consultant
agreements caused an inadvertent release of 300,000 shares of common stock from
the Company treasury bearing no legend. Upon learning of the release, the
Company and its counsel requested the stock be returned to the company. Two
individuals refused to return the stock. The Company notified the SEC and NASD.
Official letters stating that the stock was unregistered was sent to the
Depository Transfer Corporation, Cede and Co. and the brokerage houses. As of
this date the stock is still being held in the brokerage houses but are frozen
from any activity. NASD is working with the Company to have the stock returned.
On July 10th, 2002, Showintel Networks entered into a master license agreement
with Wehrenberg Theaters, St. Louis Missouri, for the installation of Plasma
Screens and/or Digital Display systems in 11 different theater locations.
On August 1, 2002 the Company arranged the merger of MNIL Acquisition, Inc, a
Nevada Corporation. MNIL Acquisition had arranged the placement of convertible
debentures into free trading stock of the Company under Rule 504 with exemptions
pursuant to Colorado Security Laws. The Company has come to believe that the
transaction may have been invalid. The Company has contacted the SEC and is
awaiting final determination as to how to proceed. If the convertible debentures
are completely placed, the company is to realize $200,000 in funding. As of this
filing no convertible debentures have been placed and the company does not have
plans to do so. Convertible debentures have been placed with OTC Success for
payment in kind for services. Convertible debentures have been placed with New
Age Media for a payment in kind for services and a promissory note of $20,000.
The Company has been notified that such shares have already been sold into the
marketplace.
On Oct 19, 2002 the company entered into a letter of intent with Channel M for
co-marketing of advertising space and the networking of theaters in contract
with Channel M. The Company has delayed marketing activity while it was
negotiating the co-marketing agreement with Channel M of Los Angeles, CA.
Channel M currently provides video content via VHS or DVD presentation to over
400 theater sites nationwide, 5400 retail sites and 130 video arcades. The
agreement allows both companies to market advertising space to each company's
respective clients. Showintel will provide the equipment and network services to
Channel M clients upon approval by the various clients. Showintel hopes to begin
networking to the Channel M theaters in the top 10 largest cities shortly. The
cooperative effort between Showintel and Channel M is to create a joint effort
to become the largest provider of in-lobby theater advertising. There no
assurances, however, that a final agreement will be reached.
The Board of Directors have resolved that the Company increase the total number
of authorized common shares from 25,000,000 shares with a par value of $.001 to
100,000,000 shares with a par value of $.001. The company is currently awaiting
confirmation from the State of Nevada that the amendment was processed.
David V. Lott, the Company's President and majority shareholder, has cancelled a
total of 6,967,000 of his own personal shares used as part of the escrow amount
for the "IFF" escrow agreement. It is contemplated that the Board of Directors
will reissue these shares to Mr. Lott upon the increase in the Company's number
of authorized shares.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits
2.1 Acquisition Agreement between Multinet International Corp. and
Showintel, Inc. dated September 26, 2001. (Incorporated by reference
in Company's 8K/A filed on October 18th, 2001.
3.1 Articles of Incorporation of Multinet International Corporation, Inc.
(Incorporated by reference from Exhibit 3.1 of Form 8-K filed October
27, 2000).
3.2 Bylaws of Multinet International Corporation, Inc. (Incorporated by
reference from Exhibit 3.2 of Form 8-K filed July 21, 2000).
3.2 Certificate of Incorporation of Nikky D. Corporation, a Delaware
corporation (Incorporated by reference from Exhibit 3.1 of Form 8-K
filed April 6, 2001).
10.1 Nikky D. Management Agreement (Incorporated by reference from Exhibit
27.1 of Form 8-K filed July 21, 2000).
10.2 Master License Agreement between Digital Theatre Resources Co. and
Showintel Networks, Inc. (July 1, 2001) (Incorporated by reference in
Company's Form 10KSB filed on April 18th, 2002)
10.3 Guaranty Agreement between See Saw Communications Inc., and Showintel
Networks, Inc. (Oct 16, 2001) (Incorporated by reference in Company's
Form 10KSB filed on April 18th, 2002)
21.1 Subsidiaries of Registrant. (Incorporated by reference in Company's
Form 10KSB filed on April 18th, 2002)
99.1 Certification of David V. Lott
(b) Reports on Form 8K
Form Description Date
- ---- ----------- ----
8K Change in Name of Corporation 10/07/02
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Showintel Networks, Inc.
By /s/ David V. Lott
----------------------------
David V. Lott,
President/Treasurer.
Date: November 26, 2002
By /s/ Eric Nelson
----------------------------
Eric Nelson,
Secretary
Date: November 26, 2002
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CERTIFICATION UNDER SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, David V. Lott, certify that:
1. I have reviewed this quarterly report on Form 10QSB of Showintel Networks,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions, about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls, which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that-could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 26, 2002
/s/ David V. Lott
- ----------------------------
David V. Lott, President