UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____.
COMMISSION FILE NUMBER: 000-29107
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Multinet International Corporation, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0441388
- ---------------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8100 West Sahara, Suite 200
Las Vegas, Nevada 89117
- ---------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
N/A
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant: 1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and 2) has been subject to such filing requirements for
the past 90 days.
YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
At June 30, 2001 there were outstanding 4,431,000 shares of the
Registrant's Common Stock, $.001 par value.
Transitional Small Business Disclosure Format (check one):
YES [ ] NO [X]
MULTINET INTERNATIONAL CORPORATION, INC.
Table of Contents
Contents Page(s)
- -------- -------
PART I - FINANCIAL INFORMATION ................................... 1
Item 1. Financial Statements .................................... 1
Item 2. Management's Discussion and Analysis .................... 14
PART II - OTHER INFORMATION ...................................... 17
Item 6. Exhibits and Reports on Form 8-K ........................ 17
SIGNATURES ....................................................... 18
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
MULTINET INTERNATIONAL CORPORATION, INC.
CONSOLIDATED FINANCIAL REPORT
June 30, 2001
December 31, 2000
December 31, 1999
Contents
INDEPENDENT AUDITOR'S REPORT ON THE CONSOLIDATED FINANCIAL
STATEMENTS 2
- ----------------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 3
Consolidated Statements of Income 4-5
Consolidated Statements of Stockholders' Equity 6
Consolidated Statements of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-13
- -----------------------------------------------------------------------------
-1-
Independent Auditor's Report
----------------------------
To the Board of Directors
Multinet International Corporation, Inc.
Las Vegas, Nevada
I have audited the accompanying consolidated balance sheet of Multinet
International Corporation, Inc. as of June 30, 2001 and 2000 and
December 31, 2000 and 1999 and the related consolidated statements of
income, stockholders' equity, and cash flows for the three months ended
June 30, 2001, the six months ended June 30, 2001 and 2000, and the
years ended December 31, 2000 and 1999. These financial statements are
the responsibility of the Company's management. My responsibility is to
express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. I believe that
my audit provides a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Multinet International Corporation, Inc. as of June 30, 2001 and 2000
and December 31, 2000 and 1999 and the results of its operations and
cash flows for the three months ended June 30, 2001, the six months
ended June 30, 2001 and 2000, and the years ended December 31, 2000 and
1999, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 5 to
the financial statements, the Company has not been generating revenue
and has suffered recurring losses from operations which raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in
Note 5. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ KYLE L. TINGLE
------------------
KYLE L. TINGLE
CERTIFIED PUBLIC ACCOUNTANT
July 31, 2001
Henderson, Nevada
-2-
MULTINET INTERNATIONAL CORPORATION, INC.
CONSOLIDATED BALANCE SHEETS
June 30, Dec. 31, Dec. 31,
2001 2000 1999
------------- ------------- -------------
ASSETS
CURRENT ASSETS
Cash $ 234 $ 779 $ 2,284
Accounts receivable (Note 2) 76,346 43,053 0
Prepaid expenses 1,159 1,159 159
------------- ------------- --------------
Total current assets $ 77,739 $ 44,991 $ 2,443
------------- ------------- --------------
Total assets $ 77,739 $ 44,991 $ 2,443
============= ============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Outstanding checks in excess of bank balance $ 6,915 $ 5,793 $ 0
Accounts payable and accrued expenses 23,945 12,730 700
Due to related parties (Note 2) 12,500 11,500 0
------------- ------------- --------------
Total current liabilities $ 43,360 $ 30,023 $ 700
------------- ------------- --------------
STOCKHOLDERS' EQUITY (NOTE 3)
Common stock: $.001 par value;
authorized 25,000,000 shares;
issued and outstanding
4,425,000 shares at December 31, 1999; $ $ $ 4,426
4,431,000 shares at December 31, 2000; 4,431
4,431,000 shares at June 30, 2001 4,431
Additional paid in capital 5,994 5,994 499
Retained earnings (accumulated deficit) 23,954 4,543 (3,182)
------------- ------------- --------------
Total stockholders' equity $ 34,379 $ 14,968 $ 1,743
------------- ------------- --------------
Total liabilities and
stockholders' equity $ 77,739 $ 44,991 $ 2,443
============= ============= ==============
See Accompanying Notes to Consolidated Financial Statements.
-3-
MULTINET INTERNATIONAL CORPORATION, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended For the six months ended
June 30, June 30,
2001 2000 2001 2000
------------------------------ ------------------------------
(unauditied)
Revenues (Notes 1 and 4) $ 52,604 $ 36,931 $ 104,621 $ 75,762
Cost of revenue 0 0 0 0
------------- ------------ ------------- ------------
Gross profit $ 52,604 $ 36,931 $ 104,621 $ 75,762
------------- ------------ ------------- ------------
Operating expenses
Salaries and payroll taxes $ 29,364 $ 28,572 $ 58,283 $ 59,027
Management fees 7,500 6,150 15,000 10,650
Other operating expenses 6,369 4,753 11,927 8,872
------------- ------------ ------------- ------------
Operating expenses $ 43,233 $ 39,475 $ 85,210 $ 78,549
------------- ------------ ------------- ------------
Operating income (loss) $ 9,371 $ (2,544) $ 19,411 $ (2,787)
Nonoperating income (expense) 0 0 0 0
------------- ------------ ------------- ------------
Net income (loss) before income taxes $ 9,371 $ (2,544) $ 19,411 $ (2,787)
------------- ------------- ------------- ------------
Federal and state income taxes 0 0 0 0
------------- ------------ ------------- ------------
Net income (loss) $ 9,371 $ (2,544) $ 19,411 $ (3,367)
============= ============= ============= ============
Net income (loss) per share (Note 3) $ 0.00 $ (0.00) $ 0.00 $ (0.00)
============= ============ ============= ============
Average number of shares
of common stock outstanding 4,431,000 4,431,000 4,431,000 4,429,104
============= ============ ============= ============
See Accompanying Notes to Consolidated Financial Statements.
-4-
MULTINET INTERNATIONAL CORPORATION, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended
December 31,
2000 1999
------------------------------
(unaudited)
Revenues (Notes 1 and 4) $ 175,462 $ 133,394
Cost of revenue 0 0
------------- ------------
Gross profit $ 175,462 $ 133,394
------------- ------------
Operating expenses
Salaries and payroll taxes $ 113,305 $ 88,083
Management fees 24,500 25,692
Other operating expenses 29,932 22,986
------------- ------------
Operating expenses $ 167,737 $ 136,761
------------- ------------
Operating income (loss) $ 7,725 $ (3,367)
Nonoperating income (expense) 0 0
------------- ------------
Net income (loss) before income taxes $ 7,725 $ (3,367)
------------- -------------
Federal and state income taxes 0 0
------------- ------------
Net income (loss) $ 7,725 $ (3,367)
============= ============
Net income (loss) per share (Note 3) $ 0.00 $ (0.00)
============= ============
Average number of shares
of common stock outstanding 4,430,057 4,425,000
============= ============
See Accompanying Notes to Consolidated Financial Statements.
-5-
MULTINET INTERNATIONAL CORPORATION, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock and Capital
In Excess of Par Value Retained Earnings
------------------------------ Accumulated
Shares Amount (Deficit)
-----------------------------------------------------
Balance at December 31, 1997 4,000,000 $ 4,000 $ 3,763
Director Compensation 425,000 425
Net (loss), December 31, 1998 (3,578)
------------- ------------- --------------
Balance at December 31, 1998 4,425,000 $ 4,425 $ 185
Sale of stock, December 16, 1999 500 500
Net (loss), December 31, 1999 (3,367)
------------- ------------- --------------
Balance at December 31, 1999 4,425,500 $ 4,925 $ (3,182)
Sale of stock, March 9, 2000 500 500
Sale of stock, June 30, 2000 5,000 5,000
Net income, December 31, 2000 7,725
------------- ------------- --------------
Balance at December 31, 2000 4,431,000 10,425 4,543
Net income, June 30, 2001 19,411
------------- ------------- --------------
Balance at June 30, 2001 4,431,000 $ 10,425 $ 23,954
============= ============= ==============
See Accompanying Notes to Consolidated Financial Statements.
-6-
MULTINET INTERNATIONAL CORPORATION, INC.
STATEMENTS OF CASH FLOWS
For the three months ended For the six months ended
June 30, June 30,
2001 2000 2001 2000
------------------------------ ------------------------------
(unaudited)
Cash Flows From Operating Activities:
Reconciliation of net income (loss) to net
cash (used in) operating activities
Net income (loss) $ 9,371 $ (243) $ 19,411 $ (3,367)
Adjustments to reconcile net income (loss)
to cash (used in) operating activities:
Change in assets and liabilities
(Increase) in accounts receivable (16,707) (1,000) (33,293) 0
(Increase) decrease in prepaid expenses 0 (159)
Increase (decrease) in accounts payable 6,068 85 12,337 (196)
------------- ------------ ------------- ------------
Net cash (used in) operating activities $ (1,268) $ (1,158) $ (1,545) $ (3,722)
Cash Flows From Investing Activities:
Net advances from related parties $ 1,000 $ 0 $ 1,000 $ 0
Proceeds from issuance of common stock 0 5,500 0 500
------------- ------------ ------------- ------------
Net cash provided by investing
activities $ 1,000 $ 5,500 $ 1,000 $ 500
------------- ------------ ------------- ------------
Cash Flows From Financing Activities
Proceeds from notes payable $ 0 $ 0 $ 0 $ 0
Principal payments on notes payable 0 0 0 0
------------- ------------ ------------- ------------
Net cash (used in) financing
activities $ 0 $ 0 $ 0 $ 0
------------- ------------ ------------- ------------
Net (decrease) in cash and cash equivalents $ (268) $ 4,342 $ (545) $ (3,222)
Cash and cash equivalents at beginning of period 502 2,284 779 5,506
------------- ------------ ------------- ------------
Cash and cash equivalents at end of period $ 234 $ 6,626 $ 234 $ 2,284
============= ============ ============= ============
See Accompanying Notes to Consolidated Financial Statements.
-7-
MULTINET INTERNATIONAL CORPORATION, INC.
STATEMENTS OF CASH FLOWS
For the years ended
December 31,
2000 1999
------------------------------
Cash Flows From Operating Activities:
Reconciliation of net income (loss) to net
cash (used in) operating activities
Net income (loss) $ 7,725 $ (3,367)
Adjustments to reconcile net income (loss)
to cash (used in) operating activities
Change in assets and liabilities
(Increase) in accounts receivable (43,053) 0
(Increase) decrease in prepaid expenses (1,000) (159)
Increase (decrease) in accounts payable 17,823 (196)
------------- ------------
Net cash (used in) operating activities $ (18,505) $ 3,722
Cash Flows From Investing Activities:
Net advances from related parties $ 11,500 $ 0
Proceeds from issuance of common stock 5,500 500
------------- ------------
Net cash provided by investing
activities $ 17,000 $ 500
------------- ------------
Cash Flows From Financing Activities
Proceeds from notes payable $ 0 $ 0
Principal payments on notes payable 0 0
------------- ------------
Net cash (used in) financing
activities $ 0 $ 0
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Net (decrease) in cash and cash equivalents $ (1,505) $ (3,222)
Cash and cash equivalents at beginning of year 2,284 5,506
------------- ------------
Cash and cash equivalents at end of year $ 779 $ 2,284
============= ============
See Accompanying Notes to Consolidated Financial Statements.
-8-
MULTINET INTERNATIONAL CORPORATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001 and December 31, 2000 and 1999
Note 1. Nature of Business and Significant Accounting Policies
Nature of Business
------------------
Multinet International Corporation, Inc. ("Company") was organized May
17, 1996 under the laws of the State of Nevada. The Company was formed
to provide experienced management to companies through management
contracts or through merger or acquisition. Currently, it manages one
convenience store in the Phoenix, Arizona area through Nikky D
Corporation, a wholly owned subsidiary.
A summary of the Company's significant accounting policies is as follows:
- ------------------------------------------------------------------------
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the
Company and Nikky D Corporation, a wholly owned subsidiary. All
significant intercompany accounts and transactions have been
eliminated.
Business Combination
--------------------
Business combinations, which have been accounted for under the
pooling-of-interests method of accounting, combine the assets,
liabilities, and stockholders' equity of the acquired entities with the
respective accounts of the Company. Prior period financial statements
have been restated to give effect to the acquisition (see Note 3).
Cash
----
For the Statements of Cash Flows, all highly liquid investments with
maturity of three months or less are considered to be cash equivalents.
There were no cash equivalents as of June 30, 2001, December 31, 2000
and December 31, 1999.
-9-
MULTINET INTERNATIONAL CORPORATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001 and December 31, 2000 and 1999
Note 1. Nature of Business and Significant Accounting Policies
(continued)
Income Taxes
------------
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets
and liabilities and their tax basis. Deferred tax assets are reduced by
a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted
for the effect of changes in tax laws and rates on the date of
enactment.
Due to the inherent uncertainty in forecasts of future events and
operating results, the Company has provided for a valuation allowance
in an amount equal to gross deferred tax assets resulting in no net
deferred tax assets at June 30, 2001, December 31, 2000 and 1999.
Revenue Recognition
-------------------
The Company reports income and expenses on the accrual basis of
accounting, whereby income is recorded when it is earned and expenses
recorded when they are incurred.
Note 2. Related Party Transactions
Revenues and Accounts Receivable
--------------------------------
Revenues are derived from a cost plus management agreement with
Fernando's Mobil Station, a related party through common ownership.
Revenues for the three months ended June 30, 2001 and 2000, the six
months ended June 30, 2001 and 2000, and the years ended December 31,
2000 and 1999 are $52,604, $36,931, $104,321, $75,762, $175,462, and
$133,394, respectively. Accounts receivable related from Fernando's
Mobil for the six months ended June 30, 2001, and the years ended
December 31, 2000 and 1999 are $76,346, $43,053, and $0, respectively.
The owners of Fernando's Mobil Station have guaranteed the balance due
to the Company.
Management Fees and Accounts Payable
------------------------------------
Nikky D Corporation has management agreements with the owners of
Fernando's Mobil Station, who are also minority owners of the Company.
Management fees to related parties for the three months ended June 30,
2001 and 2000, the six months ended June 30, 2001 and 2000, and the
years ended December 31, 2000 and 1999 are $7,500, $6,150, $15,000,
$10,650, $24,500 and $25,692, respectively. Management fees included in
accounts payable at June 30, 2001, and December 31, 2000 and 1999, are
$20,125, $0, $12,500 and $0, respectively.
-10-
MULTINET INTERNATIONAL CORPORATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001 and December 31, 2000 and 1999
Note 2. Related Party Transactions (continued)
Due to Related Parties
----------------------
Companies affiliated through partial common ownership or management
have advanced funds for the ongoing operations of the company. These
advances are anticipated to be repaid through current operations of the
company.
These advances as of June 30, 2001 are as follows:
Shogun Investment Group 8,500
Southern States Land Development 2,000
Union Connection, Inc. 1,000
High Desert Land, Inc. 1,000
----------
$ 12,500
Note 3. Stockholders' Equity
Common Stock
------------
The authorized common stock of the Company consists of 25,000,000
shares with par value of $0.001. On August 15, 1999, the Company's
shareholders approved a thousand for one stock split of the existing
shares. On July 1, 2000, the Company authorized and issued 2,000,000
shares of restricted stock to acquire Nikky D Corporation. Prior year
information has been restated to reflect the stock split. . At the
acquisition date, a common stockholder owned 3.5% of the Company and
15% of Nikky D Corporation. After the acquisition, the stockholder
owned 8.7% of the Company.
The Company has not authorized any preferred stock.
Net Loss Per Common Share
-------------------------
Net loss per share is calculated in accordance with SFAS No. 128,
"Earnings Per Share." The weighted-average number of common shares
outstanding during each period is used to compute basic loss per share.
Diluted loss per share is computed using the weighted averaged number
of shares and dilutive potential common shares outstanding. Dilutive
potential common shares are additional common shares assumed to be
exercised.
Basic net loss per common share is based on the weighted average number
of shares of common stock outstanding for the three months ended June
30, 2001 and 2000 are 4,431,000 and 4,431,000, respectively; for the
six months ended June 30, 2001 and 2000, 4,431,000 and 4,429,104,
respectively; 4,430,057 during 2000; and 4,425,000 during 1999. As of
June 30, 2001, December 31, 2000 and December 31, 1999, the Company had
no dilutive potential common shares.
-11-
MULTINET INTERNATIONAL CORPORATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001 and December 31, 2000 and 1999
Note 3. Stockholders' Equity (continued)
Form SB-2 Registration Statement
The Company filed a Form SB-2 Registration Statement Under the
Securities Act of 1933 with the Securities and Exchange Commission
("SEC") to register the current shares of the Company. The SEC declared
the Form S-2 effective as of June 11, 2001. "Selling shareholders" that
acquired shares of the Company's in private transactions are allowed to
freely trade their shares of stock subsequent to the effective date.
The Company does not receive proceeds from these transactions.
NASD Listing
------------
The Company filed disclosure and information statements pursuant to
NASD Manual Rule 6740 and Rule 15c2-11 of the Securities Exchange Act
of 1934 with the National Association of Security Dealers. Effective
xxxx xx, 2001, the Company was granted the symbol xxxx for quotation on
the Over-The-Counter Bulletin Board (OTCBB).
Note 4. Acquisitions
On July 1, 2000, the Company completed its acquisition of Nikky D
Corporation ("Nikky D"), in which Nikky D became a wholly owned
subsidiary of the Company. The Company exchanged 2,000,000 shares of
common stock for all the outstanding shares of Nikky D. The acquisition
was a recorded using the pooling method of accounting and accordingly,
the accompanying financial statements and footnotes have been restated
to include the operations of Nikky D for all periods reported. Nikky
D's revenues for the three months ended June 30, 2000, the six months
ended June 30, 2000, and the year ended December 31, 1999 were $36,931,
$75,762, and $133,394, respectively. Nikky D's net income (loss) for
the three months ended June 30, 2000, the six months ended June 30,
2000, and the year ended December 31, 1999 were $(2,544), $(2,787), and
$(1,384), respectively.
Note 5. Going Concern
The Company's financial statements are prepared in accordance with
generally accepted accounting principles applicable to a going concern.
This contemplates the realization of assets and the liquidation of
liabilities in the normal course of business.
On July 1, 2000, the Company acquired Nikky D Corporation. Nikky D
Corporation, through a management contract with Fernando's Mobil
station, a Company affiliated through common ownership and management,
manages a convenience store in the Phoenix, Arizona area. The two 50%
partners of Fernando's Mobil Station own 15.46% of the common stock of
the Company. Revenues are provided for by a management agreement with
the convenience store.
-12-
MULTINET INTERNATIONAL CORPORATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001 and December 31, 2000 and 1999
Note 5. Going Concern (continued)
The business plan contemplates equity funding or financing to acquire
other business or operating enterprises. The Company also seeks to
acquire additional management agreements to manage convenience stores
in the Phoenix, Arizona region.
As of June 30, 2001, the Company's cash flow was not sufficient to
cover expenses of the Company. Shortfalls have been covered by advances
from parties related by common ownership or management. Without the
realization of accounts receivable, increased revenues, or additional
capital through financing or sale of securities, it would be unlikely
for the Company to continue as a going concern.
-13-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
This Quarterly Report contains forward-looking statements about the
Company's business, financial condition and prospects that reflect the Company's
assumptions and beliefs based on information currently available. Words such as
"believes", "expects", "intends", "plans", "anticipates", "estimates" and
similar expressions are intended to identify forward-looking statements,
although there may be certain forward-looking statements not accompanied by such
expressions. The Company can give no assurance that the expectations indicated
by such forward-looking statements will be realized.
If any of the Company's assumptions should prove incorrect, or if any
of the risks and uncertainties underlying such expectations should materialize,
actual results may differ materially from those indicated by the forward-looking
statements. The key factors that are not within the Company's control and that
may have a direct bearing on operating results include, but are not limited to,
acceptance of the Company's services, the Company's ability to acquire
additional management contracts, the Company's ability to raise capital in the
future, the retention of its management staff, and changes in the need for the
Company's management services.
GENERAL OVERVIEW
Multinet International Corporation, Inc. (the "Company") provides
integrated management services for newly and fully operating automotive service
stations, dealerships, and convenience stores. The Company's corporate office is
based in Las Vegas, Nevada.
The integrated management package provided by the Company includes
consulting services for general accounting and management matters. The Company
intends to continue and improve its services, which will include the development
of a central accounting and management system known as "the Multinet
Connection", which will provide management and accounting services via the
Internet and telecommunications, offering a centralized organization of
inventory, accounting and sales records. The Company's management services
include the following:
o hiring and training of managerial staff ranging from general managers to
cashiers and attendants
o general site management and employee retention
o training employees to use computer equipment for full service station
operations, including credit card and lottery sales transactions
o general accounting, including daily inventory, revenues, and payroll
records, and maintenance of financial statements
-14-
The Company provides these services through its subsidiary, Nikky D.
Corporation, to Fernando's Mobile Station located in Phoenix, Arizona. The
Company intends to expand its client base by acquiring additional management
service contracts with automotive service stations, dealerships, and convenience
stores, primarily targeting newly operating stations in the Phoenix, Arizona
area. The Company anticipates great need for its specialized management services
by these newly operating stations, so that they can concentrate on their core
operations. The Company also plans to expand its client base and management team
through strategic acquisitions, in order to continue developing and enhancing
the scope of its managerial services.
RESULTS OF OPERATIONS
COMPARISON OF THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000.
REVENUES. Revenues increased for the three and six months ended
June 30, 2001 by approximately $15,670 or 42.4% and $28,860 or 38.1%
respectively, over the same periods of the prior year. This increase during
the 2001 periods was due primarily to increased revenues received under the
contract for management services between Nikky D. Corporation and Fernando's
Mobil Station. Nikky D. Corporation is a wholly-owned subsidiary
of the Company, and Jose F. Garcia is an 8.7% owner of the Company and 50%
partner of Fernando's Mobil Station.
OPERATING EXPENSES. For the three months ended June 30, 2001, operating
expenses increased by $3,760 compared to the same period of the prior year. As
a percentage of revenues, operating expenses increased from 77.4% to 82.2%.
Salaries and payroll taxes, as included in operating expenses, increased from
approximately $28,570 for the three months ended June 30, 2000 to approximately
$29,360 for the three months ended June 30, 2001. This increase was due
mainly to increased full-time equivalents during the 2001 period. Management
fees increased from $6,150 for the three months ended June 30, 2000 to $7,500
for the three months ended June 30, 2001. This increase was due to a
management contract between Nikky D. Corporation and Jose F. Garcia for
management services to Fernando's Mobil Station. Other operating expenses
included increased legal and accounting expenses from $2,831 for the three
months ended June 30, 2000 to $2,445 for the three months ended June 30, 2001.
Health insurance costs incurred by the Company's wholly-owned subsidiary,
Nikky D. Corporation increased from $2,420 for the three months ended June 30,
2000 to $3,144 for the three months ended June 30, 2001.
For the six months ended June 30, 2001, operating expenses increased by
$6,660 compared to the same period of the prior year. This increase was mainly
due to an increase in management fees to Jose F. Garcia for management services
and other operating expenses. As a percentage of revenues, operating expenses
were 81.4% for the six months ended June 30, 2001 compared to an operating
income (loss) of $2,790 during the same period of the prior year. This was due
primarily to an increase in revenues received during the 2001 periods under a
management contract for management services to Fernando's Mobil Station and
increased professional and health insurance costs incurred by the Company.
Other operating expenses included increased legal and accounting expenses from
$2,666 for the six months ended June 30, 2000 to $4,335 for the six months ended
June 30, 2001. Health insurance costs incurred by the Company's wholly-owned
subsidiary, Nikky D. Corporation increased from $5,180 for the six months ended
June 30, 2000 to $6,012 for the six months ended June 30, 2001.
-15-
LIQUIDITY AND CAPITAL RESOURCES
The ability of the Company to satisfy its obligations depends in part
upon its ability to reach a profitable level of operations, securing short and
long-term financing to continue development of its management services, and the
acquisition of additional management contracts and subsidiaries. There is no
assurance that short and long-term financing can be obtained to fulfill the
Company's capital needs. Without the short or long-term financing, the Company
will attempt to sell additional common stock to meet its current and future
capital needs. If the Company is not able to obtain either short or long-term
funding, additional management contracts, or funding through the sale of its
common stock, the Company would be unlikely to continue its operations.
The Company has continued to incur a shortfall of cash, due primarily
to significant increases in accounts receivable from Fernando's Mobil Station
for management contract services. This cash shortfall was offset by loans from
related parties and issuances of stock. The owners of Fernando's Mobil Station
have guaranteed the balance due to the Company.
Currently, the Company's sole source of internal liquidity is from the
operations of its wholly-owned subsidiary Nikky D. Corporation, which is partly
owned by a shareholder of the Company. External sources of liquidity may include
loans from the Company's management as necessary. At this time, the Company's
management is unaware of any known trends, events or uncertainties that may have
a material impact on its short- or long-term liquidity, net sales or revenues or
income from continuing operations, or any seasonal aspects that may have a
material effect on its financial conditions or results of operations.
ASSETS AND LIABILITIES. As of the six months ended June 30, 2001,
the Company had assets of $77,739 compared to $44,991 as of December 31,
2000. The increase of assets in 2001 was due primarily to an increase in
accounts receivable. The Company's current liabilities increased to $43,360 for
the six months ended June 30, 2001 compared to $30,023 as of the end of December
31, 2000. This increase was due mainly to an increase in outstanding checks
in excess of bank balance, accounts payable and accrued expenses, and amounts
due to related parties.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Number Description
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2.1 Plan of Acquisition (Incorporated by reference from Exhibit 2.1 of
Form 8-K filed July 21, 2000).
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).
3.3 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).
21.1 Subsidiaries of the Registrant (Incorporated by reference from
Exhibit 21.1 of Form 10-KSB filed April 2, 2001).
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the first or second
quarters of 2001.
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SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Multinet International Corporation, Inc.
-----------------------------------------
(Registrant)
Date: August 6, 2001
/s/ GLEN BROW
---------
GLEN BROW
PRESIDENT
Date: August 6, 2001
/s/ SHERRI KRESSER
--------------
SHERRI KRESSER
SECRETARY
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