U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: March 31, 2001
Commission file number: 000-03718
AMERINET GROUP.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 65-0957587
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 N. Military Trail, Suite 225
Boca Raton, Florida 33431
(Address of principal executive offices)
(Zip code)
(561) 998-3435
(Registrant's telephone number, including area code)
Indicate by check mark whether 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 preceding 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 No
APPLICABLE TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practical date:
On March 31, 2001, the issuer had outstanding 12,479,522 shares of common stock,
$.01 par value per share.
Page 1
Available Information.
The public may read and copy any materials filed by our company with the
Commission at the Commission's Public Reference Room at 450 Fifth Street,
Northwest, Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains an Internet site that contains reports,
proxy and information statements, and other information regarding our company
and other issuers that file reports electronically with the Commission, at
http://www.sec.gov. Our company's maintains a web site at
http://www.amerinetgroup.com.
Caveat Pertaining to Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain of the statements contained
herein, which are not historical facts, are forward-looking statements with
respect to events, the occurrence of which involve risks and uncertainties.
These forward-looking statements may be impacted, either positively or
negatively, by various factors. Information concerning potential factors that
could affect our company is detailed from time to time in our company's reports
filed with the Commission. This Report contains "forward looking statements"
relating to our company's current expectations and beliefs. These include
statements concerning operations, performance, financial condition, anticipated
acquisitions and anticipated growth. For this purpose, any statements contained
in this Report or the Form 10-KSB, Forms 10QSB, Forms 8-K, and the Information
Statement referred to herein that are not statements of historical fact are
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may", "will", "would", "expect", "believe", "anticipate",
"intend", "could", "estimate", or "continue", or the negative or other variation
thereof or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, which are beyond our company's control. Should one or more of
these risks or uncertainties materialize or should our company's underlying
assumptions prove incorrect, actual outcomes and results could differ materially
from those indicated in the forward-looking statements.
The information in this Report is qualified in its entirety by reference to
the entire Report; consequently, this Report must be read in its entirety.
Information may not be considered or quoted out of context or without
referencing other information contained in this Report necessary to make the
information considered, not misleading.
Page 2
AMERINET GROUP.COM, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTERLY PERIOD ENDED MARCH 31, 2001
INDEX
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Condensed Balance Sheet (Unaudited)
As of March 31, 2001............................................4
Condensed Statements of Operations (Unaudited)
For the Three and Nine Months Ended March 31, 2001 and 2000.....5
Condensed Statements of Cash Flows (Unaudited)
For the Nine Months Ended March 31, 2001 and 2000...............6
Condensed Notes to Consolidated Financial Statements.................7-13
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................13-16
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings..........................................16-20
Item 2 - Changes in Securities and use of Proceeds.....................21
Item 4 - Submission of Matters to a Vote of Security Holders...........21
Item 6 - Exhibits and Reports on Form 8-K...........................21-22
Signatures.............................................................23
Page 3
AMERINET GROUP.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 2001
(Unaudited)
ASSETS
Current assets:
Cash $ 7,815
Accounts receivable,net 142
-------------------
Total current assets 7,957
-------------------
Property and equipment, net 4,865
-------------------
Other assets:
Investment in subsidiary - WRIwebs.com, Inc. 642,108
Property and equipment -idle, net 292,719
-------------------
Deposits 400
Total assets $ 948,049
===================
Current liabilities:
Checks outstanding in excess of bank balance $4,373
Accounts payable 259,454
Accrued expenses 106,761
Loans payable - related parties 5,077
Current maturities of loans payable 389,808
Current maturities of capital leases 36,623
--------------
Total current liabilities 802,096
Equity subject to potential redemptions 640,987
--------------
Stockholders' deficit:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
412,116 issued and outstanding 4,121
Common stock, $0.01 par value, 20,000,000 shares authorized,
12,479,522 shares issued and outstanding 124,795
Subscription Payable 209,687
Outstanding stock options 17,270
Additional paid in capital 14,911,398
Accumulated deficit (15,762,305)
--------------
Total stockholders' deficit (495,034)
--------------
Total liabilities and stockholders' deficit $ 948,049
==============
See accompanying notes to condensed consolidated financial statements.
Page 4
AMERINET GROUP.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine and Three Months Ended March 31, 2001 and 2000
Three Months Ended Nine Months Ended
March 31, March 31,
2001 2000 2001 2000
Revenues earned $ 22,524 $ 45,063 $ 367,793 $ 249,941
Cost of revenues earned 2,355 18,398 248,569 176,476
------ ------- -------- --------
Gross profit 20,169 26,665 119,224 73,465
------- ------- -------- -------
Operating expenses:
Selling, general and
administrative expenses 1,505,264 522,096 3,403,954 1,318,983
Depreciation and
amortization 9,313 342,084 106,368 554,527
Goodwill - charges and
transactions - - 630,791 522,201
-------- -------- -------- --------
Total operating expenses 1,514,577 864,180 4,141,113 2,395,711
--------- -------- ---------- ---------
Loss from operations (1,494,408) (837,515) (4,021,889) (2,322,246)
----------- --------- ----------- ----------
Other (expenses):
Interest expense (10,684) (8,853) (47,087) (34,290)
Debt Forgiveness - - (222,983)
Equity in losses
of subsidiary (34,452) (38,269) (19,710) (45,021)
---------- -------- -------- --------
Total other (expenses) (45,136) (47,122) (289,780) (79,311)
---------- -------- --------- ---------
Net loss $(1,539,544) $ (884,637) $(4,311,669) $(2,401,557)
============= =========== ============ ============
Discount Attributable to Beneficial Conversion
Privilege of Preferred Stock - - (814,246) -
------------ ---------- --------- -----------
Net Loss Applicable
to Common Stock $ (1,539,544) $ (884,637) $(5,125,915 $(2,401,557)
============= =========== =========== ============
Basic loss per share $ (0.12) $ (0.08) $ (0.41) $ (0.27)
============= =========== ========== ============
Weighted average
shares outstanding 12,467,743 10,482,350 12,466,042 8,951,827
============ =========== =========== ==========
Fully diluted loss
per share $ (0.12) $ (0.08) $ (0.41) $ (0.27)
============ =========== ========== =========
Fully diluted average
shares outstanding 12,467,743 10,482,350 12,466,042 8,951,827
============ =========== =========== =========
See accompanying notes to condensed consolidated financial statements.
Page 4
AMERINET GROUP.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended March 31, 2001 and 2000
Nine Months Ended
March 31,
==========================
2001 2000
---------- ----------
Net cash used by operating activities $ (564,029) $ (1,130,198)
----------- -------------
Cash flows from investing activities:
Purchase of property and equipment (3,391) (36,650)
Cash overdraft acquired in acquisition - (69,838)
----------- -------------
Net cash used by investing activities: (3,391) (106,488)
----------- -------------
Cash flows from financing activities:
Common stock issued for cash, net of costs - 906,950
Preferred stock issued for cash 88,000 -
Capital contributions - 25,000
Proceeds from loans payable 561,671 -
Net payments on capital lease obligations (36,008) -
Payments on mortgage and loans payable (76,854) 345,500
----------- ------------
Net cash provided by financial activities 536,809 1,277,450
----------- ------------
Net (decrease) increase in cash (30,611) 40,764
Cash at beginning of period 38,426 79,021
---------- -----------
Cash at end of period $ 7,815 $ 119,785
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ - $ 25,601
=========== ===========
Non-cash transactions affecting investing and
financing activities:
Common stock issued for equipment $ - $ 6,075
=========== ==========
Common stock issued for interest $ - $ 22,500
=========== ==========
Common stock issued for acquisitions $ - $4,851,562
=========== ============
Contribution of professional services $ - $ 644,295
=========== ============
Preferred stock issued for debt $ 1,135,890 $ -
=========== ============
See accompanying notes to condensed consolidated financial statements.
Page 5
AMERINET GROUP.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, the financial statements do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. The consolidated financial
statements include the accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated. In the
opinion of management, all adjustments consisting of normal recurring accruals
considered necessary for a fair presentation of the results for the interim
periods presented have been included.
These results have been determined on the basis of generally accepted
accounting principles and practices applied consistently with those used in the
preparation of our Annual Financial Statements for the year ended June 30, 2000.
Operating results for the three months and nine months ended March 31, 2001 are
not necessarily indicative of the results that may be expected for the year
ending June 30, 2001. It is recommended that the accompanying condensed
financial statements be read in conjunction with the consolidated financial
statements and notes thereto included in our Annual Report on Form 10-KSB as
filed with the Securities and Exchange Commission.
NOTE 2 - GOODWILL IMPAIRMENT AND FORGIVENESS OF LOAN RECEIVABLE
Pursuant to SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," we evaluated the
recoverability of the long-lived assets, primarily the loan receivable from WRI
and the goodwill recorded upon the acquisition of Lorilei. On January 26, 2001,
we entered into a Superseder and Exchange Agreement with Yankees, WRI and
Michael A. Caputa. In summary the agreement calls for Michael Caputa, WRI's
president, to return 500,380 shares of our common stock originally issued to
him. In exchange for the common stock, we have forgiven the debt owed to us by
WRI and for WRI to distribute to the stockholders of our company 20% of its
common stock after its registration with the Commission. Upon completion of the
transactions contemplated by the agreements, we will no longer have any equity
interest in WRI. In connection with this agreement, we recorded a non-cash
charge of $222,983, adjusting the carrying value of the loan to its estimated
fair value of $-0-. Additionally, we recorded a non-cash charge of $630,791,
adjusting the carrying value of the unamortized portion of the goodwill recorded
upon the acquisition of Lorilei to its estimated fair value of $-0-.
NOTE 3 - STOCKHOLDERS' EQUITY
Common Stock
In March 2001, in connection with the disposition of our subsidiary,
Trilogy International, Inc, we issued 14,352 shares of common stock that were
held in escrow. These common shares were value at fair value of $2,870 and
charged to operations.
Page 6
NOTE 3 - STOCKHOLDERS' EQUITY (Continued)
Common Stock (Continued)
On January 1, 2000 and on March 8, 2000 our company adopted Non-Qualified
and Incentive Stock Option Plans. The objectives of these plans include
attracting and retaining the best personnel and promoting the success of the
Company by providing employees and directors the opportunity to acquire common
stock. The Stock Option Plans authorize our company to grant up to 3,000,000
common shares of which 529,800 have been granted at December 31, 2000.
Preferred Stock
On June 29, 2000 our company's Board of Directors adopted a resolution
creating and designating the initial series of our company's Preferred Stock.
The shares are designated Class A Preferred Stock and the number of shares
authorized to be issued was 500,000 shares. On February 21, 2001, the Board of
directors amended the resolution and increased the authorizesd shares to
1,000,000. Each share of Class A Preferred Stock is convertible into a minimum
of 20 shares of our Company's common stock.
During the nine months ended March 31, 2001, we issued Class A Preferred
Stock for cash, for conversion of debt and in exchange for services as follows:
During July and August 2000, we issued 23,520 shares of Class A Preferred Stock
for cash at $5.00 per share through a private placement. The net amount obtained
was $117,600.
During July and August 2000, we converted $16,965 of debt to 3,393 shares
of Class A Preferred Stock at $5.00 per share. During August 2000, we converted
$115,000 of our debt to Yankee's by issuing 46,000 shares of Class A Preferred
Stock at $2.50 per share in accordance with Yankee's preferred subscription
rights.
During the quarter ended December 31, 2000, we converted $434,493 of our
debt to Yankee's by issuing 173,797 shares of Class A Preferred Stock at $2.50
per share in accordance with Yankee's preferred subscription rights.
During the quarter ended March 31, 2001, we converted $225,608 of debt to
137,072 and 10,000 shares of Class A Preferred Stock at $1.50 and $2.00 per
share, respectively, in accordance with Yankee's preferred subscription rights.
During the quarter ended March 31, 2001, we issued converted 18,334 shares
of Class A Preferred Stock for consulting services rendered amounting to
$30,000.
The beneficial conversion feature present in the issuance of the Class A
Preferred Stock as determined on the date of issuance of the Class A Preferred
Stock totaled $1,842,690 for the nine months ended March 31, 2001 and is treated
as a reduction in earnings available (increase in loss attributable) to common
stockholders over the period from the date of issuance of the Class A Preferred
Stock to the earliest date such shares may be converted
Page 7
NOTE 3 - STOCKHOLDERS' EQUITY (Continued)
Stock Options
On December 21, 2000, we adopted the "Amerinet Group.com, Inc. 2001
Officers' & Directors' Stock Option Plan" (the Plan). The Plan became effective
on January 1, 2001. The purpose of this plan include attracting and retaining
the best personnel and promoting the success of the Company by providing
employees and directors the opportunity to acquire common stock. The Plan
authorizes us to grant to each board member options to purchase 15,000 common
shares during the twelve-month period commencing January 1, 2001 to December 31,
2001 at $.27 per share. These options vest as at 1,000 options per month with
all unvested options vesting on December 31, 2001. For services on a permanent
committee, the option will increase by an additional 10,000 shares and will vest
at a rate of 800 shares per month with all unvested options vesting on December
31, 2001. For service as the chair of a permanent committee, the option will
increase by an additional 5,000 shares and will vest at a rate of 400 shares per
month with all unvested options vesting on December 31, 2001. As of March 31,
2001, no options have been granted under this plan.
We have elected to account for the stock options under Accounting
principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. Accordingly, no compensation expense has been
recognized on the employee stock options. We account for stock options granted
to consultants under Financial Accounting Standards Board Statement No. 123,
"Accounting For Stock-Based Compensation".
We issued 223,440 stock options to Yankee during the quarter ended
September 30, 2000. We recorded compensation expense of $151,939.
We recognized $129,505 in compensation expense for the three months ended
December 31, 2000 in connection with an increase of 479,649 shares of common
stock underlying the Yankee option to purchase up to 12 1/2% of the outstanding
and reserved common shares of our company.
We recognized $138,434 in compensation expense for the three months ended
March 31, 2001 in connection with an increase of 516,545 shares of common stock
underlying the Yankee option to purchase up to 12 1/2% of the outstanding and
reserved common shares of our company. With this increase in the underlying
shares, Yankees now has the option to purchase 3,377,167 shares of our company's
common stock for an aggregate price of $90,000.
We issued 164,800 common stock options to Directors of our company for
services provided during the quarter ended December 31, 2000 at an exercise
price of $1.4375 per share of common stock. Had compensation expense for the
Incentive Stock Option Plan been determined based on the fair market value of
the options at the grant date consistent with the methodology prescribed under
Statement of Financial Standards No. 123 "Accounting for Stock Based
Compensation", our company's net loss for the three months ended December 31,
2000 would have increased by $1,648 to $1,864,088.
During the quarter ended March 31, 2001, we did not grant any stock
options.
Page 8
NOTE 3 - STOCKHOLDERS' EQUITY (Continued)
A summary of the option transactions during the three months ended March
31, 2001 is shown below:
Weighted-
Number of Average
Shares Exercise Price
---------------- ---------------
Outstanding at December 31, 2000 3,185,738 $ 0.43
Granted 516,545 .02
Exercised - -
Forfeited - -
----------------- ---------------
Outstanding at March 31, 2001 3,732,283 $ 0.37
================= =================
Other
Yankee contributed professional services of $112,530 to the Company during the
three month period ended September 30, 2000.
Yankees contributed professional services of $112,525 to our company during the
three month period ended December 31, 2000.
NOTE 4 - RELATED PARTY TRANSACTIONS
At March 31, 2001, we had outstanding payables to stockholders in the
amount of $5,077. The transactions are summarized as follows:
Balance at beginning of period $ 52,082
Advances during the period 185,000
Payments during the period (6,397)
Conversions to equity (225,608)
------------------
Balance at end of period $ 5,077
===================
During the three months ended December 31, 2000, Yankees contributed
professional services valued at $112,525 to our company. Our company recognized
the $112,525 as consulting fees expense and the entire amount was contributed to
our company as additional paid in capital.
Our company shares office space in Boca Raton, Florida with a related
party. Rent expense for the nine months ended March 31, 2001 was $4,103.
Page 9
NOTE 5 - SUBSCRIPTIONS PAYABLE
Certain officers of our company and/or one of its subsidiaries as well as
certain independent contractors provide services to our company valued
individually at $5,000 to $8,333 per month. The compensation earned by these
individuals is due and payable at the end of one year's service with our company
in the form of our company's common stock, provided they were employed for such
period. As of March 31, 2001, we had incurred a total expense for executive
compensation, consulting services and legal services provided by these
individuals in the amount of $209,687.
NOTE 6 - MATERIAL CONTRACTS
WRI Superseder and Exchange Agreement
On January 26, 2001, we entered into a Superseder and Exchange Agreement
with Yankees, WRI and Michael A. Caputa. In summary the agreement calls for
Michael Caputa, WRI's president, to return 500,380 shares of our common stock
originally issued to him. In exchange for the common stock, we have forgiven the
debt owed to us by WRI and for WRI to distribute to the stockholders of our
company 20% of its common stock after its registration with the Commission. Upon
completion of the transactions contemplated by the agreements, we will no longer
have any equity interest in WRI. As Off March 31, 2001, we had not completed
closing on this agreement. The closing will take place when the shares are
registered with the Commission and distributed to our shareholders. Subsequent
to March 31, 2001, Michael Caputa returned all of our common shares originally
issued to him.
PriMed Consulting Agreement
Our company entered into an agreement on January 16, 2001, which was fully
executed on January 31, 2001, with PriMed Technologies, Inc., and PriMed
Technologies LC of Deerfield Beach, Florida (website at www.primedtech.com;
"PriMed"), pursuant to which our company's stockholders will, subject to prior
registration under Section 5 of the Securities Act, receive 10% of the common
stock of an entity to be formed consolidating the operations of PriMed and its
affiliates ("New PriMed"). The stock will be issued to our company's
stockholders of record at the close of business on the day the required
registration statement is declared effective by the Commission provided that
their shares were outstanding prior to May 31, 2001. As currently contemplated,
our company's stockholders will receive one share of New PriMed common stock for
every 10 shares of our company's common stock held. A copy of the agreement was
filed on Form 8-K on February 8, 2001. Negotiations are continuing concerning
our company's acquisition of a majority interest in New PriMed, in addition to
the shares to be issued directly to our companies stockholders. PriMed, which is
in the process of consolidating and expanding its current operations, is
involved in the provision of management and support services to the health care
industry along with the latest on-line technologies to its growing client base
of physicians, hospitals and ancillary service organizations in South Florida.
Page 10
NOTE 7 - SUBSEQUENT EVENTS
During April 2001, we granted 83,000 options pursuant to the "Amerinet
Group.com, Inc. 2001 Officers' & Directors' Stock Option Plan". The options can
be exercised at $.27 per share and expire on December 31, 2003.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Recent Developments Pertaining to Implementation of Plan of Operation
Our ability to continue as a going concern is dependent upon its ability to
attain a satisfactory level of profitability and to continue to have access to
suitable financing. Management believes that divesting our company of its
unprofitable subsidiaries, Trilogy International, Inc. and Vista Vacations, Inc.
at June 30, 2000, was a significant step towards accomplishing this goal.
AmeriCom
In September 2000, our company organized a new subsidiary, AmeriNet
Communications, Inc., A Florida corporation ("AmeriCom") and assigned it most of
Lorilei's assets, personnel and operations. AmeriCom's target markets were
redirected and expanded. All business formerly conducted by our company's
Lorilei subsidiary have been conducted by AmeriCom since October 1, 2000. Based
on an operating plan developed by our company's chief financial officer and
chief operating officer, it was expected that AmeriCom would produce net
operating income for the three month period ended December 31, 2000 and that by
the end of our fiscal year June 30, 2001 AmeriCom would significantly contribute
to the earnings of our company.
Operations of AmeriCom did not produce the expected results and the
subsidiary experienced significant operating losses for the three-month period
ended December 31, 2000. Because of the disappointing operating results of
AmeriCom and without assurances of an immediate turnaround, Yankees informed our
company in early December 2000, that it was unwilling to lend any additional
funds to our company for use in funding the operating deficit at AmeriCom. In as
much as our company has no current financing available from sources other than
Yankees it has been unable to provide any funds to AmeriCom since early
December. AmeriCom has continued to operate by deferring payables, but without
additional financing it is uncertain as to whether the company can continue in
business. AmeriCom has made major management changes, and Edward C. Dmytryk,
also the president of our company, was elected president of AmeriCom during
February of 2001. In addition, in February, our AmeriCom subsidiary has ceased
operations. AmeriCom is re-evaluating its market and is in the process of
developing projects such as The GreenGrouper website and related businesses.
Page 11
WRI
Our company and the principals of WRI have entered into a superseder and
exchange agreement. The agreement was filed with the Commission on Form 8-K on
February 8, 2001. In summary the agreement calls for Michael Caputa, WRI's
president, to return 500,380 shares of our company's common stock originally
issued to him, for our company to forgive the debt owed to it by WRI and for WRI
to distribute to the stockholders of our company 20% of its common stock after
its registration with the Commission. Upon completion of the transactions
contemplated by the agreements our company will no longer have any equity
interest in WRI. The parties executed the final agreement on January 26, 2001,
although we have not closed this transaction as of March 31, 2001.
Park City Group, Inc.
On March 12, 2001, we signed a letter of intent to acquire Park City Group,
Inc. ("Park City"), a software developer headed by the co-founder of the
internationally renowned Mrs. Fields' Cookies. Under the terms of the proposed
agreement, Park City would receive 78% of all the issued and outstanding shares
of AmeriNet in exchange for 100 percent of its common shares. AmeriNet
shareholders would retain 18% of the company. AmeriNet will also raise up to $1
million through a private placement, which will account for up to 4 % of the
common stock to be outstanding after the acquisition. The funds will be used for
Park City operations, future acquisitions, as well as research and development.
AmeriNet's existing operating subsidiaries, Wriwebs.com, Inc. and AmeriNet
Communications, Inc., and all other investments in securities would be spun off
to AmeriNet stockholders, or their successors in interest, as of a date
preceding the Park City acquisition, or otherwise disposed of prior to closing.
Park City is a Park City, Utah-based provider of proprietary software
applications primarily for multi-unit retail operations. Through its
ActionManager Enterprise Application Suite, Park City offers management and
staff solutions to a variety of operations issues and greatly reduces dependence
on paper transactions. Park City's Fresh Market Manager, the newest in
supermarket technology, provides superior production planning and inventory
management. Randall K. Fields, co-founder of the highly successful Mrs. Fields'
Cookies stores, founded Park City Group, Inc. in 1990. The software applications
that were the genesis of Park City are rooted in applications developed during
the explosive growth of the more than 800 unit chain.
Mr. Fields currently serves as the chairman of Park City's Board and as its
chief executive officer. In its most recent fiscal year, Park City had
un-audited revenues of just more than $6 million with pretax profits of $2.4
million. It currently has 56 employees servicing such major accounts as
Victoria's Secret, The Home Depot, Pacific Sunwear, Crate & Barrel, Bath & Body
Works, Universal Studios - Orlando, Bi-Lo Foods, William-Sonoma and Wawa.
The transaction is contingent upon, among other things, certain due
diligence, board approval, shareholder consent and the execution of definitive
agreements. As a result, there are no assurances that the transaction will be
consummated.
Page 12
RESULTS OF OPERATIONS
The condensed statement of operations for our company for the three months
and nine months ended March 31, 2001 includes operations of our company at the
holding company level and its wholly owned subsidiaries Lorilei and AmeriCom. In
addition, 20% of the operating gains or losses of our company's affiliate WRI
are included in our company's consolidated financials. For the three months and
nine months ended March 31, 2000, the condensed statement of operations included
our company for the entire period; our company's formerly wholly owned
subsidiary AITC for the two months ended November 30, 1999; our formerly wholly
owned subsidiary Trilogy for the four month ended March 31, 2000 and 20% of the
operating losses of WRI for the four month ended March 31, 2000.
For the three and nine months ended March 31, 2001, we reported revenues of
$22,524 and $367,793, respectively, all of which were generated by our
subsidiary company AmeriCom. Revenues for the three and nine months ended March
31, 2000 were $45,063 and $249,941, respectively, and were generated by our
former subsidiaries AITC and Trilogy. Due to our decision to close our
unprofitable subsidiaries, our revenues have decreased substantially.
Cost of revenues for the three and nine months ended March 31, 2001, were
$2,355 and $248,569, respectively, as compared to cost of revenues for the three
and nine months ended March 31, 2000 of $18,398 and $176,476. Due to our
decision to close our unprofitable subsidiaries, our cost of revenues have
decreased substantially.
Our company as a whole reported a net loss applicable to common stock for
the nine months ended March 31, 2001 of $5,125,915. These losses were comprised
of equity in the loss of WRI (20%) of $19,710; net operating loss of our
subsidiaries Lorilei and AmeriCom of $1,015,862 which includes a writedown of
the Lorilei's goodwill of $630,791 and a net loss for the holding company of
$4,090,343.
For the three months ended March 31, 2000, our company's losses were
$1,539,544 based on the following factors: selling, general and administrative
expenses for the three months ended March 31, 2001 were $1,505,264 compared to
$522,096 for the three months ended March 31, 2000. $51,249 of the expense for
the current period was incurred by our subsidiary AmeriCom in the normal course
of business. The remaining $1,454,015 was incurred at the holding company level
a large portion of which consisted of non-cash expenses. In connection with the
issuance of our preferred stock for services and in exchange for debt, we
recorded a charge of $1,028,444 to reflect the beneficial conversion feature of
the preferred stock issued to Yankees and other related parties. Certain
employees and consultants to our company agreed to defer a total of $92,873 in
compensation earned by them during the period. The expense was recognized and a
corresponding in subscriptions payable was added to stockholders' equity. Our
company recognized a compensation expense of $138,434 in connection with the
increase of 516,545 shares of common stock underlying the Yankee option to
purchase up to 12 1/2% of the outstanding shares of our company's common stock.
Additionally, we issued preferred shares for services amounting to $30,000.
These non-cash expenses totaled $1,289,751. The remaining $164,264 of selling,
general and administrative expense for the period was incurred at the holding
company level in the normal course of conducting its business.
Page 13
Depreciation and amortization expense for the three months ended March 31,
2001 was $9,313 as compared to an expense of $342,084 for the three months ended
March 31, 2000. For the three months ended March 31, 2000, we recorded
amortization of goodwill attributable to our company's former wholly owned
subsidiary, Trilogy.
Interest expense was $10,684 for the three months ended March 31, 2001
compared to $8,853 for the same period in 2000.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001 we had cash on hand of $3,442 compared to $119,785 at
March 31, 2000. At March 31, 2001, we had a working capital deficit of $793,739
compared to a working capital deficit at March 31, 2000 of $_______. The deficit
in working capital at March 31, 2001 was related principally to accounts payable
and accrued expenses at the subsidiary level in excess of accounts receivable
and the current portion of capital leases and loans payable at the subsidiary
level. A similar situation existed at March 31, 2000; however, the subsidiary
contributing to the deficit at that time was our former subsidiary Trilogy
whereas at March 31, 2001 the deficit is principally attributable to our
subsidiaries Lorieli and AmeriCom.
Our company and its subsidiaries have accumulated a net deficit of
$15,762,305 since inception. This gives rise to questions regarding the ability
of our company to continue as a going concern. The deficit for the three months
ended March 31, 2001 is $1,539,544. Management has implemented significant cost
reductions though our discontinuance of unprofitable operations. With the
assistance of Yankees, we are actively exploring acquisitions of operating
companies and related infusions of capital which would materially improve our
cash flow, liquidity and profitability, however we can not assure that it will
be successfully implemented.
Our company relies on Yankees for capital required to fund operating cash
deficits and has a financing agreement with Yankees pursuant to which Yankees
has granted our company a conditional $1,000,000 revolving line of credit. As of
March 31, 2001, Yankees had loaned our company an aggregate of $________. The
loans are secured by all of our company's assets, including the capital stock in
its subsidiaries. At our request, Yankees has converted all of its loans to date
into shares of our company's common stock and Class A Preferred Stock. As of
March 31, 2001, Yankees had converted $________ of its aggregate loans into
equity. Our company's continuing liquidity and access to capital is totally
reliant on Yankees and investors introduced to our company by Yankees.
Page 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Our company has not been involved in any material legal proceedings, other
than the mediation in connection with our company's election to rescind the WRI
Merger and Reorganization Agreement as discussed previously in this report under
"Managements Discussion and Analysis". The inactive subsidiary Lorilei
Communications, Inc., has been sued for $7813.30 for an unpaid bill.
ITEM 2. CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
Since December 31, 2000, our company sold the securities listed in the
table below without registration under the Securities Act in reliance on the
exemption from registration requirements cited. Consequently, as of March 31,
2001, 12,479,522 shares of our company's common stock were outstanding and
412,116 shares of our company's class A preferred stock were outstanding. All
footnotes follow the last table.
Class A Preferred Stock
Amount of Total Total Registration
Securities Offering Discounts Exemption
Date Sold Subscriber Consideration or Commissions Relied on
---- ----- ---------- ------------- -------------- ---------
2001
January 31 5,000 Debra Ellenson (4) (3) (2)
January 31 5,000 Johnathan Eichner (5) (3) (2)
January 31 5,000 Scott Heicken (5) (3) (2)
February 28 10,000 Blue Lake Capital Corp (7) (3) (2)
February 28 12,000 Yankees (6) (3) (2)
February 28 2,500 K, Walker LTD (4) (3) (2)
February 28 2,500 Palm Air, Inc (4) (3) (2)
February 28 834 Vanessa Lindsey (4) (3) (2)
February 28 833 Edward Dmytryk (4) (3) (2)
March 1 10,000 Calvp Family Trust (8) (3) (2)
March 31 4,000 K. Walker LTD (4) (3) (2)
March 31 500 SRKD Trading Corp (4) (3) (2)
March 31 667 Vanessa Lindsey (4) (3) (2)
March 31 1,500 Yankees (9) (3) (2)
March 31 3,500 Palm Air, Inc (6) (3) (2)
March 31 1,500 K. Walker LTD (6) (3) (2)
March 31 736 Vanessa Lindsey (6) (3) (2)
March 31 83,336 Yankees (6) (3) (2)
March 31 14,667 Blue Lake Capital Corp (7) (3) (2)
March 31 1,333 Calvo Family Trust (8) (3) (2)
Page 15
Notes to All Tables
(1) Section 4(2) of the Securities Act. In each case, the subscriber was
required to represent that the shares were purchased for investment purposes,
the certificates were legended to prevent transfer except in compliance with
applicable laws and the transfer agent was instructed not to permit transfers
unless directed to do so by our company, after approval by its legal counsel. In
addition, each subscriber was directed to review our company's filings with the
Commission under the Exchange Act and was provided with access to our company's
officers, directors, books and records, in order to obtain required information.
(2) Section 4(6) of the Securities Act. In each case, the subscriber was
required to represent that the shares were purchased for investment purposes,
the certificates were legended to prevent transfer except in compliance with
applicable laws and the transfer agent was instructed not to permit transfers
unless directed to do so by our company, after approval by its legal counsel.
Each subscriber was directed to review our company's filings with the Commission
under the Exchange Act and was provided with access to our company's officers,
directors, books and records, in order to obtain required information; and, a
Form D reporting the transaction was filed with the Commission.
(3) No commissions or discounts were paid to anyone in conjunction with the sale
of the foregoing securities, except that Yankees exercised preferential
subscription rights granted by our company in Yankees' consulting agreement or
that it may be entitled to compensation based on the terms of its consulting
agreement with our company.
(4) Pursuant to the terms of the amended consulting agreement between our
company and Yankees, it is entitled to receive $10,000 per month or $10,000
worth of stock per month for compensation. At Yankees request the shares were
given to associates.
(5) At the issuer's request, Yankees converted $20,000 of debt to equity (a
total of 10,000 shares of preferred stock). At Yankees request the shares were
given to associates.
(6) At the issuer's request, Yankees converted $151,608 of debt to equity (a
total of 101,072 shares of preferred stock). At Yankees request the shares were
given to associates.
(7) At the issuer's request, Blue Lake Capital Corp. converted $37,000 of debt
to equity (a total of 24,667 shares of preferred stock).
(8) At the issuer's request, the Calvo Family Spendthrift Trust converted
$17,000 of debt to equity (a total of 11,333 shares of preferred stock).
AMOUNT OF COMMON EQUITY SUBJECT TO OUTSTANDING OPTIONS OR WARRANTS TO PURCHASE,
OR SECURITIES CONVERTIBLE INTO, COMMON EQUITY OF OUR COMPANY
As of January 31, 2001, our company had 10,030,875 shares of its common
stock reserved for issuance in conjunction with current obligations to issue
additional shares, in the event that currently outstanding options and warrants
are exercised and conversion of preferred to common.
Page 16
NEW AUTHORIZED SHARES
Our company's board of directors and stockholders authorized a change in
the number of shares of Class A Preferred Stock from 500,000 to 1,000,000,
however it did not increase the total number of authorized preferred stock. Our
company's board of directors and stockholders also authorized an increase in the
number of shares of common stock from 20,000,000 shares, $0.01 par value, to
200,000,000 shares, $0.01 par value. An amendment to the articles of
incorporation reflecting an increase to 30,000,000 shares has been filed with
the State of Delaware. It is anticipated that the authorized shares will be
increased to 150,000,000 shares immediately prior to closing on the acquisition
of Park City Group, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Required by Item 601 of Regulation S-B
The exhibits listed below and designated as filed herewith (rather than
incorporated by reference) follow the signature page in sequential order.
Designation Page
of Exhibit Number
as Set Forth or Source of
in Item 601 of Incorporation
Regulation S-B By Reference Description
(99) Additional Exhibits:
(b) Reports on Form 8-K Filed During Quarter Ended March 31, 2001
During the calendar quarter ended March 31, 2001, we filed the following
reports on Form 8-K with the Commission:
Financial
Items Reported Date Filed Statements Included
5 & 7 01/05/01 None
5 & 7 02/08/01 None
5 & 7 03/14/01 None
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Signatures
In accordance with the requirements of the Exchange Act, our company has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
AmeriNet Group.com, Inc.
May 15, 2001 By: /s/Edward C. Dmytryk /s/
-----------------------------
Edward C. Dmytryk President,
Chief Executive Officer &
Director
Page 18
ADDITIONAL INFORMATION
AmeriNet Group.com, Inc.
Crystal Corporate Center
2500 North Military Trail, Suite 225-C; Boca Raton, Florida 33431
Telephone (561) 998-3435; Fax (561) 998-4635
web-site, amerinetgroup.com; e-mail ed@amerinetgroup.com
Corporate Headquarters:
Officers
Edward C. Dmytryk, President & Chief Executive Officer; Lawrence R. Van Etten,
Vice President & Chief Operating Officer; Vanessa H. Lindsey, Secretary;
Douglas L. Wilson, General Counsel
Board of Directors
Lawrence R. Van Etten; Vanessa H. Lindsey;
Charles J. Champion, Jr.; G. Richard Chamberlin;
Anthony Q. Joffe; Douglas L. Wilson; Edward C. Dmytryk; and J. Bruce Gleason
Current Subsidiaries (Florida corporations)
Wriwebs.com, Inc.
100 East Sample Road, Suite 210;
Pompano Beach, Florida 33064
Telephone (954) 569-0200; Fax (954) 569-0300
Web site and e-mail www.wriwebs.com
AmeriNet Communications, Inc.
"Doing Business as The Firm MultiMedia"
7325 Southwest 32nd Street; Ocala, Florida 34474
Post Office Box 770787; Ocala, Florida 34477
Telephone (352) 861-1350; Fax (352) 861-1339
Web site and e-mail www.callthefirm.com
Independent Public Accountants:
Daszkal, Bolton & Manela, P.A.
240 West Palmetto Park Road, Suite 300; Boca Raton, Florida 33432
Telephone (561) 367-1040; Facsimile Transmission (561) 750-3236
e-mailto:patrick@dbmsys.usa.com
Transfer Agent:
Liberty Transfer Company
274B New York Avenue, Huntington, New York 11743
Telephone (516)-385-1616; Facsimile Transmission (516) 385-1619
Our company's report on Commission Form 10-QSB for the quarter ended March
31, 2001 will be furnished free of charge without exhibits to any beneficial
owner of our company's common stock eligible to vote at our company's annual
stockholders' meeting and will furnish the exhibits thereto to any such person
specifically requesting them, subject to payment of our company's actual
reproduction, handling and delivery costs associated therewith. Our company's
report on Commission Form 10-QSB for the quarter ended March 31, 2001, including
exhibits, is available without charge on the Securities and Exchange
Commission's web-site located at www.sec.gov in the EDGAR archives. Requests for
our company's report on Commission Form 10-QSB for the quarter ended March 31,
2001, with or without exhibits, should be addressed to Edward C. Dmytryk,
President; AmeriNet Group.com, Inc.; Crystal Corporate Center; 2500 North
Military Trail, Suite 225-C; Boca Raton, Florida 33431, or faxed to Mr. Dmytryk
at (561) 998-4635.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THIS REPORT NOR HAS IT PASSED UPON ITS ACCURACY OR ADEQUACY.
Page 19