<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
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: 000-25129
AFFILIATED NETWORKS, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0354269
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2701 SOUTH BAYSHORE DRIVE, 5TH FLOOR
COCONUT GROVE, FLORIDA 33133
- ---------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 285-2003
Check whether the issuer (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 [ ]
The number of shares of Common Stock of the registrant outstanding as of
November 1, 1999, was 6,352,806.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE> 2
AFFILIATED NETWORKS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998 ................................................ 3
Condensed Consolidated Statements of Operations for the three months
and nine months ended September 30, 1999 and 1998 .................... 4
Condensed Consolidated Statements of Shareholders' Equity for the
nine months ended September 30, 1999 and 1998 ........................ 5
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998 .................................... 6
Notes to Condensed Consolidated Financial Statements ................. 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................ 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ..................................... 13
</TABLE>
<PAGE> 3
AFFILIATED NETWORKS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998 (A)
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,691,190 $ 350,042
Prepaid expenses and other current assets 138,571 --
Loan to shareholder 22,200 --
Net current assets of discontinued operations -- 9,635
----------- -----------
Total current assets 4,851,961 359,677
----------- -----------
Property and equipment, net 340,352 71,270
----------- -----------
Other assets:
Trademark, net 27,083 --
Software development costs, net 76,240 89,954
Deposits 1,596 1,596
Net non-current assets of discontinued operations -- 74,099
----------- -----------
Total other assets 104,919 165,649
----------- -----------
Total assets $ 5,297,232 $ 596,596
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ -- $ 116,206
Capital lease obligations 7,157 11,296
Accounts payable and accrued expenses 160,586 106,307
Customer deposits 63,223 76,297
Due to related party -- 35,750
----------- -----------
Total current liabilities 230,966 345,856
----------- -----------
Long-term liabilities:
Notes payable, net of current portion -- 23,521
Capital lease obligations, net of current portion -- 5,126
----------- -----------
Total long-term liabilities -- 28,647
----------- -----------
Total liabilities 230,966 374,503
----------- -----------
Shareholders' equity:
Common stock, par value $.01 per share,
25,000,000 shares authorized, 6,347,306 and
4,928,180 shares issued and outstanding as of
September 30, 1999 and December 31, 1998,
respectively 63,473 49,282
Additional paid-in capital 9,299,524 2,373,000
Accumulated deficit (4,296,731) (2,200,189)
----------- -----------
Total shareholders' equity 5,066,266 222,093
----------- -----------
Total liabilities and shareholders' equity $ 5,297,232 $ 596,596
=========== ===========
(A) Derived from the audited consolidated financial statements as of December 31, 1998.
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
AFFILIATED NETWORKS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 2,112 $ -- $ 4,573 $ --
----------- ----------- ----------- -----------
Operating expenses:
Product development 388,419 36,051 578,153 36,051
Selling and marketing 219,022 77,972 661,794 96,774
General and administrative 186,195 9,949 776,348 9,949
----------- ----------- ----------- -----------
Total operating expenses 793,636 123,972 2,016,295 142,774
----------- ----------- ----------- -----------
Loss from operations (791,524) (123,972) (2,011,722) (142,774)
----------- ----------- ----------- -----------
Other income (expense):
Interest income 51,834 -- 61,844 --
Interest expense (245) (18,718) (6,297) (27,310)
Other -- -- -- (912)
----------- ----------- ----------- -----------
Total other income (expense) 51,589 (18,718) 55,547 (28,222)
----------- ----------- ----------- -----------
Loss from continuing operations (739,935) (142,690) (1,956,175) (170,996)
----------- ----------- ----------- -----------
Discontinued operations:
Loss from discontinued operations (17,573) (116,989) (100,167) (562,812)
Loss on disposal, including $11,869
for operating losses during
the phase out period (40,200) -- (40,200) --
----------- ----------- ----------- -----------
Total discontinued operations (57,773) (116,989) (140,367) (562,812)
----------- ----------- ----------- -----------
Net loss $ (797,708) $ (259,679) $(2,096,542) $ (733,808)
=========== =========== =========== ===========
Net loss per share, basic and diluted:
Continuing operations $ (0.12) $ (0.03) $ (0.36) $ (0.04)
Discontinued operations (0.01) (0.02) (0.02) (0.12)
----------- ----------- ----------- -----------
Net loss $ (0.13) $ (0.05) $ (0.38) $ (0.16)
=========== =========== =========== ===========
Weighted average shares of Common Stock
outstanding 6,308,931 4,803,180 5,477,963 4,694,938
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
AFFILIATED NETWORKS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Accumulated Shareholders'
Stock Capital Deficit Equity
------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1997 $42,602 $ 974,698 $(1,045,136) $ (27,836)
Issuance of 543,000 shares of
Common Stock 5,430 899,552 -- 904,982
Net loss -- -- (733,808) (733,808)
------- ---------- ----------- -----------
Balance, September 30, 1998 $48,032 $1,874,250 $(1,778,944) $ 143,338
======= ========== =========== ===========
Balance, December 31, 1998 $49,282 $2,373,000 $(2,200,189) $ 222,093
Exercise of stock options 2,971 45,279 -- 48,250
Issuance of 1,122,047 shares of
Common Stock 11,220 6,881,245 -- 6,892,465
Net loss -- -- (2,096,542) (2,096,542)
------- ---------- ----------- -----------
Balance, September 30, 1999 $63,473 $9,299,524 $(4,296,731) $ 5,066,266
======= ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
AFFILIATED NETWORKS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30,
--------------------------
1999 1998
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from continuing operations $(1,956,175) $(170,996)
Adjustments to reconcile loss from continuing operations to
net cash used in continuing operations
Depreciation 29,693 --
Amortization 19,131 --
Increase in prepaid expenses and other current assets (138,571) --
Increase in accounts payable and accrued expenses 148,648 36,768
Decrease in customer deposits (13,074) --
Decrease in trading securities -- 34,875
----------- ---------
Net cash used in operating activities (1,910,348) (99,353)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (298,775) (34,981)
Acquisition of trademark (32,500) --
Additions to software development costs -- (8,128)
(Increase) decrease in loan to shareholder (22,200) 61,038
----------- ---------
Net cash (used in) provided by investing activities (353,475) 17,929
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party borrowings 224,551 403,113
Proceeds from exercise of stock options 48,250 --
Principal payments on due to related party (260,301) --
Principal payments on notes payable (139,727) (74,510)
Principal payments on capital lease obligations (9,265) (9,028)
Proceeds from issuance of Common Stock 6,892,465 204,982
----------- ---------
Net cash provided by financing activities 6,755,973 524,557
----------- ---------
Net cash provided by continuing operations 4,492,150 443,133
Net cash used in discontinued operations (151,002) (467,737)
----------- ---------
Net increase (decrease) in cash and cash equivalents 4,341,148 (24,604)
CASH AND CASH EQUIVALENTS, beginning of period 350,042 28,778
----------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 4,691,190 $ 4,174
=========== =========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
For the nine months ended September 30, 1999 and 1998, interest paid was
approximately $5,000 and $16,000, respectively.
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
AFFILIATED NETWORKS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF FINANCIAL STATEMENT PRESENTATION
In management's opinion, the accompanying unaudited condensed consolidated
financial statements of Affiliated Networks, Inc., and subsidiary (the
"Company") contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the Company's financial position and
the results of its operations.
The accompanying unaudited interim condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for the reporting on Form 10-QSB. Pursuant to such rules and
regulations, certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The condensed consolidated
financial statements should be read in conjunction with the Consolidated
Financial Statements and the Notes to Consolidated Financial Statements included
in the Company's Annual Report on Form 10-KSB for the year ended December 31,
1998.
The accounting policies followed for interim financial reporting are the same as
those disclosed in Note 2 of the Notes to Consolidated Financial Statements
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
(2) 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 the 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.
(3) DISCONTINUED OPERATIONS
On August 24, 1999, the Company's Board of Directors approved a plan to
discontinue the operations of its non-core business subsidiary, Sovereign
Financial Information Services, Inc. ("Sovereign"), in order to focus its
business towards its internet-based services and products for the marine
industry. Sovereign was engaged in the publishing of research reports, stock
handbooks and global industry guides. Sovereign ceased operations on September
30, 1999. Accordingly, Sovereign is reported as a discontinued operation in the
accompanying condensed consolidated financial statements.
The estimated loss on the disposal of Sovereign was $40,200, consisting of a
write-down of Sovereign assets totaling $28,331 and a provision of $11,869 for
operating losses until the date of disposal. The losses of Sovereign prior to
August 24, 1999, are included in the unaudited statements of operations under
"Loss from discontinued operations". Sales for the three and nine months ended
September 30, 1998 were $73,307 and $88,540, respectively.
(4) CASH AND CASH EQUIVALENTS
Cash equivalents include all highly liquid investments with maturities of three
months or less when acquired.
7
<PAGE> 8
(5) LOSS PER COMMON SHARE
Basic earnings or loss per common share is computed by dividing income or loss
available to common shareholders by the weighted average number of common shares
outstanding. Diluted earnings or loss per common share includes the diluting
effect of stock options and warrants. For the three and nine months ended
September 30, 1999 and 1998, the effect of stock options and warrants were not
included in the computation because such inclusion would have been antidilutive.
(6) INCOME TAXES
The Company did not record a benefit for income taxes due to the full valuation
that has been recorded on the taxable losses recorded for the periods.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein should be read in conjunction with the Consolidated
Financial Statements, the related Notes to Consolidated Financial Statements and
Management's Discussion and Analysis included in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1998, and the Condensed Consolidated
Financial Statements and the related Notes to Condensed Consolidated Financial
Statements included in Item 1, of this quarterly report on Form 10-QSB.
OVERVIEW
Affiliated Networks, Inc. has developed an internet based wholesale trading
exchange for the marine industry known as MAREX - The National Marine Exchange
("MAREX"). MAREX allows buyers to solicit quotes on-line from sellers for
specific equipment, parts and supplies. MAREX displays to buyers the best prices
available, which are updated on a real-time basis as bids are posted. MAREX
seeks to provide a worldwide search capability to buyers for hard-to-find
equipment, parts and supplies and create a lowest price forum for buyers to take
advantage of spot market pricing of sellers' overstocked and available
inventory. Sellers utilizing MAREX will gain access to an expanded wholesale
customer base and have greater opportunity to resell slow moving inventory. The
Company anticipates that MAREX members may act as sellers and buyers on a daily
basis to take advantage of differences in regional pricing and supply
availability. The MAREX system was in the development stage until November 1998.
DISCONTINUED OPERATIONS
On August 24, 1999, the Company's Board of Directors approved a plan to
discontinue the operations of its non-core business subsidiary, Sovereign
Financial Information Services, Inc. ("Sovereign"), in order to focus its
business towards its internet-based services and products for the marine
industry. Sovereign was engaged in the publishing of research reports, stock
handbooks and global industry guides. Sovereign ceased operations on September
30, 1999. The estimated loss on the disposal of Sovereign is $40,200, consisting
of a write-down of Sovereign assets totaling $28,331 and a provision of $11,869
for operating losses until the date of disposal.
The financial information in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" refers to the continuing operations of the
Company and excludes the operations of Sovereign.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
REVENUES
MAREX generates revenues by charging a transaction fee for completed
transactions. The fee is based on a sliding scale ranging from approximately 10%
for smaller transactions to 4% for larger transactions. Revenues are recognized
at the completion of a transaction. A transaction is considered completed when
the buyer has received and approved the merchandise that was purchased through
MAREX, and the Company has remitted the purchase price, less the transaction
fee, to the seller. For the three months ended September 30, 1999, the Company
recorded revenues of $2,000 generated from $68,000 of completed transactions
through MAREX. MAREX, which was not operational until November 1998, did not
generate any revenues in 1998.
9
<PAGE> 10
PRODUCT DEVELOPMENT
Product development expenses consist primarily of compensation for product
development personnel, cost of outside contractors, amortization of software
development costs, and other costs associated with the operations and
enhancements of the website. Product development expenses increased to $388,000
for the three months ended September 30, 1999, from $36,000 for the same period
in 1998. The change related primarily to increases of $213,000 in personnel and
personnel related costs, $84,000 in outside contractor costs, and $25,000 in
depreciation and amortization. The balance was comprised of overhead and
operating costs directly associated with the development and maintenance of the
website.
SALES AND MARKETING EXPENSES
Sales and marketing expenses consist primarily of compensation for sales and
marketing personnel, advertising, trade shows and related marketing costs. Sales
and marketing expenses increased to $219,000 for the three months ended
September 30, 1999, from $78,000 for the same period in 1998. The change is
primarily due to an increase of $97,000 in personnel and personnel related costs
associated with the expansion of the sales and marketing functions. The balance
was comprised of overhead and operating costs directly associated with sales and
marketing activities.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of compensation for
executive and administrative personnel, facilities expenses, professional fees,
and general corporate expenses. General and administrative expenses increased to
$186,000 for the three months ended September 30, 1999, from $10,000 for the
same period in 1998. The change related primarily to an increase of $89,000 in
personnel and personnel related costs. The balance was comprised of professional
fees, facilities expenses, and other corporate charges directly associated with
the administrative functions of the Company.
OTHER INCOME AND EXPENSE
The Company recorded $52,000 of interest income for the three months ended
September 30, 1999, as a result of its investments in marketable securities
derived from the net proceeds of the private placements completed in 1999. The
Company recorded $19,000 of interest expense for the same period in 1998, as a
result of notes payable that were outstanding during that period.
LOSS FROM CONTINUING OPERATIONS
The Company's loss from continuing operations increased to $740,000 for the
three months ended September 30, 1999, from $143,000 for the same period in
1998. The change resulted from the increase in costs, as described above,
associated with the launch of the MAREX system which was in the development
stage until November 1998.
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
REVENUES
For the nine months ended September 30, 1999, the Company recorded revenues of
$5,000 generated from $128,000 of completed transactions through MAREX. MAREX,
which was not operational until November 1998, did not generate any revenues in
1998.
10
<PAGE> 11
PRODUCT DEVELOPMENT
Product development expenses consist primarily of compensation for product
development personnel, costs of outside contractors, amortization of software
development costs, and other costs associated with the operations of the
website. Product development expenses increased to $578,000 for the nine months
ended September 30, 1999, from $36,000 for the same period in 1998. The change
related primarily to increases of $306,000 in personnel and personnel related
costs, $99,000 in outside contractor costs, and $74,000 in depreciation and
amortization. The balance was comprised of overhead and operating costs directly
associated with the development and maintenance of the website.
SALES AND MARKETING EXPENSES
Sales and marketing expenses consist primarily of compensation for sales and
marketing personnel, advertising, trade shows and related marketing costs. Sales
and marketing expenses increased to $662,000 for the nine months ended September
30, 1999, from $97,000 for the same period in 1998. The change related primarily
to increases of $278,000 in personnel and personnel related costs, $192,000 in
advertising and marketing program costs, and increases in overhead and operating
costs directly associated with the expansion of the sales and marketing
functions of MAREX.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of compensation for
executive and administrative personnel, facilities expenses, professional fees
and general corporate expenses. General and administrative expenses increased to
$776,000 for the nine months ended September 30, 1999, from $10,000 for the same
period in 1998. The change related primarily to an increase of $393,000 in
personnel and personnel related costs. The balance was comprised of increases in
professional fees, facilities expenses, and general corporate expenses.
OTHER INCOME AND EXPENSE
The Company recorded $62,000 of interest income for the nine months ended
September 30, 1999, as a result of its investments in marketable securities
derived from the net proceeds of the private placements completed in 1999.
Interest expense decreased to $6,000 for the nine months ended September 30,
1999 from $27,000 for the same period in 1998 as a result of the decrease in
notes payable balance.
LOSS FROM CONTINUING OPERATIONS
The Company's loss from continuing operations increased to $1,956,000 for the
nine months ended September 30, 1999, from $171,000 for the same period in 1998.
The change resulted from the increase in costs, as described above, associated
with the launch of the MAREX system which was in the development stage until
November 1998.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily through
the private sale of Common Stock, short-term borrowings from banks, and
borrowings from the majority shareholder who is also the Chief Executive Officer
of the Company.
At September 30, 1999, the Company had cash and cash equivalents totaling $4.7
million and working capital of $4.6 million, compared with cash and cash
equivalents totaling $350,000 and working capital of $14,000 as of December 31,
1998. The increases are primarily due to private placements completed in 1999.
11
<PAGE> 12
Net cash used in operating activities was $1,910,000 and $99,000 for the nine
months ended September 30, 1999 and 1998, respectively, which was primarily due
to the loss reported during the period.
Net cash used in investing activities was $353,000 for the nine months ended
September 30, 1999, which was primarily due to leasehold improvements relating
to the new office, the purchase of computer and office equipment, and the
purchase of furniture and fixtures. For the nine months ended September 30,
1998, net cash provided by investing activities was $18,000 primarily due to the
repayment of amounts due from shareholder which was partially offset by
equipment purchases.
Net cash provided by financing activities was $6.8 million and $525,000 for the
nine months ended September 30, 1999 and 1998, respectively, which was primarily
due to the issuance of Common Stock and borrowings. For the nine months ended
September 30, 1999 and 1998, the Company received $6.9 million and $205,000
respectively, from the issuance of Common Stock.
Management believes that funds that will be generated from operations will not
be sufficient to meet the Company's anticipated capital needs in connection with
its present and proposed activities. Management plans to pursue sources of
equity and debt financing to fund the future operations of the Company. There
has been no firm commitment of any kind with regard to such financing and no
assurance can be given that such financing will be obtained, and if obtained,
whether they will be obtained on terms favorable to the Company.
SEASONALITY
The E-Commerce business is seasonal due to the impact of the buying and selling
patterns of the members in the MAREX system and the marine industry. The Company
believes that the second and third quarters are the peak periods for the
recreational marine industry. In addition, the recreational marine industry is
highly cyclical and is highly affected by a number of factors which includes but
not limited to (i) economic conditions (ii) consumer confidence levels and (iii)
weather conditions.
YEAR 2000 ISSUES
The Company has reviewed its internal programs and determined that there are no
significant Year 2000 issues within the Company's programs or services. However,
the Company utilizes third-party equipment and software that may not be Year
2000 compliant although the Company believes that the third-party systems that
are material to its business are Year 2000 compliant based on representations
made by these suppliers. Failure of the Company's or such third-party equipment
or software to properly process dates for the year 2000 and thereafter could
require the Company to incur unanticipated expenses to remedy any such problems,
which could have a material adverse effect on the Company's business, results of
operations and financial condition.
FORWARD LOOKING STATEMENTS
From time to time, the Company publishes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, including
certain statements in the Management's Discussion and Analysis of Financial
Condition and Results of Operations of this Form 10-QSB, which relate to such
matters as anticipated financial performance, business prospects, technological
developments, and similar matters. Such forward-looking statements involve known
and unknown risks, uncertainties, and other factors which may cause the actual
results, performance, or achievements of the Company to be materially different
from those expressed or implied by such forward-looking statements. Such factors
include, among others; (i) the ability to develop MAREX, specifically the growth
of members and transactions; (ii) the ability to obtain future financing for the
Company's operations; (iii) competition within the e-commerce industry; and (iv)
dependence on key personnel.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT DESCRIPTION OF DOCUMENT
------ -----------------------
27 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K on August 30, 1999.
Item 4. Change in Registrant's Certifying Accountants
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
13
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AFFILIATED NETWORKS, INC.
Date: November 12, 1999 By: /s/ DAVID A. SCHWEDEL
----------------- -------------------------
David A. Schwedel
Chief Executive Officer
Date: November 12, 1999 By: /s/ KENBIAN A. NG
----------------- ---------------------
Kenbian A. Ng
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AFFILIATED
NETWORKS, INC.'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,691,190
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,851,961
<PP&E> 439,857
<DEPRECIATION> (99,505)
<TOTAL-ASSETS> 5,297,232
<CURRENT-LIABILITIES> 230,966
<BONDS> 0
0
0
<COMMON> 63,473
<OTHER-SE> 5,002,793
<TOTAL-LIABILITY-AND-EQUITY> 5,297,232
<SALES> 4,573
<TOTAL-REVENUES> 4,573
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,016,295
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,297
<INCOME-PRETAX> (1,956,175)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,956,175)
<DISCONTINUED> (140,367)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,096,542)
<EPS-BASIC> (.38)
<EPS-DILUTED> (.38)
</TABLE>
