U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-KSB/A
(Mark One)
[X] report under section 13 or 15(d) of the Securities Exchange Act of 1934 for
the fiscal year ended December 31, 1999.
_____Transition report under section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from ____ to ____.
Commission File No: 000-30108
ALLNETSERVICES.COM CORP
(Name of small business in its charter)
Florida 65-0755455
-------- ----------
(State or other jurisdiction (IRS Employer
of Incorporation) Identification No.)
3650 Coral Ridge Drive, Suite 101
---------------------------------
Address of Principal Executive Office (street and number)
Coral Springs, Florida 33065
----------------------------
City, State and Zip Code
Issuer's telephone number: (954) 346-7575
Securities registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.0001
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act 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 ____
<PAGE>
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. ___
State issuer's revenue for its most recent fiscal year: $4,218,613.
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked priced of such stock, as of a specified date within
the past 60 days (See definition of affiliate in Rule12b-2): $10,733,640 as of
March 15, 2000.
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.
(Issuers involved in bankruptcy proceedings during the past five years)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes ____ No ____
(Applicable only to corporate registrants) State the number of shares
outstanding of each of the issuer's classes of common equity, as of the latest
practicable date: 10,047,200 shares of common stock as of March 15, 2000.
(Documents incorporated by reference. If the following documents are
incorporated by reference, briefly describe them and identify the part of the
Form 10-KSB (e.g. Part I, Part II, etc.) into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) of the Securities Act of 1933 ("Securities Act"). The listed documents
should be clearly described for identification purposes.
FACTORS THAT MAY AFFECT FUTURE RESULTS
This Annual Report on Form 10-KSB and the documents incorporated herein
by reference contains certain forward-looking statements within the meaning of
the Federal Securities Laws. Specifically, all statements other than statements
of historical facts included in this Annual Report on Form 10-KSB regarding our
financial performance, business strategy and plans and objectives of management
for future operations are forward-looking statements and based on our beliefs
and assumptions. If used in this report, the words "anticipate," "believe,"
"estimate", "expect," "intend," and words or phrases of similar import are
intended to identify forward-looking statements. Such statements reflect the
current view of the Company with respect to future events and are subject to
certain risks, uncertainties, and assumptions, including but without limitation,
those risks and uncertainties contained in our Annual Report on Form 10-KSB.
Although we believe that our expectations are reasonable, we can give no
assurance that such expectations will prove to be correct. Based upon changing
conditions, any one or more of these events described herein as anticipated,
believed, estimated, expected or intended may not occur. All prior and
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by this cautionary statement.
2
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General
- -------
AllnetServices.com Corp. a Florida corporation (the "Company") is in
the business of Internet sales. The Company was incorporated on October 10, 1992
and became operational in April 1997, and is headquartered at 3650 Coral Ridge
Drive, Suite 101, Coral Springs, FL 33065.
History:
The Company started with two distinct revenue generating operations;
the sales and marketing of high-end copier parts and an interactive on-line
auction site on the World Wide Web for the purpose of auctioning new,
refurbished and close-out computer hardware and software products. Sales
attributed to the Internet accounted for 14% of the total revenues for the year
ending December 31,1997. During the course of 1998, sales attributed to the
Internet increased to 35% of the total revenues for the year ending December 31,
1998. This increase in revenues related to the Internet in 1998 is due to the
launching of several new e-commerce Web sites, and the Company offering Web site
design and development services. Subsequent to November 1998, the Company was no
longer involved in its high-end copier part sales due to the restructuring of
its largest customer and decreased demand for these parts. Company revenues in
1999 were derived from sales of electronic consumer products through
conventional direct and indirect distribution channels and its various
e-commerce Web sites on the Internet. The Company also realized revenue from Web
site design, development, data base management and Web site hosting services.
Distribution of sales for 1999 was 65% electronic consumer products, and 35% Web
site design services.
3
<PAGE>
Business:
The Company now focuses its efforts on the on-line marketing and
distribution of a broad range of products and services at wholesale prices to
both consumer and trade customers and offers Internet-related services to
businesses and end-users. The growth of the Internet and its emergence as an
effective new sales medium, combined with consumer enthusiasm generated by the
Company's interactive auction format, e-commerce shopping sites and Internet
services, creates a significant business opportunity. The Company intends to
leverage its position as an Internet retailer of new, refurbished and close-out
merchandise by enhancing its brand recognition, continuing to provide a
compelling shopping experience, developing incremental revenue opportunities and
building on its technology. E-commerce is defined as electronic commerce, or the
sale of goods and services on-line via the World Wide Web.
There are many factors that could affect the success of the Company. To
the extent that our marketing efforts do not result in significantly higher net
sales, we will be materially adversely affected. The Company must continue to
develop sources for price competitive product in the refurbished marketplace. If
we are unable to accomplish that task, we will be adversely affected. Also, we
could expect to experience significant fluctuations in our future operating
results due to a variety of factors, many of which are outside our control.
Factors that may affect our operating results include the availability of
competitive products for resale, success of joint ventures, mix of product sales
and the ability to attract and maintain high quality sales, marketing and
technology staff.
In its early stages of development, the Company spent seven months
designing proprietary, fully scalable systems architecture for the Internet
shopping marketplace. The Company's system is designed to fully integrate all
aspects of retail transaction processing including order placement, secure
payment verification, inventory control, order fulfillment and vendor invoicing
in one seamless and automated process. The Company believes that the principal
competitive factors in its market are price, speed of fulfillment, wide
selection, personalized services, ease of use, 24-hour accessibility,
convenience, reliability, and quality of editorial and other site content. The
Company has developed a creative auction format and e-tailing experience on the
Web that combines a highly automated infrastructure with a user-friendly
interface designed to enhance the convenience and ease of online shopping.
E-tailing is a term used to describe electronic retailing, or sales of goods via
the World Wide Web. The Company currently has twelve full time employees.
If the Company cannot maintain its current technology systems and
upgrade to keep up with technology changes, and develop our systems and
infrastructure, this could adversely affect the results of operations. Although
we have implemented network security measures, our servers are vulnerable to
computer viruses, physical or electronic break-ins, attempts by third parties to
deliberately exceed the capacity of our systems and similar disruptions. Any of
these events could lead to interruptions or delays in service, loss of data or
the inability to accept and confirm customer orders. The occurrence of technical
or communications failures, systems downtime and Internet disruptions could also
adversely affect the Company's ability to service customers and process orders.
The Company has not experienced any serious complications relating to its
servers or Web sites to date, but there can be no assurance these events will
not take place in the future.
4
<PAGE>
Products:
The Company offers Web hosting, professional graphics design and
animation, data base management and Web site development.
Additionally, The Company currently owns and operates six Internet
sites: AllnetDirect.com, Allmonitors.com, GoingOnce.net, Allnotebooks.com,
Allnetvoice.com and AllnetServices.com. AllnetDirect.com is an electronic
computer mall on the World Wide Web, listing over 45,000 computer-related
products from IBM, Digital, Intel, NEC, 3Com, Cisco Systems, Microsoft, and many
more. Allmonitors.com is a Web site dedicated solely to offering monitor-related
merchandise, from refurbished 15" Viewsonic and brand new 21" NEC monitors to
large projection screens, projector equipment and LCD's (liquid crystal
display). GoingOnce.net, the Company's auction site, currently specializes in
selling new, refurbished and closeout desktop and notebook computers, monitors,
laser and inkjet printers, scanners, digital cameras, software, and computer
related accessories. Allnotebooks.com specializes in notebook computers, PDA's
(personal digital assistants) and accessories. Allnetvoice.com offers voice and
speech-related technology products. The Company also maintains two additional
Web sites, Allcopiers.com and Deviceline.com. in which the Company developed and
maintains the Web sites and earns a commission for goods sold through them.
AllnetServices.com is the Company's main corporate Web site where visitors can
get news about the Company, and learn more about the services the Company can
provide. Deviceline.com is currently in development and is not operational.
GoingOnce.net currently cannot be accessed on the World Wide Web because it is
down for redesign.
The Company promotes its e-commerce sites to the retail and corporate
buyer through banner and sponsorship advertisements on the World Wide Web. These
advertisements are targeted at individuals who are likely to visit specific
sites and make a purchase. A number of these sites can be best described as
"what to buy and where to buy it" sites. They include sites such as Shopper.com,
Computers.com, AOL.com, CompuServe.com and Techshopper.com. Most sites of this
nature are content-driven and provide product reviews, price comparisons, and
buyer's tips. Several of the Company's larger competitors advertise on this type
of site. The Company also employs several inside sales representatives to help
customers and to prospect businesses from leads generated from its Web sites.
These business customers range in size from small computer resellers to larger
distribution type customers.
The Company markets its Web design services primarily to small and
medium sized businesses, both locally and nationally through various promotions
including mailings, radio advertising and direct sales efforts using inside
sales staff.
5
<PAGE>
The Company procures the majority of its new products for resale from
one large computer product distribution company, Tech Data Corporation.
Refurbished and close-out products are purchased from a variety of sources
including the original manufacturers of these products, and distributors. The
Company believes that this distribution channel for the procurement of
refurbished products is strong, but future changes or consolidation could effect
the sources for product and negatively impact the Company's product offering.
The Company currently does not manufacture, re-manufacture or refurbish
any products it markets.
The Company distributes its products in several ways. New products are
drop shipped directly to our customers from various warehouses operated by Tech
Data Corporation. This is the case for products sold on all of the Company's Web
sites. Refurbished and close-out products sold are distributed directly by our
vendors, or from inventory housed in the Company's warehouse in Coral Springs,
FL. Products purchased by our larger distribution type customers are drop
shipped from the vendors. Web site design and development work is either housed
on the Company's servers in Coral Springs, FL or distributed to customers
electronically.
The Company intends to compete with its competitors in various ways.
The Company will attempt to expand its customer base and encourage repeat buying
through new product offerings and multiple sales and marketing programs
including: (i) on-line and off-line marketing and promotional campaigns, (ii)
inside sales and telemarketing campaigns, (iii) affiliate programs with targeted
Web sites, and (iv) direct marketing programs to existing customers. The Company
will also concentrate on its customer service performance to attract new
customers and maintain its existing customer base through increased in house
training and customer contact. Additionally, the Company will attempt to reduce
customer acquisition costs by employing a commissioned direct sales force
targeting particular product lines.
In the first 2 years of the Company's development, sales derived
directly from the Internet accounted for approximately 14% of the total sales
for 1997 and approximately 35% in 1998. After November 1998, the Company's
business model changed to its present form with 100% of revenue derived from
Internet related leads and sales, and Web services including Web site design,
development and hosting.
6
<PAGE>
Market:
Growth in Internet usage has been fueled by a number of factors,
including the large and growing base of personal computers installed in the
workplace and the increased awareness of the Internet among consumer and trade
customers.
According to Internet World, computers and computer equipment represent
the number one category on the Internet in terms of what consumers are
purchasing on-line. The market for new and used computers is estimated at well
over $100 billion for 1999 worldwide and U.S. personal computer sales at more
than $50 billion, according to the Computer Almanac. Experts predict growth
rates in this market of 6% annually well into the twenty-first century. Industry
analysts agree, citing that changing technologies will continue to drive the
demand for newer and faster personal computers.
According to Dataquest, worldwide monitor sales have sustained
double-digit unit and sales growth the past four years. As technology for
computers and other accessories continue to drive prices downward, advancement
in monitors has been mostly stagnate keeping prices stable, and margins
attractive. Dataquest reports that sales of monitors across the globe exceeded
$28 billion in 1997 and that sales in North America alone totaled more than $10
billion. Unit and sales growth, both globally and in North America, are
projected to increase an average of 10% over the next four years, with prices
declining only slightly.
Internet services as well are seeing more and more business. Growing
demand for better performance and more useful content has driven many companies
to out-source their Web hosting and design resources.
The Company currently has an extremely small portion of these markets
and there can be no assurances that it will be able to penetrate these markets
further in the future.
Competition:
There are many competitors in the Internet commerce arena. Several
notable Internet retailers operate under a similar model as the Company. They
include Cyberian Outpost, (NASDAQ: COOL), Egghead (NASDAQ: EGGS), OnSale
(NASDAQ: ONSL), Buy.com, eBay (NASDAQ: EBAY) and Insight (NASDAQ: NSIT). Most of
these companies not only distribute solely through the Internet but also utilize
only one major supply channel for their source of new hardware, software and
other computer equipment. Further, some of these competitors have not
diversified their offerings beyond computer products.
Many of the Company's competitors have significant competitive
advantages. Internet search engines, and large traditional retailers have
significantly greater operating histories, customer bases and brand recognition
7
<PAGE>
and/or e-commerce experience. In addition, certain competitors may be able to
devote significantly greater resources to marketing campaigns, attracting
traffic to their Web sites and attracting and retaining key employees. As we
expand the Company's business through the introduction of new products and
services, the Company will face competition from established providers of these
products and services.
The Company also potentially faces competition from a number of on-line
services that have expertise in developing on-line commerce and facilitating
Internet traffic. These potential competitors include Amazon.com, America
Online, Microsoft and Yahoo! who could choose to compete with the Company either
directly or indirectly through affiliations with other e-commerce companies.
Other large companies with strong brand recognition, technical expertise and
experience in on-line commerce and direct marketing could also seek to compete
in the buyer driven commerce market.
Technology
During the Company's initial development phase, the network
infrastructure and proprietary technology evolvement was designed as the
foundation for the future. The custom software that operates the Company's
e-tailing sites, has automated many of the procedures, such as order generation,
vendor product listing, invoicing and inventory control necessary for a
successful Internet company. The Company now also has the capability to host
hundreds of Web sites on its servers, with expansion capacity for thousands
more.
The Company's electronic commerce and data warehouse systems utilize a
combination of Microsoft and UNIX operating system technologies. On the
Microsoft side, the latest version of NT Enterprise operating system runs the
Company's mission critical backoffice platform applications while simultaneously
supporting the UNIX front end on Hewlett Packard and IBM Netfinity servers. All
company data is maintained in a widely accepted universal SQL format, by way of
SQL server clusters. This allows for easy movement of data across platforms, and
increased levels of security. All data is secure using the latest firewall
security technology and back up devices for archiving and storage. The marriage
of these systems is accomplished by software tools provided in Microsoft's
Visual Development Studio 6.0 and native, proprietary applications designed and
compiled by Allnet, directly on the UNIX hosts using both the C++ and PERL
scripting languages. The use of widely accepted programming languages and
database applications makes for efficient and economical modification and
maintenance.
Remote access, dial-up and hosting services are provided for the UNIX,
NT, Windows, and Mac clients via Microsoft Site Server Commerce edition and UNIX
systems running both Netscape FastTrack and Apache Web servers. These programs
are widely accepted and tested in the computer industry. Supplemental operations
such as electronic mail, messaging, and collaboration services are provided by
8
<PAGE>
both simple UNIX SMTP servers, and a primary Microsoft Exchange Server. By using
industry standard software programs and tools, the Company can maintain its
sites and upgrade to meet technology changes in the future. Although the Company
has not experienced any long-term critical outages of its Web sites to date,
there can be no assurance that future software problems will not arise that
could affect its ability to keep its sites in operation. Those outages could
have an adverse effect on operations.
Employees
- ---------
The Company employs a total of 12 on a full-time and part-time basis.
None of the employees belong to a union and the Company has not experienced any
work stoppages. The Company believes that its labor relations are satisfactory.
The Company's headquarters is located at 3650 Coral Ridge Drive, Suite
101, Coral Springs, FL 33065. and its telephone number is (954) 346-7575
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's office is currently located at 3650 Coral Ridge Drive,
Suite 101, Coral Springs, FL 33065. Pursuant to a written lease, the Company
leases approximately 3,870 square feet at an annual rent of $ 36,000. This lease
expires in June of 2000, with the option to renew for an additional two years.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceedings, and no
such proceedings are known to be contemplated. In addition, no director, officer
or affiliate of the Company, and no owner of record or beneficial owner of more
than 5.0% of the securities of the Company, or any associate of any such
director, officer or security holder is a party adverse to the Company or has a
material interest adverse to the Company in reference to pending litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the security holders of the
Company during the fourth quarter of the fiscal year which ended December 31,
1999.
9
<PAGE>
Part II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock trades in the over-the-counter market under
symbol ANSC on the OTC Electronic Bulletin Board. There was no trading in the
Company's Common Stock prior to March, 1997. The following table shows the
quarterly high and low bid prices for the calendar year 1998 and the first half
of 1999 as reported by the National Quotations Bureau Incorporated. These prices
reflect inter-dealer quotations without adjustments for retail markup, markdown
or commission, and do not necessarily represent actual transactions.
<TABLE>
<CAPTION>
YEAR PERIOD HIGH LOW
---- ------ ---- ---
<S> <C> <C> <C> <C>
1998 First Quarter $1.00 $0.37
Second Quarter $2.00 $0.43
Third Quarter $0.81 $0.25
Fourth Quarter $17.50 $0.43
1999 First Quarter $4.00 $1.75
Second Quarter $3.87 $1.25
Third Quarter $1.12 $0.50
Fourth Quarter $1.00 $0.37
</TABLE>
As of December 31, 1999, there were approximately 197 holders of record
of the Company's Common Stock.Holders of the Company's Common Stock are entitled
to dividends when, as and if declared by the Board of Directors out of funds
legally available therefore. The Company does not anticipate the declaration or
payment of any dividends in the foreseeable future.
The Company intends to retain earnings, if any, to finance the
development and expansion of its business. Future dividend policy will be
subject to the discretion of the Board of Directors and will be contingent upon
future earnings, if any, the Company's financial condition, capital
requirements, general business conditions and other factors. Therefore, there
can be no assurance that any dividends of any kind will ever be paid.
The Company's transfer agent is Interwest Transfer Co., Inc., which is
located at 1981 East 4800 South, Suite 100, Salt Lake City, UT 84117 and
Interwest's telephone number is (801) 272-9294.
10
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Financial
Statements, including the Notes thereto, of the Company included elsewhere in
this Form 10-KSB.
Overview:
The Company specializes in the marketing and distribution of a broad
range of products and services at wholesale prices to both retail and business
customers and offers Internet-related services to businesses and end-users. The
Company intends to leverage its position as an Internet retailer of new,
refurbished and close-out merchandise by enhancing its brand recognition,
continuing to provide a compelling shopping experience, developing incremental
revenue opportunities and building on its technology. The Company also offers
Web hosting, professional graphics design and animation, data base management
and Web site development targeting small to medium sized businesses.
Management believes that the key factor affecting the Company's
long-term financial success is its ability to attract and retain customers in a
cost-effective manner. Currently, the Company is seeking to expand its customer
base and encourage repeat buying through multiple domestic marketing programs.
Such programs include: (i) brand development, (ii) on-line and off-line
marketing and promotional campaigns (iii) direct marketing programs designed to
generate repeat sales from existing customers, and (iv) growth of the Company's
direct sales force concentrating on small to mid sized businesses.
Focusing efforts on higher margin products such as office automation
solutions including digital copiers and laser printers, the Company is in the
final stages of approval for a dealer agreement with a major manufacturer of
copiers and printers. The Company expects this agreement to complement its Web
presence in the office automation marketplace, and increase overall revenue and
margins. The Company will promote this new venture with the addition of new
outside sales representatives and on-going promotions including print
advertising, radio, direct mail and targeted e-mail campaigns. The Company is
also expanding its Web development group with the addition of several outside
marketing representatives to target the South Florida small to medium business
market.
The Company expects to experience fluctuations in its future operating
results due to a variety of factors, many of which are outside the control of
the Company. Factors that may affect the Company's operating results include the
frequency of new product releases, success of strategic alliances, mix of
product sales and seasonality of sales typically experienced by retailers. Sales
in the computer retail industry are significantly affected by the release of new
products. Infrequent or delayed new product releases, when they occur,
negatively impact the overall growth in computer retail sales. Gross profit
margins for hardware, software and peripheral products vary widely, with
computer hardware generally having the lowest gross profit margins. While the
11
<PAGE>
Company has some ability to affect its gross margins by varying its product mix
with higher margin products such as refurbished copier products and pagers, the
Company's sales mix will vary from period to period and the Company's gross
margins will fluctuate accordingly.
Results of Operations.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998.
Net sales are comprised of product sales, net of returns and
allowances. Net sales increased from $380,306 in 1998 to $4,218,613 for 1999.
The majority of this change in net sales was due to increased marketing efforts
to one large customer for displays and peripheral products. A portion of the
increase was also related to increased marketing efforts for our Web sites
resulting in a larger customer base and repeat purchases from existing
customers.
Cost of sales increased from $270,208 in 1998 to $4,009,074 in 1999. As
a percentage of net sales, the Company's gross margin was 28% for 1998 and 5%
for 1999. This decrease in gross margin is due to the increase in sales of lower
margin new display products and peripherals to our largest customer, which
eroded the overall gross margin.
Selling, general and administrative expense includes administrative,
finance and purchasing personnel and related costs, general office and
depreciation expense, as well as professional fees and advertising costs.
Selling general and administrative expenses were $1,085,146 for 1998 and
$4,207,638 for 1999. This increase was due primarily to the issuance of
restricted common stock to consultants for services rendered to the Company in
lieu of cash compensation. These consultants provided sales and marketing
support, and general business development support as needed by the Company. This
increase was also due to the professional fees and costs associated with
compliance to become a fully reporting public company.
Net cash used in operating activities was $525,512 for 1998 and
$1,510,603 for 1999. Net cash used in operating activities was primarily
attributable to net losses and the increased due on factored receivables.
Net cash used in investing activities was $21,396 for 1999. This was
primarily related to purchases of property and equipment.
Net cash provided by financing activities was $1,517,614 for the twelve
months ended December 31, 1999. Net cash provided by financing activities
resulted from the issuance of common stock in a Private Placement Offering and
the Company's Factoring Agreement.
12
<PAGE>
Liquidity and Capital Resources
As of December 31, 1999, the Company had a $337,245 working capital
deficiency. The Company is currently evaluating various equity and debt sales to
raise capital to carry out its operating plan for fiscal 2000. The Company
believes it will require approximately $400,000 to effectively carry out its
operating plan for fiscal 2000. In an effort to reduce costs, the Company has
made various changes in the compensation of certain employees. Also, with the
hiring of additional sales representatives, the Company expects that revenues
generated from sales and other internally generated capital will be sufficient
to cover operating expenses until additional capital can be raised. The Company
has renewed its Factoring Agreement to facilitate the financing of large orders
and has increased the Factor amount to $1,000,000, based on eligible sales.
There can be no assurance that additional capital will be available to the
Company on terms acceptable to it, or at all. If these funds are not available
to the Company, operating and business results likely will be materially
adversely affected. These adverse results could include but are not limited to:
(i) a reduction in personnel which would decrease sales and revenue production
(ii) a decrease in new business ventures due to lack of funds available to purse
new opportunities (iii) the inability to purchase products for resale (iv) the
inability to maintain our computer systems and e-commerce Web sites necessary
for continued operations. The Company's capital requirements will depend on
numerous factors, including the rates at which the Company expands its personnel
and infrastructure to accommodate growth and invests in new technologies. In
addition, as part of its strategy, the Company evaluates potential alliances
with businesses that extend or complement the Company's business. Future
alliances may be funded with alliance financing, institutional financing, or
additional equity offerings. There can be no assurance that future alliances, if
identified, will be consummated by the Company.
ITEM 7. FINANCIAL STATEMENTS.
Index to Financial Statements
Independent Auditors' Report................................. 14
Balance Sheet................................................ 15
Statements of Operations..................................... 16
Statement of Shareholders' Deficit........................... 17
Statements of Cash Flows..................................... 18-19
Notes to Financial Statements................................ 20-26
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Allnetservices.com Corp.
We have audited the accompanying balance sheet of Allnetservices.com
Corp. as of December 31, 1999 and the related statements of operations,
shareholders' deficit and cash flows for the years ended December 31, 1999 and
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Allnetservices.com
Corp. as of December 31, 1999, and the results of its operations and its cash
flows for the years ended December 31, 1999 and 1998 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Allnetservices.com Corp. will continue as a going concern. As discussed in Note
B to the financial statements, the Company has suffered recurring losses from
operations and has negative working capital 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 B. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
February 9, 2000
Miami, Florida /s/ Berkowitz Dick Pollack & Brant, LLP
14
<PAGE>
<TABLE>
<CAPTION>
ALLNETSERVICES.COM CORP.
BALANCE SHEET
December 31, 1999
<S> <C>
ASSETS
CURRENT ASSETS
Trade receivables, (net of allowance for doubtful accounts
of $90,000) $ 25,202
Due from factor 790,040
Other receivables 550
Inventories (net of allowance for obsolescence of $11,000) 8,158
Advances to suppliers (net of allowance for doubtful accounts
of $230,000) --
-----------
TOTAL CURRENT ASSETS 823,950
PROPERTY AND EQUIPMENT, net 48,886
OTHER ASSETS 7,268
-----------
TOTAL ASSETS $ 880,104
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 275,265
Due to factor 767,614
Due to related party, net 95,182
Accrued expenses 23,134
-----------
TOTAL CURRENT LIABILITIES 1,161,195
COMMITMENTS
SHAREHOLDERS' DEFICIT
Common Stock - $.0001 par value; authorized 50,000,000 shares, issued and
outstanding, 10,044,700 shares 1,005
Additional paid-in capital 5,175,863
Accumulated deficit (5,457,959)
-----------
TOTAL SHAREHOLDERS' DEFICIT (281,091)
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
$ 880,104
===========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
ALLNETSERVICES.COM CORP.
STATEMENTS OF OPERATIONS
Years Ended December 31,
------------------------
1999 1998
----- ----
<S> <C> <C>
Net sales $ 4,218,613 $ 380,306
Cost of sales 4,009,074 270,208
----------- -----------
GROSS PROFIT 209,539 110,098
Selling, general and administrative expenses 4,207,638 1,085,146
----------- -----------
LOSS FROM OPERATIONS BEFORE
INCOME TAX BENEFIT (3,998,099) (975,048)
Income tax benefit -- --
----------- -----------
NET LOSS $(3,998,099) $ (975,048)
=========== ===========
Basic and diluted net loss per common share $ (0.42) $ (0.15)
=========== ===========
Weighted average common shares used
in computing basic and diluted net loss per
common share 9,448,033 6,723,567
=========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
ALLNETSERVICES.COM CORP.
STATEMENT OF SHAREHOLDERS' DEFICIT
Common
Shares Common Additional Accumulated
Outstanding Stock Paid-in Capital Deficit Total
------------ ------ ---------------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 6,591,700 $ 659 $ 719,648 $ (484,812) $ 235,495
Issuance of Shares - Note G 580,000 58 168,342 168,400
Issuance of Shares - Note G 644,000 65 294,635 294,700
Net Loss -- -- -- (975,048) (975,048)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 7,815,700 782 1,182,625 (1,459,860) (276,453)
Issuance of Shares - Note G 550,000 55 699,945 700,000
Issuance of Shares - Note G 1,254,000 125 2,171,486 2,171,611
Issuance of Shares - Note G 400,000 40 1,065,560 1,065,600
Issuance of Shares - Note G 25,000 3 56,247 56,250
Net Loss -- -- -- (3,998,099) (3,998,099)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 10,044,700 $ 1,005 $ 5,175,863 $(5,457,959) $ (281,091)
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
ALLNETSERVICES.COM CORP.
STATEMENTS OF CASH FLOWS
Years Ended December 31,
------------------------
1999 1998
----- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,998,099) $ (975,048)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 11,568 8,166
Provision for bad debts 55,225 --
Issuance of common stock for services, licensing fees
and agreements 3,293,460 68,400
Changes in assets and liabilities:
(Increase) decrease in trade receivables (25,569) 29,460
(Increase) in due from factor (790,040) --
(Increase) in other receivables (550) (10,000)
Decrease in inventories 2,529 34,588
Decrease in advances to supplier -- 59,803
(Decrease) increase in accounts payable (316) 151,070
(Decrease) increase in due to related party, net (21,243) 102,552
(Decrease) increase in accrued expenses (37,568) 5,497
----------- -----------
Total adjustments 2,487,496 449,536
----------- -----------
NET CASH USED IN
OPERATING ACTIVITIES (1,510,603) (525,512)
----------- -----------
Cash flows from investing activities:
Expenditures for equipment (21,396) (12,713)
----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (21,396) (12,713)
----------- -----------
Cash flows from financing activities:
Decrease (increase) in restricted cash 50,000 (50,000)
Increase in due to factor 767,614 --
Issuance of common stock 700,000 198,200
Costs of raising capital -- (3,500)
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,517,614 144,700
----------- -----------
18
<PAGE>
ALLNETSERVICES.COM CORP.
STATEMENTS OF CASH FLOWS--Continued
Years Ended December 31,
------------------------
1999 1998
----- ----
NET DECREASE IN CASH (14,385) (393,525)
CASH AT BEGINNING OF YEAR 14,385 407,910
--------- ---------
CASH AT END OF YEAR $ -- $ 14,385
========= =========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 4,716 $ 908
========= =========
Income taxes $ -- $ --
========= =========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During 1999, the Company issued 1,254,000 shares of restricted common stock,
valued at $2,171,611, to third parties for services provided to the Company.
Additionally, the Company issued 400,000 shares of restricted common stock,
valued at $1,065,600 to a third party for software licensing fees. The Company
also issued 25,000 shares of restricted common stock valued at $56,250 to a
third party for a joint venture agreement.
During 1998, the Company issued 500,000 common shares to two corporations
controlled by a relative of the Company's president in payment of advances
previously made by the corporations to the Company amounting to $200,000.
During 1998, the Company issued 330,000 common shares, valued at $68,400, to
unrelated third parties for services provided to the Company.
See accompanying notes to financial statements.
19
<PAGE>
ALLNETSERVICES.COM CORP.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: Create-a-Basket, Inc. ("CAB") was incorporated in October 1992.
CAB had insignificant operations through December 31, 1996. Effective March
1997, CAB changed its name to Tasar Electronics Corp. ("Tasar"). In June 1997,
Tasar issued 7,000,000 common shares to Tasar Electronics, Ltd. and 1,000,000
common shares to Tasar Holdings, Ltd. resulting in a change in control of Tasar.
In June 1997, the Board of Directors of Tasar approved a reverse stock split of
the original shares of Tasar in which one share of newly issued common stock of
Tasar was exchanged for two existing outstanding shares. Effective March 1998,
Tasar changed its name to Allnetservices.com Corp. (the "Company").
Business: The Company is engaged in the marketing and distribution of electronic
consumer products in the United States and foreign markets through conventional
direct and indirect distribution channels and the Internet. In connection with
its Internet sales, the Company owns and operates an Internet auction site
through which it sells its products to consumers and conducts several Internet
related businesses including Web hosting services, Internet site design,
graphics design and data base management. In 1999 and 1998, internet related
sales amounted to approximately 11% and 35% of total sales respectively.
Inventories: Inventories, consisting primarily of new and used computer
software, computer equipment and copier parts, are valued at the lower of cost
(first-in, first-out method) or market.
Property and equipment: Property and equipment is recorded at cost. Expenditures
for major betterments and additions are capitalized. Repairs and maintenance
expenditures which do not extend the useful life of the applicable assets are
charged to expense as incurred. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets. Depreciation expense was
$11,568 and $8,166 for the years ended December 31, 1999 and 1998, respectively.
20
<PAGE>
ALLNETSERVICES.COM CORP.
NOTES TO FINANCIAL STATEMENTS--Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Advertising Costs: The Company expenses all advertising costs as they are
incurred. Total advertising costs for the years ended December 31, 1999 and 1998
were approximately $40,000 and $124,000, respectively.
Income Taxes: Deferred income taxes are recorded based on the future tax effects
of the difference between the tax and financial reporting bases of the Company's
assets and liabilities. In estimating future tax consequences, expected future
events are considered except for potential income tax law or rate changes.
Comprehensive Income: The Company has no components of other comprehensive
income (loss). Accordingly, net loss equals the comprehensive loss for all
periods presented.
Net Loss Per Share: Basic and diluted net loss per common share is based on the
weighted average number of common shares and common share equivalents
outstanding during the year. There were no common share equivalents outstanding
at December 31, 1999 and 1998.
Fair Value Information: The carrying amount of current assets and current
liabilities approximates fair value because of the short maturity of these
instruments.
Segment Reporting: Effective January 1, 1999, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information". SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in financial reports. The Company views its operations and manages its
business as one segment: the marketing and distribution of electronic consumer
products and Web hosting services. Factors used to identify the Company's single
operating segment include the organizational structure of the Company and the
financial information available for evaluation by the chief operating decision
maker in making decisions about how to allocate resources and assess
performance.
Use of 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, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenue and expenses. Actual results could differ from those estimates.
21
<PAGE>
ALLNETSERVICES.COM CORP.
NOTES TO FINANCIAL STATEMENTS--Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Reclassifications: Certain reclassifications were made to the 1998 financial
statements to conform with the current year presentation.
NOTE B--GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has incurred net
losses of approximately $4,000,000 and $975,000 for the years ended December 31,
1999 and 1998, and has a shareholders' deficit and negative working capital
amounting to approximately $281,000 and $337,000, respectively, at December 31,
1999. These factors, among others, indicate that the Company may be unable to
continue as a going concern.
Management of the Company is currently evaluating various proposals to obtain
additional capital which include the sale of additional equity securities and
the incurrence of debt. The Company is also lowering its cost structure through
various changes in compensation of certain employees and management is in the
final stages of obtaining a dealer agreement for a new line of electronic
products in an effort to increase sales and margins. Additionally, the Company
is in the process of adding several sales people to increase the volume of
higher margin Web design and development work.
The Company's continuation as a going concern is dependent upon its ability to
raise additional capital and generate sufficient cash flows from operations to
meet its obligations on a timely basis, and ultimately to achieve profitable
operations. There can be no assurance that management's efforts in this regard
will be successful.
NOTE C--RELATED PARTY TRANSACTIONS
During 1997, the Company advanced $259,000 to a company which supplies computer
related products to Allnetservices.com Corp. The Company recorded a reserve
amounting to $189,000 related to these advances as of December 31, 1997. During
1998, the Company received inventory from this supplier which reduced the
advance amount to $189,000 at December 31, 1998 which amount is fully reserved
at December 31, 1998. Certain members of the Company's management are common
shareholders of this supplier.
22
<PAGE>
ALLNETSERVICES.COM CORP.
NOTES TO FINANCIAL STATEMENTS--Continued
NOTE C--RELATED PARTY TRANSACTIONS--Continued
At December 31, 1999, the Company owes approximately $59,000 to a corporation
controlled by a relative of the Company's president. Additionally, the Company
owes approximately $36,000 to a relative of the Company's president.
The president of the Factor (Note E) was issued 250,000 restricted common shares
of the Company for $100,000 in December 1998.
During 1998, the Company issued 500,000 shares of common stock to repay $200,000
of advances made to the Company from corporations controlled by a relative of
the Company's president.
NOTE D--PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1999 consists of the following:
Office equipment $ 64,225
Furniture and fixtures 6,119
----------
70,344
Less: accumulated depreciation 21,458
----------
$ 48,886
==========
NOTE E--FACTORING AGREEMENT
In November 1998, the Company entered into a factoring agreement (the
"Agreement") in which the Company contracted to sell certain of its accounts
receivable, with recourse, to a corporation (the "Factor"), a related party (See
Note C), at 98% of face value. In the event certain accounts are not acceptable
to the Factor due to, among other things, credit worthiness or the nature of the
product sold, the Factor may agree to accept the account at a lower percentage
of face value. All accounts sold pursuant to the Agreement must be approved by
the Factor within a reasonable period of time. Amounts due the Factor under the
Agreement are collateralized by substantially all of the Company's assets. The
Agreement expired in November 1999. The Company and the Factor have continued
operating under the terms of the expired agreement.
During 1999 and 1998, the Factor earned approximately $47,000 and $0,
respectively, of fees under the Agreement.
23
<PAGE>
ALLNETSERVICES.COM CORP.
NOTES TO FINANCIAL STATEMENTS--Continued
NOTE F--LINE OF CREDIT
In November 1998, the Company entered into a revolving line of credit agreement
with the Factor which allows for borrowings up to $100,000. This agreement was
canceled as of July 1999. During 1999, the Company paid approximately $3,700 in
interest to the Factor for the use of these funds.
NOTE G--SHAREHOLDERS' DEFICIT
During fiscal 1998, the Company issued 580,000 shares of restricted common stock
for cash amounting to $100,000 and for services rendered to the Company valued
at $68,400.
In fiscal 1998, the Company issued 644,000 shares of common stock to certain
suitable investors pursuant to a Regulation D Rule 504 Offering Memorandum. The
Company sold 144,000 shares of common stock at prices ranging from $.50 to $1.00
per share, and the Company issued 500,000 shares of common stock in exchange for
the repayment of $200,000 of advances from corporations controlled by a relative
of the Company's president. Gross cash proceeds to the Company related to this
offering amounted to $98,200. The Company incurred commissions of $3,500 on this
offering.
During fiscal 1999, the Company sold 550,000 shares of common stock to certain
suitable investors pursuant to a Regulation D Rule 504 Offering. The shares of
common stock were sold at prices ranging from $0.857 to $2.00 per share. Gross
cash proceeds to the Company related to this offering amounted to $700,000.
There were no incidential expenses relating to this offering.
During 1999, the Company issued 1,254,000 shares of restricted common stock,
valued at $2,171,611, to third parties for services provided to the Company.
Additionally, the Company issued 400,000 shares of restricted common stock,
valued at $1,065,600 to a third party for software licensing fees. The Company
also issued 25,000 shares of restricted common stock valued at $56,250 to a
third party for a joint venture agreement.
NOTE H--INCOME TAXES
The Company has a deferred tax asset of approximately $1,852,000 and $195,000
resulting primarily from net operating losses at December 31, 1999 and 1998,
respectively. A valuation allowance of $1,852,000 and $195,000 was recorded to
reduce this deferred tax asset to zero at December 31, 1999 and 1998,
respectively as the realization of the deferred tax asset is not currently
predicatable. For federal income tax purposes, the Company has net operating
loss carryforwards of approximately $5,043,000 expiring through the year 2019.
24
<PAGE>
ALLNETSERVICES.COM CORP.
NOTES TO FINANCIAL STATEMENTS--Continued
NOTE I--COMMITMENTS
The Company leases office space under a non-cancelable operating lease which
commenced in May 1997. The lease requires payments of approximately $3,200 per
month and expires during June 2000, at which time the Company has the option to
renew the lease for an additional two years. Rent expense for the years ended
December 31, 1999 and 1998 was approximately $39,100 and $38,100, respectively.
NOTE J--CONCENTRATIONS OF CREDIT RISK
Cash concentration: The Company maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits. The balances are insured
by the Federal Deposit Insurance Corporation up to $100,000. The Company has not
experienced any losses in such accounts.
Major customers: The Company had one customer that accounted for approximately
65% and another customer for approximately 64% of net sales in 1999 and 1998,
respectively.
NOTE K--MAJOR SUPPLIERS
The Company purchased approximately 72% of its total purchases from two
suppliers during the year ended December 31, 1999 and approximately 61% from one
supplier during the year ended 1998, respectively.
NOTE L--LICENSING AGREEMENT
In January 1999, the Company entered into an agreement whereby the Company is
the exclusive licensee in the United States of a single user software program
that employs voice recognition technologies. The agreement required the Company
to issue 400,000 shares of restricted common stock and pay certain minimum
royalties. During fiscal 1999, this contract was cancelled due to
non-performance by the licensor with no recourse by the Company. The Company
paid approximately $25,000 of royalty fees and issued the 400,000 shares of
restricted common stock (Note G) prior to the cancellation of the contract.
NOTE M--JOINT VENTURE AGREEMENT
In March 1999, the Company entered into an agreement whereby the Company will
design, host and maintain a Website for a mortgage company which will provide
mortgages online. The Company
25
<PAGE>
ALLNETSERVICES.COM CORP.
NOTES TO FINANCIAL STATEMENTS--Continued
NOTE M--JOINT VENTURE AGREEMENT--CONTINUED
will receive 15% of the gross fees generated by the Web site. The Company issued
25,000 shares of restricted common stock to this mortgage company upon signing
the agreement and is contractually obligated to issue an additional 5,000 shares
of restricted common stock upon completion of every $10,000,000 of new
commission generating transactions. Fees earned by the Company in 1999 related
to this agreement amounted to approximately $5,000.
26
<PAGE>
Part III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The current executive officers, directors and significant employees of
the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Anthony Byrne 39 Chairman of the Board.
Robert J. Aubel 40 Director, President, Secretary, Treasurer and CEO
Jerry Aubel 40 Director and Vice President
</TABLE>
The directors named above will serve until the next annual meeting of
the Company's stockholders. Thereafter, directors will be elected for one-year
terms at the annual stockholders' meeting. Officers will hold their positions at
the pleasure of the board of directors, absent any employment agreement, of
which none currently exists or is contemplated. There is no arrangement or
understanding between any of the directors or officers of the Company and any
other person pursuant to which any director or officer was or is to be selected
as a director or officer.
Biographical Information
- ------------------------
Anthony Byrne, age 39, is the Chairman of the Board. Mr. Byrne has held this
position since May of 1999. Mr. Byrne was President and CEO of Seagil Software
prior from 1991 through 1998.
Robert J. Aubel, age 40, is a Director, Secretary and Treasurer and CEO and
President of the Company. Mr. Aubel has held these positions since May of 1997.
Prior to that, Mr. Aubel was director of operations for Computer Access
International from May 1994 to May 1997, and before that he served as a regional
sales manager for Netcomm Services from March 1991 to May 1994.
Jerry Aubel, age 40, is a Director and Vice President of the Company. Mr. Aubel
has held these positions since May 1997. Prior to that, Mr. Aubel was regional
sales director for RSI Communications from January 1995 to May 1997, and before
that he was regional sales manager for Augat Communications from July 1991 to
January 1995.
Jerry Aubel and Robert Aubel are brothers.
27
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
The Company paid the following salaries to its executives:
1999 1998
---- ----
Robert Aubel, Pres. & CEO $104,000 $ 104,000
Jerry Aubel, VP $78,000 $78,000
Todd Talbot, IT Director $70,000 $70,000
None of the executives received any stock options or stock dividends.
The three above executives received reimbursement for health insurance as part
of their compensation. The directors were not compensated for any Board of
Directors meetings.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of the end of the Company's most
recent fiscal year, the number of shares of Common Stock owned of record and
beneficially by executive officers, directors and persons who hold 5.0% or more
of the outstanding Common Stock of the Company. Also included are the shares
held by all executive officers and directors as a group.
<TABLE>
<CAPTION>
Name and Number of Shares Percent of
Address Owned Beneficially Class Owned
- ------- ------------------ -----------
<S> <C> <C>
Robert Aubel, Director 600,000 6.0%
408 NW 120 Drive
Coral Springs, FL 33071
Jerry Aubel, Director 500,000 5.0%
489 Isaac Frye Highway
Wilton, NH 03086
All Officers and Directors as a Group
Group (2 persons) 1,100,000 11.0%
</TABLE>
28
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, the Company advanced $259,000 to Computer Access
International, a company which supplies computer related products to
Allnetservices.com Corp. This advance was made to secure a steady stream of
refurbished products for resale on the Goingonce.net Web site. At the time of
the advance, Computer Access had an extremely competitive product line and the
Company expected to take advantage of this source of product by reserving future
inventory. Subsequent to receiving several deliveries of product from Computer
Access it became apparent that due to financial and other supply problems,
Computer Access could not fulfill its obligation to supply product to the
Company. The Company recorded an allowance for uncollectibility amounting to
$189,000 related to these advances as of December 31, 1997. During 1998, the
Company received inventory from Computer Access International which reduced the
advance amount to $189,000 at December 31, 1998 which amount is fully reserved
at December 31, 1998.
At December 31, 1998, the Company owes approximately $50,000 to Going
South Investment Company ("GSI") and $59,000 to Avara Trading Company, Inc.
("Avara") which are both controlled by David Aubel, brother of the Company's
president and vice president. At March 1, 2000 the Company owed $59,000 to Avara
Trading Company. This advance will be repaid at a date to be determined by the
Company and Avara. GSI advanced the Company approximately $100,000 dollars
during 1998 and $50,000 of these advances were repaid through the issuance of
125,000 common shares of the Company's stock. The advances made to the Company
were used for inventory purchases, computer hardware and system software
upgrades and for working capital.
During 1998, the Company received advances of approximately $60,000 for
working capital purposes from Directors Investment Group, LTD which is also
controlled by David Aubel, brother of the Company's president and vice
president. All of these advances were repaid through the issuance of 150,000
shares of the Company's stock.
During 1997, the Company received advances from Avara which resulted in
the Company owing Avara approximately $214,000 as of December 31, 1997. The
advances made to the Company were used for leasehold improvements, computer
equipment purchases, inventory for resale and for working capital. During 1998,
the Company received additional advances of approximately $35,000 from Avara. In
January 1998, the Company advanced $100,000 to its president. This advance to
the president was subsequently assigned to Avara and reduced the amount owed by
the Company to Avara. Additionally, in December 1998, $90,000 of these Avara
advances were repaid through the issuance of 225,000 common shares of the
Company's stock.
During 1999, the Company owed approximately $36,000 to a relative of
the Company's president for advances to the Company.
29
<PAGE>
In November 1998, the Company entered into a factoring agreement (the
"Agreement") in which the Company contracted to sell certain of its accounts
receivable, with recourse, to a corporation (the "Factor"), at 98% of face
value. In December 1998, the Company issued 250,000 shares of Restricted Common
Stock to the Factor for $100,000. In the event certain accounts are not
acceptable to the Factor due to, among other things, credit worthiness or the
nature of the product sold, the Factor may agree to accept the account at a
lower percentage of face value. All accounts sold pursuant to the Agreement must
be approved by the Factor within a reasonable period of time. Amounts due the
Factor under the Agreement are collateralized by substantially all of the
Company's assets. The Agreement expired in November 1999. The Company has
renewed the Factoring Agreement with an increase in the factor amount to
$1,000,000 based on eligible sales, and it will be in effect until November 28,
2001.
During 1999 and 1998, the Factor earned approximately $47,000 and $0,
respectively, of fees under the Agreement.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The Exhibits listed below are filed as part of this Annual Report.
Exhibit No. Document
- ----------- --------
3.1 Articles of Incorporation (incorporated by reference from
Registration Statement on Form 10-SB filed with the Securities
and Exchange Commission under File No. 000-30108
3.2 Bylaws (incorporated by reference from Registration Statement
on Form 10-SB filed with the Securities and Exchange under
File No. 000-30108
27 Financial Data Schedule
(b) No reports on Form 8-K were filed by the Company during the
last quarter of it's fiscal year ending December 31, 1999.
30
<PAGE>
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ALLNETSERVICES.COM CORP.
By: /s/ Robert J. Aubel
-----------------------
(Principal Executive Officer and Director)
Date: April 14, 2000
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Director 4/14/00
/s/ Robert J. Aubel
Director 4/14/00
/s/ Anthony Byrne
Director 4/14/00
/s/ Jerry Aubel
31
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 815,792
<ALLOWANCES> 0
<INVENTORY> 8,158
<CURRENT-ASSETS> 823,950
<PP&E> 70,344
<DEPRECIATION> (21,458)
<TOTAL-ASSETS> 880,104
<CURRENT-LIABILITIES> 1,161,195
<BONDS> 0
0
0
<COMMON> 1,005
<OTHER-SE> (282,096)
<TOTAL-LIABILITY-AND-EQUITY> 880,104
<SALES> 4,218,613
<TOTAL-REVENUES> 4,218,613
<CGS> 4,009,074
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,207,638
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,998,099)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,998,009)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,998,099)
<EPS-BASIC> (0.42)
<EPS-DILUTED> (0.42)
</TABLE>
