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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
ALLNETSERVICES.COM CORP.
3650 Coral Ridge Drive, Suite 101, Coral Springs, Florida 33065
954.346.7575
State of Incorporation: Florida EIN # 65-0755455
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under section 12 (g) of the Act:
Common Stock
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TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS.............................................2
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION............................................8
ITEM 3. DESCRIPTION OF PROPERTY............................................12
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.......................................12
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS.........................................13
ITEM 6. EXECUTIVE COMPENSATION.............................................13
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS ...............................................14
ITEM 8. DESCRIPTION OF SECURITIES..........................................15
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS ........................................16
ITEM 2. LEGAL PROCEEDINGS..................................................16
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.........................16
ITEM 4. RECENT SALE OF UNREGISTERED SECURITIES.............................18
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS...........................19
PART F/S ....................................................................20
PART III
ITEMS 1. & 2. INDEX TO AND DESCRIPTION OF EXHIBITS.........................42
SIGNATURES...................................................................42
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Registration Statement on
Form 10SB are "forward-looking statements" intended to qualify
for the safe harbors from liability established by the Private
Securities Litigation Reform Act of 1995. These
forward-looking statements can generally be identified as such
because the context of the statement will include words such
as the Company "believes," "anticipates," "expects,"
"estimates" or words of similar meaning. Similarly, statements
that describe the Company's future plans, objectives or goals
are also forward-looking statements. Such forward-looking
statements are subject to certain risks and uncertainties
which are described in close proximity to such statements and
which could cause actual results to differ materially from
those anticipated as of the date of this report. Shareholders,
potential investors and other readers are urged to consider
these factors in evaluating the forward-looking statements and
are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements
included herein are only made as of the date of this report.
PART I
ITEM 1 - DESCRIPTION OF BUSINESS:
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.
The Company has elected to file this Form 10-SB registration statement
on a voluntary basis in order to become a reporting company under the Securities
Exchange Act of 1934. The primary purpose for this is that the Company wants to
maintain its listing for its common stock on the OTC Electronic Bulletin Board.
Under the current NASD rules, in order to maintain such a listing on the OTC
Electronic Bulletin Board, a company now must be a reporting company under the
Securities Exchange Act of 1934.
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
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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.
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 eleven 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
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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.
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, VCRs, camcorders,
telephones, copiers, 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.
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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.
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 sales and services.
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.
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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
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
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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/Year 2000:
The Company has assessed its internal computerized systems to determine
its ability to correctly identify the Year 2000 and has found that they will
correctly identify the Year 2000. Beyond our internal computer systems, we rely
on third party networks for our access to the Internet and several vendors for
products sold through our web sites. Any failure of third-party networks,
systems or services or computer systems of our vendors could have a material
adverse impact on our business. Our business depends on the satisfactory
performance and reliability of the external communication and computer networks,
systems and services integral to the Internet. These networks, systems and
services are maintained or provided by third parties and could affect the
ability of customers to access and purchase products at our Web sites. Also,
such failures could result in system interruptions or failures, including our
inability to process and ship orders, to collect credit card payments and to
provide effective customer service, which could cause the loss of business and
customers and could subject us to claims for damages. The severity of these
possible problems would depend on the nature of the problem and how quickly they
could be corrected or an alternate implemented, which is unknown at this time.
As a result of our reliance on these third parties, the success of our
plan to address the Year 2000 issues depends in part on parallel efforts being
undertaken by such other third parties. We have identified and initiated
communications with those third parties whose networks, systems or services are
critical to our business to determine the status of these entities' Year 2000
compliance. We cannot assure that all such parties will provide accurate and
complete information, or that all their networks, systems or services will
achieve full Year 2000 compliance in a timely fashion. In an attempt to mitigate
the risk of noncompliance by certain critical service providers, we have begun
to diversify our use of certain services among several providers. However, we
cannot assure that this diversification will mitigate the risk of noncompliance.
Costs related to our efforts to address Year 2000 issues have not been
material to date. We expect to fund the Year 2000-related costs through funds
provided by operations and do not expect these costs to have a material adverse
effect on our liquidity or results of operations. Our estimates of the cost of
these efforts are partially based on numerous assumptions about future events.
Actual costs could differ materially from these estimates.
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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
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 effect its ability to keep its sites in operation. Those outages could
have an adverse effect on operations.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS:
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 registration statement.
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,
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continuing to provide a compelling shopping experience, developing incremental
revenue opportunities and building on its technology.
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.
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
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: Calendar year 1997 and 1998:
Net sales are comprised of product sales, net of returns and
allowances. Net sales increased from $302,888 in 1997 to $380,306 in 1998. This
increase was due to 1997 being a partial year of operations offset by a decrease
in the sales of copier parts in 1998 due to the Company's decision to cease the
sale of those products and concentrate on its Internet related business.
Included in total sales were Internet related sales of approximately $41,000 and
$132,000 in 1997 and 1998, respectively. Sales of copier parts decreased from
$261,888 in 1997 to $248,306 in 1998.
Cost of sales increased from $224,791 in 1997 to $270,208 in 1998. As a
percentage of net sales, the Company's gross margin was 25.7% in 1997 and 28.9%
in 1998. The increase in gross margin was due to several factors as follows: (i)
more favorable pricing from the Company's vendors; with an increase in
purchasing volume, vendors typically decrease cost of goods (ii) new web site
design work, which has a higher profit margin than computer hardware and
software; this web site work is attributed to the beginning of marketing efforts
in this area (iii) a slight change in product mix increasing the Company's
refurbished product sales, which have a higher profit margin than new products.
Selling, general and administrative expense includes administrative,
finance and purchasing personnel and related costs, general office and
depreciation expenses, as well as
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professional fees and advertising costs. Selling, general and administrative
expenses were $558,909 for the year ended December 31, 1997 as compared to $
1,085,146 for the year ended December 31, 1998. This increase was due to
calendar 1997 being a partial year of operations and increased personnel,
consulting and other operating expenses incurred in 1998 in connection to the
change in the Company's business model from a seller of high end copier parts to
an Internet retailer.
Net cash used in operating activities was $525,512 for the year ended
December 31,1998. Net cash used in operating activities was primarily
attributable to net losses and partially offset by increases in trade payables
and amounts due to related parties.
Net cash used in investing activities was $12,713 for the year ended
December 31,1998.
Net cash used in investing activities was primarily related to
purchases of property and equipment.
Net cash provided by financing activities was $144,700 for the year
ended December 31,1998. Net cash provided by financing activities resulted from
the issuance of common stock in a Private Placement Offering.
Results of Operations: Nine-months ended September 30, 1998 and 1999
Net sales are comprised of product sales, net of returns and
allowances. Net sales increased from $293,719 for the nine-months ended
September 30, 1998 to $2,319,754 for the same period in 1999. This change in net
sales was due to increased marketing efforts to our large customers for displays
and peripheral products as well as increased marketing efforts for our web sites
resulting in a larger customer base and repeat purchases from existing
customers.
Cost of sales increased from $217,225 for the nine-months ended
September 30, 1998 to $2,119,991 for the same period in 1999. As a percentage of
net sales, the Company's gross margin was 26% for the nine-months ended
September 30, 1998 and 8.6% for the same period in 1999. This decrease in gross
margin is due to the increase in sales of lower margin new display products and
peripherals, 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 $817,273 for the nine-months
ended September 30, 1998 and $3,887,073 for the same period in 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 as by the Company. This increase was also due to
the professional fees and costs associated with compliance to become a fully
reporting company.
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Net cash used in operating activities was $584,745 for the nine-months
ended September 30, 1998 and $ 713,384 for the same period in 1999. Net cash
used in operating activities was primarily attributable to net losses and
partially offset by increases in trade payables and amounts due to related
parties.
Net cash used in investing activities was $21,397 for the nine-months
ended September 30, 1999. This was primarily related to purchases of property
and equipment.
Net cash provided by financing activities was $750,000 for the
nine-months ended September 30, 1999. Net cash provided by financing activities
resulted from the issuance of common stock in a Private Placement Offering.
Management believes that based upon the current operating plan,
existing cash and cash equivalents, and cash generated from operations will be
sufficient to fund operating activities, capital expenditures and other
obligations through December 31, 1999. However, if the Company is not successful
in generating sufficient cash flow from operations or in raising additional
capital when required in sufficient amounts and on acceptable terms, these
failures could have a material adverse effect on the Company's business, results
of operations and financial condition. If additional funds are raised through
the issuance of equity securities, the percentage ownership of the Company's
then-current stockholders would be diluted.
As of September 30, 1999, the Company had a $121,000 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. There can be no assurance that such funds 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.
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ITEM 3 - 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. The lease
is for a term of 3 years.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
As of December 31,1999, the Company had 10,004,700 shares of its Common
Stock issued and outstanding. The following table sets forth, as of December 31,
1999, the beneficial ownership of the Company's Common Stock (i) by the only
persons who are known by the Company to own beneficially more than 5% of the
Company's Common Stock; (ii) by each director of the Company; and (iii) by all
directors and officers as a group.
Name and Amount
Address of of
Title of beneficial beneficial Percent of
Class owner owner class
Common 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 (2 persons) 1,100,000 11.0%
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ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
Directors and Executive Officers: The following are the current
Directors and Executive Officers of the Company. None of the Directors hold
similar positions in any reporting company. The directors named below 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.
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 39, 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 39, 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.
ITEM 6 - EXECUTIVE COMPENSATION:
The Company paid the following salaries to its executives:
1998 1997
---- ----
Robert Aubel, Pres. & CEO $ 104,000 $ 43,000
Jerry Aubel, VP $ 78,000 $ 32,000
Todd Talbot, IT Director $ 70,000 $ 7,500
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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 7 - 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 September 30, 1999 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.
14
<PAGE>
ITEM 8 - DESCRIPTION OF SECURITIES:
The Company is authorized to issue up to 50,000,000 shares of Common
Stock, par value $.001 per share. Holders of Common Shares are entitled to one
vote per Common Share on all matters to be voted on by stockholders. The Common
Shares do not have cumulative voting rights. Therefore, holders of a majority of
the Common Shares can elect all the members of the Board of Directors. A
majority vote is also sufficient for most other actions requiring the vote or
concurrence of stockholders. The Company's Officers and Directors as a group
(two persons) own directly approximately 11.0% of the Issuer's capital stock.
All Shares are entitled to share equally in dividends when and if
declared by the Board of Directors out of funds legally available therefore. It
is anticipated that the Company will not pay cash dividends on its Shares in the
foreseeable future. In the event of liquidation or dissolution of the Company,
whether voluntary or involuntary, holders of the Shares are entitled to share
equally in all assets of the Company legally available for distribution to
stockholders. The holders of Shares have no preemptive or other subscription
rights to acquire authorized but unissued capital stock of the Company, and
there are no conversion rights or redemption or sinking fund provisions with
respect to such Shares.
PART II
ITEM 1 - MARKET FOR COMMON EQUITY AND OTHER SHAREHOLDER 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.
15
<PAGE>
YEAR PERIOD HIGH LOW
---- ------ ---- ---
1998 First Quarter 1.00 .37
Second Quarter 2.00 .43
Third Quarter .81 .25
Fourth Quarter 17.50 .43
YEAR PERIOD HIGH LOW
---- ------ ---- ---
1999 First Quarter 4.00 1.75
Second Quarter 3.87 1.25
The fourth quarter 1998 high bid price was recorded on November 27,
1998
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 registrar and transfer agent is Interwest Transfer Co.,
Inc., which is located at 1981 East 4800 South, Suite 100, Salt Lake City, UT
84117 phone 801.272.9294.
ITEM 2 - LEGAL PROCEEDINGS
The Company is not subject to any legal proceedings. The Company is
unaware of any governmental authority that is contemplating any procedure to
which the Company is a participant.
ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS:
None.
16
<PAGE>
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES:
In a series of transactions over the last three years, the Company sold
3,285,700 shares of its $.001 par value Common Stock at prices ranging from $
.125 to $ 2.00 per Common Share for an aggregate of approximately $1,998,200 to
92 investors. These investors purchased such securities pursuant to an exemption
from registration pursuant to Section 4(2) of the Securities Act of 1933 (and
Regulation D, Rule 504 as promulgated thereunder) (the "Private Offering"). All
purchasers executed a Subscription Agreement indicating they have such knowledge
and experience in financial and business matters that either alone or with a
purchaser's representative, they are capable of evaluating the merits and risks
of the investment. No purchasers used a purchaser representative. None of the
Company's Officers, Directors or affiliates participated in the aforesaid sale
of securities.
Shares Sold: April 1997-January 1998
# of Shares # of Shares-(Continued)
7,000 10,000
8,000 100,000
4,000 10,000
30,000 2,000
4,000 10,000
60,000 40,000
350,000 5,000
15,000 10,000
1,000 10,000
8,000 10,000
3,000 20,000
3,000 87,000
20,000 5,000
20,000 8,400
15,000 50,000
24,000 10,000
62,500 10,000
10,000 3,000
40,000 4,000
46,000 25,000
10,000 200,000
8,400 6,000
30,000 25,000
10,000 100,500
10,000 17,260
40,000 73,125
8,300 2,000
1,000 2,000
1,000 28,000
1,000 1,000
3,000 191,205
10,000 25,000
3,000 6,000
10,000 10,000
99,000
17
<PAGE>
Shares Sold: April 1997 - January 1998: 2,091,700
Dollars Collected: April 1997 - January 1998: $1,000,000
Shares Sold: November 1998-February 1999
# of Shares # of Shares-(Continued)
25,000 25,000
20,000 5,000
7,000 2,000
10,000 20,000
30,000 250,000
250,000 5,000
20,000 350,000
7,500 2,500
110,000 5,000
15,000 2,500
10,000 10,000
12,500
Shares Sold: November 1998-February 1999: 1,194,000
Dollars Collected: November 1998-February 1999: $998,200
Grand Total Shares Sold: April 1997-February 1999: 3,285,700
Grand Total Dollars Collected: April 1997-February 1999: $1,998,200
No underwriters were involved in any of the offerings and all current
offerings of the Company's securities have been completed. The Company used the
proceeds from the offerings for general working capital.
In September 1998, the Company issued 250,000 shares of restricted
common stock to Christopher P. Murray for services rendered. The value of the
shares on the date of issuance was $40,000.
In May 1998, the Company issued 50,000 shares of restricted common
stock to Perry & Co. a consultant to the Company for services rendered. The
value of the shares on the date of issuance was $20,000.
In June 1998, the Company issued 5,000 shares of restricted common
stock to Todd Talbott, an employee of the Company for additional compensation.
The value of the shares on the date of issuance was $1,400.
18
<PAGE>
In June 1998, the Company issued 25,000 shares of restricted common
stock to Bruce Rothenberg, a consultant to the Company for services rendered.
The value of the shares on the date of issuance was $7,000.
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. All share amounts
presented have been retroactively adjusted for the effects of the reverse stock
split. Effective March 1998, Tasar changed its name to Allnetservices.com Corp.
(the "Company").
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS:
The Company's Amended Articles of Incorporation provide for the
indemnification of Directors in that Directors of this Corporation shall not be
personally liable for monetary damages to the Company or any other person for
any statement, vote, decision or failure to act, regarding corporate management
or policy, by a director unless the director breached or failed to perform his
duties as Director. Such indemnification is available to any person who was or
is a party to any proceeding (other than an action by, or in the right of, the
Company), by reason of the fact that he or she is or was a Director, officer,
employee or agent of the Company or is or was serving at the request of the
Company.
19
<PAGE>
INDEX TO FINANCIAL STATEMENTS
December 31, 1998 and 1997 - Audited
Page
----
Independent Auditors' Report...............................................21
Balance Sheets..........................................................22-23
Statements of Operations ..................................................24
Statements of Shareholders' (Deficit) Equity...............................25
Statements of Cash Flows................................................26-27
Notes to Financial Statements...........................................28-34
September 30, 1999 and 1998 - unaudited
Balance Sheets - Unaudited..............................................35-36
Statements of Operations - Unaudited.......................................37
Statements of Cash Flows - Unaudited....................................38-39
Notes to Financial Statements...........................................40-41
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders
of Allnetservices.com Corp.
We have audited the accompanying balance sheets of Allnetservices.com
Corp. as of December 31, 1998 and 1997 and the related statements of operations,
shareholders' equity and cash flows for the years then ended. 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, 1998 and 1997, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
BERKOWITZ DICK POLLACK & BRANT, LLP
April 27, 1999
Miami, Florida
21
<PAGE>
ALLNETSERVICES.COM CORP.
BALANCE SHEETS
December 31,
--------------------
1998 1997
-------- --------
ASSETS
CURRENT ASSETS
Cash $ 14,385 $407,910
Restricted cash
50,000 -
Trade receivables (net of allowance for
Doubtful accounts of $20,000 at
December 31, 1998)
34,661 64,121
Other receivables 10,000 -
Inventories 10,687 45,276
Advances to related suppliers(net of $189,000
allowance for uncollectibility at
December 31, 1998 and 1997, respectively) - 70,000
Advances to suppliers (net of $30,600
allowance for uncollectibility at
December 31, 1998) 10,197 -
-------- --------
TOTAL CURRENT ASSETS 129,930 587,307
PROPERTY AND EQUIPMENT, net 39,057 34,510
OTHER ASSETS 7,268 7,268
-------- --------
TOTAL ASSETS $176,255 $629,085
======== ========
See accompanying independent auditors' report and notes to financial statements.
22
<PAGE>
ALLNETSERVICES.COM CORP.
BALANCE SHEETS--Continued
December 31,
------------------------
1998 1997
----------- ----------
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
EQUITY
CURRENT LIABILITIES
Accounts payable $ 275,074 $ 124,004
Due to related party, net 116,932 214,380
Accrued expenses 60,702 55,206
----------- -----------
TOTAL CURRENT LIABILITIES 452,708 393,590
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (Deficit) EQUITY
Common stock-$.0001 par value; authorized
50,000,000 shares, issued and
outstanding, 7,815,700 shares in 1998
and 6,591,700 shares in 1997 782 659
Additional paid-in capital 1,182,625 719,648
Accumulated deficit (1,459,860) (484,812)
----------- -----------
TOTAL SHAREHOLDERS'
(DEFICIT) EQUITY (276,453) 235,495
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' (DEFICIT)
EQUITY $ 176,255 $ 629,085
=========== ===========
See accompanying independent auditors' report and notes to financial statements.
23
<PAGE>
ALLNETSERVICES.COM CORP.
STATEMENTS OF OPERATIONS
Years Ended December 31,
---------------------------
1998 1997
----------- -----------
Net sales $ 380,306 $ 302,888
Cost of sales 270,208 224,791
----------- -----------
GROSS PROFIT 110,098 78,097
Selling, general and administrative expenses 1,085,146 558,909
----------- -----------
LOSS FROM OPERATIONS BEFORE
INCOME TAX BENEFIT (975,048) (480,812)
Income tax benefit - -
----------- -----------
NET LOSS $ (975,048) $ (480,812)
=========== ===========
LOSS PER SHARE:
Loss per share $ (.15) $ (.27)
=========== ===========
Weighted average number of common shares
outstanding 6,723,567 1,757,642
=========== ===========
See accompanying independent auditors' report and notes to financial statements.
24
<PAGE>
ALLNETSERVICES.COM CORP.
STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
Common
Shares Common Additional Accumulated
Outstanding Stock Paid-in Capital Deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 500,000 $ 50 $ 3,950 $ (4,000) $ -
Issuance of Shares - Note A 4,000,000 400 (400) - -
Issuance of Shares - Note F 2,091,700 209 716,098 - 716,307
Net Loss - - - (480,812) (480,812)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1997 6,591,700 659 719,648 (484,812) 235,495
Issuance of Shares - Note F 580,000 58 168,342 - 168,400
Issuance of Shares - Note F 144,000 15 94,635 - 94,700
Issuance of Shares - Note F 500,000 50 200,000 - 200,000
Net Loss - - - (975,048) (975,048)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 7,815,700 $ 782 $ 1,182,625 $(1,459,860) $ (276,453)
=========== =========== =========== =========== ===========
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
25
<PAGE>
ALLNETSERVICES.COM CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (975,048) $ (480,812)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 8,166 1,724
Changes in assets and liabilities:
Decrease (increase) in trade receivables 29,460 (64,120)
Increase in other receivables (10,000) -
Decrease (increase) in inventories 34,588 (45,276)
Decrease (increase) in advances to suppliers 59,803 (70,000)
Increase in other assets - (7,268)
Increase in accounts payable 151,070 124,004
Increase in due to related party, net 102,552 214,380
Increase in accrued expenses 73,897 55,206
----------- -----------
Total adjustments 449,536 208,650
----------- -----------
NET CASH USED IN OPERATING
ACTIVITIES (525,512) (272,162)
----------- -----------
Cash flows from investing activities:
Expenditures for equipment (12,713) (36,235)
----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES (12,713) (36,235)
----------- -----------
Cash flows from financing activities:
Increase in restricted cash (50,000) -
Issuance of common stock 198,200 1,000,000
Costs of raising capital (3,500) (283,693)
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 144,700 716,307
----------- -----------
</TABLE>
26
<PAGE>
ALLNETSERVICES.COM CORP.
STATEMENTS OF CASH FLOWS--Continued
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
NET (DECREASE) INCREASE IN CASH (393,525) 407,910
CASH AT BEGINNING OF YEAR 407,910 -
----------- -----------
CASH AT END OF YEAR $ 14,385 $ 407,910
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 908 $ -
=========== ===========
Income taxes $ - $ -
=========== ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During 1998, the Company issued 500,000 common shares to 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.
In June 1997, the Company issued 7,000,000 common shares to Tasar Electronics
Ltd. and 1,000,000 common shares to Tasar Holding, Ltd., resulting in a change
in control of the Company.
See accompanying independent auditors' report and notes to financial statements.
27
<PAGE>
ALLNETSERVICES.COM CORP.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
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. All share amounts
presented have been retroactively adjusted for the effects of the reverse stock
split. 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 various Internet web sites
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. Internet related sales amounted to
approximately 35% and 14% of total sales, in 1998 and 1997, respectively.
Cash and Cash Equivalents: For purposes of the statement of cash flows, the
Company considers time deposits, money market accounts and other highly liquid
investments, with original maturities of three or less to be cash equivalents.
Inventories: Inventories, consisting primarily of new and used 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
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 $8,166
and $1,724 for the years ended December 31, 1998 and 1997, respectively.
28
<PAGE>
ALLNETSERVICES.COM CORP.
NOTES TO FINANCIAL STATEMENTS--Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Revenue Recognition: The Company recognizes revenue upon the shipment of goods
or the completion of services.
Advertising Costs: The Company expenses all advertising costs as they are
incurred. Total advertising costs for the years ended December 31, 1998 and 1997
were approximately $3,300 and $1,300, 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. Accordingly, net income equals comprehensive income for all periods
presented.
Net Loss Per Share: 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, 1998
and 1997.
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.
Reclassifications: Certain reclassifications of 1997 amounts have been made to
conform with the current year presentation.
NOTE B--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 an allowance
for uncollectibility amounting to $189,000 related to these advances as of
December 31, 1997.
29
<PAGE>
NOTE B--RELATED PARTY TRANSACTIONS--Continued
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.
At December 31, 1998, the Company owes approximately $109,000 to two
corporations controlled by a relative of the Company's president.
At December 31, 1997, the Company owed approximately $214,000 to a corporation
controlled by a relative of the Company's president. In January 1998, the
Company advanced $100,000 to its president. This advance was subsequently
assigned to the affiliated corporation.
During 1998, additional advances were made to the Company by corporations
controlled by a relative of the Company's president and in December 1998, these
advances of approximately $200,000 were repaid through the issuance of 500,000
common shares of the Company.
During 1997, approximately $62,000 of commissions on the sale of the Company's
common stock was paid to a relative of the Company's president.
NOTE C--PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
December 31,
--------------------
1998 1997
------- -------
Office equipment $42,828 $30,115
Furniture and fixtures 6,119 6,119
------- -------
48,947 36,234
Less: accumulated depreciation 9,890 1,724
------- -------
$39,057 $34,510
======= =======
NOTE D--FACTORING AGREEMENT
In November 1998, the Company entered into a factoring agreement in which the
Company agrees to sell certain accounts receivable to a corporation acting as a
factor ("Factor") 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 must be approved by the Factor, are
sold with recourse, and the total amount of accounts purchased and outstanding
cannot exceed $350,000. No accounts receivable have been sold pursuant to this
agreement as of December 31, 1998. The agreement expires in November 1999. The
president of the Factor was issued 250,000 restricted common shares of the
Company for $100,000 in December 1998.
30
<PAGE>
NOTE E--LINE OF CREDIT
In November 1998, the Company also entered into a revolving line of credit
agreement with the Factor which allows for borrowings up to $100,000. The
revolving credit agreement expires on December 1, 1999 and bears interest at the
prime rate (7.75% at December 31, 1998) plus 1% per annum. Interest is paid
monthly. A minimum payment amounting to 1% of the ending principal balance of
the preceding month is due monthly. Any borrowings against the line of credit
are collateralized by a $50,000 certificate of deposit which is reflected as
restricted cash on the Balance Sheet. There were no borrowings against the line
of credit as of December 31, 1998.
NOTE F--STOCKHOLDERS' EQUITY
In fiscal 1997, the Company sold 2,091,700 shares of common stock to certain
suitable investors pursuant to a Regulation D Rule 504 Offering Memorandum. The
shares of common stock were sold at prices ranging from $.125 to $1.00 per
share. Gross proceeds of the Offering amounted to $1,000,000 which was collected
by the Company in 1997. The related common shares of the Company were issued in
1998 and accounted for as issued and outstanding as of December 31, 1997.
Commissions and other expenses of the offering, including 99,000 shares of
Company common stock (fair value of $49,500) issued to certain persons, amounted
to approximately $333,500 which amount was charged to additional
paid-in-capital. Previously issued financials statements disclosed 1,702,140
shares of common stock outstanding pursuant to the above offering at December
31, 1997. The total amount of shares of common stock outstanding at December 31,
1997 pursuant to the above offering was adjusted to 2,091,700 shares based on
updated information received from the Company's transfer agent.
During fiscal 1998, the Company issued 580,000 shares of restricted common
stock. These shares of restricted common stock were issued 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.
NOTE G--INCOME TAXES
The Company had a deferred tax asset of approximately $195,000 and $56,000
resulting primarily from net operating losses at December 31, 1998 and 1997,
respectively. A valuation allowance of $195,000 and $56,000 was recorded to
reduce this deferred tax asset to zero at December 31, 1998 and 1997,
respectively. This valuation allowance was based on the Company's lack of
earnings history. For federal income tax purposes, the Company has a net
operating loss carryforward of approximately $1,029,000 expiring through the
year 2018.
31
<PAGE>
NOTE H--COMMITMENTS AND CONTINGENCIES
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, 1998 and 1997 was approximately $38,100 and $14,500, respectively.
The following is a schedule of the future minimum rental payments under this
non-cancelable operating lease as of December 31, 1998:
Year Ending
December 31,
------------
1999 $ 39,000
2000 20,000
--------
$ 59,000
========
NOTE I--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
64% and 87% of net sales in 1998 and 1997, respectively. Additionally, this
customer accounted for substantially all of the Company's accounts receivable in
1997.
NOTE J--MAJOR SUPPLIERS
The Company purchased approximately 61% and 66% of its total purchases from one
supplier during the years ended December 31, 1998 and 1997, respectively.
32
<PAGE>
NOTE K--SUBSEQUENT EVENTS
Subsequent to December 31, 1998, 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.
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 requires the Company
to issue 400,000 shares of restricted common stock and pay minimum royalties as
follows:
Years Ended January 31,
-----------------------
2000 $ 100,000
2001 200,000
2002 250,000
2003 300,000
2004 350,000
After several months, it became apparent that the software manufacturer did not
have the resources to effectively comply with its obligations in the contract.
Both parties agreed to terminate the contract on June 17, 1999. All funds in the
segregated escrow account were disbursed to the Company after the termination of
the agreement. The Company was released from all previous obligations set forth
in the original contract with the software manufacturer.
NOTE L--LIQUIDITY
The Company incurred net losses of approximately $975,000 and $481,000 for the
years ended December 31, 1998 and 1997, respectively. The Company's working
capital deficiency at December 31, 1998 amounted to approximately $323,000. The
Company has raised approximately $700,000 in a Regulation D Rule 504 Offering
subsequent to December 31, 1998. Management of the Company believes that the
inflow of new capital, coupled with the current available funds is sufficient
capital resources to allow the Company to continue in existence as a going
concern. In the event that the Company does not achieve profitable operations in
the near future, management will be forced to raise additional funds through the
sale of equity securities or the issuance of additional debt. Management is
currently evaluating several proposals to obtain additional financing through
the sale of convertible debt and equity securities.
33
<PAGE>
ALLNETSERVICES.COM CORP.
BALANCE SHEETS
(UNAUDITED)
September 30, 1999
------------------
ASSETS
CURRENT ASSETS
Cash $ 29,604
Restricted cash -
Trade receivables (net of $55,000 and $20,000 597,334
allowance for doubtful accounts at
September 30, 1999 and 1998, respectively)
Other receivables 10,000
Inventories 32,145
Advances to related suppliers (net of $189,000
at September 30, 1999 and 1998) -
Advances to suppliers (net of $30,600
and $0 reserve at September 30, 1999
and 1998, respectively) 10,197
--------
TOTAL CURRENT ASSETS 679,280
PROPERTY AND EQUIPMENT, net 51,245
OTHER ASSETS 32,268
--------
TOTAL ASSETS $762,793
========
34
<PAGE>
September 30,1999
-----------------
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 674,961
Due to related party, net 64,482
Accrued expenses 60,702
-----------
TOTAL CURRENT LIABILITIES 800,145
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (Deficit)
Common stock-$.0001 par value; authorized
50,000,000 shares; issued and outstanding:
9,895,700 shares in 1999 and 7,065,700 shares
in 1998 990
Additional paid-in capital 5,108,828
Accumulated deficit (5,147,170)
-----------
TOTAL SHAREHOLDERS'
(DEFICIT) (37,352)
-----------
TOTAL LIABILITIES AND
SHAREHOLDERS' (DEFICIT) $ 762,793
===========
35
<PAGE>
ALLNETSERVICES.COM CORP.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine-Months Ended Three-Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 2,319,754 $ 293,719 $ 809,737 $ 76,857
Cost of sales 2,119,991 217,225 781,867 54,607
----------- ----------- ----------- -----------
GROSS PROFIT 199,763 76,494 27,870 22,250
Selling, general and
administrative expenses 3,887,073 817,273 774,600 175,479
----------- ----------- ----------- -----------
NET LOSS $(3,687,310) $ (740,779) $ (746,730) $ (153,229)
=========== =========== =========== ===========
LOSS PER SHARE:
Loss per share $ (0.40) $ (0.11) $ (0.08) $ (0.02)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding 9,263,478 6,526,189 9,895,700 6,899,033
=========== =========== =========== ===========
</TABLE>
36
<PAGE>
ALLNETSERVICES.COM CORP.
STATEMENTS OF CASH FLOWS--Continued
(UNAUDITED)
Nine-Months ended
September 30,
--------------------------
1999 1998
----------- -----------
Cash flows from operating activities:
Net loss $(3,687,310) $ (740,779)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 9,209 6,114
Issuance of stock for services 3,226,409 -
Changes in assets and liabilities:
Increase in trade receivables (562,673) (3,062)
(Increase) decrease in inventories (21,458) 25,449
Increase in other advances to suppliers - (39,580)
Increase in other assets (25,000) -
Increase in accounts payable 177,408 193,719
Decrease in due to related party, net (52,450) -
Increase in other liabilities 222,481 28,600
Decrease in accrued expenses - (55,206)
----------- -----------
Total adjustments 2,973,926 156,034
----------- -----------
NET CASH USED IN OPERATING
ACTIVITIES (713,384) (584,745)
----------- -----------
Cash flows from investing activities:
Expenditures for equipment (21,397) (7,698)
----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES (21,397) (7,698)
----------- -----------
Cash flows from financing activities:
Decrease (increase) in restricted cash 50,000 -
Issuance of common stock
700,000 226,601
Costs of raising capital - (3,500)
----------- -----------
37
<PAGE>
ALLNETSERVICES.COM CORP.
STATEMENTS OF CASH FLOWS--Continued
(UNAUDITED)
Nine-Months ended
September 30,
--------------------------
1999 1998
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 750,000 223,101
----------- -----------
NET INCREASE (DECREASE) IN CASH 15,219 (369,342)
CASH AT BEGINNING OF PERIOD 14,385 407,910
----------- -----------
CASH AT END OF PERIOD $ 29,604 $ 38,568
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 4,539 $ -
=========== ===========
Income taxes $ - $ -
=========== ===========
38
<PAGE>
ALLNETSERVICES.COM CORP.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A-BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared in
accordance with Regulation SB and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. However, such information reflects all adjustments
(consisting solely of normal recurring adjustments), which are, in the opinion
of management, necessary for the fair presentation of results for the interim
periods.
The results of operations for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for the full year.
These statements should be read in conjunction with the audited financial
statements and notes thereto included in the Form 10-SB for the year ended
December 31, 1998 of Allnetservices.com Corp. (the "Company").
NOTE B-SHAREHOLDERS' DEFICIT
During the nine months ended September 30, 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 approximately $700,000.
Additionally, during the nine months ended September 30, 1999, the Company
issued 1,530,000 shares of restricted common stock for certain services rendered
to the Company. These common shares were recorded at a fair value of
approximately $3,226,000.
NOTE C-SUBSEQUENT EVENTS
Subsequent to September 30, 1999, the Company issued 149,000 shares of
restricted common stock in exchange for professional services. These common
shares were recorded at a fair value of approximately $67,000.
39
<PAGE>
PART III
ITEMS 1 AND 2: INDEX TO AND DESCRIPTION OF EXHIBITS:
A) Financial Statements filed as part of the Registration Statement.
(a) Audited year end financial statements as of December 31, 1998 and 1997,
page 19.
40
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ALLNETSERVICES.COM CORP.
By: /s/ Robert Aubel Date:
----------------------------------- --------------
Robert Aubel, President
41
