<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2000
[ ] Transition Report pursuant to 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period to
---------------
Commission File Number 0-28659
------------------
QINNET.COM, INC.
-----------------------------------------------------------------
(Exact name of small Business Issuer as specified in its charter)
Delaware 75-2610514
------------------------------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
450 North Brand Boulevard, 6th Floor
Glendale, CA 91203
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (818) 291-6250
None
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the issuer was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days [ ] Yes [X] No
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 1,300,497 Shares of
$0.00001 par value Common Stock outstanding as of November 6, 2000.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and Item 310 (b) of
Regulation S-B, and, therefore, do not include all information and
footnotes necessary for a complete presentation of financial position,
results of operations, cash flows, and stockholders' equity in conformity
with generally accepted accounting principles. In the opinion of
management, all adjustments considered necessary for a fair presentation
of the results of operations and financial position have been included
and all such adjustments are of a normal recurring nature. Operating
results for the nine months ended September 30, 2000 are not necessarily
indicative of the results that can be expected for the year ending
December 31, 2000.
<PAGE>
QINNET.COM, INC.
(a development stage company)
CONSOLIDATED BALANCE SHEETS
September 30, 2000 AND 1999
(Unaudited)
September 30, September 30,
2000 1999
------------- -------------
ASSETS
Current Asset
Cash on hand and in bank $ 7,388 $ -
Investment in Joint Venture (Note 5) 280,000 -
------------- -------------
Total Assets $ 287,388 $ -
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Other
Accrued Liabilities $ 6,294 $ -
------------- -------------
Amount due to related companies (Note 6) 298,190 -
Stockholders' Equity
Common Stock : $0.00001 Par Value
Authorized : 50,000,000
Issued and Outstanding :
1,300,497 (1999: 1,250,248) 13 13
Additional Paid In Capital 333,147 50,147
Contributed Capital 5,358 5,358
Accumulated Deficit (355,614) (5,518)
------------- -------------
(17,096) 50,000
Stock Subscription Receivable - (50,000)
------------- -------------
Total Stockholders' Equity (17,096) -
------------- -------------
Total Liabilities and
Stockholders' Equity $ 287,388 $ -
============= =============
The financial information presented herein has been prepared by management
without
audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements
<PAGE>
QINNET.COM, INC.
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Nine and Three Months Ended September 30, 2000 AND 1999
(Unaudited)
Nine Nine Three Three
months months months months
ended ended ended ended
September September September September
30, 2000 30, 1999 30, 2000 30, 1999
----------------------------------------------------------------------------
Revenue $ - $ - $ - $ -
---------- ----------- ---------- ----------
Expenses
General and administrative
expenses 16,504 - 16,365 -
Reorganization expenses 333,000 - - -
---------- ----------- ---------- ----------
Total operating expenses 349,504 - 16,365 -
---------- ----------- ---------- ----------
Loss from Operations (349,504) - (16,365) -
Other Income (Expense)
Interest income 180 - - -
Interest expense (188) - (188) -
Foreign currency
translation loss (584) - (506) -
---------- ----------- ---------- ----------
Loss before Provision
for Income Taxes (350,096) - (17,059) -
Provision for Income Taxes - - - -
---------- ----------- ---------- ----------
Net Loss (350,096) - (17,059) -
Other Comprehensive Income - - - -
---------- ----------- ---------- ----------
Comprehensive Loss $ (350,096)$ - $ (17,059)$ -
========== =========== ========== ==========
Net loss per weighted-
average share of common
stock outstanding,
calculated on net loss -
basic and fully diluted $ (0.27)$ - $ (0.01) $ -
========== =========== ========== ==========
Weighted-average number
of common shares outstanding
- basic and fully diluted 1,281,702 1,250,248 1,300,497 1,250,248
========== =========== ========== ==========
The financial information presented herein has been prepared
by management without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements
<PAGE>
QINNET.COM, INC.
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2000 AND 1999
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
2000 1999
---------------------------------------------------------------------------
Cash flows from operating activities
Net loss for the period $ (350,096) $ -
Adjustments to reconcile net loss
to net cash
Provided by (Used in) operating activities
Reorganization costs 333,000 -
Changes in assets and liabilities
Increase in accounts payable 6,294 -
------------ ------------
Net cash provided by (used in)
operating activities (10,802) -
------------ ------------
Cash flows from investing activities
Cash paid for acquisition of Internet
Corporation of America, Inc. (50,000) -
Investment in Joint Venture (280,000) -
------------ ------------
Net cash flows used in investing activities (330,000) -
------------ ------------
Cash flows from financing activities
Advanced by related companies 298,190 -
------------ ------------
Net cash flows provided by (used in)
financing activities 298,190 -
Increase (Decrease) in cash (42,612) -
------------ ------------
Cash at beginning of period 50,000 -
------------ ------------
Cash at end of period $ 7,388 $ -
============ ============
Supplemental Disclosures :
Cash paid for :
Interest $ 188 $ -
Income taxes - -
Noncash Investing and Financing :
Common stock issued for reorganization cost $ 283,000 $ -
The financial information presented herein has been prepared
by management without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements
<PAGE>
Qinnet.com, Inc.
(a development stage company)
Notes to the Consolidated Financial Statements
September 30, 2000 and 1999
Note 1 - Basis of Presentation and Background
The accompanying financial statements present the consolidated
financial condition, operations and cash flows of Qinnet.com,
Inc. and its wholly owned subsidiary, Internet Corporation of
America, from April 14, 2000, the date of its acquisition. All
significant inter-company transactions have been eliminated in
consolidation. The consolidated entities are collectively
referred to as the "Company".
During interim periods, the Company follows the accounting
policies set forth in its Annual Report Pursuant to Section 13 or
15(d) of The Securities Exchange Act of 1934 on Form 8-K as filed
with the U. S. Securities and Exchange Commission on April 14,
2000. The information presented herein may not include all
disclosures required by generally accepted accounting principles
and the users of financial information provided for interim
periods should refer to the annual financial information and
footnotes contained the Exhibits for Form 8-K as filed on April
14, 2000 when reviewing the interim financial results presented
herein.
In the opinion of management, the accompanying interim financial
statements, prepared in accordance with the instructions for Form
10-QSB, are unaudited and contain all material adjustments,
consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations and
cash flows of the Company for the respective interim periods
presented. The current period results of operations are not
necessarily indicative of results that ultimately will be
reported for the full fiscal year ending December 31, 2000.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
The Company has no major business operations through September
30, 2000. Accordingly, the Company is considered in the
development stage and, as such, has generated no significant
operating revenues and has incurred cumulative operating losses
of $355,614. Accordingly, the Company is fully dependent upon
management and/or significant stockholders to provide sufficient
working capital to preserve the integrity of the corporate entity
during this phase. It is the intent of management and
significant stockholders to provide sufficient working capital
necessary to support and preserve the integrity of the corporate
entity.
On April 13, 2000, the Company purchased 100% of the issued and
outstanding shares of Internet Corporation of America, Inc. for
$50,000 cash and 50,000 shares of restricted, unregistered common
stock. This change in control of Internet Corporation of
America, Inc. occurred in conjunction with closing under an
Agreement and Plan of Reorganization (the "Reorganization
Agreement") between the Internet Corporation of America, Inc. and
the Company. As a result of this transaction, Internet
Corporation of America, Inc. became a wholly owned subsidiary of
the Company.
The Reorganization was approved by the unanimous consent of the
Board of Directors of the Company on
<PAGE>
March 11, 2000. The Reorganization is intended to qualify as a
reorganization within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended.
Upon effectiveness of the Reorganization Agreement, pursuant to
Rule 12g-3(a) of the General Rules and Regulations of the
Securities and Exchange Commission, the Company became the
successor issuer to Internet Corporation of America, Inc. for
reporting purposes under the Securities Exchange Act of 1934
(Act) and elected to report under the Act, effective March 21,
2000. A copy of the Reorganization Agreement is filed as an
exhibit to a Form 8-K filed on April 14, 2000.
NOTE 2 - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks,
including accounts in book overdraft positions, certificates
of deposit and other highly-liquid investments with
maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Reorganization costs
--------------------
The Company has adopted the provisions of AICPA Statement of
Position 98-5, Reporting on the Costs of Start-Up Activities?
whereby all organization and initial costs incurred with the
acquisition of Internet Corporation of America, Inc. were
charged to operations as incurred.
3. Income taxes
------------
The Company uses the asset and liability method of accounting
for income taxes. At September 30, 2000 and 1999,
respectively, the deferred tax asset and deferred tax
liability accounts, as recorded when material to the financial
statements, are entirely the result of temporary differences.
Temporary differences represent differences in the recognition
of assets and liabilities for tax and financial reporting
purposes.
Due to the provisions of Internal Revenue Code Section 338,
the Company will have no net operating loss carryforwards
available to offset financial statement or tax return taxable
income in future periods as a result of a change in control
involving 50 percentage points or more of the issued and
outstanding securities of the Company.
4. Loss per share
--------------
Due to the loss for the three-month and nine-month periods
ended September 30, 2000, the effect of outstanding options
was not included as the effect would be anti-dilutive.
As of September 30, 1999, the Company had no warrants or
options outstanding that could be deemed to be dilutive to
the loss per share.
Note 3 - Common Stock Transactions
On April 13, 2000, the Company purchased 100% of the issued and
outstanding shares of Internet Corporation of America, Inc. for
$50,000 cash and 50,000 shares of restricted, unregistered common
stock. This change in control of Internet Corporation of
America, Inc. occurred in conjunction with closing under an
Agreement and Plan of Reorganization (the "Reorganization
Agreement") between the Internet Corporation of America, Inc. and
the Company. As a result of this transaction, Internet
Corporation of America, Inc. became a wholly owned subsidiary of
the Company. The stock issued in this transaction
<PAGE>
was valued at approximately $283,000, which approximates the "fair
value" of the shares issued based upon the average quoted closing
price of the Company's common stock on April 14 and April 17, 2000,
respectively. The total cost of acquiring Internet Corporation
of America, Inc. was valued at approximately $333,000 and was
charged to operations as "reorganization expense".
NOTE 4 - Merger Transactions
The Company has an agreement effective from January 12, 2000 to
merge with Qinnet Holdings Corp. (a Washington State
corporation), a privately owned corporation controlled by the
Company?s controlling shareholder. As of this date, the proposed
merger has not been completed. Due to common control and
ownership of the two merging corporations, this transaction will
be accounted for on an "as-if-pooled" basis in accordance with
Interpretation #39 of Accounting Principles Board Opinion #16
whereby the combined financial statements of the merged entities
will become the historical financial statements of the Company.
In anticipation of this merger transaction, the Company changed
its corporate name to Qinnet.com, Inc. on December 14, 1999.
NOTE 5 - Investment in Joint Venture
The Company entered into a joint venture agreement effective from
August 18, 2000 for electronic publishing of books for the Chinese
market with Liaoning Publishing Group, a publisher located in the
Province of Liaoning of the People of Republic of China ("PRC").
Under the terms of agreement, the parties will invest $5,000,000
to establish a joint venture company called Liaoning Qinnet E-book
Technologies Co. Ltd. under the enterprise laws of the PRC. The
Company will contribute $3,000,000 to own 60% of the joint venture
company. The joint venture will be for an initial term of 20 years
and becomes effective upon the approval of the PRC government
authorities. As of September 30, 2000, the Company has contributed
$280,000 to the joint venture as its initial start-up capital.
NOTE 6 - Amount Due To Related Companies
The amount was an advance from Qinnet Holdings Corp. and its
subsidiary company. The amount is unsecured, interest-free and do
not have specific repayment terms.
NOTE 7 - Stock Option Plan
In September 2000, the Company adopted a Stock Option Plan to
provide options to purchase common shares of the Company for its
employees, officers and directors. The options granted pursuant to
the Stock Option Plan are exercisable at a price of $10.00. The
maximum number of shares of common stock reserved for issuance
under the Stock Option Plan is 260,000 shares and the current
options outstanding as at September 30, 2000 is 212,500.
Information regarding the Company's stock options is as follows :
Number of shares Exercise price
---------------- --------------
Outstanding at December 31, 1999 - -
Granted in September 2000 212,500 $10.00
----------------
Outdtanding at September 30, 2000 212,500
================
<PAGE>
NOTE 7 - STOCK OPTION PLAN (CONTINUED)
The following table summarizes information concerning options
outstanding as at September 30, 2000 :
Number Exercise price Expiry date
------ -------------- -----------
187,500 $10.00 April 17, 2005
25,000 10.00 September 20, 2005
On October 12, 2000, 2,500 stock options granted with expiry date
on April 17, 2005 were cancelled. 50,000 additional stock options
were granted on the same day with expiry date on October 12, 2005.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of
Operations
MERGER AGREEMENT WITH QINNET HOLDINGS
Qinnet entered into a merger agreement with Qinnet Holdings on
January 12, 2000 (the "Merger Agreement"). Qinnet Holdings Corp.
is a Washington corporation that was incorporated in June, 1999.
The Merger Agreement contemplates the merger of Qinnet and Qinnet
Holdings (the "Merger").
The Merger Agreement contemplates that Qinnet will issue one share
of Qinnet common stock for each share of Qinnet Holdings common
stock upon completion of the Merger. Qinnet plans to file a Form
S-4 registration statement with the Securities and Exchange
Commission under the Securities Act of 1933 (the "Act") in order
to qualify the issue of the Qinnet common stock to the
shareholders of Qinnet Holdings. The closing of the Merger will
be subject to approval by the shareholders of Qinnet and Qinnet
Holdings. As of November 6, 2000, there are a total of 13,038,100
shares of Qinnet Holdings outstanding. In addition, Qinnet
Holdings has granted options to purchase 1,950,000 shares of its
common stock at a price of $5.00 per share under Rule 701 of the
Act. Accordingly, it is anticipated that Qinnet will issue a
total of 13,038,100 shares of Qinnet common stock upon completion
of the Merger, provided that this number will increase if any of
the outstanding options of Qinnet Holdings are exercised prior to
completion of the merger. Any options of Qinnet Holdings not
exercised prior to the merger will survive and continue as options
to purchase shares of Qinnet common stock after the merger on the
same terms and conditions existing prior to the merger.
Qinnet Holdings is presently preparing the audited financial
statements that will be necessary to complete the filing of the
Form S-4 registration statement. The Company is not able to
proceed with the filing of the Form S-4 registration statement or
completion of the Merger until such time as audited financial
statements for Qinnet Holdings have been finalized.
A copy of the Merger Agreement was filed as an exhibit to the
Company's Form 8-K filed on April 14, 2000
PLAN OF OPERATIONS OF THE COMPANY
The Company's plans to complete the Merger with Qinnet Holdings
and pursue the development of the business of Qinnet Holdings
once the Merger is complete. Accordingly, the plan of operations
of Qinnet Holdings is presented below. The Company anticipates
that it will spend approximately $100,000 in legal, accounting
and other professional fees in connection with the completion of
the Merger over the next six months. There is no assurance that
the Merger will be completed.
The Company has entered into a joint venture agreement with the
Liaoning Publishing Group of Companies ("LPG") dated August 18,
2000. LPG is the first and largest independently operated
publisher in China. In addition, LPG is one of the largest
<PAGE>
publishers in China. The Company and LPG have agreed to carry
out a joint venture electronic book publishing and distribution
business in China. The joint venture business is to be carried
out by Liaoning Qinnet E-book Technologies Ltd. ("Liaoning
Qinnet"), a joint venture company in Shenyang, China incorporated
in accordance the Enterprise Laws of the People's Republic of
China. Under the joint venture agreement, the Company and LPG
have agreed to invest $5,000,000 US. The Company will contribute
$3,000,000 and will own 60% of Liaoning Qinnet. LPG will
contribute $2,000,000 in Chinese RMB and will own 40% of Liaoning
Qinnet. The joint venture will be for an initial term of 20
years and becomes effective upon the approval of the PRC
government authorities. The objective of the joint venture will
be to establish a database of up to 5000 Chinese books and to
engage in the electronic publishing and sale of electronic books
for the Chinese market. The Company anticipates advancing
approximately $2,720,000 to Liaoning Qinnet to fund its portion
of the joint venture expenses over the next twelve months. A
copy of the joint venture agreement with LPG is attached hereto
PLAN OF OPERATIONS OF QINNET HOLDINGS
Qinnet Holding's business plan is to become a leading provider of
electronic commerce, Internet service provider and Internet
content provider technology and services to Chinese companies and
businesses. The business activities of Qinnet Holdings are
carried out in China by Beijing QinNet Electronic Technologies
Co., Ltd. ("Qinnet Beijing"). Qinnet Beijing is a wholly owned
subsidiary of Qinnet Holdings.
The plan of operations of Qinnet Holdings for the next twelve
months is as follows:
A. Shenyang Qinnet
Qinnet Beijing has entered into a joint venture agreement with
Shenyang Brainn Information Co., Ltd. ("Braininfo.com"). Qinnet
Beijing and Braininfo.com have established a joint venture
company called Shenyang Qinnet-Brainn Information Technologies
Company Ltd. ("Shenyang Qinnet") to develop and market an
Internet service provider business in Shenyang, China. Qinnet
Beijing owns 50% of Shenyang Qinnet. Qinnet Beijing has the
option to increase its ownership interest to 70% if Qinnet
Beijing elects to provide additional funding to the Shenyang
Qinnet joint venture Internet business in the approximate amount
of $200,000. The plan of operations for the Shenyang Qinnet
joint venture is to: (1) jointly establish the electronic book
on-line service to become the first online book sales web site in
the Liaoning Province, (2) add equipment to expand the service
capacity of Shenyang Qinnet to serve over 2,000
corporate/individual subscribers; (3) construct 50 data
information stations across the City of Shenyang. Qinnet Holdings
anticipates spending approximately $500,000 on funding its joint
venture arrangement for Shenyang Qinnet over the next twelve
months.
B. Tianjin Qinnet
11
<PAGE>
Qinnet Beijing entered into an agreement with Tianjin Xiandao
Information Network Co., Ltd. ("Tjvan.com") in October 1999 to
establish a joint venture company known as Tianjin QinNet Xiandao
Information Technology Co., Ltd. ("Tianjin QinNet"). Qinnet
Beijing owns 70% of Tianjin QinNet and Tjvan.com owns 30% of
Tianjin QinNet. Tjvan.com is the second largest Internet service
provider in the city of Tianjin in China. With capital invested
by Qinnet Beijing, the Tjvan.com and Qinnet Beijing have agreed
that the business plan for Tianjin Qinnet is to upgrade existing
equipment, add more lines and strengthen marketing development to
increase the current customer base from 12,000 to 20,000 within a
year.
Qinnet Beijing has invested 3 million RMB ($360,000 US) to acquire
a 70% equity interest in Tianjin Qinnet and to finance Tianjin
Qinnet's Internet service provider business expansion. Proposed
expansion of Tjvan.com's partnership with China Unicom is intended
to include exclusive ISDN lines and IP Telephony distributorship
in Tianjin as well as co-operating and sharing access to each
other's web sites and customer base. The joint venture will allow
Qinnet Beijing to lever the valuable experience of Tjvan.com for
future ISP operations and acquisitions. With the capital
injection, the business plan for Tianjin Qinnet is to increase the
number of subscribers from 12,000 to greater than 20,000 and
40,000 within two years to become the largest Internet service
provider in Tianjin.
Qinnet Holdings anticipates spending approximately $500,000 on
funding its joint venture arrangement for Tianjin Qinnet over the
next twelve months. Qinnet Holdings will incur these expenses
upon the installation of ISDN services by Tianjin Qinnet.
C. Beijing IT Consulting Co., Ltd. ("BITC")
Qinnet Beijing has acquired Beijing IT Consulting Co., Ltd.
("BITC"). BITC created two web sites in 1999. These two web
sites, www.cheyou.com ("cheyou" in Chinese means "Friends of
Automobiles") and www.xinxi.net ("xinxi" in Chinese means
"Information"), were designed to provide services for over 1,000
registered corporate customers and receive over 20,000 page views
per day in the Chinese auto industry and the general public.
BITC is in the process of completing a software module program
that will allow small to medium sized businesses to establish web
sites in a cost effective and swift fashion and allow them to
build their own e-commerce business. BITC plans to commence
marketing and sales efforts for this web site design service in
the fourth quarter of 2000. BITC also plans to provide hosting
service to this client base. BITC's business plan is that each
customer will retain BITC for future web design and hosting work
as their business mature through the Internet. Qinnet Holdings
plans to generate revenues from BITC by providing content related
services including web hosting, web design and on-line services.
Since Qinnet Beijing is also headquartered in Beijing, Qinnet
Beijing has merged the operations of BITC with its operations in
Beijing. Qinnet Holdings plans to spend approximately $250,000
US over the next twelve months to develop the business of BITC.
12
<PAGE>
D. QinTop
------
Beijing Qinnet has entered into a joint venture with NetTop.
NetTop is an IP Internet technology company. NetTop manages data
traffic "voice and data transmission" between North America and
Asia to China. This joint venture is named QinTop. Beijing
Qinnet has invested approximately $242,000 US (2,000,000 RMB) in
this project to date QinTop's business will be the expansion of
Internet provider services to China. Qinnet Holdings has
commenced the purchase of hardware for the QinTop IP data
transmission network between North America, Asia and China. To
date the company has purchased approximately $300,000 of initial
hardware, software and communications lines. The company has
entered into 12 month leasing arrangements for communication
lines between North America and China and has established
relationships for data traffic within China. The Company
anticipates it will spend additional capital over the next twelve
months of approximately $200,000 on this communication network.
E. Future Acquisitions
-------------------
Qinnet Holdings plans to evaluate and complete further
acquisitions of Internet technology provider businesses based in
China. Qinnet Holdings anticipates spending approximately
$300,000 on acquisitions over the next twelve months.
F. Working Capital
---------------
In addition to the above expenses, Qinnet Holdings anticipates
spending approximately $800,000 on working capital over the next
twelve months.
Qinnet Holdings plans to generate revenues from the following
activities upon completion of its stated plan of operations:
A. Content related services including web hosting, web design
and on-line services.
B. IP telephony services.
C. Electronic Book Publishing, on-line book sales via JV and new
E-Book web site.
D. Electronic commerce services.
E. Data communications services, including China nation-wide e-
mail services and installation of ISDN services.
F. Dial up and leased line access to individuals and corporate
customers.
Qinnet Holdings anticipates that it will spend approximately
$5,270,000 over the next twelve month period in pursuing its
stated plan of operations. Of these anticipated expenditures,
Qinnet Holdings anticipates that approximately $2,000,000 will be
spent in the next six months. Qinnet Holdings currently has cash
in the approximate amount of $2,920,000. Accordingly, Qinnet
Holdings will be able to complete its stated plan of operations
without additional financing over the next six month period.
13
<PAGE>
Qinnet Holding currently employs over 100 people in its
operations and anticipates hiring 200 additional employees over
the next twelve months if Qinnet Holdings is successful in
implementing its plan of operations. Of these employees, 180 are
anticipated to be located in China and 20 are anticipated to be
in North America. Of the Chinese employees, Qinnet Holdings
anticipates that 60 would be employees with technical expertise,
100 would be employees engaged in marketing and servicing of
customers and 20 would be management employees.
Qinnet Holdings will require additional equity financing to
complete its objectives. Qinnet Holdings will plan its
expenditures around its capital resources in order to maintain
its operations. The amount of expenditures may vary if: (i)
Qinnet Holdings wishes to expand or accelerate its plan of
operations; (ii) the actual costs incurred in pursuing the stated
plan of operations are greater than anticipated; or (iii) Qinnet
Holdings is not successful in achieving revenues upon completion
of the stated plan of operations. Qinnet Holdings does not have
any arrangement in place for any debt or equity financing which
would enable Qinnet Holdings to achieve additional financing if
required. However, Qinnet Holdings is seeking the appropriate
investment banking relationships to assist in the funding process
and is currently in discussions with several major investment
organizations regarding the companies capital needs. There is no
assurance that Qinnet Holdings will be able to secure additional
financing if additional financing is required.
The business plan of Qinnet Holdings may differ from the stated
plan of operations. The board of directors of Qinnet Holdings
may decide not to pursue the stated plan of operations. In
addition, the Qinnet Holdings may modify the stated plan of
operations if actual costs are greater than anticipated or if
Qinnet Holdings secures financing in order to expand or
accelerate its plan of operations.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations for Nine Months Ended September 30, 2000
The Company did not earn any revenues during the nine months
ended September 30, 2000. The Company anticipates that it will
not earn revenues until such time as the Merger is complete or
until such time as the Company realizes revenues from its
Liaoning Qinnet joint venture agreement.
The Company's operating expenses were $349,504 for the nine
months ended September 30, 2000. These expenses consisted
entirely of general and administrative expenses in the amount of
$16,504 and expenses associated with the Company's reorganization
agreement with Internet Corporation of America, Inc. These
reorganization expenses totalled $333,000 and consisted of the
payment of $50,000 and the issue of 50,000 shares of the
Company's common stock. The Company anticipates that its general
and administrative expenses will increase once the
14
<PAGE>
Company proceeds with the filing of a registration statement with
the SEC in connection with the Merger.
Liquidity and Capital Resources
The Company had cash in the amount of $7,388 as of September 30,
2000. The Company had working capital in the amount of $1,094 as
of September 30, 2000.
The Company invested a total of $280,000 in its Liaoning Qinnet
joint venture during the three months ended September 30, 2000.
Qinnet Holdings advanced the funds for this investment to the
Company as an unsecured loan without a specific repayment
schedule. The Company has a total liability of $289,190 to
Qinnet Holdings as of September 30, 2000.
The Company did not realize any financings from any sales of its
common stock during the nine months ended September 30, 2000.
The Company granted options to purchase a total of 212,500 shares
of its common stock at a price of $10.00 per share during the
three months ended September 30, 2000. The Company currently has
options to purchase a total of 260,000 shares of its common stock
at a price of $10.00 per share outstanding. None of these
options have been exercised as of November 10, 2000.
The Company will require additional capital in order to achieve
its stated plan of operations. If the Company is successful in
completing the Merger, the Company will require additional
financing to complete the plan of operations of Qinnet Holdings,
as discussed above.
The Company will require additional financing in order to
complete its obligations under the Liaoning Qinnet joint venture
and in order to provide working capital to complete the Merger.
The Company anticipates that Qinnet Holdings may advance a
portion of these funds. There is no assurance that Qinnet
Holdings will continue to advance funds to the Company.
The business plan of the Company may differ from the stated plan
of operations. The board of directors of the Company may decide
not to pursue the stated plan of operations. In addition, the
Company may modify the stated plan of operations if actual costs
are greater than anticipated or if the Company secures financing
in order to expand or accelerate its plan of operations. The
Company believes the above statements may be forward-looking
statements. Actual results and the actual plan of operations may
differ materially from what is stated above. Factors which may
cause the actual results of the Company or its actual plan of
operations to vary include, among other things, decisions of the
board of directors not to pursue a specific course of action
based on its re-assessment of the facts or new facts, changes in
the Internet business or general economic conditions and those
other factors identified herein.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
EXHIBITS
10.1 Agreement between Qinnet.com, Inc. and Liaoning Publishing
Group of Companies dated August 18, 2000
23.1 Consent of Independent Certified Public Accountants
27.1 Financial Data Schedule
REPORTS ON FORM 8-K
NIL
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned,
thereunto duly authorised.
QINNET.COM, INC.
Date: November 13, 2000
By: /s/ Paul Schwartz
-------------------------
PAUL SCHWARTZ, Director
