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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[Mark One]
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended: ______.
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from December 31, 1999 to March 31,
2000
Commission file number :000-24447
QUEST NET CORP.
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(Exact Name of Registrant as Specified in its Charter)
3001 W. HALLANDALE BEACH BLVD. 2ND FLOOR
PEMBROKE PARK, FLORIDA 33009
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(Address of principal executive offices)
(954) 457-0900
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(Registrant's telephone number)
PARPUTT ENTERPRISES, INC.
12835 E. ARAPAHOE ROAD
TOWER I, PENTHOUSE
ENGLEWOOD, COLORADO 80112
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(Former name and former address)
Indicate by check mark whether the Registrant:(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of equity
as of June 15, 2000, 2000: 23,474,309 shares of Common Stock, no par value; and,
30,000 shares of Preferred Convertible Stock, no par value.
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On February 25, 2000, Quest entered into a Stock Purchase Agreement,
effective March 1, 2000 to purchase CWTel, Inc. from Charles Wainer for the sum
of $1,200,000. Of the purchase price $200,000 was paid at closing, $700,000 was
paid by the issuance of 360,000 share of the Company's restricted common stock
and $300,000 was to be paid in three equal payments at 90 days, 180 days, and
270 days from closing. These payments were represented by promissory note and
guaranteed by the issuance, at closing, of 300,000 shares of preferred stock,
with a face value of $10.00 per share. The Company is presently in default for
the second payment under the purchase agreement. CWTel, Inc. provides
communication services to commercial and residential customers. The company is a
switch-based carrier for local and long distance voice calls utilizing
conventional transmission methods and Voice over IP protocols. CWTel, Inc. also
provides high-speed Internet service, dial-up Internet access, and web hosting.
CWTel, Inc. offers local dial tone, long distance calling, and high speed
Internet access to tenants located in commercial buildings. Agreements are
previously signed with the landlord or the management of such buildings, and
then tenants are offered discounted services. CWTel, Inc. equipment includes a
class 4 and 5 Harris tandem switch with capacity for 10,000 ports, Cisco routers
and Compaq servers. A state of the art billing and accounting package guarantees
accurate and timely invoicing of the services provided. CWTel, Inc.
has activated approximately 1,300 accounts.
As part of the transaction, Mr. Wainer was given a five-year employment
agreement as President of Quest, at an annual base salary of $100,000 during the
Term, with a 20% cost of living increase per annum and 50,000 shares of the
Company's common stock. Mr. Wainer also received options to purchase 1,000,000
shares of the Company's common stock. These options vest at the rate if 50,000
shares every six months and Options for an additional 50,000 shares can be
exercised every time the Company has increased its revenue by one million
dollars and has retained that revenue for a period of not less than two months.
These options are exercisable at $2.68 per share (110% of the fair market value
of the Company's common stock on the date of the Employment Agreement). Once
vested, the options will remain exercisable for one year from the date of
vesting. After one year from the vesting date, the options will become null and
void. Mr. Wainer was also appointed as interim CEO and a Director. At the same
time, Victor Coppola resigned from the Board of Directors.
Mr. Camilo Pereira had already expressed to the Board his desire, for
health and personal reasons to resign as CEO/Chairman of the Board. The Board of
Directors requested that Mr. Pereira remain in management of the company until
at least August 2000. Originally, Mr. Pereira had agreed in principal to remain
but in March 2000, he resigned from all managerial and directorship
responsibility. In the Form 10-QSB filed on June 16, 2000, the Company omitted
to report that in consideration for Mr. Pereira's resignation the company will:
o Keep in force and pay Camilo Pereira's medical and life insurance
premiums until April 1, 2002.
o Pay Mr. Pereira's mobile phone bill until August 1, 2000.
In March 2000, the Company entered into a two-year Consulting Agreement
with Internet Strategy Group Ltd. for a consulting fee of $20,000 per month
during the first and $24,000 the second year plus 60,000 shares of Quest Net
common stock annually, to be issued every quarter in advance. IN THE FORM 10-QSB
FILED ON JUNE 16, 2000, THE COMPANY ERRONEOUSLY REPORTED THAT MR. PEREIRA IS THE
PRINCIPAL SHAREHOLDER OF INTERNET STRATEGY GROUP LTD. MR. PEREIRA HAS NO
RELATIONSHIP WITH INTERNET STRATEGY GROUP EXCEPT AS AN EMPLOYEE. MR. PEREIRA
ALSO HAS ADVISED THE COMPANY THAT NONE OF HIS FAMILY MEMBERS ARE DIRECTLY
AFFILIATED WITH INTERNET STRATEGY GROUP LTD. IN JUNE 2000, THE COMPANY AND
INTERNET STRATEGY GROUP LTD. MUTUALLY AGREED TO RESCIND THE CONSULTING
AGREEMENT. INTERNET STRATEGY GROUP LTD. WILL CONTINUE TO RENDER CONSULTING
SERVICES TO QUEST UNTIL AUGUST 1, 2000 ON AN "AS NEEDED BASIS" FOR NO ADDITIONAL
COMPENSATION. AS CONSIDERATION FOR THE RESCISSION OF THE AGREEMENT, QUEST WILL:
o PAY TO INTERNET STRATEGY GROUP LTD. THE SUM OF $10,000 AS
REIMBURSEMENT OF NON-ACCOUNTABLE EXPENSES.
AS PAYMENT FOR INTERNET STRATEGY GROUP LTD. ACCRUED CONSULTING FEES AND
ITS CONSULTING FEE FOR JULY 2000, QUEST WILL ASSIGN TO INTERNET STRATEGY GROUP
LTD. THE AFRICAN INTERNET PROMISSORY NOTE, IN THE AMOUNT OF $100,000. Mr.
Pereira is the Principal shareholder of Internet Strategy Group Ltd. Internet
Strategy Group Ltd. will perform consulting and advisory services on behalf of
the Company on an as-needed basis, not to exceed 60 hours per months. Its duties
consist of providing advice and consultation with respect to all matters
relating to or affecting the telecommunications business. In addition, Internet
Strategy Group Ltd. will provide assistance to the Company with regard to new
business ventures, evaluating and negotiating potential mergers, acquisitions,
and other similar transactions, providing advice to the Company and its lawyers
concerning corporate financing issues and corporate structure. The Agreement
also provides that the Consultant will be entitled to receive an amount equal to
2% of any equity or debt financing consummated by the Company and introduced by
or procured through the efforts of Consultant and 2% of the value of any
acquisition or merger consummated by the Company and introduced by or procured
through the efforts of Consultant. The Company's payment of consulting fees
under the agreement is three months in arrears and the Company has not issued
any restricted common stock to the Consultant.
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In February 2000, Quest had also decided to cancel its purchase of shares
of Africa Internet Corp. Quest had paid $200,000 of the purchase price. Pursuant
to the cancellation agreement, the company received back the shares issued for
the acquisition and paid a cancellation penalty of 100 Thousand Dollars and the
balance was agreed would be paid back in one year with an interest bearing note
as a guarantee for that amount.
The company also saw the departure of George Elia of the Investor
Relations Department when he refused to cooperate with the SEC inquiry.
During the quarter, there was a substantial scale back in Quest's Sales
Department as the company found that there were severe technological problems
with the equipment of Wireless, Inc., which we are in the process of returning
to the manufacturer. Mr. Paul Zeller, the Company's former Executive Vice
President, was transferred to Sales/Marketing but eventually his service was
terminated. The Company felt that it was not receiving the performance expected
from his position. The Company also terminated the services of its Vice
President Thomas Magill. John Scafidi, the Company's Chief Financial Officer
resigned in May 2000. Mr. Wainer is now the sole officer of Quest.
Since Mr. Wainer became President and interim CEO, a scaled down of staff
and management occurred. The company also moved to its new facility. During the
move, it was discovered that two Maux's were lost or stolen from each warehouse.
This equipment is valued at approximately $ $655,000. After several meetings and
an investigation by the Board, it was decided that the Company should proceed
with a claim under its insurance policy. The Company has written off those
assets on their balance sheets.
The Company saw the need to start the deployment of more sites under its
GlobalBot subsidiary and the commission of the development on Carsonline,
Boatsonline, and Motorbikesonline was initiated. Due to technological problems,
the WINGS Online, Inc. revenue was not collected for several months. Some of
that revenue has been collected, some written off and the company is working
diligently to correct such flaws.
Since the Company does not have the resources available to operate, fund,
and grow GlobalBot to its full potential, the Company's Board of Directors has
approved the "spin off" of GlobalBot, under certain conditions including but not
limited to a successful private sale of 20% of GlobalBot's common stock owned by
Quest, and additional funding for GlobalBot. In addition, the Board believes
that the "spin off" would allow management of Quest to concentrate on its core
business, and enhance GlobaBot's access to financing
During quarter, the Company saw the installation of five new building for
its Wireless and Telecommunications business. In addition, the company has
pending contracts for six new buildings. Due to the severe technological
problems with the equipment of Wireless, Inc. and the change to a better
technology, Quest has experienced certain delays in fulfilling those
installations.
The Company spent approximately $ 200,000 for advertising for its new
$9.95 unlimited Internet dial-up but did not manage to attract a substantial
number of clients. Although the Company experienced a growth on its customer
base, that growth was far less then originally projected by management.
In April 2000, the Company entered into agreements with Sprint and
Broadwing to provide up to 90 Mbps of bandwidth for the Company' wireless and
other Internet related operations. In addition, Nextlink in the process of
installing one DS3 (PRI) which will enable Quest to supply connections to an
additional 9,660 customers.
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MERGER
Pursuant to an Agreement and Plan of Merger (the "Merger Agreement") dated
as of March 13, 2000 between Parputt Enterprises, Inc. ("PEI"), a Nevada
corporation, and Quest Net Corp., all the outstanding shares of common stock of
PEI were exchanged for 275,000 shares of common stock of Quest in a transaction
in which Quest was the surviving company.
The Merger Agreement was adopted by the unanimous consent of the Board of
Directors of PEI and approved by the unanimous consent of the shareholders of
PEI on March 13, 2000 The Merger Agreement was adopted by the unanimous consent
of the Board of Directors of Quest on March 13, 2000. Pursuant to Florida, law
the consent of the shareholders of Quest was not required.
Prior to the merger, PEI had 500,000 shares of common stock outstanding,
which shares were exchanged for 275,000 shares of common stock of Quest. By
virtue of the merger, Quest acquired 100% of the issued and outstanding common
stock of PEI.
Prior to the effectiveness of the merger, Quest had an aggregate of
22,786,022 shares of common stock issued and outstanding, and 30,000 shares of
preferred stock outstanding. The preferred stock has a preference on dividends,
liquidation, and merger at $10.00 per share. The preferred stock has no voting
or conversion rights.
Upon effectiveness of the merger, Quest had an aggregate of 23,061,022
shares of common stock outstanding.
The officers, directors, and by-laws of Quest continued without change as
the officers, directors, and by-laws of the successor issuer.
A copy of the Merger Agreement and the Articles of Merger and Plan of
Merger are filed as an exhibit to Quest's Form 8-K filed on March 23, 2000.
The consideration exchanged pursuant to the Merger Agreement was
negotiated between PEI and Quest.
In evaluating Quest as a candidate for the proposed merger, PEI used
criteria such as the value of the assets of Quest, its business operations, plan
of operation, the demand for wireless Internet service Quest's current business
operations and anticipated operations, and Quest's business name and reputation.
PEI determined that the consideration for the merger was reasonable.
Quest intends to continue developing and marketing it Wireless Internet
and Internet related services in Florida.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
EXHIBITS DESCRIPTION
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10.24 Wainer Employment Agreement*
10.25 CWTel Purchase Agreement*
10.26 Internet Strategy Group Ltd. Consulting Agreement
*Contained in the Form 10-QSB filed on June 16, 2000.
(b) REPORTS ON FORM 8-K
Form 8-K filed on March 23, 2000.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, who is duly
authorized to sign as an officer and as the principal financial officer of the
registrant.
Dated: June 16, 2000 QUEST NET CORP.
By: /s/ Charles Wainer
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Charles Wainer, President
Acting Chief Financial Officer
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