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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended September 30, 2000
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act; For the transition period from _________ to __________
Commission File Number: 000-28845
---------------------
INETVISIONZ.COM, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 33-0285179
---------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6033 West Century Boulevard, Suite 500, California 90045
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(310) 338-9822
Check whether the issuer (1) 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 issuer had 11,840,959 shares outstanding as of November 16, 2000.
Transitional Small Business Disclosure Format (check one):
Yes No X
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<TABLE>
<CAPTION>
INETVISIONZ.COM, INC.
INDEX
PAGE NO.
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets 3-4
As of September 30, 2000 (unaudited) and December 31, 1999
Consolidated Statements of Operations for the 9 months and 3 months 5
ended September 30, 2000 and September 30, 1999 (unaudited)
Consolidated Statements of Cash Flows for the 9 months ended 6
September 30, 2000 and September 30, 1999 (unaudited)
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 14
Item 2. Changes in Securities and Use of Proceeds. 14
Item 3. Defaults Upon Senior Securities. 14
Item 4. Submission of Matters to a Vote of Security Holders. 14
Item 5. Other Information. 14
Item 6. Exhibits and Reports of Form 8-K. 14
(a) Exhibits
(b) Reports on Form 8-K
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INETVISIONZ.COM, INC.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
2000 1999
--------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 19,264 $ 1,000
Cash-restricted - 107,957
Accounts receivable,
net of allowance for doubtful accounts
of $150,000 as of September 30, 2000 and
$112,941 as of December 31, 1999 1,077,546 333,639
Common stock receivable - 50,000
Inventory 20,989 -
License, net of accumulated amortization 187,500 -
Other current assets 5,823 23,220
--------------- --------------
Total Current Assets 1,311,122 515,816
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 470,257 402,396
OTHER ASSETS:
Customer lists, net 163,436 205,436
Product license, copyrights, trademark
and concept, net 145,925 183,425
Covenant not to compete, net 29,185 36,685
Loan receivable-related party 15,054 12,750
Investment in non-marketable equity securities 937,500 -
--------------- --------------
Total Assets $ 3,072,479 $ 1,356,508
=============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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INETVISIONZ.COM, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
2000 1999
--------------- --------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,436,338 $ 1,164,457
Deferred consulting revenues 375,000 -
Deferred tuition - 90,451
Loan payable, bank - 100,015
Notes payable, related parties, net of debt
discount 219,583 250,000
Advances, related parties 529,543 -
Convertible debt 250,000 -
--------------- --------------
Total Current Liabilities 2,810,464 1,604,923
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock; $0.001 par value, 71,428,571
shares authorized, 11,840,959 and 11,007,626
shares issued and outstanding, respectively 11,841 11,007
Committed shares 550,000 -
Additional paid in capital 3,634,176 3,052,410
Accumulated deficit (3,934,002) (3,311,832)
--------------- --------------
Total Shareholders' Equity (Deficit) 262,015 (248,415)
--------------- --------------
Total Current Liabilities and
Shareholder's Equity (Deficit) $ 3,072,479 $ 1,356,508
=============== =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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INETVISIONZ.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
(unaudited) (unaudited)
Nine months Nine months
ended ended
September 30, September 30,
2000 1999
--------------- --------------
<S> <C> <C>
NET REVENUES $ 3,677,397 $ 1,957,085
COST OF REVENUES 865,421 774,945
--------------- --------------
GROSS PROFIT 2,811,976 1,182,140
OPERATING EXPENSES 3,434,146 1,598,923
--------------- --------------
NET INCOME (LOSS) $ (622,170) $ (416,783)
--------------- --------------
NET INCOME (LOSS) PER SHARE $ (0.05) $ (0.05)
--------------- --------------
basic and diluted
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
basic and diluted 11,348,623 8,510,936
--------------- --------------
</TABLE>
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three months Three months
ended ended
September 30, September 30,
2000 1999
--------------- --------------
<S> <C> <C>
NET REVENUES $ 986,258 $ 527,780
COST OF REVENUES 206,244 210,723
--------------- --------------
GROSS PROFIT 780,014 317,057
OPERATING EXPENSES 1,680,808 623,912
--------------- --------------
NET INCOME (LOSS) $ (900,794) $ (306,855)
--------------- --------------
NET INCOME (LOSS) PER SHARE $ (0.08) $ (0.03)
--------------- --------------
basic and diluted
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
basic and diluted 11,632,168 8,813,990
--------------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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INETVISIONZ.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
2000 1999
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (622,170) $ (415,179)
--------------- --------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN
OPERATING ACTIVITIES:
Depreciation and amortization 287,500 170,711
Non-cash revenue (562,500) --
Debt discount amortization 62,183 --
Fair market value of options granted for legal fees 240,000 --
Changes in operating assets and liabilities
Accounts receivable, net (743,907) 28,739
License (250,000) --
Other current assets (3,592) 8,985
Accounts payable and accrued expenses 271,881 31,715
Deferred tuition revenue (90,451) 27,000
--------------- --------------
Total adjustments (788,886) 267,150
--------------- --------------
Net cash used in operating activities (1,411,056) (148,029)
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash-restricted (restriction released) 107,957 --
Advances on loan receivable (2,304) (12,750)
Payments to acquire property, equipment and intangibles (205,861) (171,168)
--------------- --------------
Net cash used in investing activities (100,208) (183,918)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from advances payable, related parties 529,543 549,205
Proceeds from notes payable, related parties 250,000 --
Repayment of loan payable, bank (100,015) 95,970
Proceeds from collection of common stock receivable 50,000 --
Proceeds from convertible debt 250,000 --
Proceeds from committed stock 550,000
--------------- --------------
Net cash provided by financing activities 1,529,528 645,175
--------------- --------------
NET INCREASE IN CASH 18,264 313,228
CASH, beginning of period 1,000 4,066
--------------- --------------
CASH, end of period 19,264 317,294
=============== ==============
</TABLE>
See the accompanying notes to consolidated financial statements for non-cash
financing and investing activities.
The accompanying notes are an integral part of the consolidated financial
statements.
6
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INETVISIONZ.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited for the 9 Months ended September 30, 2000 and 1999)
NOTE 1 BASIS OF PRESENTATION
The financial statements of iNetVisionz.com, Inc. (the "Company") for the
three and nine months ended September 30, 2000 and 1999 are unaudited.
Certain information and note disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. These financial statements should be read in
conjunction with the audited financial statements and notes thereto as of and
for the year ended December 31, 1999 included in the Company's Form 10. In
the opinion of management, the financial statements contain all adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
financial position of the Company for the periods presented. The interim
operating results may not be indicative of operating results for the full
year or for any other interim periods.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of
Inetvisionz.com, Inc. (the "Parent"), and its wholly owned subsidiaries. All
material intercompany transactions have been eliminated in consolidation.
BUSINESS ACTIVITY:
The Company is in the business of providing technology training services,
technology consulting, and technology job placement services.
DEFERRED TUITION REVENUES
Deferred revenue represents amounts received as non-refundable deposits on
student enrollments for which the revenue is not yet recognizable as the
services have not yet been performed. The deposits received are non-refundable.
However, the Company honors delayed enrollments at a future date, for as long as
a timely notice as determined on an individual basis is provided to the Company.
DEFERRED CONSULTING REVENUES
Deferred consulting revenues represents amounts received for providing computer
consulting and technical support that has not yet been earned.
INVESTMENT IN NON-MARKETABLE EQUITY SECURITIES:
The Company owns 50% of the outstanding common stock of LiquidationBid.com,
Inc., a start-up company. This investment is accounted for by the equity
method, as the Company does not have control.
There is no cost basis in this investment and there are no assets, liabilities
nor operating activities of the investee. Pursuant to APB 18, "The Equity Method
of Accounting for Investments in Common Stock," there are no recorded amounts
included in the financial statements.
The Company entered into an agreement with RxAlternative.com, Inc.
("RxAlternative") in which it received stock as compensation for services
provided to RxAlternative, which is valued at $937,500 (see Note 7).
7
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LICENSE:
The Company paid $250,000 in June 2000 for a 12 month distributor and user
license agreement with a software company (Preference Technologies, Inc.),
which will be amortized on a straight-line basis over the contractual life of
the agreement. The program will be used for the e-marketing of software for
web site development.
NET LOSS PER SHARE:
Basic and diluted net loss per share have been calculated based upon the
weighted average number of common shares outstanding during the period. Common
equivalent shares have been excluded from the calculation of diluted earnings
per share in 2000 and 1999 as their impact would be anti-dilutive.
SEGMENT:
The Company currently believes it operates in two business segments, which are
as follows:
- Provide education through the distant learning
environment using the internet and traditional
classroom setting;
- Provide corporations e-commerce solutions through
web consulting.
See Note 11 for segment disclosures.
RECENT ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities on the balance sheet at their fair value. This
statement, as amended SFAS 137, is effective for financial statements for all
fiscal years beginning after June 15, 2000. The Company has not yet
determined the impact of the adoption of this standard on its results of
operations, financial position or cash flows.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") 101, "Revenue Recognition," which outlines the basic criteria
that must be met to recognize revenue and provides guidance for presentation of
revenue and for disclosure related to revenue recognition policies in financial
statements filed with the Securities and Exchange Commission. The effective date
of this pronouncement is the fourth quarter of the fiscal year beginning after
December 15, 1999. The Company believes that adopting SAB 101 will not have a
material impact on its financial position and results of operations.
NOTE 3 GOING CONCERN
The Company's consolidated financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. Without realization of additional capital, it would be unlikely for
the Company to continue as a going concern. This factor raises substantial doubt
about the Company's ability to continue as a going concern.
Management recognizes that the Company must generate additional resources to
enable it to continue operations. The Company intends to begin recognizing
significant revenues during 2000. Management's plans also include the sale of
additional equity securities and debt financing from related parties and outside
third parties. However, no assurance can be given that the Company will be
successful in raising additional capital. Further, there can be no assurance,
assuming the Company successfully raises additional equity, that the Company
will achieve profitability or positive cash flow. If management is unable to
raise additional capital and expected significant revenues do not result in
positive cash flow, the Company will not be able to meet its obligations and
will have to cease operations.
NOTE 4 MAJOR CUSTOMERS
During the three and nine months ended September 30, 2000, revenues from the
three largest customers accounted for approximately 36% and 30% of total
revenues and 55% and 44% of education and job placement revenues,
respectively. Included in accounts receivable at September 30, 2000 is
approximately $860,000 due from these customers.
Also during the three and nine months ended, one customer (RxAlternative)
accounted for approximately 49% and 56% of technological revenues and 11% and
15% of total revenues, respectively.
8
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NOTE 5 PAYABLES TO RELATED PARTIES
The Company has various notes payable and advances to related parties. The notes
payable consists of the following at September 30, 2000:
Unsecured promissory notes, bearing interest at 9%
per annum, principal and interest due on the maturity
date. Pursuant to this agreement, the maturity date
shall be one year from the execution date of the
promissory note (March 2001), net of unamortized
discount of $30,417.
$219,583
========
The total interest expense on the above notes for the three and nine month
periods ended September 30, 2000 was approximately $8,000 and $25,500,
respectively.
In addition, in connection with the unsecured promissory notes, the Company
issued warrants to purchase a total of 100,000 shares of common stock at $0.80
per share, expiring March 2003, immediately exercisable. The warrants were
valued at $73,000 (based on Black-Scholes computation under SFAS 123) which was
recorded as a debt discount and will be amortized over the life of the
promissory note. The related interest expense recognized for the debt discount
amortization for the three and nine month periods ended September 30, 2000 was
approximately $18,000 and $42,500, respectively.
In addition, the Company, from time to time, received advances from other
related parties. The advances from related parties are unsecured, non-interest
bearing and payable on demand. At September 30, 2000, the advances amounted to
$529,543.
NOTE 6 CONVERTIBLE DEBENTURES
In June 2000, the Company issued a $250,000 secured convertible debenture
bearing interest at a rate of 8%. The notes are convertible at one share of
Company common stock per $.75 principal amount of the debenture or 70% of the
five day average of the ask price per share of the Company's common stock based
on the five days preceding the notice of intent to convert.
In connection with this discounted conversion feature the Company recorded
$19,600 of debt discount. The Company will amortize the debt discount over the
period the debt was issued to the date it becomes exercisable and has recognized
$15,843 and $19,600 in interest expense for the three and nine months ended
September 30, 2000, respectively.
NOTE 7 CONTRACTS
The Company entered into agreements with RxAlternative to develop two
websites starting January 2000 and provide monthly technical support and
maintenance services over a period of one year. Pursuant to these agreements,
the Company received 750,000 shares of RxAlternative's (a private company)
restricted common shares (4.17% undiluted interest of RxAlternative) valued
at $1.25 per share (based on mutual agreement by both parties and less than
recent private sales of RxAlternative stock) for total revenues of $937,500,
$375,000 of which was deferred at September 30, 2000 based on the Company's
estimates of percentages completed. The Company was also granted 100,000
stock options to purchase 100,000 shares of common stock at $1.00 per share.
In a separate agreement, the Company will also receive $10,000 per month for
maintenance services for up to 40 man-hours of services rendered and plans to
record this revenue over the term of the agreement upon satisfactory
completion of services and acceptance by RxAlternative.
In June 2000, the Company entered into an agreement with Lawrence W. Horwitz,
a member of the Company's board of directors to develop three websites for
$250,000 which was recognized as revenue in the period ended June 30, 2000 as
the web site related to the contract were accepted by the customer with no
further performance obligations.
In May 2000, the Company entered into an agreement with perFORMplace.com, an
unrelated party, to develop their
9
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web site for a total of $240,000 to be received through December 2000. The
Company received approximately $116,000 during the quarter, recognizing the
amount as revenue based on its estimate of percentage of completion.
NOTE 8 STOCK ACTIVITY
In August 2000, the Company issued 833,333 shares of common stock to related
parties. This issuance was in connection with the conversion of notes payable
totalling $250,000. The beneficial conversion price of $0.30 per share was
recognized as a beneficial conversion of $250,000 in fiscal 1999 when the
notes were first executed.
In September 2000, the Company committed to issue 1,000,000 shares of
preferred stock at a price of $0.50 per share for a total of $500,000. In
addition, the Company committed to issue 50,000 additional shares of
preferred stock at a price of $1.00 per share for a total of $50,000. The
shares have been authorized by both the shareholders and the board of
directors. Once the amended articles are effective, the shares will be
distributed pursuant to the agreements.
NOTE 9 STOCK OPTIONS
During the nine months ended September 30, 2000, the Company was authorized
to issue 1,000,000 shares to employees, consultants and directors, of which
200,000 have been granted to an employee at $1.00 per share. The shares
granted will result in compensation expense of $0 under APB 25.
In addition, the Company issued 100,000 warrants in connection with the related
party notes (see Note 5).
In 1999, the Company entered into an agreement with one of its
directors in which the director (Mr. Lawrence W. Horwitz) received options to
acquire 300,000 shares of stock at $1.75 per share. Under the terms of the
option agreement, 225 options vest for each hour of service provided by Mr.
Horwitz on behalf of the Company. The exercise price of $1.75 is payable as
follows: $1.00 in services at the value of $225 per hour and $0.75 in cash.
During the current year, the director received 240,000 options for services
provided which was valued as $240,000 of legal expense. In addition, the
Company incurred in additional $68,822 of legal expense that is recorded in
accrued expenses.
In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44").
"Accounting for Certain Transactions involving Stock Compensation, an
interpretation of APB Opinion No. 25". FIN 44 clarifies the application of
Opinion 25 for (a) the definition of employee for purposes of applying
Opinion 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence for various
modifications to the terms of a previously fixed stock option or award, and
(d) the accounting for an exchange of stock compensation awards in a business
combination. The Company adopted FIN 44 in the quarter ended September 30,
2000; such adoption did not have a material effect on the financial
statements.
NOTE 10 PAYROLL TAX LIABILITY
In April 2000, the Company negotiated a payment plan on its delinquent payroll
taxes including an estimated $154,000 in interest and penalties. Under the
payment plan, the Company will make monthly payments of $15,000 until the
liability is fully paid off. The remaining liability at September 30, 2000 is
approximately $320,000.
NOTE 11 SEGMENT INFORMATION
The Company's principal segments are:
- Provide education through distant learning environment using the
internet and traditional classroom settings, and permanent
placement of technical personnel with the Company's customers.
- Provide corporations e-commerce solutions through web consulting.
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Financial information about industry segments as of and for the nine months
ended September 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
Nine Months ended September 30,
2000 1999
--------------- --------------
<S> <C> <C>
Operating revenues:
Education and placement $ 2,680,847 $ 1,957,085
Technological consulting 996,550 -
--------------- --------------
Total operating revenues $ 3,677,397 $ 1,957,085
=============== ==============
Operating income (loss):
Education and placement $ (752,482) $ (416,783)
Technological consulting 130,312 -
--------------- --------------
Net operating income (loss) $ (622,170) $ (416,783)
=============== ==============
Identifiable assets:
Education and placement $ 1,862,303 $ 1,716,473
Technological consulting 1,210,176 -
--------------- --------------
Total $ 3,072,479 $ 1,716,473
=============== ==============
</TABLE>
Operating income (loss) is revenues minus operating expenses, including
allocation of corporate expenses.
Identifiable assets by segment are assets used in or otherwise identifiable with
the Company's operations in each segment.
NOTE 12 SUBSEQUENT EVENTS
From October 1, 2000 through November 15, 2000, the Company's wholly owned
subsidiary issued 500,000 shares of stock to outside investors at a price of
$0.60 per share for a total of $300,000.
Also, from October 1, 2000 through November 15, 2000, the Company committed to
issue an additional 250,000 shares of preferred stock at a price of $1.00 per
share for a total of $250,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of iNetVisionz.com's
financial condition and results of operations. Detailed information is contained
in the financial statements included in this document. This section contains
forward-looking statements that involve risks and uncertainties, such as
statements of the company's plans, objectives, expectations and intentions. The
cautionary statements made in this document should be read as being applicable
to all related forward-looking statements wherever they appear in this document.
11
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NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) COMPARED TO THE NINE MONTHS
ENDED JUNE 30, 1999 (UNAUDITED).
Revenues for the nine month period ended September 30, 2000 increased by 88%
to $3,677,397 from $1,957,085 in the year ago period. Of the total increase,
$723,762 is from education and placement revenues and $996,550 is from
technological consulting revenues. Education revenue increases are due to
increased classes and students that reflect the strong demand in the
marketplace for technical training. Technological consulting revenues began
in the second quarter, and represent $562,500 non-cash sales relating to
RxAlternative, $250,000 in cash sales to a related party and $184,050 in cash
sales to unrelated third parties.
The increase in gross profit from 60.4% in last year's nine months ended
September 30, 1999 to 76.5% in the current nine month period, reflects better
management and cost control by the Company in the current period. The Company
hired several instructors on a full time basis resulting in a decrease in
cost of sales percentage as compared to prior periods when the Company used
outside contractors at three to four times cost of an on staff instructor. In
addition, the Company earned $996,550 in its new technology consulting
segment which produced a higher than average gross margin due to the nature
of the work performed.
Operating expenses increased to 93.4% of revenue in the nine months ended
September 30, 2000 as compared to 81.7% of revenue in the last years period.
The Company had $3,434,146 in operating expenses for the nine months ended
September 30, 2000, as compared to $1,598,923 of such expense for the same
period in 1999. The increase in operating expenses is primarily attributed to
the increase in facilities and the increase in number of employees and key
personnel to accommodate the growing needs of the Company.
As a result of the above factors, net loss increased to $622,170 or $0.05 per
share in 2000 from a net loss of $416,783 or $0.05 per share in 1999.
THREE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1999 (UNAUDITED).
Revenues for the three month period ended September 30, 2000 increased 87% to
$986,258 from $527,780 in the year ago period. Of the total increase,
$230,928 is from education and placement revenues and $227,550 is from
technological consulting revenues. Education revenue increases are due to
increased classes and student count that reflect strong demand in the
marketplace for technical training. Technological consulting revenues
represent $112,500 non-cash sales relating to RxAlternative and $115,050 in
cash sales to unrelated third parties.
The increase in gross profit from 60.1% in last year's three months ended
September 30, 1999 to 79.1% reflects better management and cost control by
the Company in the current period. The Company hired several instructors on a
full time basis resulting in a decrease in cost of sales percentage as
compared to prior periods when the Company used outside contractors at three
to four times cost of an on staff instructor. In addition, the Company earned
$227,550 in its new technology consulting segment which produced a higher
than average gross margin due to the nature of the work performed.
Operating expenses increased to 170% revenue in the three months ended
September 30, 2000 as compared to 118% of revenue in the last years period.
The Company had $1,680,808 in operating expenses for the quarter ended
September 30, 2000, as compared to $623,912 of such expense for the same
period in 1999. The increase in operating expenses is primarily attributed to
the increase in facilities and the increase in number of employees and key
personnel to accommodate the growing needs of the Company.
As a result of the above factors, net loss increased to $900,794 or $0.08 per
share in 2000 from a net loss of $306,855 or $0.03 per share in 1999.
12
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LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, the Company had cash and cash equivalent balance of
$19,264 as compared to $1,000 as of December 31, 1999.
Gross accounts receivable in September 30, 2000 was approximately $1,228,000
or 39% of the cash revenues recorded for the nine month period ended
September 30, 2000. These accounts primarily represent sales of $860,000 to
customers that are traditionally slow payers; of this total, approximately
$200,000 has been collected since September 30, 2000. Management routinely
assessed the collectibility of these receivables and maintains reserves that
are adequate based on management's detailed analysis and historical
experience.
The Company increased cash flows used in operations by $1,263,027 from
$148,029 to $1,411,056 for the nine months ended September 30, 1999 and 2000,
due primarily to payments for a license and increased operating activity
related to the Company's growth.
Net investing activities consumed $100,208 for the nine months ended compared
to 183,918 in the corresponding period last year.
Cash provided by financing activities amounted to $1,529,528 as compared to
$645,175 in the same period last year. The increase primarily reflects
increased borrowing from related parties, convertible debentures and cash
received for omitted shares.
The Company intends to fund future capital expenditures and working capital
requirements through anticipated cash flow from acquisitions. Although the
Company believes that this funding will be sufficient, the Company may also
consider the use of funds from other extant sources, including, but not
limited to, public or private offerings of debt or equity. The Company's
auditors have issued a going concern opinion for the year ended December 31,
1999. While management believes that private sources of funding should be
sufficient to continue as its operations, there is no guarantee that such
funding will be available to the Company as needed or on terms favorable to
the Company.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In management's opinion, there are no material litigation matters
pending or threatened against the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In December 1999, Laguna Pacific Partners, LLP and Knightrider
Investments, Inc. provided $150,000 and $100,000 respectively through a
secured promissory note financing. In August 2000, the Company determined
that it would be unable to pay back these sums and as a result, the Company
negotiated to convert each of these investments into 475,000 shares to
Strawberry Canyon Capital, Inc., 25,000 to Laguna Pacific Partners, LLP and
333,333 shares to Knightrider Investments, Inc. Strawberry Canyon Capital Inc.
paid to Laguna Pacific Partners, LLP under this bridge facility. Lawrence W.
Horwitz, Director, is the sole shareholder of Strawberry Canyon Capital, Inc.
one of the general partners of Laguna Pacific Partners, LLP. Laguna Pacific
Partners, LLP and Knightrider Investments, Inc. are accredited investors. The
Company relied upon an exemption from registration available under Section
4(2) of the Act when issuing these securities to these investors.
ITEM 3. DEFAULT UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
The Registrant has engaged Corbin & Wertz, certified public
accountants, 2603 Main Street, Suite 600 Irvine, California 92614 ("Corbin &
Wertz") as its independent accountants for all accounting purposes related to
the Registrant's business operations and the Registrant's reporting
requirements. Corbin & Wertz replaced Kabani & Company, Inc., Certified Public
Accountants, as the Registrant's principal accountants as of August 14, 2000
("Kabani") for this purpose. The principal accountants' report on the financial
statements of the Registrant contained no adverse opinion or a disclaimer of
opinion, or was qualified nor modified as to audit scope, or accounting
principles. The principal accountants' report included an explanatory paragraph
describing an uncertainty regarding the Company's ability to continue as a going
concern. The engagement of Corbin & Wertz was approved by the Board of
Directors.
During the Registrant's two most recent fiscal years and any subsequent
interim period preceding such registration, declination, or dismissal, there
were no disagreements with the former accountant on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure. There is nothing to report under Item 304 (a) (1) (v) (A) through
(D).
A copy of the form 10-QSB for the quarter ended on June 30, 2000 was
sent to Kabani and a letter from Kabani is attached hereto as Exhibit 16.1,
stating whether or not they agree with the disclosures contained in the form
10-QSB .
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
16.1 Letter from Kabani & Company, Inc.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
On July 13, 2000, the Company filed a Form 8-K to report that
Mr. Mahin Samadani resigned from his position as a director.
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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.
INETVISIONZ.COM, INC.
Dated: November 20, 2000 /s/ Noreen Khan
------------------------------------
Noreen Khan,
Chief Executive Officer and Director
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