Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K/A
Current Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): June 25, 1999
AmeriNet Group.com, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation
0-3718
(Commission File Number)
11-2050317
(IRS Employer Identification No.)
902 Clint Moore Road, Suite 136: Boca Raton, Florida 33487
(Address of principal executive offices) (Zip Code)
(561) 998-3435
Registrant's telephone number, including area code
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
TABLE OF CONTENTS
Item Number Description Page Number
Item 2. Acquisition or Disposition of Assets 3
Item 7. Financial Statements and Exhibits
(a) Financial statements of American Internet
from inception until December 31, 1998 7
(b) Pro forma financial statements for the
Registrant and American Internet. 17
(c) Exhibits 23
Signatures 6
FORWARD LOOKING STATEMENTS
This Form 8-KSB contains certain "forward-looking statements" relating to
the Registrant which represent the Registrant's current expectations or beliefs,
including, but not limited to, statements concerning the Registrant's
operations, performance, financial condition and growth. For this purpose, any
statements contained in this Form 8-KSB that are not statements of historical
fact are forward-looking statements. Without limiting the generality of the
foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"intend", "could", "estimate", or "continue", or the negative or other variation
thereof or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, such as credit losses, dependence on management and key personnel
and variability of quarterly results, ability of the Registrant to continue its
growth strategy and competition, certain of which are beyond the Registrant's
control. Should one or more of these risks or uncertainties materialize or
should the underlying assumptions prove incorrect, actual outcomes and results
could differ materially from those indicated in the forward looking statements.
2
<PAGE>
Item 2. Acquisition or Disposition of Assets.
This current report amends and supplements the information concerning the
Registrant's acquisition of American Internet Technical Center, Inc., a Florida
corporation ("American Internet"), on June 25, 1999, as originally reported in a
current report filed with the Commission on July 12, 1999 (the "Original
Report").
The audited financial statements for American Internet filed herewith (see
"Item 7[a], Financial Statements") disclosed results different from those used
by the Registrant and American Internet during the negotiation of the
acquisition, as a result of which, the Registrant, J. Bruce Gleason and Mike D.
Umile, the former principal stockholders of American Internet ("Messers Gleason
and Umile") have amended the reorganization agreement filed as an exhibit to the
Original Report (the "Reorganization Agreement"), as follows:
The provisions of the Reorganization Agreement pertaining to the shares of
the Registrant's common stock (the "AmeriNet Stock") to be exchanged for all of
the American Internet capital stock (the "American Stock"), were modified as
follows:
The initial shares of AmeriNet Stock issued to Messers Gleason and Umile
were reduced from 2,232,756 shares to 1,482,756 shares, 250,000 of which
were sold by them to The Yankee Companies, Inc., a Florida corporation
("Yankees") in consideration for the sum of $25,000, which Messers Gleason
and Umile contributed to American Internet as an additional capital
contribution, correcting inaccuracies in the representations and warranties
in the Reorganization Agreement;
The remaining 750,000 shares of AmeriNet Stock deducted from the shares
originally received by Messers Gleason and Umile were returned to the
Registrant for cancellation and are now reserved for re-issuance to the
former American Internet stockholders (the "Subscribers") as a component of
the AmeriNet Stock issuable pursuant to the Reorganization Agreement's
"Performance Criteria", as a result of which, the aggregate number of
shares of AmeriNet Stock issuable to the Subscribers thereunder has
increased from 4,500,000 shares to 5,250,000 shares, as described in the
following paragraph:
AmeriNet will now issue additional shares of AmeriNet Stock to the
Subscribers as additional shares exchanged for American Stock (the
"Additional Exchange Shares"), predicated on American Internet attaining
the following annual net, pre-tax profit thresholds determined as of June
30 of each year in accordance with generally accepted accounting
principals, consistently applied ("GAAP"), as follows:
Goal Time Frame Additional Exchange Shares
(A) $200,000 2000 500,000 Shares; or
$259,000 2000 875,000 Shares;
(B) $500,000 2001 800,000 Shares; or
$559,000 2001 1,175,000 Shares;
(C) $1,000,000 2002 800,000 Shares;
$1,500,000 2003 800,000 Shares;
$2,000,000 2004 800,000 Shares;
$2,500,000 2005 800,000 Shares.
3
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As set forth in the original Reorganization Agreement, in the event that
the thresholds are not attained and the Registrant has provided American
Internet with at least $250,000 in funding for its operations, then:
If the net, pre tax earnings are less than 33% of the required threshold
during the subject 12 month period, the Additional Exchange Shares for such
period will be forfeited;
If the net, pre tax earnings are between 33% and 80% of the required
threshold during the subject 12 month period, the Additional Exchange
Shares for such period and the required threshold will be carried over to
the next year, increasing both the aggregate threshold and the aggregate
bonus attainable for such year; and
If the net, pre tax earnings are between 80% and 100% of the required
threshold during the subject 12 month period, the Additional Exchange
Shares for such period shall be prorated.
In the event that the thresholds are not attained but AmeriNet has not
provided American Internet with at least $250,000 in funding for its operations,
then, the Additional Exchange Shares for such period shall be prorated.
In addition to changes in the quantity of shares exchanged, other
provisions of the Reorganization Agreement were modified, as follows:
The ratio of seats on American Internet's board of directors allocated to
designees of the Subscribers was reduced from 2/3 to 1/2, the initial board
membership being Messrs. Gleason and Umile, Michael Harris Jordan,
currently the Registrant's president, and a further designee of the
Registrant to be determined.
Messrs. Gleason's and Umile's annual salaries under their employment
agreements with American Internet were reduced from $75,000 to $52,000,
until profits from operations (after required internal investments for
expansion) attain the levels contemplated in the Reorganization Agreement,
such issue to be revisited monthly until resolved.
If required by the Registrant, American Internet will hire a senior
marketing and production executive to be designated by the Registrant on
terms materially identical to those reflected in the employment agreements
between American Internet and Messrs. Gleason and Umile, and American
Internet will acquire the assets and operations of another Internet
business capable of in house production and hosting of web sites,
designated by the Registrant.
A copy of the amendment to the Reorganization Agreement is filed as an
exhibit to this report, see "Item 7(c), Exhibit Index."
4
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Item 7. Financial Statements and Exhibits.
The following financial statements, pro forma financial information and
exhibits, are filed as a part of this report.
(a) Financial statements of American Internet from inception until December 31,
1998, pursuant to Item 310(c) of Regulation S-B, pages 7 - 16.
Independent Auditor's Report 8
Financial Statements:
Balance Sheet 9
Statement of Income 10
Statements of Changes in Stockholders' Equity 11
Statements of Cash Flows 12
Notes to Financial Statements 13 - 16
(b) Pro forma financial statements for the Registrant and American Internet,
pursuant to Item 310(d) of Regulation S-B, see pages 17 - 22.
On June 25, 1999, the Registrant, completed the acquisition of 99%+ of the
issued and outstanding stock of American Internet Technical Center, Inc.
("American Internet"), a Florida corporation, from J. Bruce Gleason and Mike D.
Umile in exchange for 2,232,756, shares of the Registrant's common stock,
reduced on August 25,1999, to 1,482,756 shares, with an additional 5,250,000
shares issuable based on performance during the period ending on June 30, 2005.
The following Pro Forma Combined Balance Sheet of the Registrant has been
prepared by management of the Registrant based upon the balance sheets of the
Registrant as of December 31, 1998 and June 30, 1999 and of American Internet as
of December 31, 1998 and June 30, 1999. The Pro Forma Combined Statement of
Income was prepared based on the statement of income for the Registrant and
American Internet for the twelve months ended December 31, 1998 and the six
months ended June 30, 1999. The pro forma statements give effect to the
transaction under the purchase method of accounting and the assumptions and
adjustments in the accompanying notes to pro forma combined financial
statements. The pro forma combined balance sheet gives effect to the acquisition
as if it had occurred as of American Internet's organization on April 15, 1998.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. The pro forma combined
financial statements do not purport to represent what the combined companies's
financial position or results of operations would actually have been had the
acquisition occurred on such date or as of the beginning of the period
indicated, or to project the combined companies' financial position or results
of operations for any future period.
(c) Pursuant to the requirements of Item 601 of Regulation S-B, the following
exhibits are filed herewith, see pages 23 to 31.
5
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Regulation S-B
Exhibit Page or
Table Number Source Description
10.40 23 First amendment to Reorganization Agreement with
American Internet.
22.9 31 Consent of experts and counsel: consent of Daszkal,
Bolton & Manela, P.A., certified public accountants
American Internet's auditors (now also the Registrant's
auditors)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AmeriNet Group.com, Inc.
Dated: September 8, 1999
/s/ Micheal Harris Jordan
---------------------------------
Michael Harris Jordan
President
6
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AMERICAN INTERNET TECHNICAL
CENTER, INC.
FINANCIAL STATEMENTS
FROM APRIL 15, 1998 (INCEPTION)
THROUGH DECEMBER 31, 1998
TABLE OF CONTENTS
Independent Auditor's Report . . . . . . . . . . . . . . . . 8
Financial Statements:
Balance Sheet . . . . . . . . . . . . . . . . . . . . . 9
Statement of Income . . . . . . . . . . . . . . . . . . . . 10
Statements of Changes in Stockholders' Equity . . . . . . 11
Statements of Cash Flows. . . . . . . . . . . . . . . . . . 12
Notes to Financial Statements. . . . . . . . . . . . . . . . 13
7
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DASZKAL, BOLTON, MANELA, DEVLIN & CO.
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
2401 N.W. BOCA RATON BOULEVARD, SUITE 100 BOCA RATON, FLORIDA 33431
TELEPHONE (561) 367-1040 FAX (561) 750-3236
JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE
MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
ROBERT A. MANELA, CPA, P.A.
TIMOTHY R. DEVLIN. CPA, P.A.
MICHAEL S. KRIDEL, CPA, P.A.
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders
American Internet Technical Center, Inc.
We have audited the accompanying balance sheet of American Internet Technical
Center, Inc. as of December 31, 1998, and the related statement of income,
changes in stockholders' equity and cash flows from April 15, 1998 (inception)
to December 31, 1998. These financial statements are the responsibility of the
management of American Internet Technical Center, Inc. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides 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 American Internet Technical
Center, Inc. as of December 31, 1998, and the results of its operations and its
cash flows from April 15, 1998 (inception) to December 31, 1998, in conformity
with generally accepted accounting principles.
Boca Raton, Florida
August 19, 1999
8
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AMERICAN INTERNET TECHNICAL CENTER, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current assets:
Cash $ 3,694
Accounts receivable -
net of allowance for doubtful accounts $45,932 68,903
Prepaid expenses 3,161
Total current assets 75,758
Property and equipment, net 22,266
Other assets:
Deposits 16,092
Total assets $ 114,116
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,741
Accrued expenses 8,106
Billings in excess of costs and estimated
earnings on uncompleted contracts 41,552
Loans to stockholders 9,333
Total current liabilities 87,732
Stockholders' equity:
Common stock, $1.00 par value, 7500 shares authorized,
200 shares issued and outstanding 200
Retained earnings 26,184
Total stockholders' equity 26,384
Total liabilities and stockholders' equity $ 114,116
See accompanying notes to financial statements
9
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AMERICAN INTERNET TECHNICAL CENTER, INC.
STATEMENT OF INCOME
FROM APRIL 15, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998
Revenues earned $ 784,463
Costs of revenues earned 137,752
Gross profit 646,711
Operating expenses:
Selling expenses 323,762
Bad debts expense 45,932
General and administrative expenses 132,517
Total operating expenses 502,211
Net income $ 144,500
See accompanying notes to financial statements
10
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AMERICAN INTERNET TECHNICAL CENTER, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM APRIL 15, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C>
Additional
Number of Common Paid-In Retained Total
Shares Stock Capital Earnings
Common stock issued for cash 200 $ 200 $ - $ - $ 200
Distributions to stockholders - - - (118,316) (118,316)
Net income - 1998 - - - 144,500 144,500
Balance, December 31, 1998 200 $ 200 $ - $ 26,184 $ 26,384
</TABLE>
See accompanying notes to financial statements
11
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AMERICAN INTERNET TECHNICAL CENTER, INC.
STATEMENT OF CASH FLOWS
FROM APRIL 15, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998
Cash flows from operating activities:
Net income $ 144,500
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization 3,930
Bad debts expense 45,932
(Increase) decrease in:
Accounts receivables (114,835)
Prepaid expenses (3,161)
Deposits (16,092)
Increase (decrease) in:
Accounts payable 28,741
Accrued expenses 8,106
Billings in excess of costs and estimated earnings
on uncompleted contracts 41,552
Loans to stockholders 9,333
Net cash provided by operating activities 148,006
Cash flow used by investing activities:
Purchases of property and equipment (26,196)
Cash flows from financing activities:
Issuance of common stock 200
Distributions to stockholders (118,316)
Net cash used by financing activities (118,116)
Net increase in cash 3,694
Cash at beginning of period -
Cash at end of period $ 3,694
Additional cash payment information:
Interest paid $ -
Income taxes $ -
See accompanying notes to financial statements
12
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AMERICAN INTERNET TECHNICAL CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
American Internet Technical Center, Inc. (the "Company"), a Florida corporation,
was established on April 15, 1998, to design and host websites and provide
e-commerce programs, marketing and other Internet services. Hosting services,
including search engine registrations, are typically six month or one year
contracts.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all cash and
other demand deposits to be cash and cash equivalents. As of December 31, 1998,
the Company had no cash equivalents.
Property and Equipment
Property and equipment are stated at cost and are being depreciated using the
straight-line method over the estimated useful lives of five to seven years.
Revenue and Cost Recognition
Revenues from long-term contracts are recognized on the percentage-of-completion
method, measured by the percentage of costs incurred to date to estimated total
costs for each contract (i.e., cost-to-cost method). This method is used because
management considers total cost to be the best available measure of progress on
the contracts. Because of inherent uncertainties in estimating cost, it is
possible that the estimates used will change within the near term. Contract
costs include all direct material and labor costs and those indirect costs
related to contract performance, such as subcontractors, equipment rental, and
supplies and, certain general administrative expenses are charged to expense.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined. Claims are included in revenues when
realized.
The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Advertising
Advertising costs are expensed when incurred. The advertising cost incurred for
the period ended December 31, 1998, was $2,104.
13
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AMERICAN INTERNET TECHNICAL CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
The following schedule presents the status of costs and estimated
earnings on uncompleted contracts at December 31, 1998.
Costs incurred on uncompleted contracts $ 15,468
Estimated earnings 11,441
Total 26,909
Less: billings to date (68,461)
Total $ (41,552)
Included in accompanying balance sheet under the
following captions:
Costs and estimate earnings in excess of billings on
uncompleted contracts $ -
Billings in excess of cost and estimated earnings on
uncompleted contracts (41,552)
Total $ (41,552)
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash, accounts receivable, accounts payable and loans to
stockholders approximates fair value because of their short maturities.
NOTE 5 - RELATED PARTY TRANSACTIONS
At December 31, 1998, the Company had an outstanding payable to the stockholders
in the amount of $9,333. The transactions involving the stockholders/officers
are summarized below:
Balance at April 15, 1998 $ -
Advances from stockholders 9,333
Balance at December 31, 1998 $ 9,333
14
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AMERICAN INTERNET TECHNICAL CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1998:
Machinery and equipment $ 21,400
Furniture and fixtures 4,796
Total property and equipment 26,196
Less: accumulated depreciation (3,930)
Property and equipment, net $ 22,266
Depreciation expense for the period ended December 31, 1998, was $3,930.
NOTE 7 - OPERATING LEASES
The Company leases its facilities in Florida under an operating lease with no
fixed term. Total lease expense for the period ended December 31, 1998 was
$13,939.
NOTE 8 - CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially expose the Company to concentrations of
credit risk, as defined by Statement of Financial Accounting Standards No. 105,
consist primarily of trade receivables. The Company officers have attempted to
minimize this risk by monitoring the companies for whom they provided credit and
also avail themselves of the lien process for contracts.
NOTE 9 - SIGNIFICANT VENDOR
During the initial six months of operation, the Company had its website
production department in house. Beginning September 1998, the Company
subcontracted the production of its websites to an unrelated party. This
unrelated party provides 100% of the website development to the company.
NOTE 10 - INCOME TAXES
The Company has elected to be treated as an S Corporation for Federal and State
income tax purposes. Under this election, all taxable income, losses and credits
pass through to the individual stockholders and are reflected on their
individual income tax returns. Consequently, no provision for income taxes has
been provided by the corporation. The financial statements reflect earnings on
the percentage of completion method of accounting whereas the completed contract
method is used for income tax purposes.
15
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AMERICAN INTERNET TECHNICAL CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - SUBSEQUENT EVENTS
The Company raised $20,000 through a private placement offering of common stock
during the period January 1, 1999, through March 31, 1999.
On April 26, 1999, the Company was acquired by Ascot Industries, Inc., a Nevada
corporation ("Ascot"), in a stock exchange agreement. Ascot exchanged 90% of its
common stock for all the common shares of American Internet. On July 9, 1999,
this agreement was rescinded and control of Ascot was re-acquired by AmeriNet
Group.com, Inc., as the sucessor in interest to the original stockholders.
On June 25, 1999 AmeriNet Group.Com, Inc., (f/k/a Equity Growth Systems, Inc.)
acquired all of the outstanding common stock of American Internet Technical
Center, Inc. As consideration AmeriNet Group.Com, Inc., issued 1,632,978 of its
common stock. The acquisition will be recorded as a purchase, and the results of
operations and goodwill will be included in the consolidated financial
statements beginning with the date of closing. On the date of acquisition, the
Company's tax status changed to a regular corporation from a S corporation.
16
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AmeriNet Group.com
Pro Forma Combined Balance Sheets
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
American Internet
AmeriNet Group.com Technical Center Pro Forma
December 31, 1998 December 31, Total Adjustments Combined
1998
Assets:
Cash $13,182 $ 3,694 $ 16,876 (B) $ 25,000 $ 41,876
Accounts receivable
- 68,903 68,903 68,903
Prepaids
- 3,161 3,161 3,161
-------------------------------------------------------------------------------------------
Total Current Assets
13,182 75,758 88,940 25,000 113,940
Property and equipment
- 26,196 26,196 26,196
Less acumulated depreciation
- (3,930) (3,930) (3,930)
-------------------------------------------------------------------------------------------
Total Property & equipment
- 22,266 2,266 - 22,266
Other assets:
Goodwill (A)
- - - 1,198,350 1,198,350
Accumulated amortization
- - - -
Deposits
- 16,092 16,092 16,092
-------------------------------------------------------------------------------------------
Total other assets
- 16,092 16,092 1,198,350 1,214,442
===========================================================================================
Total Assets $13,182 $ 114,116 $ 127,298 $1,223,350 $ 1,350,648
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Liabilities and stockholders' equity
Current liabilities:
Accounts payable $4,661 $ 28,741 $ 33,402 $ - $ 33,402
Accrued expenses
- 8,106 8,106 - 8,106
Billings in excess of costs
and estimated earnings on
uncompleted contracts
- 41,552 41,552 41,552
Loans to stockholders
- 9,333 9,333 9,333
-------------------------------------------------------------------------------------------
Total current liabilities
4,661 87,732 92,393 - 92,393
-------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock (A)
59,911 200 60,111 16,130 76,241
Additional paid in capital (A)
2,914,395 - 2,914,395 1,233,404 4,147,799
Retained earnings
(2,965,785) 26,184 (2,939,601) (26,184) (2,965,785)
-------------------------------------------------------------------------------------------
Total stockholders' equity
8,521 26,384 34,905 1,223,350 1,258,255
-------------------------------------------------------------------------------------------
===========================================================================================
Total liabilities and $13,182 $ 114,116 $ 127,298 $1,223,350 $ 1,350,648
stockholders' equity
18
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AmeriNet Group.com, Inc.
Pro Forma Combined Statement of Income
(Unaudited)
For the period ended
American Internet
AmeriNet Group.com Technical Center Pro Forma
December 31, 1998 December 31, Total Adjustments Combined
1998
Revenues earned $ - $ 784,463 $ 784,463 $ - $ 784,463
Costs of revenue earned
- 137,752 137,752 - 137,752
Gross profit
- 646,711 646,711 - 646,711
Operating expenses:
Selling
- 323,762 323,762 - 323,762
General & Administrative (A)
expenses - 132,517 132,517 79,890 463,240
(C)
118,316
Bad debt expense
- 45,932 45,932 - 45,932
-------------------------------------------------------------------------------------------
Total operating expenses
- 502,211 502,211 198,206 700,417
-------------------------------------------------------------------------------------------
Income (loss) from operations
- 144,500 144,500 (198,206) (53,706)
Loss from discontinued
operations (399,415) - (399,415) - (399,415)
===========================================================================================
Net income (loss) $(399,415) $ 144,500 $ (254,915) $(198,206) $ (453,121)
Basic income (loss) per share ($0.096) ($0.061) ($0.109)
Weighted average shares 4,174,778 4,174,778 4,174,778
Fully diluted income (loss) ($0.095) ($0.060) ($0.107)
per share
Fully diluted average shares 4,222,199 4,222,199 4,222,199
</TABLE>
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AmeriNet Group.com
Pro Forma Combined Balance Sheets
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
American Internet
AmeriNet Group.com Technical Center Pro Forma
June 30, 1999 June 30, 1999 Total Adjustments Combined
Assets
Cash $(290) $74,046 $73,756 (B) $25,000 $98,756
Accounts receivable - 91,907 91,907 - 91,907
Prepaids - 4,360 4,360 - 4,360
Total Current Assets (290) 170,313 170,023 25,000 195,023
Property and equipment - 49,810 49,810 - 49,810
Less acumulated depreciation - (3,930) (3,930) - (3,930)
Total Property & equipment - 45,880 45,880 - 45,880
Other assets:
Investment shares 100,000 - 100,000 - 100,000
Goodwill - - - (A) 1,070,643 1,070,643
Accumulated amortization - - - - -
Deposits - 19,092 19,092 - 19,092
Total other assets 100,000 19,092 119,092 - 1,070,643 1,189,735
Total Assets $99,710 $235,285 $334,995 $1,095,643 $1,430,638
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $4,678 $22,906 $27,584 $ - $27,584
Billings in excess of costs
and estimated earnings on
uncompleted contracts - 28,955 28,955 - 28,955
Debentures payable 100,000 - 100,000 - 100,000
Loans to stockholders - 29,333 29,333 - 29,333
Total current liabilities 104,678 81,194 185,872 - 185,872
Stockholders' equity:
Common stock 59,911 200 60,111 (A) 16,130 76,241
Additional paid in capital 2,914,395 92,000 3,006,395 (A) 1,141,404 4,147,799
Retained earnings (2,979,274) 61,891 (2,917,382) (61,891) (2,979,273)
Total stockholders' equity (4,968) 154,091 149,124 1,095,643 1,244,767
Total liabilities and stockholders'
equity $99,710 $235,285 $334,995 $1,095,643 $1,430,638
20
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AmeriNet Group.com, Inc.
Pro Forma Combined Statement of Income
(Unaudited)
For the period ended
American Internet
AmeriNet Group.com Technical Center Pro Forma
June 30, 1999 June 30, 1999 Total Adjustments Combined
Revenues earned $- $550,147 $550,147 $ - $550,147
Costs of revenue earned - 124,448 124,448 - 124,448
Gross profit - 425,699 425,699 - 425,699
Operating expenses:
Selling - 145,912 145,912 - 145,912
General & Administrative expenses 13,489 244,080 257,569 (A) 35,688 293,257
Total operating expenses 13,489 389,992 403,481 35,688 439,169
Income from operations (13,489) 35,707 22,218 (35,688) (13,470)
Loss from discontinued operations - - - - -
Net loss $(13,489) $35,707 $22,218 $(35,688) $(13,470)
Basic income (loss) per share ($0.096) ($0.003)
Weighted average shares 4,174,778 4,174,778
Fully diluted income (loss) per share ($0.095) ($0.003)
Fully diluted average shares 4,222,199 4,222,199
</TABLE>
21
<PAGE>
AMERINET GROUP COMMUNICATIONS, INC.
NOTES TO PRO FORMA COMBINED
FINANCIAL STATEMENTS
(UNAUDITED)
A) The initial purchase price for the acquisition of all of the common stock
of American Internet Technical Centers was 1,632,978 shares of the
company=s common stock. However, the purchase price is subject to
adjustment based upon the earnings of American Internet Technical Center
over the next six years. The Company recorded approximately $1,198,500 at
December 31, 1998 and $1,070,643 at June 30, 1999 in goodwill which will be
amortized using the straight line method over 15 years.
B) This reflects the capital contribution made by Messers Gleaosn and Umile.
C) To reflect the increase in salaries and benefits paid to the former owner
of American Internet Technical Centers, Inc.
D) To reflect the increase in the amortization expense associated with the
goodwill.
22
Amendments & Supplements to Reorganization Agreement
These amendments and supplements (the "Amendment") to the
Reorganization Agreement closed on by the following defined Parties on
June 25, 1999 (the "Agreement") are made and entered into by and among
AmeriNet Group.com, inc., a Delaware corporation with a class of
securities registered under Section 12 of the Securities Exchange Act
of 1934, as amended formerly operating as Equity Growth Systems, inc.
("AmeriNet" and the "Exchange Act," respectively); American Internet
Technical Center, Inc., a Florida corporation now wholly owned by
AmeriNet ("American") and, Messrs. J. Bruce Gleason, a Florida
resident ("Mr. Gleason") and Michael D. Umile, a Florida resident
("Mr. Umile;" Messrs. Gleason and Umile being sometimes collectively
hereinafter referred to as the "Subscribers"; AmeriNet, American and
the Subscribers being sometimes hereinafter collectively referred to
as the "Parties" and each being sometimes hereinafter generically
referred to as a "Party"). This Agreement is also executed by The
Yankee Companies, Inc., a Florida corporation ("Yankees"), for the
limited purposes specifically set forth in this Agreement directly
involving Yankees.
Preamble:
WHEREAS, a number of the representations by American and the
Subscribers in the Reorganization Agreement and the exhibits thereto
have, after post closing review, proved to be materially inaccurate,
requiring adjustments to the substantive terms of the Reorganization
Agreement; but
WHEREAS, the Parties have agreed that the inaccuracies were
inadvertent and that the long term consequences thereof may prove
minimal, justifying a restructuring that permits the Subscribers to
recapture the bulk of the consideration originally contemplated in the
Reorganization Agreement; and
WHEREAS, the Subscribers have advised AmeriNet and Yankees that
American requires an immediate infusion of $25,000, in addition to the
short term capital requirements disclosed in the Reorganization
Agreement; and
WHEREAS, Yankees has indicated that it is willing to provide such
short term capital immediately, by purchasing 250,000 shares of
AmeriNet Stock (as hereinafter defined) from the Subscribers, and the
Subscribers have agreed to make such AmeriNet stock available for such
purposes, immediately paying over such proceeds to American; and
WHEREAS, the Parties desire to formally memorialize their
understandings concerning the required modifications and supplements
to the Reorganization Agreement required to effect the foregoing:
23
<PAGE>
NOW, THEREFORE, in consideration of the premises, as well as the
mutual covenants hereinafter set forth, the Parties, intending to be
legally bound, hereby amend and supplement the Reorganization
Agreement, as follows:
Witnesseth:
Article One
Amendments & Supplements
The Parties hereby amend & supplement the Reorganization Agreement,
in all manners required to reflect the following changes in the terms
thereof:
A. The Parties hereby agree to modify the provisions of the
Reorganization Agreement pertaining to the shares of AmeriNet
common stock (the "AmeriNet Stock") to be exchanged for all of
American capital stock (the "American Stock"), as follows:
(1) The initial shares of AmeriNet Stock issued to the Subscribers
shall be reduced to 1,482,756 shares of AmeriNet Stock and the
Subscribers will immediately convey 250,000 of such shares to
Yankees in consideration for the sum of $25,000, to be
immediately paid by the Subscribers to American as an
additional capital contribution, correcting a number of the
inaccuracies in their original representations and warranties
in the Reorganization Agreement;
(2) The remaining 750,000 shares of AmeriNet Stock deducted from
the shares originally received by the Subscribers shall be
immediately returned to AmeriNet for cancellation and shall be
reserved for re-issuance to the Subscribers as a component of
the shares of AmeriNet Stock issuable pursuant to the
Performance Criteria, as a result of which, the aggregate
number of shares of AmeriNet Stock issuable shall be increased
from 4,500,000 shares to 5,250,000 shares, as follows:
(3) AmeriNet will issue additional shares of AmeriNet Stock to the
Subscribers as additional shares exchanged for American Stock
(the "Additional Exchange Shares"), predicated on American's
attaining the following annual net, pre-tax profit thresholds
determined as of June 30 of each year in accordance with
generally accepted accounting principals, consistently applied
("GAAP"), as follows:
Goal Time Frame Additional Exchange Shares
(A) $200,000 2000 500,000 Shares; or
$259,000 2000 875,000 Shares;
(B) $500,000 2001 800,000 Shares; or
$559,000 2001 1,175,000 Shares;
(C) $1,000,000 2002 800,000 Shares;
$1,500,000 2003 800,000 Shares;
$2,000,000 2004 800,000 Shares;
$2,500,000 2005 800,000 Shares.
24
<PAGE>
(D) In the event that the thresholds are not attained and
AmeriNet has provided American with at least $250,000 in
funding for their operations, then:
(1) If the net, pre tax earnings are less than 33% of the
required threshold during the subject 12 month
period, the Additional Exchange Shares for such
period will be forfeited;
(2) If the net, pre tax earnings are between 33% and 80%
of the required threshold during the subject 12 month
period, the Additional Exchange Shares for such
period and the required threshold will be carried
over to the next year, increasing both the aggregate
threshold and the aggregate bonus attainable for such
year; and
(3) If the net, pre tax earnings are between 80% and 100%
of the required threshold during the subject 12 month
period, the Additional Exchange Shares for such
period shall be prorated.
(E) In the event that the thresholds are not attained but
AmeriNet has not provided American with at least $250,000
in funding for its operations, then, the Additional
Exchange Shares for such period shall be prorated.
B. The ratio of seats on American's board of directors allocated
to designees of the Subscribers shall be reduced from 2/3 to
1/2, the initial board membership being Messrs. Gleason and
Umile, Michael Harris Jordan, currently AmeriNet's president,
and a further designee of AmeriNet.
C. Messrs. Gleason's and Umile's annual salaries under their
employment agreements with American will be reduced from
$75,000 to $52,000, until profits from operations (after
required internal investments for expansion) attain the levels
contemplated in the Reorganization Agreement, such issue to be
revisited monthly until resolved.
D. If required by AmeriNet, American will hire a senior marketing
and production executive to be designated by AmeriNet on terms
materially identical to those reflected in the employment
agreements between American and the Subscribers and American
will acquire the assets and operations of another Internet
business capable of in house production and hosting of web
sites, designated by AmeriNet.
E. Yankees hereby covenants and agrees to immediately purchase
250,000 shares of AmeriNet Stock from the Subscribers in
consideration for $25,000, provided that such sum is paid
directly to American, for the purpose reflected above, and
acknowledges that such shares have not been registered under
state or federal securities laws, but rather, are being
transferred in reliance on exemptions from the registration
requirements thereof predicated on Yankees' status as an
accredited investor, investment intent and agreement to legending
and stop transfer restrictions required to assure that the shares
will not be transferred except in compliance with applicable
state and federal securities laws.
25
<PAGE>
Article Five
Miscellaneous
5.1 Amendment.
No modification, waiver, amendment, discharge or change of this
Amendment shall be valid unless the same is evinced by a written
instrument, subscribed by the Party against which such modification,
waiver, amendment, discharge or change is sought.
5.2 Notice.
(a) All notices, demands or other communications given hereunder
shall be in writing and shall be deemed to have been duly given
on the first business day after mailing by United States
registered or unaudited mail, return receipt requested, postage
prepaid, addressed as follows:
To AmeriNet:
AmeriNet Group.com, Inc.
902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487
Attention: Michael Harris Jordan, President
Telephone (561) 998-3435, Fax (561) 998-3425;
and, e-mail [email protected]; ; with a copy
to
G. Richard Chamberlin, Esquire; General Counsel
Equity Growth Systems, inc.
14950 South Highway 441; Summerfield, Florida 34491
Telephone (352) 694-6714, Fax (352) 694-9178; and, e-mail,
[email protected].
To the Subscribers:
At such addresses as they provide AmeriNet's transfer
agent for such purpose.
To American:
American Internet Technical Center, Inc.
440 East Sample Road; Pompano Beach, Florida 33056
Attention: J. Bruce Gleason, President.
Telephone (954) 943-4748; Fax (954) 943-4046; e-mail [email protected]
To Yankees:
The Yankee Companies, Inc.
902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487
Attention: Leonard Miles Tucker, President
Telephone (561) 998-2025, Fax (561) 998-3425;
and, e-mail [email protected];
or such other address or to such other person as any Party shall
designate to the other for such purpose in the manner hereinafter
set forth.
(b) (1) The Parties acknowledge that Yankees serves as a
strategic consultant to AmeriNet and has acted as
scrivener for the Parties in this transaction but that
Yankees is neither a law firm nor an agency subject to any
professional regulation or oversight.
(2) Because of the inherent conflict of interests involved, Yankees
has advised all of the Parties to retain independent legal and
accounting counsel to review this Amendment and its exhibits
and incorporated materials on their behalf.
(3) The decision by any Party not to use the services of legal
counsel in conjunction with this transaction shall be solely at
their own risk, each Part acknowledging that applicable rules
of the Florida Bar prevent AmeriNet's general counsel, who has
reviewed, approved and caused modifications on behalf of
AmeriNet, from representing anyone other than AmeriNet in this
transaction.
26
<PAGE>
5.3 Merger.
This instrument, together with the instruments referred to herein,
contains all of the understandings and agreements of the Parties with
respect to the subject matter discussed herein. All prior agreements
whether written or oral are merged herein and shall be of no force or
effect.
5.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and the Closing
hereon and shall be effective regardless of any investigation that may
have been made or may be made by or on behalf of any Party.
5.5 Severability.
If any provision or any portion of any provision of this Amendment,
other than one of the conditions precedent or subsequent, or the
application of such provision or any portion thereof to any person or
circumstance shall be held invalid or unenforceable, the remaining
portions of such provision and the remaining provisions of this
Amendment or the application of such provision or portion of such
provision as is held invalid or unenforceable to persons or
circumstances other than those to which it is held invalid or
unenforceable, shall not be af-
fected thereby.
5.6 Governing Law.
This Amendment shall be construed in accordance with the substantive
and procedural laws of the State of Delaware (other than those
regulating taxation and choice of law) but any proceedings pertaining
directly or indirectly to the rights or obligations of the Parties
hereunder shall, to the extent legally permitted, be held in Broward
County, Florida.
5.7 Indemnification.
Each Party hereby irrevocably agrees to indemnify and hold the other
Parties harmless from any and all liabilities and damages (including
legal or other expenses incidental thereto), contingent, current, or
inchoate to which they or any one of them may become subject as a
direct, indirect or incidental consequence of any action by the
indemnifying Party or as a con-
sequence of the failure of the indemnifying Party to act, whether
pursuant to requirements of this Amendment or otherwise. In the event
it becomes necessary to enforce this indemnity through an attorney,
with or without litigation, the successful Party shall be entitled to
recover from the indemnifying Party, all costs incurred including
reasonable attorneys' fees throughout any negotiations, trials or
appeals, whether or not any suit is instituted.
27
<PAGE>
5.8 Dispute Resolution.
(a) In any action between the Parties to enforce any of the terms
of this Amendment or any other matter arising from this
Amendment, the prevailing Party shall be entitled to recover
its costs and expenses, including reasonable attorneys' fees up
to and including all negotiations, trials and appeals, whether
or not any formal proceedings are initiated.
(b) In the event of any dispute arising under this Amendment, or
the negotiation thereof or inducements to enter into the
Amendment, the dispute shall, at the request of any Party, be
exclusively resolved through the following procedures:
(1) (A) First, the issue shall be submitted to mediation
before a mediation service in Broward County, Florida to
be selected by lot from six alternatives to be provided,
one by Yankees, two by AmeriNet, one by American and one
by each of the Subscribers.
(B) The mediation efforts shall be concluded within ten business
days after their initiation unless the Parties unanimously
agree to an extended mediation period;
(2) In the event that mediation does not lead to a resolution of
the dispute then at the request of any Party, the Parties shall
submit the dispute to binding arbitration before an arbitration
service located in Broward County, Florida to be selected by
lot, from six alternatives to be provided, one by Yankees, two
by AmeriNet, one by American and one by each of the
Subscribers.
(3) (A) Expenses of mediation shall be borne by American, if
successful.
(B) Expenses of mediation, if unsuccessful and of arbitration
shall be borne by the Party or Parties against whom the
arbitration decision is rendered.
(C) If the terms of the arbitral award do not establish a
prevailing Party, then the expenses of unsuccessful
mediation and arbitration shall be borne equally by the
Parties involved.
28
<PAGE>
5.9 Benefit of Amendment.
The terms and provisions of this Amendment shall be binding upon and
inure to the benefit of the Parties, their successors, assigns,
personal representatives, estate, heirs and legatees.
5.10 Captions.
The captions in this Amendment are for convenience and reference
only and in no way define, describe, extend or limit the scope of this
Amendment or the intent of any provisions hereof.
5.11 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, neuter, singular or plural, as the identity
of the Party or Parties, or their personal representatives, successors
and assigns may require.
5.12 Further Assurances.
The Parties agree to do, execute, acknowledge and deliver or cause
to be done, executed, acknowledged or delivered and to perform all
such acts and deliver all such deeds, as-
signments, transfers, conveyances, powers of attorney, assurances,
stock certificates and other documents, as may, from time to time, be
required herein to effect the intent and purpose of this Amendment.
5.13 Status.
Nothing in this Amendment shall be construed or shall constitute a
partnership, joint venture, employer-employee relationship,
lessor-lessee relationship, or principal-agent relationship, rather,
the relationships established hereby are those of exchanging
stockholders in a transaction meeting the requirements of Section
368)(a)(1)(B) of the Code, and parties incidental thereto.
5.14 Counterparts.
(a) This Amendment may be executed in any number of counterparts.
(b) All executed counterparts shall constitute one Amendment
notwithstanding that all signatories are not signatories to the
original or the same counterpart.
(c) Execution by exchange of facsimile transmission shall be deemed
legally sufficient to bind the signatory; however, the Parties
shall, for aesthetic purposes, prepare a fully executed
original version of this Amendment which shall be the document
filed with the Commission.
29
<PAGE>
5.15 License.
(a) This Amendment is the property of Yankees and the use hereof by
the Parties is authorized hereby solely for purposes of this
transaction.
(b) The use of this form of Amendment or of any derivation thereof
without Yankees' prior written permission is prohibited.
(c) This Amendment shall not be construed more strictly against any
Party as a result of its authorship.
In Witness Whereof, the Parties have caused this Agreement to be
executed effective as of the date last set forth below.
Signed, sealed and delivered
In Our Presence:
AmeriNet Group.com, Inc.
--------------------------------
_________________________________ By: /s/ Michael H. Jordan
Michael Harris Jordan, President
(Corporate Seal)
Attest: /s/ G. Richard Chamberlin
G. Richard Chamberlin, Secretary
Dated: August 25, 1999
American Internet Technical Centers, Inc.
_________________________________ (A Florida corporation)
_________________________________ By: /s/ J. Bruce Gleason
J. Bruce Gleason, President
(Corporate Seal)
Attest: /s/ Michael D. Umile
Michael D. Umile, Secretary
Dated: August 25, 1999
Subscribers
---------------------------------
--------------------------------- /s/ J. Bruce Gleason
---------------------------------
--------------------------------- /s/ Michael D. Umile
Dated: August 25, 1999
The Yankee Companies, Inc.
for the limited purposes specifically
set forth in this Agreement
---------------------------------
_________________________________ By: /s/ Leonard M. Tucker
Leonard Miles Tucker, President
(Corporate Seal)
Attest: /s/ William A. Calvo, III
William A. Calvo, III, Secretary
30
DASZKAL, BOLTON, MANELA, DEVLIN & CO.
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
2401 N.W. BOCA RATON BOULEVARD, SUITE 100 BOCA RATON, FLORIDA 33431
TELEPHONE (561) 367-1040 FAX (561) 750-3236
JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE
MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
ROBERT A. MANELA, CPA, P.A.
TIMOTHY R. DEVLIN. CPA, P.A.
MICHAEL S. KRIDEL, CPA, P.A.
We consent to the use of our report on the Financial Statements of American
Internet Technical Center, Inc. for the year ended December 31, 1998 dated
August 19, 1999, in the Form 8-K, dated September 8, 1999.
/s/ Daskal Bolton Manela Devlin & Co.
Boca Raton, Florida
September 8, 1999
31
