U.S. 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 nine month period ended September 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ____________________to_____________________
Commission File No. 0-23806
I/NET INC.
(Name of Small Business Issuer in its Charter)
DELAWARE 87-0046720
(State or Other Jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
643 West Crosstown Parkway
Kalamazoo, Michigan 49008
(Address of Principal Executive Officers)
Issuer's Telephone Number: (616) 344-3017
Indicate by check mark whether the Issuer (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Exchange Act of 1934 during the
preceding 12 months (or for 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.
(1) Yes X No __ (2) Yes X No__
<PAGE>
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State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practical date:
September 30, 1998
31,037,652
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
The consolidated financial statements included herein have been prepared by
I/NET Inc. ("I/NET" or the "Company") without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. It is suggested that
these consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in I/NET's 1997
annual report on Form 10-KSB
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the financial
position of the Company as of September 30, 1998, the results of its operations
for the nine month periods ended September 30, 1998 and 1997, and its cash flows
for the nine month periods ended September 30, 1998 and 1997. All such
adjustments are of normal and recurring nature.
<PAGE>
I/NET Inc.
Consolidated Statements of Income
(Unaudited)
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Nine Months Ending
September 30, September 30,
1998 1997
Revenues $ 1,338,856 $ 1,094,997
Cost of Revenues 652,740 476,697
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Gross Profit $ 686,116 $ 618,300
Selling, General, and Administrative Expenses 391,797 468,589
----------- -----------
Earnings from operations $ 294,319 $ 149,711
Interest Expense - Net of interest income of
$5,864 in 1998 and $789 in 1997. (58,696) (79,126)
----------- -----------
Earnings before Extraordinary Item $ 235,623 $ 70,585
Extraordinary item:
Gain on extinguishment of debt (note 13) - 97,946
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Net Earnings $ 235,623 $ 168,531
=========== ===========
Net Earnings per share
Earnings before Extraordinary Item $ .01 $ -
Extraordinary Item $ - $ -
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Net Earnings per share $ .01 $ -
=========== ===========
Basic and Diluted Weighted Average Number of
Common Shares Outstanding 31,037,652 30,937,652
See accompanying summary of accounting policies and notes to consolidated
financial statements
<PAGE>
I/NET, Inc.
Consolidated Balance Sheet
(unaudited)
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September 30, 1998
Assets (Note 2 and 3)
Current Assets
Cash $ 150,319
Trade Receivables 152,571
-----------
Total Current Assets $ 302,890
Office Furniture and Equipment, Net of
Accumulated Depreciation $184,591 26,304
-----------
Total Assets $ 329,194
===========
Liabilities and (Capital Deficit)
Current Liabilities
Accounts Payable $ 141,207
Accruals:
Commissions (Note 1) 258,000
Other 139,660
Advances from Stockholders' (Note 2) 100,780
Current maturities of long-term debt (Note 3) 715,000
-----------
Total Current Liabilities $ 1,354,647
Long-term Debt, less current maturities (Note 3) 508,036
-----------
Total Liabilities $ 1,862,683
Commitments and Contingencies (Notes 8 and 11) -
Stockholders' Equity (Capital Deficit)
Common Stock $.001 par value; Authorized
50,000,000 Shares:
Issued and outstanding 31,037,652 31,038
Additional Paid in Capital 11,886,674
Deficit (13,451,201)
------------
Total (Capital Deficit) (1,533,489)
Total Liabilities and (Capital Deficit) $ 329,194
============
See accompanying summary of accounting policies and notes to consolidated
financial statements
<PAGE>
I/NET Inc.
Consolidated Statements of Cash Flows
(unaudited)
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Nine Months Ending
September 30 September 30
1998 1997
Operating Activities
Net Earnings $235,623 $ 168,531
Depreciation and Amortization 22,500 22,500
Extraordinary Item: Gain on
Extinquishment of debt - (97,946)
Changes in Assets and Liabilities
Accounts Receivable (72,815) (157,278)
Accounts Payable 64 93,324
Accruals 961 (7,377)
--------- ---------
Cash Provided By Operating Activities $186,333 $ 21,754
Investing Activities
Capital Expenditures (12,512) -
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Cash (Used In) Investing Activities $(12,512) -
Financing Activities
Advances from Stockholder - 50,000
Repayment of Advances from Stockholders (33,998) -
Proceeds from the Issuance of Common Stock - 50,000
Proceeds from the Issuance of Notes Payable - 50,000
Principle Payments on Long-Term Debt (125,443) (166,995)
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Cash (Used In) Financing Activities (159,441) $(16,995)
--------- ---------
Increase in Cash and Cash Equivalents $ 14,380 $ 4,759
Cash and Cash Equivalents, Beginning of Period 135,939 20,517
--------- ---------
Cash and Cash Equivalent, End of Period $ 50,319 $ 25,276
========= =========
See accompanying summary of accounting policies and notes to consolidated
financial statements
<PAGE>
I/NET, Inc.
Summary of Accounting Policies
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Basis of Presentation
The consolidated financial statements include the accounts of the Company,
I/NET, Inc., (a Delaware Corporation) and its wholly owned subsidiary I/NET,
Inc. (a Michigan Corporation). Only the subsidiary remains an active Company and
therefore the consolidated financial statements presented within are those of
the subsidiary.
Description of the Busines
The Company is engaged in the business of providing Website services on a
contract basis to private sector clients. In addition, the Company has further
developed and is marketing Internet computer software products. Its major
customers are International Marketing Strategies (IMS) and International
Business Machines (IBM).
Use of Estimate
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with maturity of three months or less when purchased
to be cash equivalents.
Office Furniture, Equipment and Deprecition
Office furniture and equipment are stated at cost. Depreciation is computed
by the straight-line method for financial reporting purposes over the estimated
useful lives of the assets and by accelerated methods for tax purposes.
Taxes on Income
Deferred income taxes are recorded to reflect the future tax consequences
of temporary differencess between the tax bases of assets and liabilities and
<PAGE>
I/NET, Inc.
Summary of Accounting Policies
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between the tax bases of assets and liabilities and their financial reporting
amounts.
Developed Computer Software
Software development costs are accounted for in accordance with the
provisions of Statement of Financial Accounting Standard (SFAS) No. 86,
"Accounting for the Cost of Computer Software To Be Sold, Leased or Otherwise
Marketed." Software development costs and certain product enhancements, when
significant, are capitalized subsequent to the establishment of technological
feasibility for the product and prior to the products general release to
customers. Costs incurred prior to technological feasibility or subsequent to
the product's general release to customers, as well as selling, general, and
administrative costs associated with the products, are expensed as incurred.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash, receivables, notes
payable, accounts payable, and long-term debt. Due to the short-term nature of
the items, other than long-term debt and the variable interest rates on a
substantial portion of the long-term debt, management estimates that carrying
amounts of the Company's financial instruments approximate their fair values at
September 30, 1998.
Revenue Recognition
Revenues for the sale of the Company's Internet products are recognized
when the product has been accepted by the customer. The Company records revenue
for its long-term contracts on the percentage-of-completion basis. Under this
method, revenues are determined by comparing costs incurred to date to the
estimated total costs for the contract. The proportionate amounts of contract
revenue are then recorded based on this percentage of completions of costs.
Earnings Per Share
Earnings per share amounts have been calculated using the weighted average
number of common shares outstanding, for the respective periods. Effective
<PAGE>
I/NET Inc.
Summary of Accounting Policies
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December 31, 1997, the Company adopted SFAS No. 128, "Earnings per Share."
This pronouncement requires dual presentation of basic and diluted earnings per
share. All outstanding warrants and options are anti-dilutive at
September 30, 1998.
Comprehensive Income
In July 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements. The objective
of SFAS 130 is to report a measure of all changes in equity of an enterprise
that result from transactions and other economic events of the period other than
transactions with owners. Comprehensive income is the total of net income and
all other non-owner changes in equity. The Company adopted this standard
effective January 1, 1998. Total comprehensive income was the same as net income
for the nine months ended September 30, 1998 and 1997 respectively.
New Accounting Pronouncements
In July 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information" were issued. SFAS No. 131 requires disclosure of reportable
operating segments. In October 1997, Statement of Position (SOP) 97-2 "Software
Revenue Recognition" was issued by the AICPA Accounting Standards Executive
Committee. This SOP provides guidance on when revenue should be recognized and
in what amounts for licensing, selling, leasing or otherwise marketing computer
software. These statements are effective for the Company for the year ended
December 31, 1998. The Company is reviewing these pronouncements to determine
their applicability to the Company, if any.
See accompanying notes to consolidated financial statements
<PAGE>
I/NET Inc.
Notes to Consolidated Financial Statements
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1. Commissions
In prior years the Company agreed to release a distributor from its
exclusive contract to distribute certain I/NET products. In exchange for this
release I/NET agreed to pay a 7.5% commission to the other distributor of
I/NET's sales of certain products sold through September 30, 1999 but at a
minimum of $250,000 and a maximum amount of $500,000.
2. Short-term Advances From Stockholders
Advances from stockholders consist of:
September 30, 1998
Non-interest bearing notes payable to
stockholders, due on demand $ 10,280
Secured stockholder's advances bearing
interest at 8%, and are due on demand 90,500
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$ 100,780
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3. Long-term Debt
Long-term debt consists of:
September 30, 1998
Notes payable to vendors (see below) $ 879,096
Notes payable to stockholders
bearing interest at 8% and due in
January, 2002, secured by all
the company's assets 343,940
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1,223,036
Less current maturities 715,000
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Total Long-term Debt $ 508,036
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<PAGE>
I/NET Inc.
Notes to Consolidated Financial Statements
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Notes Payable to Vendors
Unsecured notes payable to various vendors totaling $879,096 are due in
various installments and at varying interest rates.
Two notes totaling $440,655 are due on demand. These notes bear interest at
the prime rate plus 2% (effectively 10.25% at September 30, 1998).
Another note in the amount of $98,950 is due in monthly installments at the
rate of 5% of the previous months cash receipts (as defined) but at a minimum of
$2,000 bi-monthly. The principle balance of this note was due in September 1996.
The Company is in default on repayment on this note but continues to make
repayments as required by the original note. This note bears interest at 8% and
is classified as current.
Another note in the amount of $243,536 calls for monthly installments of 5%
of the previous months cash receipts (as defined) but at a minimum rate of
$10,000 bi-monthly and bears interest at the prime rate plus 2%. Final payment,
assuming minimum payments only is, December 2003.
Another note in the amount of $87,299 is due in monthly installments of 5%
of the previous month's cash receipts (as defined) but at a minimum rate $3,000
monthly and bears interest at 10%. Final payment, assuming minimum payments
only, is July 2001.
Another note in the amount of $8,656 is due in monthly installments of 5%
of the previous months cash receipts (as defined) but at a number minimum of
$2,000 bi-monthly and bears interest at the prime rate plus 2%. Final payments
assuming minimum payment only is July 1999.
<PAGE>
I/NET Inc.
Notes to Consolidated Financial Statements
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For the years following September 30, 1998 aggregate maturities of
long-term debt over the next five years assuming repayment of stockholders'
advances (Note 2) and notes are as follows:
1999 $715,000
2000 $ 73,000
2001 $ 72,000
2002 $394,000
2003 $ 56,000
Subsequent to 2003 $ 14,000
4. Stock Warrants
During prior years, the Company sold common stock for cash, trademark, and
extinguishment of debt. In connection with the issuances, the Company issued
warrants to the purchasers of the common stock to acquire up to 1,839,285 shares
of common stock at $2.40 per share. The warrants expire through 1999 and are not
dilutive. Also, in connection with these sales, underwriters were issued
warrants for 1,145,714 shares of common stock at a weighted average price of
$.90 and are exercisable for five years, expiring in 1999. In 1997, the Company
issued 460,000 additional warrants at prices ranging from $.50 to $1.00. These
warrants were issued in connection with the obtaining of the right for the
Company to port certain Netscape Communications Corporation Internet Products to
the IBM AS/400 platform. (See Note 11). These warrants expire in 2000. All
warrants were exercisable at September 30, 1998.
<PAGE>
I/NET Inc.
Notes to Consolidated Financial Statements
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5. Related Party Transactions/Major Customers
The Company provided Internet products, and websight consulting services to
a few major customers namely International Business Machines (IBM) and
International Marketing Strategies (IMS) as follows:
Nine months ended September 30, 1998 1997
Internet Products:
LANSA, Inc. - $ 138,000
IBM $ 375,000 $ -
IMS 376,000 379,000
$ 751,000 $ 517,000
Websight Consulting Services:
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IBM $ 506,000 $ 500,000
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IBM is also a minority stockholder in the Company
6. Taxes on Income
Income taxes are calculated using the liability method specified by
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes."
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
<PAGE>
I/NET Inc.
Notes to Consolidated Financial Statements
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Significant components of the Company's deferred tax assets are as follows:
September 30, 1998
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Deferred Tax Assets:
Accruals $ 97,000
Trademark 61,000
Net operating loss carryforwards 3,507,000
Tax Credit carryforwards 42,000
Capital loss carryforwards 24,000
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Total Deferred Tax Assets $ 3,731,000
Valuation Allowance ( 3,731,000)
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$ -
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As of September 30, 1998, the Company had a net operating loss carryforward
approximately $10,021,000 and investment tax credit carryforwards of
approximately $42,000 available to reduce future taxable income and taxes,
respectively. These carryforwards expire from 1998 through 2011.
7. Employee Benefit Plan
The Company has a profit sharing defined contribution pension plan covering
substantially all employees. Under the plan, employees may make tax deferred
voluntary contributions which, at the discretion of the Company Board of
Directors, may be matched within certain limits by the Company. In addition, the
Company may make additional discretionary contributions to the plan as profit
sharing contributions. All contributions to the plan are limited by applicable
Internal Revenue Code regulations. There were no Company contributions charges
against operations in 1998 or 1997.
<PAGE>
I/NET Inc.
Notes to Consolidated Financial Statements
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8. Operating Lease
The Company leases its facilities and certain equipment under
non-cancelable leases. Rental expense under these leases was approximately
$79,000 for the month nine months ended September 30, 1998 and $58,000 for the
nine months ended September 30 1997. Future minimum annual lease payments for
the years subsequent to September 30, 1998 are as follows:
1999 $112,000
2000 $ 94,000
2001 $ 40,000
9. Incentive Stock Option Plan
The Company maintains and incentive stock option plan that provides for the
granting of options to officers and other key employees at an exercise price not
less than 100% of the fair market value on the date of the grant. Twenty percent
of the options become exercisable each year following the date they were
granted, and can remain outstanding for five years following the day they become
fully vested. Changes in options outstanding are summarized as follows:
Option Price Weighted Average
Shares Per Share Price per share
January 1, 1997 42,500 $2.50 $2.50
Granted June 1997 100,000 .37 .37
Lapsed ( 27,500) 2.50 2.50
December 31, 1997
and September 30, 1998 115,500 $.37-2.50 $.65
At September 30, 1998, 582,255 shares of common stock are reserved for the
incentive stock option plan and 32,000 options were vested and exercisable. The
remaining contractual life on these options is four years. The remaining
contractual life of the 83,000 shares outstanding is nine years.
<PAGE>
I/NET Inc.
Notes to Consolidated Financial Statement
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Under SFAS no. 123 "Accounting for Stock Based Compensation", the Company
is required to provide pro forma information regarding net income and earnings
per share as if compensation cost for the Company's stock option plan had been
determined in accordance with the fair based method prescribed in SFAS no. 123.
The Company estimates the fair value of each stock option at the grant date by
using the Black-Scholes option pricing model with the following assumptions used
for the grant in 1997; expected volatility of 93 percent; risk-free interest
rate of 6.4 percent, and an expected option life at 10 years.
Under the accounting provisions of SFAS No. 123, the Company's net income
for the nine months ended September 30, 1998 would not have been affected.
10. Supplemental Disclosure of Cash Flow Information
Interest paid for the nine months ended September 30, 1998 and 1997 was
$34,000 and $44,000 respectively. The Company paid no income taxes during 1998
and 1997.
11. Contingencies
Royalties
In September 30, 1997, the Company entered into a software license
agreement with Netscape Communications Corporation (Netscape) wherein Netscape
granted to the Company the right to port certain of its Internet Server products
to the IBM AS/400 platform. This agreement is for a period of three years and
allows the Company to market and distribute the ported products upon their
modification to the AS/400 platform.
In exchange for this license agreement, I/NET has agreed to pay minimum
royalties to Netscape in the amount of $3,000,000 according to the following
repayment schedule:
<PAGE>
I/NET Inc.
Notes to Consolidated Financial Statements
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Paid by IBM on behalf of I/NET in October 1997 $ 250,000
Paid by IBM on behalf of I/NET in September 1998 $ 750,000
September 30, 1999 $1,000,000
September 30, 2000 $1,000,000
In addition, I/NET has agreed to pay Netscape an annual development support
fee of $250,000 for a three year period. Netscape has agreed to waive this fee
until the products are ready to be marketed.
IBM has guaranteed to Netscape the above listed royalties in the event that
product sales are insufficient to repay amounts due under this agreement.
In addition, IBM will provide advances against royalties in the amount of
$600,000 as certain tasks are completed during the porting of the Netscape
products to the IBM platform. These amounts will be reimbursed to IBM after
deduction of Netscape royalties, in the amount of 10% of total revenue received
from the sale of the ported products. The first reimbursement was due in March
1998. The Company recognized $200,000 of revenue from these advances in 1997 and
$375,000 in the first nine months of 1998 as certain milestone events were met.
These advances are treated as if under a research and development agreement
whereby I/NET is not obligated to repay any of these funds advanced by IBM
except from royalties of future sales, if any. It anticipates recording the
remaining $25,000 as revenue as other milestones are met in 1998.
Litigation
The Company is involved in various legal actions arising from the normal
course of business. Management does not anticipate any material losses as a
result of these proceedings.
<PAGE>
I/NET Inc.
Notes to Consolidated Financial Statements
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12. Continued Existence
The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company had
suffered recurring losses from operations in prior years, has a significant
operating capital deficit and requires additional capital to continue its
product development. Management believes the Company will continue as a going
concern and is actively marketing its products, which would enable the Company
to meet its current obligations and provide additional funds for continue new
product development. In addition, management is currently developing several
additional projects for its services and products. However, there can be no
assurance these activities will be successful.
13. Management's Discussion And Analysis of Financial Condition and Results of
Operation
Nine months ended September 30, 1998 and 1997.
Results of Operation
Revenues for nine months ended September 30, 1998 were $1,338,856 as
compared to $1,094,997 for the nine months ended September 30, 1998. When
analyzed by product category, revenues of Website consulting services to IBM
were $506,000 in 1998, as compared to $500,000 in 1997. Sale of Internet
products accounted for revenues of $756,000 in 1998 and $517,000 in 1997.
Revenue from the porting of Netscape products, which are included in the above
sale of Internet products to the AS/400 operating system produced revenue of
$375,000 in 1998 and $0 in 1997.
Cost of revenues increased by $176,000 as compared to 1997. The primary
cause for this increase was the hiring of additional development personnel for
the Netscape and IBM projects.
<PAGE>
I/NET Inc.
Notes to Consolidated Financial Statements
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General and administrative expenses decreased by $75,000 as compared to
1997. The cause for this decrease was the reduction of administrative personnel
costs and continued cost containment measures.
Interest expenses decreased by $20,000 due to decreased borrowings in the
first nine months of 1998 as interest-bearing debt continues to be repaid.
Also in 1997, the Company recognized an extraordinary item in the amount of
$98,000 from the recognition of forgiveness of indebtedness.
14. Financial Condition and Liquidity
The Company's primary need for capital has been and Liquidity to invest in
computer software development. As of September 30, 1998. The Company's working
capital deficit was $1,052,000 as compared to a deficit of $1,317,000 at
September 30, 1997, the resulting decrease in working capital deficit has been
provided by earnings in 1998 and 1997.
The Company believes that the additional sales provided by the above
mentioned agreements, the continued development of new products, together with
the renegotiations of its defaulted debt, should provide the Company with
sufficient working marketing its products, which would enable the Company to
meet its current obligations and provide additional funds for continue new
product development. In addition, management is currently negotiating several
additional several additional contracts for its services and products. However,
there can be no assurance these activities will be successful.
During the third quarter of 1998, the Company introduced the Beta Version
of its Netscape Servers running on the AS/400. This Beta Version has been
initially well received. The Company has scheduled the next release of this
Internet product at the end of 1998.
<PAGE>
I/NET Inc.
Notes to Consolidated Financial Statements
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In June 1997, SFAS No. 130 "Reporting Comprehensive Income "Segments of an
Enterprise Related Information" were issued by the AICPA Accounting Standards
Executive Committee. This SOP provides guidance on when revenue should be
selling or otherwise marketing computer software. All statements are effective
for the Company for the year ended December 31, 1998. The Company is reviewing
this pronouncement to determine its applicability to the Company, if any.
All I/NET developed software is year 2000 compliant.
"SAFE HARBOR" Statement Under the Private Securities Litigation Act of 1995
Certain information contained in this form 10-QSB may constitute or include
forward-looking statements. Such forward-looking information involves important
known and unknown risks and uncertainties and other factors that may cause the
actual results, performance, or achievements of the Company to be materially
different from any future results, performance, or achievements expressed or
implied by such forward-looking statements. These risks and uncertainties
include, but are not limited to, uncertainties relating to economic conditions;
possible future acquisitions and divestitures; technological changes and
developments in the competitive environment in which the Company operates;
spending patterns of the Company's customers; success of the Company in
negotiations with its lenders; size, timing, and recognition of revenue from
significant orders; ability of the Company to successfully implement its
business strategy of developing and licensing client/server decision support
application software designed to address specific industry markets; new product
introductions and announcements by the Company's competitors; changes in Company
strategy; product life cycles, cost and continued availability of third party
software and technology incorporated into the Company's products; potential
obsolescence of the Company's existing products or services; cost ans
<PAGE>
I/NET Inc.
Notes to Consolidated Financial Statements
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availability of developers, success in and expense associated with the
development, production, testing, marketing, and shipping of products, including
a failure to ship new products and technologies when anticipated, failure of
customers to accept these products and technologies when planned, and any
defects in products; perceived absolute or relative overall value of the
Company's products by the company's customers, including features, quality, and
pricing compared to other competitive products; amount, and rate of growth in,
the Company's selling, general and administrative expenses; occurrence of any
expenditures and expenses, including depreciation and research and development
expenses; costs and other effects of legal and administrative cases and
proceedings (whether civil or criminal), settlements, and investigations,
claims, and changes in those items; developments or assertions by or against the
Company relating to intellectual property rights; adoption of new, or changes
in, accounting policies and practices and the application of such policies and
practices; and effects or changes within the Company's organization or in
compensation and benefit plans. Since the purchase of the Company's products is
relatively discretionary and involves a commitment of capital, in the event of
any downturn in any potential customers' business or the economy in general,
purchases of the Company's products may be deferred or canceled. Further, the
Company's expense levels are based, in part, on its expectations as to future
revenue and a significant portion of the Company's expenses do not vary with
revenue. As a result, if revenue is below expectations, results of operations
are likely to be materially adversely affected. Shareholders are cautioned not
to place undue reliance on the forward-looking statements made in this Form
10-QSB, which speaks only as of the date hereof.
<PAGE>
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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following person on behalf of the
registrant and in the capacities and on the dates indicated:
I/NET, Inc.
Date: October 23, 1998
By: /S/ Stephen J. Markee
_________________________________
Stephen J. Markee
Director, President, CEO and CFO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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<CIK> 0000789860
<NAME> I/NET
<MULTIPLIER> 1
<CURRENCY> $
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Sep-30-1998
<EXCHANGE-RATE> 1
<CASH> 150,319
<SECURITIES> 0
<RECEIVABLES> 152,571
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 302,890
<PP&E> 210,895
<DEPRECIATION> 184,591
<TOTAL-ASSETS> 329,194
<CURRENT-LIABILITIES> 1,354,647
<BONDS> 0
0
0
<COMMON> 31,038
<OTHER-SE> 11,886,674
<TOTAL-LIABILITY-AND-EQUITY> 329,194
<SALES> 1,338,856
<TOTAL-REVENUES> 1,338,856
<CGS> 652,740
<TOTAL-COSTS> 652,740
<OTHER-EXPENSES> 391,797
<LOSS-PROVISION> 0
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