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 June 30, 2000
-------------
[ ] 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.
(Exact Name of Small Business Issuer as specified 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
Check whether the Issuer: (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
The registrant had 31,062,652 shares of common stock outstanding as of June 30,
2000.
Transitional Small Business Disclosure Format:
Yes No X
--- ---
<PAGE>
ITEM 1. FINANCIAL INFORMATION
I/NET, Inc.
Consolidated Balance Sheet
(Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
June 30, 2000
-------------
Assets (Notes 2 and 3)
Current Assets
Cash $214,755
Receivables:
Trade $161,556
Note (Note 5) 209,000 370,556
------- -------
Total Current Assets 585,311
Office Furniture and Equipment, Net of
Accumulated Depreciation of $28,995 10,587
-------
Total Assets $595,898
=======
Liabilities and Capital Deficit
Current Liabilities
Accounts Payable $6,825
Accruals:
Commissions (Note 1) $258,000
Interest 179,145
Other 75,400 512,545
------ ---------
Advances from Stockholders (Note 2) 95,500
Current maturities of long-term debt (Note 3) 509,000
---------
Total Current Liabilities 1,123,870
Long-term Debt, less current maturities (Note 3) 453,566
---------
Total Liabilities 1,577,436
Commitments and Contingencies (Notes 7, 8, 11 and 14)
Capital Deficit (Notes 4 and 9)
Common Stock $.001 par value; Authorized 50,000,000 Shares:
Issued and outstanding 31,062,652 31,063
Additional Paid in Capital 11,886,674
Deficit (12,899,275)
------------
Total Capital Deficit (981,538)
------------
Total Liabilities and Capital Deficit $595,898
============
See accompanying summary of accounting policies and notes to consolidated
financial statements
<PAGE>
I/NET, Inc.
Consolidated Statements of Earnings
(Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Three Months Ended Six Months Ended
----------------------------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- ----------
Revenues (Note 5) $348,668 $373,931 $758,569 $894,549
Cost of Revenues 213,060 182,273 422,453 455,167
----------- ----------- ----------- ----------
Gross Profit 135,608 191,658 336,116 439,382
Selling, General, and
Administrative Expenses 132,009 123,484 275,687 299,296
----------- ----------- ----------- ----------
Earnings from operations 3,599 68,174 60,429 140,086
Other income (expense):
Interest expense (14,465) (16,885) (29,507) (33,561)
Interest income 5,825 461 11,156 1,595
Other income (expense) (5) (2,677) 879 2,909
Gain on sale of securities
(Note 13) - - 28,199 -
----------- ----------- ----------- ----------
(8,645) (19,101) 10,727 (29,057)
----------- ----------- ----------- ----------
Earnings (Loss) before
Extraordinary Item
and Income Taxes (5,046) 49,073 71,156 111,029
Income Tax Benefit 25,000 - 25,000 -
----------- ----------- ---------- -----------
Earnings before Extraordinary
Item 19,954 - 96,156 -
Extraordinary Item:
Gain on extinquishment of
debt net of tax effect
(Note 3) 48,975 - 48,975 -
----------- ----------- ----------- ----------
Net Earnings $68,929 $49,073 $145,131 $111,029
=========== =========== ========== ==========
Net Earnings per Share (Note 12)
Basic and Diluted $- $- $- $-
=========== =========== =========== ==========
Average Number of Basic Common
Shares Outstanding (Note 12) 31,062,652 31,037,652 31,050,252 31,037,652
=========== =========== =========== ==========
Average Number of Diluted Common Shares
Outstanding (Note 12) 31,093,613 31,718,224 31,081,113 31,718,224
=========== =========== =========== ==========
See accompanying summary of accounting policies and notes to consolidated
financial statements
<PAGE>
I/NET, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Six Months Ended
---------------------------
June 30, June 30,
2000 1999
---------- ---------
Operating Activities
Net Earnings $145,131 $111,029
Depreciation and Amortization 6,000 8,619
Gain on sale of securities (Note 13) (28,199) -
Extraordinary item:
Gain on extinquishment of debt
(Note 3) (73,975) -
Changes in Assets and Liabilities
Trades Receivables (6,303) (72,538)
Accounts Payable (13,792) (38,330)
Accruals 60,011 (5,287)
--------- --------
Cash Provided By Operating Activities 88,873 3,493
Investing Activities
Proceeds from sale of securities (Note 13) 28,199 -
Capital expenditures - (2,725)
--------- --------
Cash Provided By (Used In) Investing Activities 28,199 (2,725)
Financing Activities
Principal payments on notes to stockholders (10,194) (17,800)
Principal payments on long-term debt (63,804) (33,435)
--------- --------
Cash Used In Financing Activities (73,998) (51,235)
Increase (Decrease) in Cash and Cash Equivalents 43,074 (50,467)
Cash and Cash Equivalents, Beginning of Period 171,681 103,847
--------- --------
Cash and Cash Equivalents, End of Period $214,755 $53,380
========= ========
See accompanying summary of accounting policies and notes to consolidated
inancial statements
<PAGE>
I/NET, Inc.
Summary of Accounting Policies
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Basis of Presentation
----------------------
The consolidated financial statements included herein have been prepared by
I/NET, Inc. (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 the Company's 1999 annual
report on Form 10-KSB.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all normal adjustments considered necessary to present fairly
the financial position of the Company as of June 30, 2000, the results of its
operations for the three- month and six- month periods ended June 30, 2000 and
1999 and its cash flows for the six- month periods ended June 30, 2000 and 1999.
All such adjustments are of a normal and recurring nature. Interim results are
not necessarily indicative of results for a full year.
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) and its wholly-owned subsidiary, Stek, Ltd. (a
Caymanian corporation).
Stek, Ltd. was formed to receive shares of SEGOES, Ltd. which it earned for the
successful completion of the development, installation and operation of the
SEGOES website, an Internet- based offshore asset management and trading system.
Description of the Business
---------------------------
The Company operates as one business segment, which provides Website consulting
services and development of Internet computer software products. The Company
does not operate based upon product lines but as one business unit. Its major
customers are International Business Machines (IBM) and Appsmall.com (See Note
5).
Use of Estimates
----------------
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 significantly from those estimates.
<PAGE>
I/NET, Inc.
Summary of Accounting Policies
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 Depreciation
--------------------------------------------
Office equipment and furniture are stated at cost. Depreciation is computed
principally by the straight-line method for financial reporting purposes over
the estimated useful lives of the assets and by accelerated methods for tax
purposes.
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 product's 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 June 30, 2000.
Revenue Recognition
-------------------
Revenues for the sale of the Company's Internet products are recognized when the
customer has accepted the product. The Company records its revenue from Website
consulting contracts on a monthly basis as amounts are invoiced for time and
expenses incurred.
Earnings Per Share
-------------------
Basic earnings per share includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflect, in periods in
which they have a dilutive effect, the effect of common shares issuable upon
exercise of stock options and warrants.
<PAGE>
I/NET, Inc.
Summary of Accounting Policies
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
New Accounting Pronouncements
-----------------------------
SFAS 133 regarding derivative instruments is effective for all fiscal quarters
of fiscal years beginning after June 15, 2000, as amended by SFAS 137. The
statement will become effective for the Company for the quarter ended March 31,
2001. Historically, the Company has not entered into derivative contracts either
to hedge existing risks or for speculative purposes. Accordingly, the Company
does not expect adoption of the new standard to affect its financial statements.
See accompanying notes to consolidated financial statements.
<PAGE>
I/NET, Inc.
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1. Commissions
-----------
During a prior year, the Company negotiated to release a distributor from its
exclusive contract to distribute certain Company products. In exchange for this
release, the Company agreed to pay commissions totaling $258,000 at June 30,
2000.
2. Short-term Advances from Stockholders
-------------------------------------
Short-term advances from stockholders as of June 30, 2000 consist of:
Non-interest bearing notes payable to
Stockholders, due on demand $20,500
Stockholder's advances bearing interest at 8%, due
on demand and secured by all the Company's assets 75,000
-------
$95,500
3. Long-term Debt
--------------
Long-term debt as of June 30, 2000 consists of:
Notes payable to vendors (see below) $661,118
Notes payable to stockholders bearing interest
at 8% and due in December, 2001, secured
by all the Company's assets 301,448
-------
962,566
Less current maturities 509,000
-------
Total Long-term Debt $453,566
========
<PAGE>
I/NET, Inc.
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Notes Payable to Vendors
-------------------------
Unsecured notes payable to various vendors totaling $661,118 are due in various
installments and at varying interest rates.
A note in the amount of $374,023 is due on demand. This note bears interest at
the prime rate plus 2% (effectively 11.50% at June 30, 2000).
Another note in the amount of $62,410 is due in monthly installments at the rate
of 5% of the previous month's cash receipts (as defined) but at a minimum of
$2,000 bi-monthly. The principle balance of this note, which the Company was
unable to pay, was due in September 1996. The Company continues to make monthly
payments as required by the original note. This note bears interest at 8% and is
classified as current.
Another note in the amount of $195,518 is due in monthly installments of 5% of
the previous month's 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 June 2004.
Another note in the amount of $29,167 is due in monthly installments of 5% of
the previous month's cash receipts (as defined), but at a minimum rate of $3,500
monthly and bears interest at 10%. Final payment, assuming minimum payments
only, is March l, 2001.
Aggregate maturities of long-term debt over the next five years assuming
repayment of stockholders' advances (Note 2) and notes are as follows:
2001 $604,000
2002 $348,000
2003 $52,000
2004 $54,000
During April 2000, the Company reached an agreement with a note holder, whereby
the Company exchanged 25,000 of its common shares of stock for forgiveness of
$74,000 of indebtedness less an income tax benefit of $25,000. This transaction
has been treated as an extraordinary item for financial statement purposes.
4. Stock Warrants
--------------
In 1997, the Company issued 460,000 warrants at prices ranging from $0.50 to
$1.00 with a weighted average price of $.69. These warrants were issued in
connection with obtaining the right for the Company to port certain Netscape
Communications Corporation Netscape Internet products to the IBM AS/400
platform. These warrants expire in September 2000.
<PAGE>
I/NET, Inc.
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5. Major Customers
---------------
The Company provided Internet products, website consulting services and support
services to three major customers totaling $692,000 and $644,000 for the six
months ending June 30, 2000 and 1999, respectively. These three customers in the
aggregate accounted for 91% and 72% of the Company's revenue for these periods,
respectively.
During 1998, the Company signed a licensing agreement and supplemental support
services agreement with Career/NET L.L.C. for the Company's previously developed
Career/NET product. In March of 1999, Career/NET L.L.C. desired to be relieved
of the support services agreement in exchange for giving a $209,000 demand
promissory note which bears interest at 7% per annum. The Company continues to
perform ongoing programming and website development services for Career/NET.
6. Taxes on Income
---------------
Income taxes are calculated using the liability method.
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.
Significant components of the Company's deferred tax assets as of June 30, 2000
are as follows:
Accruals $88,000
Trademark 51,000
Net operating loss carryforwards 3,406,000
Tax credit carryforwards 27,000
Capital loss carryforwards 24,000
--------
Total Deferred Tax Assets $3,596,000
Valuation Allowance (3,596,000)
-----------
$-
As of June 30, 2000, the Company had a net operating loss carryforward of
approximately $10,017,000 and investment tax credit carryforwards of
approximately $22,000 available to reduce future taxable income and taxes,
respectively. These carryforwards expire from 2000 through 2011.
<PAGE>
I/NET, Inc.
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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's 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 charged
against operations during the three months and six months ended June 30, 2000 or
1999.
8. Operating Leases
----------------
The Company leases its facilities and certain equipment under non-cancelable
operating leases. Management expects that in the normal course of business,
leases will be renewed or replaced with other leases. Rental expense under these
leases was approximately $53,000 and $55,000 for the six months ended June 30,
2000 and 1999, respectively. Future minimum annual lease payments subsequent to
June 30, 2000 are as follows:
2000 $96,000
2001 $25,000
9. Incentive Stock Option Plan
---------------------------
The Company maintains an 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. Options outstanding are summarized as follows:
Option Price Weighted Average
Shares Per Share Price Per Share
January 1, 1999 115,000 $.37-2.50 $.63
Lapsed October 1999 (100,000) .37 .37
Granted December 1999 50,000 .29 .29
--------- ---------- -----
December 31, 1999
and June 30, 2000 65,000 $.29-2.50 $.80
========= ========== =====
<PAGE>
I/NET, Inc.
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
At June 30, 2000, 582,255 shares of common stock were reserved for the incentive
stock option plan and 15,000 options were vested and exercisable. The remaining
weighted average contractual life on these options is five years. The remaining
50,000 options are not vested and have a remaining contractual life of ten
years.
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 1999: expected volatility of 80%; risk-free interest rate of
6.2%, and an expected option life of 7.2 years. Net earnings for the six-month
periods ending June 30, 2000 and 1999 would not have been materially affected.
The fair value of the options granted during 1999 was $0.19 per share.
10. Supplemental Disclosure of Cash Flow Information
-----------------------------------------------
Interest paid for the six months ended June 30, 2000 and 1999 was $14,000 and
$17,000 respectively. The Company paid no income taxes during 2000 and 1999.
Non-cash investing and financing activities are summarized as follows:
Forgiveness of indebtedness in the amount of $74,000 in exchange for 25,000
shares of common stock in April, 2000.
<PAGE>
I/NET, Inc.
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11. Contingencies
--------------
Royalties
In a prior year, the Company entered into a software license agreement wherein
Netscape granted to the Company the right to port certain of its Internet Server
products to the IBM AS/400 platform. This agreement, which terminates on
September 30, 2000, allows the Company to market and distribute the ported
products upon their modification to the AS/400 platform.
In exchange for this license agreement, the Company has agreed to pay minimum
royalties to Netscape in the amount of $3,000,000 according to the following
repayment schedule:
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
Paid by IBM on behalf
of I/NET in September 1999 $1,000,000
September 30, 2000 $1,000,000
IBM Corporation has guaranteed to Netscape the above listed royalties in the
event that product sales are insufficient to repay amounts due under this
agreement.
During prior years, IBM has provided advances against royalties in the amount of
$600,000. These amounts will be reimbursed to IBM after deduction of Netscape
royalties in the amount of 10% of total revenue received from sale of the ported
products. If the revenue from the sales of these Netscape products is
insufficient, the Company will not have to repay any of these advanced
royalties. To date, sales of this product have been insignificant.
Litigation
From time to time, the Company is involved in various legal actions arising in
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
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
12. Earnings Per Share
------------------
A reconciliation of shares used in calculating basic and diluted earnings per
share follows:
Three months ended June 30, 2000 1999
---- ----
Basic 31,062,652 31,037,652
Effect of assumed conversion of
options and warrants 30,961 680,572
----------- -----------
Diluted 31,093,613 31,718,224
=========== ===========
Six months ended June 30, 2000 1999
---- ----
Basic 31,050,152 31,037,652
Effect of assumed conversion of
options and warrants 30,961 80,572
---------- -----------
Diluted 31,081,113 31,718,224
=========== ===========
For the three months and six months ended June 30, 2000, warrants to purchase
230,000shares of common stock at prices ranging from $0.75 to $1.00 per share
and options to purchase 15,000 shares of common stock at $2.50 per share were
not included in the computation of the diluted earnings per share as they were
anti-dilutive.
For the three months and six months ended June 30 1999, options to purchase
15,000 shares of common stock at $2.50 per share were not included in the
computation of the diluted earnings as they were anti-dilutive.
13. Sale of Securities
------------------
In January 2000, Stek, Ltd., the Company's wholly owned Caymanian subsidiary
sold approximately 20,000 shares of its 1,500,000 shares of SEGOES, Ltd. stock
with net proceeds to the Company of $28,199. The Company had received these
shares in January 1999 for the successful completion of the development,
installation and operation of the SEGOES website.
<PAGE>
I/NET, Inc.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
14. 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 has suffered
recurring losses from operations in prior years, has a significant working
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 continued new product
development. In addition, management is currently negotiating several additional
contracts for its services and products. Management is also embarking on other
strategic initiatives to expand its business opportunities. However, there can
be no assurance these activities will be successful.
Item 2.Management's Discussion and Analysis or Plan of Operation
Results of Operations
---------------------
First Half of 2000 Compared to the First Half of 1999
Revenues for the six months ended June 30, 2000 were $759,000 compared to
$895,000 for the six months ended June 30, 1999. Sales of Internet software
products accounted for revenues of $210,000 in 2000 and $221,000 in 1999. The
decrease in software sales was due primarily to lower European sales, as the
Company's primary distributor in that region underwent a change in marketing and
sales personnel. This decrease was offset, in part, by sales from the Company's
new distributor in the Pacific Rim. Revenues from website and related consulting
totaled $549,000 for the six-month period of 2000, compared with $674,000 for
the same period of 1999. The decrease was due primarily to $209,000 in revenue
from the termination of a support services agreement with Career/NET L.L.C. in
1999. Exclusive of this item, revenues from website and related consulting were
$465,000 in 1999.
Cost of revenues decreased by approximately $33,000 to $422,000 in 2000 as
compared to $455,000 in 1999. The cause for this decrease was the reduction in
personnel costs for the completed Netscape project.
General and administrative expenses decreased by approximately $23,000 to
$276,000 in 2000 as compared to $299,000 in 1999. The cause for this decrease
was lower employee costs.
<PAGE>
I/NET, Inc.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other income (expense) increased by $39,000 primarily due to the gain on the
sale by Stek Ltd. of SEGOES, Ltd. stock in the amount of $29,000 and increased
interest income of $10,000.
During April 2000, the Company exchanged 25,000 of its common shares for the
forgiveness of $74,000 less an income tax benefit of $25,000 of indebtedness to
a note holder. This exchange has been treated as an extraordinary item.
Second Quarter of 2000 Compared to Second Quarter of 1999
---------------------------------------------------------
For the three month period ended June 30, 2000, revenues decreased by $25,000 as
compared to the same period of 1999, reflecting lower software sales in Europe
that were offset, in part, by higher consulting revenues and software sales by
the Company's new distributor in the Pacific Rim.
Cost of revenues increased during the second quarter of 2000 compared with the
same period in 1999, reflecting increased use of contract employees for the
Company's website development consulting business.
Financial Condition and Liquidity
--------------------------------------
The Company's primary need for capital will be to invest in computer software
development. The company has reduced its working capital deficit from a year
ago. As of June 30, 2000, the Company's working capital deficit was $539,000, as
compared to a deficit of $961,000 at June 30, 1999. Earnings and continued debt
reductions have provided the resulting decrease in working capital deficit in
2000 and 1999.
In March 2000, the Company signed an extension to its current website consulting
agreement with IBM through the end of March 2001. In addition, the Company has
signed new exclusive worldwide marketing and distribution agreements for the
distribution of its Webserver products. Appsmall.com has the exclusive right
through September 2000 to market and distribute the Company's products in the
United States, Canada, Europe and the Middle East and Africa. General Business
Services Co. LTD (GBS) of Tokyo, Japan has the exclusive territory of Japan for
2000.
<PAGE>
I/NET, Inc.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The Company believes that the additional sales provided by these agreements, the
continued development of new products, together with the renegotiations of its
defaulted debt, should provide the Company with sufficient working capital to
market its products, which would enable the Company to meet its current
obligations and provide additional funds for continued new product development.
The Company continues to explore alternative options to reduce its debt
obligations, which could increase the Company's financial stability. In
addition, management is currently negotiating several additional contracts for
its services and products. However, there can be no assurance these activities
will be successful.
"Safe Harbor" Provisions Under the Private Securities Litigation Reform Act
---------------------------------------------------------------------------
Statements in this filing that are not historical facts are forward-looking
Statements, which involve risks and uncertainties that could affect the
Company's results of operations, financial position and cash flows. of 1995
Actual results may differ materially from those projected in the forward
-looking statements, due to variety of factors, some of which may be beyond the
control of the Company. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report.
PART II- OTHER INFORMATION
Item 2. Change in Securities and Use of Proceeds
On April 25,2000, the Company issued 25,000 shares of its unregistered common
stock for the forgiveness of $74,000 of outstanding indebtedness. The Company
believes the issuance to be exempt from registration under ss.4(2) of the
Securities Act.
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
being duly authorized
I/NET, Inc.
Date: July 31, 2000
By: _/s/Stephen J. Markee
--------------------------------
Stephen J. Markee
Director, President, CEO and CFO
