UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended September 30, 2000
Commission file Number 0-23892
RAINWIRE PARTNERS, INC.
(Exact name of registrant as specified in its charter.)
DELAWARE 57-0941152
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
695 Pylant Street
Atlanta, GA 30306
(Address of principal executive offices)
Registrant's telephone number, including area code:
(843) 553-9456
Indicate by check mark whether the registrant(1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
As of September 30, 2000 the Registrant had outstanding 7,125,387 shares of
Common Stock. Transitional small business disclosure format (check one):
YES [ ] NO [X]
<PAGE>
INDEX
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PART I. FINANCIAL INFORMATION Page #
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at
September 30, 2000 and December 31, 1999 2
Condensed Statement of Operations for the
Third Quarter ended September 30, 2000 3
Condensed Statement of Cash Flows for the
Third Quarter ended September 30, 2000 4
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Conditions 6-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 3. Defaults upon Senior Securities 11
Item 5. Other Information 12
Item 6. Exhibits and Reports 12-20
Signature 12
<PAGE>
RAINWIRE PARTNERS, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2000 and December 31, 1999
RNWR RNWR
2000 1999
(Unaudited) (Audited)
------------- -------------
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 16,006 $ 2,294
Notes receivable, current portion 124,416 20,000
Trade receivables less allowance
for doubtful accounts $5,000
in 2000 and 1999 174,676 233,897
Inventories 4,001 -
Prepaid expenses - -
----------- -----------
TOTAL CURRENT ASSETS 319,099 256,191
----------- -----------
OTHER ASSETS AND INTANGIBLES
Deposits 14,362 4,942
Goodwill(Net) 460,960 486,103
Other 9,352 -
----------- -----------
484,674 491,045
----------- -----------
PROPERTY AND EQUIPMENT
Furniture and equipment 278,772 42,489
Vehicles 9,490 -
----------- -----------
288,262 42,489
Less accumulated depreciation 111,269 12,769
----------- -----------
176,993 29,720
----------- -----------
$ 980,766 $ 776,956
=========== ===========
LIABILITIES AND ACCUMULATED DEFICIT
CURRENT LIABILITIES
Notes payable $ 100,424 $ 500,000
Current maturities of
long-term debt 18,171 -
Accounts payable 390,403 26,786
Accrued expenses 90,534 54,268
----------- -----------
TOTAL CURRENT LIABILITIES 599,532 581,054
----------- -----------
LONG-TERM DEBT,
less current maturities 92,813 -
Deferred Gain on Asset Sale 6,042 -
----------- -----------
98,855 -
----------- -----------
Redeemable Preferred Sotck 54,411 -
----------- -----------
COMMON STOCK AND ACCUMULATED DEFICIT
Common stock par value $.001;
authorized 10,000,000 shares;
issued 2000 - 7,125,387 7,125 60,000
Additional paid-in capital 1,191,221 554,930
Retained earnings(deficit) (970,378) (419,028)
----------- -----------
227,968 195,902
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 980,766 $ 776,956
=========== ===========
See Notes to Condensed Consolidated Financial Statements
1
<PAGE>
RAINWIRE PARTNERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30,
2000 2000
(Unaudited) (Unaudited)
-------- --------
<S> <C> <C>
Service Revenue $ 341,826 $ 1,264,381
---------------
Direct Service Costs 101,991 455,036
-------------------- -------------- ---------------
Gross Profit 239,835 809,345
-------------- ---------------
Operating Expenses
------------------
Sales and marketing 28,725 113,588
General and administrative 485,072 1,135,111
Research and Development 71,414 71,414
Depreciation and amortization 17,637 43,999
-------------- ---------------
602,848 1,364,112
-------------- ---------------
Operating Loss (363,013) (554,767)
-------------- ---------------
Financial Income (Expense)
-----------------------
Interest Income 2,221 3,351
Interest Expense 9,174 (7,076)
Gain (loss), Sale of Property 6,092 6,092
Other - 1,050
-------------- ---------------
17,487 3,417
-------------- ---------------
Net Income (Loss) (345,526) (551,350)
============== ===============
Weighted average number of
common shares outstanding 6,004,149 6,261,798
============== ===============
Net(loss) per common share $ (0.058) $ (0.088)
============== ===============
Net (loss) per common share,
after preferred dividends $ (0.059) $ (0.090)
============== ===============
Dividends per common share $ - $ -
============== ===============
<FN>
See Notes to Condensed Consolidated Financial Statements
</FN>
</TABLE>
2
<PAGE>
RAINWIRE PARTNERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000
September 30,
2000
--------
Cash Flows From Operating Activities:
Net income $ (551,350)
Adjustments To Reconcile net income
(loss) to net cash used in
operating activities:
Depreciation 43,999
(Gain)loss on disposal of real property (6,092)
Settlement of payable to subcontractor (2,000)
Net adjustments to allowance for uncollectible
accounts and other (8,632)
Change in assets and liabilities:
(Increase) decrease in accounts receivable 74,421
(Increase) decrease in prepaid expenses 1,046
Increase (decrease) in accounts
payable and accrued expenses 116,891
------------
Net cash provided by (used in)
operating activities (331,717)
------------
Cash Flows From Investing Activities:
Collections on notes receivable 22,292
Net cash received in asset acquisition 6,570
Purchase of furniture and equipment (33,668)
(Increase) decrease in deposits 2,432
(Increase) decrease in other assets 95
------------
Net cash provided by (use in)
investing activities (2,279)
------------
Cash Flows From Financing Activities:
Proceeds from issuance of
common stock 700,000
New borrowings on notes issued -
Principal payments on long-term
borrowing (352,292)
------------
Net cash provided by financing activities 347,708
------------
Net increase in cash and cash equivalents 13,712
Cash and cash equivalents, beginning 2,294
------------
Cash and cash equivalents, ending $ 16,006
============
Supplemental Disclosure of Cash Flows
Information
Cash payments for interest $ 7,076
============
Supplemental Disclosure of Noncash Investing
and Financing Activities
Net monetary value of assets acquired/
recapitalization at transaction date $ (235,322)
============
Issuance of common stock for
debt conversion $ 150,000
============
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
RAINWIRE PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(1) The unaudited condensed financial statements and related notes have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and regulations.
The accompanying condensed consolidated financial statements of the Company, and
notes thereto, should be read in conjunction with the audited financial
statements and related notes included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999, filed under the Company's former
name Envirometrics, Inc. and the audited financial statements and related notes
included in the Form 14A filed May 18, 2000 on The Catapult Group, Inc.
The results of activity for the interim periods shown in this report are not
necessarily indicative of results to be expected for the fiscal year. In the
opinion of management, the information contained herein reflects all adjustments
necessary to present fairly the consolidated financial position, discontinued
operations and changes in cash flow for the interim periods. All such
adjustments are of a normal recurring nature.
(2) Envirometrics, Inc. entered into a binding agreement with The Catapult
Group, Inc. and acquired all of the outstanding stock of that corporation on
July 26, 2000. The transaction was accounted for as a purchase of assets by The
Catapult Group. The Company subsequently changed its name to Rainwire Partners,
Inc.
(3) Net loss per common share is computed using the weighted average number of
common shares outstanding, after giving effect for the 1 for 10 reverse split
effective with the closing of the transaction with The Catapult Group on July
26, 2000.
(4) The Company's listing on the OTC-Bulletin board was deleted November 18,
1999 and re-listed on March 21, 2000 after filing the required forms 10-KSB for
the years 1996, 1997, 1998 and 1999.
(5) At November 30, 2000 the Company had accrued $1,747 in dividends on Series C
preferred shares. In March 2000, the holders of all preferred shares agreed to
convert to Common Stock all accrued dividends of $69,304.
(6) On July 26, 2000 Nine Hundred Thousand (900,000) shares were issued for
Seven Hundred Thousand dollars ($700,000). These funds were used to retire
notes payable and for general working capital.
(7) On August 3, 2000 Structured Data Systems agreed to convert $150,0000 of its
$250,000 note payable by the company to equity for the issuance of One Hundred
Twenty Thousand (120,000) shares. The shares were issued on August 31, 2000.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended September 30, 2000
-------------------------------------
The Company is not presenting comparative financial information for prior period
in 1999 because operations for The Catapult Group commenced during third quarter
of 1999, therefore the third quarter in 2000 is not comparable to the prior
year.
The following financial information reports operating trends for the Company for
the three months ended September 30, 2000. Net service revenue for the third
quarter of 2000 amounted to $341,800. Revenue was negatively impacted primarily
as the result of one customer contract which defaulted and required the reversal
of $78,000 of revenue that had been accrued. One customer accounted for $62,000
in 2000 third quarter revenue.
Cost of revenue was $102,000 for the third quarter of 2000 due to a decline in
purchases of outside services.
The gross profit for the third quarter ended September 30, 2000 was $239,800.
The Company reported a 70% gross margin for the third quarter of 2000. The
reason for a improvement in gross margin is related to the decreased use of
outside services and the re-allocation of managerial, marketing, and development
salaries to general and administrative expense.
Operating expenses amounted to $602,800 for the three months ended September 30,
2000. General and administrative costs were $485,100 for the three months ended
September 30, 2000. Non-recurring legal expenses in the third quarter 2000
incurred in connection with the merger and shareholder matters amounted to
$55,700. Depreciation and amortization costs increased overall by $13,000 after
the acquisition of assets in July 2000.
The Company incurred an operating loss of $363,000 for the three months ended
September 30, 2000. The loss is due to legal expenses discussed above and the
write-off of one customer receivable to bad debt expense.
Interest income for the quarter ended September 30, 1999 was $2,200 and interest
expense was $9,200. The majority of interest expense was related to a $250,000
note that the Company paid off in July 2000.
The Company reported a net loss of $345,500 for the three months ended September
30, 2000.
Nine Months Ended September 30, 2000
------------------------------------
The Company is not presenting comparative financial information for the prior
period in prior year because the operations for The Catapult Group commenced
during third quarter 1999, therefore the third quarter and nine month periods in
2000 are not comparable to the prior year. Net service revenue for the nine
months ending September 30, 2000 was $1,264,400 an average of approximately
$140,000 in revenue per month. Average monthly revenue during the third quarter
was approximately $114,000. The short fall in the average monthly revenue for
the third quarter over the annualized average is a result of an overall slow
down in the technology sector and the reversal in revenue accrued as a result of
the default previously mentioned. As reported in the pro forma in our second
quarter 10-QSB the default generated the write-off of nearly $100,000 in
receivables and the elimination of unbilled revenue accruals. The total
write-off to this customer was approximately $250,000.
Operating expenses for the nine month period ending September 30, 2000 were
$1,360,000. Approximately $200,000 of the general and administrative expense is
made up of non-recurring professional fees associated with the July 26, 2000
transaction. Approximately $234,000 made up the salaries of billable personnel
that were hired to fulfill the project of the customer that defaulted and when
other expected contracts were not executed it became an expense that was not
associated with a revenue producing project. In November when it was obvious the
revenue cycle for some other large proposals the company was attempting to
negotiate into signed contracts had increased, the company was forced to make
staff cutbacks amounting to approximately $400,000 in annualized salaries.
The net loss for the nine months ending September 30, 2000 was $551,400.
Approximately $250,000 resulted from the customer which defaulted.
Financial Condition
Working capital deficiency at September 30, 2000 amounted to $280,400 which was
approximately a $44,400 improvement over December 31, 1999. Cash increased by
approximately $13,700 and trade accounts receivable decreased by approximately
$59,200 over December 31, 1999. Two notes receivable are expected to be
collected within one year and are recorded as current assets. Included in
current maturities of long-term debt is $73,400 in debt that will be paid off as
collections from the notes receivable are realized.
The Company did not have adequate assets to meet its obligations at September
30, 2000. The most significant liability is related to older trade accounts
payable for which the Company is in negotiations for extended payment terms. The
Company has significant professional fees included in accounts payable at
September 30, 2000. The Company has been unable to make any sizable payments on
these fees and is currently carrying in excess of $150,000 on amounts owed to
these vendors. Payments for these fees will be from additional financing
anticipated through the sale of new shares of common stock. Approximately
$73,400 (representing 100%) of debt in connection with the Small Business
Administration is expected to be paid from collections of a note receivable.
In addition, the Company received $700,000 through the issuance of new shares of
common stock subsequent to the completion of its acquisition on July 26, 2000,
approximately $370,000 was used to repay notes payable of which $250,000 was in
default and $150,000 was converted to equity. The remaining amount was used for
working capital.
On November 6, 2000 the Company secured $25,000 in working capital by entering
into a promissory note with Mr. Ronald Potts. The terms of the promissory note
allow for a balloon payment in 12 months. The note has a 10% per annum interest
rate.
Recent Development
On May 18, 2000 Envirometrics, Inc. filed a definitive Information Statement
soliciting consents from its shareholders to consummate the transaction with The
Catapult Group, Inc. and take other actions as outlined in the Information
Statement necessary to comply with the Plan and Agreement to Exchange Stock
dated as of February 16, 2000 (the "Exchange Agreement"). On June 8, 2000 the
Company's transfer agent, Continental Stock Transfer & Trust Company suspended
the consent count because a majority (approximately 60%) of the consents had
been returned. The transfer agent then issued the Company a confirmation letter
tabulating the consent count, 3,264,363 votes were received with greater than
99% giving consent to the transactions outlined in the Information Statement.
Prior to the closing of the Exchange Agreement, on July 26, 2000, Registrant
effected a 10:1 reverse split of its outstanding common stock, issued 5,555,064
shares of its common stock to purchase all of the outstanding common stock of
Catapult, changed its name to The Catapult Group, Inc. and increased its
authorized shares from Ten Million (10,000,000) to Twenty Million (20,000,000).
An amendment to Registrant's Certificate of Incorporation reflecting such
changes was filed with the Secretary of State of Delaware on July 26, 2000. Upon
completion of the Exchange Agreement, The Catapult Group, Inc. became a wholly
owned subsidiary of the Company and the shareholders of The Catapult Group, Inc.
became owners of approximately 90% of the current outstanding shares of Common
Stock of the Company. The Company subsequently changed its name to Rainwire
Partners, Inc. Mr. Walter H. Elliott, III resigned as President and CEO and Mr.
Bryan M. Johns became President and CEO.
On July 26, 2000 four individuals, Jake Cantrell, Ronald Potts, Nancy Edwards
and Shiela A. Tallent (the "Purchasers") acquired a total of Nine Hundred
Thousand (900,000) shares of newly issued Common Stock of the Company for Seven
Hundred Thousand dollars ($700,000) or approximately $0.78 per share. Although
the Exchange Agreement required an investment of $2 million, both Envirometrics,
Inc. and The Catapult Group, Inc. agreed to waive this requirement and accept
the $700,000 capital investment. In consideration of their purchase of Common
Stock the Purchasers were granted certain Registration Rights.
The Purchasers' registration rights include the right to make one demand that
the Company register common stock constituting all or part of the
above-mentioned 900,000 shares on Forms S-1, S-2 or S-3 at any time after
September 1, 2000. If the Company is unable to financially bear the cost of the
filing of the registration statement under the demand registration, the
Purchasers may elect to pay the registration expenses. Subject to certain
restrictions, the Purchasers' registration rights also require the Company, upon
request, to use its best efforts to include in any registration of equity
securities of the Company, whether for sale for the account of the Company or
for the account of any holder of securities of the Company, common stock
constituting all or part of the above-mentioned 900,000 shares that the Company
has been so requested to register. For a more detailed description of the terms
of the registration rights agreement please see the Company's second quarter
10-QSB. On or about September 5, 2000 the Company received notification from the
Purchasers that they wanted to exercise their registration rights and the
Company is now preparing a S-3 registration statement in compliance with their
request. The Company expects that this S-3 registration will be filed with the
SEC during the next 30 days.
On August 3, 2000 Structured Data Systems, Inc. signed a subscription agreement
to convert $150,000 of their $250,000 note payable to 120,000 shares of Common
Stock of the Company. The balance of the note payable was paid in cash prior to
the signing of the subscription agreement.
On August 9, 2000 the Company filed a S-8 registration statement for 509,214
shares of the Company's common stock. This registration resulted from a
consulting agreement entered into with Mr. Ronald Potts and Mr. Jake Cantrell
during 1999. These individuals rendered consulting services to The Catapult
Group, Inc. in exchange for shares of The Catapult Group which were converted to
common stock of Rainwire during the stock exchange on July 26, 2000.
In a letter dated September 5, 2000 the holder of the Series C Preferred Shares
of the Company gave sixty days notice of their intent to exercise the "put"
options as outlined in their preferred stock agreement. The eligible shares are
Class I of Series C which equals approximately 8,300 shares at a "put" value of
$2.12 per share. The total obligation is approximately $17,650 and became due on
November 5, 2000. The Company has not paid this amount as of the filing of this
10-QSB and is in discussions with the holder to resolve this obligation.
On November 6, 2000 the Company secured $25,000 in working capital by entering
into a promissory note with Mr. Ronald Potts. The terms of the promissory note
allow for a balloon payment in 12 months. The note has a 10% per annum interest
rate.
On November 10, 2000 the Company entered into a consulting agreement with Mr.
Ronald Potts to locate potential acquisition targets and potential merger
partners for the Company that would further the business interests of the
Company. Additional duties included locating, negotiating and arranging of a
bank loan or credit line for the Company and the locating of additional
directors or officers that would enhance the current management of the Company.
In consideration of the consultant entering into this agreement, the Company has
agreed to issue to Mr. Potts 480,000 shares of the Company's common stock.
On November 14, 2000 the Company filed a S-8 registration statement for the
registration of 480,000 shares of its common stock issued to Mr. Ronald Potts as
consideration for the services described above.
General Overview
On July 26, 2000, the majority of the shareholders of Registrant elected to
change the name of Registrant from The Catapult Group, Inc. to Rainwire
Partners, Inc. An amendment to Registrant's Certificate of Incorporation
reflecting the name change was filed with the Secretary of State of Delaware on
July 27, 2000.
On August 1, 2000, Rainwire Partners, Inc. received a new symbol from NASDAQ. As
of that date, Rainwire Partners, Inc. is traded on the OTC Bulletin Board under
the symbol RNWR.
Rainwire Partners, Inc. is an advanced technology consulting firm specializing
in the design, management and auditing of Internet technology initiatives.
Rainwire is a "next generation" web development company. The company provides
strategy, design, process management and quality assurance services that act as
an insurance policy for organizations undertaking broad and expensive advanced
technology initiatives. Structured as a consultancy, Rainwire offers a cohesive
set of services targeted exclusively at the "delivery" of technology solutions.
These service offerings include:
1. Solutions Design and Management. The solutions design and management services
of Rainwire provide the customer with the strategy, planning, solution design
and documentation services necessary to successfully begin any technology
implementation initiative. The end result of these services is the Rainwire
Blueprint. This extensive set of documentation acts as a road-map to the
successful completion of any technology project and is used to create and manage
customer expectation throughout the development process.
2. Managed Development Services. The managed development services of Rainwire
supply the customer with a streamlined and effective means of developing a
technology initiative. This group assists the customer in selecting and managing
an inventory of capable and value-driven development organizations to fulfill
development for Rainwire customers. This group also provides project management
and project auditing services to insure that the customer is consistently
receiving the value committed to them by their selected developer.
3. Quality Management & Auditing Services. The quality management and auditing
services of Rainwire provide the customer with the peace of mind that their
money and efforts dedicated to technology will pay the dividend originally
committed in the Rainwire Blueprint. By providing solution testing, quality
management and completed project auditing services, this group provides the
customer with a set of "checks and balances" to document that their expenditures
and efforts have resulted in a functional, tested and value-driven solution.
The goal of Rainwire Partners is to ensure that every customer expenditure made
toward the implementation of Internet solutions and other advanced technologies
yields a positive financial return while exceeding the expectations of the
customer and their stakeholders. Initially operating in the Atlanta area in
Georgia, Rainwire is rapidly expanding to sell its services into multiple
markets in the Southeastern, United States.
The emphasis will be on providing a complete specialized service based on having
years of experience in the processes and procedure of developing difficult
technology for business use. Market research indicates that the major criticism
Rainwire's type of client has of existing web development firms is that they
rarely meet the expectation of their customer. These customers feel that they
are already spending too much money for the service that they are being
provided.
By capitalizing on the Company's experience in the customer delivery and
management aspects of complex technology initiatives, we will be able to
establish a reputation for excellence, value and reliability in a market that is
currently starved for such an enterprise.
The Company intends to pursue merger and acquisition opportunities with
technology companies during the latter part of the year 2000 and throughout
2001. As part of such strategy, the Company intends to target companies that
supply technology products and services to markets in the Southeastern, United
States, which complement the Company's existing products and services, and which
present an opportunity to exchange products, services, expertise and customers.
This 10-QSB contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. Investors are cautioned that certain
statements in this 10-QSB are "forward looking statement" within the meaning of
the Private Securities Litigation Reform Act of 1995 and involve known and
unknown risks, uncertainties and other factors. Such uncertainties and risks
include, among others, government regulation, and general economic and business
conditions. Actual events, circumstances, effects and results may be materially
different from the results, performance or achievements expressed or implied by
the forward-looking statements. For example, Rainwire may not achieve its
expansion goals in the Southeastern, United States and may not be able to
establish and maintain a good reputation in its industry. Consequently, the
forward-looking statements contained herein should not be regarded as
representations by the Company or any other person that the projected outcomes
can or will be achieved.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 3. Defaults upon Senior Securities
Dividends on Preferred Shares
As of September 30, 2000, 24,959 shares of Series C preferred stock remain
outstanding. Dividends on these shares total $1,747 and are still unpaid.
Item 5. Other Information - None
Item 6. Exhibits and Reports
(a) The following exhibits are filed along with this Report on Form 10-QSB:
Number Description of Exhibit
10.1 Consulting Agreement by and between Registrant and Ronald Potts, dated
November 10, 2000
10.2 Subscription Agreement by and between Registrant and Structured Data
Systems, dated August 3, 2000
(b) Reports on Form 8-K: The Company filed a Form 8-K on August 4, 2000 and a
Form 8-K/A on September 22, 2000.
SIGNATURE
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 thereunto duly authorized.
RAINWIRE PARTNERS, INC.
Date: November 17, 2000
/s/ Bryan M. Johns
------------------
Bryan M. Johns
CEO
