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 OF 1934
For the quarter ended August 31, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-28729
INFE.COM, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 11-3144463
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8000 Towers Crescent Drive #640
Vienna, VA 22182
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(703) 734-5650
----------------------------------------------------
(Registrant's telephone number, including area code)
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 [___]
Number of shares outstanding of the issuer's common stock, as of
August 31, 2000
Common Stock, par value $.0001 per share 15,405,009
---------------------------------------- ----------------------------
Class Number of shares outstanding
<PAGE>
INFE.COM, INC.
FORM 10-QSB
FOR THE QUARTER ENDED AUGUST 31, 2000
TABLE OF CONTENTS
PART 1 FINANCIAL INFORMATION PAGE NO.
ITEM 1 Condensed Financial Statements
Balance Sheets as of August 31, 2000 (Unaudited)
and November 30, 1999 2
Unaudited Statements of Operations for the three
months ended August 31, 2000 and 1999 3
Unaudited Statements of Operations for the nine
months ended August 31, 2000 and 1999 4
Unaudited Statements of Cash Flows for the nine
months ended August 31, 2000 and 1999 5
Notes to Condensed Financial Statements (Unaudited) 6
ITEM 2 Management's discussion and analysis of financial
condition and results of operations 12
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings 16
ITEM 2 Changes in securities 16
ITEM 6 Exhibits 18
SIGNATURES 20
<PAGE> 2
INFE.COM, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, November 30,
2000 1999
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 24,189 $ 117,227
Certificate of deposit - restricted 50,000 50,000
Trade accounts receivable, net 197,794 32,880
Trading securities 168,055 -
Available-for-sale securities 409,297 -
Stock and warrants receivable 1,226,692 -
Loan and notes receivable 127,390 -
Loan receivable, related party 66,500 -
Prepaid expenses 70,053 -
Accrued interest receivable 4,235 -
----------- -----------
Total Current Assets 2,344,205 200,107
Property and equipment, net 33,724 24,246
Software development costs, net 116,753 38,010
Intangible assets, net 631,920 -
Deferred costs - 25,000
Deposits 34,528 6,028
816,925 93,284
----------- -----------
$ 3,161,130 $ 293,391
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses $ 346,818 $ 122,958
Line of credit - bank 50,000 45,000
Current portion of capital lease obligation 2,932 4,589
Subordinated Note payable 295,021 -
Note payable - 12,245
Due to related parties 4,150 41,616
Deferred revenue 230,929 -
Liability for stock to be issued 133,683 309,280
----------- -----------
Total Current Liabilities 1,063,533 535,688
Long-Term Liabilities:
Capital lease obligation 1,921 3,978
----------- -----------
Total Liabilities 1,065,454 539,666
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock 1,541 854
Additional paid-in-capital 5,892,301 1,227,145
Accumulated deficit (2,675,863) (1,474,274)
Accumulated other comprehensive loss (391,848) -
----------- -----------
2,826,131 (246,275)
Deferred Compensation (730,455) -
----------- -----------
Total Stockholders' Equity (Deficit) 2,095,676 (246,275)
----------- -----------
$ 3,161,130 $ 293,391
=========== ===========
</TABLE>
See notes to condensed financial statements
<PAGE> 3
INFE.COM, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended August 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
REVENUE:
IT Staffing $ 112,067 81,480
Management Consulting Fees 1,258,710 -
----------- ----------
1,370,777 81,480
COST OF REVENUE - IT Staffing 52,180 55,892
----------- ----------
Gross Profit 1,318,597 25,588
OPERATING EXPENSES 1,205,132 97,790
----------- ----------
Income (Loss) from operations 113,465 (72,202)
OTHER INCOME (EXPENSES):
Depreciation and amortization (38,519) (4,725)
Realized loss on investments (63,215) -
Unrealized holding gain on investments 94,930 -
Interest income 2,642 -
Interest expense (1,684) (256)
----------- ----------
(5,846) (4,981)
----------- ----------
NET INCOME (LOSS) $ 107,619 $ (77,183)
=========== ==========
NET INCOME (LOSS) PER COMMON SHARE
- BASIC AND DILUTED $ 0.01 $ (0.01)
=========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 13,972,316 7,697,763
=========== ==========
</TABLE>
See notes to condensed financial statements
<PAGE> 4
INFE.COM, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended August 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
REVENUE:
IT Staffing $ 247,951 197,700
Management Consulting Fees 1,453,060 -
----------- -----------
1,701,011 197,700
COST OF REVENUE - IT Staffing 150,810 172,722
----------- -----------
Gross Profit 1,550,201 24,978
OPERATING EXPENSES 2,618,016 463,913
----------- -----------
Loss from operations (1,067,815) (438,935)
OTHER INCOME (EXPENSE):
Depreciation and amortization (92,360) (8,934)
Realized loss on investments (78,213)
Unrealized holding gain on investments 55,435
Interest income 5,037 2,407
Interest expense (23,673) (543)
----------- -----------
(133,774) (7,070)
----------- -----------
NET LOSS $(1,201,589) $ (446,005)
=========== ===========
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.10) $ (0.06)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 12,033,737 7,549,430
=========== ===========
</TABLE>
See notes to condensed financial statements
<PAGE> 5
INFE.COM, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended August 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss (1,201,589) (446,005)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 92,360 8,934
Unrealized holding gain on investments (55,435) -
Realized losses on investments 78,213 -
Stock issued in lieu of cash for professional
services 1,616,155 307,569
Stock to be issued in lieu of cash for
professional services 52,349 -
Stock received and to be received in lieu of
cash for services rendered (1,255,943) -
Changes in operating assets and liabilities:
Increase in accounts receivable (209,914) (49,635)
Increase in accrued interest receivable (4,235) -
Increase in prepaid expenses (2,000) -
Increase in accounts payable and accrued
expenses 218,685 58,465
Amortization of deferred revenue (2,117) -
---------- ---------
(673,471) (120,672)
Cash Flows from Investing Activities:
Purchase of investments (385,540) -
Proceeds from sale of investments 270,527 -
Purchase of property and equipment (12,310) (1,878)
Investment in sofware development costs - (132)
Payments received from (issuance of) note receivable (124,890) 69,438
Decrease in deferred costs 25,000 -
Loan to related party (66,500) -
Deposit (28,500) -
Net cash used in acquisitions (84,950) -
---------- ---------
(407,163) 67,428
Cash Flows from Financing Activities:
Net proceeds from issuance of common stock 741,000 40,000
Proceeds from issuance of note payable 295,021 669
Proceeds from loans from related parties 4,150 10,407
Repayment of loans from related parties (41,616)
Payments of capital lease obligation (3,714) (1,918)
Repayment of long-term debt (12,245) -
Increase in bank line of credit 5,000 -
---------- ---------
987,596 49,158
Net Decrease in Cash and Cash Equivalent (93,038) (4,086)
Cash and Cash Equivalent, Beginning 117,227 4,086
---------- ---------
Cash and Cash Equivalent, Ending 24,189 -
========== =========
</TABLE>
See notes to condensed financial statements
<PAGE> 6
INFE.COM, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2000
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The condensed balance sheet as of August 31, 2000, the condensed
statements of operations for the three months and nine months ended
August 31, 2000 and 1999, and the condensed statements of cash flows
for the nine months ended August 31, 2000 and 1999 have been prepared
by the Company. In the opinion of management, all adjustments (which
include reclassifications and normal recurring adjustments) necessary
to present fairly the financial position, results of operations and
cash flows at August 31, 2000 and for all periods presented, have been
made.
Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It is
suggested that these financial statements be read in conjunction with
the Company's financial statements and notes thereto included in the
Company's November 30, 1999 Form 10SB/A. The results of operations
for the three and nine-month periods ended August 31, 2000 are not
necessarily indicative of the operating results for the full year.
NOTE 2. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information for the nine
months ended August 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Interest paid during the period $ 3,732 $ 543
============ ============
Non-Cash Investing and Financing Activities:
Stock issued and to be issued for services
to be received $ 800,508
============
Purchase of assets through issuance of stock
and liability for stock to be issued:
ClubComputer $ 597,800
============
Exposure4U $ 13,281
============
Stock issued in exchange for investments $ 575,020
============
Stock issued as a reduction of the liability
for stock to be issued $ 309,280
============
Purchase of internal use software through
issuance of stock $ 92,813
============
Stock received in satisfaction of trade account
receivable and note receivable $ 45,000
============
Stock issued for services rendered to 3rd party $ 15,000
============
Receipt of securities in satisfaction of loan
receivable $ 12,500
============
Financed acquisition of equipment 11,576
============
</TABLE>
NOTE 3. SEGMENT INFORMATION
The Company's reportable operating segments include IT staffing,
management consulting and ClubComputer.com. The IT staffing operating
segment provides human resources and staffing services; the management
consulting operating segment provides management consulting services
<PAGE> 7
INFE.COM, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2000
(Unaudited)
to emerging growth companies; and the ClubComputer.com operating
segment is an on-line computer retailer.
The Company does not allocate operating expenses to these
segments, nor does it allocate specific assets to segments other than
ClubComputer.com. Therefore, segment information reported includes
only revenues, cost of revenues, gross margin and assets allocated to
ClubComputer.com.
Operating segment data for the three and nine months periods
ended August 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
IT Management Club
Staffing Consulting Computer.com Total
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Three months ended August 31,
2000:
Revenue $ 112,067 $ 1,258,710 $ - $ 1,370,777
Cost of revenue (52,180) - - (52,180)
--------- ----------- ---------- -----------
Gross margin $ 59,887 $ 1,258,710 $ - $ 1,318,597
========= =========== ========== ===========
Three months ended August 31,
1999:
Revenue $ 81,480 $ - $ - $ 81,480
Cost of revenue (55,892) - - (55,892)
--------- ----------- ---------- -----------
Gross margin $ 25,588 $ - $ - $ 25,588
========= =========== ========== ===========
Nine months ended August 31,
2000:
Revenue $ 247,951 $ 1,453,060 $ - $ 1,701,011
Cost of revenue (150,810) - - (150,810)
--------- ----------- ---------- -----------
Gross margin $ 97,141 $ 1,453,060 $ - $ 1,550,201
========= =========== ========== ===========
Assets as of August 31, 2000:
ClubComputer.com $ - $ - $ 531,378 $ -
========= =========== ========== ===========
Nine months ended August 31,
1999:
Revenue $ 197,700 $ - $ - $ 197,700
Cost of revenue (172,722) - - (172,722)
--------- ----------- ---------- -----------
Gross margin $ 24,978 $ - $ - $ 24,978
========= =========== ========== ===========
</TABLE>
<PAGE> 8
INFE.COM, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2000
(Unaudited)
NOTE 4. INVESTMENTS
In accordance with SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", securities are classified
into three categories: held-to-maturity, available-for-sale and
trading. The Company's investments consist of equity securities
classified as trading and available-for-sale securities. Accordingly,
they are carried at fair value in accordance with the statement. The
statement further requires that unrealized holding gains and losses
for trading securities be included in earnings and unrealized gains
and losses for available-for-sales securities be excluded from
earnings and reported as a separate component of other comprehensive
income.
The following is a summary of investment securities (including
stock and warrants receivable) as of August 31, 2000. The Company did
not have any investment securities as of November 30, 1999.
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Equity securities $ 2,027,837 $ - $ 391,848 $ 1,635,989
=========== =========== ========== ===========
</TABLE>
There were no proceeds from sales of available-for-sales
securities and no gross realized gains and gross realized losses from
sales of available-for-sales securities for the three months and nine
months ended August 31, 2000 and 1999. The change in net unrealized
holding losses included in other comprehensive income was $243,098 and
$148,750 for the nine months and three months periods ended August 31,
2000, respectively. There were no unrealized holding gains or losses
for the three months and nine months ended August 31, 1999.
The change in the net unrealized holding gain (losses) on trading
securities for the nine months ended August 31, 2000 was $94,930.
NOTE 5. REVENUE RECOGNITION
The Company earns revenue from IT Staffing fees and management
consulting fees, both of which are recognized as the services are
rendered, generally over the life of an agreement.
The Company periodically receives equity instruments and warrants
from companies for which it performs services, in addition to the cash
paid for such services. Primarily all of the equity instruments are
capital stock of public companies, with limited trading activity.
Equity instruments and warrants for which there is not a readily
available market value, are valued based on factors such as price
offered in a private placement, a history of cash flow from
operations, and other pertinent factors. Management also considers
recent offers to purchase a portfolio of the company's securities and
the filings of registration statements in connection with other
offerings of the company's securities. During the three months and
nine months ending August 31, 2000, the Company recognized revenue
associated with the stock and warrants received or to be received in
the amount of $1,258,710 and $1,453,060, respectively.
NOTE 6. LOANS AND NOTES RECEIVABLE
The Company loaned a total of $127,390 to one of its customers
under the following terms:
- An unsecured convertible subordinated debenture dated May 2000 in
the original amount of $50,000 with interest payable quarterly at
an interest rate of 9% per annum, maturing in one year from the
date of the note. The debenture is convertible at any time at the
holder's option into shares of the borrowing company's corporate
stock.
<PAGE> 9
INFE.COM, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2000
(Unaudited)
- An unsecured note dated August 2000 in the original amount of
$50,000 accruing interest at 8%, with no stated maturity date.
- An unsecured $12,390 loan
- 37,500 shares of the Company's common stock valued at $15,000
issued to a third party for services performed by the third party
for the customer.
Subsequent to August 31, 2000, the 8% $50,000 note and the $12,390
loan were repaid.
NOTE 7. LIABILITY FOR STOCK TO BE ISSUED
The amount due of $133,683 at August 31, 2000 represents stock to
be issued to individuals for services rendered during the period, and
stock to be issued for the Exposure4U acquisition.
NOTE 8. COMPREHENSIVE INCOME (LOSS)
The components of comprehensive income (loss) are as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended August 31, Ended August 31,
---------------- ----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income (loss) $ 107,619 ($ 77,183) ($1,201,589) ($ 446,005)
Unrealized loss on available-
for-sale securities ( 243,098) - ( 391,848) -
--------- --------- ---------- ---------
($ 135,479) ($ 77,183) ($1,593,437) ($ 446,005)
========= ========= ========== =========
</TABLE>
NOTE 9. ACQUISITIONS
Effective April 10, 2000, the Company acquired the intangible
assets of ClubComputer.com, Inc. in exchange for consideration
consisting of (1) 250,000 shares of the Company's restricted common
stock at closing, which were valued at $320,250 and (2) seven equal
installments of $250,000 in the Company's restricted common stock
every three months from the date of closing. The acquisition was
accounted for as a purchase. Under the purchase method of accounting,
the purchase price of approximately $1.6 million had been assigned to
intangible assets acquired based on estimated fair values at April 10,
2000, the date of acquisition. The intangible assets are being
amortized over a three year period.
On August 9, 2000, the Company signed an addendum to the
Agreement for Sales of Assets of ClubComputer.com, Inc. The addendum
provides for a single and final payment of 800,000 shares after
receipt of which the Company will have completely extinguished its
debt to the Seller. The 800,000 shares were issued to ClubComputer,
and valued at $277,550, resulting in a downward adjustment of the
purchase price of approximately $1,035,000. The value originally
assigned to intangible assets was modified accordingly.
On July 19, 2000, the Company acquired the intangible assets of
Placeum.com, in exchange for $50,000 in cash and assumption of a
$6,171 liability. The acquisition was accounted for as a purchase.
The entire purchase price of $56,171 is included in intangible assets
and is being amortized over a three year period.
<PAGE> 10
INFE.COM, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2000
(Unaudited)
On August 16, 2000, the Company acquired the assets of
Exposure4u.com, Inc. for a total consideration of $53,406, consisting
of $40,125 in cash and the issuance of 42,500 shares of the Company's
common stock valued at $13,281. The acquisition was accounted for as a
purchase. The total consideration exceeded the assets acquired
(consisting of hardware and software) by approximately $46,063. The
excess has been included in intangible assets and is being amortized
over a three year period.
As an integral part of the acquisition of Exposure4U, the Company
entered into employment agreements with the two former owners of
Exposure4U. Both agreements were for a period of one year, from August
21, 2000 to August 21, 2001. Each agreement provides for the
following:
- An annual salary of $72,000;
- After six months of employment, a bonus consisting of 50,000
shares of the Company's common stock and an additional $25,000
worth of the Company's common stock based on the fair market
value of the stock at the end of the six-month period;
- After twelve months of employment, $50,000 worth of the Company's
common stock based on the fair market value of the stock at the
end of the twelve-month period; and
- 30,000 stock options at an exercise price of $0.50 per share,
vesting ratably over a three-year period, with an expiration date
of 5 years.
NOTE 10. RELATED PARTY TRANSACTIONS
As of August 31, 2000, the Company has a receivable of $66,500
from its President.
The President of the Company was compensated for services to be
rendered during the year ending November 30, 2000 by the granting of
250,000 shares of the Company's common stock. The unearned portion of
this compensation has been included in prepaid expenses. In addition,
as of August 31, 2000, the Company was liable to the President for
bonus amounts representing an additional 180,001 shares of restricted
stock; this amount is included in the liability for stock to be
issued.
NOTE 11. SUBORDINATED NOTE PAYABLE
As of August 31, 2000, the Company had a $295,021 subordinated note
payable to a third party. The note is accruing interest at 10% per
annum. The note is collateralized by an engagement agreement between
the Company and one of its customers dated May 2, 2000, pursuant to
which the Company is to receive a management fee of $150,000. Upon
receipt of this fee, the Company shall remit to the holder of the note
the principal amount of $150,000 and all accrued interest. The
remaining balance of the note is payable through issuance of the
Company's common stock and/or, through delivery of securities owned by
the Company.
NOTE 12. COMMON STOCK
Private Placements of Common Stock
During the nine months ended August 31, 2000, the Company issued
a total of 1,821,000 shares of common stock for a total consideration
of $1,006,000 in private transactions to accredited investors. Of the
total consideration of $1,006,000, $265,000 related to cash received
during the period prior to August 31, 2000.
<PAGE> 11
INFE.COM, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2000
(Unaudited)
Common Stock for Services
During the nine months ended August 31, 2000, the Company issued
a total of 3,352,108 shares of common stock for services rendered and
to be rendered to the Company valued at $2,390,890. Of this amount,
$44,280 related to services performed during the period prior to August
31, 2000 and $730,455 relates to services to be performed for the
Company. In addition, the Company issued 37,500 shares to a vendor for
services rendered to a third party valued at $15,000. The $15,000 is
shown as a receivable from that third party. See note 6.
Shares Exchange Agreements
During the nine months ended August 31, 2000, the Company entered
into two consulting and/or strategic alliance agreements with two
entities providing for exchange of shares between the Company and the
respective entities as follows:
- In the first agreement, the Company exchanged 300,000 shares of
its common stock for 4,307,692 shares of the entity. This
transaction was valued at $336,000.
- In the second agreement, the Company exchanged 200,000 shares of
its common stock for 200,000 shares of the entity. This
transaction was valued at $239,020.
Purchase of internal use software through issuance of common stock
During the nine months ended August 31, 2000, the Company purchased
internal use software through issuance of 107,471 shares of its common
stock value at $92,813.
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is an analysis of our results of operations and our
liquidity and capital resources. To the extent that such analysis
contains statements that are not of historical nature, such statements
are forward-looking statements, which involve risks and uncertainties.
Results of Operations
---------------------
Three Months Ended August 31, 2000 and 1999
Revenues for the quarter ended August 31, 2000 increased
$1,289,297 or 1,582%, to $1,370,777 from $81,480 for the quarter ended
August 31, 1999. The increase was largely attributable to an increase
of $1,258,710 in revenues for consulting services of INFe-Ventures,
Inc.
Cost of revenues decreased by $3,712, or 7%, to $52,180 in the
third quarter of fiscal 2000 from $55,892 for the corresponding period
in fiscal 1999. The cost of revenues decreased although revenues in
the IT staffing division increased from $81,480 in the third quarter
of fiscal 1999 to $112,067 in the third quarter of fiscal 2000, a 38%
increase. As a percentage of revenue, the cost of revenues decreased
to 46% in the third quarter of fiscal 2000 from 69% in the same period
during the prior year, primarily as a result of our increased focus on
improving margin percentages.
Operating expenses increased $1,107,342, or 1132%, to $1,205,132
in the quarter ended August 31, 2000, from $97,790 for the period
ended August 31, 1999. This increase in operating expenses is
primarily a result of expanding our management team in preparation for
future growth. These expenses consist primarily of compensation, rent
and professional services fees.
Depreciation and amortization increased $33,794, to $38,519 in
the quarter ended August 31, 2000, from $4,725 for the period ended
August 31, 1999. This increase is due to the amortization of the
assets purchased from ClubComputer.com, Inc. in the prior quarter.
Realized loss on investments increased $63,215 to $63,215 in the
quarter ended August 31, 2000 from $0 for the period ended August 31,
1999. The increase in this account is due to the sale of certain
trading securities for less than the original cost.
Unrealized holding gain on trading securities increased $94,930,
to $94,930 in the quarter ended August 31, 2000, from $0 for the
period ended August 31, 1999. The increase in this account is due to
an increase in the market value of some securities, offset by a
temporary decline in the market value of other securities.
<PAGE> 13
Nine Months Ended August 31, 2000 and 1999
Revenues for the nine months ended August 31, 2000 increased by
$1,503,311, or 760%, to $1,701,011 from $197,700 for the nine months
ended August 31, 1999. The increase was largely attributable to an
increase of $1,453,060 in revenues for consulting services of INFe-
Ventures, Inc.
Cost of revenues decreased by $21,912, or 13%, to $150,810 during
the nine months ended August 31, 2000 from $172,722 for the
corresponding period in fiscal 1999. The cost of revenues decreased
although revenues in the IT staffing division increased from $197,700
for the nine months ended August 31, 1999 to $247,951 for the nine
months ended August 31, 2000, a 25% increase. As a percentage of
revenue, the cost of revenues decreased to 61% in the third quarter of
fiscal 2000 from 87% in the same period during the prior year,
primarily as a result of our increased focus on improving margin
percentages.
Operating expenses increased $2,154,103, or 464%, to $2,618,016
for the nine months ended August 31, 2000, from $463,913 for the
period ended August 31, 1999. This increase in operating expenses is
primarily a result of expanding our management team in preparation for
future growth. These expenses consist primarily of compensation, rent
and professional services fees.
Depreciation and amortization increased by $83,426, to $92,360
for the nine months ended August 31, 2000, from $8,934 for the period
ended August 31, 1999. This increase is due to the amortization of
the assets purchased from ClubComputer.com, Inc. in the prior quarter.
Realized loss on trading securities increased $78,213, to $78,213
for the nine months ended August 31, 2000 from $0 for the period ended
August 31, 1999. The increase in this account is due to the sale of
certain trading securities below the original cost.
Unrealized gain on trading securities increased $55,435, to
$55,435 for the nine months ended August 31, 2000, from $0 for the
period ended August 31, 1999. The increase in this account is due to
an increase of approximately $72,916 on the market value of one group
of securities, offset by a temporary decline, in our opinion, in the
market value of the remaining securities.
Liquidity and Capital Resources
-------------------------------
Net cash provided by financing activities was $987,596 for the
nine months ended August 31, 2000, compared to $49,158 during the nine
months ended August 31, 1999. During 2000, the cash provided by
financing activities came from sale of our common stock for
approximately $741,000 compared to $40,000 in 2000. During 1999, we
borrowed $295,021 from third parties, compared to $669 in 1999. During
2000, we borrowed $4,150 from related parties and repaid them $41,616.
During 1999, we borrowed $10,407 from third parties. In addition in
2000, we repaid $12,245 in long-term debt and borrowed an additional
$5,000 under our bank line of credit.
<PAGE> 14
During 2000, net cash used in investing activities amounted to
$407,163, compared to net cash provided by investing activities of
$67,428 during 1999. During 2000, we purchased investments for
$385,540 and sold investments at $270,527. We also purchased property
and equipment for $12,310. In 2000, we lent $124,890 to one of our
customers under separate notes and loans and lent $66,500 to a related
party. In addition, during 2000, we spent $84,950 in acquisitions.
During 1999, most of the cash provided by investing activities came
from payment received on a note receivable for $69,438.
Cash used in operating activities in 2000 was $673,471, compared
to $120,672 in 1999. During 2000, the cash used in operating
activities was due to net losses of $1,201,589, increased by stock
received and to be received in lieu of cash for services rendered of
$1,255,943, mostly offset by stock issued and to be issued in lieu of
cash for professional services rendered of approximately $1,616,155.
During 1999, the cash used in operating activities was due to net
losses of $446,005 partly offset by stock to be issued in lieu of cash
for professional services rendered of $307,569.
Accumulated Deficit and Management Plan
As of August 31, 2000, accumulated deficit amounted to
$2,675,863. Operating losses for the nine months ended August 31,
2000 were 1,201,589 compared to $446,005 during the nine months ended
August 31, 1999. Approximately $394,000 of the losses for the nine
months ended August 31, 2000 were due to non-recurring expenses in
connection with issuance of our stock to various consultants which we
no longer utilize. However for the three months ended August 31,
2000, net income was $107,619, compared to net losses of $77,183 for
the three months ended August 31, 1999. This increase is mostly due
to services provided by our Infe-Venture division. We have deferred
fees from certain of our clients since we have not yet completed
providing services to them. In addition, much of the public company
common stock of our clients that we have received in fees is not yet
available for sale. Some of the stock contains demand registration
rights, some piggy-back registration, and in either case, all of the
stock becomes available for sale after we have owned the stock for
more than one year, as described in Rule 144 of the SEC code. We have
valued this stock at a discount due to those restrictions. Once the
stock becomes free trading and we decide to sell it, we may realize
additional revenue if it increases in value, or we may incur losses if
the market value decreases below the discounted value.
We have formulated, and we are in the process of implementing a
business plan intended to develop new and increased revenues and gross
profit in all of our areas of operation. This plan includes the
following, subject to us obtaining financing:
- Signing new clients for our INFe-Ventures, Inc. subsidiary,
including those for whom we do not have to defer our fees;
- Completing the acquisition of at least one Professional Employer
Organization for our human resources subsidiary, INFe-Human
Resources, Inc;
- Adding sales staff to our ITCareerNet.com and Placeum operations;
and
- Working on bringing additional financing into the company which
will allow for a great sales effort and for making additional
acquisitions for the human resources subsidiary.
<PAGE> 15
We have commenced sales efforts for our investor public relations
services under our INFe-Relations, Inc. subsidiary.
Year 2000 Compliance
We did not experience any problems related to the year 2000 issues.
We believe that our preparations were adequate and we do not
anticipate any problems.
Inflation
In the opinion of management, inflation will not have a material
effect on the operations of the Company.
Recent Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income", establishes
standards for reporting and displaying comprehensive income, its
components and accumulated balances. SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," establishes
standards for reporting information about operating segments in annual
financial statements and requires reporting of selected information
about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. We
adopted these new accounting standards in 1998.
SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended by SFAS 137, establishes accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts)
be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset
related results on the hedged item in the income statement, and
requires that a company formally document, designate and assess the
effectiveness of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after
June 15, 2000. A company may also implement the provisions of SFAS No.
133 as of the beginning of any fiscal quarter commencing June 16, 1998
and thereafter. SFAS No. 133 cannot be applied retroactively. SFAS No.
133 must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued,
acquired, or substantively modified after December 31, 1997 (and, at
the Company's election, before January 1, 1998). We have not entered
into derivatives contracts to hedge existing risks or for speculative
purposes. Accordingly, we do not expect the adoption of the new
standard to affect our financial statements.
In March 1998, the Accounting Standards Executive Committee
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." SOP 98-1
requires all costs related to the development of internal use software
other than those incurred during the application development stage to
be expensed as incurred. Costs incurred during the application
development stage are required to be capitalized and amortized over
the estimated useful life of the software. SOP 98-1 was adopted by the
<PAGE> 16
Company on January 1, 1999 and did not have a material effect on the
Company's financial position or results of operations.
<PAGE> 17
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of the date of this filing, there is only one pending legal
proceeding against or involving our company. On August 25, 2000 we
were served with a lawsuit captioned Venture Consultants, LLC et al. v
Dennis Tracz, et al. We are named as a defendant in the lawsuit,
which was filed in the Circuit Court for Baltimore City, Maryland.
The lawsuit was filed by some of the shareholders of ClubComputer.com,
Inc. and concerns our purchase of Clubcomputer.com's assets in April
2000. The plaintiffs objected to the sale of assets and sought
monetary damages from some defendants, but not from us, as well as
other relief. We were named in one count, alleging we knowingly
participated in the misappropriation of a corporate opportunity by
Harold Mohn, Clubcomputer.com's CFO. The plaintiffs have requested
the court to declare that we knowingly participated in this alleged
misappropriation and that the assets should be sold to a third party
in exchange for stock. Plaintiffs also request the court declare that
we acquired its stock in the third party purchase as a constructive
trustee for the benefit of Clubcomputer.com. We deny the allegations
in the complaint, will defend our interests in court and believe that
we will prevail.
ITEM 2. CHANGES IN SECURITIES
Recent Issuance Of Unregistered Securities
<TABLE>
<CAPTION>
Date Name # of Shares Total Price
---- ---- ----------- -----------
<S> <C> <C> <C>
12/17/99 CRC International Inc 40,000 (1)
12/17/99 Arthur D. Viola 60,000 (2)
12/17/99 Joseph F. Rinaldi III 20,000 (3)
12/17/99 John M. Hughes 5,000 (2)
12/17/99 Douglas M. Larkin 5,000 (2)
12/17/99 Elizabeth C. Sara 5,000 (2)
12/22/99 Carl Shade & Sharon Fitzsimmons
JTWROS 139,100 $ 25,000 (4)
1/13/00 Bill Nesmith 12,500 (5)
1/13/00 Peter J. Frugone 10,500 (5)
1/13/00 Gino M. DiClemente 2,000 (5)
3/17/00 Capital Media Group 250,000 (2)
3/17/00 Interactive Business Channel 256,401 (6)
3/17/00 National Financial Communications
Corp. 125,000 (7)
3/17/00 Robert Marks Co Inc. 125,000 (7)
3/17/00 Madden Consulting, Inc. 25,000 (8)
4/3/00 Marathon Consulting Corporation 50,000 (9)
4/7/00 IBF Consulting LTD 200,000 (10)
4/11/00 ClubComputer.com, Inc. 250,000 (11)
4/20/00 Interactive Business Channel 175,000 (6)
5/25/00 John Curry & Lisa Curry JTWROS 15,470 (12)
5/26/00 Joe C Pilgrim TTEE Apria Investments
Defined Benefit Pension Plan 15,000 $ 15,000
5/26/00 Scott R. Bittl 20,000 $ 20,000
5/26/00 Thomas M. Bruce 12,000 $ 12,000
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION> Contd..
<S> <C> <C> <C>
5/26/00 John Curry & Lisa Curry JTWROS 50,000 $ 50,000
5/26/00 Lee E. Davis II 5,000 $ 5,000
5/26/00 Garrick Der 10,000 $ 10,000
5/26/00 Mary A. Eubanks 10,000 $ 10,000
5/26/00 Donald J. Hall, Jr. 4,000 $ 4,000
5/26/00 J. Hoyt Hayes, Jr. 30,000 $ 30,000
5/26/00 Richard W. Hoyt 10,000 $ 10,000
5/26/00 Rick Hunts 10,000 $ 10,000
5/26/00 Chad M. Kammerer 20,000 $ 20,000
5/26/00 Philip W. Kilgore 10,000 $ 10,000
5/26/00 E. Howard King, Jr. 15,000 $ 15,000
5/26/00 Michael Kovalchik 10,000 $ 10,000
5/26/00 Robert K. McConnel & Barbara
McConnel JTWROS 20,000 $ 20,000
5/26/00 Dean A. Mitchell 10,000 $ 10,000
5/26/00 Harold S. Mohn, Sr. 20,000 $ 20,000
5/26/00 Gerald J. Napolitano 10,000 $ 10,000
5/26/00 Gerard A. Napolitano 25,000 $ 25,000
5/26/00 Jeffrey A. Neal 10,000 $ 10,000
5/26/00 Nellysford.com, LLC 10,000 $ 10,000
5/26/00 Larry T. Shaffer, Jr. 15,000 $ 15,000
5/26/00 Ronnie Stanfill 30,000 $ 30,000
5/26/00 Kory Swekla 10,000 $ 10,000
5/26/00 Crews Turner Construction Profit
Sharing Plan FBO William P. Turner 10,000 $ 10,000
5/26/00 S. Greg Waughn 5,000 $ 5,000
5/26/00 Gary R. Wood 10,000 $ 10,000
5/26/00 David M. Zani 5,000 $ 5,000
6/1/00 Richard A. Cooper 76,190 $ 20,000
6/1/00 Charles Dunn 47,620 $ 10,000
6/1/00 Charles Riviere 76,190 $ 20,000
6/5/00 William R. DeRosa Family Trust 500,000 $ 250,000
6/15/00 Archer Systems Limited Inc. 300,000 (13)
6/19/00 Richard Sullivan 100,000 (14)
6/26/00 William R. DeRosa Family Trust 500,000 $ 250,000
6/26/00 William R. DeRosa Family Trust 200,000 (15)
7/6/00 Adam Taylor 70,000 (16)
7/25/00 Eric Majors 100,000 $ 10,000 (17)
8/14/00 ClubComputer.com, Inc. 300,000 (11)
8/14/00 CNET Networks, Inc. 500,000 (11)
______________________
</TABLE>
1) Compensation for 2 years of advisory board services
2) Issued in lieu of cash for consulting services rendered to
INFe.com, Inc.
3) Compensation for advisory board services
4) 100,000 shares sold at $25,000 and 39,100 shares issued pursuant
to a Consulting Agreement dated September 24, 1999
5) Pursuant to a Consulting Agreement dated December 15, 1999
<PAGE> 19
6) Pursuant to a Consulting Agreement dated March 7, 1999 and a
Modification to Consulting Agreement dated March 7, 1999
7) Pursuant to a Consulting Agreement dated March 13, 2000
8) Pursuant to a Consulting Agreement dated March 10, 2000 and letter
revising agreement dated June 19, 2000
9) Pursuant to a Consulting Agreement dated March 28, 2000
10) Pursuant to a Share Exchange Agreement dated March 20, 2000
11) Pursuant to an Agreement for Sale of Assets of ClubComputer.com,
Inc. dated April 1, 2000; an addendum to the Agreement for Sale of
Assets of ClubComputer.com, Inc. dated August 9, 2000; and an letter
dated August 9, 2000
12) Issued in lieu of cash for finder fees
13) Pursuant to a Strategic Alliance Agreement dated May 18, 2000
14) Pursuant to a Consulting Agreement dated June 9, 2000 and Addendum
to Consulting Agreement dated August 10, 2000
15) Pursuant to a Consulting Agreement dated November 11, 1998
16) Pursuant to an Employment Agreement dated April 26, 2000
17) Shares issued upon exercise of options
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
--------
(2.1) Addendum to Agreement for Sale of Assets of ClubComputer.com, Inc.
dated August 9, 2000.(1)
(2.2) Letter dated August 9, 2000 related to issuance of the Company's
common stock in connection with the purchase of ClubComputer.com,
Inc.(2)
(2.3) Agreement for Sale of Assets of Placeum.com Division of International
Data Operations, Inc. dated July 19, 2000.(3)
(2.4) Bill of Sale and Assignment dated July 19, 2000 between International
Data Operations, Inc., and INFe.com, Inc.(4)
(2.5) Agreement for Sale of Assets of Exposure 4u.com, Inc.*
(10.1) Strateginet Corporation Convertible Subordinated Debenture dated May
12, 2000.(5)
(10.2) Guaranty of Strateginet Corporation dated May 12, 2000.(6)
(10.3) Strateginet Corporation Non-Transferable 8% Note.*
(10.4) Letter Revising Agreement between the Company and Madden Consulting,
Inc. dated June 19, 2000.(7)
(10.5) Consulting Agreement between the Company and RTS Investor Relations
dated June 9, 2000.(8)
(10.6) Addendum to Consulting Agreement between the Company and RTS Investor
Relations dated August 10, 2000.(9)
(10.7) Consulting Agreement between the Company and BC Pictures Ltd. dated
June 1, 2000.(10)
(10.8) Douglas Babcock Employment Agreement dated August 25, 2000*
(10.9) Kevin Cable Employment Agreement dated August 25, 2000.*
(10.10) 10% Subordinated Note Payable dated August 31, 2000. *
(27.1) Financial Data Schedule (For Commission Use Only)
---------------------
<PAGE> 20
* Filed herewith
(1) Incorporated by reference from Exhibit 2.2 filed with the Company's
Registration Statement on Form SB-2 dated August 31, 2000.
(2) Incorporated by reference from Exhibit 2.3 filed with the Company's
Registration Statement on Form SB-2 dated August 31, 2000.
(3) Incorporated by reference from Exhibit 2.4 filed with the Company's
Registration Statement on Form SB-2 dated August 31, 2000.
(4) Incorporated by reference from Exhibit 2.5 filed with the Company's
Registration Statement on Form SB-2 dated August 31, 2000.
(5) Incorporated by reference from Exhibit 10.1 filed with the Company's
Registration Statement on Form SB-2 dated August 31, 2000.
(6) Incorporated by reference from Exhibit 10.2 filed with the Company's
Registration Statement on Form SB-2 dated August 31, 2000.
(7) Incorporated by reference from Exhibit 10.5 filed with the Company's
Registration Statement on Form SB-2 dated August 31, 2000.
(8) Incorporated by reference from Exhibit 10.6 filed with the Company's
Registration Statement on Form SB-2 dated August 31, 2000.
(9) Incorporated by reference from Exhibit 10.7 filed with the Company's
Registration Statement on Form SB-2 dated August 31, 2000.
(10) Incorporated by reference from Exhibit 10.10 filed with the Company's
Registration Statement on Form SB-2 dated August 31, 2000.
Reports on Form 8-K
-------------------
On June 27, 2000, the Company filed on form 8-K/A amended information
pursuant to Item 2, "Acquisition or Disposition of Assets" supplying the
required information regarding the Company's acquisition of a significant
number of assets from Clubcomputer.com, Inc. of Nellysford, VA, pursuant to
an Agreement for Sale of Assets.
On August 31, 2000, the Company filed on form 8-K/A amended information
pursuant to Item 2 and Item 7(b) to revise certain pro forma financial
information with respect to the Merger, which information reflects an
amendment to the terms of the Merger the Registrant filed with the Current
Report on Form 8-K dated April 28, 2000 as amended by Amended Current Report
on Form 8-K/A filed on June 27, 2000.
On October 10, 2000, the Company filed on Form 8-K information pursuant to
Item 4 regarding the termination of Hoffman, Fitzgerald & Snyder, P.C.,
formerly Hoffman, Morrison & Fitzgerald, P.C., as the Company's independent
certified public accountants, and the engagement of Rachlin, Cohen & Holtz,
P.C., as the Company's independent certified public accountants.
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has fully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INFE.COM, INC.
(Registrant)
Date: October 13, 2000 /s/ Tom Richfield
--------------------------------------
Tom Richfield, Chief Executive Officer
Date: October 13, 2000 /s/ Dominique Sada
--------------------------------------
Dominique Sada, EVP and Controller
