SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the fiscal year ended March 31, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 0-24408
INTERJET NET CORPORATION
(Exact name of small business issuer in its charter)
DELAWARE 33-0611753
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13405 NW Freeway, Suite 228
Houston, Texas 77040
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 462-4222
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Securities registered pursuant to Section 12(b) of the Act: None
----------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
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Indicate by check mark whether the issuer (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 issuer
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year: $147,057
The aggregate market value of the voting stock held by non-affiliates
of the issuer as of July 13, 1998 was equal to $55,545,883 based on the average
bid and ask price of $10.375.
The number of shares outstanding of the issuer's classes of Common
Stock as of July 13, 1998:
Common Stock, $.001 Par Value - 13,504,282 shares
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PART I
Item 1. DESCRIPTION OF BUSINESS
The Business
Interjet Net Corporation (the "Company" or "IJNT") is engaged in the business of
providing wireless Internet access through microwave technology. The Company
also offers dial-up Internet access, web site design and web hosting services.
The Company's Salt Lake City business (the "Salt Lake System") commenced
offering access in July 1997. This system now offers one-way wireless, two-way
wireless, dial-up access and web site design and hosting services. As of March
31, 1998, the Salt Lake System serviced over 500 subscribers. The Company's
business in Beaumont, Texas (the "Beaumont System") offers one-way wireless
Internet access, dial-up Internet access, web site design and web hosting
services. The Beaumont System served over 100 users as of March 31, 1998. On
January 1, 1998, the Company acquired Access Communications, Inc. ("Access").
Access was in the business of providing dial-up Internet access and served
approximately 1,800 subscribers in the Houston, Texas area at the time of the
acquisition. The Company is currently designing the wireless system to be
installed in Houston and expects to be offering wireless Internet services in
the Houston market in July of 1998. The Company intends to open additional
markets as well as acquire additional licenses.
The Company has entered into two acquisitions of web hosting businesses and
Internet Service Providers since March 31, 1998. See "ITEM 13 - Certain
Transactions and Subsequent Events." The Company is currently in discussions
with other Companies and is pursuing additional acquisitions in order to grow
its customer base and market influence.
The corporate offices of the Company are located at 15554 FM 529, Suite 123,
Houston, Texas 77095, and its telephone number is (713) 462-4222.
Background
The Company was incorporated in the State of Delaware under the name Picometrix,
Inc. on June 11, 1992 and authorized 20,000,000 shares of $0.01 par value common
stock. On June 30, 1997 the Company effected a 2.3399365-for-1 share forward
stock split. The split increased the total outstanding shares from 579,600 to
1,356,377. On August 8, 1997 the Company issued 9,964,286 shares of post
forward-split stock to InterJet Net in conjunction with the purchase of all of
the outstanding stock of InterJet Net, Inc. Immediately following the
acquisition of InterJet Net, the Company changed its name to Interjet Net
Corporation and conducted a private placement of 680,000 shares of its common
stock at a price of $1.95 per share. This offering was completed on August 27,
1997.
Overview
The Interjet Net system operates over a wireless spectrum allocated by the FCC,
specifically in the microwave frequency of 2.4-2.7 Ghz bandwidth. In the Salt
Lake City area, Interjet Net has leased frequency for ten years from an MMDS,
Hispanic Information Telecommunications Network, Inc. ("HITN"). The HITN antenna
is currently located in downtown Salt Lake City but is intended to be moved to a
new site on Farnsworth Peak, which is in the line of sight to substantially all
of the population area of Greater Salt Lake City. The antenna operates at 10
watts and the space for the antenna is licensed from a local television station.
The topography of the Salt Lake City area gives excellent line of sight
transmission to the entire population area of 1.3 million. The Salt Lake City
metropolitan area is rapidly growing, with a concentration of high technology
enterprises. The Company began testing the signal for the one-way wireless
system in June of 1997 and began selling the service in September of 1997.
During the first quarter of 1998, the Company began offering two-way wireless
Internet access, dial-up Internet access, web site design and web hosting. It is
the intention of the Company to offer this full array of Internet services in
all markets.
Industry Overview
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The Internet, a network of hundreds of interconnected, separately administered
public and commercial networks, has emerged as a global communications medium
enabling millions of people to share information and conduct business
electronically. During the past few years, the number of Internet users,
advertisers and content developers and businesses online has grown dramatically.
With readily-available, low-cost Internet access, consumers and businesses are
making increased use of Web browsers, electronic mail, corporate intranets,
telecommuting, online advertising and electronic commerce. According to Wireless
Broadcasting Magazine, there are over 12 million Internet users in the United
States. According to Jupiter Communications, the number of Internet households
worldwide will grow from an estimated 23.4 million in 1996 to 66.6 million by
2000. The Company believes that this growth in the number of users will drive
more substantial increases in both Internet advertising, which International
Data Corporation ("IDC") estimates will grow from $181 million in 1996 to $2.9
billion in 2000, and Internet commerce, which IDC estimates will grow from $318
million in 1995 to $95 billion in 2000.
Internet usage continues to be stimulated by a number of factors, including the
emergence of the World Wide Web, the increasing sophistication of Internet
browsers and Web-enabled software, the availability of low-cost, flat-rate
pricing for Internet access and online services, and the wealth of increasingly
useful information published on the Internet. Increased Internet usage and the
availability of powerful new tools for the development and distribution of
Internet content have led to a proliferation of Internet-based services, such as
advertising, online magazines, specialized news feeds, interactive games and
educational and entertainment applications, that are increasingly incorporating
multimedia information such as video and near-CD-quality audio clips. The
Internet has the potential to become a platform through which consumers and
businesses easily access rich multimedia information and entertainment, creating
new sources of revenue for advertisers, content providers and businesses. The
growth of Internet advertising and commerce depends, in part, on the ability of
advertisers and online merchants to deliver a compelling multimedia message to
attract viewers and potential customers.
It is estimated that approximately 40% of US households have personal computers
and that 60% of businesses already have Internet access or will have access
within one year. Almost all of the access is provided over local telephone
company circuits, most of which are limited by current technology to providing
56 Kbps access. Many telephone companies also offer ISDN telephone service, with
128 Kbps or T-1 lines, with 1.4 Mbps, but such lines are not available in every
area and are more expensive. Currently, the typical Internet user uses a modem
with 14.4 Kbps to 33.6 Kbps capabilities. In early 1997, dial-up modems offering
a peak data transmission speed of 56 Kbps were introduced for use with ISP/OSPs
over existing telephone lines, although many ISP/OSPs do not yet support this
transmission speed. The lack of a universal standard has slowed the rate of
adoption of faster modems. Integrated Services Digital Network ("ISDN")
technology enables a peak data transmission speed of 128 Kbps between the user
and the ISP/OSP over specially conditioned telephone lines. Although ISDN
technology has been available for several years, it has not been widely deployed
due primarily to its high costs. Asymmetric Digital Subscriber Line ("ADSL") is
currently the most prominent implementation of Digital Subscriber Line ("xDSL")
technology, an emerging telecommunications protocol originally developed to
deliver video on demand. ADSL enables peak data transmission speeds of 8.4 Mbps
downstream from the ISP/OSP to the user and 640 Kbps upstream from the user to
the ISP/OSP; however, typical implementations realize substantially lower data
transmission speeds. ADSL access is priced significantly above other access
services and is not expected to be widely available in the near term. Cable
modem technology offers data transmission at speeds of 10 Mbps downstream and 10
Mbps upstream, with speeds comparable to wireless available only in those
metropolitan areas where hybrid fiber-coaxial ("HFC") cable is installed at
significant cost. The perceived advantage of cable modem access to the Internet
is the availability of current infrastructure. However, businesses, which are
the heaviest users of Internet services, are not typically wired for cable, and
cable companies are already laden with debt and are burdened with a negative
consumer perception.
Satellite-delivered approaches such as direct broadcast satellite ("DBS")
currently provide a peak data transmission speed of approximately 400 Kbps
downstream and rely on dial-up modems and the telephony network for upstream
transmission ("telephone return"). These approaches have scaling limitations due
to the necessity of dividing a finite amount of satellite bandwidth among
subscribers in a broad geographic area. Other wireless offerings rely on
ground-based radios instead of satellites. Such offerings include multichannel
multipoint distribution service ("MMDS"), low power television stations in the
VHF bandwidth ("LPTV") and local multipoint distribution service ("LMDS"), which
are one-way and two-way high-bandwidth wireless digital broadcasting systems,
respectively. MMDS and LMDS are not yet widely available,
<PAGE>
require unobstructed "line-of-sight" transmission paths and may require
additional radio frequency spectrum allocations, an entirely new distribution
infrastructure and new equipment (including specialized radio modems).
Competition
The markets for consumer and business Internet services are extremely
competitive, and the Company expects that competition will intensify in the
future. The Company's most direct competitors in these markets are ISPs,
national long distance carriers and local exchange carriers, wireless service
providers, OSPs and Internet content aggregators. Many of these competitors are
offering (or may soon offer) technologies that will attempt to compete with some
or all of the Company's high-speed data service offerings. Such technologies
include Integrated Services Digital Network ("ISDN") and Digital Subscriber Line
("xDSL"). The Company also competes with other wireless, telephone or
cable-based data services. The bases of competition include transmission speed,
reliability of service, ease of access, price/performance, ease-of-use, content
quality, quality of presentation, timeliness of content, customer support, brand
recognition and operating experience. ISPs, such as BBN Corporation ("BBN"),
Earthlink Network, Inc. ("Earthlink"), MindSpring Enterprises, Inc.
("MindSpring"), Netcom On-Line Communications Services, Inc. ("Netcom") and
PSInet Inc. ("PSInet"), provide basic Internet access to residential consumers
and businesses, generally using existing telephone network infrastructures. This
method is widely available and inexpensive. Barriers to entry are low, resulting
in a highly competitive and fragmented market. Long distance inter-exchange
carriers, such as AT&T Corp. ("AT&T"), MCI Communications Corporation ("MCI"),
Sprint Corporation ("Sprint") and WorldCom, Inc. ("WorldCom"), have deployed
large-scale Internet access networks and sell connectivity to business and
residential customers. The regional Bell operating companies ("RBOCs") and other
local exchange carriers have also entered this field and are providing price
competitive services, and cable television companies are also offering Internet
access. Many of such carriers are offering diversified packages of
telecommunications services, including Internet access service, to residential
customers and could bundle such services together, which could place the Company
at a competitive disadvantage.
Wireless service providers, including AT&T and Hughes Network Systems, are
developing wireless Internet connectivity, such as multichannel multipoint
distribution service, local multipoint distribution service and digital
broadcast satellite. OSPs include companies such as America Online, Inc.
("America Online"), CompuServe Corporation ("CompuServe"), Microsoft's Microsoft
Network ("MSN"), Prodigy, Inc. ("Prodigy") and WebTV Networks Inc. ("WebTV")
(which has agreed to be acquired by Microsoft) that provide, over the Internet
and on proprietary online services, content and applications ranging from news
and sports to consumer video conferencing. These services are designed for broad
consumer access over telecommunications-based transmission media, which enables
the provision of data services to the large group of consumers who have personal
computers with modems. In addition, they provide basic Internet connectivity,
ease-of-use and consistency of environment. In addition to developing their own
content or supporting proprietary third-party content developers, online
services often establish relationships with traditional broadcast and print
media outlets to bundle their content into the service, such as the relationship
of Microsoft with NBC to provide multimedia news and information programming
over both cable television and MSN.
Content aggregators seek to provide a "one-stop" shop for Internet and online
users. Their success depends on capturing audience flow, providing ease-of-use
and offering a range of content that appeals to a broad audience. Their business
models are predicated on attracting and retaining an audience for their set of
offerings. Leading companies in this area include America Online, CompuServe,
Excite, Inc. ("Excite"), Microsoft and Yahoo! Inc. ("Yahoo!"). In this market,
competition occurs in acquiring both content providers and subscribers. The
principal bases of competition in attracting content providers include quality
of demographics, audience size, cost- effectiveness of the medium and ability to
create differentiated experiences using aggregator tools. The principal bases of
competition in attracting subscribers include richness and variety of content
and ease of access to the desired content. The proprietary online services such
as America Online, CompuServe and MSN have the advantage of a large customer
base, industry experience, many content partnerships and significant resources.
Many cable system operators have developed their own cable-based services and
market those services to unaffiliated cable system operators that are planning
to deploy data services. Several cable system operators, including Time Warner
Inc. ("Time Warner") and the Continental Cablevision subsidiary of U S WEST,
Inc. ("US West"), have deployed high-speed Internet access services over their
existing local HFC cable networks. Specifically, Time Warner, which is the
second
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largest cable company in the United States, has established its own cable-based
ISP with proprietary content, called Road Runner, which features a variety of
Time Warner publications and services. Time Warner plans to market the Road
Runner service through Time Warner's own cable systems as well as to other cable
system operators nationwide. Continental Cablevision has developed another
service called Highway One, which offers high-speed Internet services to its
existing customers. Others that have publicly announced limited-area trials for
their own cable-based Internet services include Adelphia, BellSouth Corporation
("BellSouth") and Jones Intercable, Inc. ("Jones Intercable"). Some of these
companies such as Time Warner have their own substantial libraries of multimedia
content and the other competitors could establish strategic relationships with
content providers, which could provide them with a significant competitive
advantage.
Many of the Company's competitors and potential competitors have substantially
greater financial, technical and marketing resources, larger subscriber bases,
longer operating histories, greater name recognition and more established
relationships with advertisers and content and application providers than the
Company. Such competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and devote substantially more
resources to developing Internet services or online content than the Company.
There can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competitive pressures faced by the
Company will not materially adversely affect the Company's business, operating
results or financial condition. Further, as a strategic response to changes in
the competitive environment, the Company may make certain pricing, service or
marketing decisions or enter into acquisitions or new ventures that could have a
material adverse effect on the Company's business, operating results or
financial condition.
Regulatory Environment
The Company's services are subject to current regulations of the Federal
Communications Commission (the "FCC") with respect to the use of its wireless
access. In addition, changes in the regulatory environment relating to the
Internet connectivity market, including regulatory changes that, directly or
indirectly, affect telecommunications costs, limit usage of subscriber-related
information or increase the likelihood or scope of competition from the RBOCs or
other telecommunications companies, could affect the prices at which the Company
may sell its services. For example, regulations recently adopted by the FCC are
intended to subsidize Internet connectivity rates for schools and libraries,
which could affect demand for the Company's services. The Company cannot predict
the impact, if any, that future regulation or regulatory changes might have on
its business.
Business Strategy
The Company is one of few companies currently offering wireless applications to
access the Internet. The opportunity for this application over a wide area
became available only a little more than 18 months ago when a wireless
downstream application for Internet access was announced. This technology is
built around a headend (Point of Presence or "POP") that is then connected to a
microwave transmitter located in the 2.5-2.7 Ghz- bandwidth range. The Salt Lake
System was one of the first systems of this kind built in the country.
Although the one-way system works well, it is a "downstream" only transmission.
A customer is still tethered to a phone line through an ISP to transmit
information onto the Internet backbone. The return information is then obtained
by high-speed return. Recently, however, newer technology has provided wireless
two-way applications that the Company has also installed in the Salt Lake
System. With wireless two-way a customer eliminates the phone company altogether
and is provided high-speed up and down the pipe. The customer's computer is
always on the Internet with virtually no delays in downloading any file. The
two-way system also opens the door to telephone, videoconferences, and a
wide-range of other applications.
The Company has positioned itself as presumably the only full service wireless
company in the country that offers all Internet-related service as well as
high-speed connectivity. From its core business of high-speed wireless Internet
access to standard ISP accounts and Web design and hosting that is either
sophisticated or relatively simple, the Company is in a position to provide full
service to the entire community of Internet users. It is the Company's belief
that it has become the Internet provider of the future--a provider that can
serve each customer's
<PAGE>
full needs with a powerful, unique tool with high-speed, two-way, wireless
high-speed Internet access as the business core.
In the Company's view:
*There is a huge and rapidly growing market demand for high-speed
Internet access that is satisfied by the Company's wireless products.
*Two-way wireless solutions provide a high growth-potential market
that is early in its evolution.
*High scalability is achievable within two years.
*The Company's wireless approach has a potentially national and global
application.
*Wireless applications can cut infrastructure cost by as much as 50%, thus
reducing equipment cost dramatically.
*The Company must act as a full-service ISP with wireless solutions as its
unique niche.
*The current market focus of the Company is small to mid-size businesses and
high-end Internet users.
Wireless Network Solutions
The core business of the Company is to provide high-speed wireless Internet
access to businesses and high-end individual users. Such primary targets are
Multiple Dwelling Units (apartments, condominiums), commercial buildings, and
telecommuters. The application of each of these units is better shown by example
than discussion.
A large apartment complex or condo is linked to the Company's wireless two-way
headend and ISP rather inexpensively. Then cable is run to each unit within the
building, similar to phone or cable wiring. Each of those units is now ready to
receive the Company's signal and an individual secure link to the Internet. As
the Company becomes the customer's ISP as well as their high-speed access
provider and Web host, the customer eliminates second phone line charges, ISP
fees and the necessity to purchase a traditional phone modem. For about the same
cost per month, that user can receive high-speed access with savings which the
Company contends can't be matched by any other service available today.
Another example with a current client of the Company, is the Overland
Corporation in Salt Lake City. The Company wired Overland's new 100+ unit
apartment complex. The Company anticipates that at least 50% of the unit rentals
will subscribe to the Company's service. Thus, the building should produce about
$2500 per month or almost $30,000 per year into the foreseeable future.
Construction costs, building wiring, and antennas totaled about $15,000.
Commercial buildings are similar, such as the Judge Building in the Salt Lake
System. The Company has an agreement with the owners of this property (40
business tenants) to provide wireless T1 service to all the tenants. It is
anticipated that the average price per tenant for this high-end service will be
about $400 per tenant. The tenants will be able to subscribe for service from a
64Kbps to a full T-1 at far less than phone rates.
Another example of high-end Internet use is the growing telecommuting
industry--the home-office user that must have high-speed access.
These examples are representative of the customer base for the Company. The
initial growth and experience indicate that the Company's wireless approach is a
product that is better, cheaper, and faster than any current competition.
Internet Service Provider
Wireless Internet access solutions are the core of the Company's business. The
sales efforts of the Company made it clear, however, that most business
executives want a full service provider. The Company believes that businesses
generally want an Internet provider that has the ability to address all Internet
needs in full, not
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partially. InterJet Net does that with the wireless system, dial-up access as
well as web site services as value-added items.
The Company believes that the dial-up subscribers are important. They may
eventually want to upgrade as they become more active on the Internet and as the
price of wireless modems fall.
Marketing
Although the Company expects the bulk of its new subscribers will come from
acquisition, local sales and marketing are also an intricate part of the
Company's growth plan. Local marketing will give the Company brand name
recognition that will lead to wireless system sales.
The Company's ISP marketing strategy is built around local activity with local
radio, TV, newspapers, and retail computer stores. The computer store program is
the most productive. The Company has forged relationships in its markets with
businesses that influence the purchasing decisions of its primary target
customers for ISP services. Partnerships with computer stores include:
In-store demonstration of our high-speed wireless connection.
Joint marketing and advertising.
In-store POP displays.
Internet Education classes at computer retail outlets.
Special Promotions and Event Sponsors.
Reseller Agreement with Revenue.
The Company has such relationships with several resellers in the Company's
various markets.
Web Development, Design, and Hosting
Web sites are business tools that can dramatically improve customer service,
expand marketing efforts, and reduce marketing and support cost. The Company
currently hosts about 500 Web sites in its Salt Lake City, UT, Beaumont, TX,
Houston, TX and Newport Beach, CA offices. It is a relatively low maintenance
and profitable side of the business. The Company also builds "designer" sites
tailored for the individual client and administered on a daily, weekly, or
monthly basis.
Network Integration Solutions
The Company provides network solutions, consulting, and integration for its
wireless clients. Computer networks are continuing to be key to the flow of
information within corporations and thus are mission critical to the Company's
customers. The Company is committed to providing the latest up-to-date training
and certifications for our personnel, thus providing our subscribers with
assurances of top level expertise in the industry.
The Company's networking engineers specialize in the development of Wide Area
Networks (WAN), Metropolitan, and Local Area Networks (LAN), including network
integration of all computer systems platforms. Corporate experience includes
in-depth working knowledge of routing/switching technology, including Breezecom,
Lucent Technologies, Bay Networks, Ascend Communications, Hybrid Networks, and
others in dealing with the design and layout of LAN and WAN environments. The
Company has developed LAN/WAN environments utilizing large-scale deployments of
the Major LAN Network Operating Systems.
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Network Support
The Company provides ongoing day-to-day support for all products and services
offered. This support includes complete management of hardware and software,
help-desk functionality, and support of all individual components relating to
integration, Internet, telecommuting, and in-band video conferencing and
products (non-proprietary and proprietary) of the Company. Support is often
aided by the use of network analyzers and management stations, which can be
supplied by the Company or provided by the customer. The Company's support
includes software and hardware upgrades for systems and networks. Future product
evaluations are also part of the support service. Building the customers'
knowledge concerning networks is a specific goal of training, and documentation
can be included as part of the support phase of the contract. The Company has
close ties with each of the major hardware and software independent vendors and
maintains an excellent reputation as a quality service and support provider.
Telecommuting and Video Conferencing Services
The Company provides telecommuting and in-band video conferencing services to
corporate users within a corporate entity to allow for employees of customers to
work seamlessly outside the corporate location. Currently, the Company offers
such telecommuting and in-band video conferencing services as an ongoing feature
of its services. The Company continues to develop its offerings by utilizing new
technology, as it becomes available in this emerging market. It is expected that
telecommuting and in-band video conferencing will increase the revenue base of
the Company. The Company believes that it has a strategic advantage in this
emerging market by having the ability to integrate various vendor-independent
products to provide a seamless integrated package to the customer.
Product and Services
The Company provides a wide array of Internet and data services ranging from
basic single-user dial-up accounts to Web hosting and design to elaborate
corporate data transfer solutions. In basic terms, the Company provides a
connection to the Internet and various related services to help companies
promote their business on the Internet.
The Company's quality and reliable service begins with its connection to the
Internet. In each of its operating markets, a high-speed connection to a major
Internet backbone provider is part of the Company's system. The Company
currently uses UUNET, which is currently the largest carrier of Internet
traffic. The Company uses multiple T-1s in Houston and Beaumont and a T-3 line
in Salt Lake City to ensure that customer traffic gets to and from the Internet
quickly and reliably.
The Point-of-Presence ("POP") is where the data is routed between the Internet
and local users. The Company's POPs use the latest in technology and equipment
from manufacturers which include Unix and NT servers, Cisco routers, digital
modems by Ascend and Lucent Technologies, and computer hardware by Sun
Microsystems, Dell Computer, and other reputable manufacturers. To operate the
POPs, the Company has hired a staff that is fluent in Unix, NT, and MacIntosh
platforms. In addition to qualified network administrators, the Company
maintains support/customer service staff in-house to care for the needs of its
business and residential customers.
Dial-Up Connections
The simplest connection to the Internet is the dial-up account. This method of
service connects the user to the Internet through the use of a modem and
standard telephone line. Currently, users can connect via dial-up at speeds up
to 56 Kbps. The Company supports these users through the use of sophisticated
modem banks at the POP that send data through a router and out to the Internet.
The Company supports the higher speed 56K and ISDN connections with
state-of-the-art digital modems. With a dial-up connection, a user can gain
access to the Internet for e-mail, World Wide Web ("WWW"), FTP, newsgroups, and
a variety of other useful applications.
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User-to-Modem Ratio
A dial-up connection requires the use of a modem on the customer side and a
modem at the POP. The customer normally owns his or her modem. The modem at the
POP side of the connection is owned and maintained by the ISP. These modems come
in a chassis, or "bank," that holds multiple modems, such as the Ascend 4000 or
Portmaster PM3. Each time a dial-up customer connects, he or she uses one of the
limited number of modems at the POP. Once all the modems are in use, subsequent
users will get busy signals. Most ISPs maintain a user-to- modem ratio of 8-to-1
to 12-to-1. ISPs using a higher ratio will most likely have users that, at
times, cannot connect to the POP or must wait for modems to become available for
use. In IJNT markets, the Company maintains a user-to-modem ratio that is below
the industry average of 10-to-1.
Dedicated Dial-up Connections
For the user who needs to be connected immediately to the Internet 100% of the
time, the Company offers dedicated dial-up connections. This service basically
sets aside one dial-up modem for the customer, guaranteeing that the customer
can always get a connection when needed.
Leased Line Connections
Many businesses and some individuals have a need for more bandwidth to the
Internet in order to support an entire network of users or a busy Web site. The
Company has the capacity to sell a leased line connection to users. This method
of connection gives the user a full-time high-speed (up to 1.5 mbps) connection
to the Internet through the POP. The leased line solution comes at greater
expense to the user, who must lease a specially dedicated line from its location
to the POP. These lines are leased through the telephone companies at a high
installation and monthly fee. It is the Company's preference to offer the
customer a two-way wireless connection, thus capturing telephone company revenue
and saving the customer money.
Downstream Wireless System
Currently, IJNT is operating a high-speed wireless service in the Salt Lake City
area. The system was launched in November 1997 and has experienced success in
the first six months of service. This system uses a land-based microwave
transmitter to deliver Internet data to businesses and homes at up to 10Kbps.
Whereas the downstream data flow is carried on a microwave frequency, the
upstream data flow returns to the POP via traditional telephone lines. The
service is best suited for the business or home user who pulls large amounts of
information from the Internet. Studies show that the download requirements of
almost all users far outweigh the upload needs, making this service very
desirable for almost all Internet users, but especially high-end and "power"
Internet users.
To provide the downstream wireless service, the Company places a small microwave
receive antenna and frequency downconverter at the user site. The receive
antenna is cabled via standard RG-6 coaxial cable to a specialized, proprietary
modem. The modem connects directly to the user's computer or network through a
normal 10BaseT Ethernet connection.
Wireless T1
The Company offers "wireless T1" service to those businesses that have greater
bandwidth needs. The wireless T1 is a point-to-point microwave connection from
the POP to the user's site. The bi-directional connection can be throttled or
metered to allow competitive service to an expanded coverage area. The
technology was developed in part by the military for secure data transmission.
As such, it is extremely reliable, robust, and secure.
Point-to-Point Data Transfers
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The Company provides point-to-point data transfer without Internet connection
via its wireless technology to companies with the need to connect two or more
locations to one local area network. Through wireless networking capabilities,
the Company's point-to-point wireless services can be applied to locations up to
approximately 4 to 5 miles apart.
Web Hosting Services
Web hosting is in essence the rental of space on a server that has a full-time
connection to the Internet. The Company will host a customer's Web space,
allowing access to it by customers, employees, suppliers, etc. 24- hours per
day, seven days a week. As part of the service, Interjet Net applies for a
virtual domain (www.yourcompany.com) for its customers through InterNIC, the
company that registers and verifies domain names. The application process takes
24 to 48 hours to complete. When the domain name is registered, the Company
reserves a portion of hard disk space on one of its servers where the customer
can upload the web page. The page has its own address and can be reached by
anyone on the Internet at any time. Virtual hosting also allows companies to
assign e-mail addresses with their own domain name.
The Company also provides a number of services related to Web hosting for the
customer, including Web site statistics, CGI scripting, FrontPage extensions,
SSL security, telnet/shell access, MSQL and postgre SQL databases, auto
responders, e-commerce management, credit card transaction hosting, video
conferencing, and other available services.
The Company's staff can consult on a variety of programming services of PERL,
TCL/TK, Java, JavaScript, VM script, ActiveX, C,C++, Pascal, shell, and PHP/FI
scripting.
The Market
The Internet and Internet Access. The growth of the Internet is well documented
and perhaps the greatest growth industry in the history of the World.
Growth in the Internet is about 12% per month.
Every two seconds the Internet has a new subscriber.
Use of the Internet file search and retrieving tool is currently growing at
1,000 percent annually.
There are more than 10 million host computer systems connected to the
Internet.
Transactional commerce on the Internet is estimated at $2 billion today,
and by the year 2002 will be at $300 billion.
User population of the Internet is approaching over 100 million people.
Business Integration in a World of Wireless E-Commerce. Global villages, virtual
communities, information superhighways, and gigabit networks have been used to
describe the world where teleconferencing, interactive television, traditional
on-line information services, and public telephone systems converge. The U.S.
information services market is huge, and its shift toward digital media is a
change of monumental proportions. Today's communication networks are not ready
to meet the demands being placed upon them. The trend towards digital delivery
will require improvements to the underlying communication infrastructure.
Telecommuting, Telephony, and Video Conferencing. Integration is not confined to
interconnecting a corporation's major locations. With the use of laptop,
palmtop, and notebook computers on the rise, there is an increasing demand to
provide access to corporate networks while employees are at home and on the
road. Demand for remote access will continue to grow and increase the demand for
modems, routers, and cellular communications software and hardware.
A conservative estimate by the Rochester Institute of Technology's
Office of Distance Learning shows that 5.5 million people are presently working
from remote offices. According to the Gartner Group, telecommuting and in-band
video conferencing is expected to expand from such base to approximately 30
million users in the USA by the year 2000. Additionally, the U.S. Department of
Transportation estimates that fifteen
<PAGE>
percent (15%) of the USA workforce will be utilizing telecommuting and in-band
conferencing by the year 2002. Therefore, the growth in that marketplace is
expected to be dramatic as corporations understand the benefits to management
through the increase in employees' (1) morale, (2) flexibility, (3) reduced
office costs and (4) compliance with federal standards. The Telecommunications
Act, recently passed by Congress, will clear the way for telecommuting to become
commonplace.
The World Wide Web. The World Wide Web is the multimedia part of the Internet.
It is the primary system used on the Internet to find and transfer information.
It has, moreover, become (with the exception of e-mail) the most popular and the
most promising and active source for business use.
The Web offers incredible diversity for business, education,
communication, and entertainment. Web pages are available on the Internet in
tens of thousands of styles and subjects, with almost as many reasons for
posting them on the Web. For example, there are thousands of sites in each of
these subject areas:
Commercial, Shareware, Freeware software
Business, marketing, commerce
Finance, stock market, corporate information
K-12 education
Online books
Online magazines
Government sites and information
Legal information
Health and medical information
Daily and categorized news
Travel/booking/ticketing information and purchase
Reference books
Scientific sites covering archeology through zoology
History
Museums and libraries
All social, scientific, and economic disciplines, viz., philosophy,
religion, languages, etc.
Virtually all knowledge in the history of mankind may someday soon be on the
Web. For example, the Vatican has started to download images of 150,000 original
documents dating from as early as the second century A.D. on the Internet. The
Securities and Exchange Commission maintains free Internet access to its library
of corporate records.
Last year Web-based transactions came to nearly $20 billion and online retail to
$2.74 billion in sales. By 2003 the U.S. Department of Commerce estimates that
figure could reach $115 billion. ( See Forbes, "E-Commerce Engine", May, 1998).
Market Strategy
InterJetNet Corporation views market share within the delivery of high-speed
Internet access as extremely fragmented. Competitive firms and industry view
Internet access as a by-product of their core business. Cable and Satellite's
primary mission is, of course, television delivery; RBOC's mission is the
delivery of long distance and local phone service. Wireless cable companies
(whose frequencies may be used for Internet access) are awash in debt and unable
to add product value.
The Company believes that it has immense opportunities for acquisition in the
ISP area, thus providing an expanded subscriber base, local phone lines,
equipment, offices, and technicians. ISPs are available now because most were
started several years ago by technically oriented people who had little or no
marketing or sales skills.
<PAGE>
Furthermore, the industry is riding a wave of unprecedented growth. The growth
is faster than any economic or technical growth in the history of the world.
Consider these facts as published by the Commerce Department ("The Emerging
Digital Economy," Dept. of Commerce, April 1998):
More than 100 million people around the world, most of whom had never
heard of the Internet four years ago, now use it to do research, send
e-mail, make requests for bids to suppliers, and shop.
Years to acquire 50 million users: Radio: 38 years.
Television: 13 years.
PC: 16 years.
Internet: 4 years.
In recent years information technology industries have been
responsible for more than one-quarter of real economic growth.
In 1994, three million people, mostly in the U.S., used the Internet.
In 1998, 100 million people around the world use the Internet.
UUNET, one of the largest Internet backbone providers, estimates that
Internet traffic doubles every 100 days.
The Internet makes electronic commerce (e-commerce) affordable to even
the smallest home office.
Marketing and Growth
The key elements in the Company's sales and marketing strategy include:
Acquisitions. As part of planned acquisitions, the Company anticipates acquiring
both key customers and sales and marketing personnel. Additionally, the Company
anticipates name recognition in market presence gained through acquisitions and
brand recognition in the community.
Expansion to New Locales/Cities. The Company intends to expand offices into
other targeted locales through acquisition and development of two-way wireless
infrastructure. Pre-Marketing. The Company will perform a thorough and well
planned advertising and trade show campaign. Each customer service will include
a full offering of the Company's services.
Increase Customer Accounts. The Company will continue to develop in each market
an aggressive sales strategy through effective hiring and training. To achieve
desirable growth forecast, the Company will use a number of marketing and sales
tools, most of which they have already implemented. These tools include:
Direct Mail. A direct mail piece is most effective when it focuses on a
business core target. Mailing to vertical markets such as design firms, service
bureaus, research firms, lawyers, CPAs, etc. has proven to be effective.
Partnership Mailings. This might include such companies and organizations
as the Chamber of Commerce, network administrators, computer groups and firms,
etc.
Trade Publication Advertising. Targeted advertising in markets where
Internet-related services are growing the fastest delivers the greatest return
for the Company's advertising dollars. Target advertising opportunities include:
local business-to-business magazines, chamber ads, local computer or tech
magazines, local computer user group newsletters, tech administrators magazines,
Yellow pages or discount buying magazine services, vertical market organization
newsletters, etc.
Local Web Page Partnerships and Advertising. Advertising on the Web
targets an existing Internet user. Many local Web sites have dedicated
residential or business visitors. High-speed connections will provide a value ad
for the Web sites, and visitors will see an immediate application and benefit.
Examples include radio, TV, magazines, newspapers, universities, court and
legal, etc.
Kiosk. The use of Kiosk in shopping centers and high traffic areas
connected to the wireless high-speed has created large crowds and has produced a
substantial amount of business in the Company's markets.
Trade Shows and Event Sponsorship. Computer-related trade shows attract
technology savvy decision- makers and buyers. In most markets Internet- related
services dominate the themes and attractions. At the recent
<PAGE>
Hot Technology Expo in Salt Lake City, the Company's booth recorded more traffic
(as counted by "swipe" cards) than any other attraction.
Computer and Technology Retail and Distributor Vendor Partnerships.
Building a relationship with another technology provider allows the Company to
benefit from existing relationships. Small businesses buy computers and office
equipment from local companies. By partnering with these companies we can reach
qualified decision-makers very inexpensively. Example companies include Computer
City, Circuit City, and other local computer outlets.
Mass Media Advertising. Mass media advertising is done primarily through
partnerships and trades, thus keeping the cash cost under control.
Employees
The Company currently employs 38 employees. Of this group, about one third are
dedicated to technical solutions and engineering. For each 400 new subscribers,
a new technical person is added within the system. Each market requires four to
six salespeople, two installers, at least two technicians, and two office
support personnel.
<PAGE>
Item 2. DESCRIPTION OF PROPERTY
The Company currently leases approximately 2,500 square feet of office space in
the Houston, Texas market. The term of this lease has expired as of May of 1998.
The Company leases two offices in Salt Lake City. The first which houses the
administrative and sales functions of this system is a 2,820 square foot
facility which is leased at a cost of $3,529 per month. This lease term expires
on July of 2000. The second office space in Salt Lake is approximately 1,000
square feet. It is leased at a cost of $800 per month and expires on December
11, 2000. This facility houses the Company's equipment and technical employees.
The Company also leases a garage for equipment and installation vehicles at a
rate of $675 per month. This lease expires on September 30, 1998
The Beaumont office is approximately 2,500 square feet and has been leased at a
cost of $2,102 per month which expires on October 31, 2000.
The Company's Newport Beach office is 2,866 square feet. This lease expires on
August 31, 1999 and is for $5,015 per month.
Each additional office that is opened will require about 2,000 square feet of
office space, rooftop availability for transmitting equipment, a private
air-cooled server and equipment room as well as warehouse space for installation
equipment and truck storage.
Item 3. LEGAL PROCEEDINGS
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 31, 1998.
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock began trading on the Over-the-Counter Bulletin Board
under the symbol "IJNT" on December 7, 1997. As of March 31, 1998, the Company
had 482 holders of record. The following table sets forth, on a per share basis
for the period shown the high and low prices of the Common Stock as reported on
the OTC Bulletin Board.
Closing
Price
High Low
Fiscal Year Ended March 31, 1998
From December 7 - December 31, 1997 . $6.00 $3.75
From January 1 - March 31, 1998 . . $5.50 $4.00
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Results of Operations for the Year Ended March 31, 1998
Management believes that period-to-period comparisons of the Company's
consolidated financial results to date are not meaningful as prior to the
acquisition of Interjet Net the Company was not involved in any operations other
than organizational activities.
Revenues
The Company's revenues for the year ending March 31, 1998 totaled $147,057. This
revenue was derived from the commencement of operations in Salt Lake City and
Beaumont as well as the continued operations of the Houston system. Of the
current fiscal year revenues, approximately $10,000 was earned in the quarter
ending December 31, 1997 and the remaining $137,000 was earned in the fourth
quarter of the fiscal year. This represents an increase in revenues of over 800%
in comparing the quarter ending December 31, 1997 to the quarter ending March
31, 1998. The Salt Lake City System accounted for approximately $33,500 in
revenues for the year ended March 31, 1998, Beaumont grossed approximately
$1,100 and the Houston System recorded the remaining $112,400 of revenues for
the fiscal year.
The Company anticipates future growth in revenues from adding customers in its
existing markets as well as through acquisitions.
Cost of Sales
The Company's cost of sales for the year ending March 31, 1998 equaled $66,405.
Gross Profit
The Company's gross profit for the fiscal year was $80,652. This represents a
gross profit percentage of 55%. Since much of the cost of sales figures are
fixed, such as the cost of T-1 and T-3 connections, the Company anticipates that
the gross profit percentage will increase as additional subscribers are added.
Selling, General and Administrative Expenses
The Company incurred total selling, general and administrative expenses ("SG&A")
of $2,044,431 for the year ended March 31, 1998. The Company currently maintains
five offices in four cities (Newport Beach, CA, Salt
<PAGE>
Lake City, UT, Beaumont, TX and Houston, TX). Currently 38 employees are
employed to service these offices. It is anticipated that the number of
employees should be sufficient to support the anticipated growth of the Company
for the next several months. Much of the SG&A expenses are fixed and should not
increase as the Company grows.
Salary expense made up the greatest portion of SG&A. Total salary expense for
the year ended March 31, 1998 equaled $713,482, or approximately 35% of total
SG&A. Of the salary expense, $223,525 represents officers compensation and
$489,957 is salary expense to other employees.
Professional fees, which include accounting, legal, engineering and other
consultants, totaled $240,376 for the year ended March 31, 1998. This
represented approximately 12% of total SG&A. The legal costs associated with the
acquisition of InterJet Net, Inc. and Access Communications, Inc. were
substantial. The Company anticipates continuing to incur legal, accounting and
consulting expenses in conjunction with continued acquisitions. Engineering fees
may continue to escalate as the Company has wireless systems designed and
installed in future markets.
With the Company leasing office space in four cities, the total rent expense for
the fiscal year was $190,944. This amounted to 9% of total SG&A. The Company
anticipates leasing additional space in other cities as additional systems
become operational.
Travel and associated costs for the fiscal year were $203,754, or approximately
10% of total SG&A. Travel costs are necessary in setting up new systems in other
markets. The Company intends on substantial travel costs continuing to be
incurred as additional markets are anticipated to be launched in the next fiscal
year.
Depreciation and Amortization
Depreciation and amortization for the year ended March 31, 1998 was equal to
$82,874. This expense is primarily attributable to the substantial amounts of
equipment that were placed into service in the fiscal year. The Company expects
depreciation and amortization expense to rise in future periods as additional
equipment is being purchased and placed into service.
Interest Expense
The Company incurred interest expense of $10,071 in the year ended March 31,
1998. Currently, the Company has no interest bearing debt.
Income Tax Benefit
The Company currently has net operating loss carryforwards equal to
approximately $2,500,000. The Company has not recognized any of this tax benefit
as an asset due to uncertainty of future income.
Net Loss
The Company incurred a loss of $2,395,484 in the year ended March 31, 1998. The
Company hopes to increase revenues and gross profit in the upcoming fiscal year
while controlling the growth of SG&A expenses.
Liquidity and Capital Resources
The Company had working capital of $348,443 as of March 31, 1998. As of March
31, 1998, the Company has stock subscriptions receivable of $794,325 which have
been received to filing of this report and have been included in current assets.
This amount was received in full as part of a private stock offering made by the
Company. The Company believes that it can finance future operations and plans
for growth through additional stock offerings, debt offerings and increased
revenues from operations. Since March 31, 1998 the Company has
<PAGE>
successfully entered into other equity sales that have generated approximately
$2.5 million in net proceeds to the Company.
Inflation
The Company's Management does not believe that inflation has had or is likely to
have any significant impact on the Company's operations. Management believes
that the Company will be able to increase subscriber rates after its wireless
systems are launched, if necessary, to keep pace with inflationary increases in
costs.
Other
The Company does not provide post-retirement or post-employment benefits
requiring charges under Statements of Financial Accounting Standards Nos. 106
and 112.
<PAGE>
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The selected financial data presented below for the year ended March 31, 1998
were derived from the consolidated financial statements of the Company, which
were audited by Smith & Company, independent certified public accountants, and
which are included elsewhere in this Form 10-KSB. This selected consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements (including the notes thereto) included
elsewhere in this Form 10-KSB.
As the Company was not involved in operations prior to the acquisition of
Interjet Net, the financial data has not been presented in a comparative format.
InterJet Net Corporation
and Subsidiaries
Condensed Consolidated Income Statement
For the Year Ended March 31, 1998
Sales $ 147,057
Cost of Sales 66,405
--------------
GROSS PROFIT 80,652
General and Administrative Costs 2,044,431
Depreciation and Amortization 82,874
Interest and Bank Charges 10,071
--------------
TOTAL OPERATING EXPENSES 2,137,376
Net Operating Loss (2,056,724)
Other Income (Expense)
Interest Income $ 12,947
Acquisition Costs (351,707)
--------------
NET LOSS $ (2,395,484)
===============
Earnings (Loss) per Common Share $ (0.21)
================
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INTERJET NET CORPORATION
AND SUBSIDIARIES
PAGE
Independent Auditors Report . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheet as of March 31, 1998 .. . . . F-2
Consolidated Statements of Operations for the two years ended
March 31, 1998 and March 31, 1997 . . . . . . . . . . F-3
Consolidated Statements of Changes in Stockholders Equity
for the two years ended March 31, 1998 and March 31, 1997 . F-4
<PAGE>
Consolidated Statements of Cash Flows for the two years
ended March 31, 1998 and March 31, 1997 . . . . . . . F-5
Notes to the Consolidated Financial Statements . . . . . . . . F-6
Consolidated General and Administrative Expenses
for the two years ended March 31, 1998 and March 31, 1997 . F-9
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
<PAGE>
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors and Executive Officers
The members of the Board of Directors of the Company serve until the next annual
meeting of stockholders, or until their successors have been elected. The
officers serve at the pleasure of the Board of Directors. Information as to the
directors and executive officers of the Company is as follows.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Jon H. Marple (1)(2) 58 Chairman, Chief Executive Officer, President and
Treasurer since August 8, 1997 (date of purchase of
InterJet Net)
Mary E. Blake (1)(2)(3) 45 Vice President, Director and Secretary since August
8, 1997 (date of purchase of InterJet Net)
Richard W. Torney 58 Director since August 8, 1997 (date of purchase of
InterJet Net)
</TABLE>
(1) Marple and Blake are husband and wife.
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
Jon H. Marple - Mr. Marple's background is in law and management. Upon
graduation from the University of Washington College of Law in 1966, Mr. Marple
taught Business Law and Constitution Law at a branch college of The Ohio State
University while beginning his law practice with George, Greek, King, McMahon
and McConnaughy in Columbus, Ohio. Leaving the law firm in 1969, Mr. Marple was
appointed as Sr. Trial Attorney at the United States Department of Justice in
Washington D.C., working as an assistant to the Deputy Attorney General of the
United States. Mr. Marple moved to the Federal Communications Commission, where
he served as an assistant to the General Counsel, Richard Wiley, and as a Senior
Appellate Counsel, representing the FCC before the Federal Courts. While in this
position, Mr. Marple wrote several briefs which were presented to the Supreme
Court of the United States and represented the Commission before Federal
Appellate courts in matters pertaining to telephone and broadcast issues. In
1972, Mr. Marple moved to the prestigious Washington, D.C. communications law
firm of Dow, Lohnes and Albertson, where he practiced communications law for
several years before acquiring standard broadcast facility KRKO in Everett,
Washington, in 1976. As an owner-operator of KRKO, Mr. Marple was involved in
all phases of the operation. One year after taking over the operation, KRKO's
sales had doubled. Mr. Marple also owned minority interest in several other
broadcast properties in the Northwest before selling his interest in 1983.
The next several years Mr. Marple consulted and acquired FCC allocated
spectrum starting Marrco Communications in 1991 to consolidate these functions.
IJNT was incorporated with Mary E. Blake (Mr. Marple and Ms. Blake are husband
and wife), in January of 1997.
Mary E. Blake - Upon graduation from Waltrip H.S. in Houston, where she was a
member of the National Honor Society, Ms. Blake attended Sam Houston State
University before Texas A&M as a member of the first co-ed class. After managing
a small oil and gas company, Ms. Blake entered the management training program
for Southwestern Bell where she quickly rose through the management ranks as a
Business Office Supervisor. Ultimately, she supervised 25,000 accounts for
sales, service and collection. She also worked as a supervisor for Directory
advertising and the first S.W. Bell word processing applications. She was also
trained as a lobbyist for
<PAGE>
the company. InterJet Net was co-founded by Ms. Blake along with her husband,
Jon H. Marple. She has been Vice President and Director of the Company since the
acquisition of InterJet Net on August 8, 1997.
Richard W. Torney - Mr. Torney is President and sole owner of Imaging Systems,
Inc., an international sales and marketing organization with representation in
Europe and South America. He has been a director of InterJet Net Corporation
since the acquisition of InterJet Net on August 8, 1997. Mr. Torney is fluent in
Spanish and German, and has been involved in international business extensively
for 35 years. His expertise in foreign markets, accounting and professional
experience is important as the Company builds a foundation toward international
growth.
Conflicts of Interest
Certain conflicts of interest may exist between the Company and its
management, and conflicts may develop in the future. The Company has not
established policies or procedures for the resolution of current or potential
conflicts of interests between the Company, its officers and directors or
affiliated entities. There can be no assurance that management will resolve all
conflicts of interest in favor of the Company, and failure by management to
conduct the Company's business in the Company's best interest may result in
liability to the management. The officers and directors are accountable to the
Company as fiduciaries, which means that they are required to exercise good
faith and integrity in handling the Company's affairs. Shareholders who believe
that the Company has been harmed by failure of an officer or director to
appropriately resolve any conflict of interest may, subject to applicable rules
of civil procedure, be able to bring a class action or derivative suit to
enforce their rights and the Company's rights.
The Company has no arrangement, understanding or intention to enter
into any transaction for participating in any business opportunity with any
officer, director, or principal shareholder or with any firm or business
organization with which such persons are affiliated, whether by reason of stock
ownership, position as an officer or director, or otherwise.
<PAGE>
Item 10. EXECUTIVE COMPENSATION
Annual All Other
Name and Principal Position Compensation Compensation
Jon H. Marple, President $127,500 (1) $10,000(3)
Mary E. Blake, Vice President $ 83,525 (2) $ 2,500(3)
(1) $32,500 of this annual compensation was accrued and converted into
stock as of the acquisition of InterJet Net on August 8, 1997. (2) $11,250
of this annual compensation was accrued and converted into stock as of the
acquisition of InterJet Net on August 8, 1997. (3) Represents year end
bonuses for the calendar year ended December 31, 1997.
Item 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information relating to the beneficial
ownership of Company common stock by those persons beneficially holding more
than 5% of the Company capital stock, by the Company's directors and executive
officers, and by all of the Company's directors and executive officers as a
group, as of March 31, 1998.
Percentage
Name of Number of of Outstanding
Stockholder Shares Owned Common Stock
Mary E. Blake (1) 8,150,462 63.7%
Jon H. Marple (1) -- --
Richard W. Torney -- --
All officers and
directors as a group
(3 persons) 8,150,462 63.7%
(1) Mary E. Blake and Jon H. Marple are husband and wife. Mr. Marple
disclaims beneficial ownership of the shares owned by Ms. Blake.
<PAGE>
Item 12. CERTAIN TRANSACTIONS AND SUBSEQUENT EVENTS
Access Communications, Inc. Acquisition
Effective January 1, 1998, the Company acquired Access Communications, Inc., a
Texas Corporation ("Access"), as a wholly owned subsidiary. The Company issued
211,000 shares of its common stock to the shareholders of Access in exchange for
all of the outstanding stock in Access. Access had a customer base of
approximately 1,800 in Houston, Texas at the time of the acquisition. This
acquisition positioned the Company as an ISP in the Houston area and gives the
Company an infrastructure around which to build a wireless system. The Company
is currently designing the wireless system for this market.
SUBSEQUENT EVENTS
The following represent acquisitions and significant transactions completed
after the end of the fiscal year ended March 31, 1998 and prior to the filing of
this report.
Acquisition of WebIt of Utah, Inc.
On June 1, 1998, the Company entered into a Definitive Agreement to acquire all
of the outstanding stock of WebIt of Utah, Inc., a Utah Corporation ("WebIt").
As consideration, the Company assumed a note payable in the amount of $15,000
and issued 20,000 shares of its common stock to the shareholders of WebIt. WebIt
is a web site design and hosting company which had approximately 550 customers.
This acquisition gave the Company a wide variety of web sites that it now hosts.
The Company believes that the continued promotion of web site design and hosting
is a very profitable line of business and plans on continuing to expand in this
area. The added customer base allows the Company to offer value-added services
to these individuals and businesses, such as enhanced web site design, Internet
access, e-mail accounts and marketing support.
Acquisition of Internet Solutions, LLC
On June 20, 1998, the Company purchased all of the assets and customer base of
Internet Solutions, LLC ("IS, LLC") in exchange for 2,500 shares of its common
stock. IS, LLC had approximately 100 subscribers to its Internet Access System.
With this system based in Provo, Utah, the Company has formed a presence in this
market and intends on beginning marketing efforts in Provo. The Company has also
started the engineering of a wireless system in this market.
The following represent sales of the Company's stock which took place after the
end of the fiscal year ended March 31, 1998 and prior to the filing of this
report.
Offering Under Regulation S
On May 28, 1998, the Company commenced an offering of 600,000 shares of its
common stock under Regulation S. Under the rules of Regulation S as of April
1998, this stock bears a restrictive legend of one year. As of July 13, 1998,
this offering was completed generating net proceeds to the Company of
$1,478,125.
Offering Under Regulation D
On June 10, 1998, the Company commenced an offering of 1,000,000 shares of its
common stock under Regulation D. This stock bears a restrictive legend of one
year. This offering was completed on July 13, 1998 and the Company expects to
receive net proceeds of $2,250,000 shortly.
<PAGE>
PART IV
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits of the Company are included
herein.
Sequential
Exhibit No. Document Description Page No.
3. Certificate of Incorporation and Bylaws
3.1. Articles of Incorporation(1)
3.2 Bylaws(1)
(1) Incorporated by reference to such exhibit as filed with the
Company's registration statement on Form 10-SB, File No. 0-24408.
(b) Reports on Form 8-K.
None filed during the fourth quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 July 14, 1998.
INTERJET NET CORPORATION
By: /s/ Jon H. Marple
Jon H. Marple
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities on July 14, 1998.
By: /s/ Jon H. Marple President, Treasurer, Chief Executive Officer,
Jon H. Marple Chief Financial, Officer and Chairman
By: /s/ Mary E. Blake Vice President, Secretary and Director
Mary E. Blake
By: /s/ Richard W. Torney Director
Richard W. Torney
<PAGE>
SMITH & COMPANY
A PROFESSIONAL CORPORATION OF
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: 10 WEST 100 SOUTH, SUITE 700
AMERICAN INSTITUTE OF SALT LAKE CITY, UTAH 84101
CERTIFIED PUBLIC ACCOUNTANTS TELEPHONE: (801) 575-8297
UTAH ASSOCIATION OF FACSIMILE: (801) 575-8306
CERTIFIED PUBLIC ACCOUNTANTS E-MAIL: [email protected]
- -------------------------------------------------------------------------------
Board of Directors
InterJet Net Corporation
Salt Lake City, Utah
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of InterJet Net
Corporation and Subsidiaries as of March 31, 1998, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the years ended March 31, 1998 and 1997. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit. The financial statements for March 31, 1997 have been restated to reflect
the acquisition of a subsidiary in 1997. The statements for 1997 reflect the
acquisition under the pooling-of-interests method of accounting as if it had
occurred at April 1, 1996.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of InterJet Net
Corporation and Subsidiaries as of March 31, 1998 and the results of their
operations, changes in stockholders' equity, and cash flows for the years ended
March 31, 1998 and 1997 in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The information in Schedule 1 is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements, and in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
June 30, 1998
F-1
<PAGE>
INTERJET NET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31,
1998
-----------------
ASSETS
CURRENT ASSETS
<S> <C>
Cash in bank $ 63,303
Accounts receivable 39,912
Stock subscription receivable (Note 7) 794,325
Inventory 44,834
Prepaid expenses 12,108
-----------------
TOTAL CURRENT ASSETS 954,482
PROPERTY AND EQUIPMENT (Notes 1 and 4) 975,839
OTHER ASSETS
Deposits 8,907
Organization costs (Note 1) 8,992
Licenses and other (Note 5) 761,475
-----------------
TOTAL OTHER ASSETS 779,374
-----------------
$ 2,709,695
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 490,244
Accrued liabilities 46,392
Income taxes payable 800
Note payable 35,000
Loans from shareholders (Note 3) 13,690
Current portion of long-term debt 19,913
-----------------
TOTAL CURRENT LIABILITIES 606,039
LONG-TERM LIABILITIES (Note 6) 49,162
-----------------
TOTAL LIABILITIES 655,201
SHAREHOLDERS' EQUITY
Common stock, $.001 par value:
Authorized 20,000,000 shares;
Issued and outstanding 12,854,145 shares 12,854
Additional paid-in capital 4,614,838
Retained deficit (2,573,198)
-----------------
TOTAL SHAREHOLDERS' EQUITY 2,054,494
-----------------
$ 2,709,695
=================
</TABLE>
See Notes to the Financial Statements.
F-2
<PAGE>
INTERJET NET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended March 31,
1998 1997
------------------ ---------------
<S> <C> <C>
Sales $ 147,057 $ 0
Cost of sales 66,405 0
------------------ ---------------
GROSS PROFIT 80,652 0
General and administrative expenses (Schedule 1) 2,044,431 174,739
Depreciation and amortization (Note 1) 82,874 56
Interest and bank charges 10,071 0
------------------ ---------------
2,137,376 174,795
------------------ ---------------
Net operating loss (2,056,724) (174,795)
Other Income (Expense)
Interest income $ 12,947 $ 0
Acquisition costs (351,707) 0
------------------- ---------------
NET LOSS $ (2,395,484) $ (174,795)
================== ===============
EARNINGS (LOSS) PER COMMON SHARE
Net income (loss) $ (.21) $ (.02)
================== ===============
Weighted average number of common shares
used to compute net income (loss) per
weighted average share 11,528,021 10,388,886
================== ===============
</TABLE>
See Notes to the Financial Statements.
F-3
<PAGE>
INTERJET NET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Retained
Shares Amount Capital Deficit
----------------- ------------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Balances at 3/31/96 424,600 $ 425 $ 821 $ (2,919)
Issue shares to acquire InterJet Net, Inc. * 9,964,286 9,964 1,676,438
Net loss (174,795)
----------------- ------------------ ---------------- ----------------
Balances at 3/31/97 10,388,886 10,389 1,677,259 (177,714)
Issue stock for note payable 7/31/97 155,000 155 1,400
Stock split 2.339936535 for 1 7/31/97 776,677 776 (776)
Sale of shares in private placement 8/20/97 680,000 680 1,325,320
Issue shares to acquire Access Comm. 1/1/98 211,000 211 421,789
Sale of shares in private placement 1/27/98 69,620 70 146,064
Issue shares for services 1/27/98 15,000 15 31,485
Sale of shares in private placement 2/1/98 48,200 48 101,172
Sale of shares in private placement 3/1/98 9,762 10 20,490
Sale of shares in private placement 3/10/98 500,000 500 890,635
Net loss (2,395,484)
----------------- ------------------ ---------------- ---------------
Balances at 3/31/98 12,854,145 $ 12,854 $ 4,614,838 $ (2,573,198)
================= ================== ================ ===============
</TABLE>
*Transaction occurred 8/1/97, but is reflected earlier under the
pooling-of-interests method of accounting.
See Notes to the Financial Statements.
F-4
<PAGE>
INTERJET NET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended March 31,
1998 1997
----------------- ----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (2,395,484) $ (174,795)
Add items not requiring the use of cash
Stock issued for services 31,500 0
Amortization and depreciation 82,874 56
Acquisition costs 351,707 0
Changes in assets and liabilities:
Accounts receivable (39,912) 0
Inventory (44,834) 0
Prepaid expenses (12,108) 0
Accounts payable 401,262 87,239
Accrued liabilities (41,108) 87,500
Income taxes 800 0
----------------- ----------------
NET CASH REQUIRED BY
OPERATING ACTIVITIES (1,665,303) 0
INVESTING ACTIVITIES
Deposits (8,907) 0
Organization costs (8,978) 0
----------------- ----------------
NET CASH REQUIRED BY
INVESTING ACTIVITIES (17,885) 0
FINANCING ACTIVITIES
Sale of common stock 1,690,664 0
Proceeds from loans 83,690 0
Principal payments on loans and leases (27,862) 0
----------------- ----------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,746,491 0
----------------- ----------------
INCREASE IN CASH AND
CASH EQUIVALENTS 63,303 0
Cash and cash equivalents at beginning of period 0 0
----------------- ----------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 63,303 $ 0
================= ================
Supplemental Disclosures of Cash Flow Information Cash paid during the period
for:
Interest $ 10,071 $ 0
Income taxes 0 0
</TABLE>
Noncash investing and financing activities
During the period ended March 31, 1998, the Company issued 10,190,286
shares of common stock for assets valued at $2,139,902 and expenses of
$31,500, and the Company issued 155,000 shares to satisfy debt. Vehicles at
a cost of $96,937 were acquired by incurring contracts and leases payable
in the same amount.
See Notes to the Financial Statements.
F-5
<PAGE>
INTERJET NET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements for 1998 and 1997 include the
accounts of the Company and its wholly-owned subsidiary InterJet
Net, which was incorporated January 15, 1997 under the laws of the
State of Nevada. The consolidated financial statements for 1998
include the accounts of the Company and its wholly-owned subsidiary
Access Communication, Inc., a Texas corporation, which was
purchased January 1, 1998. All significant intercompany balances
and transactions have been eliminated in consolidation.
Business Activity
The Company was incorporated on June 11, 1992 in Delaware as
Picometrix, Inc. On August 8, 1997 the name was changed to InterJet
Net Corporation. The Company acquired the bulk of its assets July
31, 1997 with the acquisition of InterJet Net and January 1, 1998
with the acquisition of Access Communications, Inc. The Company is
engaged in providing internet access to businesses and individuals.
Basis of Accounting
The consolidated financial statements are prepared using the
accrual basis of accounting where revenues are recognized when
earned and expenses are recognized when incurred.
Earnings (Loss) Per Share
Earnings (loss) per share amounts are calculated based on the
weighted average number of shares outstanding during the period.
Organization costs:
Organization costs are being amortized over a five year period.
Property and Equipment
Property and equipment are depreciated over their estimated useful
lives. Depreciation and amortization are computed using
straight-line methods over an estimated life of five to seven
years.
Cash and Cash Equivalents
For financial statement purposes, the Company considers all highly
liquid investments with an original maturity of three months or
less when purchased to be cash equivalents.
Income Taxes
The Company records the income tax effect of transactions in the
same year that the transactions enter into the determination of
income, regardless of when the transactions are recognized for tax
purposes.
Tax credits are recorded in the year realized.
The Company utilizes the liability method of accounting for income
taxes as set forth in Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS 109). Under the
liability method, deferred taxes are determined based on the
difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely than not
that such tax benefits will not be realized.
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, liabilities, revenues and expenses during the reporting
period. Estimates also affect the disclosure of contingent assets
and liabilities at the date of the financial statements. Actual
results could differ from these estimates.
NOTE 2: FORMER DEVELOPMENT STAGE COMPANY
The Company was in the development stage from its inception until
December 31, 1997. Commencing January 1, 1998, the Company has
sufficient revenue through operations of its subsidiaries that
management considers it to be no longer in the development stage.
F-6
<PAGE>
INTERJET NET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1998
NOTE 3: RELATED PARTY TRANSACTIONS
During 1997, the Company's subsidiary, InterJet Net acquired assets
valued at $699,000 from an officer in exchange for 1,000 shares of
common stock. The officer paid costs of $321,252 on behalf of
InterJet Net as additional consideration for the stock. The assets
were recorded on InterJet Net's books at their historical cost to
the officer.
The officers and directors of the Company are involved in other
business activities and may, in the future, become involved in
other business opportunities. If a specific business opportunity
becomes available, such persons may face a conflict in selecting
between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
At March 31, 1998, the Company owed two shareholders amounts
totaling $13,690, payable within the next 12 months without
interest.
NOTE 4: PROPERTY AND EQUIPMENT
Property and equipment as of March 31, 1998 are summarized as
follows:
<TABLE>
<CAPTION>
Cost Depreciation Net Book Value
-------------- ---------------- ------------------
<S> <C> <C> <C>
Furniture $ 127,789 $ 10,080 $ 117,709
Equipment 205,964 27,297 178,667
Transmission Equipment 709,947 42,171 667,776
Leased Vehicle 12,749 1,062 11,687
-------------- ---------------- ------------------
$ 1,056,449 $ 80,610 $ 975,839
============== ================ ==================
</TABLE>
NOTE 5: LICENSES AND OTHER
The Company owns various MMDS and LPTV (wireless cable) licenses to
operate in various cities. A summary is as follows:
MMDS Channel rights $ 62,475
LPTV rights and licenses (See
Note 3) 699,000
-------------
$ 761,475
NOTE 6: LONG-TERM LIABILITIES
Long-term debt at March 31, 1998 is detailed as follows:
<TABLE>
<CAPTION>
Interest Principal Balance
Rate Payment Current Long-term
------------ ------------- ------------- --------------
<S> <C> <C> <C> <C>
Vehicle contract 9.75 $ 1,099 $ 9,002 $ 33,540
Vehicle contract 13.30 378 4,536 11,372
Vehicle lease 9.90 531 6,375 4,250
------------- --------------
$ 19,913 $ 49,162
============= ==============
</TABLE>
Scheduled principal reductions of the debt are as follows:
1999 $ 19,912
2000 17,824
2001 15,138
2002 15,829
2003 371
--------------
$ 69,074
NOTE 7: STOCK SUBSCRIPTION RECEIVABLE
The Company sold 500,000 shares of common stock March 10, 1998
subject to receipt of the $891,135 subscription price. The final
installment was received May 7, 1998. For purposes of these
financial statements, it is assumed that the shares were issued
March 10, 1998.
F-7
<PAGE>
INTERJET NET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1998
NOTE 8: COMMITMENTS AND CONTINGENCIES
The Company conducts its operations in leased facilities under
noncancellable operating leases expiring through 2001. In addition,
the Company leases equipment under noncancellable operating leases
expiring through 2007. The minimum future rental commitments under
operating leases are as follows:
<TABLE>
<CAPTION>
Year ending
March 31, Facilities Equipment Total
---------------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
1999 151,463 69,389 220,852
2000 103,124 26,318 132,442
2001 66,808 7,737 74,545
2002 34,115 6,000 40,115
2003 0 6,000 6,000
Beyond 2003 0 24,000 24,000
-------------- ------------- -------------
355,510 142,444 497,954
============== ============= =============
</TABLE>
NOTE 9: INCOME TAXES
No federal income taxes were due for the years ended March 31,1998
or 1997.
At March 31, 1998, the Company has a federal net operating loss
carryover of approximately $2,500,000. The federal loss will expire
December 31, 2012.
At March 31, 1998, the Company has a deferred tax asset in the
amount of $0. There is a potential asset based on future reduction
of income taxes using the net operating loss carryforward. The
amount has been reserved 100% due to the Company's losses.
Management believes that the Company will realize sufficient income
in the future to utilize the net operating loss carryforward.
However, since future income can only be estimated, there is not
sufficient basis for recognition of any deferred tax asset at this
time.
NOTE 10: ACQUISITION OF SUBSIDIARIES
The Company issued 9,964,286 shares to InterJet Net (a Nevada
corporation) effective July 31, 1997 in a reverse acquisition. This
combination has been treated as a pooling-of-interests, and
financial statements as of March 31, 1997 have been restated as if
the acquisition had occurred April 1, 1996.
The Company issued 211,000 shares to acquire Access Communication,
Inc. (a Texas corporation) effective January 1, 1998. This
acquisition has been treated as a purchase transaction.
F-8
<PAGE>
SCHEDULE 1
INTERJET NET CORPORATION AND SUBSIDIARIES
CONSOLIDATED GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
Years ended March 31,
1998 1997
----------------- ----------------
<S> <C> <C>
Accounting $ 26,035 $ 0
Automobile expense 35,947 4,292
Computer expense 85,311 615
Consulting 131,489 7,430
Insurance 48,280 6,334
Lease - channel 136,682 0
Legal 82,852 0
Marketing and advertising 60,933 0
Meals and entertainment 25,779 969
Office expense 72,215 5,072
Outside services 40,061 516
Payroll taxes and benefits 60,666 2,062
Postage 23,005 3,006
Relocation expense 5,310 574
Repairs and maintenance 4,039 0
Rent expense 190,944 11,464
Salaries 713,482 114,450
Taxes and licenses 9,498 0
Telephone 113,928 9,543
Travel 177,975 8,412
----------------- ----------------
$ 2,044,431 $ 174,739
================= ================
</TABLE>
F-9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from InterJet Net Corporation March 31, 1998 financial statements
and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000925739
<NAME> InterJet Net Corpoation
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 63,303
<SECURITIES> 0
<RECEIVABLES> 39,912
<ALLOWANCES> 0
<INVENTORY> 44,834
<CURRENT-ASSETS> 954,482
<PP&E> 1,056,449
<DEPRECIATION> 80,610
<TOTAL-ASSETS> 2,709,695
<CURRENT-LIABILITIES> 606,039
<BONDS> 69,075
0
0
<COMMON> 12,854
<OTHER-SE> 4,614,838
<TOTAL-LIABILITY-AND-EQUITY> 147,057
<SALES> 147,057
<TOTAL-REVENUES> 0
<CGS> 66,405
<TOTAL-COSTS> 2,127,305
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,071
<INCOME-PRETAX> (2,395,484)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,395,484)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,395,484)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
