UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the quarter period ended: December 31, 1998
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the transition period from: to
Commission file number: 0-24408
IJNT INTERNATIONAL, INC. (formerly known as InterJet Net Corporation)
(Exact name of registrant as specified in its charter)
Delaware 33-0611753
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
13405 NW Freeway, Suite 228 Houston, Texas 77095
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 462-4222
Indicate by check mark whether the registrant (1) has filed all reports
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
The number of shares outstanding of the registrant's common stock on
February 12, 1998 was 15,126,857.
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
The following Consolidated Financial Statements of the Company and its
subsidiaries and related notes are included herein:
Consolidated Balance Sheet as of December 31, 1998 and March 31, 1998;
Consolidated Statements of Income for the three and nine months ended
December 31, 1998, for the three months ended December 31, 1998 and December 31,
1997 and for the nine months ended December 31, 1998 and pro-forma results for
the nine months ended December 31, 1997;
Consolidated Statement of Cash Flows for the nine months ended December
31, 1998 and pro-forma results for the nine months ended December 31, 1997;
Notes to Consolidated Financial Statements.
2
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IJNT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(DECEMBER 31, 1998 UNAUDITED)
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
------------------ ------------------
ASSETS
Current Assets:
<S> <C> <C>
Cash $ 2,769,751 $ 63,303
Account Receivable 158,106 39,912
Stock Subscription Receivable 0 794,325
Prepaid Expenses 66,126 12,108
Loan to Shareholder 86,603 0
Short-Term Receivable 85,336 0
Inventory 350,622 44,834
------------------ ------------------
Total Current Assets 3,516,544 954,482
Property, Plant, & Equipment 1,683,854 975,839
Other Assets:
Organizational Costs 7,306 8,992
Deposits 50,624 8,907
Licenses and Other 1,169,418 761,475
------------------ ------------------
1,227,348 779,374
------------------ ------------------
TOTAL ASSETS $ 6,427,746 $ 2,709,695
================== ==================
LIABILITIES & SHAREHOLDERS EQUITY Current Liabilities:
Accounts Payable $ 209,583 $ 490,244
Accrued Liabilities 65,740 46,392
Income Taxes Payable 800 800
Note Payable 0 35,000
Loans from Shareholders 0 13,690
Current Portion of Long-Term Debt 35,499 19,913
------------------ ------------------
Total Current Liabilities 311,622 606,039
Long-Term Debt 36,964 49,162
------------------ ------------------
Total Liabilities 348,586 655,201
Shareholders Equity:
Common Stock, $.001 par value;
Authorized 20,000,000 shares;
Issued and Outstanding 12,854,145 at March 31,
1998 and 15,027,216 at December 31, 1998 15,027 12,854
Preferred Series A Stock, $.01;
Authorized 1,000,000 shares;
Issued and Outstanding none at March 31, 1998
and 2,000 at December 31, 1998 20 0
Additional Paid-in Capital 11,405,254 4,614,838
Retained Earnings (Deficit) (5,341,141) (2,573,198)
------------------ ------------------
Total Shareholder's Equity 6,079,160 2,054,494
------------------ ------------------
TOTAL LIABILITIES & EQUITY $ 6,427,746 $ 2,709,695
================== ==================
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
IJNT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
<S> <C> <C>
Revenues $ 420,271 $ 10,233
Cost of Sales 115,564 40,542
------------------ ------------------
Gross Profit 304,707 (30,309)
General & Administrative Expensens:
Professional Services 254,876 25,858
Salaries - Officers 86,118 73,400
Salaries - Others 493,182 147,009
Payroll Taxes & Benefits 45,937 19,378
Office Expenses 31,823 16,704
Advertising & Marketing 113,441 70,282
Auto Expense 12,313 11,211
Travel & Entertainment 54,034 58,415
Computer Expenses 8,573 25,535
Depreciation & Amortization 74,491 6,000
Channel Lease Payments 6,250 88,552
Equipment Lease Payments 11,658 5,856
Postage & Delivery 14,668 8,593
Insurance 27,896 9,486
Interest Expense 9,201 1,126
Rent 51,337 34,102
Temporary Help & Outside Services 17,556 4,380
Tower Lease Payments 7,395 425
Telephone Expenses 62,856 22,373
Taxes - Other 1,744 525
------------------ ------------------
Total General & Administrative Expenses 1,385,349 629,210
Interest Income 24,862 7,252
Sate Income Taxes (1,809) 0
------------------ ------------------
TOTAL INCOME (LOSS) $ (1,057,589) $ (652,267)
================== ==================
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
IJNT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE AND NINE MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
------------------ ------------------
<S> <C> <C>
Revenues $ 420,271 $ 971,333
Cost of Sales 115,564 267,348
------------------ ------------------
Gross Profit 304,707 703,985
General & Administrative Expensens:
Professional Services 254,876 734,311
Salaries - Officers 86,118 203,713
Salaries - Others 493,182 1,084,565
Payroll Taxes & Benefits 45,937 114,576
Office Expenses 31,823 87,759
Advertising & Marketing 113,441 327,136
Auto Expense 12,313 28,059
Travel & Entertainment 54,034 175,619
Computer Expenses 8,573 25,600
Depreciation & Amortization 74,491 172,557
Channel Lease Payments 6,250 4,395
Equipment Lease Payments 11,658 55,888
Postage & Delivery 14,668 36,451
Insurance 27,896 75,050
Interest Expense 9,201 10,207
Rent 51,337 124,079
Temporary Help & Outside Services 17,556 43,533
Tower Lease Payments 7,395 15,230
Telephone Expenses 62,856 191,942
Taxes - Other 1,744 3,960
------------------ ------------------
Total General & Administrative Expenses 1,385,349 3,514,630
Interest Income 24,862 44,511
Sate Income Taxes (1,809) (1,808)
------------------ ------------------
TOTAL INCOME (LOSS) $ (1,057,589) $ (2,767,942)
================== ==================
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
IJNT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Pro-Forma
1998 1997
------------------ ------------------
<S> <C> <C>
Revenues $ 971,333 $ 10,233
Cost of Sales 267,348 46,286
------------------ ------------------
Gross Profit 703,985 (36,053)
General & Administrative Expensens:
Professional Services 734,311 146,547
Salaries - Officers 203,713 258,825
Salaries - Others 1,084,565 285,050
Payroll Taxes & Benefits 114,576 33,499
Office Expenses 87,759 54,352
Advertising & Marketing 327,136 102,203
Auto Expense 28,059 34,683
Travel & Entertainment 175,619 129,595
Computer Expenses 25,600 44,320
Depreciation & Amortization 172,557 6,000
Channel Lease Payments 4,395 90,052
Equipment Lease Payments 55,888 10,529
Postage & Delivery 36,451 19,144
Insurance 75,050 32,221
Interest Expense 10,207 7,051
Rent 124,079 95,876
Temporary Help & Outside Services 43,533 7,295
Tower Lease Payments 15,230 3,831
Telephone Expenses 191,942 61,369
Taxes - Other 3,960 1,852
------------------ ------------------
Total General & Administrative Expenses 3,514,630 1,424,294
Interest Income 44,511 12,560
Sate Income Taxes (1,808) (800)
------------------ ------------------
TOTAL INCOME (LOSS) $ (2,767,942) $ (1,448,587)
================== ==================
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE>
IJNT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1998
------------------ ------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net Income (Loss) $ (2,767,942) $ (1,448,587)
Adjustments:
Depreciation & Amortization 172,557 44,320
Expenses Paid with Common Stock 541,548 321,252
Changes in Current Accounts 579,129 407,812
------------------ ------------------
Net Cash Required by Operating Activities (1,474,708) (675,203)
INVESTING ACTIVITIES
Purchase of Fixed Assets (880,572) (909,279)
Purchase of Inventories (305,788) 0
Purchase of Licenses and Other Assets (407,943) (486,439)
------------------ ------------------
Net Cash Required by Investing Activities (1,594,303) (1,395,718)
FINANCING ACTIVITIES
Loans (173,491) 330,136
Repayment of Loans (43,750) (26,622)
Sale of Common Stock 4,192,700 1,978,716
Sale of Preferred Stock 1,800,000 0
------------------ ------------------
Net Cash Provided (Required) by Financing Activites 5,775,459 2,282,230
------------------ ------------------
Increase (Decrease) in Cash & Cash Equivalents 2,706,448 211,309
Cash & Cash Equivalents at:
Beginning of Period 63,303 0
------------------ ------------------
End of Period $ 2,769,751 $ 211,309
================== ==================
</TABLE>
See Notes to Consolidated Financial Statements.
7
<PAGE>
IJNT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company's management, all
adjustments (consisting of normal accruals) considered necessary for a fair
presentation of these financial statements have been included.
The Company was essentially inactive prior to the acquisition of InterJet Net,
Inc., a Nevada Corporation, now known as IJNT, Inc. (See Note 2 below). This
acquisition was completed in August of 1997. Where appropriate, the Company has
used pro-forma financial information, which includes the activity of IJNT, Inc.
prior to the acquisition in presenting comparative financial results.
NOTE 2: CAPITALIZATION
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, Inc. in conjunction with the purchase of
all of the outstanding stock of InterJet Net, Inc. Immediately following the
acquisition of InterJet Net, Inc., 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. In August of 1998, the Company changed its name to IJNT International,
Inc. and InterJet Net, Inc., a wholly owned subsidiary of the Company, changed
its name to IJNT, Inc.
The Company has entered into various private placement offerings and offerings
under Regulation S of the Securities Act of 1933. As of March 31, 1998, the
Company had sold a total of 642,582 shares of its common stock in various
offerings with net proceeds to the Company totaling $1,189,846. This fiscal year
(the period from April 1, 1998 to December 31, 1998), the Company has sold an
additional 1,380,825 shares with net proceeds of $4,103,336 resulting from such
sales. Of these sales, 20,000 shares were sold in the quarter ended December 31,
1998 with net proceeds of $42,900.
On December 4, 1998, the Company entered into an Agreement with Private
Investors (the "Investors") whereby the Investors purchased 2,000 shares of the
Company's Preferred Series A Stock (the "Preferred Stock") for a price of $1.8
million. The Preferred Stock has a par value of $0.01 per share and has a Stated
Value of $1,000 per share. A dividend of eight percent (8%) per annum accrues on
the Preferred Stock. The Investors have the ability to convert the Preferred
Stock into common stock of the Company at a rate of $1,250 worth of common stock
for each share of Preferred Stock converted. The Company has the ability to put
additional shares of Preferred Stock with the Investor based on the market price
and average daily volume of shares traded of the Company's common stock. The
maximum total investment to be made by the Investor is equal to $10 million.
In the nine months ended December 31, 1998, the Company has issued 151,112
shares of its common stock for services rendered to and on behalf of the
Company.
NOTE 3: RELATED PARTY TRANSACTIONS
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
8
<PAGE>
available, such persons may face a conflict in selecting between the Company and
their business interests. The Company has not formulated a policy for the
resolution of such conflicts.
As of December 31, 1998, the Company has loaned $86,603 to the majority
shareholders of the Company and their wholly owned subsidiary. As of March 31,
1998, the Company had borrowed $13,690 from these same shareholders.
NOTE 4: INCOME TAXES
The Company has available at December 31, 1998, estimated net operating loss
carryforwards of approximately $5,250,000 which may provide future tax benefits
expiring in June of 2010.
NOTE 5: WARRANTS TO PURCHASE COMMON STOCK
On August 27, 1998, a holder of warrants to purchase 512,821 shares of the
Company's common stock at $1.95 per share exercised these options. The net
proceeds to the Company were $1,000,000. These represented the only issued and
outstanding warrants or options to purchase the Company's common stock.
NOTE 6: STOCK SUBSCRIPTION RECEIVABLE
As of March 31, 1998, the Company had sold 500,000 shares of its Common Stock,
subject to receipt of the subscription price of $890,635. The final installment
was received in May of 1998. For purposes of these consolidated financial
statements, it was assumed that the shares were issued as of March 31, 1998.
NOTE 7: ACQUISITIONS
The Company is currently in various stages of negotiation on acquisitions which
are expected to be announced prior to the end of this fiscal year.
NOTE 8: SUBSEQUENT EVENTS
See "PART II - Item 5. Other Information".
9
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The Company's loss for the quarter ended December 31, 1998 was equal to
$1,057,589, compared with a loss for the quarter period ended December 31, 1997
of $652,267. The loss in the current quarter was primarily attributable to the
Company's Selling, General and Administrative Expenses of which salaries,
professional fees and marketing made up the largest amount. The increased loss
this quarter, compared to the losses in the previous quarters, reflects the
continuation of the Company's aggressive growth strategy. The increased expenses
also reflect the activity of Access Communications, Inc., Man Rabbit House
Multimedia, Inc. and WebIt of Utah, Inc., which are now wholly owned
subsidiaries of the Company. The Company's aggressive growth strategy has
resulted in additional expenses due to the aforementioned acquisitions as well
as increased marketing and advertising costs.
Total salaries of $579,300 were paid or accrued for the three months ended
December 31, 1998. This equated to 41.8% of the total expenses for the quarter,
which totaled $1,385,349. This salary expense is compared to $220,409 (which was
35.0% of total expenses of $629,210) incurred by the Company in the three months
ended December 31, 1997. The Company incurred expenses of $254,876 on
professional fees, or 18.4% of total expenses for the quarter. This includes
amounts paid to attorneys, accountants, engineers and consultants. The Company
pays several individuals as consultants, including technical consultants,
outside accountants and business consultants. Continued negotiations in
additional acquisitions have resulted in increased legal and consulting fees.
The total cost advertising and marketing expenses for the quarter totaled
$113,441 for the three months ended December 31, 1998. This represented to 8.2%
total expenses for the quarter. The Company's advertising and marketing expense
in the quarter ended December 31, 1997 was equal to $70,282, or 11.2% of total
expenses.
The Company produced gross revenues of $420,271 for the quarter ended December
31, 1998. Of these revenues, $99,374 or 23.6% were derived from the Company's
Houston operations (Access Communications, Inc.) and $128,117 or 33.4% were
derived from the Company's Man Rabbit House Multimedia subsidiary. Revenues for
Salt Lake and Beaumont were equal to $172,683 and $20,097, or 30.5% and 4.8% of
total revenue, respectively. The Company anticipates generating additional
revenues from existing operations as well as new operations in the Orange
County, California market in the next quarter. The Company has launched its
wireless Internet system in Orange County as of February 1999 and has begun
collecting revenues from its operations. The Company generated revenues in the
quarter ended December 31, 1997 equal to $10,233. The current quarter's revenues
represent an increase of approximately 4000%. The revenues for the Company in
the last quarter, which ended on September 30, 1998, were equal to $372,875. The
revenues in the current quarter represent an increase of 12.7% compared to the
quarter ended September 30, 1998.
The Company's revenues are produced from various Internet services. These
services include wireless Internet services, dial-up Internet connections, web
site design and web site hosting. The Company currently services nearly 7,000
monthly subscribers. The Company operates as an international dial-up Internet
service provider under the name "urjet" (pronounced "your jet"). The majority of
the Company's current subscribers are dial-up users. The current wireless
subscriber base from the Company's wireless system in Salt Lake City is
approximately 250. The wireless systems in Orange County and Houston are being
launched prior to the end of the current fiscal year.
The Company has current assets totaling $3,516,544 at December 31, 1998 with
total net working capital of $3,204,922. This equates to a current ratio of
approximately 11.3.
YEAR 2000 RISKS. Currently, many computer systems, hardware and software
products are coded to accept only two digit entries in the date code field and,
consequently, cannot distinguish 21st century dates from 20th century dates. The
interaction between various software and hardware platforms rely upon the date
coding system. As a result, many companies' software and computer systems may
need to be upgraded or replaced in order to function properly after the turn of
the century. The Company, its customers, and suppliers are reliant on computers
and related automated
10
<PAGE>
systems for daily business operations. Failure to achieve at least a minimum
level of Year 2000 systems compliance could have a material adverse effect on
the Company.
The Company has begun the process of identifying computer systems that could be
affected by the Year 2000 issue as it relates to the Company's internal hardware
and software, as well as third parties that provide the Company goods or
services. Three categories or general areas have been identified for review and
analysis.
(1) Systems providing customers services. These include hardware
and software systems that are used to provide services to the
Company's customers in the form of Internet connectivity,
e-mail servers, news servers, authentication servers, etc.
Hardware in the form of routers and switches are also included
in this area.
(2) Third party vendors providing critical services including
circuits, hardware, long distance and related products. These
include telecommunications providers, suppliers of routers,
modems and switches.
(3) Critical internal systems that support the Company's
administrative systems for billing and collecting, general
accounting systems, computer networks, and communication
systems.
The Company is in the planning and initial study phase of Year 2000 compliance
review and testing. In regards to Item (1) listed above the Company's critical
existing systems are no more than two years old and it is anticipated that many
of these systems will not have significant Year 2000 problems. These systems are
in process of being inventoried and a systems testing schedule is being
developed. All newly acquired hardware systems, operating systems, and software
are required to have vendor certification for Year 2000 compliance.
In regards to Item (2) above - third party products and services - the Company's
significant vendors are large public companies such as US West Communications,
UU Net, Cisco, Lucent Technologies, and Ascend Communications, that are all
under SEC mandates to report their compliance in all publicly filed documents.
The Company will initiate a compliance review program with these vendors during
the first quarter of 1999 and will continue to track progress of all critical
vendors for compliance.
Item (3) above relates to internal systems for company administrative and
communications requirements. The Company is in the process of implementing new
billing and billing presentment systems during the first half of 1999. These
system vendors are required to certify Year 2000 compliance. Additionally, the
Company will test these systems for compliance during the implementation
processes. Internal computer networks and communications systems will be tested
in the second quarter of 1999 for compliance.
The costs to address the Year 2000 compliance issues have not been determined at
this time. Based on growth the Company plans to implement new hardware platforms
and software systems that should be Year 2000 compliant and therefore costs
specifically allocated to Year 2000 compliance may not be significant. Systems
testing and compliance reviews with third party services providers will incur
manpower and consultant costs.
The nature of the Company's business makes it dependent on computer hardware,
software, and operating systems that are susceptible to Year 2000 issues.
Failure to attain at least minimum levels of Year 2000 compliance would have a
material adverse effect on the Company's ability to deliver services.
The Company has not developed a contingency plan for dealing with Year 2000
risks at this time.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. Other Information.
Acquisition of Global Broadband Services, Inc. On February 12, 1999, the Company
acquired Global Broadband Services, Inc., a Nevada Corporation ("Global").
Global owns and operates a wireless Internet system in Petaluma, California.
This system has recently begun selling its wireless Internet access and
currently serves approximately 25 customers. Lack of funding had prevented
Global from properly marketing its services. With funds readily available to
increase advertising and marketing and to keep adequate installation inventory
on hand, the Company is planning for substantial growth to the Petulama system.
Global also owns adequate equipment to construct an additional wireless Internet
access system. As consideration for the purchase of all outstanding stock in
Global, the Company issued 250,000 shares of its common stock to the
shareholders of Global.
ITEM 6. Exhibits and Reports on Form 8-K
Reports of Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: February 15, 1998
IJNT INTERNATIONAL, INC.
s:/ Jon H. Marple
Jon H. Marple, President, Chairman,
Chief Executive Officer and
Chief Financial Officer
s:/ Mary E. Blake
Mary E. Blake, President and
Director
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from IJNT International, Inc. December 31, 1998 financial
statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000925739
<NAME> IJNT International, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 2,769,751
<SECURITIES> 0
<RECEIVABLES> 158,106
<ALLOWANCES> 0
<INVENTORY> 350,622
<CURRENT-ASSETS> 3,516,544
<PP&E> 1,951,605
<DEPRECIATION> (267,751)
<TOTAL-ASSETS> 6,427,746
<CURRENT-LIABILITIES> 311,622
<BONDS> 36,964
0
20
<COMMON> 15,027
<OTHER-SE> 6,064,113
<TOTAL-LIABILITY-AND-EQUITY> 6,427,746
<SALES> 971,333
<TOTAL-REVENUES> 971,333
<CGS> 267,985
<TOTAL-COSTS> 3,514,630
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 1,808
<INCOME-CONTINUING> (2,767,942)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,767,942)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
