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: June 30, 1999
or
[] Transition report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the transition period from:
Commission file number: 0-24408
IJNT.net, Inc.
(Exact name of registrant as specified in its charter)
Delaware 33-0611753
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2800 Post Oak Boulevard, Houston, Texas 77056
(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
August 10, 1999 was 17,419,031
1
<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 June 30, 1999;
Consolidated Statements of Income for the three months ended June 30,
1999 and June 30, 1998;
Consolidated Statement of Cash Flows for the three months ended June
30, 1999 and June 30, 1998;
Notes to Consolidated Financial Statements.
2
<PAGE>
IJNT.net, Inc.
CONSOLIDATED BALANCE SHEET
June 30, 1999
<TABLE>
<CAPTION>
ASSETS
Current Assets
<S> <C>
Cash $ 764,447
Account Receivable 670,704
Prepaid Expenses 90,676
Other Receivables 207,980
Inventory 166,338
-----------------
Total Current Assets 1,900,145
Property, Plant, and Equipment 2,812,360
Other Assets
Organizational Costs 6,743
Deposits 179,287
Licenses and Other 2,121,918
-----------------
2,307,948
-----------------
TOTAL ASSETS $ 7,020,453
=================
LIABILITIES & STOCKHOLDERS EQUITY
Current Liabilities
Accounts Payable $ 510,648
Accrued Liabilities 122,874
Payroll Withholding & Other 54,787
Income Taxes Payable (State) 4,811
Loans from Stockholders 16.690
Current Portion of Long-term Debt 19,873
-----------------
Total Current Liabilities 729,683
Long-term Debt 191,430
-----------------
Total Liabilities 921,113
Stockholders Equity
Series A Preferred Stock, $.01 par value:
Authorized 1,000,000 shares;
Issued and Outstanding 3,200 shares 32
Additional Paid-in Capital - Preferred Stock 3,589,968
Common Stock, $.001 par value;
Authorized 20,000,000 shares;
Issued and Outstanding 17,183,756 17,184
Additional Paid-in Capital 11,789,777
Retained Earnings (Deficit) (9,297,621)
-----------------
Total Stockholders Equity 6,099,340
-----------------
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $ 7,020,453
=================
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
IJNT.net, Inc.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------------- -----------------
<S> <C> <C>
Revenues $ 1,153,251 $ 179,851
Cost of Sales 508,658 97,270
----------------- -----------------
Gross Profit 644,593 82,581
General & Administrative Expenses
Professional Services 195,656 142,537
Salaries - Officers 88,250 52,200
Salaries - Others 738,127 226,139
Payroll Taxes & Benefits 69,749 26,860
Office Expenses 74,893 19,193
Advertising & Marketing 282,337 105,253
Auto Expense 24,936 7,816
Travel & Entertainment 81,722 96,730
Computer Expenses 18,666 9,067
Depreciation & Amortization 167,377 40,609
Channel Lease Payments 0 13,750
Equipment Lease Payment 0 11,281
Postage & Delivery 18,479 10,848
Insurance 32,325 23,227
Interest Expenses 0 7
Rent 131,365 36,020
Temporary Help & Outside Services 2,703 11,107
Tower Lease Payments 0 4,640
Telephone Expense 352,695 24,002
Taxes - Other 1,999 3,656
----------------- -----------------
Total General & Administrative Expenses 2,281,279 864,942
Interest Income 0 1,080
Provision for Income Tax 14,352 0
----------------- -----------------
NET PROFIT (LOSS) $ (1,651,038) $ (781,281)
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
IJNT.net, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------------- -----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net Income (Loss) $ (1,651,038) $ (781,281)
Adjustments:
Depreciation and Amortization 167,377 40,609
Expenses Paid with Common Stock 0 88,948
Changes in current accounts (31,155) (162,564)
----------------- -----------------
Net Cash Required by Operating Activities (1,514,816) (814,288)
INVESTING ACTIVITIES
Purchase of Inventory (79,693) (165,677)
Purchase of Fixed Assets (665,782) (104,407)
Deposits and Other (163,360) 0
----------------- -----------------
Net Cash Requited by Investing Activities (908,835) (270,084)
FINANCING ACTIVITIES
Loans 0 (4,250)
Repayment of Loans (4,249) (17,540)
Sale of Common Stock 2,289,590 1,486,620
----------------- -----------------
Net Cash Provided (Required) by Investing Activities 2,285,341 1,464,830
----------------- -----------------
Increase (Decrease) in Cash and Cash Equivalents (138,310) 380,458
Cash and Cash Equivalents at Beginning of Period 902,757 63,303
----------------- -----------------
Cash and Cash Equivalents at End of Period $ 764,447 $ 443,761
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
INTERJET NET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended June 30, 1999
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
IJNT.net, Inc. and its wholly-owned subsidiaries IJNT, Inc., Access
Communications, Inc., WebIt of Utah, Inc., UrJet Backbone Network, Inc., Man
Rabbit House Multimedia, Inc., and Global Broadband Services, Inc. have been
prepared in accordance with generally accepted accounting principals 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 principals 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.
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 IJNT, Inc. (formerly known as InterJet Net, Inc.) in
conjunction with the purchase of all of the outstanding stock of IJNT, Inc.
Over the past two years, the Company has entered into various private placement
offerings as well as offerings under Regulations D and S of the Securities and
Exchange Act of 1933.
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. In May of 1999, the agreement was amended to include an additional 2000
shares of Preferred Series A Stock, which netted an additional $ 1.8 million to
the Company. Through June 30, 1999 approximately 800 shares of Preferred Stock
has been converted to 800,000 shares of Common Stock. The Preferred Stock has a
par value of $.01 per share. A dividend of 8% per annum accrues on unconverted
Preferred Shares held by the investors. The investors have the ability to
convert the Preferred Stock into Common Stock of the Company at a rate of 1,000
shares of Common Stock for each share of Preferred Stock converted. The Company
has the ability to put additional shares of Preferred Stock to the Investors
based on the market price and average daily volume of shares traded of the
Company's common stock. The maximum total investment, which can be made by the
investors under the Agreement, is $10 million.
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 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, except that the Company has adopted a policy that its executives are
not permitted to accept positions to serve as directors of any organization
which does business with the Company without the prior approval of the Company's
CEO.
6
<PAGE>
INTERJET NET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Three Months Ended June 30, 1999
NOTE 4: INCOME TAXES
The Company has available at March 31, 1999, net operating loss carry forwards
of approximately $9.3 million which may provide future tax benefits which expire
starting in June of 2010.
NOTE 5: WARRANTS OR OPTIONS TO PURCHASE COMMON STOCK
At June 30, 1999, there are outstanding no outstanding warrants or options
purchase shares of the Company's common stock. As described in Note 2 above, the
outstanding Preferred Series A Stock is convertible into shares of common stock
in the Company.
NOTE 6: SUBSEQUENT EVENTS
See "PART II - Item 5. Other Information".
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Company produced gross revenues of $1,153,251 for the quarter ended on June
30, 1999. This represents an increase of 541 % when compared to the revenue of
$179,851 for the quarter ended June 30, 1998.
The Man Rabbit House subsidiary, which was acquired in August of 1998,
contributed $354,612 in revenues for the current quarter.
The Salt Lake City system generated gross revenues of $171,110 an increase of
212% compared with revenues of $54,801 in the same period a year ago. The
wireless subscriber base in Salt Lake increased to 273 as of June 30, 1999. This
is a 170% increase from the 101 subscribers signed up as of June 30, 1998.
Currently, there are 1898 dial-up subscribers on the Salt Lake systems. The
gross revenues from wireless subscribers totaled $18,208 in the current quarter.
Similarly, the revenues of the Beaumont system increased to $118,301 from $7,095
in the quarter ended June 30, 1998. This represents an increase of 1567 %.
The Houston office generated gross revenues of $187,224 in the quarter ended
June 30, 1999, compared with gross revenues of $117,955 in the same period last
year. This represents an increase of 59 %. The Houston system has been expanded
to offer wireless Internet access in the current quarter. This development is
expected to dramatically increase revenues in the upcoming quarters.
The Northern California operations have been added since the beginning of this
calendar year. The current quarter's revenues totaled $27,432.
UrJet Backbone Network ("UBN") is a wholly owned subsidiary of the Company that
was formed in the last quarter of 1998 to deploy fiber backbone connectivity and
a variety of telecommunications carrier services. Competitive Local Exchange
Carrier (CLEC) registration is currently pending in several states. Upon
approval of this registration, UBN will compete with local telephone companies
to deliver various telecommunication services to customers. UBN's fiber backbone
is now in place in such markets as Los Angeles, San Francisco and Orange County.
Los Angeles, Dallas, Houston, Salt Lake City, Phoenix, San Diego and several
other major markets should be fully connected by the end of the 1999 calendar
year. UBN also has rights to fiber routes and collocation/interconnection
facilities in 13 major cities across the U.S. In the current quarter, UBN will
begin recognizing revenues in fiscal Q2, 1999. The revenues of UBN are expected
to increase greatly after the granting of CLEC status, which is anticipated
soon.
The Company's loss for the three months ended June 30, 1999 was equal to
$1,651,038. This is compared to a loss for the three-month period ended June 30,
1998 of $781,281. The current quarter's loss increased dramatically due to the
aggressive expansion of the Company's business. The expenses are 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 expenses also reflect the activity of the newly acquired and
incorporated subsidiaries of the Company.
Total salaries of $826,377 were paid or accrued for the three months ended June
30, 1999. This equated to 36.2 % of the total expenses for the quarter that
totaled $2,281,279. This salary expense is compared to $278,339 (which was 32.2%
of total expenses of $864,942) incurred by the Company in the three months ended
June 30, 1998. The Company incurred expenses of $195,656 in professional fees,
including attorneys, accountants, engineers and consultants. This amount
represented 8.6 % of total G&A expenses for the quarter. In the same quarter a
year ago, $142,537 was expended on professional fees, or 16.5%
8
<PAGE>
of total expenses for the quarter. The Company anticipates continuing to incur a
large amount of professional fees as it continues to rapidly expand. The total
cost advertising and marketing increased this quarter to $282,337 (or 12.4 % of
total G&A expenses) compared to $105,253 for the three months ended June 30,
1998. This represented 12.2% total expenses for the quarter.
The Company has current assets totaling $1,900,145 at June 30, 1999 with total
net working capital of $1,170,462. This equates to a current ratio of
approximately 2.60.
PART II - OTHER INFORMATION
ITEM 5. Other Information.
On or about July 30, 1999, the Company entered into a Master Purchase Agreement
and secured line of credit agreement with Nortel Networks, a Canadian
corporation which manufactures telecommunications equipment. Under the terms of
the Agreement, Nortel Networks will provide the Company with $7 million in
operating capital, to be repaid from future public equity fundraising by the
Company. Nortel Networks will also deliver $8.2 million worth of equipment to
the Company for installation in its Los Angeles office and surrounding locations
as part of a network being built to offer DSL (Digital Subscriber Line) service
and other telecommunications services to the Company's customers. The Agreement
also extends a $37 million line of credit to the Company to purchase goods and
services from Nortel Networks over the next two years for the buildout of the
DSL network. The network planned by Nortel and the Company's engineers under the
agreement will accommodate DSL service, other dial-up and high-speed Internet
access services, traditional telephone service, fax, video, audio and
videoconferencing services, as well as other data transport products and
services. The network is scalable such that additional locations may be added to
the network in the future as components without altering the core of the
network. Initially, Nortel will deliver a DMS-500 telecommunications switch, and
an extensive list of associated hardware and software, including one-megabit
modems(TM) for customer premises equipment and StarHub(TM) network access
devices. The Company anticipates placing the first customers on the network in
service in October 1999, and placing approximately 15,000 DSL subscribers on the
network in Phase I of the network development.
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: August 16, 1999
IJNT.net, Inc.
s:/ Jon H. Marple
Jon H. Marple, President, Chairman
and Chief Financial Officer
s:/ Mary E. Blake
Mary E. Blake, Vice President and
Director
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from IJNT.net, Inc. June 30, 1999 financial statements and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000925739
<NAME> IJNT.net, Inc.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 764,447
<SECURITIES> 0
<RECEIVABLES> 670,704
<ALLOWANCES> 0
<INVENTORY> 166,338
<CURRENT-ASSETS> 1,900,145
<PP&E> 3,168,758
<DEPRECIATION> (356,398)
<TOTAL-ASSETS> 7,020,453
<CURRENT-LIABILITIES> 729,683
<BONDS> 0
0
32
<COMMON> 17,184
<OTHER-SE> 6,082,124
<TOTAL-LIABILITY-AND-EQUITY> 7,020,453
<SALES> 1,153,251
<TOTAL-REVENUES> 1,153,251
<CGS> 508,658
<TOTAL-COSTS> 2,281,279
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,636,686)
<INCOME-TAX> (14,352)
<INCOME-CONTINUING> (1,651,038)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,651,038)
<EPS-BASIC> (.10)
<EPS-DILUTED> (.10)
</TABLE>
