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: September 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: to
Commission File Number: 0-24408
IJNT.net, Inc.
(Exact name of registrant as specified in its charter)
Delaware 33-0611753
(State of other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
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 November 5,
1999 was 17,870,980.
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 September 30, 1999 and March 31, 1999
Consolidated Statements of Operations for the three and six months
ended September 30, 1998 and 1999.
Consolidated Statements of Cash Flows for the six months ended
September 30, 1999 and 1998.
Notes to Consolidated Financial Statements.
2
<PAGE>
IJNT.net, Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
September 30, March 31,
1999 1999
------------------ -----------------
(Unaudited)
ASSETS
Current Assets
<S> <C> <C>
Cash $ 5,449,662 $ 902,757
Accounts Receivable 715,916 291,642
Less Allowance for doubtful (21,450) 0
Stockholder Receivable 0 79,693
Prepaid Expenses 0 300,720
Other Receivables 0 207,980
Inventory 132,849 86,645
------------------ -----------------
Total Current Assets 6,276,977 1,869,437
Property, Plant & Equipment 6,021,890 2,313,953
Other Assets
Organizational Costs 5,693 6,743
Deposits 123,956 65,422
Licenses and Other 2,007,877 2,072,423
------------------ -----------------
Total Other Assets 2,137,526 2,144,588
------------------ -----------------
TOTAL ASSETS $ 14,436,393 $ 6,327,978
================== =================
LIABILITIES & SHAREHOLDERS EQUITY
Current Liabilities
Accounts Payable $ 691,655 $ 283,249
Accrued Liabilities 147,101 200,266
Payroll Withholdings & Other 68,128 0
Income Taxes Payable 8,313 4,811
Loans from Stockholders 0 156,690
Current Portion of Long-Term Debt 0 26,497
------------------ -----------------
Total Current Liabilities 915,197 671,513
Long-Term Debt 9,849,884 195,679
------------------ -----------------
Total Liabilities 10,765,081 867,192
Shareholders Equity
Series A Preferred Stock, $.01 par value:
Authorized 1,000,000 shares
Issued and Outstanding 3,200 32 20
Additional paid-in capital - Preferred Stock 3,589,968 1,799,980
Common Stock, $.001 par value;
Authorized 20,000,000 shares;
Issued and Outstanding 17,879,900 17,870 15,975
Additional Paid-in Capital 11,790,986 11,291,396
Retained Earnings (Deficit) (11,727,544) (7,646,585)
------------------ -----------------
Total Shareholder's Equity 3,671,312 5,460,786
------------------ -----------------
TOTAL LIABILITIES & SHAREHOLDERS EQUITY $ 14,436,393 $ 6,327,978
================== =================
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
IJNT.net, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues $ 883,442 $ 372,875 $ 2,036,693 $ 544,067
Cost of Sales 770,005 64,571 1,278,663 144,532
------------------ ------------------ ----------------- -----------------
Gross Profit 113,437 308,304 758,030 399,535
Selling General & Administrative
Expenses:
Professional Services 328,443 335,866 524,099 475,635
Salaries - Officers 129,166 65,395 217,416 117,595
Salaries - Others 885,406 365,246 1,623,533 591,384
Payroll Taxes & Benefits 11,917 53,061 81,666 92,141
Office Expenses 78,990 35,659 153,883 57,819
Advertizing & Marketing 89,262 109,267 371,599 213,829
Auto Expense 17,553 7,930 42,489 15,746
Travel & Entertainment 109,744 24,823 191,466 122,081
Computer Expenses 45,271 12,383 63,937 16,916
Depreciation & Amortization 230,164 57,457 397,541 98,067
Channel Lease Payments 0 (15,605) 0 (1,855)
Equipment Lease Payments 0 16,922 0 40,991
Postage & Delivery 20,992 10,935 39,471 21,026
Insurance 64,391 12,645 96,716 23,654
Interest Expense 0 1,097 0 1,098
Rent 275,102 36,719 406,467 72,741
Temporary Help & Outside
Services 30,944 12,187 33,647 24,409
Tower Lease Payments 0 3,195 0 7,835
Telephone Expense 137,914 108,436 490,609 132,437
Taxes - Other 78,005 (1,469) 80,004 2,187
Allowance for Doubtful Accounts 21,450 0 21,450 0
------------------ ------------------ ----------------- -----------------
TOTAL SELLING, GENERAL,
& ADMINISTRATIVE EXPENSES 2,554,714 1,252,149 4,835,993 2,125,736
------------------ ------------------ ----------------- -----------------
NET OPERATING LOSS (2,441,277) (943,845) (4,077,963) (1,726,201)
Interest Income 13,253 18,569 13,253 19,649
Provision for Income Tax 0 0 (14,352) 0
------------------ ------------------ ----------------- -----------------
NET PROFIT (LOSS) $ (2,428,024) $ (925,276) $ (4,079,062) $ (1,706,552)
================== ================== ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
IJNT.net, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1999 1998
----------------- -----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net Income (Loss) $ (4,079,062) $ (1,706,552)
Adjustments:
Depreciation and Amortization 396,608 98,067
Expenses Paid with Common Stock 0 481,548
Changes in current accounts 429,253 129,782
----------------- -----------------
Net Cash Required by Operating Activities (3,253,201) (997,155)
INVESTING ACTIVITIES
Purchase of Inventory (46,204) (268,961)
Purchase of Fixed Assets (4,106,442) (325,137)
Deposits and Other 7,062 (38,440)
----------------- -----------------
Net Cash Required by Investing Activities (4,145,584) (632,538)
FINANCING ACTIVITIES
Loans 9,654,205 (51,117)
Repayment of Loans 0 (49,946)
Sale of Common Stock 2,291,485 4,149,800
----------------- -----------------
Net Cash Provided (Required) by Financing Activities 11,945,690 4,048,737
----------------- -----------------
Increase (Decrease) in Cash and Cash Equivalents 4,546,905 2,419,044
Cash and Cash Equivalents at Beginning of Period 902,757 63,303
----------------- -----------------
Cash and Cash Equivalents at End of Period $ 5,449,662 $ 2,482,347
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
IJNT.net, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
NOTE 1: BASIS OF PRESENTATION
The accompanying un-audited consolidated financial statements of IJNT.net, Inc.
(the "Company") and its wholly -owned subsidiaries (collectively "the
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 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 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.
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 $.01 par value common
stock. On June 30, 1997, the Company effected 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.net, Inc. (formerly known as InterJet Net, Inc. and
IJNT, 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 Regulation 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
2,000 shares of Preferred Series A Stock, which netted an additional $1.8
million to the Company. Through September 30, 1999 approximately 800 shares of
Preferred Stock have 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 year
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 can require the Investors to purchase additional shares
of Preferred Stock 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
Some of 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 person
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.
NOTE 4: INCOME TAXES
The Company has available at September 30, 1999, net operating loss carry
forwards of approximately $11.7 million which may provide future tax benefits
expiring in September of 2011.
NOTE 5: WARRANTS OR OPTIONS TO PURCHASE COMMON STOCK
At September 5, 1999, there are warrants or options to purchase shares of the
Company's Common Stock in the form of (Nortel Warrants). As described in Note 2
above, the outstanding Preferred Series A Stock is convertible into shares of
Common Stock in the Company.
6
<PAGE>
IJNT.net, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
September 30, 1999
NOTE 6: DEBT
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 term of
the Agreement, Nortel Networks will provide the Company with $7 million in
operating capital, to be repaid from future public equity fund-raising 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 build-out 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
video-conferencing 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 network in service in November
1999.
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The Company produced gross revenues of $883,442 during the quarter ended on
September 30, 1999. This represents an increase of 136.93% when compared to the
revenue of $372,872 for the quarter ended September 30, 1998.
The Man Rabbit House subsidiary, which was acquired in August of 1998,
contributed $175,039 in revenues for the current quarter. Last year's
contribution for the same period was $124,814.
The Salt Lake City system generated gross revenues of $193,485, an increase of
56.46% compared with revenues of $123,670 in the same period a year ago.
The revenues of the Beaumont system increased to $61,785 from $23,259 in the
quarter ended September 30, 1998. This represents an increase of 165.64%.
The Houston office generated gross revenues of $143,585 in the quarter ended
September 30, 1999, compared with gross revenues of $94,237 in the same period
last year. This represents an increase of 52.37%.
The Irvine office operations have been added since the beginning of this
calendar year. The current quarter's revenues totaled $32,451.
Fair Auction operations have been added since the beginning of this calendar
year. The current quarter's revenues totaled $209,541.
The Northern California operations have been added since the beginning of this
calendar year. The current quarter's revenues totaled $25,047.
The Company recognized $42,509 related to on-line ISP subscriptions, which were
not specific to any sales office during the quarter ended September 30, 1999.
UrJet Backbone Network ("UBN") 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 telecommuncation 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
co-locations/interconnection facilities in 13 major cities across the United
States.
The Company's loss for the three months ended September 30, 1999 was equal to
$2,428,024. This compared to a loss for the three-month period ended September
30, 1998 of $925,276. The current quarter's loss increased dramatically due to
the aggressive expansion of the Company's Selling, General and Administrative
Expenses of which salaries, professional services, advertising and marketing
made up the largest amount. The increased expenses also reflect the activity of
the newly acquired and incorporated subsidiaries of the Company, particularly
the development of the UBN subsidiary which has taken partial delivery of the
Nortel DMS-500 switch in Los Angeles. UBN has also entered into a lease
agreement for an additional 6,000 square feet of office space, and co- location
space to accommodate the DMS-500 switch and it's related technical and
administrative support team. Total salaries of $1,014,572 were paid or accrued
for the three months ended September 30, 1999, representing 39.92% of total
Selling, General, and Administrative Expenses as compared to $430,641 in the
same quarter last year. The Company incurred expenses of $328,443 in
professional fees, including attorneys, accountants, engineers and consultants.
This amount represented 12.92% of the total Selling, General, and Administrative
Expenses for the quarter. In the same quarter a year ago, $335,866 was expended
to professional services. The Company anticipates continuing to incur a large
amount of professional services as it continues to rapidly expand. The total
cost of advertising and marketing increased this quarter to $89,262 (or 3.51% of
total Selling, General and Administrative Expenses) compared to $109,267 for the
three months ended September 30, 1998 (8.86% of total expenses for the quarter.
The Company has current assets totaling $6,276,977 at September 30, 1999 with
total net working capital of $5,361,780. This equates to a current ratio of
approximately 6.86/1.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 10, 1999 IJNT.net, Inc.
Jon H. Marple, President, Chairman, and
Chief Financial Officer
Mary E. Blake, Vice President and Director
9
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from IJNT.net, Inc. September 30, 1999 financial statements
and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000925739
<NAME> IJNT.net, Inc.
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1.00
<CASH> 5,449,662
<SECURITIES> 0
<RECEIVABLES> 715,916
<ALLOWANCES> (21,450)
<INVENTORY> 132,849
<CURRENT-ASSETS> 6,276,977
<PP&E> 6,696,593
<DEPRECIATION> (674,703)
<TOTAL-ASSETS> 14,436,393
<CURRENT-LIABILITIES> 915,197
<BONDS> 9,849,884
0
3,590,000
<COMMON> 17,870
<OTHER-SE> 63,442
<TOTAL-LIABILITY-AND-EQUITY> 14,436,393
<SALES> 2,036,693
<TOTAL-REVENUES> 2,049,946
<CGS> 1,278,663
<TOTAL-COSTS> 4,835,993
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,064,710
<INCOME-TAX> 14,352
<INCOME-CONTINUING> (4,079,062)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,079,062)
<EPS-BASIC> (.24)
<EPS-DILUTED> (.24)
</TABLE>
