UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT
April 29, 2000
(AMENDING REPORT OF FEBRUARY 25, 2000)
--------------------
E-NET FINANCIAL.COM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 0-24512 84-1273503
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
3200 BRISTOL STREET, SUITE 710, COSTA MESA, CA 92626
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(714) 557-2222
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On or about February 11, 2000, e-Net Financial.Com Corporation ("e-Net")
acquired Loan Net Mortgage, Inc. ("Loan Net") a Kentucky corporation. This
report, as amended, includes the audited financial statements of Loan Net. The
purchase price consisted of 250,000 shares of e-Net common stock valued at
$1,920,477, plus acquisition costs of $13,000. The excess of cost over the fair
market value of the assets acquired, amounting to $1,741,725 was allocated to
goodwill. Management expects to amortize goodwill over a period of 10 years.
The pro forma financial data of the Loan Net acquisition would not be meaningful
without the effects of the American Residential Funding, Inc. ("AMRES")
acquisition completed on April 12, 2000. Effective April 12, 2000, e-Net changed
its basis of accounting.
Management will include the pro forma effects of the acquisition of Loan Net and
AMRES in e-Net's Form 8-K/A to be filed in connection with the acquisition of
AMRES. The required pro forma financial information will be filed as soon as
practicable, but not later than 60 days after the date the AMRES Form 8-K is
required to be filed.
ITEM 7. FINANCIAL STATEMENTS OR EXHIBITS
(a) Financial Statements of Business Acquired.
(1) Loan Net Mortgage, Inc.
Audited Financial Statements as of February 15, 2000 and for the
period from inception, December 16, 1999, through February 15, 2000.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report................................................F-2
Financial Statements:
Balance Sheet as of February 15, 2000..................................F-3
Statement of Operations for the period from December 16, 1999
(Inception) to February 15,
2000...................................................................F-4
Statement of Stockholders' Equity for the period from December 16,
1999 (Inception) to February 15,
2000...................................................................F-5
Statement of Cash Flows for the period from December 16, 1999
(Inception) to February 15,
2000...................................................................F-6
Notes to Financial Statements..........................................F-7
F-1
<PAGE>
Independent Auditors' Report
Board of Directors
LoanNet Mortgage, Inc.
We have audited the accompanying balance sheet of LoanNet Mortgage, Inc., (the
"Company") as of February 15, 2000, and the related statements of operations,
stockholders' equity, and cash flows for the period from December 16, 1999
(Inception) to February 15, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the financial position of LoanNet Mortgage, Inc. as of
February 15, 2000, and the results of their operations and their cash flows for
the period from December 16, 1999 (Inception) to February 15, 2000, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred operating losses, has a deficit
of working capital and tangible net worth, and other adverse financial
indicators. These conditions raise substantial doubt about its ability to
continue as a going concern. Management's plans regarding those matters are also
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Irvine, California
April 27, 2000 /s/ McKennon, Wilson & Morgan LLP
---------------------------------
McKennon, Wilson & Morgan LLP
F-2
<PAGE>
LOANNET MORTGAGE, INC.
BALANCE SHEET
FEBRUARY 15, 2000
ASSETS
Current assets:
Cash $ 150,439
Due from related party 13,000
---------
Total current assets 163,439
Property and equipment, net 84,089
---------
$ 247,528
=========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 10,400
Accrued expenses 45,376
Total current liabilities 55,776
Stockholders' equity:
Preferred stock, no par value; 400 shares
authorized; 400 shares issued and outstanding 100,000
Common stock, no par value; 1,600
shares authorized; 1,600 issued and outstanding 134,543
Accumulated deficit (42,791)
Total stockholders' equity 191,752
---------
$ 247,528
=========
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
LOANNET MORTGAGE, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 16, 1999 (INCEPTION)
TO FEBRUARY 15, 2000
Net revenues $ --
--------
Operating expenses-
Selling, general and administrative 42,791
Net loss $(42,791)
========
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
LOANNET MORTGAGE, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 16, 1999 (INCEPTION)
TO FEBRUARY 15, 2000
Preferred Stock Common Stock
---------------------- --------------------- Accumulated
Shares Amount Shares Amount Deficit Total
------ ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C>
Common stock issued to
founders -- $ -- 614 $ 50,454 $ -- $ 50,454
Preferred stock issued to
officer 400 $ 100,000 -- -- -- 100,000
Common stock issued for
acquisition of property
and equipment -- -- 986 84,089 -- 84,089
Net loss -- -- -- -- (42,791) (42,791)
--------- --------- --------- --------- --------- ---------
Balances, February 15, 2000 400 $ 100,000 1,600 $ 134,543 $ (42,791) $ 191,752
========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements
F-5
</TABLE>
<PAGE>
LOANNET MORTGAGE, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM DECEMBER 16, 1999 (INCEPTION)
TO FEBRUARY 15, 2000
Cash flows from operating activities:
Net loss $ (42,791)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation --
Changes in operating assets and liabilities:
Accounts payable 10,400
Accrued expenses 45,376
Net cash provided by operating activities 12,985
---------
Cash flows used in investing activities-
Due from related party (13,000)
Cash flows from financing activities:
Issuance of common stock 50,454
Issuance of preferred stock 100,000
Net cash provided by financing activities 150,454
---------
Net increase in cash 150,439
Cash at beginning of period --
Cash at end of period $ 150,439
=========
Non Cash Financing Activities-
Stock issued for property and equipment $ 84,089
=========
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
Note 1 - Organization
- ---------------------
LoanNet Mortgage, Inc. (the "Company") was incorporated in the state of Kentucky
on December 16, 1999 ("Inception"). The Company originates mortgage loans
primarily to residential customers through a network of three branch offices
located in the United States.
On February 14, 2000, the Company was acquired by e-Net Financial.com Corp.
("e-Net") for 250,000 shares of e-Net common stock for all the issued and
outstanding capital stock of the Company. e-Net is a publicly-held company
acquiring assets in the residential mortgage service industry. e-Net had minimal
operations at the date of acquisition.
On February 15, 2000, the Company was capitalized and began operations.
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Basis of Presentation
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has been recently formed,
has limited operating history, and requires substantial funds for its
operational activities and sales efforts. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management is
seeking financing from e-Net through a private placement of e-Net's common
stock. There are no assurances that funds will be available to execute the
Company's operating plan or that future collaborative arrangements will be
consummated. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Fiscal Year End
The Company has elected an April 30 year end for financial and income tax
reporting purposes.
Use of 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 and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reported periods.
Actual results could materially differ from those estimates. Significant
estimates made by management include, but are not limited to, the allowance for
losses on uncollectible accounts receivable, and the impairment of long-lived
assets.
Impairment of Long-Lived Assets
The Company accounts for impairment of long-lived assets under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of."
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
F-7
<PAGE>
Note 2 - Summary of Significant Accounting Policies, continued
- --------------------------------------------------------------
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
Property and Equipment
Property and equipment are depreciated over their estimated useful lives using
the straight-line method over three to seven years. Additions and betterments
are capitalized. The cost of maintenance and repairs is charged to expense as
incurred. When depreciable property is retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the accounts and any
gain or loss is reflected in operations.
The Company periodically reviews the value of its property and equipment for
impairment whenever events or changes in circumstances indicate that the book
value of an asset may not be recoverable. An impairment loss would be recognized
whenever the review demonstrates that the future undiscounted net cash flows
expected to be generated by an asset from its use and eventual deposition are
less than the carrying amount of the asset. Management believes no permanent
impairment has occurred.
Revenue recognition
The Company expects to generate revenue through commissioned broker
transactions. Revenue will be recorded upon the close of escrow and
collectibility is certain.
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes," whereby deferred tax assets and liabilities are
recognized for the future tax consequences attributable to temporary differences
between bases used for financial reporting and income tax reporting purposes.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. A valuation allowance is
provided for certain deferred tax assets if it is more likely than not that the
Company will not realize tax assets through future operations.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," defines a fair value
based method of accounting for stock-based compensation. However, SFAS No. 123
allows an entity to continue to measure compensation cost related to stock and
stock options issued to employees using the intrinsic method of accounting
prescribed by Accounting Principles Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees." Entities electing to remain with the accounting
method of APB No. 25 must make pro forma disclosures of net income (loss) and
earnings (loss) per share, as if the fair value method of accounting defined in
SFAS No. 123 had been applied. Through February 15, 2000, the Company had no
employee stock options outstanding.
F-8
<PAGE>
Note 2 - Summary of Significant Accounting Policies, continued
- --------------------------------------------------------------
Reporting Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting the components of
comprehensive income and requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
included in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income includes net income (loss), as
well as certain non-shareholder items that are reported directly within a
separate component of stockholders' equity and bypass net income (loss). The
Company had adopted the provisions of this statement during the current fiscal
year, with no impact on the accompanying financial statements.
Disclosures about Segments of an Enterprise and Related Information
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." The provisions of this statement require
disclosures of financial and descriptive information about an enterprise's
operating segments in annual and interim financial reports issued to
stockholders. The statement defines an operating segment as a component of an
enterprise that engages in business activities that generate revenue and incur
expense, whose operating results are reviewed by the chief operating
decision-maker in the determination of resource allocation and assessing
performance, and for which discrete financial information is available. The
Company has adopted the provisions of this statement in 1999 with no impact on
the accompanying financial statements.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. Accordingly, the Company will adopt SFAS
No. 133 beginning on January 1, 2001. SFAS No. 133 establishes standards for the
accounting and reporting of derivative instruments and hedging activities,
including certain derivative instruments embedded in other contracts. Under SFAS
No. 133, entities are required to carry all derivative instruments at fair value
on their balance sheets. The accounting for changes in the fair value (i.e.,
gains or losses) of a derivative instrument depends on whether it has been
designated and qualifies as part of a hedging activity and the underlying
purpose for it. The Company does not believe that the adoption of SFAS No. 133
will have a significant impact on the Company's financial statements or related
disclosures.
Note 3 - Property and Equipment
- -------------------------------
Property and equipment consists of the following at February 15, 2000:
Furniture and fixtures $ 52,233
Equipment 31,856
Less accumulated depreciation (--)
--------
$ 84,089
========
F-9
<PAGE>
Note 4 - Stockholders' equity
- -----------------------------
Preferred Stock
On December 16, 1999, the Company's board of directors and shareholders approved
the issuance of 400 shares of preferred stock. On February 9, 2000, the Company
issued 400 shares of such preferred stock. On February 14, 2000, such shares
were acquired by e-Net and will be cancelled by e-Net. The preferred stock had a
non-cumulative preferred annual dividend of 8.0%, payable on a quarterly basis
and before any payments of dividends of common stock. Additionally, the Company
held the right to redeem the preferred stock at any time for $250 per share.
Upon the liquidation or dissolution of the Company the holders of preferred
stock were entitled to receive $250 per share, plus any accrued but unpaid
dividends. There were no voting rights associated with the preferred stock.
Common Stock
On December 16, 1999 the Company's founders authorized 1,600 shares of common
stock. On December 23, 1999 the Company's founders issued themselves 614 shares
of common stock for $50,454 in cash. Common stock had rights and privileges of
voting, dividend participation, among others. Each common share represents one
vote.
On February 15, 2000, the Company acquired property and equipment, consisting
primarily of furniture, computer equipment and software through the issuance of
986 shares of common stock. The assets acquired at fair value amounted to
$84,089.
Note 5 - Provision for Income Taxes
- -----------------------------------
The Company's net deferred tax assets at February 15, 2000, consist of net
operating loss carryforwards for federal and state income tax reporting
amounting to approximately $43,000. At February 15, 2000, the Company provided a
100% valuation allowance for these net operating loss carryforwards totaling
approximately $16,000. The Company's net operating loss carryforwards will begin
to expire in 2019 and 2004 for federal and state income tax purposes,
respectively. The Company recorded no benefit for income taxes during the
periods presented.
The difference between the tax benefit assuming a Federal income tax rate of 34%
and amounts recorded in the financial statements of zero percent is the result
of the Company recording a 100% valuation allowance for its deferred tax assets.
Note 6 - Related Party Transactions
- -----------------------------------
The Company has amounts due from e-Net (Note 1) totaling $13,000 at February 15,
2000 for costs incurred by the Company in connection with the acquisition of the
Company by e-Net.
F-10
<PAGE>
(b) Exhibits.
27 Financial Data Schedule
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned hereunto
duly authorized.
DATE April 28, 2000 E-NET FINANCIAL.COM CORPORATION
/s/ James E. Shipley
---------------------------
James E. Shipley, Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> FEB-15-2000
<PERIOD-START> DEC-16-1999
<PERIOD-END> FEB-15-2000
<CASH> 150,439
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 163,439
<PP&E> 84,089
<DEPRECIATION> 0
<TOTAL-ASSETS> 247,528
<CURRENT-LIABILITIES> 55,776
<BONDS> 0
0
100,000
<COMMON> 134,543
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 247,528
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 42,791
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (42,791)
<INCOME-TAX> 0
<INCOME-CONTINUING> (42,791)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (42,791)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
