<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
-----------
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2000
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
-------------------------------------------
.
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Commission File Number 0-22045
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GENFINITY CORP0RATION
---------------------
(Exact name of registrant as specified in its charter)
District of Delaware 13-3525328
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
GENFINITY CORPORATION
308 West Rosemary
Chapel Hill, North Carolina 27516
(Address of principal executive offices)
(919) 960-2660
(Issuer's telephone number)
APPLE HOMES CORPORATION
124 North Belair Road
Evans, Georgia 30809
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(Former name, former address and former fiscal year
if changed since last report)
Check whether the registrant (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 registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes (X) No (_)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 22,121,367 shares of Common Stock,
$.002 par value, were outstanding as of September 30, 2000.
Transitional Small Business Disclosure Forms (check one):
Yes (_) No (X)
<PAGE>
ITEM I - FINANCIAL STATEMENTS.
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
INDEX TO FORM 10-QSB
SEPTEMBER 30, 2000
Page Nos.
---------
PART I - FINANCIAL INFORMATION:
CONSOLIDATED BALANCE SHEET 1
At September 30, 2000
CONSOLIDATED STATEMENT OF OPERATIONS 2-3
For the Six Months Ended September 30, 2000 and 1999
For the Three Months Ended September 30, 2000 and 1999
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY 4
For the Six Months Ended September 30, 2000
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
For the Six Months Ended September 30, 2000 and 1999
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6-16
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AT SEPTEMBER 30, 2000
ASSETS
----------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $ 25,867
Trade accounts receivable, net of allowance for
doubtful accounts of $20,850 217,474
Receivable under asset sale 400,000
Prepaid expenses 106,019
-----------
TOTAL CURRENT ASSETS 749,360
-----------
PROPERTY AND EQUIPMENT - at cost, net of accumulated
depreciation 233,596
INTANGIBLE ASSETS, net of accumulated amortization 55,145
SECURITY DEPOSITS 12,141
-----------
TOTAL ASSETS $ 1,050,242
===========
----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------------------------------------------
CURRENT LIABILITIES
Accrued merger costs $ 389,660
Other accrued liabilities 251,055
Accrued interest - convertible debentures 13,326
Due to related parties 116,125
-----------
TOTAL CURRENT LIABILITIES 770,166
-----------
CONVERTIBLE DEBENTURES 387,500
-----------
TOTAL LIABILITIES 1,157,666
-----------
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Notes 5, 6 and 7)
STOCKHOLDERS' DEFICIENCY
Common stock - $.002 par value; authorized 60,000,000
shares, issued and outstanding 22,121,367 shares 44,243
Additional paid-in capital 4,743,162
Accumulated deficit (4,894,829)
-----------
TOTAL STOCKHOLDERS' DEFICIENCY (107,424)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 1,050,242
===========
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See accompanying notes.
2
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
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2000 1999
------------ ------------
---------------------------------------------------------------- ------------
REVENUES $ 860,857 $ 245,177
COST OF REVENUES 380,782 165,715
------------ ------------
GROSS PROFIT 480,075 79,462
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 786,506 59,895
------------ ------------
(LOSS) INCOME FROM OPERATIONS (306,431) 19,567
WRITE-OFF OF EXCESS OF ACQUISITION COST OVER
FAIR VALUE OF NET ASSETS ACQUIRED 4,580,416 --
------------ ------------
(LOSS) INCOME BEFORE INCOME TAXES (4,886,847) 19,567
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET (LOSS) INCOME $ (4,886,847) $ 19,567
============ ============
BASIC AND DILUTED NET INCOME (LOSS) PER COMMON
SHARE $ (.24) $ --
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 20,000,000 20,000,000
============ ============
--------------------------------------------------------------------------------
See accompanying notes.
3
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
------------ ------------
REVENUES $ 435,049 $ 123,210
COST OF REVENUES 204,497 133,706
------------ ------------
GROSS PROFIT 230,552 (10,496)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 453,712 31,367
------------ ------------
LOSS FROM OPERATIONS (223,160) (41,863)
WRITE-OFF OF EXCESS OF ACQUISITION COST OVER
FAIR VALUE OF NET ASSETS ACQUIRED 4,580,416 --
------------ ------------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES (4,803,576) (41,863)
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET LOSS $ (4,803,576) $ (41,863)
============ ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (.24) $ --
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 20,000,000 20,000,000
============ ============
See accompanying notes.
4
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
Retained
Common Stock Additional Earnings
------------------------- Paid-in Subscriptions (Accumulated
Shares Amount Capital Receivable Deficit) Total
----------- ----------- ----------- ----------- ----------- -----------
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance - March 31, 2000 (1) 20,000,000 $ 40,000 $ 504,671 $ (300,000) $ (7,982) $ 236,689
Common shares to Apple shareholders in
reverse merger - September 30, 2000 2,121,367 4,243 4,238,491 -- -- 4,242,734
Receipts of stock subscriptions -- -- -- 300,000 -- 300,000
Net loss -- -- -- -- (4,886,847) (4,886,847)
----------- ----------- ----------- ----------- ----------- -----------
Balance - September 30, 2000 22,121,367 $ 44,243 $ 4,743,162 $ -- $(4,894,829) $ (107,424)
=========== =========== =========== =========== =========== ===========
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Share amounts have been restated to reflect the merger transactions
effected in April and May of 2000 (Note 1).
See accompanying notes.
5
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
------------------------------------------------------------------------------
2000 1999
----------- -----------
------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(4,886,847) $ 19,567
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Non-cash portion of write-off of excess of
acquisition cost over fair value of net
assets acquired 4,104,560 --
Depreciation and amortization 68,190 11,507
----------- -----------
Cash (used in) provided by:
Accounts receivable (110,928) (10,320)
Prepaid expenses and other assets (101,463) --
Accounts payable and accrued liabilities 544,705 16,997
Security deposit (12,141) --
----------- -----------
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES (393,924) 37,751
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (99,173) (32,108)
Intangible assets expenditures (13,319) --
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (112,492) (32,108)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments to related parties (16,545) (5,575)
Proceeds from issuance of stock 300,000 --
Proceeds from asset sale 200,000 --
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 483,455 (5,575)
----------- -----------
(DECREASE) INCREASE IN CASH (22,961) 68
CASH AND CASH EQUIVALENTS - BEGINNING 48,828 3,072
----------- -----------
CASH AND CASH EQUIVALENTS - ENDING $ 25,867 $ 3,140
=========== ===========
SUPPLEMENTAL INFORMATION:
------------------------
Cash paid during the period for:
Interest $ 900 $ --
=========== ===========
Income taxes
$ -- $ --
=========== ===========
------------------------------------------------------------------------------
See accompanying notes.
6
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
NOTE 1 - NATURE OF BUSINESS
Basis of Presentation
---------------------
The accompanying consolidated financial statements are unaudited. These
statements have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission ( the "SEC"). Certain information and
footnote disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of management,
the financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to state fairly the financial position and
results of operations as of and for the periods indicated. These financial
statements should be read in conjunction with the Company's financial statements
and notes thereto for the year ended March 31, 2000, included in the Company's
Form 10KSB as filed with the Securities and Exchange Commission. Fiscal years
will continue to end on March 31st.
The preparation of financial statements in conformity with general 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 statement and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Description of Business
-----------------------
Genfinity Corporation ("Genfinity"), previously known as Apple Homes
Corporation, was organized as a Delaware corporation on April 17, 1989 under the
name PLAM Properties, Inc. It changed its name to Mayfair Homes Corporation in
1993 to reflect the name of its principal residential development and again to
Apple Homes Corporation in 1997 to reflect the trade name under which it
operates its manufactured home sales centers. On September 30, 2000, Genfinity
merged with Bravo.com Acquisition Corp. ("Bravo") and PlayRadio.net Acquisition
Corp. ("PlayRadio") and sold its historical business of the selling and the
installation of manufactured homes (the "Merger Transaction"). Upon the filing
of the Certificates of Merger with the State of Delaware the name of the
corporation was changed to Genfinity Corporation. Genfinity's new business
consists of the combined operations of Bravo and PlayRadio. Two of the
operations are currently generating revenues and their services consist of web
development, application services and hosting. The other three operations are
under development and have not generated any revenue.
Genfinity Corporation now has three primary operating lines:
1) NetworkArts is the continuation of the predecessor NetworkArts and
Calvander business operations that were combined with the Bravo.com
Acquisition Corporation merger.
2) Genfinity Consulting Services is a new operating line that concentrates on
consulting services to medium-to-large organizations.
3) LetterPath is a development stage operating line focusing on the
7
<PAGE>
LetterPath products and services.
Additional information on the Merger Transaction is found in Note 2 and in the
Management Presentation in Item 2 of this document. Information on the Bravo.com
Acquisition Corporation and PlayRadio.net Acquisition Corporation business
formations is contained in the Management Presentation in Item 2 of this
document and the Definitive Proxy Statement dated July 19th 2000.
No assurance can be given that Genfinity can complete the development and
successfully commercialize the above described businesses under development.
Basis of Consolidation
----------------------
The consolidated financial statements include the accounts of Bravo and
PlayRadio, and commencing September 30, 2000, Genfinity (collectively, the
"Company"). All significant intercompany accounts and transactions have been
eliminated.
8
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
NOTE 2 - MERGER TRANSACTIONS
Merger - September 30, 2000
---------------------------
On September 30, 2000, pursuant to a merger agreement dated May 10, 2000,
Genfinity completed a merger with Bravo.com Acquisition Corp. ("Bravo") and
PlayRadio.net Acquisition Corp. ("PlayRadio"), whereby all of the outstanding
common shares of Bravo and PlayRadio held by its shareholders were exchanged for
20,000,000 shares of common stock of Genfinity. The merger was considered a
reverse merger in that the shareholders of Bravo and PlayRadio collectively
owned 90.4% of the common stock of Genfinity after the stock issuances.
Bravo and PlayRadio were incorporated on April 3, 2000 in the state of New York
for the purpose of bringing together existing internet-related businesses. Bravo
and PlayRadio each had 10,000,000 shares of authorized, issued and outstanding
common stock at $0.0001 par value at the date of the merger with Apple. On the
effective date of the merger, the separate existence of Bravo and PlayRadio
ceased, and Apple survived as the surviving corporation, governed under the laws
of Delaware. The reverse merger has been accounted for under the purchase method
of accounting with Bravo and PlayRadio being the acquirer. The excess of the
acquisition cost over the fair value of the net assets acquired was treated as
an expense on the effective date of the merger, September 30, 2000.
The merger agreement also provided that on the effective date of closing, the
surviving corporation will sell to Apple Homes Acquisition Corp. ("AHAC") all of
Apple's existing assets and business, along with the assumption of all of
Apple's contracts, liabilities and duties other than Apple's debentures and
Apple's warrants. AHAC, Bravo, and PlayRadio have a major common shareholder,
Thomas Kontogiannis. As a purchase price for the sale of assets, AHAC will pay
to Apple $1,500,000 less the amount by which the cash and cash equivalents of
Apple transferred to AHAC in the transaction total less than $800,000. The
purchase price was reduced on the closing date by a cash shortfall of $600,000.
In addition, expenses and commissions, in connection with this sale, were
$300,000. As of September 30, 2000, a balance of $400,000 was outstanding under
this asset sale. The $400,000 was received in October and November of 2000.
The above transactions were approved by a vote of the stockholders of Apple held
on August 21, 2000.
9
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
NOTE 2 - MERGER TRANSACTIONS (Continued)
Mergers - April and May of 2000
-------------------------------
Bravo Group:
The Bravo group consisted of The Calvander Corporation ("Calvander"),
NetworkArts, Inc. ("Network") and LetterPath, Inc. ("LetterPath").
On May 1, 2000, Calvander, Network and LetterPath entered into a merger
agreement with Bravo, whereby the shareholders of Calvander received 3,100,000
shares of Bravo in exchange for all 1,500 shares of Calvander and the
shareholders of Network received 1,000,000 shares of Bravo in exchange for all
1,000,000 shares of Network and the shareholders of LetterPath received
3,000,000 shares of Bravo in exchange for all 1,802,332 shares of LetterPath.
The founding shareholders of Bravo received 2,900,000 shares of the common stock
of Bravo upon its formation.
Calvander was incorporated in the state of Delaware on November 12, 1999.
Calvander, doing business as "Catalogue.com", is a full-service web development
and application service provider.
In November of 1999, the shareholders of Calvander contributed the assets of a
former corporation to Calvander. The net assets were valued at $155,000, which
was recorded as additional paid-in capital. The former corporation operated a
Web development business organized as Catalogue.com, Inc.
Historical and pro forma financial information has not been provided for the six
months ended September 30, 1999 because the contributed operations were
co-mingled with other lines of business and separate financial information is
unavailable.
Network was incorporated in the state of North Carolina on July 6, 1998. Network
is an Internet Web Site development, management, and hosting firm. Network
acquired the assets of Signal Interactive, Inc. in July of 1998, thereby
creating the goodwill on the books of Network of $52,446.
On March 22, 2000, Network effected a 100-to-1 stock split, thereby increasing
the number of issued and outstanding shares to 1,000,000, and decreasing the par
value of each share to $0.0001.
10
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
NOTE 2 - MERGER TRANSACTIONS (Continued)
Mergers - April and May of 2000 (Continued)
-------------------------------
Bravo Group: (Continued)
LetterPath was incorporated on September 9, 1999 in the state of North Carolina.
LetterPath is a development-stage company, which has not generated any revenues
to date. LetterPath has a patent-pending for a process for converting an e-mail
message to a paper document formatted to the customer's specifications.
On February 8, 2000, the shareholders and directors of LetterPath declared a
dividend of 14.29982 shares of common stock on each share of common stock issued
and outstanding, thereby increasing the number of shares of common stock to
1,529,982 from 100,000.
On March 25, 2000, LetterPath entered into a stock purchase agreement with a
shareholder of Calvander, whereby the shareholder of Calvander agreed to pay the
shareholders of LetterPath an aggregate of $200,000 and to pay LetterPath the
sum of $300,000. Upon receipt of these payments, the shareholders of LetterPath
agreed to transfer an aggregate of 180,236 of their own common shares and
LetterPath agreed to issue 270,332 common shares to the shareholder of
Calvander.
PlayRadio Group:
PlayRadio is a New York corporation incorporated on April 3, 2000 as
"Motel.com". PlayRadio has two divisions, effective May 1, 2000: (1) PlayRadio,
and (2) MoneyLink.
PlayRadio is a web-based music broadcasting platform. It is still in the process
of starting up its commercial operations.
On October 28, 1999, MoneyLink Capital.com, Inc. ("MoneyLink") was incorporated
in the state of Delaware with 1,500 authorized, unissued shares. On April 28,
2000, one share was issued with no par value for $1. On May 1, 2000, the sole
shareholder of MoneyLink entered into a merger agreement with PlayRadio, whereby
the shareholder of MoneyLink received 4,275,000 shares of PlayRadio in exchange
for one share of MoneyLink common stock and $427.50. MoneyLink thereby became a
division of PlayRadio. MoneyLink has the rights to a software program that
automates the process of applying for a home mortgage on the Internet. MoneyLink
is still in the start-up stage and does not have any commercial operations or
employees to date.
The total common shares of PlayRadio outstanding at the time of the merger with
Apple was 10,000,000.
11
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents.
Foreign Currency Exposure
-------------------------
The Corporation's current activities have all been denominated in dollars.
Consequently there has been no Foreign Currency Exposure.
Accounts Receivable
-------------------
Accounts receivable have been adjusted for all known uncollectible accounts. An
allowance for doubtful accounts has been provided aggregating $20,850 as of
September 30, 2000.
Property and Equipment
----------------------
Depreciation is provided for using the straight-line method over the estimated
useful lives of three to seven years.
Intangible Assets
-----------------
Intangible assets consist of goodwill, patents rights, domain name rights and
organization costs. Goodwill represents the excess of the cost of a company
acquired in July 1998 over the fair value of its net assets at the date of
acquisition. Goodwill is amortized on the straight-line method over 15 years.
Other intangible assets are being amortized on the straight-line method over
five years.
The Corporation holds title to a number of Internet domains and related
intangible assets. The costs of maintaining and protecting these assets are
charged to expense as incurred.
Stock-Based Compensation
------------------------
As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation", Bravo
and Radio account for stock-based compensation arrangements pursuant to APB
Opinion No. 25, "Accounting for Stock Issued to Employees". In accordance with
the provisions of SFAS No. 123, Bravo recorded compensation expense for options
granted to non-employees during the six months ended June 30, 2000 at the fair
value of services rendered.
Loss Per Share
--------------
12
<PAGE>
Basic earnings per share ("basic EPS") is computed by dividing net income
available to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share ("diluted EPS") gives
effect to all dilutive potential common shares outstanding during the period. In
computing diluted EPS, the treasury stock method is used in determining the
number of shares assumed to be purchased from the conversion of common stock
equivalents. See Note 9 for potentially dilutable securities
13
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advertising
-----------
Advertising costs are charged to operations when incurred. Advertising expense
for the six months ended September 30, 2000 and 1999 was $-0- and $-0-,
respectively.
Revenue Recognition
-------------------
Fees for Web development, management, and hosting services are recognized when
earned.
Income Taxes
------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Prior to the merger date of May 1, 2000, each company's tax situation was as
follows:
- The Calvander Corporation
Calvander's tax loss for the year ended December 31, 1999 has been carried
forward was utilized during the four months ending April 30, 2000. No deferred
and current tax provision has been provided as it has been estimated to be
insignificant.
- NetworkArts, Inc.
NetworkArts elected to be an "S" corporation for Federal and State tax purposes.
In general, an "S" corporation does not pay a tax on its income since the
shareholders are responsible for paying income taxes on the taxable income
earned by the corporation. Accordingly, no Federal and State corporation taxes
were provided for NetworkArts prior to May 1, 2000. Pursuant to the May 1, 2000
merger discussed in Note 1, NetworkArts terminated its "S" corporation status.
No accumulated deficit existed on April 30, 2000. If NetworkArts had been a "C"
corporation, the tax provisions would have been insignificant for the periods
prior to May 1, 2000.
- LetterPath, Inc.
LetterPath had no operations during the year ended December 31, 1999 and
incurred a loss during the four months ended April 30, 2000. A deferred tax
asset has not been recorded as it has been estimated to be insignificant.
14
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (Continued)
------------
PlayRadio.net Acquisition Corp. and MoneyLink Capital.com, Inc.
---------------------------------------------------------------
PlayRadio and MoneyLink have no revenues from operations to date. No tax benefit
has been provided for the period prior to the merger as it has been estimated to
be insignificant.
Effective with the Bravo and PlayRadio mergers on May 1, 2000, Calvander,
Network, LetterPath and MoneyLink ceased to exist. Bravo and PlayRadio reported
combined net income of approximately $4,000. No current tax provision has been
provided as it has been estimated to be insignificant.
There are no Federal or State tax credits that have been carried forward.
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 reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
-----------------------------------
For certain financial instruments, including cash and cash equivalents, accounts
receivable, accounts payable and other accrued liabilities, the carrying amounts
approximate fair value due to their short maturities. The carrying amounts of
long-term debt approximate fair value due to the length of maturities, as well
as borrowing rates currently available for bank loans with similar terms and
maturities.
Impairment of Assets
--------------------
The Company reviews for the impairment of long-lived assets and certain
identifiable intangibles whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment loss
would be recognized when estimated future cash flows expected to result from the
use of the asset and its eventual disposition is less than its carrying amount.
Management has not identified any such impairment losses.
15
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
Office and computer equipment $ 414,375
Office furniture and fixtures 24,052
----------
438,427
Accumulated depreciation (204,831)
----------
$ 233,596
==========
Depreciation expense for the six months ended September 30, 2000 and 1999 was
$62,906 and $10,573, respectively.
NOTE 5 - INTANGIBLE ASSETS
Intangible assets consisted of the following:
------------------------------------------------------
Goodwill $ 52,446
Other 14,506
---------
66,952
Accumulated amortization (11,807)
---------
$ 55,145
=========
------------------------------------------------------
Amortization expense for the six months ended September 30, 2000 and 1999 was
$5,284 and $934, respectively.
16
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
NOTE 6 - RELATED PARTY TRANSACTIONS
Amounts due to related parties consist of the following:
Advances from shareholders and relative
of shareholders $ 99,125
Two-year note payable to certain
shareholders at 9% interest and equal
monthly installments of $1,000
beginning April of 2000; secured by
certain computer equipment 17,000
---------
Total $ 116,125
=========
The two-year note payable to shareholders described above included an option to
purchase common shares representing 4.5% of issued and outstanding stock of
Network at an exercise price equal to one month's principal payment. The option
was exercised during March of 2000.
A leasing company, controlled by a Director at the date of the Merger
Transaction, had executed a lease with Calvander for certain computing equipment
on a 24 month operating lease. Payments for this lease are:
2000 $22,387.64 (calendar year)
2001 $24,422.88
2002 $2,035.24
17
<PAGE>
GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
NOTE 7 - CONVERTIBLE DEBENTURES
As part of the merger transaction completed on September 30, 2000 (Note 2), the
liabilities under various convertible debentures remained as obligations of
Genfinity. During the year ended March 31, 1994, Apple completed a private
placement of seventeen debentures in the principal amount of $300,000. The
debentures are due in 2003, pay interest semi-annually at 10.0% and are
convertible by the holders after two years into shares of the Company's common
stock at a conversion ratio of $2.00 per share subject to anti-dilution rights.
As of September 30, 2000, $115,000 of the original debentures have been
converted to stock, leaving a remaining balance of $185,000.
In December 1998, Apple offered convertible subordinated debentures as a private
placement, pursuant to Rule 504 of Regulation D of the 1933 Securities Act. As
of March 31, 2000, Apple completed the placement of $202,500 of debentures to
eight investors. The debentures are due five years from their date of issue.
They bear interest, payable semi-annually, at a rate of 10.0% per annum. They
are convertible into common stock of the Company at the conversion price of
$5.00 per share subject to anti-dilution rights. There were no conversions into
common stock as of September 30, 2000.
NOTE 8 - COMMITMENTS, CONTINGENCIES, AND OTHER MATTERS
Leases and Contractual Commitments
----------------------------------
On September 15, 1998, Calvander entered into a three-year lease agreement with
a third party for dedicated Internet access. The lease provides for a minimum
monthly billing of $3,594.
On May 24, 2000, Bravo entered into a 50-month lease agreement for a new
furnished facility in Chapel Hill, North Carolina. The lease requires minimal
annual rent payments of $19.00 per square foot (7,778), with escalation clauses
of 4% over the previous year's rent for years two, three, and four. In addition,
the lease requires $1.50 per square foot for the furniture. The lease expires on
July 14, 2004.
Future minimum lease payments are as follows:
Year Ending September 30
------------------------
2001 $ 202,578
2002 176,142
2003 171,508
2004 177,902
---------
$ 728,130
=========
Genfinity Corporation leases space where connectivity to customers and the
Internet provider is maintained. Payments are made on a month-to-month
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basis at a cost of $2,400 per month.
In April 2000, LetterPath entered into a 12-month lease agreement for an
unfurnished facility in Chapel Hill, North Carolina. The lease requires minimum
payments in the Year Ending December 2000 of $23,600, and in the Year Ending
December 2001 of $8,600. The facility has never been actively used and the
Corporation is actively seeking to release the space.
In July 2000, LetterPath entered into a secured finance transaction for certain
equipment and services to be provided by an outside vendor. Installation of the
equipment was not accepted and the Corporation anticipates that the funds
advanced to execute the transaction, shown as Prepaid Expenses, will be
returned.
Genfinity Corporation entered into a services agreement in September 2000 that
has a total value of $100,000 with payments on a quarterly basis commencing in
the 4th calendar quarter of 2000 thru calendar 3rd quarter 2002.
Genfinity Corporation does not currently have any binding bank covenants or
short term borrowing lines.
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GENFINITY CORPORATION
(Formerly Apple Homes Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
NOTE 8 - COMMITMENTS, CONTINGENCIES, AND OTHER MATTERS (Continued)
Concentration of Credit Risk
----------------------------
Financial instruments, which potentially subject the Company to concentrations
of credit risk, are primarily trade accounts receivable. Ongoing credit
evaluations of customers' financial condition are performed and generally no
collateral is required. The Company has not experienced any material losses in
these transactions and maintains a reserve for potential credit losses and such
losses, in the aggregate, have not exceeded management's expectations.
One customer accounted for approximately 21% of the accounts receivable balance
at September 30, 2000, contributing approximately 32% of six month revenues, and
65% of sales for the continuing accounts.
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NOTE 9 - STOCKHOLDERS' EQUITY
As of September 30, 2000, the Company had outstanding Class A warrants allowing
holders to purchase 2,913,872 shares of the Corporation's common stock at $6.50
per share. The warrants expire on December 31, 2001. The holders of the warrants
have certain anti-dilution rights.
On August 21, 2000, the shareholders approved an amendment to the Corporation's
article of incorporation increasing the number of authorized common shares from
10,000,000 to 60,000,000, as part of the approval of the Merger Transaction.
The total number of shares authorized for Genfinity Corporation is 60,000,000.
As of September 30, 2000, at the completion of the Merger Agreement, the number
of shares was 22,121,367.
The total number of shares as per the Definitive Proxy Statement was 22,101,367.
In the July 2000 period, a conversion of a debenture was made for 20,000 shares
that increased the total number of shares outstanding.
In addition to shares outstanding, Convertible Debenture Holders have certain
rights of conversion as well as anti-dilution rights that are continued from the
original issue by Apple Homes Corporation to Genfinity Corporation.
Securities that could potentially dilute basic earnings per share (`EPS') in the
future that were not included in the computation of diluted EPS because to do so
would have been anti-dilutive for the periods presented consist of the
following:
Warrants to purchase common stock 2,913,872
Convertible Debentures (assumed conversion at
September 30, 2000 1,400,000
---------
Total as of September 30, 2000 4,313,872
=========
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
a. Background Information
On September 30, 2000 control of the Apple Homes Corporation changed from its
prior board of directors to Thomas Kontogiannis and Robert Shatles and directors
designated by them, including Ray E. Shain, David Cymrot, Nick Tsismenakis and
Hiram Dixon Settle III. (Mr. Ed Tyler was listed in the Proxy Statement as a
director of the Company, however; he has since declined the position due to his
lack of time.) This change of control was effectuated by the merger of Bravo.com
Acquisition Corporation ("Bravo") and PlayRadio.net Acquisition Corporation
(PlayRadio) into Apple Homes, Inc.
As part of the mergers, Apple Homes Corporation's name has been changed to
Genfinity Corporation (ticker symbol on the OTC Bulletin Board - GFIN). The
original terms of the deal called for the name of the Apple Homes Corporation to
be changed to Letterpath, Inc., but the parties agreed on the new name as being
more representative of the multiple businesses in which the Registrant intends
to engage. Warrants of Apple Homes, Inc. remain the obligation of Genfinity
Corporation. (ticker symbol on the OTC Bulletin Board - GFINW).
In the mergers, 20 million shares of common stock of the Apple Homes Corporation
representing approximately 90.5% of its outstanding stock, was issued to the
former stockholders of the Bravo and PlayRadio. Of these shares, Mr.
Kontogiannis beneficially owns 9,373,000 shares of the Registrant's common
stock, or 43.4%, Mr. Shatles beneficially owns 1,895,000 shares, or 8.57%, and
the four new directors appointed in the transaction own in the aggregate
1,902,000 shares or 8.6%. Mr. Ray Shain has subsequently left the board for
personal reasons. He retains his level of beneficial share interest. The
remaining three directors now own in the aggregate 1,502,000 shares or 6.8%.
On September 30, 2000 as part of the agreement under which the mergers referred
to in the Definitive Proxy took place, the Genfinity Corporation sold to Apple
Homes Acquisition Corporation, a Georgia corporation controlled by Thomas
Kontogiannis, all of the assets and business of the home related business (as it
existed as Apple Homes Corporation, immediately prior to the Merger
Transaction), and Apple Homes Acquisition Corporation assumed all of the
liabilities of the Apple Homes Corporation other than its obligations to then
existing debenture holders and warrant holders. Please see other Notes for
additional information and explanation.
Apple Homes Acquisition Corporation's intent is to continue the original
business of the Apple Homes Corporation. As part of this intent, it will change
its name to Apple Homes Corporation.
As part of the sale of assets, Apple Homes Acquisition Corporation was to have
caused the personal guaranties issued by E. Samuel Evans, the President of the
Registrant, to be released. These guaranties included substantially all of the
Registrant's outstanding debt totaling at the date of closing approximately
$7,600,000. Instead, it was decided at the closing to have these guaranties
continue, with Mr. Evans to be indemnified by the Apple Homes Acquisition
Corporation and Mr. Kontogiannis against loss as a result of their continuance.
The change was made to accommodate the desires of the Apple Homes Corporation's
principal floor plan lenders the debts to whom were assumed by the Apple Homes
Acquisition Corporation as part of the transaction.
As consideration for his agreement to continue his guaranties, Mr. Evans
received 10% of the stock of the Apple Homes Acquisition Corporation. This
consideration was not part of the original agreement for the sale of the Apple
Homes Corporation. assets as described in the Definitive Proxy
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statement.
Also at the closing, Mr. Evans, formerly the President and Chief Executive
Officer of the Registrant, was elected as President and Chief Operating Officer
of the Apple Homes Acquisition Corporation and Laura H. Rollins, formerly the
Secretary and Treasurer and Chief Financial Officer of Apple Homes Corporation,
was elected Secretary and Treasurer and Chief Financial Officer of the Apple
Homes Acquisition Corporation.
Apple Homes Acquisition Corporation is now a private Georgia Corporation.
Detailed information concerning prior periods for Apple Homes Corporation, prior
to the merger and sale transaction, including a description of its business,
property, legal proceedings, and market price and dividends paid on its Common
Stock, as well as audited financial statements for its fiscal years ended March
31, 1998, 1999 and 2000 selected financial data and supplementary financial
information and a management discussion and analysis of Apple Homes, Inc.
financial condition and results of operations are contained in Apple Homes
Corporation. Annual Report on Form 10-K for its fiscal year ended March 31,
2000, filed with the SEC on June 29, 2000.
Business Combinations Prior to September 30, 2000
Background Information
The background information is to provide a brief summary of the activity that
resulted in operations of Genfinity Corporation. This summary is limited to the
business combinations as already discussed in the Definitive Proxy, dated July
19th, 2000.
Bravo.com Acquisition Corp.
---------------------------
The Bravo.com Acquisition Corp. consisted of The Calvander Corporation
("Calvander"), NetworkArts, Inc. ("NetworkArts") and LetterPath, Inc.
("LetterPath").
On May 1, 2000, Calvander, NetworkArts and LetterPath entered into a merger
agreement with Bravo, whereby the shareholders of Calvander received 3,100,000
shares of Bravo in exchange for all 1,500 shares of Calvander and the
shareholders of NetworkArts received 1,000,000 shares of Bravo in exchange for
all 1,000,000 shares of NetworkArts and the shareholders of LetterPath received
3,000,000 shares of Bravo in exchange for all 1,802,332 shares of LetterPath.
The founding shareholders of Bravo received 2,900,000 shares of the common stock
of Bravo upon its formation. A definitive Shareholder Agreement was executed
June 9, 2000.
The Calvander Corporation
The Calvander Corporation ("Calvander") was incorporated in the state of
Delaware on November 12, 1999. Calvander, doing business as "Catalogue.com", is
a full-service web development and application service provider. In November of
1999, the shareholders of Calvander contributed the assets of a former
corporation to Calvander. The net assets were valued at $155,000, which was
recorded as additional paid-in capital. The former corporation operated a Web
development business organized as Catalogue.com, Inc. (New York)
NetworkArts, Inc.
NetworkArts, Inc. ("Network") was incorporated in the state of North Carolina on
July 6, 1998. NetworkArts is an Internet Web Site development,
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management, and hosting firm. NetworkArts acquired the assets of Signal
Interactive, Inc. in July of 1998.
LetterPath, Inc.
LetterPath, Inc. ("LetterPath") was incorporated on September 9, 1999 in the
state of North Carolina. LetterPath is a development-stage company, which has
not generated any revenue to date. The May 1, 2000 Merger Agreement for Bravo
followed an earlier Stock Purchase Agreement dated March 25, 2000. LetterPath
owns the rights to a patent-pending process for converting an e-mail message to
a paper document formatted to the customer's specifications.
PlayRadio Group
---------------
PlayRadio.net Acquisition Corporation ("PlayRadio") was incorporated in New York
on April 3, 2000 as "Motel.com". PlayRadio has two divisions, effective May 1,
2000: (1) PlayRadio.Net, and (2) MoneyLink Capital.
PlayRadio.Net
PlayRadio.Net is a development stage company merged into Genfinity Corporation
with the conclusion of the merger with Apple Homes, Inc. PlayRadio consists of
two divisions: PlayRadio.net and MoneyLink Capital.
PlayRadio owns the rights to the name and source codes of the "PlayRadio.net"
website. PlayRadio.net broadcasts radio channels through the Internet and
provides its customers with information on music artists, concerts and PlayRadio
contests and opportunities to buy music through affiliated websites such as
Amazon.com and CDNow.com. This website was set up in March 2000 and was acquired
by PlayRadio in April 2000. PlayRadio.net is still in start-up stage and is not
producing revenue.
On October 28, 1999, MoneyLink Capital.com, Inc. ("MoneyLink") was incorporated
in the state of Delaware with 1,500 authorized, unissued shares. On April 28,
2000, one share was issued with no par value for $1. On May 1, 2000, the sole
shareholder of MoneyLink entered into a merger agreement with PlayRadio, whereby
the shareholder of MoneyLink received 4,275,000 shares of PlayRadio in exchange
for one share of MoneyLink common stock and $427.50. MoneyLink thereby became a
division of PlayRadio. MoneyLink has the rights to a unique software program
that automates the process of applying for a home mortgage on the Internet. It
is the licensee of Coastal Capital Corporation's The Mortgage Shop.com.
MoneyLink is still in start-up stage and is not producing revenue..
b. Management Discussion of Operations
The financial statements and background information provided in this document
reflect a period of extensive transitions for Genfinity Corporation. Changes
since the last reporting period for Apple Homes, Inc. include:
o A Merger Transaction, September 30, 2000, wherein Bravo.com Acquisition
Corporation and PlayRadio.net Acquisition Corporation were merged into the
Corporation. An Apple Home, Inc. stockholder vote to approve the merger was
finalized on August 21, 2000 at a special meeting of stockholders of record as
of June 30, 2000, with 99.85% of the votes received approving the merger and
sale of assets. The stockholder vote was
24
<PAGE>
held on the material in the Definitive Proxy dated July 19, 2000.
o Concurrent sale of the operating businesses that have been Apple Homes, Inc.
to Apple Homes Acquisition Corporation on September 30, 2000.
o Integration of operations for Bravo.com Acquisition Corporation operating
groups.
o Introduction of a substantially new management team to operations combined
from Bravo.com Acquisition Corporation, PlayRadio Acquisition Corporation, and
new business and markets.
Genfinity Corporation operates in a single line of business for segment
reporting. The Internet, consulting, and Internet-based services industries are
all undergoing extreme turbulence and volatility as markets, equity/capital
markets, technology, business landscape, and demographic changes are all
radically changing. Genfinity Corporation's continuing operations will depend on
both its own actions and the combined effect of external forces.
Genfinity Corporation's President is Shea Tisdale. Mr. Tisdale is a widely
respected web designer and consultant who led site developments for IBM, NASA,
John Deere, and many other organizations. The merger of companies to form
Genfinity Corporation sustains his team of talented web and graphics designers,
software specialists, and production support.
Genfinity Corporation's Chief Operating Officer is Arnold W. Kwong. Mr. Kwong
has more than 25 years of working in engineering, information technology, and
management. His experience includes management at GartnerGroup, patent work in
telecommunications, and development of Total Cost of Ownership methodologies.
The consultants, sales and marketing, and operations specialists joining
Genfinity Corporation bring an average of more than 20 years experience to focus
on operations and customer fulfillment. Their backgrounds building and improving
operations includes:
o setting up and improving customer service at both small and large
corporations,
o recruiting and developing a sales force to establish and build revenue from
startup to tens of millions,
o establishing and sustaining measurement programs at large international
manufacturers, o designing and delivering large and small scale software
products, and
o deploying extensive computer networks for team collaboration and workforce
productivity.
Genfinity Corporation has three operating lines:
1) The NetworkArts brand provides sophisticated Internet World Wide Web site
development, web marketing programs, e-commerce B2B (business to business) and
B2C (business to consumer) solutions to both `clicks' and `mortar' companies.
Operations for PlayRadio.net and MoneyLink Capital are shared with NetworkArts.
2) Genfinity Consulting Services provides high-end management consulting to
medium-to-large organizations in practice areas such as Total Cost of Ownership,
Metrics (business operations and information-technology measurement), Customer
Bonding, and Transition Management.
3) LetterPath is a development stage line of business to provide organizations
and the general public with a tool to send a mailed communication from the
Internet, or directly from a computer system, anywhere in the world via postal
mail or courier.
The following brief descriptions of these operating lines should be viewed by
readers with several common factors in mind:
o Genfinity is a new business operation with very limited operating history.
o Comparisons of financial and operating results from period to period is of
limited value because of radical changes in cost structures, technology
marketplaces, and business operations.
25
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o Significant risks for continued financing, retention of key personnel, and
continuing customer relationships exist and will continue for the foreseeable
future. If any significant failures occur in obtaining timely financing,
retaining key personnel, or maintaining large customer relationships continued
operation of the Corporation is in severe jeopardy.
NetworkArts
Genfinity's has provided a web hosting, web site development, web-based
marketing, applications hosting and other related web-based business solutions.
Business methods and processes are changing very frequently in response to both
new organizational and customer driven issues. As a result, reliance on
period-to-period comparisons of revenue and operating results, including costs
of sale and other operating expenses as a percentage of total revenue, are not
meaningful and should not be relied upon as indicators of future performance.
Genfinity is currently a small business where growth in one or more operating
lines will substantially change both the allocations of resources and the
financial characterization of the business.
For the current set of statements, substantial majorities of our revenues were
from shared and dedicated web hosting/e-commerce services. Consulting revenues
and continuing customer support are present and are anticipated to substantially
grow. Our strategy is to grow our customer base and revenues by marketing
high-value services to a variety of industrial, government, and non-profit
organizations. Most of our hosting revenues are generated from recurring monthly
fees and bandwidth charges. Many existing customers have under short-term (12
months of less) setup and operating agreements. Material amounts of existing
customer revenue operates on a month-to-month contractual basis that may be
cancelled on thirty days notice. Large web design and marketing projects are
proposed to receive payment in advance typically for more than 20% of the
contract amount that may cover the initial work effort for project startup and
initial deliverables.
Expenses in the operating line consist of:
o Cost of revenue, which is mainly comprised of compensation and related
expenses for technical operations, internet connectivity and other related
telecommunications expense, lease expense in particular related to our leased
property, and depreciation of equipment;
o Sales and marketing, which is mainly comprised of compensation costs and
costs associated with marketing our products and services. Compensation costs
include salaries and related benefits, commissions and bonuses. Our marketing
expenses include the costs of direct mail, advertising and other marketing
programs; and
o General and administrative, which is mainly comprised of compensation and
related expenses, occupancy costs, and other operating expenses.
A substantial risk to continuing operations is the availability of highly
skilled personnel in an extremely competitive job market. Genfinity operates in
areas where personnel can realize substantial salary gains by changing employers
and large numbers of positions are being created and filled.
Genfinity has incurred significant losses in the period covered by the financial
statements as well as having various Net Operating Loss carryforwards. Further
investment in capital equipment, staff, marketing, and product development will
require additional financing in both near term and long-term expectations.
Failure to obtain timely investment capital will also place continued operations
in doubt.
Genfinity intends to expand both the business sold to existing customers and to
bring substantial new business by startup of new Consulting Services and
extensions to reflect market changes for existing services. Competitors in the
web hosting and site management business are both substantial and
26
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are actively pursuing business without high regard to immediate profitability.
Microsoft, IBM, Qwest, Genuity, and other large organizations have announced
substantial efforts to win market share and attention. Some very large
competitors (such as Interland) are spending in excess of 200% of revenue to
build economies of scale and marketshare. In this marketplace landscape
Genfinity will be selective in its prioritization of investment to avoid
substantial losses. Even with this care substantial losses may be incurred from
continuing historical operations. Our ability to achieve profitability and
positive cash flow from these operations will be dependent upon our ability to
grow our revenues substantially and achieve longer-term commitments from our
customers.
Substantial changes in the market for web site design and implementation are
occurring as the technology matures and many new firms and individuals enter the
marketplace. Large-scale projects are becoming increasingly complex and
requiring high-risk time schedules. Small projects are becoming a commodity
product that is often used as a promotional leader by organizations seeking to
expand marketplace awareness and service/product marketshare. In this climate
the development of human resources, expending appropriate capital to maintain a
competitive infrastructure, and continuing efforts to improve services and
quality will be difficult for Genfinity to meet without a stable financing
commitment.
Consulting Services
Genfinity Consulting Services focuses on medium-to-large organizations with a
need for improved business processes or significant risk management activity.
The Practice areas selected for initial marketing and delivery emerge from the
specific experience and background of key personnel hired within 60 days of the
close of the Merger Transaction. Existing relationships and deep knowledge will
be applied to build practice areas for Genfinity Corporation. A significant risk
is the retention of these key personnel. Continued timely financing for
Genfinity is essential to cover the capital investments and marketing costs of
building these new Practices. Revenue growth and profitability will also depend
on market conditions, such as intellectual properties acquired or supplied by
external parties, regulatory initiatives of governmental organizations, and the
success of marketing programs.
Expenses in this operating line consist primarily of:
o Costs of personnel (and related benefits, travel, and infrastructure),
o Costs of capital investment (in development or licensing of intellectual
properties), and
o Costs of marketing and sales activities to pursue these markets.
The close and sales cycle for these types of business are typically longer than
90 days and large projects are estimated to be in the range of $250,000 to
$750,000.
LetterPath
LetterPath is a development stage line of business to provide organizations and
the general public with a tool to send a mailed communication from the Internet,
or directly from a computer system, anywhere in the world via postal mail or
courier. LetterPath development continues with resources and infrastructure
shared with other Genfinity Corporation operating lines. The continued
availability of sufficient skilled personnel, integration of emerging
technologies, and market success is not yet assured. Patent protection for the
LetterPath process has been applied for, but not yet issued, from the relevant
governmental bodies. Risks to the operating line include major shifts in the
marketplace, intellectual property protection,
27
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and the success of continuing product development efforts. LetterPath is not
viewed as having substantial revenues that will offset incurred costs for an
indefinite period. Demands for cash expenditures and capital will add to the
needs of Genfinity Corporation as a whole.
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Part II. Other Information
Item 1. Legal Proceedings
Genfinity Corporation is a party to routine litigation incidental to its
business, however, management believes that none of which is likely to have a
material effect on the Corporation's financial position or capabilities.
Item 2. Changes in Securities and Use of Proceeds
Please see Notes to financial statements for additional information. Interested
parties are also encouraged to view the Form D, Form 3, and Form 13 on the
Securities and Exchange Commission web site (http://www.sec.gov) for additional
information.
Item 3. Defaults on Senior Securities
As noted in the Notes to Financial Statements Genfinity Corporation has
continued the rights and privileges of continuing holders of Convertible
Debentures and Warrants for Apple Homes Corporation.
Senior debt related to the historical business conducted by Apple Homes
Corporation was assumed by Apple Homes Acquisition Corporation in the asset sale
transaction on September 30, 2000.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Additional Press Release Information is available on the Corporation Web Site
(http://www.genfinity.com) or on public news services.
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K
The Corporation filed the following information on Form 8-K with the SEC during
the period ending September 30, 2000:
None
Subsequently, the Corporation has filed the following information on Form 8-K
with the SEC thru the date of this filing:
Form 8-K, Merger Transaction, dated October 13, 2000
Form 8-K, Change in Auditors, dated November 16, 2000
Item 7. Segment Reporting
Genfinity Corporation operates in a single segment for reporting purposes. The
previous SIC Code for Apple Homes Corporation (5271) will be changed to reflect
the transition to Internet and consulting services as the primary focus of the
Corporation.
WHERE YOU CAN FIND MORE INFORMATION
You can find more information concerning Genfinity Corporation by examining its
reports and other filings with the SEC. These can be examined at the SEC's
Public Reference Room at 450 Fifth Street NW, Washington DC 20549 or by calling
the SEC at 1-800-SEC-0330. They may also be examined on the SEC's web site,
www.sec.gov, or by calling Arnold W. Kwong, Chief Operating Officer of Genfinity
Corporation, at 919 960-2660.
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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.
GENFINITY CORPORATION
Dated: November 20, 2000
By /s/ Hiram Dixon Settle, III
-----------------------------------
Hiram Dixon Settle, III
Chair of the Board
30
