10QSB 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the Quarter Ended November 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the transition period from ______________ to _________________ Commission file number 000-28935 OMNINET MEDIA.COM, INC. (Name of Small Business Issuer) Nevada 880398783 (State or Other (I.R.S. Employer Jurisdiction of Identification Incorporation or Number) Organization) 8615 E. Florence, Suite 210, Downey, CA 92024 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number including area code: (858) 856-1392 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. OMNINET MEDIA.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED NOVEMBER 30, 2000 AND 1999 TABLE OF CONTENTS Page Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets 1 Condensed Consolidated Statements of Operations 2 Condensed Consolidated Statements of cash Flows 3 Notes to Condensed Consolidated Financial Statements 4 - 6 OMNINET MEDIA.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS November 30, August 30, 2000 2000 Current Assets Cash $ - $ 1,420 Prepaid expenses - 6,779 Total Current Assets - 8,199 Property and Equipment, net 150,365 158,507 Other Assets License agreement, net - 703,916 Other assets 6 2,796 Total Assets $150,371 $873,418 LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities Accounts payable and accrued expenses $413,815 $400,920 Current portion of note payable 19,000 642,000 Notes payable to related parties 627,046 623,956 Total Current Liabilities 1,059,861 1,666,876 Noncontrolling interest ( 302,171) ( 277,405) Stockholders' Deficit Preferred stock, $0.0001 par value; 10,000 shares authorized, no shares issued and outstanding - - Common stock, $0.0001 par value; 690,000,000 shares authorized; 42,278,173, shares issued and outstanding 4,228 4,228 Additional paid in capital 1,759,262 1,759,262 Accumulated deficit (2,370,809) (2,279,543) Total Stockholders' Deficit ( 607,319) ( 516,053) Total Liabilities and Stockholders' Deficit $ 150,371 $ 873,418 See accompanying summary of notes to unaudited condensed consolidated financial statements. -1- OMNINET MEDIA.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended November 30, 2000 1999 Revenues, net $ - $ 305,504 Cost of products sold - ( 163,069) Gross Profit - 142,435 Expenses General and administrative 54,116 310,979 Impaired loss on license agreements 61,916 - Operating Loss ( 116,032) ( 168,544) Non-controlling interest 24,766 40,451 Net Loss $ ( 91,266) $( 128,093) Net Loss Per Common Share $ ( 0.002) $( 0.011) Weighted Average Number of Common Shares Outstanding 42,278,173 11,260,748 See accompanying summary of notes to unaudited condensed consolidated financial statements. -2- OMNINET MEDIA.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Three Months Ended November 30, 2000 1999 Cash Flows From Operating Activities Net loss $( 91,266) $(128,093) Adjustment to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 8,142 61,620 Minority interest in net loss of consolidated subsidiaries ( 24,766) ( 40,451) Impairment loss on license agreements 61,916 - Decrease in accounts receivable - 70,125 Increase in inventory - 84,588 Decrease in prepaid expenses 6,779 - Decrease in security deposit 2,790 - Increase in accounts payable and accrued expenses 12,895 4,788 Net Cash Provided by (Used In) Operating Activities ( 23,510) 52,577 Cash Flows From Investing Activities Purchase of property and equipment - ( 215) Net Cash Used by Investing Activities - ( 215) Cash Flows From Financing Activities Proceeds from notes payable 22,090 - Payments on notes payable - ( 30,464) Net Cash Provided by (Used In) Financing Activities 22,090 ( 30,464) Net Increase (Decrease) in Cash ( 1,420) 21,898 Cash at beginning of year 1,420 99,770 Cash at end of year $ - $121,668 See accompanying summary of notes to unaudited condensed consolidated financial statements. -3- OMNINET MEDIA.COM, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Presentation of Interim Information In the opinion of the management of OmniNet Media.Com, Inc. and Subsidiaries, Inc. (the Company), the accompanying unaudited condensed consolidated financial statements include all normal adjustments considered necessary to present fairly the financial position as of November 30, 2000, and the results of its operations and cash flows for the three months ended November 30, 2000 and 1999. Interim results are not necessarily indicative of results for a full year. The condensed consolidated financial statements and notes are presented as permitted by Form 10-Q, and do not contain certain information included in the Company's audited consolidated financial statements and notes for the year ended August 31, 2000. 2. Financial Statements The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated. 3. Supplemental Disclosures of Cash Flow Information Three months ended November 30, 2000 1999 Operating Activities: Interest paid $ - $ - ==== ==== 4. Going Concern As shown in the accompanying financial statements, the Company incurred net losses of $91,266 for the three months ended November 30, 2000. The Company's current liabilities exceeded its current assets by $1,059,861 at November 30, 2000. In addition, a subsidiary of the Company is involved in litigation, the outcome which is unknown at this time and has defaulted on the license agreements. The ability of the Company to continue as a going concern is contingent upon its ability to secure additional equity financing. The Company will offer additional shares of its common stock to raise capital and obtain financing on an as needed basis. -4- OMNINET MEDIA.COM, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5. Stock Options On August 31, 2000, the Company issued options to purchase an aggregate of 250,000 shares of its common stock as $4.00 per share to a vendor of advertising services. These options were fully vested as of the date of their issuance with an exercise period of three years. Activity related to the Company's stock options during the three months ended November 30, 2000, was as follows: Outstanding Options Weighted Number Average Of Exercise Shares Price September 1, 2000 22,000 $ 4.00 Grants - - Exercises - - Cancellations - - ________ Options exercisable at: November 30, 2000 22,000 $ 4.00 ======= SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) was issued during 1995 and is effective for fiscal years ending after December 15, 1996. This pronouncement established financial accounting and reporting standards for stock-based employee compensation plans. It encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options and other equity instruments to employees based on new fair value accounting rules. Companies that choose not to adopt the new fair value accounting rules are required to disclose net income and earnings per share under the new method on a pro forma basis. The Company accounts for its options and warrants according to APB No. 25 and follows the disclosure provisions of SFAS 123. Accordingly, if options or warrants are granted to employees or others for services and other consideration with an exercise price below fair market value on the date of the grant, the difference between the exercise price and the fair market value is charges to operations. The fair value of the options granted during the eight months ended August 31, 2000 reported below, has been estimated at the dates of grant using the Black-Schole option pricing model with the following assumptions: Expected life (in years) 2 Risk-free interest rate 6.0% Volatility 11.0% Dividend yield 0.0% -5- OMNINET MEDIA.COM, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5. Stock Options, (Continued) The Black-Scholes option valuation method was developed for use in estimating the fair value traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in the opinion of management, the existing models do not materially affect the fair value estimate, in the opinion of management, the existing models do not necessarily provide a reliable single measure of the fair value of its options. For the purpose of pro form disclosures, the estimated fair values of the options amortized to expense over the options vesting period. The Company's pro forma for the three months ended November 30, 2000, is as follows: Pro forma net loss $( 91,266) Pro forma loss per share $( .002) The effects on pro forma disclosures of applying SFAS 123 are not necessary indicative of the effects on pro forma disclosures of future years. 6. Impairment Loss In September 2000, the issuer of the license agreements to the Company cancelled the agreements for non-payment of license fees. An impairment loss in the amount of $61,916 was recognized. 7. Subsequent Event Effective December, 2000, the Company's Board of Directors approved the purchase of the Company's minority shareholder interests. -6- ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION OmniNet Media.Com, Inc. commenced active operations in January of 2000 which have continued to the date of this report. In note 1 to its financial statements as of August 31, 2000 its auditors stated that the financial statements were presented on a going concern basis which contemplated the realization of assets and satisfaction of liabilities in the normal course of business. However, as noted there, the Company has sustained recurring losses since inception and had negative working capital for the eight months ended August 31, 2000 and the years ended December 31, 1999 and 1998. The Company experienced operating losses of $1,560,604, $41,971 and $14,350, respectively, during those periods. Its ability to continue as a going concern is contingent upon its ability to secure additional equity financing, initiate sales of its products and thereby attain profitable operations. The Company is continueing to pursue financing by the issuance of common stock shares. Although the Company plans to pursue additional financing on terms beneficial to the Company and its stockholders. Without such funds the Company will be unable to comply with its payment obligations to vendors. The Company anticipates that it will require $5,000,000 in additional debt or equity financing in order to continue as a going concern during the next twelve months of operation. The Company plans to attempt to enter into arrangements to raise these funds through the private or public sale of common shares, and by initiating profitable operations. No assurance can be given that either of these plans will be realized and thus, no assurance can be given that the Company will be able to continue as a going concern in the foreseeable future. Its plan of operation is to aggressively market digital information kiosks in malls, individual large retail stores like Target and Wal-Mart, public transportation stations and airports, and individual pay telephone locations. The Company believes its Cellular Digital Packet Data network links are attractive to retailers because they link all retailers, manufacturers, distributors, marketers, advertisers and shoppers together, and offer interactive TV, MultiMedia, computer technology and communications technology together by use of a user-friendly electronic presentation via keyboard and touch screens. Specific retailer and advertiser information and coupon and other sales incentives are available to shoppers at a touch in a format that can be updated daily via wireless communications between OmniNet and any number of MINTtm installations. Though its plan is yet unproven, the Company believes these installations will be attractive to vendors because in the age of self-service and transactional marketing the Company can, through four vertical market "Shopper Intranets," supply the means by which participating industry, manufacturers, advertisers, retailers and industry service providers can create "one-on-one" relationships with their customers through new "sell-through" retail technologies. The Company has established seven combined goals for successful implementation of its store-based MINTtm program. These goals require each installed system (1) create store traffic by offering unique products and services, (2) be a stand-alone profit center for the retailer, (3) address specific vertical market needs of the shopper, (4) offer manufacturer coupons in all categories which can be produced by the machine on demand, (5) offer on-board tangible products and services, (6) capture specific data from users for demographic statistics and profiles, and (7) provide an incentive for shopper use. Though untested, the Company believes it will succeed in distributing these devices and that once in place, they will be profitable both for the operator of the location in which they are installed, and for the Company. The Company has suspended all active business operations in its subsidiary U.S./Ace Security Laminates and does not expect to resume active operation of this business in the foreseeable future. PART II ITEM 1. Legal Proceedings. There are no legal proceedings pending against OmniNet and the Company has received no threat or other such notice that any such proceeding is likely to be filed in the foreseeable future. To its knowledge no administrative or other similar action is threatened or warranted by any state, local or federal administrative agency. U.S./Ace, now known as Global Glass Guard ("3G"), is involved in litigation. U.S./Ace, including certain employees, officers, and directors, is a defendant in a lawsuit filed by the original licensor (in Hull, Quebec, Canada) of certain territories which U.S./Ace entered into contracts for dealership and distribution. The claim is for outstanding license fees allegedly owing pursuant to contracts dated February 9, 1998 and July 7, 1998. The suit asks for damages totaling approximately $9.3 million (Canadian) plus legal costs. Outside counsel for U.S./ACE has advised that, at this stage in the proceeding, the counsel cannot offer an opinion as to the probable outcome. U.S./Ace believes the suit is without merit and is vigorously defending its position. The plaintiffs attorney has been sanctioned by the Court for no appearance at court hearings. ITEM 2. Changes in Securities. There have been no changes in the Company's securities. ITEM 3. Defaults Upon Senior Securities. There have been no defaults upon senior securities. ITEM 4. Submission Of Matters To A Vote Of Security Holders. There have been no Submission of matters to a vote of security holders ITEM 5. Other Information. There is no other information. ITEM 6. Exhibits And Reports On Form 8-K. The registrant has filed two Current Reports on Form 8-K, to wit: 1. Form 8-K filed September 27, 2000 which reported the change of the registrant's fiscal year to August 31. 2. Form 8-K/A filed January 19, 2001 which reports (1) a change in control of the registrant resulting from the election of Don Steffens as President to replace Michael Knox, who resigned; (2) the resignation of Michael Knox as a director of the registrant and the appointment of Don Steffens to fill his unexpired term; and (3) a change of address of the registrant. All of these reports are incorporated herein by reference. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: January 19, 2001 By:/s/ James A. Graves, Secretary ______________________________________