-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SmCLYwbBUABebw8LWVPnwpSwUlpRsNnTB9CLgy44pmi8C7QfrvOqPEi27eddixsd ZE3eUwZy1K2EWqm+5/nA8g== 0000050471-99-000034.txt : 19991214 0000050471-99-000034.hdr.sgml : 19991214 ACCESSION NUMBER: 0000050471-99-000034 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19991213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERINET GROUP COM INC CENTRAL INDEX KEY: 0000050471 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 112050317 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: SEC FILE NUMBER: 000-03718 FILM NUMBER: 99773583 BUSINESS ADDRESS: STREET 1: 902 CLINT MOORE ROAD SUITE 136 CITY: BOCA RATON STATE: FL ZIP: 33487 BUSINESS PHONE: 5619983435 MAIL ADDRESS: STREET 1: 902 CLINT MOORE ROAD SUITE 136 CITY: BOCA RATON STATE: FL ZIP: 33487 FORMER COMPANY: FORMER CONFORMED NAME: EQUITY GROWTH SYSTEMS INC /DE/ DATE OF NAME CHANGE: 19951214 FORMER COMPANY: FORMER CONFORMED NAME: INFOTEC INC DATE OF NAME CHANGE: 19930506 10KSB/A 1 AMENDMENT TO FORM 10-KSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 OMB APPROVAL OMB Number: 3235-0420 Expires: May 31, 2000 Estimated average burden hours per response: 3225 FORM 10-KSB/A Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended June 30, 1999 Commission file number 000-03718 AMERINET GROUP.COM, INC. (Name of small business issuer in its charter) DELAWARE (State of incorporation or organization) 11-2050317 (I.R.S. Employer Identification No.) 902 CLINT MOORE ROAD, SUITE 136-C; BOCA RATON, FLORIDA (Address of principal executive offices) 33487 (Zip Code) Issuer's Telephone Number: (561) 998-3435 Securities registered under Section 12(b) of the Exchange Act: Title of Each Class: NONE Name of each exchange on which registered: NONE Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK, $0.01 PAR VALUE (Title of Class) Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. [x] Yes [ ] No Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [x] State issuer's revenues for its most recent fiscal year: $0. State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days: $5,501,785.50; based on the final transaction reported on the OTC Bulletin Board at the close of business on September 30, 1999 ($1.50 per share), there being 3,667,857 shares of the Registrant's common stock on such date held by non-affiliates of the Registrant (persons holding less than 10% of the Registrant's common stock who were not officers or directors within the last 90 days). State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. As of September 30, 1999, there were 8,192,384 shares of the Registrant's common stock outstanding. Transitional Small Business Disclosure Format (Check one): Yes No x Page 1 AVAILABLE INFORMATION. The public may read and copy any materials filed by the Registrant with the Commission at the Commission's Public Reference Room at 450 Fifth Street, Northwest, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding the Registrant and other issuers that file reports electronically with the Commission, at http://www.sec.gov. The Registrant's wholly owned operating subsidiary, American Internet Technical Center, Inc., maintains a web site at http://www.aitc.com. CAVEAT PERTAINING TO FORWARD LOOKING STATEMENTS The Private Securities Litigate Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain of the statements contained herein, which are not historical facts, are forward-looking statements with respect to events, the occurrence of which involve risks and uncertainties. These forward-looking statements may be impacted, either positively or negatively, by various factors. Information concerning potential factors that could affect the Registrant is detailed from time to time in the Registrant's reports filed with the Commission. This report contains "forward looking statements" relating to the Registrant's current expectations and beliefs. These include statements concerning operations, performance, financial condition and anticipated growth. For this purpose, any statements contained in this Annual Report and Form 10-KSB that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as "may", "will", "expect", "believe", "anticipate", "intend", "could", "estimate", or "continue", or the negative or other variation thereof or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties which are beyond the Registrant's control. Should one or more of these risks or uncertainties materialize or should the Registrant's underlying assumptions prove incorrect, actual outcomes and results could differ materially from those indicated in the forward looking statements. Page 2 TABLE OF CONTENTS Only the following items are amended by this report: PART ITEM PAGE NUMBER NUMBER NUMBER CAPTION II 7 4 Financial Statements III 13 37 Exhibits and Reports on Form 8-K Signatures 38 This document incorporates into a single document the requirements of the Securities and Exchange Commission for the Annual Report to Stockholders and the Form 10-KSB. This document amends the financial statements previously filed with the Commission on form 10-KSB for the years ended December 31, 1997 and 1998, and June 30, 1999, except as amended hereby or in other subsequent filings with the Commission, to the best of management's knowledge such reports remain accurate, as of their respective dates. Page 3 PART II ITEM 7 FINANCIAL STATEMENTS (a) Index to financial statements and financial statement schedules. The auditor's report and audited balance sheet of the Registrant for its years ended June 30, 1999, December 31, 1998, and 1997 and related statements of operations, stockholder's equity, cash flows and notes to financial statements for such years follow in sequentially numbered pages numbered 5 through 22. The page numbers for the financial statement categories are as follows: AmeriNet Group.com, Inc. financial statements 5 Cover Page 6 Report of Independent Accountants 7 Report of Independent Accountants from Bowman & Bowman for 1998 8 Report of Independent Accountants from Baum & Company for 1997 9 Balance Sheet 10 Statements of Operations 11 Statements of Shareholders' Equity 12 Statement of Cash Flows 13 Notes to Financial Statements The auditors report and audited balance sheet of the Registrant for its six months ended June 30, 1999, and related statements of operations, stockholder's equity, cash flows and notes to financial statements for such years follow in sequentially numbered pages numbered 23 through 32. The page numbers for the financial statement categories are as follows: American Internet Technical Center, Inc. financial statements 23 Cover Page 24 Independent auditor's report 25 Balance sheets 26 Statements of operations 27 Statements of shareholders' equity 28 Statements of cash flows 29 Notes to financial statements (b) Financial Statements follow (c) Pro Forma Financial Statements The combined balance sheets and statement of income of the Registrant and American Internet for its year ended December 31, 1998, and statement of income for six months ended June 30, 1999, follow in sequentially numbered pages numbered 33 through 36. Page 4 (b) Financial Statements AMERINET GROUP.COM, INC. AND SUBSIDIARY (F/K/A EQUITY GROWTH SYSTEMS, INC.) CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1999 AND YEARS ENDED DECEMBER 31, 1998 AND 1997 Page 5 DASZKAL BOLTON MANELA DEVLIN & CO. CERTIFIED PUBLIC ACCOUNTANTS A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS 2401 N.W. BOCA RATON BOULEVARD, SUITE 100 BOCA RATON, FLORIDA 33431 TELEPHONE (561) 367-1040 FAX (561) 750-3236 JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS ROBERT A. MANELA, CPA, P.A. TIMOTHY R. DEVLIN. CPA, P.A. MICHAEL S. KRIDEL, CPA INDEPENDENT AUDITOR'S REPORT To The Board of Directors and Stockholders AmeriNet Group.com, Inc. and Subsidiary We have audited the accompanying consolidated balance sheet of AmeriNet Group.com, Inc. (f/k/a Equity Growth Systems, Inc.), and subsidiary as of June 30, 1999, and the related statement of operations, changes in stockholders' equity and cash flows for the six months ended June 30, 1999. These financial statements are the responsibility of the management of AmeriNet Group.com, Inc., and subsidiary. 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 AmeriNet Group.com, Inc., and subsidiary as of June 30, 1999, and the results of its operations and its cash flows for the six months ended June 30, 1999, 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 22 to the financial statements, the Company has suffered recurring losses from operations and has negative cash flow from operations that together raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 22. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Daszkal Bolton Manela Devlin & Co. Boca Raton, Florida October 5, 1999, except for Notes 9 and 15, as to which the date is November 10,1999. Page 6 BOWMAN& BOWMAN, P.A. Certified Public Accountants 1705 Colonial Blvd., Suite D-l Fort Myers, Florida 33907 (941) 939-2301 (941) 939-1297 (Fax) To the Board of Directors Equity Growth Systems, inc. (A Development Stage Company) 3821-B Tamiami Trail, Suite 201 Port Charlotte, Florida 33952 We have audited the accompanying balance sheet of Equity Growth Systems, inc. (A Development Stage Company) as of December 31, 1998, and the related statements of operations, stockholders' equity, and cash flows for the year ended December 31, 1998. 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 audits 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 Equity Growth Systems, inc. (A Development Stage Company) as of December 31, 1998, and the results of its operations and its cash flows for the year ended December 31, 1998 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 8 to the financial statements, the Company has suffered recurring losses from operations and has a net working capital deficiency that together raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 8. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Bowman & Bowman Bowman & Bowman, P.A. Myers, Florida April 23, 1999, except Note 2 and Note 5B(b) as to which the date is November 10, 1999. Page 7 BAUM & COMPANY, P.A. Certified Public Accountant 1515 University Drive, suite 209 Coral Springs, Florida 33071 (954) 752-1712 INDEPENDENT AUDITOR'S REPORT To the Shareholders of Equity Growth Systems, Inc. Port Charlotte, Florida We have audited the balance sheets of Equity Growth Systems, Inc. at December 31, 1997 and 1996, and the related statements of operations, shareholders' equity and cash flows for the years then ended. 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 audits. We conducted our audits 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 misstatements. 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. We were unable to obtain a discussion or evaluation from the Company's outside legal counsel of pending or threatened litigations described in Note 14. In our opinion, except for the effects on the 1997 and 1996 financial statements of such adjustments, if any, as might have been determined to be necessary have we been able to obtain a discussion or evaluation of pending or threatened litigation from the Company's outside legal counsel as discussed in the preceding paragraph, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Equity Growth Systems, Inc., as of December 31, 1997 and 1996 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. May 4, 1998 Coral Springs, Florida Page 8 AMERINET GROUP.COM, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS JUNE 30, 1999 AND DECEMBER 31, 1998 ASSETS 1999 1998 CURRENT ASSETS: Cash $ 79,021 $13,182 Accounts Receivable, net 76,662 - ------------ ------------ Total Current assets 155,683 13,182 Property and equipment, net 33,656 - OTHER ASSETS: Goodwill, net 1,470,559 - Deposits 14,492 - -------------- ----------- Total other Assets 1,485,051 - -------------- ----------- TOTAL ASSETS $1,674,390 $13,182 ============== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 10,648 $ 4,661 Accrued expenses 16,901 147,000 Billings in excess of costs and estimated earnings on uncompleted contracts 80,558 - Loans payable-Stockholders 29,333 - -------------- ------------ TOTAL CURRENT LIABILITIES 137,440 151,661 -------------- ------------ SHAREHOLDERS' EQUITY Preferred stock, no par value, 5,000,000 shares authorized, -0- issued and outstanding - - Common stock, $.01 par value, 20,000,000 shares authorized; 8,094,884 and 5,991,148 shares issued and outstanding in 1999 and 1998, respectively 80,948 59,991 Additional paid in capital 4,841,005 2,930,395 Accumulated deficit prior to December 31, 1998 (3,128,785) (3,128,785) Accumulated deficit from inception of development stage on December 31, 1998 (256,218) - ------------- ------------- Total Stockholders' equity 1,536,950 (138,479) ------------- ------------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $1,674,390 $ 13,182 ============= =============
See accompanying notes to financial statements Page 9 AMERINET GROUP.COM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1999 AND YEAR ENDED DECEMBER 31, 1998 AND 1997 1999 1998 1997 Revenues earned $ - $ - $ - General and administrative expenses (256,218) - - Loss from Operations (256,218) - - Provision for income taxes - - - Loss from discontinued operations - (562,415) (74,043) Net loss $(256,218) $(562,415) $ (74,043) ============ ========== ========== Basic loss per share $ (0.04) $ (0.13) $ 0.02 Weighted average shared outstanding 6,091,566 4,174,778 3,807,814 ============ ========== =========== Fully diluted loss per share $ (0.04) $ (0.13) $ (0.02) Fully diluted average shares outstanding 6,091,566 4,222,191 3,807,814 ============ ========== ===========
See accompanying notes to financial statements Page 10 AMERINET GROUP.COM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY SIX MONTHS ENDED JUNE 30, 1999 AND YEARS ENDED DECEMBER 31, 1998 AND 1997 Accumulated Additional Deficit No. of Common Paid-in Accumulated Development Shares Stock Capital Deficit Stage Total Balances, December 31, 1996 3,771,148 $ 37,711 $2,892,195 $(2,492,327) $ - $ 437,579 Common Stock Issued for services 55,000 550 550 - - 1,100 Net loss, December 31, 1997 - - - (74,043) - (74,043) --------- --------- ---------- ------------ ----------- ----------- Balances, December 31, 1997 3,826,148 38,261 2,892,745 (2,566,370) - 364,636 Common stock issued for services 415,000 4,150 4,150 - - 8,300 Common stock issued for cash 1,750,000 17,500 17,500 - - 35,000 Stock Options outstanding 16,000 16,000 Net loss, December 31, 1998 - - - (562,415) - (562,415) --------- --------- ---------- ------------- ------------ ------------ Balances, December 31, 1998 5,991,148 59,911 2,930,395 (3,128,785) - (138,479) Common stock issued for services 247,000 2,470 171,780 - - 174,250 Common stock issued for cash 220,000 2,200 97,800 - - 100,000 Common stock issued for acquisition 1,636,736 16,367 1,423,960 - - 1,440,327 Stock options outstanding - - 37,498 - - 37,498 Contribution of professional services 179,572 179,572 Net loss, June 30, 1999 - - - - (256,218) (256,218) --------- --------- ---------- ------------ ------------- ------------ Balances, June 30, 1999 8,094,884 $ 80,948 $4,814,005 $(3,128,785) $ (256,218) $ 1,536,950
See accompanying notes to financial statements Page 11 AMERINET GROUP.COM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1999 AND YEARS ENDED DECEMBER 31, 1998 AND 1997 1999 1998 1997 Cash flows from operating activities: Net (loss) $(256,218) $(546,415) $ (74,043) Adjustments to reconcile net income to net cash used by operating activities: Loss on non-collectible financial instruments - - 144,440 Stock options granted to consultant 37,498 - - Common stock issued for services 27,250 8,300 1,100 Contribution for professional services 179,572 Changes in operating assets and liabilities, net of effect from acquisitios: (Increase) decrease in: Other receivables - 98,590 (98,580) Increase (decrease) in: Accounts Payable and accured expenses (1,573) 146,651 (7,990) Cash overdraft - (4) 4 ----------- ---------- ------------ Net cash used by operations (13,471) (292,878) (35,069) Cash flows from investing activities: Cash overdraft acquired in acquisitions (20,690) - - ----------- ---------- ------------ Cash flows from financial activities: Common stock issued for cash 100,000 35,000 - Decrease (increase) in mortgage and notes receivable - 1,570,888 339,544 Increase (Decrease) in mortgage and notes payable - (1,299,828) (305,437) ----------- ----------- ------------ Net cash provided by financial activities 100,000 306,060 34,107 Net increase in cash 65,839 13,182 (962) Cash at beginning of year 13,182 - 962 ----------- ---------- ------------- Cash at end of year $ 79,021 $ 13,182 $ - =========== ========== =============
See accompanying notes to financial statements Page 12 AMERINET GROUP.COM, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS AmeriNet Group.com, Inc., formerly known as Equity Growth Systems, Inc. (the "Company") was organized under the laws of the State of Delaware on December 8, 1964. Beginning in 1996, the principal business of the Company was structuring and marketing of mortgaged backed securities as well as the acquisition of select commercial real estate for its own account. Effective December 31, 1998, the Company discontinued the mortgage business and was reclassified as a development stage company. The purpose of the development stage company was to acquire other operating companies. On June 25, 1999, the Company acquired all of the outstanding common stock of American Internet Technical Center. American Internet Technical Center, Inc., is a Florida corporation, established on April 15, 1998, to design and host websites and to provide e-commerce programs, marketing and other Internet services. Hosting services, including search engine registrations, are typically six-month to one-year contracts. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all cash and other demand deposits to be cash and cash equivalents. As of June 30, 1999, and December 31, 1998 and 1997, the Company had no cash equivalents. PROPERTY AND EQUIPMENT Property and equipment are stated at cost and are being depreciated using the straight-line method over the estimated useful lives of five to seven years. REVENUE AND COST RECOGNITION Revenues from long-term contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract (i.e., cost-to-cost method). This method is used because management considers total cost to be the best available measure of progress on the contracts. Because of inherent uncertainties in estimating costs, it is possible that the estimates used will change within the near term. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as subcontractors, equipment rental, supplies, and certain general administrative expenses are charged to expense. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts," represents billings in excess of revenues recognized. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of AmeriNet Group.com, Inc. and its wholly owned subsidiary, American Internet Technical Center, Inc., at June 30, 1999. All intercompany accounts and transactions have been eliminated in consolidation. The financial statements as presented, reflect the Company, for the six months ended June 30, 1999, and American Internet Technical Center, Inc., for accounting purposes, June 30, 1999. Page 13 AMERINET GROUP.COM, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ADVERTISING Advertising costs are expensed when incurred. The advertising cost incurred for the period ended June 30, 1999, was $792. BASIS LOSS PER SHARES Basic loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the year. DILUTED LOSS PER SHARES Fully diluted loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding plus the shares that would be outstanding if all stock options were exercised. NOTE 3 - ACQUISITION On June 25, 1999, the Company acquired all of the outstanding common stock of American Internet Technical Center, Inc. For accounting purposes the transaction was deemed to have become effective June 30, 1999. As initial consideration, the Company issued an aggregate of 2,236,736 shares of common stock to the stockholders of American Internet Technical Center, Inc. These initial shares were reduced by 750,000 shares to an aggregate of 1,486,736 shares and then again reduced to an aggregate of 553,980 shares. The stockholders of American Internet Technical Center, Inc. sold 250,000 shares of common stock to Yankee in consideration for $25,000. The shareholders subsequently contributed the $25,000 to the Company. Under the terms of the earn out provisions of the acquisition agreement, the Company will issue shares of common stock over a six-year period beginning June 30, 2000, contingent upon the operating performance of American Internet Technical Center, Inc. The maximum number of shares that would have been issued under this agreement is 5,250,000 shares. As a material subsequent event, such contingency has been eliminated. The acquisition was recorded using the purchase method of accounting. The results of operations since the date of acquisition, June 30, 1999, for accounting purposes, will be included in the consolidated statements of operations beginning July 1, 1999. Goodwill of $1,470,559 was recorded in this transaction and is being amortized over 15 years using the straight-line method. The following summarizes the fair value of the assets acquired and liabilities assumed: Cash $(20,690) Accounts receivable 76,661 Property and equipment 33,656 Deposits 14,492 Accounts payable (7,560) Accured expenses (16,901) Loan payable-stockholder (29,333) Billings in excess of cost and estimated earnings on uncompleted contracts (80,558) ----------- Net Assets $ (30,233) Page 14 AMERINET GROUP.COM, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS NOTE 4 - AMORTIZATION OF GOODWILL Goodwill represents the amount by which the purchase price of businesses acquired exceeds the fair market value of the net assets acquired under the purchase method of accounting. The excess of the fair value of the net assets of American Internet Technical Center, Inc. acquired was $1,470,559 and was recorded as goodwill. Goodwill is being amortized on a straight-line method over 15 years. The accumulated amortization of the excess fair value of net assets of the Company acquired over cost is $-0- at for the six months ended June 30, 1999, and the years ended December 31, 1998 and 1997. NOTE 5 - ALLOWANCE FOR DOUBTFUL ACCOUNTS Accounts receivable are recorded net of an allowance for doubtful accounts of $57,160 and $-0- and $-0- at June 30, 1999, and December 31, 1998 and 1997, respectively. NOTE 6 - CONSULTING AGREEMENT In September 1998, the Company entered into a consulting arrangement with Yankee Companies, Inc., ("Yankee") for services relating to reorganization, mergers, acquisitions and other strategic corporate development, which was formalized in a written agreement dated November 24, 1998. As compensation Yankee was granted an option to purchase up to 10% of the outstanding and reserved common stock for a maximum of $60,000. The option term commenced on the 60th day after the execution of the agreement and will terminate at the close of business on the 45th business day after the shares of common stock into which they can be exercised are registered for sale to the public under applicable federal and state securities laws. The agreement also allows the options to be exercised at a 50% discount if exercised prior to such registration. If the option had been exercised on June 30, 1999, the Company would have issued approximately 809,488 shares under this agreement for $60,000, approximately $0.07 per share. Assuming that the Company's authorized capitalization remains 20,000,000 shares of common stock, the maximum number of shares issuable under the terms of this agreement will be 2,000,000 shares for $60,000 or $0.03 per share. Had the options been exercised at the 50% discount the 809,488 shares would have been issued for $30,000 ($0.04 per share) and the 2,000,000 would have been issued for $30,000 ($0.02 per share). In addition to the stock options, Yankee is entitled the following compensation: (1) In the event that Yankee arranges or provides funding for the Company on terms more beneficial than those reflected in Company's current principal financing agreements, Yankee will be entitled, at its election, to either: (a) A fee equal to 25% of such savings, on a continuing basis; or (b) If equity funding is provided through Yankee, a discount of 10% from the bid price for the equity securities, if they are issued as free trading securities, or, a discount of 50% from the bid price for the equity securities, if they are issued as restricted securities. (2) In the event that Yankee generates business for the Company, then Yankee shall be entitled to a commission equal to 10% of the gross income derived by the Company, on a continuing basis. (3) In the event that Yankee arranges for an acquisition by the Company, then Yankee shall be entitled to compensation equal to 10% of the compensation paid. Page 15 AMERINET GROUP.COM, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS NOTE 6 - CONSULTING AGREEMENT, CONTINUED (4) In addition to all other compensation reflected in the agreement, the Company shall, after one year following execution of this agreement, pay to Yankee the sum of $5,000 per month, throughout the balance of this agreement or any renewals. NOTE 7 - RESCISSION SETTLEMENT AGREEMENT GRANVILLE-SMITH JR. RESCISSION SETTLEMENT AGREEMENT On March 22, 1999, the Company's former president, Edward Granville-Smith, rescinded by agreement, all employment, consulting and creditor agreements and the following transactions described in previous reports on 10-KSB by the Company and on previous filings with the Securities and Exchange Commission as follows: "During March of 1995, the Company's Board of Directors elected Edward Granville-Smith, then president of KSG (then operating as EGSI), to the Company's Board of Directors, after which all directors other than Mr. Granville-Smith resigned. Mr. Granville-Smith, as the sole director, elected himself as president, chief executive officer and chairman of the Company's Board of Directors. Thereafter, Mr. Granville-Smith, as the sole stockholder, officer and director of Milpitas Investors, Inc., a Delaware corporation ("Milpitas"), caused Milpitas to assign interests of four leases involving five separate leased parcels of real estate (one lease covers two parcels, four promissory notes secured by mortgages on real estate leased to third parties in each case subject to mortgages to third parties, and four demand notes with an aggregate original principal balance of approximately $160,000, to the Company in exchange for 1,616,000 shares of the Company's common stock. The demand notes are subject to an arrangement with Mr. Jerry C. Spellman (which the Company has agreed to honor) whereby payments thereon are used to repay a $100,000 loan by Mr. Spellman to a former holder. Milpitas thereafter distributed such stock to Granville-Smith Trust, which thereafter transferred to K. Walker, Ltd., a Bahamian corporation (affiliated with Mr. Granville-Smith) and Bolina Trading Registrant, a Panamanian corporation and/or the WEFT Trust, (affiliated with Jerry C. Spellman)." SPELLMAN GENERAL RELEASE On March 22, 1999, Mr. Jerry C. Spellman, on his own behalf and on behalf of Bolina Trading Registrant, S.A., a Panamanian Corporation, also known as Bolina Trading Registrant, a Panamanian Corporation, and Bolina Trading Corporation, and the WEFT Trust signed and executed for the protection of the Company a general release. NOTE 8 - LOSS FROM DISCONTINUED OPERATIONS On March 22, 1999, the Company entered into an agreement (See Note 7) that resulted in the discontinued operations of the mortgage finance business. The following is a summary of loss from operations of the discontinued mortgage finance business. 1999 1998 1997 Revenue of discontinued operations $ - $162,395 $214,001 Expenses of discontinued operations - 331,535 288,044 _________ ________ Loss from operations of discontinued operations (169,140) (74,043) Loss on disposal of discontinued operations - (377,275) - Loss from discontinued operations $ - $(546,415) $(74,043) ========== ========= Page 16 AMERINET GROUP.COM, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS NOTE 9 - STOCKHOLDERS' EQUITY During the six months ended June 30, 1999, the Company issued its common stock for cash and in exchange for services as follows: (a) On May 25, 1999, 200,000 shares of common stock were issued for services. This transaction resulted in $36,500 of professional fees expense, which was included in the statement of operations. (b) On May 25, 1999, the Company issued 47,000 shares of common stock to current and former officers and directors of the Company in order to discharge all agreements and receive a general release in favor of the Company. This transaction resulted in $11,750 of professional fees that was included in the statement of operations. (c) On June 25, 1999, as a result of the merger, the Company issued 1,486,736 shares of common stock to the shareholders of American Internet Technical Center, Inc. Additionally, 150,000 shares of common stock were issued to Yankee as compensation for the acquisition. See Note 15. Subsequent to June 30, 1999, the Company renegotiated its acquisition of American Internet Technical Center, Inc., and consequently the number of shares granted to Yankee was reduced to 55,398. (d) The Company issued 220,000 shares of common stock for cash during the six months ended June 30, 1999. The total amount obtained from the issuance was $100,000. During the year ended December 31, 1998 the Company issued its common stock for cash and in exchange for services as follows: (a) On March 26, 1998, 20,000 shares of common stock were issued at $.02 per share for services. (b) On September 9, 1998, 50,000 shares of common stock were issued at $.02 per share for services. (c) On December 9, 1998, 75,000 shares of common stock were issued at $.02 per share for services and 1,750,000 shares were issued at $.02 per share for cash. During 1997 the Company also issued stock options for 200,000 shares to the president of the corporation. The options are exercisable at $.02 per share and accordingly, no compensation expense has been recorded or will be incurred with the issuance. (d) In September 1998, the Company entered into a consulting arrangement for services relating to reorganization, mergers, acquisitions and other strategic corporate development, which was formalized in a written agreement dated November 25, 1998. As compensation the consultant was granted an option to purchase up to 10% of the outstanding and reserved common stock for a maximum of $60,000 (See Note 6). Additional paid-in capital of the Company increased by $179,572. This increase was due to a capital contribution of professional services provided to the Company during 1999 by Yankee. NOTE 10 - COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS The following schedule presents the status of costs and estimated earnings on uncompleted contracts at June 30, 1999, and at December 31, 1998 and 1997: Page 17 AMERINET GROUP.COM, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS NOTE 10, COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS The following schedule presents the status of costs and estimated earnings on uncompleted contracts at June 30, 1999, and at December 31, 1998 and 1997: 1999 1998 1997 Costs incurred on uncompleted contracts $ 5,682 $ - $ - Estimated earnings 5,743 - - ------- ----- ----- Total 11,425 - - Less; billings to date (91,983) - - -------- ----- ----- Total $ (80,558) $ - $ - Included in accompanying balance sheet under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $ - $ - $ - Billings in excess of cost and estimated earnings on uncompleted contracts (80,558) - - ------- ------ ------ Total $(80,558) $ - $ - NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of cash, accounts receivable, accounts payable and loans to stockholders approximates fair value because of their short maturities. NOTE 12 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following at June 30, 1999 and December 31, 1998 and 1997: 1999 1998 1997 Machinery and equipment $33,656 $ - $ - Less: accumulated depreciation - - - Property and equipment, net $33,656 $ - $ - Depreciation expense for the period ended June 30, 1999 and the years ended December 31, 1998, and 1997 was $0. NOTE 13 - OPERATING LEASES The Company leases its American Internet Technical Center, Inc. facility in Florida under an operating lease with no fixed term. Page 18 AMERINET GROUP.COM, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS NOTE 14 - SUPPLEMENTAL COST FLOW INFORMATION Supplemental cash flow information: 1999 1998 1997 Cash paid for interest $ - $ 127,257 $ 99,602 ===== ======= ====== Cash paid for income tax $ - $ - $ - ===== ======= ====== Non cash investing and financing activities: Issuance of common stock for acquisition $ 1,636,736 - - ========= ======= ====== Stock issued in settlement of liabilities and agreements 247,000 - - ========= ======= ====== NOTE 15 - RELATED PARTY TRANSACTIONS During the six months ended June 30, 1999, Yankee contributed professional services valued at $217,000 to the Company. The Company recognized $37,428 in compensation expenses relating to the stock options and the remaining $179,572 was contributed to the Company as additional paid-in capital. At June 30, 1999, the Company had an outstanding payable to the former shareholders of American Internet Technical Center, Inc. in the amount of $29,333. During the development stage ending June 25, 1999, the Company's corporate offices and certain management services were provided by two of the Company's shareholder/directors at no cost to the Company. On February 18, 1999, the Company issued 150,000 shares of its common stock in consideration $150,000 of legal and advisory services and related costs provided by a shareholder, and Vice President of Yankee, during the year ended December 31, 1998. The fair market value of the shares was $24,000, and the remaining $126,000 was contributed to the Company as additional paid-in captial. NOTE 16 - LEGAL MATTERS The Company is currently not a party to any material legal proceedings. Although the Company is not a party to the following proceedings directly, they involve real estate located in Kansas and Tennessee in which the Company had an interest. A) On October 20, 1997, the various parties entered into a wrap around mortgage transaction with a previous affiliate of the Company. The current tenant agreed to settle, but certain parties reserved claims against each other. The settlement calls for a payment from the current tenant of $150,000 in exchange for a transfer of a clear and free title of the underlying real estate. The mortgage holder, Fleet National Bank, received $52,000 with the balance to be held in escrow between the other parties. The Company, which was an assignee of rights to such proceeds, held the position that the ultimate disbursement of the substantial portion of these escrowed funds should be earmarked for the reduction of the wrap around mortgage and promissory note receivable. Therefore, the Company's affiliate set up an escrow receivable for $98,000 ($150,000 less $52,000). The escrow receivable was determined to be uncollectable and was expensed in the loss from discontinued operations during the year ended December 31, 1998. As a result of the divestiture of the assets involved, during March 1999 the Company's management has determined that such litigation will not have any materially adverse consequences. Page 19 AMERINET GROUP.COM, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS (B) A former affiliate of the Company was also in default of the mortgage on property located in Memphis, Tennessee because it could not satisfy the balloon payment, in the original amount of $193,580, which was due on December 31, 1996. The mortgage holder (Lutheran Brotherhood) has refused to renegotiate or extend the term of the mortgage and would not accept any further payments from the lessor of other underlying lease, other than the one made in December, 1996, which was based upon the old repayment schedule's terms. Through August, 1997, the Company as an assignee, had received funds from Sun West N.O.P., the lessor on the underlying lease, which represented the monthly rent payments made on such lease ($4,609) by the tenant of the Memphis Property. Because the mortgage holder could not accept any amortization payments on their matured loan from Sun West N.O.P., the Company was using such proceeds to reduce the related wrap mortgage receivable. (In August of 1997, the mortgage holder foreclosed on the mortgage payable, which resulted in a foreclosure sale of the Memphis property. As a result of these events of foreclosure, the Company wrote off the balance on the mortgage payable and the related wrap mortgage receivable ($51,772) and promissory note receivable ($93,686) at December 31, 1996. As a result of the divestiture of the assets involved, during March 1999, the Company's management has determined that such litigation will not have any materially adverse consequences. (C) IMPROPER ISSUANCES OF STOCK PURSUANT TO RULE 504. During 1998, the Company's transfer agent issued unregistered shares of the Company's common stock as free trading securities, purporting to rely on Commission Rule 540 Current management, upon discovery of the transactions, insisted that they be reissued as restricted securities. To date, principals and affiliates of the Registrant's transfer agent and William J. Riley, Esquire, have failed to comply with the Registrant's demand that the subject shares be legended and restricted as having been issued as unregistered securities under Section 4(2) of the Securities Act. Carrington Capital Corp., a Florida corporation ("Carrington), has returned its shares for re-legending, fully complying with the Registrant's demand. The Registrant believes that its transfer agent and Mr. Riley have violated Section 5 of the Securities Act and continue to do so, and that the Commission may at some point take action against them. In addition, it appears that Edward Granville-Smith, Jr., at the time the Registrant's sole director, may also have violated Section 5 of the Securities Act by authorizing the issuance of securities to Mr. Riley and Carrington (but not to its transfer agent) in reliance on Commission Rule 504, apparently based on Mr. Riley's legal advice. The Registrant does not believe that the Commission will initiate any action against it as a result of such violations, as, since the replacement of Mr. Granville-Smith, it has aggressively taken all steps available to it to correct such actions. (D) CERTAIN STOCK TRANSFERS FOR INADEQUATE OR NON-CONSIDERATION. In a number of instances, subscribers for stock in exchange for services did not render the required services. The Registrant's legal counsel has contacted each party involved and demanded either payment for the subject shares or their return. No response has been provided by any of the holders and the Registrant's transfer agent has been instructed not to transfer any of the securities in question as the holding period under Commission Rule 144 cannot have started for any of such holders in the absence of full payment. The Registrant has furthermore elected not to accept payment for such shares in the future at an amount less than their market price on the date payment is tendered. NOTE 17 - CONCENTRATION OF CREDIT RISK Financial instruments, which potentially expose the Company to concentrations of credit risk, as defined by Statement of Financial Accounting Standards No. 105, consist primarily of trade receivables. The Company's officers have attempted to minimize this risk by monitoring the companies for whom they provided credit. NOTE 18 - SIGNIFICANT VENDOR During 1999, American Internet Technical Center, Inc. subcontracted the production of its websites to an unrelated party. This unrelated party provides 100% of the website development. Page 20 AMERINET GROUP.COM, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS NOTE 19 - INCOME TAXES The significant components of deferred income tax expense benefit for the six months ended June 30, 1999 and the years ended December 31, 1998 and 1997, arising from net operating losses are as follows: 1999 1998 1997 Deferred tax asset: Net benefit of net operation loss $ 194,175 $ 160,976 $25,175 Less: valuation allowance (194,175) (160,976) (25,175) --------- --------- -------- Deferred tax asset $ - $ - $ - ========= ========= ======== The Company has operating loss carryforwards of approximately $570,000. The operating loss carryforwards will expire beginning in 2012. NOTE 20 - STOCK OPTIONS At June 30, 1999, the Company has granted 1,009,488 stock options to certain employees and consultants at an average exercise price of $0.07 per share. The Company has elected to account for the stock options under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Accordingly, no compensation expense has been recognized on the employee stock options. The Company accounts for stock options granted to consultants under Financial Accounting Standards Board Statement No. 123, "Accounting For Stock-Based Compensation". The Company recognized $37,498 in compensation expense for the six months ended June 30, 1999, and $-0- for the years ended December 31, 1998 and 1997. Had compensation expense for the employee stock option been determined based on the fair value of the options at the grant date consistent with the methodology prescribed under Statement of Financial Standards No. 123, "Accounting for Stock Based Compensation", the Company's net loss at June 30, 1999 would have been increased by approximately $-0-, and approximately $16,000 at December 31, 1998. The fair value of each option is estimated on the date of grant using the fair market option pricing model with the assumption: Risk-free interest rate 5.5% Expected life (years) 3 Expected volatility 9.516 Expected dividends None Page 21 AMERINET GROUP.COM, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS NOTE 20 - STOCK OPTIONS (CONTINUED) A summary of option transactions during the six months ended June 30, 1999 is shown below: Number Weighted-Average of Shares Exercise Price Outstanding at December 31, 1998 $ 786,615 $ 0.10 Granted 222,873 $ 0.07 Exercised - Forfeited - ---------- Outstanding at June 30, 1998 1,009,488 ========== Exercisable at June 30, 1999 1,009,488 ========== Available for issuance at June 30, 1999 11,905,116 ========== NOTE 21 - SUBSEQUENT EVENTS On April 26, 1999, American Internet Technical Center, Inc. was acquired by Ascot Industries, Inc., a Nevada corporation ("Ascot"), in a stock exchange agreement. Ascot exchanged 90% of its common stock for all the common shares of American Internet Technical Center Inc. On July 9, 1999, the agreement was rescinded and control of Ascot was re-acquired by the original shareholders, with American Internet Technical Center Inc. becoming a direct, wholly-owned subsidiary of the Company. On September 8, 1999, Xcel Associates, Inc. ("Xcel") purchased a warrant for $10,000, to purchase up to 1,000,000 shares of the Company's common stock at $0.75 per share. On September 27, 1999, Xcel loaned American Internet Technical Center, Inc. $75,000; the note is due on December 31, 1999. In lieu of interest, Xcel will receive 15,000 shares of the Company's common stock. Yankee pledged 35,000 shares of its common stock as collateral, and the Company has agreed to indemnify Yankee in the event that Xcel retains the collateral for non-payment of the note by American Internet Technical Center, Inc. In addition, the Company agreed to issue 3,500 shares, or the value thereof, to Yankee as consideration for the pledge of these shares. In August 1999 the Company adopted a non-qualified stock option and stock incentive plan. The Company has reserved 1,000,000 shares of common stock upon the exercise of options granted to employees of the Company. NOTE 22 - GOING CONCERN The accompanying financial statements have been prepared assuming that the organization will continue as a going concern. As discussed below, the organization has negative cash flows from operations and an accumulated deficit that raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's continued existence as a going concern will require the infusion of new businesses. It is anticipated that the Company will effect this transition through the acquisition of companies that will operate as subsidiaries. The Company's continuation is dependent upon its ability to acquire profitable businesses, control costs, and attain a satisfactory level of profitability with sufficient financing capabilities or equity investment. Page 22 AMERICAN INTERNET TECHNICAL CENTER, INC. (A WHOLLY-OWNED SUBSIDIARY OF AMERINET GROUP.COM, INC.) FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1999 Page 23 DASZKAL, BOLTON, MANELA, DEVLIN & CO. CERTIFIED PUBLIC ACCOUNTANTS A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS 2401 N.W. BOCA RATON BOULEVARD, SUITE 100 BOCA RATON, FLORIDA 33431 TELEPHONE (561) 367-1040 FAX (561) 750-3236 JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS ROBERT A. MANELA, CPA, P.A. TIMOTHY R. DEVLIN. CPA, P.A. MICHAEL S. KRIDEL, CPA, P.A. INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders American Internet Technical Center, Inc. We have audited the accompanying balance sheet of American Internet Technical Center, Inc.(a wholly-owned subsidiary of AmeriNet Group.Com, Inc.) as of June 30, 1999, and the related statement of operations, changes in stockholders' equity and cash flows for the six months ended June 30, 1999. These financial statements are the responsibility of the management of American Internet Technical Center, Inc. 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 audits 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 American Internet Technical Center, Inc. as of June 30, 1999, and the results of the operations and its cash for the six months ended June 30, 1999, 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 13 to the financial statements, the Company has suffered recurring losses from operations and has negative cash flow from operations that together raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 13. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Daszkal, Bolton, Manela, Devlin & Co., CPAs Boca Raton, Florida October 5, 1999 Page 24 AMERICAN INTERNET TECHNICAL CENTER, INC. BALANCE SHEETS JUNE 30, 1999 ASSETS Current assets: Cash $ 79,310 Accounts Receivable, net 76,663 ---------- Total Current assets 155,973 ---------- Property and equipment, net 33,656 ---------- Other assets: Goodwill, net 1,470,559 Deposits 14,492 -------------- Total other Assets 1,485,051 -------------- Total assets: $1,674,680 ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,560 Accrued expenses 16,901 Billings in excess of costs and estimated earnings on uncompleted contracts 80,558 Loan payable-stockholders 29,333 Loan payable-AmeriNet Group 100,000 -------------- Total current liabilities 234,352 ------------ Shareholders' equity Common Stock, $.001 par value, 20,000,000 shares authorized, 551,333 shares issued and outstanding 551 Additional paid in capital 1,439,777 Retained earnings - ------------- Total Stockholders' equity 1,440,328 ------------- Total liabilities and stockholders' equity $1,674,680 =============
See accompanying notes to financial statements Page 25 AMERICAN INTERNET TECHNICAL CENTER, INC. STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1999 Revenues earned $ 485,618 Cost of revenues earned 145,718 ----------- Gross profit 339,900 Operating Expenses: Selling expenses 163,702 Bad debt expense 6,717 General and administrative expenses 236,097 ----------- Total operating expenses $ 406,516 ----------- Net Loss $ (66,616) ===========
See accompanying notes to financial statements Page 26 AMERICAN INTERNET TECHNICAL CENTER, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY SIX MONTHS ENDED JUNE 30, 1999 Additional No. of Common Paid-in Retained Shares Stock Capital Earnings Total Balances, January 1, 1999 200 $ 200 $ - $ 26,184 $ 26,384 2666.66 for one stock split 533,133 333 (333) - - --------- --------- ---------- ------------ ----------- Balance, January 1, 1999 533,333 533 (333) 26,184 26,384 Issuance of common stock for cash, net of issuance costs 18,000 18 9,982 - 10,000 Investment by Parent - - 1,430,128 40,432 1,470,560 Net loss, June 30 - - - (66,616) (66,616) --------- --------- ---------- ------------ ------------- Balance, June 30, 1999 551,333 $ 551 $1,439,777 $ - $ 1,440,328
See accompanying notes to financial statements Page 27 AMERICAN INTERNET TECHNICAL CENTER, INC. STATEMENT OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1999 Cash flows from operating activities: Net (loss) $(66,616) Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amoritization 3,125 Bad debts expenses 11,228 (Increase) decrease in: Accounts receivables (18,987) Prepaid expenses 3,161 Deposits 1,600 Increase (decrease) in: Accounts payable (21,181) Accured expenses 8,795 Billings in excess of costs and estimated earnings on uncompleted contracts 39,006 ------------ Net cash (used) by operating activities (39,869) Cash flows used by investing activities: Purchase of property and equipment (14,515) ------------ Cash flows from financing activities: Issuance of common stock, net of issuance cost 10,000 Loans from stockholders 20,000 Loan from AmeriNet Group.com, Inc. 100,000 ------------ Net cash provided by financing activities 130,000 Net increase in cash 75,616 Cash at beginning of year 3,694 ----------- Cash at end of year $ 79,310 =========== Additional cash payment information: Interest paid $ - Income taxes $ -
See accompanying notes to financial statements Page 28 AMERICAN INTERNET TECHNICAL CENTER, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS American Internet Technical Center, Inc. (the "Company"), a Florida corporation, was established on April 15, 1998, to design and host websites and provide e-commerce programs, marketing and other Internet services. Hosting services, including search engine registrations, are typically six month or one year contracts. The company is a wholly-owned subsidiary of AmeriNet Group.Com, Inc. (see Note 14). NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all cash and other demand deposits to be cash and cash equivalents. As of June 30, 1999, the Company had no cash equivalents. PROPERTY AND EQUIPMENT Property and equipment are stated at cost and are being depreciated using the straight-line method over the estimated useful lives of five to seven years. REVENUE AND COST RECOGNITION Revenues from long-term contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract (i.e., cost-to-cost method). This method is used because management considers total cost to be the best available measure of progress on the contracts. Because of inherent uncertainties in estimating cost, it is possible that the estimates used will change within the near term. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as subcontractors, equipment rental, and supplies and, certain general administrative expenses are charged to expense. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. . The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts," represents billings in excess of revenues recognized. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. ADVERTISING Advertising costs are expensed when incurred. The advertising cost incurred for the six months ended June 30, 1999 was $12,125. Page 29 AMERICAN INTERNET TECHNICAL CENTER, INC. NOTES TO FINANCIAL STATEMENTS NOTE 3 - COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS The following schedule presents the status of costs and estimated earnings on uncompleted contracts at June 30, 1999. Costs incurred on uncompleted contracts $ 5,682 Estimated earnings 5,743 Total 11,425 Less; billings to date (91,983) Total $(80,558) Included in accompanying balance sheet under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $ - Billings in excess of cost and estimated earnings on uncompleted contracts (80,558) Total $(80,558) NOTE 4 - AMORTIZATION OF GOODWILL Goodwill represents the amount by which the purchase price of business acquired exceeds the fair market value of the net assets acquired under the purchase method of accounting. The excess of the fair value of the net assets of AITC acquired was $1,470,559, and was recorded as goodwill. Goodwill is being amortized on a straight-line method over 15 years. The accumulated amortization of the excess fair value of net assets of the Company acquired over cost is $-0- at the six months ended June 30, 1999. NOTE 5 - ALLOWANCE FOR DOUBTFUL ACCOUNTS Accounts receivable are recorded net of an allowance for doubtful accounts of $57,160 at June 30, 1999. NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of cash, accounts receivable, accounts payable and loans to stockholders approximates fair value because of their short maturities. Page 30 AMERICAN INTERNET TECHNICAL CENTER, INC. NOTES TO FINANCIAL STATEMENTS NOTE 7 - RELATED PARTY TRANSACTIONS At June 30, 1999, the Company had an outstanding payable to the stockholders in the amount of $29,333. The transactions involving the stockholders/officers are summarized below: Balance at December 31, 1998 $ 9,333 Advances from stockholders 20,000 Balance at June 30, 1999 $ 29,333 NOTE 8 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following at June 30, 1999: Machinery and equipment $34,597 Furniture and fixtures 6,114 Total property and equipment $40,711 Less: accumulated depreciation (7,055) Property and equipment, net $33,656 Depreciation expense for the six months ended June 30, 1999, was $3,125. NOTE 9 - OPERATING LEASES The Company leases its facilities in Florida under an operating lease with no fixed term. Total lease expense for the six months ended June 30, 1999 was $11,934. NOTE 10 - CONCENTRATION OF CREDIT RISK Financial instruments, which potentially expose the Company to concentrations of credit risk, as defined by Statement of Financial Accounting Standards No. 105, consist primarily of trade receivables. The Company officers have attempted to minimize this risk by monitoring the companies for whom they provided credit and also avail themselves of the lien process for contracts. NOTE 11 - SIGNIFICANT VENDOR During 1999, the Company subcontracted the production of its websites to an unrelated party. This unrelated party provides 100% of the website development to the company. NOTE 12 - INCOME TAXES The Company has elected to be treated as an S Corporation for Federal and State income tax purposes. Under this election, all taxable income, losses and credits pass through to the individual stockholders and are reflected on their individual income tax returns. Consequently, no provision for income taxes has been provided by the corporation. The financial statements reflect earnings on the percentage of completion method of accounting whereas the completed contract method is used for income tax purposes. Page 31 AMERICAN INTERNET TECHNICAL CENTER, INC. NOTES TO FINANCIAL STATEMENTS NOTE 13 - STOCKHOLDERS' EQUITY The Company raised $20,000 through a private placement offering of common stock during the period January 1, 1999, through March 31, 1999. On April 26, 1999, the Company was acquired by Ascot Industries, Inc., a Nevada corporation ("Ascot"), in a stock exchange agreement. Ascot exchanged 90% of its common stock for all the common shares of American Internet. On July 9, 1999, this agreement was rescinded and control of AITC was re-acquired by AmeriNet Group.com, Inc., as the successor in interest to the original stockholders. NOTE 14 - ACQUISITION On June 25, 1999, AmeriNet Group.com, Inc. (AmeriNet) acquired all of the outstanding common stock of the Company; for accounting purposes the transaction was effective June 30, 1999. As initial consideration, AmeriNet issued an aggregate of 1,486,736 shares of common stock to the stockholders of the Company. Under the terms of the earn out provisions of the acquisition agreement, AmeriNet will issue shares of common stock over a six-year period beginning June 30, 2000, contingent upon the operating performance of AITC. The maximum number of shares that could be issued under this agreement is 5,250,000 shares. Such amounts will be accounted for as purchase price adjustments. The acquisition was recorded using the purchase method of accounting. The results of operations since the date of acquisition, June 30, 1999, for accounting purposes, will be included in the consolidated statements of operations beginning July 1, 1999. Goodwill of $1,470,559 was recorded in this transaction and is being amortized over 15 years using the straight-line method. On the date of acquisition, the Company's tax status changed to a regular corporation from an S-corporation. NOTE 15 - GOING CONCERN The accompanying financial statements have been prepared assuming that the organization will continue as a going concern. As discussed below, the organization has negative cash flows from operations and an accumulated deficit that raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The company's continued existence as a going concern will require new lines of business. It is anticipated that the Company will effect this transition through the acquisition of companies that will operate as subsidiaries of the parent company, AmeriNet Group.com, Inc. The Company's continuation is dependent upon its ability to acquire profitable businesses, control costs, and attain a satisfactory level of profitability with sufficient financing capabilities or equity investment. Page 32 c) PRO FORMA AMERINET GROUP.COM, INC. PRO FORMA FINANCIAL STATEMENTS On June 25, 1999, AmeriNet Group.com, Inc., acquired all of the outstanding common stock of American Internet Technical Center, Inc., ('AITC'). For accounting purposes, the acquisition was effective June 30, 1999. The following Pro Forma Combined Balance Sheet for the Registrant has been prepared by management of the Registrant based upon the balance sheets of the Registrant as of December 31, 1998. The Pro Forma Combined Statement of Operations was prepared based upon the statement of operations for the Registrant for the twelve months ended December 31, 1998, and the six months ended June 30, 1999. The pro forma statement of operations also includes AITC's statement of operations for the twelve months ended December 31, 1998, and the six months ended June 30, 1999. The pro forma statements give effect to the transaction under the purchase method of accounting and the assumptions and adjustments in the accompanying notes to pro forma combined financial statements. The pro forma combined balance sheet gives effect to the acquisition as if it had occurred as of December 31, 1998. The pro forma combined statement of operations for the year ended December 31, 1998, gives effect to the acquisition as if it had occurred as of January 1, 1997. The pro forma combined statement of operations for the six months ended June 30, 1999, gives effect to the acquisition as if it had occurred as of January 1,1999. The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable. The pro forma combined financial statements do not purport to represent what the combined companies' financial position or results of operations would actually have been had the acquisition occurred on such date or as of the beginning of the period indicated, or to project the combined companies' financial position or results of operations for any future period. Page 33 AmeriNet Group.com, Inc. Pro Forma Combined Balance Sheets December 31, 1998 (Unaudited) ASSETS American AmeriNet Internet Pro Forma December 31, 1998 December 31, 1998 Total Adjustments Combined Current assets: Cash 13,182 3,694 16,876 16,876 Accounts Receivable 0 68,903 68,903 68,903 Prepaid and other assets 0 3,161 3,161 3,161 --------------------------------------------------------------------------------- Total Current assets 13,182 75,758 88,940 88,940 Property and equipment, net 0 22,266 22,266 22,266 --------------------------------------------------------------------------------- Other assets: Deposits 16,092 16,092 16,092 Goodwill, net 0 0 0 (a) 1,413,942 1,413,942 --------------------------------------------------------------------------------- Total other Assets 0 16,092 16,092 1,413,942 1,430,034 --------------------------------------------------------------------------------- TOTAL ASSETS: 13,182 114,116 127,298 1,413,942 1,541,240 ================================================================================= Current liabilities: Accounts payable 151,661 28,741 180,402 180,402 Accrued expenses 0 8,106 8,106 8,106 Billings in excess of costs and profits 0 41,552 41,552 41,552 Loans to Stockholders 9,333 9,333 9,333 ---------------------------------------------------------------------------------- Total current liabilities 151,661 87,732 239,393 239,393 Stockholders equity (deficit) Common stock 59,911 200 60,111 (a) 14,201 74,312 Additional paid in capital 2,930,395 0 2,930,395 1,425,925 4,356,320 Retained earnings/deficit (3,128,785) 26,184 (3,102,601) (a) (26,184) (3,128,785) ------------------------------------------------------------------------------ Total stockholders' equity (deficit) (138,479) 26,384 (112,095) 1,413,942 1,301,847 Total liabilities and stockholders' equity 13,182 114,116 127,298 1,413,942 1,541,240 ====================================================================================
1. The Pro Forma Balance Sheet at December 31, 1998 is based upon the balance sheets of the Registrant and American Internet as of December 31, 1998 (a) The purchase price for the acquisition of all common stock of American Internet was 1,486,736 shares at $0.88 per share goodwill of $1,413,942 would have been recorded if the acquisition had taken place on December 31, 1998. Page 34 AmeriNet Group.com, Inc. Pro Forma Combined Statement of Income For the twelve months ended December 31, 1998 (Unaudited) American AmeriNet Internet Pro Forma December 31, 1998 December 31, 1998 Total Adjustments Combined Revenues earned 0 784,463 784,463 784,463 Costs and revenues earned 0 137,752 137,752 137,752 ------------------------------------------------------------------------------- Gross profit 0 646,711 646,711 646,711 Selling expenses 0 323,762 323,762 323,762 Bad debt expenses 0 45,932 45,932(b) 94,263 140,195 General and administrative expenses 0 132,517 132,517 132,517 ------------------------------------------------------------------------------- Total operating expenses 0 502,211 502,211 94,263 596,474 Loss from operations 0 144,500 144,500 (94,263) 50,237 Other income (expenses): Loss from discontinued operations (562,415) 0 (562,415) (562,415) -------------------------------------------------------------------------------- Total other income (expenses) (562,415) 0 (562,415) 0 (562,415) -------------------------------------------------------------------------------- Net loss (562,415) 144,500 (417,915) (94,263) (512,178) ================================================================================ Basic net loss per share (0.13) (0.09) Weighted average shares outstanding 4,174,778 5,811,514 ============ ==========
1. The Pro Forma Statement of Operations for the year ended December 31, 1998 is based upon the twelve months ended December 31, 1998 for the Registrant and American Internet and gives effect to the acquisition as if it had occured on January 1, 1998. (b) Amount represents the amortization of goodwill of $1,413,942 over 15 years using the straight line method. Page 35 AmeriNet Group.com, Inc. Pro Forma Combined Statement of Income For the six months ended June 30, 1999 (Unaudited) AmeriNet Group American Internet Six months ended six months ended Pro Forma June 30, 1999 June 30, 1999 Total Adjustments Combined Revenues earned 0 485,618 485,618 485,618 Costs and revenues earned 0 145,718 145,718 145,718 ------------------------------------------------------------------------------- Gross profit 0 339,900 339,900 339,900 Operating expenses: Selling expenses 163,702 163,702 163,702 Bad debt expenses 6,717 6,717 6,717 General and administrative 0 expenses 256,218 236,097 492,315(c) 49,019 541,334 ------------------------------------------------------------------------------- Total operating expenses 256,218 406,516 662,734 49,019 711,753 -------------------------------------------------------------------------------- Net loss (256,218) (66,616) (322,834) (49,019) (371,853) ================================================================================ Basic net loss per share (0.03) (0.05) Weighted average shares outstanding 8,094,884 8,094,884 ============== ================
1. The Pro Forma Statement of Operations for the six months ended June 30, 1999 of the Registrant and six months ended June 30, 1999 of American Internet. The Pro Forma gives effect to the acquisition as if it had occured on December 31, 1998. (c) Amount represents the amortization of goodwill of $1,470,559 over 15 years using the straight line method. Page 36 ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-B The exhibits listed below and designated as filed herewith (rather than incorporated by reference) follow the signature page in sequential order. Only the exhibits listed are being amended by this report. All other exhibits filed in the prior report or reports remain unchanged. DESIGNATION PAGE OF EXHIBIT NUMBER AS SET FORTH OR SOURCE OF IN ITEM 601 OF INCORPORATION REGULATION S-B BY REFERENCE DESCRIPTION (23) Consent of experts and counsel .1 39 Consent of Baum & Company re audit for year ending December 31, 1997 .2 40 Consent of Bowman & Bowman re audit for year ending December 31, 1998 .3 41 Consent of Daszkal, Bolton & Manela, P.A. Certified Public Accountants re audit for short year ending June 30, 1999 - ------- * Not applicable ** None Page 37 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AMERINET GROUP.COM, INC. December 13, 1999 BY: /S/ MICHAEL HARRIS JORDAN /s/ Michael Harris Jordan President & Director In accordance with the Exchange Act, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated: Signature Date Title /s/Michael H. Jordan/s/ December 13, 1999 President, Chief Executive Officer, Director, Executive Committee /s/G. Richard Chamberlin/s/ December 13, 1999 General Counsel, Director, Executive Committee /s/Penny L. Adams Field December 13, 1999 Director /s/Anthony Q. Joffe /s/ December 13, 1999 Director, Audit Committee, Executive Committee /s/ Bruce J. Gleason /s/ December 13, 1999 Director /s/ Saul B. Lipson December 13, 1999 Director, Audit Committee Chair, Executive Committee /s/ Edward Dmytryk December 13, 1999 Director /s/ Michael A. Caputa December 13, 1999 Director /s/ Dennis A. Berardi December 13, 1999 Director /s/ Carol A. Berardi December 13, 1999 Director Page 38 EX-23.1 2 BAUM & COMPANY CONSENT Baum & Company, P.A. 1515 University Drive-Suite 209 Coral Springs, Florida 33071 October 15, 1999 To the Board of Directors AmeriNet Group.com, Inc. Equity Growth Systems, Inc. 902 Clint Moore Road, Suite 136C Boca Raton, Florida 33487 We consent to the use of our audit report on financial statements of Equity Growth Systems, Inc. for the year ended December 31, 1997 in the form 10-KSB for the year ended June 30, 1999 dated October 18, 1999. /s/ Baum & Company, P.A. Baum & Company, P.A. Page 39 EX-23.2 3 BOWMAN & BOWMAN CONSENT BOWMAN & BOWMAN, P.A. Certified Public Accountants 1705 Colonial Blvd., Suite D-l Fort Myers, Florida 33907 (941) 939-2301 (941) 939-1297 (Fax) To the Board of Directors AmeriNet Group.com, Inc. Formerly Equity Growth Systems, inc. (A Development Stage Company) 3821-B Tamiami Trail, Suite 201 Port Charlotte, Florida 33952 We consent to the use of our audit report dated April 23, 1999, except Note 2 and Note 5B(b) as to which date is November 10, 1999 on the financial statements of Equity Growth Systems, Inc. for the year ended December 31, 1998 in their current SEC filing dated on or about this eighth day of December, 1999. /s/ Larry Bowman Bowman & Bowman, P.A. Certified Public Accountants Fort Meyers, Florida December 8, 1999 Page 40 EX-23.3 4 CONSENT OF DASZKAL, BOLTON, MANELA & DEVLIN DASZKAL BOLTON MANELA DEVLIN & CO. CERTIFIED PUBLIC ACCOUNTANTS A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS 2401 N.W. BOCA RATON BOULEVARD, SUITE 100 BOCA RATON, FLORIDA 33431 TELEPHONE (561) 367-1040 FAX (561) 750-3236 JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS ROBERT A. MANELA, CPA, P.A. TIMOTHY R. DEVLIN. CPA, P.A. MICHAEL S. KRIDEL, CPA CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT We hereby consent to the use of our audit report dated October 5, 1999 in the form 10-KSB/A of AmeriNet Group.com, Inc.(f/k/a Equity Growth Systems, inc.) and subsidiary, for the six months ended June 30, 1999. Boca Raton, Florida December 10, 1999 /s/ Daszkal Bolton Manela Devlin & Co. Daszkal, Bolton, Manela, Devlin & Co DASZKAL BOLTON MANELA DEVLIN & CO. CERTIFIED PUBLIC ACCOUNTANTS A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS 2401 N.W. BOCA RATON BOULEVARD, SUITE 100 BOCA RATON, FLORIDA 33431 TELEPHONE (561) 367-1040 FAX (561) 750-3236 JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS ROBERT A. MANELA, CPA, P.A. TIMOTHY R. DEVLIN. CPA, P.A. MICHAEL S. KRIDEL, CPA, P.A. CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT We hereby consent to the use of our audit report dated October 5, 1999 in the form 10-KSB of American Internet Technical Center, Inc. for the six months ended June 30, 1999. Boca Raton, Florida October 21, 1999 /s/ Daszkal Bolton Manela Devlin & Co. Daszkal, Bolton, Manela, Devlin & Co Page 42 EX-27 5 FINANCIAL DATA SCHEDULE
5 6-MOS JUN-30-1999 JUN-30-1999 79,021 0 133,822 57,160 0 155,683 33,656 0 1,674,390 137,440 0 0 0 80,948 1,456,002 1,674,390 0 0 0 256,218 0 0 0 0 0 0 0 0 0 (256,218) (0.04) (0.04)
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