SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ___________
Commission file number: 0-26886
INTERNET HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
UTAH 13-3758042
(State or other jurisdiction of incorporation) (IRS Employer
Identification Number)
16 Curzon Street, Mayfair, London, W1Y 7FF
United Kingdom (Zip Code)
(Address of principal executive offices)
Registrant's Telephone Number, Including Area Code: 011 44 171 409 1600
Securities registered under Section 12(b) of the Exchange Act:
Title of each class registered: None Name of each exchange on
which registered: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.001
------------------------------
(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. Yes [X] No [_]
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is 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]
<PAGE>
State the issuer's revenues for its most recent fiscal year: $10,971
State the aggregate market value of the voting and non-voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days. The aggregate market value of the voting and non-voting stock
held by non-affiliates of the registrant is approximately $106,575,345 as of
March 24, 2000.
State the number of shares outstanding of each of the registrant's classes of
common equity as of the latest practicable date: 16,559,470 shares of the
registrant's common stock are issued and outstanding as of March 24, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424 (b) or
(c) of the Securities Act of 1933. None
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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TABLE OF CONTENTS
Page
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PART I
Item 1. Description of Business........................................... 4
Item 2. Description of Property........................................... 7
Item 3. Legal Proceedings................................................. 7
Item 4. Submission of Matters to a Vote of Security Holders............... 7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.......... 7
Item 6. Management's Discussion and Analysis or Plan of Operation......... 9
Item 7. Financial Statements.............................................. 10
Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.......................................... 11
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons...... 11
Item 10. Executive Compensation............................................ 13
Item 11. Security Ownership of Certain Beneficial Owners and Management.... 13
Item 12. Certain Relationships and Related Transactions.................... 15
Item 13. Exhibits and Reports on Form 8-K.................................. 15
Forward-Looking Statements
This report contains forward-looking statements. The forward-looking statements
include all statements that are not statements of historical fact. The
forward-looking statements are often identifiable by their use of words such as
"may," "expect," "believe," "anticipate," "intend," "could," "estimate," or
"continue," "plans" or the negative or other variations of those or comparable
terms. Our actual results could differ materially from the anticipated results
described in the forward-looking statements. Factors that could affect our
results include, but are not limited to, those discussed in Item 6,
"Management's Discussion and Analysis or Plan of Operation" and included
elsewhere in this report.
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PART I
Item 1. Description of Business.
A. Business Development
Background
Internet Holdings, Inc. is a Utah Corporation which was incorporated on
March 8, 1977 (hereinafter, "Internet Holdings" or "the Company") under the name
Trolley Enterprises, Inc. The Company is authorized to issue 50,000,000 shares
of common stock, par value $0.001 per share. As of March 24, 2000, 16,559,470
shares of common stock and warrants to purchase 1,000,000 shares of common stock
were issued and outstanding.
Internet Holdings has not been subject to bankruptcy, receivership or any
similar proceedings.
Internet Holdings maintains its corporate offices at 16 Curzon Street,
Mayfair, London, United Kingdom W1Y 7FF.
Acquisition and Divestiture of Chiron Systems Ltd.
Pursuant to an acquisition agreement dated May 22, 1997, the Company
acquired Chiron Systems Ltd. ("Chiron"), a developer of Integrated Services
Digital Network (ISDN) related products. Subsequently, the Company decided to
divest Chiron, such divestiture taking effect as of December 19, 1997. As a
result of the divestiture of Chiron, the Company was unable to deliver products
and technology as contracted under agreements with its joint venture partners.
This failure led to legal proceedings against the Company. In November 1999, the
Company settled these legal proceedings and entered into a comprehensive
settlement agreement. Under the settlement agreement the Company agreed not to
pursue claims against certain assets purchased from the joint venture partners,
the joint venture partners agreed not to pursue claims against the Company for
alleged negligence and breach of contract and the Company was released from
debts totaling approximately $300,000. This resulted in a net write off to the
Company of $1.9 million all of which was recorded on the books of the
predecessor prior to the December 22, 1999 reverse acquisition.
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Reverse Acquisition of the Company by Fairfax Equity Ltd.
On October 27, 1999, the Company entered into a conditional Acquisition
Agreement and Plan of Reorganization (the "Reorganization Agreement") with
Fairfax Equity Ltd. ("Fairfax"), a holding company, and the stockholders of
Fairfax whereby the Company would acquire all of the issued capital stock of
Fairfax. The acquisition was contingent upon the completion by the Company of
its audited financial statements, the filing of all outstanding reports required
by the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
settlement of all outstanding legal proceedings. On December 22, 1999, all the
conditions precedent to the Reorganization Agreement were met by the Company
and, accordingly, the Company and Fairfax proceeded to implement the
transactions contemplated by the Reorganization Agreement. Pursuant to this
implementation, the Company issued a total of 8,640,000 shares of common stock
to the shareholders of Fairfax in order to acquire 100% of the issued capital
stock of Fairfax. These shares accounted for 80.3% of the issued share capital
of the Company. The shareholders of Fairfax as a group thus acquired a majority
of the shares issued and STG Holdings Plc ("STG"), the major shareholder of
Fairfax, controlled 60.2% of the Company. STG is a publicly quoted English
company whose shares are traded on the London Stock Exchange OFEX market.
Simultaneously with the closing of the Reorganization Agreement, Stefan
Allesch-Taylor, the Company's present President, Chief Executive Officer and
Director, Nicholas Thistleton, the Company's present Chief Technical Officer and
Director, and Sir Euan Calthorpe, the Company's present Director were appointed
to the Board of Directors.
B. Current Business Operations
General
Internet Holdings intends to make strategic acquisitions in Internet and
Internet related businesses in Europe, the United States and other regions as
these markets expand. These acquisitions will be effected through the purchase
of both minority and majority interests, joint ventures, partnerships and
alliances. It is anticipated that the Company will take an active role in the
management and development of the acquired companies, adding financial and
management resources to the companies in which it invests. It is anticipated
that Internet Holding's collaborative network will enable a mutual leveraging of
resources that will enhance the long-term market potential of its companies and
create value for the Company's shareholders. To date, Internet Holdings has
raised $4.95 million, net of expenses, pursuant to a Regulation S offering of
5,000,000 common shares to pursue its investing strategy.
Competition
The Company will face competition from other capital providers including
publicly-traded Internet companies, venture capital companies and large
corporations. Many of these competitors have greater financial resources and
brand name recognition than the Company. These competitors may limit the
Company`s opportunity to acquire interests in other attractive Internet and
Internet related companies. If the Company cannot acquire interests in such
companies on reasonable terms, the business strategy of creating a collaborative
network of Internet companies may not succeed.
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The Company's Internet investments will compete in the electronic
technology and Internet service arenas, specifically e-commerce businesses. The
market for Internet products and services is rapidly evolving and highly
competitive. Although Internet Holdings believes that the diverse segments of
the Internet market will provide opportunities for more than one supplier of
products and services similar to those of the Company's prospective Internet
investments, it is possible that a single supplier may dominate one or more
market segments. The Company believes the principal competitive factors in this
market are name recognition, performance, ease of use, variety of value-added
services, functionality and features and quality of support. It is anticipated
that competitors will include a wide variety of companies and organizations,
including Internet software, content, service and technology companies,
telecommunication companies, cable companies and equipment/technology suppliers.
Once fully operational, a number of the Company's competitors will have greater
financial, technical and marketing resources than the Company.
Employees
As of March 24, 2000, Internet Holdings had 5 employees, of which all are
full-time employees.
C. Offer to Acquire Radical Technology Plc
On March 3, 2000, the Company offered to acquire all of the issued and
outstanding shares of Radical Technology Plc ("RadTech") in a stock-for-stock
transaction valued at approximately $12 million (the "Offer"). Pursuant to the
Offer, Internet Holdings has offered 50 shares of common stock of the Company
(the "Exchange Stock") for every 143 shares of capital stock of RadTech.
Assuming full acceptance of the offer, 1,281,714 shares of the Company will be
issued then constituting approximately 7.7% of the Company's outstanding shares.
The Exchange Stock will not be registered under the Securities Act of 1933, as
amended (the "Securities Act"). However, as a condition of the Offer, within
twelve months from the date of issue of the Exchange Stock, the Company shall
file a registration statement with the Securities and Exchange Commission (the
"Commission") covering the Exchange Stock. Furthermore, during this twelve month
period, the Company shall not file a registration statement covering any shares
held by STG Holdings Plc, the 39% shareholder of the Company. To date,
shareholders holding approximately 57% of the RadTech shares have irrevocably
undertaken to accept the Offer. However, no assurance can be given that the
transactions contemplated by the Offer will close.
RadTech is a publicly quoted English company whose shares are traded on the
London Stock Exchange OFEX market. RadTech is a computer software developer,
business systems integrator and package software supplier. The majority of its
current products and services are Internet/Intranet related, primarily utilizing
Microsoft(R) development tools. The Company's management believes that the
acquisition of RadTech represents the first step in its strategy of investing
in, partnering and acquiring businesses involved in the Internet, business
e-commerce and telephony. Furthermore, management expects that RadTech will form
the core technical base in Europe for the Company's Internet, e-commerce and
software development activities and the experience and expertise of the
management team at RadTech will substantially assist the Company in achieving
its goals.
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Item 2. Description of Property.
The Company maintains its corporate offices at 16 Curzon Street, Mayfair,
London, United Kingdom W1Y 7FF (the "Office"). The Office is comprised of 3,174
square feet. The lease expires June 24, 2006. The Company is currently exploring
the prospect of leasing additional office space in New York, Paris and Munich.
Item 3. Legal Proceedings.
No material legal proceedings to which the Company (or any officer or
director of the Company, or any affiliate or owner of record or beneficially of
more than five percent of the common stock, to management's knowledge) is a
party or to which the property of the Company is subject is pending, and no such
material proceeding is known by management of the Company to be contemplated.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the fourth
quarter of 1999.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
Market Information
As of July 22, 1977, the prices for the shares of the Company's common
stock have been quoted on the "OTC-Bulletin Board," maintained by the National
Association of Securities Dealers, Inc. The common stock is presently trading
under the symbol "HTTP".
The following table sets forth the range of high and low bid information
for Internet Holdings common stock for each quarter within the last two fiscal
years. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions:
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1999 1998
Bid Prices($) Bid Prices($)
-------------------- --------------------
Period High Low High Low
- ------ ------- ------- ------ -------
First Quarter............. 1.75 0.1875 0.3125 0.09375
Second Quarter............ 0.5 0.25 0.3125 0.25
Third Quarter............. 0.40625 0.15625 0.3125 0.15625
Fourth Quarter............ 4.75 0.15625 1.125 0.0625
Holders
On March 24, 2000, there were 790 holders of record of Internet Holdings
common stock.
Dividends
The Company has never declared or paid cash dividends on its common stock.
The Company currently intends to retain earnings, if any, to support its growth
strategy and does not anticipate paying cash dividends in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of the
Company's Board of Directors after taking into account various factors,
including the Company's financial condition, operating results, current and
anticipated cash needs and plans for expansion.
Recent Sales of Unregistered Securities
On October 25, 1999, the Company raised $50,000 through the issuance of a
Convertible Loan Note (the "Note") to Palamon (Gestion) S.A. The Note was
offered pursuant to an exemption from registration under Regulation S
promulgated under the Securities Act. The purpose of this funding was to enable
the Company to file all outstanding reports required by the Exchange Act, and to
search for suitable acquisition candidates in the Internet related fields. The
Note bore interest at 5.5% per annum. The Note was converted by the Note holder
into 200,000 shares of common stock in the Company at the rate of $0.25 per
share on January 24, 2000.
On December 22, 1999, the Company entered into an annual consulting
agreement with Oxford Capital, Inc. Payment was made by the issuance of 600,000
shares of common stock at the weighted average rate of $0.375 per share. Such
shares were issued pursuant to an exemption from registration under Section 4(2)
of the Securities Act.
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On January 6, 2000, the Company entered into an underwriting agreement (the
"Underwriting Agreement") with Panther Capital Ltd. ("Panther") to sell shares
of common stock and warrants of the Company pursuant to an exemption from
registration under Regulation S promulgated under the Securities Act. Under the
Underwriting Agreement, the Company sold 5,000,000 shares of its common stock,
par value $0.001 (the "Panther Shares"), at a price of $1.00 per share to
certain sub-underwriters named in the Underwriting Agreement, for whom Panther
acted as lead underwriter. In consideration for such underwriting, Panther
received warrants to purchase up to 1,000,000 shares of common stock of the
Company (the "Warrants"). The Warrants are exercisable at $1.00 per share if
exercised within one year of the date of the first closing of the Agreement
which occurred on January 28, 2000 (the "First Closing") and at a price of
$10.00 per share if exercised within two years of the date of the First Closing.
Warrants which have not been exercised before the second anniversary of the
First Closing will expire automatically.
Under the Underwriting Agreement, a registration statement covering 25% of
the Panther Shares will be prepared by the Company under the Securities Act and
will be filed with the Commission within 90 days of the completion of the
offering of the Panther Shares (the "Registration Statement"). Prior to and
during the period of 120 days after the Registration Statement is declared
effective by the Commission, the Company has agreed not, without prior written
consent of Panther, to issue, offer, sell, or grant options to purchase or
otherwise dispose any of the Company's equity securities or any other securities
convertible into or exchangeable for its common stock or other equity security,
other than pursuant to transactions already disclosed to Panther. Additionally,
for a period of 180 days after the first date that any of the Panther Shares are
released for sale to the public, the officers and directors of the Company have
agreed not to directly or indirectly sell or offer to sell or otherwise dispose
any of their shares of common stock of the Company or any right to acquire any
such shares without the prior written consent of Panther.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation
The Company intends to make strategic acquisitions in Internet and Internet
related businesses in Europe, the United States and other regions as these
markets expand. These acquisitions will be effected through the purchase of both
minority and majority interests, joint ventures, partnerships and alliances. It
is anticipated that the Company will provide value added services for portfolio
companies including, technical resources, incubator facilities, pan-European
localization, management team recruitment and appointment of a board of
directors, and uniting them into a network of e-commerce companies. It is
anticipated that Internet Holding's collaborative network will enable a mutual
leveraging of resources that will enhance the long-term market potential of its
companies and create value for the Company's shareholders.
On March 3, 2000 the Company offered to acquire all of the issued and
outstanding shares of Radical Technology Plc in a stock-for-stock transaction
valued at approximately $12 million. The Company has received irrevocable
acceptances from 57% of RadTech outstanding shares. RadTech's core products
include: ReAD (Rapid e-Business Application Development) - a unique method that
helps clients realize the benefits of e-business initiatives most effectively;
RADNeT - a software framework with multi-level security for building,
integrating and presenting Internet, Intranet and Extranet solutions; PLANNeT -
a web-based multi-project management tool; DOCUNeT - a knowledge management
system and Intranet in a Box - an easy intranet deployment tool. RadTech will
provide part of a strategic integration to enhance the incubator infrastructure.
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
The Company had no operating activities in 1999. As of December 31, 1999,
Internet Holdings had current assets of $702,068.
At this time the Company had outstanding obligations of $135,591, of which
$50,000 was a convertible loan note that was exercised on January 24, 2000. The
purpose of the loan note was to enable the Company to file all outstanding
reports required by the Exchange Act and to search for suitable acquisition
candidates in the Internet related fields. The loan note bore interest at 5.5%
per annum
Internet Holdings is the successor consolidated entity formed by the
reverse acquisition on December 22, 1999 by Fairfax Equity, Ltd. of Internet
Holdings, Inc. Pursuant to the reverse acquisition, Fairfax's shareholders were
issued 8,640,000 shares of the Company, then constituting 80.3% of outstanding
common shares. At the time of acquisition, the majority stockholder of Fairfax
represented the value of Fairfax`s cash and investment assets to be not less
than $2,160,000. In the event that when the investment is realized, the net
proceeds, together with cash at the date of acquisition, total less than
$2,160,000, the majority stockholder of Fairfax has guaranteed to contribute
additional cash to bring the total amount up to $2,160,000.
On January 6, 2000, the Company entered into an underwriting agreement with
Panther Capital Ltd. to sell shares of common stock and warrants of the Company
pursuant to an exemption from registration under Regulation S promulgated under
the Securities Act. Under this agreement, the Company sold 5,000,000 shares of
its common stock at a price of $1.00. The Warrants are exercisable at $1.00 per
share if exercised within one year of the date of the first closing of the
Agreement which occurred on January 28, 2000 (the "First Closing") and at a
price of $10.00 per share if exercised within two years of the date of the First
Closing. Warrants which have not been exercised before the second anniversary of
the First Closing will expire automatically.
Further funding will be necessary for the Company to continue its plan of
operations.
Item 7. Financial Statements.
In response to this Item, the information contained on pages 18 to 25 of
this annual report for the year ended December 31, 1999 is incorporated herein
by reference.
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Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons.
The following table sets forth the current officers and directors of
Internet Holdings:
Name Age Position
- ---- --- --------
Stefan Allesch-Taylor 30 President, Chief Executive Officer and
Director
Jason E. Forsyth 29 Chief Financial Officer
Nicholas Thistleton 30 Chief Technical Officer and Director
Sir Euan Calthorpe 34 Director
Directors are elected in accordance with the Company's by-laws to serve
until the next annual stockholders meeting and until their successors are
elected in their stead. Internet Holdings does not currently pay compensation to
directors for services in that capacity. Officers are elected by the Board of
Directors and hold office until their successors are chosen and qualified, until
their death or until they resign or have been removed from office. All corporate
officers serve at the discretion of the Board of Directors. There are no family
relationships between any director or executive officer and any other director
or executive officer of Internet Holdings.
Stefan Allesch-Taylor has served as the Company's President, Chief
Executive Officer and Director since December 22, 1999. Mr. Allesch-Taylor is
also Chairman of the Board of STG Holdings Plc, a majority shareholder of the
Company. Mr. Allesch-Taylor began his career as a stockbroker, becoming a
Registered Representative of the London Stock Exchange in 1988. He has
considerable commercial experience having served as a director of a wide variety
of companies over the last 7 years. In April 1997, he was appointed Chief
Executive of Worthing Premier Property Plc, a property investment company.
Following a restructuring of management, the company was floated on the London
OFEX market in December 1997. Upon admission to OFEX in December 1997, the
company changed its name to STG Holdings Plc. and subsequently spearheaded the
company's strategy to expand its business operations in real estate to become an
investment company. In October 1999, he was appointed Non-Executive Director of
Radical Technology Plc and was part of the management team that steered the
company's successful Initial Public Offering and subsequent floatation on the
London OFEX market. He is a board member of The Princes' Trust, a charity
established by HRH Prince Charles, Prince of Wales, specifically to help young
entrepreneurs with financial and practical assistance for their new businesses.
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Jason E. Forsyth, has served as the Company's Chief Financial Officer since
February 9, 2000. Mr. Forsyth has eight years of experience in accounting and
finance in both the United Kingdom and the United States. He has worked in a
variety of industries including software, telephony and consumer products. He
has extensive commercial and corporate strategy experience having worked at AT&T
Wireless (formerly LA Cellular) and has been involved in corporate finance, seed
financing, working capital fund raising and mezzanine financing for several
years. From 1997 to 1998, Mr. Forsyth implemented statistical forecasting
mechanisms to reduce overheard and improve sales planning for AT&T Wireless.
From 1998 to 1999, he served as Director of Finance of Purely Cotton, Inc., a
consumer products company, where he worked in debt and equity mezzanine
financing. Mr. Forsyth has specialized in advising both start-up companies and
more established businesses throughout the United States, Europe, and the Middle
East. His most recent projects have focused exclusively on Internet and Internet
related enterprises. Mr. Forsyth has passed the Certified Management Accountant
(CMA), Certified Financial Manager (CFM) and Certified Public Accountant (CPA)
examinations. He gained a BSc (Honors) in Accountancy and Economics from
Southampton University, England.
Nicholas Thistleton has served as the Company's Chief Technical Officer and
Director since December 22, 1999. Mr. Thistleton has been a technology
consultant and analyst for 6 years. His project work for Spectrum Strategy
Consultants included strategic reviews of various telecommunications, pay-TV and
Internet markets in Europe and Asia for a series of large clients, and he was
involved in tracking closely the development and impact of the Internet from its
earliest years. More recently he advised QXL, the UK Internet auction house, on
site implementation, supplier management and product strategy during its initial
start-up phase. Mr. Thistleton has advised a number of Internet companies on
site design and construction prior to their product launch. In addition, he has
acted as technology advisor to STG Holdings Plc since 1997. Mr. Thistleton was a
scholar at Winchester College and gained an MA (Honors) in French and Russian
from Oxford University. He is fluent in French and conversational in Russian. He
is highly computer literate, with proficiency in HTML and JavaScript.
Sir Euan Calthorpe has served as the Company's Director since December 22,
1999. Sir Euan Calthorpe has been the principal of the private Calthorpe Estates
group of companies for over 10 years. The core activity of this substantive
group is real estate investment and development spanning a wide variety of
assets from leisure to retail shopping centers and serviced offices. Utilizing
significant financial and management expertise, the Group has diversified
investments in publishing, e-commerce and B2B information technology companies.
These investments have included a number of successful Internet and
Telecommunications companies. He is a highly experienced private investor and
has worked with a wide range of companies from start-ups to established public
companies. He leads a team of professionals from offices in the United Kingdom
and has a broad network of business connections both in Europe and the United
States.
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Item 10. Executive Compensation.
The following table summarizes calendar 1999 compensation for services in
all capacities of the Company's executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
Securities LTIP All Other
Name and Principal Salary Bonus Underlying Payouts Compensation
Position Year ($) ($) Options (#) ($) ($)
- -------- ---- ------ ----- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Stefan Allesch-Taylor 1999 0 0 0 0 0
Jason E. Forsyth 1999 0 0 0 0 0
Nicholas Thistleton 1999 0 0 0 0 0
Sir Euan Calthorpe 1999 0 0 0 0 0
Christopher J. Wilkes(1) 1999 0 0 0 0 0
</TABLE>
- ----------
(1) Christopher J. Wilkes served as the Company's President and Director from
September 30, 1996 to January 10, 2000. He resigned from his positions with
the Company as a result of the implementation of the Reorganization
Agreement.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock as of March 24, 2000, by (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding common stock; (ii) each director of the Company; (iii) each
executive officer of the Company; and (iv) all executive officers and directors
of the Company as a group.
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<TABLE>
<CAPTION>
Number of Shares Percentage of Common Equity
Name of Beneficial Owner Beneficially Owned(1) Beneficially Owned(2)
- ------------------------ --------------------- ---------------------
<S> <C> <C>
STG Holdings Plc(3) 6,480,000 39.1%
T.H. Investments Ltd.(4) 2,160,000 13.0%
Stefan Allesch-Taylor(5) 0 0%
Jason E. Forsyth(6) 25,000 0.2%
Nicholas Thistleton(7) 0 0%
Sir Euan Calthorpe(8) 0 0%
Total Officers and Directors as a Group 25,000 0.2%
</TABLE>
- ----------
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In general, a person who has voting power and/or investment
power with respect to securities is treated as a beneficial owner of those
securities. For purposes of this table, shares subject to the Warrants
which are exercisable within 60 days of March 24, 2000 are considered as
beneficially owned by the person holding such securities. To management's
knowledge, except as set forth in the footnotes to this table, the persons
named in this table have sole voting and investment power with respect to
the shares shown. Except as otherwise indicated, the address of each of the
directors and executive officers in this table is as follows: Internet
Holdings, Inc., 16 Curzon Street, Mayfair, London, United Kingdom W1Y 7FF.
(2) Percentage beneficially owned is based upon 16,559,470 shares of common
stock issued and outstanding as of March 24, 2000 including 1,000,000
shares of common stock issuable upon exercise of the Warrants.
(3) The address for STG Holdings Plc is 16 Curzon Street, Mayfair, London,
United Kingdom W1Y 7FF.
(4) The address for T.H. Investments Ltd. is Suite 2B, Centre Plaza, Main
Street, Gibraltar.
(5) Stefan Allesch-Taylor is the Chief Executive Officer, President and
Director of the Company. Mr. Allesch-Taylor is also the Chairman of the
Board of Directors of STG Holdings Plc, a 39% shareholder of the Company.
Mr. Allesch-Taylor is the beneficial owner of 2,576,236 STG Holdings Plc
shares representing 47.5% of the outstanding capital.
(6) Jason E. Forsyth is the Chief Financial Officer of the Company.
(7) Nicholas Thistleton is the Chief Technical Officer and a Director of the
Company.
(8) Sir Euan Calthorpe is a Director of the Company.
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Item 12. Certain Relationships and Related Transactions.
Since March 24, 1998, Internet Holdings has not been a party to any
transaction or series of similar transactions in which the amount involved
exceeded $60,000 and in which any director, executive officer, or holder of more
than 5% of its common stock had or will have a direct or indirect material
interest.
All future transactions, including loans, if any, between Internet Holdings
and its officers, directors and principal shareholders and their affiliates and
any transactions between Internet Holdings and any entity with which its
officers, directors or principal shareholders are affiliated will be subject to
the approval of a majority of the Company's Board of Directors, including the
majority of the independent and disinterested outside directors of the Board of
Directors and must be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
EXHIBIT NO. DESCRIPTION
1.1 Underwriting Agreement between Internet Holdings and
Panther Capital Ltd., dated January 6, 2000(1)
2.1 Acquisition Agreement and Plan of Reorganization between
Internet Holdings, Fairfax Equity Ltd. and the
stockholders of Fairfax Equity Ltd., dated October 28,
1999(2)
3.1 Certificate of Incorporation of Internet Holdings and
amendments thereto(3)
3.2 By-Laws of Internet Holdings(4)
4.1 Form of Convertible Loan Note issued to Palamon (Gestion)
S.A., dated January 1999(5)
21.1 Subsidiaries of the Registrant (Fairfax Equity Ltd. is a
subsidiary of Internet Holdings)
27.1 Financial Data Schedule
- ----------
15
<PAGE>
(1) Underwriting Agreement between Internet Holdings and Panther Capital Ltd.,
dated January 6, 2000 is hereby incorporated herein by reference to the
Company's Current Report on Form 8-K filed January 31, 2000.
(2) Acquisition Agreement and Plan of Reorganization between Internet Holdings,
Fairfax Equity Ltd. And the stockholders of Fairfax Equity Ltd., dated
October 28, 1999 is hereby incorporated herein by reference to the
Company's Current Report on Form 8-K filed November 3, 1999.
(3) The Certificate of Incorporation of Internet Holdings and amendments
thereto are hereby incorporated herein by reference to the Company's
registration statement on Form 10-SB filed September 28, 1995.
(4) The By-Laws of Internet Holdings is hereby incorporated herein by reference
to the Company's registration statement on Form 10-SB filed September 28,
1995.
(5) The Form of Convertible Loan Note issued to Palamon (Gestion) S.A. is
hereby incorporated herein by reference to the Company's Current Report on
Form 8-K filed January 7, 2000.
(b) Reports on Form 8-K
On November 3, 1999, the Company filed a Current Report on Form 8-K
announcing that Internet Holdings had entered into a conditional acquisition
agreement to acquire Fairfax Equity Ltd.
16
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTERNET HOLDINGS, INC.
By: /s/ Stefan Allesch-Taylor
----------------------------
Stefan Allesch-Taylor,
President, Chief Executive
Officer and Director
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Stefan Allesch-Taylor
- -------------------------- President, Chief Executive March 29, 2000
Stefan Allesch-Taylor Officer, and Director
/s/ Jason E. Forsyth
- -------------------------- Chief Financial Officer March 29, 2000
Jason E. Forsyth
/s/ Nicholas Thistleton
- -------------------------- Chief Technical Officer March 29, 2000
Nicholas Thistleton and Director
/s/ Sir Euan Calthorpe
- -------------------------- Director March 29, 2000
Sir Euan Calthorpe
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Internet Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of Internet
Holdings, Inc. (the "Company") and Subsidiary (a development stage enterprise),
as of December 31, 1999, and the related consolidated statements of operations,
stockholders' equity and cash flows for the period from inception (October 18,
1999) to December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Internet
Holdings, Inc. and Subsidiary as of December 31, 1999, and the results of their
operations and cash flows for the period from inception (October 18, 1999) to
December 31, 1999 in conformity with generally accepted accounting principles.
/s/ CALLAGHAN NAWROCKI LLP
--------------------------
CALLAGHAN NAWROCKI LLP
Melville, New York
March 13, 2000
18
<PAGE>
INTERNET HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
CURRENT ASSETS:
Cash $ 506,149
Accrued interest receivable 1,474
Prepaid expense 194,445
----------
Total current assets 702,068
INVESTMENTS, at cost 666,406
----------
$1,368,474
==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 85,591
----------
Total current liabilities 85,591
----------
CONVERTIBLE NOTE, subsequently converted 50,000
----------
Total liabilities 135,591
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 50,000,000 shares
authorized, 11,359,470 shares issued and outstanding 11,359
Additional paid-in capital 1,217,362
Retained earnings 4,162
----------
Total stockholders' equity 1,232,883
----------
$1,368,474
==========
The accompanying notes to consolidated financial statements are an
integral part of this statement.
19
<PAGE>
INTERNET HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (OCTOBER 18, 1999) TO DECEMBER 31, 1999
REVENUES:
Exchange gains $ 9,200
Interest income 1,771 $ 10,971
----------
EXPENSES 6,809
----------
Net income $ 4,162
==========
PER SHARE DATA:
Net income $ --
==========
Weighted average number of common
shares outstanding 9,002,596
==========
The accompanying notes to consolidated financial statements are an
integral part of this statement.
20
<PAGE>
INTERNET HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (OCTOBER 18, 1999) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Common Stock Additional Total
-------------------------- Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
INITIAL CAPITALIZATION 10,000 $ 162 $ 1,153,832 $ -- $ 1,153,994
Effective shares issued in connection
with reverse acquisition 8,630,000 8,478 (8,478) -- --
Shares of Internet Holdings, Inc.
outstanding prior to reverse acquisition 2,119,470 2,119 (127,392) -- (125,273)
Issuance of shares pursuant to
consulting agreement 600,000 600 199,400 -- 200,000
Net income for the period -- -- -- 4,162 4,162
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1999 11,359,470 $ 11,359 $ 1,217,362 $ 4,162 $ 1,232,883
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of this statement.
21
<PAGE>
INTERNET HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (OCTOBER 18, 1999) TO DECEMBER 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,162
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accrued interest receivable (1,474)
Decrease in prepaid expense 5,555
Increase in accounts payable
and accrued expenses 1,214
---------
Net cash provided by operating activities 9,457
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares issued for cash 496,692
---------
Net cash provided by financing activities 496,692
---------
NET INCREASE IN CASH 506,149
CASH, INCEPTION --
---------
CASH, END OF PERIOD $ 506,149
=========
NONCASH OPERATING AND FINANCING ACTIVITIES:
Shares issued in exchange for investment $ 666,406
Liabilities incurred on reverse acquisition 84,377
Shares issued pursuant to consulting agreement 200,000
The accompanying notes to consolidated financial statements are an
integral part of this statement.
22
<PAGE>
INTERNET HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and basis of presentation
Internet Holdings, Inc. (the "Company") is the successor consolidated
entity formed by the reverse acquisition on December 22, 1999 by Fairfax
Equity, Ltd. of Internet Holdings, Inc. a publicly-held company originally
incorporated in Utah in 1977, under the name, Trolley Enterprises, Inc.
Fairfax Equity, Ltd. ("Fairfax") which is treated as the accounting
acquirer in the transaction, was incorporated in the United Kingdom on
October 18, 1999. The accompanying financial statements are those of
Fairfax from its inception with the former Internet Holdings, Inc.
consolidated from the date of acquisition.
Prior to its reverse acquisition by Fairfax, control of the former Internet
Holdings, Inc., as well as the corporate name, had changed many times. All
prior operations had previously been discontinued and all claims and
counterclaims were settled, the last of which settlements occurred in
October 1999.
Pursuant to the reverse acquisition, Fairfax's shareholders were issued
8,640,000 shares of the Company, then constituting 80.3% of outstanding
common shares. At the time of acquisition, the majority stockholder of
Fairfax represented the value of its cash and investment assets to be not
less than $2,160,000. In the event that when the investment is realized,
the net proceeds, together with cash at the date of acquisition, total less
than $2,160,000, the majority stockholder of Fairfax has guaranteed to
contribute additional cash to bring the total amount up to $2,160,000.
The Company is presently in the development stage, and is seeking and/or
negotiating the acquisition of more than one Internet/e-commerce related
businesses. (See Note 6).
(2) Summary of significant accounting policies:
Cash and cash equivalents -
The Company considers investments with original maturities of three months
or less to be cash equivalents.
Investments -
Investments consist of a 14% equity position in a corporation established
in England, which is stated at historical cost.
Foreign currency translation -
Gains and losses from foreign currency transactions are reflected in
current operating results.
23
<PAGE>
Income taxes -
The Company did not incur any income taxes in its initial period.
Earnings per share -
Net income per share was computed by dividing net income by the weighted
average number of common shares issued and outstanding during the period.
Comprehensive income -
Other than net income, the Company has no items of comprehensive income as
defined by generally accepted accounting principles.
(3) Consulting agreement
In connection with the acquisition agreement with Fairfax Equity Ltd. on
December 22, 1999, the Company entered into a consulting agreement with an
unrelated company to assist the Company with its strategy, expansion and
financing. Upon signing of the agreement, the Company issued the consultant
600,000 shares of common stock for services to be rendered in the upcoming
year. The shares were valued at $200,000 and were recorded as a prepaid
expense at the date of the agreement.
(4) Accounts payable and accrued liabilities
As of December 31, 1999, accounts payable and accrued liabilities consist
primarily of obligations for legal and professional fees.
(5) Convertible loan note
On October 25, 1999, Internet Holdings, Inc. raised $50,000 through the
issuance of a convertible loan note (the "Note"). The Note was offered
pursuant to an exemption from registration under Section 4 (2) of the
Securities Act of 1933, as amended, and/or Regulation S promulgated by the
Securities and Exchange Commission. The purpose of this funding was to
enable the Company to file all outstanding reports required by the
Securities Exchange Act of 1934, as amended, and to search for suitable
acquisition candidates in the Internet related fields. The Note bore
interest at 5.5% per annum. The Note is convertible upon demand by the Note
holder into common stock in the Company at the rate of $.25 per share. (See
Note 6).
(6) Subsequent events:
Issuance of common stock -
On January 24, 2000, the $50,000 convertible loan note was converted into
200,000 shares of the Company's common stock.
24
<PAGE>
On January 28, 2000, the Company sold 5,000,000 shares of its common stock
at a price of $1.00 per share pursuant to Regulation S. The Company
received the full $5,000,000 and estimates that its expenses for this issue
will be less than $50,000. The Company has agreed to register 25% of the
shares under the Securities Act of 1933, as amended.
In consideration for underwriting the issue in full, the underwriter
received warrants to purchase up to 1,000,000 shares of common stock of the
Company. The warrants are exercisable at $1.00 per share if exercised
within one year of the first closing of the underwriting agreement (the
"First Closing"), and $10.00 per share if exercised within two years of the
First Closing. Warrants which have not been exercised within two years will
expire automatically.
Corporate acquisition -
On March 3, 2000, the Company offered to acquire Radical Technology PLC
("Radical"). In connection therewith, it is anticipated that the Company
will issue 1,281,714 shares of common stock, then constituting
approximately 7.7% of its outstanding shares, to the stockholders of
Radical in order to acquire 100% of the issued capital stock of Radical.
25
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 506,149
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 702,068
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,368,474
<CURRENT-LIABILITIES> 85,591
<BONDS> 50,000
0
0
<COMMON> 11,359
<OTHER-SE> 1,221,524
<TOTAL-LIABILITY-AND-EQUITY> 1,368,474
<SALES> 0
<TOTAL-REVENUES> 10,971
<CGS> 0
<TOTAL-COSTS> 6,809
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,162
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
