As filed with the Securities and Exchange Commission on June 9, 2000
Registration No. 333-3074
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.2 TO FORM 8-K
FILED DECEMBER 3, 1999
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
--------------------------------------------------------------------------------
Date of Report (Date of earliest event reported) November 17, 1999
NEXLAND, INC.
(Exact Name of registrant as specified in its charter)
Arizona 333-3074 37-1356503
------- -------- ----------
(State of other jurisdiction (Commission File Number) (IRS Employer
or incorporation) Identification No.)
Nexland, Inc.
1101 Brickell Avenue
Suite 702, North Tower
Miami, Florida 33131
(address of principal executive offices)
Tel: (305) 358-7771
(Registrant's telephone number)
20801 Biscayne Boulevard
Aventura, Florida 33180
(Former address, if changed since last report)
The following is to correct information previously filed. The method of
accounting for certain business combinations reported in the previous Form 8K-A
for November 17, 1999, has been determined to be inappropriate. The Registrant
has corrected this information and the accompanying financial statements have
been restated accordingly.
<PAGE>
Item 1. Change in Control of Registrant.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
Not applicable.
Item 3. Bankruptcy or Receivership.
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not applicable.
Item 5. Other Events.
Item 6. Resignation of Registrant's Directors.
Not applicable.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements and Businesses Acquired
Restated Financial Statements of
Nexland, Inc.
Reissued Financial Statements of Nexland
Limited Partnership
(b) Pro Forma Financial Information
Not applicable.
(c) Exhibits
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Nexland, Inc.
By:/s/ Martin Dell'Oca
----------------------
Martin Dell'Oca, Chief Financial Officer
Dated: June 13, 2000
Nexland, Inc.
1101 Brickell Avenue
Suite 702, North Tower
Miami, Florida 33131
<PAGE>
NEXLAND, INC.
Financial Statements (Restated)
November 17, 1999
December 31,
1998 and 1997
WILLIAMS & WEBSTER, P.S.
Certified Public Accountants
Bank of America Financial Center
W. 601 Riverside, Suite 1940
Spokane, WA 99201
(509) 838-5111
<PAGE>
NEXLAND, INC.
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6
<PAGE>
Board of Directors
Nexland, Inc.
Miami, Florida
Independent Auditor's Report
----------------------------
We have audited the accompanying balance sheets of Nexland, Inc. as of November
17, 1999, and December 31, 1998 and 1997 and the related statements of
operations and stockholders' equity, and cash flows, for the period and 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 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 audits provide 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 Nexland, Inc. as of November
17, 1999, and December 31, 1998 and 1997, and the results of its operations and
its cash flows for the period and years then ended 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 17 to the
financial statements, the Company's significant losses raise substantial doubt
about its ability to continue as a going concern. Management's plans regarding
the resolution of this issue are also discussed in Note 17. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
As described in Note 18 to the financial statements, the Company's earlier
method of accounting for certain business combinations has been deemed
inappropriate by the Company's management which as elected to correct these
financial statements for the effects of these combinations. Accordingly, 1999,
1998 and 1997 financial statements have been restated.
Williams & Webster, P.S.
Spokane, Washington
February 24, 2000 (except for Note 18, as to which the date is May 31, 2000)
1
<PAGE>
NEXLAND, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(Restated) (Restated) (Restated)
November 17, December 31, December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
A S S E T S
CURRENT ASSETS
Cash $ 14,151 $ 23 $ 9,540
Accounts receivable 52,989 - -
Inventory 90,519 7,643 -
------------ ----------- ----------
TOTAL CURRENT ASSETS 157,659 7,666 9,540
------------ ----------- ----------
PROPERTY AND EQUIPMENT
Furniture and equipment 8,434 6,183 5,651
Less: accumulated depreciation (3,659) (1,943) (415)
------------ ----------- ----------
TOTAL PROPERTY AND EQUIPMENT 4,775 4,240 5,236
------------ ----------- ----------
OTHER ASSETS
Escrow and security deposits 3,180 - -
------------ ----------- ----------
TOTAL OTHER ASSETS 3,180 - -
------------ ----------- ----------
TOTAL ASSETS $ 165,614 $ 11,906 $ 14,776
============ =========== ==========
L I A B I L I T I E S & S T O C K H O L D E R S ' E Q U I T Y (D E F I C I T)
CURRENT LIABILITIES
Accounts payable $ 196,061 $ 7,643 $ -
Accrued expense 47,196 2,453 200
Notes payable 19,553 - -
------------ ----------- ----------
TOTAL CURRENT LIABILITIES 262,810 10,096 200
------------ ----------- ----------
LONG-TERM LIABILITIES
Notes payable, related parties 201,917 87,136 -
------------ ----------- ----------
TOTAL LIABILITIES 464,727 97,232 200
------------ ----------- ----------
COMMITMENTS AND CONTINGENCIES - - -
------------ ----------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, 10,000,000 shares authorized
$0.0001 par value; no shares outstanding - - -
Common stock, 50,000,000 shares authorized,
$ 0.0001 par value; 34,094,703 , 29,500,000
and 29,500,000 issued and outstanding, respectively 3,410 2,950 2,950
Additional paid-in capital - 64,950 64,950
Accumulated deficit (302,523) (153,226) (53,324)
------------ ----------- ----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (299,113) (85,326) 14,576
------------ ----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (D E F I C I T) $ 165,614 $ 11,906 $ 14,776
============ =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
NEXLAND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Restated) (Restated) (Restated)
Period Year Year
Ending Ending Ending
November 17, December 31, December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
R E V E N U E S $ 196,281 $ - $ -
COST OF REVENUES 95,136 - -
--------------- ---------------- ----------------
GROSS PROFIT 101,145 - -
--------------- ---------------- ----------------
E X P E N S E S
Advertising 10,164 3,354 6,698
Professional services 15,492 42,814 20,876
Selling and administrative 181,725 53,734 25,750
--------------- ---------------- ----------------
TOTAL OPERATING EXPENSES 207,381 99,902 53,324
--------------- ---------------- ----------------
LOSS FROM OPERATIONS (106,236) (99,902) (53,324)
INCOME TAXES - - -
--------------- ---------------- ----------------
NET LOSS $ (106,236) $ (99,902) $ (53,324)
=============== ================ ================
BASIC AND DILUTED LOSS PER COMMON SHARE $ nil $ nil $ nil
=============== ================ ================
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON STOCK SHARES OUTSTANDING $ 29,500,000 $ 29,500,000 $ 29,500,000
=============== ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
NEXLAND, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock (Restated) (Restated) (Restated)
--------------------- Total
Number Additional Accumulated Stockholders'
of Shares Amount Paid-in Capital Deficit Equity
--------- ------ --------------- ------- ------
<S> <C> <C> <C> <C> <C>
Issuance of common stock in December, 1997
for cash at $1.00 per share 4,425,000 $ 443 $ 2,557 $ - $ 3,000
Restated effect of 1999 combination with Nexland LP 25,075,000 2,507 62,393 - 64,900
Net loss for year ending December, 1997 - - - (53,324) (53,324)
------------ ---------- ------------- ---------- ----------
Balance at December 31, 1997 29,500,000 2,950 64,950 (53,324) 14,576
Net loss for year ending December, 1998 - - - (99,902) (99,902)
------------ ---------- ------------- ---------- ----------
Balance at December 31, 1998 29,500,000 2,950 64,950 (153,226) (85,326)
Stock exchanged in reverse acquisition of and recapitalization
of WindStar Resources, Inc. by Nexland, Inc. 4,594,703 460 (64,950) (43,061) (107,551)
Net loss for period ending November 17, 1999 - - - (106,236) (106,236)
------------ ---------- ------------- ---------- ----------
Balance at November 17, 1999 34,094,703 $ 3,410 $ - $ (302,523) $ (299,113)
============ ========== ============= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
NEXLAND, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Restated) (Restated) (Restated)
Period Year Year
Ending Ending Ending
November 17, December 31, December 31,
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(106,236) $ (99,902) $ (53,324)
Adjustments to reconcile net loss
to net cash provided (used) by operating activities:
Depreciation and amortization 1,716 1,528 415
Decrease (Increase) in :
Accounts receivable (52,989) -- --
Inventory (82,876) (7,643) --
Increase (Decrease) in :
Accounts payable 98,745 7,643 --
Accrued expenses 44,743 2,253 200
--------- --------- ---------
Net cash used by operating activities (96,897) (96,121) (52,709)
--------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment (2,251) (532) (5,651)
Deposits paid (3,180) -- --
--------- --------- ---------
Net cash used by investing activities (5,431) (532) (5,651)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from common stock issued -- -- 67,900
Loans from stockholder 114,781 87,136 --
Net cash acquired in reverse acquisition
with WindStar Resouces, Inc. 1,675 -- --
--------- --------- ---------
Net cash provided by financing activities 116,456 87,136 67,900
--------- --------- ---------
Net increase (decrease) in cash 14,128 (9,517) 9,540
Cash, beginning of period 23 9,540 --
--------- --------- ---------
Cash, end of period $ 14,151 $ 23 $ 9,540
========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest and income taxes:
Interest expense -- -- --
========= ========= =========
Income taxes -- -- --
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For Period ended November 17, 1999 and the Years Ended December 31,
1998 and 1997
NOTE 1 - BUSINESS ORGANIZATION
Nature of Operations
--------------------
Nexland, Inc. (hereinafter "Nexland") was incorporated on December 4, 1994 under
the laws of the State of Florida. From inception until November 15, 1999,
Nexland was inactive. On November 15, 1999, the partners of Nexland Limited
Partnership assigned all rights, title and interest in partnership assets to
Nexland, Inc. in exchange for 25,075,000 common stock shares of Nexland, Inc.
Nexland LP was formed on September 25, 1997. The activities of the Partnership
are reflected in the financial statements. The Company is engaged in the
production of internet sharing boxes.
On November 17, 1999, WindStar Resources, Inc. (hereinafter "WindStar") acquired
all of the outstanding common stock of Nexland. For accounting purposes the
acquisition has been treated as a recapitalization of Nexland with Nexland as
the acquirer. This form of business combination is referred to as a "reverse
acquisition." The historical financial statements prior to November 17, 1999 are
those of Nexland. WindStar was incorporated on March 22, 1995, under the laws of
the State of Arizona under the name of Turtleback Mountain Gold Co., Inc. to
conduct business in the fields of mineral exploration, construction and mining.
WindStar Resources, Inc. has been in development stage since inception and had
not realized any significant revenues from its planned operations. Prior to
November 17, 1999, WindStar discontinued all mineral exploration, construction
and mining operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Nexland, Inc. is presented to
assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management, which is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Basis of Accounting
-------------------
Nexland uses the accrual basis of accounting in accordance with generally
accepted accounting principles.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Advertising
-----------
Advertising costs are charged to operations in the year incurred.
6
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For Period ended November 17, 1999 and the Years Ended December 31,
1998 and 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, Plant and Equipment
-----------------------------
Property, plant and equipment is recorded at cost and depreciated using the
straight-line method over estimated useful lives of three to seven years.
Expenditures for repairs and maintenance that do not extend the useful life of
the related asset are expensed as incurred.
Impairment of Long-lived Assets
-------------------------------
The Company evaluates the recoverability of long-lived assets when events and
circumstances indicate that such assets might be impaired. The Company
determines impairment by comparing the undiscounted future cash flows estimated
to be generated by these assets to their respective carrying amounts.
Income Taxes
------------
No provision for taxes or tax benefit has been reported in the financial
statements, as there is not a measurable means of assessing future profits or
losses. The Company's net operating loss is approximately $25,000, and is
available to offset future net income. The Company has no significant deferred
tax assets or liabilities, and the net operating loss is fully reserved by a
valuation allowance.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments with a maturity of three
months or less at the date of acquisition to be cash equivalents.
Basic and Diluted Earnings Per Share
------------------------------------
In December 1997, the Company adopted Statement of Financial Accounting
Standards Statement (SFAS) No. 128, Earnings Per Share. Basic earnings per share
are computed using the weighted average number of common shares outstanding.
Diluted net loss per share is the same as basic net loss per share as the
inclusion of common stock equivalents would be antidilutive. At November 17,
1999, the Company had 320,000 stock options and 3,200,000 warrants, which were
not included in computing diluted loss per share because their effects were
antidilutive.
Revenue Recognition
-------------------
Revenues and cost of revenues are recognized when services and products are
furnished or delivered.
Derivative Instruments
----------------------
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This new standard establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value.
7
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For Period ended November 17, 1999 and the Years Ended December 31,
1998 and 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
At November 17, 1999, the Company has not engaged in any transactions that would
be considered derivative instruments or hedging activities.
Reclassifications
-----------------
Certain amounts from prior periods have been reclassified to conform to the
current period presentation. This reclassification has resulted in no changes to
the Company's accumulated deficit or net losses presented.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets of five to
seven years. The Company evaluates the recoverability of property and equipment
when events and circumstances indicate that such assets might be impaired. The
Company determines impairment by comparing the undiscounted future cash flows
estimated to be generated by these assets to their respective carrying amounts.
Major additions and betterments are capitalized. Costs of maintenance and
repairs that do not improve or extend the lives of the respective assets are
expensed as incurred. When property and equipment are retired or otherwise
disposed of, the related costs and accumulated depreciation are removed from the
accounts and any gain or loss is recognized in operations.
NOTE 4 - INVENTORY
Inventories are stated at the lower of cost or market, with cost being
determined on a first-in-first-out basis.
Inventories at November 17, 1999 and December 31, 1998 consist of internet
sharing devices valued at $90,519 and $7,643, respectively. The Company did not
maintain inventories at December 31, 1997.
NOTE 5 - LEASE COMMITMENT
Nexland leases commercial office space in Miami, Florida on a month-to-month
agreement. The monthly rent is $3,000. The Company is currently negotiating a
lease for a new location.
NOTE 6 - INTANGIBLE ASSETS
At December 31, 1999, the Company's trademark applications were still pending
approval and no costs have been capitalized.
8
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For Period ended November 17, 1999 and the Years Ended December 31,
1998 and 1997
NOTE 7 - NOTES PAYABLE, RELATED PARTIES
Nexland has unsecured cash loans from a stockholder in the amount of $174,318 at
November 17, 1999 and $87,136 at December 31, 1998. The notes bear interest
equal to the applicable federal rate, which is 5.83%, are unsecured and are
subject to adjustment on August 1, 2000. The terms of the notes were not
finalized until after the merger with WindStar Resources, Inc.
Other long-term debt at November 17, 1999 consists of an unsecured note with
Phoenix International Mining, Inc., a related party, dated August 1, 1997, with
interest due at 1% per month and the principal payable at the discretion of
WindStar Resources, Inc. with any remaining principal due not later than five
years from the date of the note. Under terms of the note, the Company may borrow
from time to time in varying amounts up to the sum of one million dollars within
the two years from the date of the note. The balance due at November 17, 1999,
was $27,600.
NOTE 8 - NOTES PAYABLE
In the November 1999 acquisition, the Company acquired notes payable from
WindStar that are short-term, unsecured demand notes with an interest rate of
12% per annum. The balance on these notes at November 17, 1999 was $19,553.
NOTE 9 - PREFERRED STOCK
The Company has the authority to issue 10,000,000 shares of preferred stock,
having a par value of $0.0001 per share. At December 31, 1999, no shares of
preferred stock were issued or outstanding.
NOTE 10 - COMMON STOCK
On November 17, 1999, Nexland, Inc. exchanged each of its shares of common stock
for 1,475 shares of WindStar Resources, Inc. common stock shares. Nexland,
Inc.'s shareholders received 29,500,000 shares of WindStar Resources, Inc.
common stock in exchange for their 20,000 shares of Nexland's common stock.
Furthermore, Nexland contributed $25,000 in cash for the payment of WindStar's
outstanding payables and assumed $82,551 of the net liabilities of WindStar. The
shareholders of WindStar Resources, Inc. retained their 4,594,703 shares of
common stock. This acquisition has been treated as a recapitalization of Nexland
with Nexland as the acquirer (reverse acquisition). The Company has 34,094,703
shares of common stock outstanding at December 31, 1999.
Mr. Israel D. Sultan, the original shareholder of Nexland, was issued 4,425,000
shares of common stock for his original capital contribution of $3,000. On
November 15, 1999, Nexland LP was acquired for the issuance of 25,075,000 shares
of common stock. Mr. Sultan owned 100% of Nexland and 50% of Nexland LP and,
accordingly, as such this transaction is treated as
9
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For Period ended November 17, 1999 and the Years Ended December 31,
1998 and 1997
NOTE 10 - COMMON STOCK (Continued)
a combination of common interests. All financial activity is combined and
reported in these financial statements in a manner similar to a pooling of
interest.
WindStar, the Company's predecessor by reverse acquisition, had during the year
ended December 31, 1995, issued 1,240,000 shares of common stock in exchange for
eight mining claims. The stock was issued at $0.0105 per share.
During the year ended December 31, 1996, WindStar issued 1,600,000 units in
exchange for one hundred twenty eight mining claims (Note 3). Each unit
consisted of one share of common stock, one "Class A Warrant" and one "Class B
Warrant". The stock was issued at $0.04125 per share.
During the year ended December 31, 1998, the Board of Directors of WindStar
authorized a 1-for-250 reverse stock split, thereby decreasing the number of
issued and outstanding shares and increasing the par value of each share to
$0.0001. All references in the accompanying financial statements to number of
common shares and per share amounts for 1997, 1998 and 1999 have been restated
to reflect the reverse stock split.
WindStar issued 22,000 shares of its common stock during the year ended December
31, 1998, in payment of outstanding debt that was owed to Baragan Mountain
Mining, LLC for an unpaid royalty fee and the interest accrued. The shares were
issued at $2.50 per share.
In November 1999, WindStar issued 382,173 shares of common stock to related
parties in payment of debt.
In consideration of Nexland S.A. granting a right of first refusal for purchase
of Nexland S.A. to Nexland, Inc., certain Nexland stockholders conveyed
1,584,000 shares of common stock they received out of the 29,500,000 shares of
common stock to Nexland S.A. for distribution to Nexland S.A. shareholders. See
Note 15.
On November 17, 1999 the Company committed to a consulting agreement with Fred
Schmid, a related party. This agreement provides for compensation to be paid in
common stock at 5,000 shares per month issued quarterly. Either party can
terminate this agreement at any time.
NOTE 11 - STOCK WARRANTS
During the year ended December 31, 1996, the Company's predecessor by reverse
acquisition issued 1,600,000 units. As stated in Note 10, each unit consisted of
one share of common stock, one "Class A Warrant" and one "Class B Warrant". Each
"Class A Warrant" may be exercised to purchase one share of common stock at
exercise prices ranging from $0.25 to $2.50 per share. Each "Class B Warrant"
may be exercised to purchase one share of common stock at an exercise price of
$5.00. The warrants are redeemable at any time upon the Company giving thirty
days
10
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For Period ended November 17, 1999 and the Years Ended December 31,
1998 and 1997
NOTE 11 - STOCK WARRANTS (Continued)
written notice to the holder thereof at redemption price of $0.0025 per warrant.
The warrants are exercisable up to five years from the effective date of the
offering unless called sooner.
As of November 17, 1999, 1,541,558 "Class A Warrants" remain authorized and
outstanding (not exercised). No "Class B Warrants" were exercised during 1997,
1998 or 1999.
NOTE 12 - SALE OF STOCK AND GRANT OF OPTIONS
The Company's predecessor by reverse acquisition sold 540,000 shares of common
stock to its president and chief executive officer for $10,000 cash and also
granted purchase options to him during November 1997. The Company's options
("Stock Options") enable the holder to purchase up to 160,000 shares of the
stock during the ten-year period commencing on the second anniversary of the
date of this agreement for exercise prices ranging from $0.25 to $2.50 per
share, and up to 160,000 additional shares of stock during the ten-year period
commencing on the third anniversary of the date of this agreement for the
exercise price of $5.00 per share. This agreement was dated November 11, 1997.
No options were granted or exercised during 1998 or 1999.
Following is a summary of the status of fixed options outstanding at December
31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Weighted
Exercise Average Remaining Weighted Average
Price Range Number Contractual Life Exercise Price
----------- ------ ---------------- --------------
<S> <C> <C> <C> <C>
$0.25 to $5.00 320,000 5-10 years $3.875
</TABLE>
Of the 320,000 options referred to above, 160,000 are exercisable beginning
November 11, 1999. These options were exercised in March 2000 at $1.00 per share
with the Company receiving a total of $160,000. The remaining 160,000 options
are not exercisable until November 11, 2000. The Company estimates that
substantially all of these options will be exercised during the contractual
period.
NOTE 13 - YEAR 2000
Like other companies, Nexland could be adversely affected if the computer
systems it, its suppliers or customers use do not properly process and calculate
date-related information and data from the period surrounding and including
January 1, 2000. This is commonly known as the "Year 2000" issue. Additionally,
this issue could impact non-computer systems and devices such as production
equipment, elevators, etc.
The Company has reviewed its business and processing systems and believes that
the majority of its systems are already Year 2000 compliant or can be made so
with software updates. Based on
11
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For Period ended November 17, 1999 and the Years Ended December 31,
1998 and 1997
NOTE 13 - YEAR 2000 (continued)
preliminary assessments, the Company regards the costs associated with Year 2000
readiness to be immaterial.
NOTE 14 - MERGERS AND ACQUISITIONS
Nexland Limited Partnership
---------------------------
The combination of Nexland with Nexland LP is accounted for as a combination of
common interest, which is similar to a pooling of interest. The financial
statements have been restated for all periods presented. As of November 15,
1999, Nexland LP had accumulated losses of $259,461 and a net partners' deficit
of $194,461. The original Partners' capital was $65,000, of which $100 was for
Nexland's one percent general partnership interest.
WindStar Resources, Inc.
------------------------
On November 17, 1999, when Nexland, by reverse acquisition, became the successor
entity, WindStar had liabilities in excess of assets of $82,551 after Nexland's
advance payment to reduce WindStar debts of $25,000. The allocation to
additional paid-in capital as part of this combination exceeded the available
balance by $43,061, which was charged to accumulated deficit. In this
combination, WindStar acquired all of the outstanding stock of Nexland. For
accounting purposes, the acquisition has been treated as a recapitalization of
Nexland with Nexland as the acquirer. The historical financial statements prior
to November 17, 1999 are those of Nexland. Proforma information giving effect to
the acquisition as if the acquisition took place on January 1, 1998 is as
follows:
Proforma for the period ended November 17, 1999:
<TABLE>
<CAPTION>
Historical
---------- Proforma
Nexland WindStar Total
------- -------- -----
<S> <C> <C> <C>
Revenue $ 196,281 $ -- $ 196,281
Net Loss (106,236) (295,059) (401,295)
Loss per share nil nil (0.01)
Weighted average number of
common stock shares outstanding 29,500,000 4,213,230 33,713,230
</TABLE>
Proforma for year ended December 31, 1998:
<TABLE>
<CAPTION>
Historical
---------- Proforma
Nexland WindStar Total
------- -------- -----
<S> <C> <C> <C>
Revenue $ -- $ -- $ --
Net Loss (99,902) (160,664) (260,566)
Loss per share nil (0.04) (0.01)
Weighted average number of
common stock shares outstanding 29,500,000 4,162,223 33,662,223
</TABLE>
12
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For Period ended November 17, 1999 and the Years Ended December 31,
1998 and 1997
NOTE 14 - MERGERS AND ACQUISITIONS (continued)
As of November 17, 1999, the effect of the above business combination on
Nexland's accumulated deficit is $259,462 of partnership losses from Nexland LP,
$43,061 of recapitalization losses from WindStar.
NOTE 15 - ACQUISITION OPTION FOR NEXLAND S.A.
Nexland, Inc. has the option to purchase all common stock shares of Nexland
S.A., a French corporation. This option expires on June 30, 2000. The purchase
price is contingent upon a valuation to be performed by an independent French
accounting firm. See Note 10.
NOTE 16 - MINERAL PROPERTIES
WindStar, immediately prior to the reverse acquisition, discontinued all mineral
exploration, construction and mining operations. Although mineral exploration
and mining are inherently speculative and subject to complex environmental
regulations, at the time WindStar discontinued these activities, WindStar was
unaware of any pending litigation or of any specific past or prospective matters
which could affect the Company or its assets. The following disclosures of
mineral properties summarize the recent activities of WindStar.
Eight mining claims were transferred to WindStar on June 30, 1995 by quitclaim
deed in exchange for 1,240,000 shares of common stock. The mining claims were
valued at the transferor cost of $13,000. Prior to November 17, 1999 and the
acquisition, WindStar allowed these claims to expire, resulting in a charge
against operations in the amount of $13,000.
One hundred twenty-eight mining claims located in the La Paz, Maricopa, and Yuma
counties of Arizona were transferred to WindStar on November 16, 1996 by
quitclaim deed in exchange for 1,600,000 units as explained in Note 10. Prior to
November 17, 1999 and the acquisition, WindStar allowed these claims to expire
resulting in a charge against operations in the amount of $66,076.
The four Red Raven II claims purchased from Maxam Gold Corporation have a
royalty fee clause attached to them. The royalty fee, payable to Baragan
Mountain Mining, LLC, is five percent of the net income from operations on the
claims, or $50,000 annually (whichever is greater) beginning July 14, 1996.
During 1998, WindStar settled a default on the $50,000 annual payment, which was
due July 14, 1997, by the exchange of 22,000 shares of its common stock. This
included $5,000 of interest, which had been accrued on the indebtedness. As part
of this settlement, the $50,000 annual fee has been rescinded and future royalty
fees will be calculated on 2.5% of net smelter return from production from those
claims, if any.
13
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For Period ended November 17, 1999 and the Years Ended December 31,
1998 and 1997
NOTE 17 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
As shown in the accompanying financial statements, the Company and its
predecessor, Nexland LP, have generated no revenues before 1999. The Company
recognized a net loss of ($106,236) for 1999 through November 17, 1999 from its
activities and that of its predecessor. Nexland, Inc. has an accumulated deficit
of $302,523 at November 17, 1999.
Management believes that significant resources will be available from private
and public sources in 2000 to continue the marketing of its internet sharing
devices. The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
Management has established plans designed to increase the sales of the Company's
products. Management intends to seek new capital from new equity securities
offerings that will provide funds needed to increase liquidity, fund internal
growth and fully implement its business plan.
NOTE 18 - CORRECTION OF ACCOUNTING FOR BUSINESS COMBINATIONS AND SUBSEQUENT
EVENTS
The prior issued financial statements for the period ended November 17, 1999,
did not recognize that a strict interpretation of the accounting for reverse
acquisitions, should not result in the recognition of goodwill or intangible
assets. Also, the accounting for a combination of common interests is equivalent
to a pooling of interest.
The accounting for the combination with Nexland LP originally recognized
$211,562 in the value of intangible assets (i.e. trademarks). This has been
corrected and the Company's additional paid-in capital has been reduced by
$211,562. Furthermore, for 1999, 1998, and 1997, the restated financial
statements recognize the net effect of revenue, expenses and losses from
operations from the partnership of $106,236, $99,902 and $53,324, respectively.
The prior issued financial statements present proforma disclosures which
recognized an increase in the value of trademarks of $1,116,976 from the
recognition of a minimal stock valuation of the common stock issued in the
combination and the net liabilities acquired from WindStar as part of the
reverse acquisition. The Company should not have recognized any goodwill or
increase in intangible assets as part of this combination. To correct this
overstatement, the Company has reduced its additional paid-in capital by
$1,116,976.
The financial statements and the notes thereto reflect the appropriate
disclosures for the above corrections.
14
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For Period ended November 17, 1999 and the Years Ended December 31,
1998 and 1997
NOTE 18 - CORRECTION OF ACCOUNTING FOR BUSINESS COMBINATIONS AND SUBSEQUENT
EVENTS (Continued)
In April and May 2000, subsequent to the prior issuance of these financial
statements, the Company entered into employment agreements with a new chief
executive officer and a new chief financial officer. These contracts, which are
for two years, require base salaries of $150,000 and $100,000, respectively, and
the issuance of shares of restricted common stock of 1,170,000 and 200,000,
respectively. The base salary of the chief executive officer is subject to the
Company raising one million dollars. The base salary of the chief financial
officer will increase to $120,000 per year upon the Company raising one million
dollars. The issuance of the shares of restricted common stock is subject to
forfeiture, if the executives terminate their contracts during the initial
two-year periods and other conditions.
15
<PAGE>
NEXLAND LIMITED PARTNERSHIP
Financial Statements
For the period ended November 15, 1999 and
For the years ended December 31, 1998 and 1997
WILLIAMS & WEBSTER, P.S.
Certified Public Accountants
Bank of America Financial Center
W 601 Riverside, Suite 1940
Spokane, WA 99201
(509) 838-5111
<PAGE>
NEXLAND LIMITED PARTNERSHIP
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations and Partners' Capital (Deficit) 3
Statements of Cash Flows 4
NOTES TO FINANCIAL STATEMENTS 5
<PAGE>
General Partner
Nexland Limited Partnership
Miami, Florida
Independent Auditor's Report
We have audited the accompanying balance sheets of Nexland Limited Partnership
as of November 15, 1999, December 31, 1998 and 1997 and the related statements
of operations and partner's capital (deficit), and cash flows, for the period
and 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
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 audits 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 Nexland Limited Partnership as
of November 15, 1999, December 31, 1998 and 1997, and the results of its
operations and its cash flows for the period and years then ended 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 12 to the
financial statements, the Company's significant losses raise substantial doubt
about its ability to continue as a going concern. Management's plans regarding
the resolution of this issue are also discussed in Note 12. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Williams & Webster, P.S.
Spokane, Washington
February 24, 2000 (except for Note 1, 6 and 10 as to which the date is
May 31, 2000)
1
<PAGE>
NEXLAND LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
November 15, December 31, December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
A S S E T S
CURRENT ASSETS
Cash $ 12,476 $ 23 $ 9,540
Accounts receivable 52,989 -- --
Inventory 90,519 7,643 --
--------- --------- ---------
TOTAL CURRENT ASSETS 155,984 7,666 9,540
--------- --------- ---------
PROPERTY AND EQUIPMENT --
Furniture and equipment 8,434 6,183 5,651
Less: accumulated depreciation and amortization (3,659) (1,943) (415)
--------- --------- ---------
TOTAL PROPERTY AND EQUIPMENT 4,775 4,240 5,236
--------- --------- ---------
OTHER ASSETS --
Escrow deposit 25,000 -- --
Security deposit 3,180 -- --
--------- --------- ---------
TOTAL OTHER ASSETS 28,180 -- --
--------- --------- ---------
TOTAL ASSETS $ 188,939 $ 11,906 $ 14,776
========= ========= =========
L I A B I L I T I E S & P A R T N E R S' C A P I T A L
CURRENT LIABILITIES
Accounts payable $ 196,060 $ 7,643 $ --
Accrued expenses 10,122 2,453 200
Leases, current -- -- --
Advance from related party 2,900 2,900 2,900
Notes payable to partner 174,318 87,136 --
--------- --------- ---------
TOTAL CURRENT LIABILITIES 383,400 100,132 3,100
--------- --------- ---------
COMMITMENTS AND CONTINGENCIES -- -- --
--------- --------- ---------
PARTNERS' CAPITAL (194,461) (88,226) 11,676
--------- --------- ---------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 188,939 $ 11,906 $ 14,776
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
NEXLAND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL (DEFICIT)
For the Period Ended November 15, 1999 and
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
R E V E N U E S $ 196,281 $ -- $ --
COST OF REVENUES 95,136 -- --
--------- --------- ---------
GROSS PROFIT 101,145 -- --
--------- --------- ---------
E X P E N S E S
Advertising 10,164 3,354 6,698
Administrative expenses 181,724 53,734 25,750
Professional fees 15,492 42,814 20,876
--------- --------- ---------
TOTAL EXPENSES 207,380 99,902 53,324
--------- --------- ---------
NET LOSS (106,235) (99,902) (53,324)
PARTNERS' CAPITAL (DEFICIT), BEGINNING BALANCE (88,226) 11,676 --
PARTNERS' CAPITAL CONTRIBUTION -- -- 65,000
--------- --------- ---------
PARTNERS' CAPITAL (DEFICIT), ENDING BALANCE $(194,461) $ (88,226) $ 11,676
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
NEXLAND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Period Ended November 15, 1999 and
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(106,235) $ (99,902) $ (53,324)
Adjustments to reconcile net loss
to net cash provided (used) by operating activities:
Depreciation and amortization 1,716 1,528 415
Decrease (Increase) in :
Accounts receivable (52,989) -- --
Inventory (82,876) (7,643) --
Prepaids and other assets (28,180) -- --
Increase (Decrease) in :
Accounts payable 188,417 7,643 --
Accrued expenses 7,662 2,253 200
--------- --------- ---------
Net cash provided (used) in operating activities (72,485) (96,121) (52,709)
--------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment (2,244) (578) (5,651)
Cash contributed by partners 87,182 87,182 65,000
--------- --------- ---------
Net cash provided (used) in investing activities 84,938 86,604 59,349
--------- --------- ---------
Cash flows from financing activities:
Advance from related party -- -- 2,900
--------- --------- ---------
Net cash provided (used) in financing activities -- -- 2,900
--------- --------- ---------
Net increase (decrease ) in cash 12,453 (9,517) 9,540
Cash, beginning of period 23 9,540 --
--------- --------- ---------
Cash, end of period $ 12,476 $ 23 $ 9,540
========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Interest $ -- $ -- $ --
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
NEXLAND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
For the Period Ended November 15, 1999
For the Years Ended December 31, 1998 and 1997
NOTE 1 - BUSINESS ORGANIZATION
Nature of Operations
--------------------
Nexland Limited Partnership (hereinafter "Nexland LP") was formed on September
27, 1997 under the laws of the State of Florida. Nexland LP has engaged in the
production of internet sharing boxes. From inception until November 15, 1999,
Nexland LP was actively engaged in the development and marketing of the internet
sharing activities. On November 15, 1999, the partners of Nexland LP assigned
all rights, title and interest in partnership assets to Nexland, Inc. in
exchange for 17,000 common stock shares of Nexland, Inc. which became 25,075,000
common stock shares of the continuing Nexland, because subsequent to November
17, 1999, Nexland, Inc. exchanged its stock in an acquisition with WindStar
Resources, Inc. See Note 10.
The combination of Nexland LP with Nexland, Inc. will be accounted for as a
combination of common interest, which is similar to a pooling of interest.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
-------------------
Nexland LP uses the accrual basis of accounting in accordance with generally
accepted accounting principles.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Advertising
-----------
Advertising costs are charged to operations in the year incurred.
Property, Plant and Equipment
-----------------------------
Property, plant and equipment is recorded at cost and depreciated using the
straight-line method over estimated useful lives of three to seven years.
Expenditures for repairs and maintenance which do not extend the useful life of
the related asset are expensed as incurred.
Impairment of Long-lived Assets
-------------------------------
The Company evaluates the recoverability of long-lived assets when events and
circumstances indicate that such assets might be impaired. The Company
determines impairment by comparing the undiscounted future cash flows estimated
to be generated by these assets to their respective carrying amounts.
5
<PAGE>
NEXLAND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
For the Period Ended November 15, 1999
For the Years Ended December 31, 1998 and 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
------------
All tax effects of the Partnership's income or loss are passed through to the
partners individually, and as such, no income taxes are provided for in the
financial statements.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments with a maturity of three
months or less at the date of acquisition to be cash equivalents.
Revenue and Cash Recognition
----------------------------
Revenues and cost of revenues are recognized when services and products are
furnished or delivered.
Trademarks
----------
Trademarks will be amortized using a straight-line method over twenty years,
once the trademarks are legally granted.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. The Company
evaluates the recoverability of property and equipment when events and
circumstances indicate that such assets might be impaired. The Company
determines impairment by comparing the undiscounted future cash flows estimated
to be generated by these assets to their respective carrying amounts.
Major additions and betterments are capitalized. Costs of maintenance and
repairs which do not improve or extend the lives of the respective assets are
expensed as incurred. When property and equipment are retired or otherwise
disposed of, the related costs and accumulated depreciation are removed from the
accounts and any gain or loss is recognized in operations.
NOTE 4 - INVENTORY
Inventories are stated at the lower of cost or market, with cost being
determined on a first-in-first out basis.
Inventories of finished goods at November 17, 1999 were $90,519.
NOTE 5 - LEASE COMMITMENT
Nexland leases commercial office space in Miami, Florida under a six month
lease. The monthly rent is $3,000 and the lease term ends in February, 2000.
NOTE 6 - INTANGIBLE ASSETS
6
<PAGE>
NEXLAND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
For the Period Ended November 15, 1999
For the Years Ended December 31, 1998 and 1997
As of November 15, 1999, the Company's trademark applications were still pending
approval and no costs have been capitalized.
NOTE 7 - NOTES PAYABLE, RELATED PARTIES
Nexland LP has unsecured cash loans with its shareholder in the amounts of
$174,318 and $87,136 at November 15, 1999 and December 31, 1998 respectively.
The notes bear an interest rate equal to the applicable federal rate, (which is
5.83%), are unsecured and are subject to adjustment on August 1, 2000. The loan
was not finalized until after the merger with Nexland, Inc. Accrued interest at
November 30, 1999 and December 31, 1998 was $9,821 and $2,200, respectively.
Nexland LP received an unsecured, noninterest-bearing advance from Nexland, Inc.
in 1997 of $2,900.
NOTE 8 - PARTNERS' CAPITAL
The original partners contributed $65,000 as the initial capital of Nexland LP.
All further funding was from loans from related parties. See Note 7.
NOTE 9 - YEAR 2000
Like other companies, Nexland could be adversely affected if the computer
systems it, its suppliers or customers use do not properly process and calculate
date-related information and data from the period surrounding and including
January 1, 2000. This is commonly known as the "Year 2000" issue. Additionally,
this issue could impact non-computer systems and devices such as production
equipment, elevators, etc. At this time, because of the complexities involved in
the issue, management cannot provide assurances that the Year 2000 issue will
not have an impact on the company's operations.
The Company has reviewed its business and processing systems and believes that
the majority of its systems are already Year 2000 compliant or can be made so
with software updates. Based on preliminary assessments, the Company regards the
costs associated with Year 2000 readiness to be immaterial.
7
<PAGE>
NEXLAND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
For the Period Ended November 15, 1999
For the Years Ended December 31, 1998 and 1997
NOTE 10 - SUBSEQUENT EVENT - MERGER /ACQUISITION
On November 17, 1999 Nexland, Inc. exchanged each of its shares of common stock
for 1,475 shares of WindStar Resources, Inc. common stock shares. Nexland,
Inc.'s shareholders received 29,500,000 shares of WindStar Resources, Inc.
common stock. In this combination WindStar acquired all of the outstanding stock
of Nexland, Inc. for accounting purposes, the acquisition will be treated as a
recapitalization of Nexland, Inc. with Nexland as the acquirer.
Nexland was wholly merged into WindStar Resources, Inc and WindStar Resources,
Inc. subsequently changed its name to Nexland, Inc.
NOTE 11 - ACQUISITION OPTION FOR NEXLAND SA
Nexland, Inc. has the option to purchase all the common stock shares of Nexland
S.A., a French corporation. This option expires on June 30, 2000. The sales
price is dependent upon a valuation preformed by an independent French
accounting firm.
NOTE 12 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company would continue as a going concern.
As shown in the accompanying financial statements, the Company had not generated
any significant revenues before 1999. Although revenues were generated in 1999,
the net loss was $106,235 for the period ending November 15, 1999. The Company
is currently involved in a merger, which will, if successful, mitigate these
factors which raise substantial doubt about the Company's ability to continue as
a going concern. Management believes that significant resources will be
available from private and public sources in 2000 to continue the marketing of
its internet sharing devices. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.
Management has established plans designed to increase the sales of the Company's
products. Management intends to seek new capital from new equity securities
offerings that will provide funds needed to increase liquidity, fund internal
growth and fully implement its business plan.
8
