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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(Amendment No. 1)
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ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: Commission file number:
March 31, 1997 000-20865
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e-Net, Inc.
(Name of Small Business Issuer in Its Charter)
Delaware 52-1929282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12800 Middlebrook Road, Suite 200,
Germantown, MD 20874
(Address of principal executive offices) (Zip code)
(301) 601-8700
(Company's telephone number, including area code)
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Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange
------------------- on Which Registered
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Not Applicable Not Applicable
Securities registered pursuant to Section 12(g) of the Exchange Act:
Title of Class
Common Stock, $.01 Par Value
Warrants
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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 past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year: $549,000.
The total market value of the voting stock was $23,000,000, of which
$23,000,000 was held by nonaffiliates of the registrant, based upon the closing
price of the common stock on June 30, 1997, as quoted by the Nasdaq SmallCap
Market System.
The number of outstanding shares of the registrant's common stock on
June 30, 1997 was 5,750,000.
Transitional Small Business Disclosure Format: Yes No X
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Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The officers and directors of e-Net, Inc. (the "Company") as of the
date of the original filing (the "Filing Date") of the Company's Annual Report
on Form 10-KSB for its fiscal year ended March 31, 1997 were as follows:
<TABLE>
<CAPTION>
Name Age Title
----- --- ------
<S> <C> <C>
Alonzo E. Short 57 Chairman of the Board
Robert A. Veschi 35 President, Chief Executive Officer, Director
Christina L. Swisher 32 Vice President, Operations and Secretary
William W. Rogers, Jr. 55 Director
Clive Whittenbury, Ph.D. 63 Director
William L. Hooton 45 Director
</TABLE>
Each of the directors of the Company at the Filing Date held office
until his or her successor is elected and qualified. There were no family
relationships among any officers or directors of the Company and none of the
Company's officers and directors had been involved in any material legal
proceedings during the past five years which relate to or effect their duties
to the Company. Mr. Veschi had served as a promoter of the Company and the
consideration received for such services has been limited to the compensation
disclosed under Item 10. The officers of the Company devoted full time to the
business of the Company.
The principal occupation and business experience for each officer and
director of the Company for at least the last five years prior to the Filing
Date was as follows:
ALONZO E. SHORT, JR., Lt. Gen., USA (ret.), 57, has been chairman of
the board of the Company since January 1996. General Short has more than 30
years experience in executive management, operations and the engineering, design
and development of large-scale telecommunications and data systems. General
Short retired from the service in 1994 following a career that included serving
as deputy commanding general (1988-1990) and commanding general (1990-1991) of
the U.S. Army Information Systems Command, a major information technology
organization, which was responsible for all telecommunications during the Desert
Shield/Desert Storm operation, among other responsibilities. From 1991 to 1994,
General Short was director of the Defense Information Systems Agency, a major
information technology organization which is responsible for telecommunications
and related services to the President of the United States, Secret Service,
Joint Chiefs of Staff, Secretary of Defense, among other high level federal
entities. From 1994-1997, General Short was president and chief executive
officer of MICAH Systems, Inc., a Washington, D.C. metropolitan area based
information, technologies management and consulting firm. In September 1997,
General Short joined Lockheed Martin , an aerospace, defense, and information
technology company, as a Vice-President. Since January 1996, General Short has
been instrumental in the organization and development of the business of the
Company.
ROBERT A. VESCHI, 35, has been president, chief executive officer, and
a director of the Company since January 1995. Mr. Veschi is the founder of the
Company, which began its operations in June 1995. Mr. Veschi has significant
experience in executive management, operations and the engineering, design and
development of telecommunications and computer products and systems. From 1986
to 1990, Mr. Veschi was manager of systems engineering for International
Telemanagement, Inc., a Washington, D.C. metropolitan area based information,
data and network systems firm. From 1990 to 1994, Mr. Veschi was a group
president of I-Net, Inc., a Washington, D.C. metropolitan area based
information, data and network systems firm. From December 1994 to May 1995, for
approximately six months, Mr. Veschi was president and chief executive officer
of Octacom, Inc., a Washington, D.C. metropolitan area based information, data
and network systems firm, and a wholly-owned subsidiary of Octagon, Inc., an
Orlando, Florida metropolitan area based publicly held technical services firm.
From July 1994 to May 1995, for approximately nine months, Mr. Veschi was a vice
president of telecommunications for
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Octagon, Inc., and from January 1995 to May 1995, for approximately four months,
Mr. Veschi was a member of the board of directors of such company. Since June
1995, Mr. Veschi has been instrumental in the organization, development and
promotion of the Company.
CHRISTINA L. SWISHER, 32, has been vice president of operations since
December 1996 and secretary of the Company since February 1997. Ms. Swisher has
significant experience in the computer networking management, systems and
operations. From 1991 to 1993, Ms. Swisher was a technical and graphics
specialist with the Air Force Association, a Washington, DC area based national
services organization, where she was responsible for technical and statistical
analyses. From 1993 to 1995, Ms. Swisher was the manager for computer networks
for computer network systems and operations for I-Net, Inc., a Washington, DC
metropolitan area based information, data and network systems firm. Since 1995,
Ms. Swisher has been director of technical services with the Company, becoming
vice president of operations in December 1996. Since June 1995, Ms. Swisher has
been instrumental in the organization and development of the business of the
company.
WILLIAM W. ROGERS, JR., 55, has been a director of the Company since
January 1997. Mr. Rogers has substantial senior management, operations and
technical and engineering services experience. From 1972 to 1987, Mr. Rogers was
a general manager engaged in operations, technical and engineering services for
Boeing Computer Services, Inc. From 1987 to 1989, Mr. Rogers was president and
chief executive officer of International Telemanagement , Inc., a McLean,
Virginia based telecommunications and systems engineering and services company.
From 1989 to 1991, Mr. Rogers was a vice president of Fluor-Daniel, where he was
responsible for telecommunications and systems integration services. Since 1991,
Mr. Rogers has been a vice president with Computer Sciences Corporation, a
McLean, Virginia based technology products, systems and services company, where
he is responsible for systems integration and related technical services. Since
January 1997, Mr. Rogers has been instrumental in the organization and
development of the Company. Mr. Rogers holds a B.A. degree from West Virginia
University.
WILLIAM L. HOOTON, 45, has been a director of the Company since January
1996. Mr. Hooton has substantial experience in the management, design,
operation, marketing and sales of image conversion systems, electronic imaging
system integration, data automation and high performance data storage
subsystems. From 1990 to 1993, Mr. Hooton was vice president of operations and
technical and business development of the Electronic Information Systems Group
of I-Net, Inc., a Washington, D.C. metropolitan area based information, data and
network systems firm. Since 1993, Mr. Hooton has been president and chief
executive officer of Q Corp., a Washington, D.C. metropolitan area high
technology consulting firm specializing in digital imaging systems and other
complex imagery in media. Since January 1996, Mr. Hooton has been a director of
the Company and has been instrumental in the organization and development of the
Company. Mr. Hooton holds a B.B.A. degree from the University of Texas.
CLIVE G. WHITTENBURY, PH.D., 63, has been a director of the Company
since June 1996. Dr. Whittenbury has substantial senior management, operations
and technical advisory experience. From 1972 to 1979, Dr. Whittenbury was a
senior vice president and, from 1976 to 1986, a director of Science Applications
International Corporation ("SAIC"), a La Jolla, California based major
international systems engineering firm with current annual revenues of
approximately $2 billion. Since 1979, Dr. Whittenbury has been executive vice
president and a director of the Erickson Group, Inc., a major international
diversified products firm. Since 1994, Dr. Whittenbury has been a director of
MVSI, Inc., a publicly held (NASDAQ: "MVSI") McLean, Virginia based laser vision
robotics company. Dr. Whittenbury is a member of the International Advisory
Board for the British Columbia Advanced Systems Institute, which manages
commercialization programs in technology at the three major Vancouver/Victoria
universities, a member of the Advisory Board of Compass Technology Partners, an
investment fund, and is chairman of the Advisory Board (Laser Directorate) for
the Lawrence Livermore National Laboratory. Dr. Whittenbury has also served as a
technical advisor to three U.S. Congressional Committees, the Grace Commission
and numerous major U.S. and foreign companies. Since June 1996, Dr. Whittenbury
has been instrumental in the organization and development of the Company. Dr.
Whittenbury holds a B.S. degree (physics) from Manchester University (England)
and a Ph.D. degree (aeronautical engineering) from the University of Illinois.
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Item 10. Executive Compensation.
OFFICER COMPENSATION
The following table sets forth certain compensation information for the
fiscal year ended March 31, 1997 with regard to the Company's chief executive
officer. No other executive officer had combined salary and bonus of $100,000 or
more in fiscal year 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
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Other
Annual
Name of Individual Position with Company Year Salary Bonus Compensation(1)
- - ------------------ --------------------- ---- ------ ----- ---------------
<S> <C> <C> <C> <C> <C>
Robert A. Veschi President, Chief Executive
Officer, Director 1997 175,000 87,500 ---
</TABLE>
(1) As of the Filing Date, the officers of the Company may have received
remuneration as part of an overall group insurance plan providing
health, life and disability insurance benefits for employees of the
Company. The amount allocable to each officer could not be specifically
ascertained, but, in any event, did not in any reported fiscal year
exceed the lesser of $50,000 and such officer's combined salary and
bonus. The Company had purchased key-man term life insurance on Mr.
Veschi in the amount of $2 million, which designates the Company as the
owner and beneficiary of the policy.
DIRECTOR COMPENSATION
As of the Filing Date, the directors of the Company, with the exception
of Mr. Veschi, were entitled to annual remuneration of $24,000 pursuant to oral
agreements between such directors and the Company. In addition, General Short
received $1,000 per month under a consulting services agreement for his
additional specific business services on behalf of the Company.
As of the Filing Date, each outside director of the Company was
entitled to receive reasonable expenses incurred in attending meetings of the
Board of Directors of the Company. The members of the Board of Directors
intended to meet at least quarterly during the Company's fiscal year, and at
such other times as duly called. The Company had four outside directors.
EMPLOYMENT AGREEMENT
As of the Filing Date, the Company had entered into an employment
agreement (the "Agreement") with Robert A. Veschi, the president and chief
executive officer of the Company, dated as of April 1, 1996. The Agreement will
expire on March 31, 2001. The current annual salary under the Agreement as of
the Filing Date was $175,000, which salary may be increased to reflect annual
cost of living increases and may be supplemented by discretionary merit and
performance increases as determined by the Board of Directors of the Company. As
of the Filing Date, Mr. Veschi was entitled to an annual bonus equal to 50
percent of the salary provided under this Agreement, which bonus is not subject
to any performance criteria.
The Agreement provides, among other things, for participation in an
equitable manner in any profit-sharing or retirement plan for employees or
executives and for participation in other employee benefits applicable to
employees and executives of the Company. The Agreement provides for the use of
an automobile, payment of club dues and other fringe benefits commensurate with
his duties and responsibilities. The Agreement also provides for benefits in the
event of disability. The Agreement also contains non-compete provisions which
are limited in geographical scope to the Washington, D.C. metropolitan area.
Pursuant to the Agreement, Mr. Veschi's employment may be terminated by
the Company with cause or by Mr. Veschi with or without good reason. Termination
by the Company without cause, or by Mr. Veschi for good reason, would subject
the Company to liability for liquidated damages in an amount equal to Mr.
Veschi's current salary and a pro rata portion of his bonus for the remaining
term of the Agreement, payable in a lump sum cash
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payment, without any set-off for compensation received from any new employment.
In addition, Mr. Veschi would be entitled to continue to participate in and
accrue benefits under all employee benefit plans and to receive supplemental
retirement benefits to replace benefits under any qualified plan for the
remaining term of the Agreement to the extent permitted by law.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the
Company's Common Stock owned as of March 31, 1997 by (i) each person who is
known by the Company to own beneficially more than five percent of the Company's
Common Stock; (ii) each of the Company's officers and directors; and (iii) all
officers and directors as a group.
<TABLE>
<CAPTION>
Number
Name and Address Position with Company of Shares Percentage of Shares
- - ---------------- --------------------- --------- --------------------
<S> <C> <C> <C>
Alonzo E. Short, Jr., Lt. Gen., Chairman of the Board 90,000 1.57
USA (ret.) (1)
Robert A. Veschi (2) President, Chief Executive 1,375,000 23.91
Officer, Director
Christina Swisher (2) Vice President, Secretary 120,000 2.09
William L. Hooton (3) Director 50,000 .87
Clive W. Whittenbury, Ph.D. (4) Director 50,000 .87
William W. Rogers, Jr. (2) Director 5,000 .09
Edward Ratkovich, Maj. Gen. Stockholder 500,000 8.70
USA (ret.) (5)
Arthur Henley (6) Stockholder 487,500 8.48
Thomas T. Prousalis (7) Stockholder 450,000 7.83
All Officers and Directors as a 1,690,000 29.39
Group (7 persons)
</TABLE>
(1) c/o Lockheed Martin, 5203 Leesburg Pike, Suite 1501, Falls Church,
Virginia 22041.
(2) c/o e-Net, Inc., 12800 Middlebrook Road, Suite 200, Germantown, Maryland
20874.c/o e-Net, Inc., 12800 Middlebrook Road, Suite 200, Germantown,
Maryland 20874.
(3) 13333 Glen Taylor Lane, Herndon, Virginia 22071.
(4) 511 Trinity Avenue, Yuba City, California 95991. Does not include
250,000 shares owned by MVSI, Inc., of which Dr. Whittenbury is, to the
Company's knowledge, a director.
(5) 1030 Delf Drive, McLean, Virginia 22101. Does not include 250,000 owned by
MVSI, Inc., of which Gen. Ratkovich is, to the Company's knowledge, a
significant shareholder, chairman and chief executive officer.
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(6) 10705 Bay Laurel Trail, Austin, Texas 78750.
(7) 1919 Pennsylvania Avenue, N.W., Suite 800, Washington, D.C. 20006. Does not
include 250,000 shares owned by MVSI, Inc., of which Mr. Prousalis is, to
the Company's knowledge, a significant shareholder.
Item 12. Certain Relationships and Related Transactions.
In January 1995, in connection with the founding of the Company, the
Company issued 300 shares of its Common Stock to Alonzo E. Short, Jr., 4,332
shares to Robert A. Veschi, 400 shares to Christina L. Swisher, 167 shares to
William L. Hooton, 167 shares to Donald J. Shoff, 1,583 shares to Arthur Henley
and 1,500 shares to Thomas T. Prousalis, Jr. Each such founding shareholder was
assessed $0.01 per share for his or her Common Stock, which amount was
equivalent to its par value at the time. Taking into account a 600:1 stock split
effective as of March 1996 (the "Forward Split") and a 2:1 reverse stock split
effective as of March 1997 (the "Reverse Split"), each such shareholder acquired
at that time the equivalent of 90,000, 1,300,000, 120,000, 50,000, 50,000,
475,000 and 450,000 shares of today's Common Stock.
In March 1996, the Company was loaned $500,000 by Edward Ratkovich,
$250,000 by Robert Foise, $200,000 by Armstrong Industries and $50,000 by Martin
Sumichrast. Principal and interest computed at the rate of eight percent
annually was to become due at the earlier of June 1, 1997 or the expected June
1996 closing date of a proposed initial public offering of Company securities.
As additional consideration for these loans, the Company issued 500,000 bridge
units to Mr. Ratkovich, 250,000 to Mr. Foise, 200,000 to Armstrong Industries
and 50,000 to Mr. Sumichrast. Each bridge unit contained one share of Common
Stock, one Class A Warrant and one Class B Warrant. In June 1996, the loan
principal was converted into paid-in capital and accounted for as consideration
for the bridge units. The Class A Warrants and Class B Warrants were canceled in
March 1997 in exchange for each such shareholder receiving additional shares of
Common Stock such that, even taking the Reverse Split into account, each such
shareholder had 500,000, 250,000, 200,000 and 50,000 shares of today's Common
Stock.
In August 1996, the Company entered into a letter of intent with MVSI,
Inc. ("MVSI"), a Washington, D.C. area based NASDAQ-listed technology products
and services company, in which the Company agreed to be acquired and become a
wholly-owned subsidiary of MVSI in an exchange of securities. To the Company's
knowledge, Edward Ratkovich is a significant shareholder and the chairman and
chief executive officer of MVSI, Thomas T. Prousalis, Jr. is a significant
shareholder of MVSI and Clive Whittenbury is a director of MVSI. Pursuant to
the letter of intent, MVSI loaned the Company $500,000 for working capital. In
October 1996, the Company entered into an agreement to be acquired by MVSI,
subject to shareholder approval. MVSI loaned an additional $500,000 to the
Company in November 1996. However, in January 1997, the parties mutually agreed
to terminate the acquisition, primarily due to market conditions that involved a
significant decrease in the bid price of MVSI's common stock and, thereby, the
value of the purchase price.
As part of a mutual cooperation agreement, in January 1997 MVSI loaned
the Company an additional $250,000 under a convertible debenture. The aggregate
principal amount of the convertible debenture at that time was $1,275,081,
reflecting the total amount of loan advances made to the Company by MVSI. The
terms provided for outstanding principal to bear annual interest of nine
percent, and for principal to be convertible into Common Stock upon the
completion of the Company's initial public offering at a ratio calculated using
the offering price per share. In March 1997, MVSI converted the convertible
debenture into 250,000 shares of Common Stock.
In March 1996, the Company acquired all right, title and interest in
the 353 Patent from Arthur Henley and Scott Grau in consideration of a five
percent overriding royalty interest against gross profits involving the use of
the 353 Patent. The Company agreed to allocate $1,000,000 of its capital to
develop and exploit the market opportunities of the 353 Patent by December 31,
1996, or the 353 Patent would be subject to repurchase by its inventors. The
Company satisfied this commitment timely.
The Company paid legal fees of approximately $380,000 during the year
ended March 31, 1997, to Thomas T. Prousalis, Jr., an attorney who is a
significant stockholder of the Company, relating to the Initial Public Offering.
The Company also paid $100,000 during the year ended March 31, 1997, to Mr.
Prousalis for services relating to an offering that was abandoned in September
1996.
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The Company rents an aircraft for business purposes from an entity
owned by Robert A. Veschi, the Company's President and Chief Executive Officer.
For the year ended March 31, 1997, the Company paid $27,796 for the rental of
the aircraft.
The Company entered into a consulting agreement with Alonzo E. Short,
Jr., Lt. Gen., USA (ret.), the Chairman of the Board, to provide services for a
fixed monthly amount of $1,000. No amounts were paid to the stockholder during
1997.
Item 13. Exhibits, List and Reports on Form 8-K.
A. Exhibits.
The following is a list of exhibits, all of which are incorporated by
reference to the Company's SB-2 Registration Statement, and related Prospectus,
Registration File No. 333-3860, declared effective by the Securities and
Exchange Commission on April 7, 1997.
3.0 Certificate of Incorporation, filed January 9, 1995.
3.1 By-laws, as amended.
4.0 Specimen Copy of Common Stock Certificate.
4.1 Form of Warrant Certificate.
4.2 Form of Representative's Warrant Agreement.
4.3 Form of Warrant Agreement.
10.0 Employment Agreement, Robert A. Veschi, dated April 1, 1996.
10.1 United States Patent, Notice of Allowance, dated January 23, 1996.
10.2 Assignment of Patent Rights, dated March 22, 1996.
10.3 Sprint Agreement, dated March 1, 1996.
10.4 Financial Advisory Agreement.
10.5 Merger and Acquisition Agreement.
10.6 Mutual Cooperation Agreement, dated January 14, 1997.
10.7 Lockheed Martin Agreement, dated January 3, 1997.
11.0 Computation of Per Share Loss.
B. Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter ending
March 31, 1997.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
e-NET, INC.
June 25, 1998
By: /s/ Robert A. Veschi
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Robert A. Veschi
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Alonzo E. Short, Jr. Chairman of the Board June 25, 1998
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Alonzo E. Short, Jr., Lt. Gen., USA (ret).
/s/ Robert A. Veschi President, Chief Executive June 25, 1998
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Robert A. Veschi Officer, Director
/s/ Christina J. Swisher Vice President, Secretary June 25, 1998
------------------------
Christina J. Swisher
/s/ William L. Hooton Director June 25, 1998
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William L. Hooton
/s/ Clive Whittenbury Director June 25, 1998
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Clive Whittenbury, Ph.D.
/s/ William W. Rogers, Jr. Director June 25, 1998
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William W. Rogers, Jr.
</TABLE>
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