U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the fiscal year ended December 31, 1999
OR
[_] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
for the transition period from __________ to ___________.
Commission File Number: 33-36670
HIDENET SECURE ARCHITECTURES, INC.
------- ------ -------------- ----
(Name of Small Business Issuer in Its Charter)
New Jersey 59-3453151
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
103 Medinat Hayehudim Street, P.O.B. 837, Herzliya Israel 46733
--- ------- --------- ------- ------ ---- -------- ------ -----
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: 011-972-9-957-9795
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Name of Each Exchange on which
Title of Each Class: Registered:
----- -- ---- ----- ----------
None None
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 [_] No [X]
Check if there is no disclosure of delinquent filers pursuant 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. [_]
The issuer's revenues for its most recent fiscal year were $ 0.
<PAGE>
The aggregate value of the voting stock of the registrant held by
non-affiliates of the registrant as of March 2000, was $7,788,100, based on
$4.75 per share, which was the last price of the stock when the shares were
de-listed in March 2000. Therefore, it is difficult if not impossible to
accurately arrive at a completely realistic value of the stock of the registrant
in view of the fact that there is no current market.
As of June 15, 2000, 5,154,553 shares of the registrant's common stock,
par value $.025 per share, were outstanding.
Check whether the issuer has filed all documents and reports required
to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes [_] No [_]
Not Applicable _ See, however, Part I, Item 1 and Note 1(b) to the
Company's audited financial statements with respect to its wholly owned
subsidiary being placed in receivership in August 1997.
Transitional Small Business Disclosure Format Yes [_] No [X]
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY
Savin Electronics Inc. (the "Company") is a company incorporated in the
State of New Jersey in August, 1990. The Company recently decided to enter the
field of network data security and it is currently developing products in such
area (see Item 6 "Management's Plan of Operation" below). On June 29, 1999, the
Company changed its name to "Hidenet Secure Architectures, Inc." to reflect the
Company's current business plans.
The Company filed a Self-Underwritten Registration Statement on Form 18,
which Registration Statement was declared effective on November 1, 1991 and the
offering described therein closed in January of 1992. From the conclusion of its
aforesaid public offering of securities through April of 1996 the Company had
been pursuing its stated business activities seeking to acquire business(es);
its public offering having been a "blind pool/blank check" offering. The Company
had basically been inactive since "going public" until the closing in April 1996
of its initial acquisition. The Company acquired as a result of such
acquisition, Savin Electronics, Ltd., an Israeli corporation ("Savin Israel"),
which was engaged in the development, manufacture and marketing of electronic
power supply products for computers and other electronic systems. Savin Israel
incurred losses in excess of $1,200,000 as at December 31, 1996. Additionally,
as at December 31, 1996, Savin Israel's current liabilities exceeded its current
assets by approximately $2,100,000 and it had a shareholders' deficiency of
approximately $1,300,000. Savin Israel was placed in receivership in August 1997
and remains in the process of being liquidated for the benefit of creditors.
The Company has not had any revenues from operations from its inception
through December 31, 1999.
The Company, formerly known as Savin Electronics Inc., decided to enter
the field of network data security, and in connection therewith entered into an
agreement on June 11, 1999 (the "Agreement") with Uriel Ginsberg, Jonatan Levin
and John Federman (collectively, the "Inventors") and Royce Investment Group
("RIG") pursuant to which the Company issued to Ginsberg, Levin and Federman,
600,000, 600,000 and 1,800,000 shares, respectively of its common stock, par
value $.025 per share ("Common Stock"). In consideration for the issuance of an
aggregate of 3,000,000 shares of Common Stock, the Inventors delivered to the
Company all right, title and interest owned by each of the Inventors in the
proprietary products in the field of Internet protocol network and data
encryption and related property (collectively the "Intellectual Property"). As a
result of the issuance, the Inventors collectively held 73.9% of the issued and
outstanding capital stock of the Company.
Upon consummation of the Agreement, in July 1999 the Company established a
research and development subsidiary, Hidenet Secure Architectures Ltd. (the
"Subsidiary"), in Israel and all the Intellectual Property was transferred to
the Subsidiary. Federman became a consultant and Ginsberg and Levin became full
time employees of the Subsidiary.
RIG was retained to act as a financial consultant to the Company to sell
up to $600,000 worth of shares of Common Stock for the Company. Upon the sale of
each installment of $50,000, RIG was entitled to 80,000 shares of Common Stock,
up to a maximum of 1,800,000 shares, and was issued a total of 1,500,000 shares
in connection with its services to the Company. Currently, RIG owns no shares of
Common Stock.
In November 1999, investors invested $50,000 in the Company in exchange
for 80,000 shares of Common Stock. In connection therewith, the Company issued
to RIG an additional 80,000 shares of Common Stock (which were subsequently sold
by RIG). In addition, the Company is to pay RIG $75,000 for performing
consultancy services to the Company. Said amount is payable upon the closing of
an offering of 1,000,000 shares of Common Stock. In addition, the Company shall
pay RIG a finder's fees equal to 10% of the gross proceeds of any investment
made by an investor introduced by RIG and a non-accountable expense allowance of
$10,000 in connection with the private placement. RIG also received a warrant,
exercisable for three years from July 1999, to purchase up to 500,000 shares of
Common Stock at an exercise price of $0.125 per share (the "Warrant"). The
Warrant has been exercised, and the shares are not currently owned by RIG.
The Company agreed not to execute any financing agreement or engage in any
offering of securities of the Company for a twelve-month period following such
period. RIG has a right of first refusal on any Regulation S, Regulation D or
Section 4(2) offerings proposed to be effected by the Company.
The net proceeds of first phase of the offering are to be transferred to
Subsidiary. In connection with acting as a consultant to the Subsidiary, RIG is
entitled to 7% of the gross proceeds of any investment made into the Subsidiary
and common shares of the Subsidiary representing 7% of the gross proceeds of an
investment made in the Subsidiary.
On December 28, 1999, IBDH, LLC, a Delaware limited liability company
("IBDH"), purchased all of the shares of the Company owned by the Inventors.
These shares were initially issued by the Company in connection with the
acquisition by the Company of the right, title and interest in the proprietary
technology in the field of network data security owned by the Inventors. IBDH is
80% owned by Ron Fussman, the President, Secretary and a director of the Company
and 20% by Uriel Ginsberg.
NetworkPrivacy. Com, Inc., a Delaware corporation, was formed as a
wholly-owned subsidiary of the Company ("NPI") on January 7, 2000 to assume all
of the business currently transacted by the Subsidiary. The Subsidiary assigned
all of its right, title and interest in the intellectual property and certain
equipment to NPI in consideration for $325,000. Said amount is payable by NPI
upon the earlier of the completion of a private placement by NPI or April 1,
2002. In addition, NPI must pay the Subsidiary royalties equal to 1% of sale
proceeds received by NPI until April 1, 2002. Upon the investment made by the
Investor described below, NPI paid the Subsidiary $325,000, which was
subsequently paid to the Company.
NP PARTNERS, LLC INVESTMENT
On April 13, 2000, NP Partners, LLC, a New York limited liability company
(the "Investor"), entered into a Stock and Option Purchase Agreement (the
"Purchase Agreement") with the Company and NPI pursuant to which the Investor
purchased 80,000 shares of Series A Convertible Preferred Shares of NPI ("Series
A Shares") for $1,000,000, and had the right to purchase up to an additional
80,000 Series A Shares for an additional $1,000,000 investment within 30 days
from April 14, 2000. The Company granted the Investor an option (the "Option")
to exchange the Series A Shares for (i) 873,336 shares of the Common Stock if
the Investor exercises its option and invests $2,000,000 in NPI, (ii) 436,668
shares of the Common Stock if the Investor invests $1,000,000 and (iii) an
appropriately pro rata number of shares of Common Stock if the Investor invests
a portion of $1,000,000 in NPI. In connection with the transaction, Mark S.
Hauser was nominated by the Investor to become a director of both the Company
and NPI, and the Investor has the right to maintain a director on the Board of
Directors of both the Company and NPI so long as the Investor holds at least 75%
of the aggregate of the Series A Shares purchased pursuant to the Purchase
Agreement and the shares exercisable upon exercise of the option granted by the
Company. The Investor was also granted 62,053 shares of Common Stock; at the
option of the Investor, such shares are exchangeable for shares in NPI.
The Investor was also granted demand registration rights and piggyback
registration rights on the securities of both the Company and NPI and co-sale
rights and preemptive rights with respect to future issuances of securities by
either the Company or NPI. In addition, the Investor has a right of first
refusal on transfers of shares of the Company's Common Stock in excess of
300,000 each 6-month period effectuated by IBDH, the majority stockholder of the
Company.
The Board of Directors of the Company approved the increase of the size of
the Board of Directors of the Company to five, and such vacancies were filled by
Robert Friedman and Uriel Ginsburg. Each of the directors of the Company
(Messrs. Fussman, Savran, Friedman and Ginsburg) was subsequently granted 62,053
shares.
For terms and conditions of the Purchase Agreement, the Stock Option
Agreement and the Investor Rights Agreement, reference is made to such documents
attached as Exhibits 10.1, 10.2 and 10.3 to the Current Report on Form 8-K filed
by the Company dated April 14, 2000. All statements made herein concerning the
foregoing agreements are qualified in their entirety by reference to such
Exhibits.
The Purchase Agreement was amended on May 19, 2000 to extend the time that
the Investor can purchase additional shares of Series A Shares until July 1,
2000. In connection with said amendment, the Investor purchased an additional
32,000 shares of Series A Shares, and the option to exchange the Series A Shares
for common shares of the Company was increased to 174,669 shares. For the terms
and conditions of the amendment to the Purchase Agreement, reference is made to
such document attached hereto as Exhibit 10.8. All statements made herein
concerning the foregoing agreement is qualified in its entirety by reference to
such Exhibit.
On June 12, 2000, the Investor purchased an additional 10,000 shares of
Series A Shares, and the option to exchange the Series A Shares for Common Stock
was increased to 229,253 shares.
EMPLOYEES
As of calendar year ended December 31, 1999 the Company did not have any
employees; currently the Company employs 9 individuals on a full-time basis.
Pursuant to the terms of the Employment Agreement between the Subsidiary and
Robert Friedman, Mr. Friedman shall be the Chief Executive Officer of the
Subsidiary until October 31, 2003 at an annual salary of $150,000. Mr. Friedman
is entitled to an aggregate amount of 15% of the equity of the Company, or
818,753 shares of common stock, during the term of his employment. For the terms
and conditions of the Employment Agreement, reference is made to such document
attached hereto as Exhibit 10.8. Mr. Friedman is also the Chief Executive
Officer of NPI.
ITEM 2. DESCRIPTION OF PROPERTY
The Company maintains a business address care of Subsidiary at 103 Medinat
Hayehudim Street, Herzliya, Israel 46733. Such offices are maintained pursuant
to a two-year lease at a cost of approximately $4,640 per month. The lease is
renewable at the option of the Company at a 10% annual increase above the
current rent. NPI leases approximately 660 square feet of space in New York City
at a base monthly rental of $1,850 pursuant to lease which expires in June 2002.
ITEM 3. LEGAL PROCEEDINGS
The Company's wholly owned subsidiary, Savin Israel, was placed in
receivership in August of 1997. The Company is not presently a party to any
other material litigation nor, to the knowledge of management, is any material
litigation threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock was traded on the over-the-counter bulletin
board (OTCBB) until March, 2000. The following table sets forth, for the periods
indicated, the high and low bid prices for a share of the Common Stock for the
first fiscal quarter of 2000 and each fiscal quarter during the prior two fiscal
years. All prices indicated below are as reported to the Company by
broker-dealer(s) making a market in its securities in the National Quotation
Data Service ("pink sheets") and/or in the OTCBB (the latter under the symbol
SVPS until July 1999 when in connection with the Company's name change, the
Company changed its trading symbol to HIDE). The aforesaid securities were not
traded or quoted on any automated quotation system (other than as may be
indicated herein). The over-the-counter market quotes indicated below reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.
High Low
Fiscal Year Ended December 31, 1998
First Quarter........................ $ .40 $ .10
Second Quarter....................... $ .10 $ .10
Third Quarter........................ $ .10 $ .10
Fourth Quarter....................... $2.50 $2.50
Fiscal Year Ended December 31, 1999
First Quarter........................ $3.87 $1.90
Second Quarter....................... $3.87 $3.87
Third Quarter........................ $3.87 $2.00
Fourth Quarter....................... $5.00 $1.13
First Fiscal Quarter of 2000............. $5.25 $2.00
Second Fiscal Quarter of 2000 (through March 14) $5.25 $3.00
As of April 4, 2000, there were approximately 59 stockholders of record as
indicated on the transfer agent's list of stockholders.
The Company has not paid or declared any dividends upon its Common Stock
since its inception and, by reason of its present financial status and its
contemplated financial requirements, does not currently contemplate or
anticipate paying any dividends on its Common Stock in the foreseeable future.
<PAGE>
ITEM 6. MANAGEMENT'S PLAN OF OPERATION
Cautionary Statement for Forward-Looking Information
Certain statements contained in this report, including statements
regarding the anticipated development of the Company's business, the intent,
belief or current expectations of the Company, its directors or its officers,
primarily with respect to the performance of the Company and the products it
expects to offer and other statements contained herein regarding matters that
are not historical facts, are "forward-looking" statements within the meaning of
the Private Securities Litigation Reform Act (the "Reform Act"). Future filings
with the Securities and Exchange Commission, future press releases and future
oral or written statements made by or with the approval of the Company which are
not statements of historical fact, may contain forward-looking statements under
the Reform Act. Because such statements include risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements
include, without limitation, the failure of the Company to obtain additional
financing, the failure of the Company to develop a product which is marketable,
rapid technological changes in the environment, frequent new product
introductions by others in the industry with greater resources than the Company,
competition in the marketplace in which the Company decided to operate and
evolving industry standards and customer preferences in that market which are
difficult to predict. Not only could the Company fail to produce a marketable
product, but the introduction of products embodying new technologies and the
emergence of new industry standards could render the Company's product, if it is
even developed, as well as any potential new products, obsolete and
unmarketable. Such constant technological changes also make accurate market
predictions difficult. The Company's results depend in part upon its ability to
attract, train, retain and motivate qualified management, technical,
manufacturing, sales and support personnel for its operations. The Company is in
the process of filing for patent protection in the United States for the product
which it is in the process of developing.
All forward-looking statements speak only as of the date on which they are
made. The Company undertakes no obligation to update such statements to reflect
events that occur or circumstances that exist after the date on which they are
made.
The Company has never had any revenues since its inception.
The Company currently intends to develop and market products in the field
of network data security through NPI. The Company and NPI are still in the
development stage of a marketable product in the field of network data security.
The Company has no current operations, and even if the products it is developing
in the networks data security field are brought to market, there is no
likelihood that the sales of the Company's products will be sufficient to cover
the costs and expenses of the Company's operations. The Company estimates that
sales of its products will commence in the third quarter of 2000, but there is
no assurance that its products will be ready for market at such time. The
Company will attempt to obtain equity financing. Failure to locate funding for
the Company raises doubts about its ability to continue as a going concern.
The Company currently has no significant business operations and (as
heretofore indicated) its wholly owned subsidiary Savin Israel is being
liquidated for the benefit of creditors.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company, including the notes thereto,
together with the report thereon by Kost Forer & Gabbay, a member of Ernst &
Young International are presented beginning at page F-1.
<PAGE>
HIDENET SECURE ARCHITECTURES INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
IN U.S. DOLLARS
INDEX
Page
-----------
Report of Independent Auditors F2
Consolidated Balance Sheet F3
Consolidated Statements of Operations F4
Statements of Changes in Shareholders' Deficiency F5
Consolidated Statements of Cash Flows F6
Notes to Consolidated Financial Statements F7 - F16
- - - - - - - -
F-1
<PAGE>
[OBJECT OMITTED]ERNST & YOUNG
|X| Kost Forer & Gabbay
3 Aminadav St.
Tel-Aviv 61575, Israel
|X| Phone: 972-3-6232525
Fax: 972-3-5622555
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
HIDENET SECURE ARCHITECTURES INC.
We have audited the accompanying consolidated balance sheet of Hidenet
Secure Architectures Inc. and its subsidiary (a company in the development
stage) as of December 31, 1999 and the related consolidated statements of
operations, changes in shareholders' deficiency and cash flows for each of the
two years in the period ended December 31, 1999 and for the period from August
23, 1990 (inception) until December 31, 1999. 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 auditing standards generally
accepted in the United States. 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 also 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 consolidated financial position of Hidenet Secure
Architectures Inc. and its subsidiary as of December 31, 1999 and the results of
their consolidated operations and cash flows for each of the two years in the
period ended December 31, 1999 and for the period from August 23, 1990
(inception) until December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
Tel-Aviv, Israel KOST FORER & GABBAY
May 17, 2000 A Member of Ernst & Young
International
F-2
<PAGE>
HIDENET SECURE ARCHITECTURES INC.
(A Company in the development stage)
CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
In U.S. dollars
December 31,
1999
-------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................................... 4,360
Accounts receivable and prepaid expenses (Note 3) ............. 43,888
----------
Total current assets .......................................... 48,248
----------
PROPERTY AND EQUIPMENT, NET (Note 4) .......................... 38,846
----------
OTHER ASSETS, NET (Note 5) .................................... 100,000
----------
187,094
==========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities (Note 6) ............. 116,178
Related parties (Note 10) ..................................... 85,000
Loan received from officer (Note 7) ........................... 3,352
----------
Total current liabilities ..................................... 204,530
----------
COMMITMENTS (Note 11)
SHAREHOLDERS' DEFICIENCY:
Common shares - $ 0.025 par value (Note 8):
Authorized: 15,000,000 shares as of December 31, 1999 and 1998
Issued and outstanding: 59,600 stock and 4,139,600 shares as of
December 31, 1998 and 1999, respectively ................... 103,490
Additional paid-in capital .................................... 1,278,166
Accumulated deficit ........................................... (1,399,092)
----------
Total shareholders' deficiency ................................ (17,436)
----------
187,094
==========
The accompanying notes are an integral part of
the consolidated financial statements.
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
In U.S. dollars
<TABLE>
<CAPTION>
Period from
August 23,
1990
Year ended (inception)
December 31, through
December 31,
-----------------------------------
1999 1998 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
Operating costs and expenses:
Research and development ................ 75,041 -- 75,041
Marketing ............................... 25,000 -- 25,000
General and administrative .............. 286,034 23,250 438,673
Write down of investment in subsidiary .. -- -- 859,478
--------- --------- ---------
Operating loss ............................. 386,075 23,250 1,398,192
Financial expenses, net .................... 900 -- 900
--------- --------- ---------
Net loss ................................... 386,975 23,250 1,399,092
========= ========= =========
Basic and diluted net loss per share ....... 0.19 0.67 6
========= ========= =========
Weighted average number of shares
used in computing basic and diluted net
loss ....................................... 2,072,933 34,850 233,276
per share
========= ========= =========
</TABLE>
The accompanying notes are an integral part of
the consolidated financialstatements.
F-4
<PAGE>
STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY
--------------------------------------------------------------------------------
In U.S. dollars
<TABLE>
<CAPTION>
Additional Total
Common stock paid-in Accumulated shareholders'
-----------------------
Stock Amount capital deficit deficiency
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance as of August 23, 1990 . -- -- -- -- --
Issuance of shares, net ..... 1,820 1,820 14,857 -- 16,677
Net loss .................... -- -- -- (16,915) --
---------- ---------- ---------- ---------- ----------
Balance as of April 1, 1992 ... 1,820 1,820 14,857 (16,915) (238)
Additional Paid-In Capital .... --
Acquired ...................... -- -- 9,000 -- 9,000
Through Services Provided
Without
Cost
Net Loss ...................... -- -- -- (11,227) (11,227)
---------- ---------- ---------- ---------- ----------
Balance as of April 1, 1993 ... 1,820 1,820 23,857 (28,142) (2,465)
Additional Paid-In Capital
Acquired ...................... -- -- 9,000 -- 9,000
Through Services Provided
Without Cost
Net Loss ...................... -- -- -- (12,020) (12,020)
---------- ---------- ---------- ---------- ----------
Balance as of April 1, 1994 ... 1,820 1,820 32,857 (40,162) (5,485)
Additional Paid-In Capital
Acquired Through Services ..... -- -- 9,000 -- 9,000
Provided Without Cost
Net Loss ...................... -- -- -- (9,681) (9,681)
---------- ---------- ---------- ---------- ----------
Balance as of April 1, 1995 ... 1,820 1,820 41,857 (49,834) (6,166)
Additional Paid-In Capital
Acquired ...................... -- -- 9,000 -- 9,000
Through Services Provided
Without Cost
Net Loss ...................... -- -- -- (8,434) (8,434)
---------- ---------- ---------- ---------- ----------
Balance as of April 1, 1996 ... 1,820 1,820 50,857 (58,277) (5,600)
Adjustment from change of par
value to ...................... -- (1,775) 1,775 -- --
$ 0.025 per share
Shares issued to acquire ...... 24,600 615 -- -- 615
foreign subsidiary
Net proceeds from private
placement of .................. 6,180 155 871,959 -- 872,114
shares
Net loss ...................... -- -- -- (918,103) (918,103)
---------- ---------- ---------- ---------- ----------
Balance as of December 31, 1996 32,600 815 924,591 (976,380) (50,974)
Net Loss ...................... -- -- -- (12,487) (12,487)
---------- ---------- ---------- ---------- ----------
Balance as of January 1, 1998 . 32,600 815 924,591 (988,867) (63,461)
Issuance of shares, net ....... 27,000 675 19,325 -- 20,000
Net loss ........... -- -- -- (23,250) (23,250)
---------- ---------- ---------- ---------- ----------
Balance as of December 31, 1998 59,600 1,490 943,916 (1,012,117) (66,711)
Issuance of common shares in
respect of .................... 1,800,000 45,000 135,000 -- 180,000
services
Issuance of warrants in respect
of consulting services ....... -- -- 15,000 -- 15,000
Issuance of common shares in
respect of .................... 1,200,000 30,000 90,000 -- 120,000
purchasing know-how
Issuance of common stock, net . 1,080,000 27,000 94,250 -- 241,250
Net loss ...................... -- -- (386,975) (386,975)
---------- ---------- ---------- ---------- ----------
Balance as of December 31, 1999 4,139,600 103,490 1,278,166 (1,399,092) (17,436)
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
In U.S. dollars
<TABLE>
<CAPTION>
Period from
August 23,
1990
Year ended (inception)
December 31, through
December 31,
-----------------------------
1999 1998 1999
------------- -------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ........................................... (386,975) (23,250) (1,399,092)
Adjustments to reconcile net loss to net cash used
in
operating activities:
Officer salary and rent without cost ............... -- -- 41,930
Write-down of investment in subsidiary ............. -- -- 859,478
Consulting services expenses ....................... 195,000 -- 195,000
Depreciation and amortization ...................... 22,480 -- 22,941
Increase in accounts receivable and prepaid expenses (43,888) -- (44,388)
Increase in accounts payable and accrued liabilities 57,302 2,415 116,218
Increase in payables to related parties ............ 85,000 -- 85,000
---------- ---------- ----------
Net cash used in operating activities .............. (71,081) (20,835) (122,913)
---------- ---------- ----------
Cash flows from investing activities:
Purchase of fixed assets ........................... (41,326) -- (41,326)
Advance to foreign subsidiary ...................... -- -- (858,864)
---------- ---------- ----------
Net cash used in investing activities .............. (41,326) -- (900,190)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock, net ........ 121,250 20,000 1,015,111
Loan received from officer ......................... 200 835 17,035
Payments of loan received from officer ............. (4,683) -- (4,683)
---------- ---------- ----------
Net cash provided by financing activities .......... 116,767 20,835 1,027,463
---------- ---------- ----------
Increase in cash and cash equivalents .............. 4,360 -- 4,360
Cash and cash equivalents at the beginning of the -- -- --
period
---------- ---------- ----------
Cash and cash equivalents at the end of the period . 4,360 -- 4,360
========== ========== ==========
Non-cash investing and financing activities:
Issuance of common stock to acquire know-how ....... 120,000 -- 120,000
========== ========== ==========
Common stock issued to acquire a foreign subsidiary -- -- 615
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-6
<PAGE>
HIDENET SECURE ARCHITECTURES INC.
(A Company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In U.S. dollars
NOTE 1:- GENERAL
a. Hidenet Secure Architectures Inc. ("the Company"), formerly
known as Savin Electronics Inc.
b. The Company was incorporated in the State of New Jersey in
August, 1990. The Company recently decided to enter the field of
network data security and it is currently developing products in
such area.
c. The subsidiary is devoting substantially all of its efforts
towards conducting research and development. The Company has
sustained operating losses and expects such losses to continue
in the foreseeable future. The Company has not generated any
significant revenues or product sales and has not achieved
profitable operations or positive cash flow from operations. The
Company's deficit accumulated during the development stage
aggregated to $ 1,399,092 through December 31, 1999. There is no
assurance that profitable operations, if ever achieved, could be
sustained on a continuing basis.
The Company plans to continue to finance its operations with a
combination of raising cash through an offering or by financial
support from its shareholders and, in the longer term, by
generating revenues from product sales. There is no assurance,
however, that the Company will be successful in obtaining an
adequate level of financing needed for the long-term development
and commercialization of its planned products.
In June 1999, the Company entered into an investment agreement,
as described in Note 9, (See also Note 13).
d. Hidenet Secure Architectures Ltd. was incorporated in June 1999,
as a wholly-owned subsidiary of the Company. (See Note 9).
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in
United States.
b. Use of estimates:
The preparation of the financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
c. Financial statements in U.S. dollars:
A substantial portion of the subsidiary's costs are incurred in
dollars. Accordingly, the subsidiary has determined the U.S.
dollar as the primary currency of its economic environment and
thus its functional and reporting currency.
F-7
<PAGE>
The subsidiary's transactions and balances denominated in
dollars are presented at their original amounts. Non-dollar
transactions and balances are recorded at the exchange rate at
the date of the transaction and remeasured to dollars in
accordance with Statement of Financial Accounting Standards
("SFAS") No. 52 of the U.S. Financial Accounting Standards Board
("FASB"). All transaction gains and losses from remeasurement of
monetary balance sheet items denominated in non-dollar
currencies are reflected in the statements of operations as
financial income or expenses, as appropriate.
d. Principles of consolidation:
The consolidated financial statements include the accounts of
the Company and its subsidiary. Intercompany transactions and
balances have been eliminated in consolidation.
e. Cash equivalents:
The Company considers all highly liquid investments originally
purchased with maturities of three months or less to be cash
equivalents.
f. Property and equipment:
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is calculated using the straight line
method over the estimated useful lives, at the following annual
rates:
%
-----------------
Leasehold improvements (Over the term of
the lease)
Computers and related equipment 33
Office furniture and equipment 7 - 10
g. Other assets:
Other assets are stated at amortized cost. Amortization is
calculated using the straight-line method over the estimated
useful life, at the following annual rate:
%
------------------
Know-how 33
F-8
<PAGE>
h. Fair value of financial instruments:
SFAS No. 107, "Disclosure About Fair Value of Financial
Instruments", requires disclosures about the fair value of
financial instruments. The following disclosures of the
estimated fair value of financial instruments have been
determined by the Company using available market information and
valuation methodologies described below. However, considerable
judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented
herein may not be indicative of the amounts that the Company
could realize in a current market exchange. The use of different
market assumptions or valuation methodologies may have a
material effect on the estimated fair value amounts.
The financial instruments of the Company are mainly cash and
cash equivalents, accounts receivable, accounts payable and
accrued liabilities. The carrying amounts of these financial
instruments reasonably approximate their fair values due to the
short-term maturities of these instruments
i. Basic and diluted net loss per share:
Basic loss per share is computed based on the weighted average
number of common shares outstanding during each year. Diluted
net loss per share is computed based on the weighted average
number of common shares outstanding during each year, plus the
dilutive potential common shares considered outstanding during
the year, in accordance with FASB Statement No. 128, "Earnings
Per Share".
All outstanding warrants have been excluded from the calculation
of the diluted net loss per Common stock because all such
securities are anti-dilutive for all periods presented. The
total numbers of stocks related to the outstanding warrants
excluded from the calculations of diluted net loss per share
were 500,000 for the year ended December 31, 1999.
j. Accounting for stock-based compensation:
In accounting for warrants granted to those other than
employees, the provisions of Statement of Financial Accounting
Standard Board No. 123, "Accounting for Stock-Based
Compensation", were applied. The fair value of these warrants
was estimated at the grant date using the Black-Scholes option
pricing model.
k. Research and development costs:
Research and development expenditures are charged to operations
as incurred. SFAS No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed", requires
capitalization of certain software development costs, subsequent
to the establishment of technological feasibility. Based on the
Company's product development process, technological feasibility
is established upon the completion of a working model. The
Company generally does not incur any costs between the
completion of the working model and the point at which the
product is ready for general release. Therefore, through
December 31, 1999, The Company has charged all software
development costs to research and development expenses in the
period incurred.
F-9
<PAGE>
l. Concentrations of credit risk:
SFAS No. 105, "Disclosure of Information About Financial
Instruments with off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk", requires
disclosure of any significant off-balance-sheet and credit risk
concentrations. The Company has no significant off-balance-sheet
concentration of credit risk such as foreign exchange contracts
or other foreign hedging arrangements.
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and
cash equivalents. Cash and cash equivalents are deposited with
major banks in Israel. Management believes that the financial
institutions that hold the Company's investments are financially
sound, and, accordingly, minimal credit risk exists with respect
to these investments.
m. Income taxes:
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes". This statement prescribes the use
of the liability method, whereby deferred tax asset and
liability account balances are determined based on differences
between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. The Company provides a valuation allowance, if
necessary, to reduce deferred tax assets to their estimated
realizable value.
n. Impact of recently issued accounting standards:
In June 1998, the Financial Accounting Standards Board issued
No. 133 ("SFAS 133"), "Accounting for Derivative instruments and
Hedging Activities" ("SFAS No. 133"). This Statement establishes
accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. The
Statement also requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying
hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. The
FASB has issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133". The Statement defers for one
year the effective date of SFAS No. 133. The rule will apply to
all fiscal quarters of all fiscal years beginning after June 15,
2000. The Company does not expect the impact of this new
statement on the Company's consolidated balance sheets or
results of operations to be material.
F-10
<PAGE>
NOTE 3:- ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
December 31,
1999
-----------------
Government authorities 4,834
Receivable-officer ... 3,760
Prepaid expenses ..... 35,294
------
43,888
======
NOTE 4:- PROPERTY AND EQUIPMENT
Cost:
Leasehold improvements ........ 6,450
Office furniture and equipment 13,228
Computers and related equipment 21,648
------
41,326
Accumulated depreciation ........ 2,480
------
Depreciated cost ................ 38,846
======
Depreciation expenses amounted to $ 2,480 for the year ended
December 31, 1999.
NOTE 5:- OTHER ASSETS
Cost ................... 120,000
Accumulated amortization 20,000
-------
100,000
=======
See also Note 9.
NOTE 6:- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accrued expenses ..... 97,752
Employees ............ 5,575
Other accounts payable 12,851
-------
116,178
=======
F-11
<PAGE>
NOTE 7:- LOAN RECEIVED FROM OFFICER
The balance does not bear interest and a repayment date has not yet been
determined.
NOTE 8:- COMMON SHARES
a. In October 1998, the Company effected a reverse stock split of
1:250 on the nominal common stock of the existing shareholders.
All Common shares and per Common share amounts have been
retroactively adjusted to reflect this split, for all periods
presented.
b. In November 1998, the Company issued 27,000 shares to a
financial agent, in consideration of consulting fees totaling $
20,000. The consulting fees are charged as an expense.
c. Pursuant to the Investment agreement (Note 9) the Company
issued:
In June 1999, 1,200,000 shares to the inventors, and 1,800,000
shares to the consultant.
In July 1999, 1,000,000 shares to inventors, in consideration
for $ 100,000.
In November 1999, 80,000 shares to investors, in consideration
for $ 50,000.
In June 1999, 500,000 warrants to financial consultant at and
exercise price of $ 0.125 per share, exerecisable for a period
of three years
NOTE 9:- PURCHASE OF KNOW-HOW AND INVESTMENT AGREEMENT
In June 1999, the Company entered into an agreement with two
inventors, a consultant and a financial agent.
The Company purchased from the inventors, a know-how in the
field of network data security, in consideration for 1,200,000
shares. The know-how was recorded at its fair market value $
120,000, and is amortized over a period of three years. The
Company also entered into employment agreement with the two
inventors.
The Company entered into a six months consulting agreement with
the consultant, in consideration for 1,800,000 shares.
Consulting fees totaling $ 180,000 are charged as an expense
over the consulting period.
F-12
<PAGE>
The agent will offer and sell (on a best efforts basis) the
Company's shares in two steps, in consideration for 10% finders
fee, plus expenses totaling $ 10,000, as follows:
a. 1,000,000 shares in consideration for $ 100,000 within 120 days.
b. 800,000 shares in consideration for $ 500,000, within additional
180 days, which may be executed in installments of $ 50,000
each.
The agent has a twelve month exclusive right for executing
financing agreement on behalf of the Company, and a twelve month
first refusal right on any offering proposed by the Company.
The agent will serve as the Company's financial consultant for a
period of 12 months, in consideration for $ 75,000, and 500,000
warrants (including registration rights at Company's expense) at
an exercise price of $ 0.125 per share, exercisable for a period
of three years commencing with the closing of step A. Consulting
expense, comprising the fair value of these options, totaling $
15,000 are charged as an expense over the consulting period.
In June 1999, the Company transferred the know-how to its
wholly-owned subsidiary, Hidenet Secure Architectures Ltd. The
agent will serve as LTD.'s financial agent in consideration for
7% of the proceeds raised, and as financial consultant in
consideration for warrants to purchase 7% of LTD.'s raised
stock. As to subsequent events in respect of LTD. see Note 13.
NOTE 10:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES
December 31,
1999
-----------
a. Balances with related parties:
Current liabilities:
Related parties (1) 85,000
===========
(1) For consulting services, offering and selling the
Company shares.
Year ended
December 31,
-------------
1999
-------------
b. Transactions with shareholders:
Consultation services 43,125
=============
Salaries and related benefits 10,811
=============
F-13
<PAGE>
NOTE 11:- COMMITMENTS
The subsidiary rents offices in Israel for a monthly payment of
U.S. $ 3,500, which expires at the end of November 2001.
The subsidiary has an option to extend the lease term for an
additional two years.
Future rental payments, under non cancelable operating leases
are as follows:
U.S. dollars
-------------
2000 42,000
2001 38,500
-------------
80,500
=============
Rent expenses for the years ended December 31, 1999, were $ 17
thousand. No rent expenses were recorded in 1998.
NOTE 12:- TAXES ON INCOME
a. Measurement of results for tax purposes:
Results for tax purposes of the Israeli subsidiary are measured
on real basis adjusted to the increase in the Israeli CPI. As
explained in Note 2b, the financial statements are prepared in
U.S. Dollars. The difference between the annual change in the
Israeli CPI and in the NIS/U.S. dollar exchange rate causes a
difference between taxable income and the reported income
reflected by the financial statements. In accordance with
paragraph 9(f) of SFAS No. 109 the subsidiary has not provided
deferred income taxes on differences between the reporting
currency and the tax bases of assets and liabilities.
F-14
<PAGE>
b. Reconciliation of the theoretical tax benefit to the actual tax
benefit:
A reconciliation of theoretical tax benefit, assuming all income
is taxed at the statutory rate and the actual tax benefit, is as
follows:
Year ended
December 31,
--------------------------
1999 1998
========== =========
Loss before taxes on income, as reported
in the consolidated statements of income 386,975 23,250
======== ========
Statutory tax rate ....................... 35% 35%
======== ========
Theoretical tax benefit .................. 135,441 8,138
Decrease in taxes resulting from:
Non-deductible expenses, net ........... 1,338 (8,138)
Losses for which valuation allowances in
respect of deferred tax assets were ...... (136,779) --
provided
-------- --------
Actual tax benefit ....................... -- --
======== ========
c. Carryforward tax losses and deductions:
Carryforward tax losses and deductions of the Company and its
subsidiary totaled approximately $ 134 thousand at December 31,
1999.
d. Loss before income taxes consists of the following:
Year ended
December 31,
--------------------------
1999 1998
========== ============
Domestic 246,225 23,250
Foreign 140,750 --
----------- ------------
386,975 23,250
=========== ============
F-15
<PAGE>
e. Deferred income taxes
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets are as follows:
Year ended
December 31,
--------------------------
1999 1998
========== ============
Loss carryforward 134,103 --
Less - valuation allowance (134,103) --
---------- ------------
-- --
========== ============
The Company and its subsidiary have provided valuation
allowances in respect of deferred tax assets resulting from tax
loss carryforwards and other temporary differences; management
currently believes that it is more likely than not that the
deferred taxes related to these items will not be realized.
NOTE 13:- SUBSEQUENT EVENTS
a. In April 2000, Hidenet Secure Architectures Ltd. sold the
intellectual property and equipment to Network Privacy.Com Inc.
("NPI") in exchange for $ 325,000 and royalties equal to 1% of
the sales proceeds received by the Company within two years.
NPI, a Delaware corporation, was formed as a wholly-owned
subsidiary of the Company on January 7, 2000 to assume all of
the business currently transacted by Hidenet Secure
Architectures Ltd.
b. On April 13, 2000, NP Partners, LLC, "the Investor", entered
into a Stock and Option Purchase agreement with the Company and
its subsidiary, according to which the investor will purchase
112,000 Preferred shares of NPI and will grant an option to
purchase an additional 611,335 Common shares of the Company, in
consideration of $ 1,400,000.
The investor was also granted demand registration rights.
F-16
- - - - - - - -
<PAGE>
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;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Set forth below are the name, age and positions with the Company, their
business experience during the last five years and the year each was first
elected a director of the Company of the directors and executive officers of the
Company as of December 31, 1999:
Name and Address Position(s) Held Age
-------------------------------- ----------------------- -----
Ron Fussman President, Secretary and 38
c/o Hidenet Secure Director
Architectures, Inc.
103 Medinat Hayehudim Street
Herzliya Israel 46733
Avrum Savran Chairman of the Board of 56
c/o Hidenet Secure Directors and Treasurer
Architectures, Inc.
103 Medinat Hayehudim Street
Herzliya Israel 46733
RON FUSSMAN served as President, Secretary-Treasurer and a Director of the
Company from March 1996 until his resignation in April 1996 and thereafter
served as an independent business consultant to the Company until assuming his
current positions with the Company in May of 1997. Mr. Fussman also serves as
President and control person of Universal Eagle Ltd., a firm founded by him in
1988 for purposes of providing business and financial consulting services.
AVRUM SAVRAN from 1987 to the present has managed Margolin Marketing Ltd.,
a finance and economic consulting company as well as serving as manager and
owner of PBA Investment, a relatively large Israeli exporting firm and during
such same period of time helped support Israeli based industrial companies
through the raising of funds from governmental and private sources. From 1981 to
1987 Mr. Savran served as a Financing Manager of Kibbutz Yizreel and from 1982
to 1985 served as manager of Team USA of the United Kibbutz Movement. Mr. Savran
received a Bachelor of Arts degree in Business Administration from Haifa
University in 1973 and currently serves as Chairman of the Board of Directors
and as Treasurer of the Company.
<PAGE>
As of April 11, 2000, the individuals listed below became directors of the
Company.
URIEL GINSBURG, 23, became a director of the Company in April 2000 and has
served as a director of NPI since January 2000. From approximately October 1998
to October 1999, Mr. Ginsburg was the senior software engineer to PRAGMA
Computing Systems in Tel Aviv, Israel. From approximately June 1995 to February
1997, he as the Network and Systems Administrator at Shani Information
Technologies in Tel Aviv, Israel. He recieved his high school diploma from Ort
"Yad-Giyora" in Israel in 1995.
ROBERT FRIEDMAN, 38, Director, is the Chief Executive Officer and
President of Network Privacy.com, Inc. From March 1997 to January 2000, Mr.
Friedman managed the US operations of TTR Technologies, Inc., a New York based
publicly-traded security technology company with an R&D center in Petach Tikva,
Israel. Mr. Friedman served as the VP of Marketing and Business Development and
as the CFO of TTR. Prior to that, from 1993 through 1996 he was a Vice President
of Oppenheimer & Co., Inc., where he managed the Israel Desk and was responsible
for cross-border equity investments primarily in Israeli technology companies.
From 1989 to 1993, he was Vice President of The Castle Group Ltd. in New York, a
venture capital firm, where he performed financial and strategic marketing
analysis for seed capital investments and equity private placements for hi-tech
companies. From 1989 to 1990 he also served as CEO of The Metropolitan Media
Group, a Los Angeles-based start-up company. He has a Master's Degree from Yale
University's School of Management and a B.A. in Economics, with Honors, from
Yeshiva University.
MARK S. HAUSER, 42, is a founder and Managing Director of Tamarix Capital
Corporation, a New York-based merchant and investment banking firm which is an
affiliate of the Investor. Since March 1998, Mr. Hauser has been the President
and Chief Executive Officer of Trident Rowan Group, a public holding company.
Since March 8, 1999, he has been the Executive Chairman of Moto Guzzi
Corporation, an Italian manufacturer of luxury motorcycles. Between 1986 and
1990, Mr. Hauser was Managing Director of Ocean Capital Corporation, an
international investment banking firm. In 1991, Mr. Hauser founded Hauser,
Richards & Company, also an international investment banking firm. He currently
serves as a director of Integrated Technologies of Israel, Ltd., a joint venture
of an investment group and Israel Aircraft Industries, and of International
Language Communications, Inc., a multilingual communications services company.
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Officers serve at the discretion of the Board of Directors.
The Board of Directors took no actions during the fiscal year ended
December 31, 1999. The Board does not have any committees.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own more
than 10% of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of equity securities of the Company. Such persons are
required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms they filed.
To the Company's knowledge, no Initial Statement of Beneficial Ownership
of Securities on Form 3, or Statement of Changes in Beneficial Ownership on Form
4 or Annual Statement of Changes in Beneficial Ownership on Form 5 were filed
with the Commission or furnished to the Company.
ITEM 10. EXECUTIVE COMPENSATION
The following table presents certain specific information regarding the
compensation of the President and the Chairman of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
Annual Compensation Long-Term Compensation
Securities
Underlying
Fiscal Bonus Stock All other
Name and Principal Position Year Salary ($) ($) Options (#) Compensation
---- --- --------- -------- ---- ------ --- --- ------- --- ------------
<S> <C> <C> <C> <C> <C> <C>
Ron Fussman, President and 1999 -- -- -- -- --
Secretary 1998 -- -- -- -- --
1997 -- -- -- -- --
Avrum Savran, Chairman of the 1999 -- -- -- -- --
Board and Treasurer 1998 -- -- -- -- --
1997 -- -- -- -- --
</TABLE>
Neither of Messrs. Fussman or Savran have received any compensation for
services rendered in their capacities as officers or directors of the Company.
In connection with the investment by the Investor in the Company, each of
the directors of the Company were granted 62,053 shares of Common Stock.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the
Company's Common Stock on June 15, 2000 by persons who either (i) are beneficial
owners of 5% of the Company's Common Stock of the 5,154,553 shares outstanding,
or (ii) are directors or officers of the Company. Except as otherwise noted,
each person has sole voting power and sole investment power with respect to the
number of shares beneficially owned.
<TABLE>
<CAPTION>
Name and Address of Beneficial Ownership of
Beneficial Owner Common Stock Percent of Class
-------------------------------------- ------------------------- ----------------
<S> <C> <C>
Ron Fussman 3,063,153(1)(2)(3) 59.43%
c/o Hidenet Secure Architectures Ltd.
103 Medinat Hayehudim Street
P.O.B. 837
Herzliya, Israel 46733
Avrum Savran 62,053(3) *
2 Habroshim Street
Ramat Efal
Tel Aviv 52960
Israel
Mark S. Hauser 62,053(4) *
c/o Hidenet Secure Architectures Ltd.
103 Medinat Hayehudim Street
P.O.B. 837
Herzliya, Israel 46733
Robert Friedman 266,741(5) 5.17%
c/o Hidenet Secure Architectures Ltd.
103 Medinat Hayehudim Street
P.O.B. 837
Herzliya, Israel 46733
Uriel Ginsberg 3,062,053(1)(3) 59.40%
c/o Hidenet Secure Architectures Ltd.
103 Medinat Hayehudim Street
P.O.B. 837
Herzliya, Israel 46733
IBDH, LLC 58.20%
c/o Hidenet Secure Architectures Ltd.
103 Medinat Hayehudim Street
P.O.B. 837
Herzliya, Israel 46733 3,000,000
All officers and directors as a group 3,516,053 68.21%
(5 persons)
</TABLE>
* Less than 2%.
(1) Includes 3,000,000 shares owned by IBDH, LLC, which is owned 80% by
Mr. Fussman and 20% by Mr. Uriel Ginsburg. Mr. Fussman has sole voting
power of said shares.
(2) Includes 1,100 shares owned by Universal Eagle Ltd., a firm under the
control of Mr. Fussman by virtue of the fact that he is President of
such firm. Accordingly, Mr. Fussman may be considered to be the
beneficial owner of such shares.
(3) Includes 62,053 shares granted to each of the directors of the
Company.
(4) The shares were transferred by the Investor, which was granted said
shares in connection with its investment in NPI.
(5) Pursuant to the Employment Agreement with Mr. Friedman, the Company is
obligated to issue an additional 614,065 shares pro ratably over the
next three years. See the Employment Agreement between Hidenet Secure
Architectures Ltd. and Mr. Friedman.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For the past two years, there have not been any transactions between the
Company and any director, executive officer, 5% security holder or any member of
the immediate family of any of the aforementioned which exceeded $60,000 other
than as may be indicated in this Form 10-KSB and the financial statements and
footnotes thereto which are a part hereof. See "Item I, Description of
Business."
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation of American Acquisition Corporation (filed as
Exhibit 3.1 to the Company's Registration Statement on Form S-18 (No.
33-36670) filed on August 30, 1990 and incorporated herein by reference)
3.2 Bylaws of American Acquisition Corporation (filed as Exhibit 3.2 to the
Company's Registration Statement on Form S-18 (No. 33-36670) filed
August 30, 1990 and incorporated herein by reference)
3.3 Certificate of Amendment to the Certificate of Incorporation of American
Acquisition Corporation filed February 27, 1996
3.4 Certificate of Amendment to the Certificate of Incorporation of Savin
Electronics Ltd. filed March 18, 1996
3.5 Certificate of Amendment to the Certificate of Incorporation of Savin
Electronics Inc. (filed as Exhibit 3.1 to the Company's Current Report
on Form 8-K dated June 29, 1999)
4.1 Articles of Incorporation of American Acquisition Corporation (See
Exhibit 3.1 above)
4.2 Certificate of Amendment to Certificate of Incorporation of Savin
Electronics Ltd. filed March 18, 1996 (See Exhibit 3.4 above)
4.3 Common Stock Purchase Warrant between the Company and Royce Investment
Group.
4.4 Assignment of the Common Stock Purchase Warrant between the Company and
Royce Investment Group to Ron Fussman.
10.1 Agreement dated June 11, 1999 between Savin Electronics Inc., Uriel
Ginsberg, Jonathan Levin, John Federman and Royce Investment Group
(filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated
June 11, 1999)
10.2 Assignment Agreement dated as of June 11, 1999 by Uriel Ginsberg to and
in favor of Savin Electronics Inc. (filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K dated June 11, 1999)
10.3 Assignment Agreement dated as of June 11, 1999 by Jonathan Levin to and
in favor of Savin Electronics Inc. (filed as Exhibit 10.3 to the
Company's Current Report on Form 8-K dated June 11, 1999)
10.4 Assignment Agreement dated as of June 11, 1999 by John Federman to and
in favor of Savin Electronics Inc. (filed as Exhibit 10.4 to the
Company's Current Report on Form 8-K dated June 11, 1999)
10.5 Stock and Option Purchase Agreement entered into as of April 13, 2000 by
and between Hidenet Secure Architectures, Inc., NetworkPrivacy.Com, Inc.
and NP Partners, LLC (filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K dated April 14, 2000)
10.6 Stock Option Agreement dated as of April 13, 2000 by and between Hidenet
Secure Architectures, Inc. and NP Partners LLC (filed as Exhibit 10.2 to
the Company's Current Report on Form 8-K dated April 14, 2000)
10.7 Investors Rights Agreement entered into as of April 13, 2000 by and
among Hidenet Secure Architectures, Inc., Network Privacy.Com, Inc.,
IBDH LLC and NP Partners LLC (filed as Exhibit 10.3 to the Company's
Current Report on Form 8-K dated April 14, 2000)
10.8 Amendment to Stock and Option Purchase Agreement as of May 19, 2000 by
and among Hidenet Secure Architectures, Inc., NetworkPrivacy.Com, Inc.,
and NP Partners, LLC. *
10.9 Employment Agreement dated as of December 1999 by Hidenet Secure
Architectures Ltd. and Robert Friedman *
10.10 Transfer and Assignment Agreement as of April 1, 2000 between Hidenet
Secure Architectures Ltd. and NetworkPrivacy.Com, Inc. *
21. Subsidiaries of the Company*
---------------
* Filed herewith
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the fiscal quarter ended
December 31, 1999.
<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.
HIDENET SECURE ARCHITECTURES, INC.
(formerly known as Savin Electronics Inc.)
-------- ----- -- ----- ----------- ---
By /s/Ron Fussman
Ron Fussman, President
Date: July 7, 2000
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.
/s/ Ron Fussman President, Secretary and a Director Dated:
-------------------- July 7, 2000
Ron Fussman
/s/ Avrum Savran Chairman of the Board of Directors Dated:
-------------------- and Treasurer July 7, 2000
Avrum Savran
/s/ Uriel Ginsberg Director Dated:
-------------------- July 7, 2000
Uriel Ginsberg
<PAGE>
Exhibit Index
Exhibit Description of Exhibit
3.1 Articles of Incorporation of American Acquisition Corporation (filed as
Exhibit 3.1 to the Company's Registration Statement on Form S-18 (No.
33-36670) filed on August 30, 1990 and incorporated herein by reference)
3.2 Bylaws of American Acquisition Corporation (filed as Exhibit 3.2 to the
Company's Registration Statement on Form S-18 (No. 33-36670) filed
August 30, 1990 and incorporated herein by reference)
3.3 Certificate of Amendment to the Certificate of Incorporation of American
Acquisition Corporation filed February 27, 1996
3.4 Certificate of Amendment to the Certificate of Incorporation of Savin
Electronics Ltd. filed March 18, 1996
3.5 Certificate of Amendment to the Certificate of Incorporation of Savin
Electronics Inc. (filed as Exhibit 3.1 to the Company's Current Report
on Form 8-K dated June 29, 1999)
4.1 Articles of Incorporation of American Acquisition Corporation (See
Exhibit 3.1 above)
4.2 Certificate of Amendment to Certificate of Incorporation of Savin
Electronics Ltd. filed March 18, 1996 (See Exhibit 3.4 above)
4.3 Common Stock Purchase Warrant between the Company and Royce Investment
Group.
4.4 Assignment of the Common Stock Purchase Warrant between the Company and
Royce Investment Group to Ron Fussman.
10.1 Agreement dated June 11, 1999 between Savin Electronics Inc., Uriel
Ginsberg, Jonathan Levin, John Federman and Royce Investment Group
(filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated
June 11, 1999)
10.2 Assignment Agreement dated as of June 11, 1999 by Uriel Ginsberg to and
in favor of Savin Electronics Inc. (filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K dated June 11, 1999)
10.3 Assignment Agreement dated as of June 11, 1999 by Jonathan Levin to and
in favor of Savin Electronics Inc. (filed as Exhibit 10.3 to the
Company's Current Report on Form 8-K dated June 11, 1999)
10.4 Assignment Agreement dated as of June 11, 1999 by John Federman to and
in favor of Savin Electronics Inc. (filed as Exhibit 10.4 to the
Company's Current Report on Form 8-K dated June 11, 1999)
10.5 Stock and Option Purchase Agreement entered into as of April 13, 2000 by
and between Hidenet Secure Architectures, Inc., NetworkPrivacy.Com, Inc.
and NP Partners, LLC (filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K dated April 14, 2000)
10.6 Stock Option Agreement dated as of April 13, 2000 by and between Hidenet
Secure Architectures, Inc. and NP Partners LLC (filed as Exhibit 10.2 to
the Company's Current Report on Form 8-K dated April 14, 2000)
10.7 Investors Rights Agreement entered into as of April 13, 2000 by and
among Hidenet Secure Architectures, Inc., Network Privacy.Com, Inc.,
IBDH LLC and NP Partners LLC. (filed as Exhibit 10.3 to the Company's
Current Report on Form 8-K dated April 14, 2000)
10.8 Amendment to Stock and Option Purchase Agreement as of May 19, 2000 by
and among Hidenet Secure Architectures, Inc., NetworkPrivacy.Com, Inc.,
and NP Partners, LLC.
10.9 Employment Agreement dated as of December 1999 by Hidenet Secure
Architectures Ltd. and Robert Friedman.
10.10 Transfer and Assignment Agreement as of April 1, 2000 between Hidenet
Secure Architectures Ltd. and NetworkPrivacy.Com, Inc.
21 Subsidiaries of the Company
