U.S. Securities and Exchange Commission
Washington, D.C. 20549
____________
Form 10-SB/A-2
____________
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of
1934
NET:X AMERICA, INC.
(Name of Small Business Issuer in its charter)
OREGON
93-1216387
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
Salina 149-B
Willemstad, Curacao
Netherlands, Antilles
N/A
(Address of principal executive Offices)
(Zip Code)
Issuer's telephone number: 599 9 465-1260
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None.
Securities to be registered under Section 12(g) of the Act:
COMMON
(Title of Class)
<PAGE>
Item 1. Description of Business
Company History.
Net:X America Inc. (the "Company" or "Net:X") was organized
under the laws of the State of Oregon on June 22, 1987 as WESTAQ
Network, Inc. The Company was dormant until June 20, 1996, when
it changed its name to Net:X America, Inc., and began searching
for business opportunities in the information technology
industry.
In June 1998, the Company exchanged 6,400,000 shares of
Company common stock for the exclusive licensing rights to Island
Product Management's Investor Account Manager ("IAM") software in
the Caribbean and Latin America. The Company's licensing rights
are royalty-free and allow the Company to relicence, rent or sell
the software within the Caribbean or Latin America, together with
all its related intellectual property rights, title and
interests. The IAM software was purchased from a non-affiliated
third party.
Since acquiring the licensing rights to the IAM software,
which offers reporting and account management capabilities, the
Company has worked to improve and integrate the IAM software with
the Company's proprietary StockEX software, which can enable
brokerage houses to offer online stock trading. The Company's
software products are currently not being sold in the market.
The Company recently delivered pre-production versions of its
software package to 12 brokerage houses in the Caribbean for
testing. Based on initial feedback from these brokerage houses
and the nature of the changes requested, the Company hopes to
complete testing and development by the fourth quarter of 2000,
and have its software ready for distribution by the first quarter
2001. At that time, the Company will focus its primary efforts
on marketing and licensing its software products to brokerages
wishing to offer online account management and stock trading
capabilities to their clients.
As noted by the independent auditors, the Company has not
yet established an ongoing source of revenue sufficient to cover
its operating costs and to allow it to continue as a going
concern. Moreover, there can be no assurance that the Company
will ever establish an ongoing source of revenue sufficient to
cover its costs. The Company currently has no assets or revenue.
The Company has sustained net losses from operations of $601,973
in fiscal year 1999 and $1,880,230 in fiscal year 1998. The
Company sustained a net loss of $6,992 for the nine months ended
March 31, 2000.
Clearly, given the losses sustained by the Company, combined
with the Company's lack of revenue, assets and a currently
saleable product, there is substantial doubt that the Company can
continue as a going concern. To continue as a going concern, the
Company needs to obtain adequate capital to fund its operating
losses until it can become profitable. Given the Company's
history and present condition, there can be no assurance that the
Company will obtain additional funds. If the Company cannot
obtain additional funding, there is little chance the Company can
continue as a going concern.
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Industry Background
In the past, investors could access the financial markets
only through a full-commission broker. These brokers provided
investment advice and executed trades for investors. With the
deregulation of brokerage commissions in 1975, investors
discovered they could separate financial advisory services from
securities trading. This led to changes in the industry
including increased access to information about public companies
and the advent of discount brokerage firms, which allow investors
who are willing to engage in their own research, a less expensive
alternative to traditional full-commission brokers. With the
advent of the internet and online commerce, additional innovation
is occurring in the industry as it expands and evolves to
integrate these technological advances.
The internet has fundamentally changed the way many
investors manage their financial affairs. Online account
management and trading is growing quickly within the brokerage
industry. The speed, convenience, choice, cost savings and
information the internet offers has driven many investors online.
Our Opportunity
The Company believes there is a need within the offshore
security brokerage houses of the Caribbean and Latin America to
offer their clients the ability to manage their accounts and
trade stocks online. The Company bases this belief in part on
the positive initial feedback it has received from the offshore
brokerages testing its software. The Caribbean and Latin
American financial markets, like many other markets have
experienced growth recently. With this growth has come increased
pressure on investment professionals in that region to provide
online capabilities. The Company believes its software can
provides these offshore brokerage houses the ability to offer
online account management and stock trading without the
significant expense of developing their own proprietary systems
or contracting with existing expensive United States systems.
The Company currently has no agreements or understandings
with any offshore brokerage houses to acquire the Company's
software. The only discussions the Company has had are with
those brokerages currently testing the pre-production versions of
the software. While the Company hopes these brokerages will
become future users, the brokerages are not in anyway committed
to, nor have they agreed to purchase the Company's software.
The Company believes there may be as many as 2,400 brokerage
houses in the Caribbean and Latin America. While initial
feedback from the offshore brokerage houses testing the software
has been positive, at this point it is difficult to predict
possible demand. The Company believes it will be in a better
position to estimate the potential market for its software once
it receives final feedback from these brokerage houses,
particularly in the areas of perceived need for, and interest in
acquiring the Company's software. If, based on the final
feedback the Company does not believe there will be sufficient
demand for its software, the Company will have to reevaluate its
business plan and perhaps discontinue planned operations.
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Products
The Company's software product is made up of two software
programs, StockEX and Investor Account Manager ("IAM"). The
Company purchased the rights to license the IAM software in the
Caribbean and Latin America in June 1998. From June 1998 to June
1999, the Company retained a staff of four to six independent
outside programmers who continued research, development and
testing of the IAM software and StockEX software. The
programmers also worked to integrate the two software packages.
The Company relied primarily on the proceeds from the sale of its
securities to fund these research, development and testing
expenses.
Since July 1999, the Company has continued to develop its
software, however, due to lack of funds, the Company's
development efforts have decreased significantly. The Company
has relied primarily on the efforts of Mr. Dong, a Company
director, and more recently, Mr. Jones, the Company
CEO/President, to meet its technical needs. From time to time,
the Company has also used the services of an outside independent
programmer. The brokerage houses currently testing the Company's
software are not charging the Company any fee for testing.
StockEX
StockEX is a proprietary transaction-based software program
which provides an interface between the investor's computer and
the brokerage's web site, which the Company developed in-house
with the help of independent contractors. Via StockEX, the
investor can setup online stock trading accounts through the
brokerage's web site. In addition to providing online stock
trading, the StockEX program also offers such record keeping
features as trade confirmations and records of all transactions
executed by the client.
Investor Account Manager
IAM is an easy to operate, cost effective and customizable
PC based software program designed to manage client transactions.
This software offers several account management programs that
interface with one another. These include managing cash
accounts, pooled funds, assets and securities trading accounts
along with client account reporting via the internet. This
software will allow a brokerage house, investment manager or
trustee to access and provide full client account information to
their clients, including the following:
"CASH MANAGEMENT ACCOUNT" which is a cash account
management system for checking and savings type accounts.
It can be linked to an investment account to facilitate
withdrawals and deposits of funds in conjunction with
security trading.
"FUND ACCOUNT" which is a cash/share management system
which allows a broker, mutual fund or trust manager to
process investor contributions, withdrawals, dividends, and
earnings in accordance with the time value of each
transaction for accurate distribution of income to each
investor. This feature is capable of calculating proper
income distributions to an unlimited number of investors or
accounts.
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"INVESTMENT ACCOUNT" is an asset/investment management
system which allows an investment manager to trade and
manage assets for the Fund Account and/or individual
investors. For buy and sell transactions, funds will
automatically be drawn from or deposited to a designated
"Trading Cash Account" for easy cash management.
To the Company's knowledge, the IAM software is not being
used operationally in any other markets.
Marketing
The Company expects that testing and development based on
testing results should be finished during the first quarter 2001.
At that time, the Company intends to undertake an aggressive
direct marketing program in the Caribbean, as funds will allow.
Specifically, the Company will do e-mail drops to as many
brokerage houses in the Caribbean and Latin America as it can
reach, inviting them to visit the Company's website. Visitors to
the website will have access to a fully functional demo of the
software allowing them to test the software and its capabilities.
Visitors to the website will be provided information on how to
contact the Company. The website will also ask visitors for
information that the Company can use to make follow up contact.
The Company does not currently have a website. Assuming the
Company has adequate funds, it intends to launch the website by
year end 2000.
The Company may also undertake direct mailing and direct
calling programs providing information about the Company's
software and directing interested parties to the Company's
website for additional information.
The Company anticipates costs associated with its marketing
efforts could range from $400,000 to $500,000 over the next
twelve months. Clearly, the Company does not currently have
sufficient funds to meet these needs. The Company anticipates it
will need to sell shares of its stock, or seek some other type of
equity of debt financing to help it meet these costs. The
Company is not and will not actively seek funds until current
software testing is finished. The Company currently has no
commitments from any source to provide these funds.
Until funds permit and need dictates, the Company's officers
and directors will assume responsibility for marketing the
Company's software.
Distribution
The Company will seek to establish license agreements with
brokerage houses in the Caribbean and Latin America. Pursuant to
these license agreements, the brokerage houses will distribute
the Net:X software to brokers, and brokerage clients, including
fund and investment managers, trust managers, and individual
investors. The brokers, managers and clients will then be able
to manage their accounts online. They will also be able to trade
stocks online via pre-established securities trading accounts
with the brokerage house from whom they received the software.
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The Company believes that having brokerage houses distribute
the Company's software to their existing and new brokers,
managers and clients will speed market penetration of the
software as opposed to the Company attempting to market the
software to individual users.
Licensing Fee
Consistent with current trends in the internet software
industry, the Company will provide its software to interested
brokerages and their clients with no up-front charge. The
licensing agreement will provide that the brokerage houses, not
the investors, pay Net:X on a per use basis. The licensing fee
will be $10.00 per stock trade. The Net:X software is programmed
to record each trade done by each brokerage. The system is also
programmed to download to the Company information regarding the
number of stock trades executed online by each brokerage. The
licensing agreement will provide that each brokerage pay the
license fee on a bi-weekly basis or monthly basis. Thus, the
licensing fee to be paid by the brokerage will be equal to the
number of stock trades executed within the appropriate time frame
multiplied by $10.00 per trade.
The Company is aware that services such as E*Trade,
Ameritrade, Charles Schwab, and others charge from $8.00 per
trade to $29.99 per trade and up. Offshore brokerage houses,
however, are not subject to the regulations of the NASD, the
S.E.C., and other U.S. and State regulatory agencies, with their
commission and price restrictions. Based on an informal survey
recently conducted by the Company, it found that of the few
offshore brokerages offering online trading, the fees ranged from
$19.99 to $75.00 per trade. Most charged quite a bit more than
the going rate in the United States.
The Company believes that offshore brokerages will be
willing to pay the $10.00 per trade licensing fee for several
reasons. First, many of the brokerages in the Caribbean and
Latin America still rely on cumbersome and time consuming manual
order-writing and record keeping to execute trades and manage
securities accounts. The account management and record keeping
features of the Company's software will allow brokerages to
manage accounts electronically, thus eliminating much of the
inefficiency and cost of manual systems. Also, as demand for
online access to accounts increases, brokerage houses not
offering online capabilities will be at a significant competitive
disadvantage.
The Company also believes that to the extent offshore
brokerages using the Company's software may charge higher per
trade fees to their clients than the going rate in the United
States, the offshore brokerage clients will be willing to pay
those fees. The Company bases this belief, in part, on the fact
that many United States brokerage firms do not allow foreign
investors to open accounts with their firms unless the investor
has a United States address and a United States social security
number. This is certainly an inconvenience for non-United States
citizens and may, in some instances, subject them to United
States tax liability. The Company believes foreign investors
will be willing to pay the potentially higher fees charged by
offshore brokerages for online account management and stock
trading to avoid these inconveniences. Moreover, as discussed
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above, given the improved efficiency and potential cost savings,
brokerages houses using the Company's software may not increase
the fees they charge their clients.
The Company knows of no reliable source of information as to
the volume of stock traded by Caribbean and Latin America
brokerage houses. Therefore, it is very difficult for the
Company to predict the number of stock trades that might be
executed by brokerage houses using the Company's software.
Without this knowledge, it is impossible for the Company to know
whether there is sufficient volume in the market for it to
operate profitably. The Company believes that until there are a
number of brokerages using the company's software, it will be
unable to determine whether it can operate profitably. Once
there are a number of brokerages using the software, the Company
should be able to better gauge overall volume and its potential
market penetration. Based on this information, the Company
should better understand the number of licensees it will need to
be profitable. The Company does not believe it will be in a
position to make this determination until at least the third
quarter of 2001.
Employees
Currently, the Company's only employee is its CEO/President
William Jones. The day-to-day affairs of the Company are
currently being handled by its officers and directors. Mr. Jones
dedicates 100% of his time to Company affairs. Mr. Jones is also
currently handling most of the ongoing research and development
needs of the Company, and working with the brokerage houses
testing the Company's software to address questions and requests
for additional features. Andrew Dong, a Company director
currently dedicates 50% of his time to Company affairs. Mr. Dong
is also assisting in research and development and will be
primarily responsible for implementing the Company's marketing
program. The Company currently does not have any employment
contracts with its officers or directors.
Assuming there is sufficient funding, over the next twelve
months the Company anticipates the need to hire a full time
secretary/office manager to oversee the day-to-day affairs of the
Company. As demand dictates, the Company anticipates also
needing to hire 1-3 persons to assist in marketing, sales and
customer service. Depending on need, the Company may also hire a
programming specialist to provide technical support and
development services.
Reports to Security Holders
Prior to the filing of this registration statement on Form
10-SB, the Company was not subject to the reporting requirements
of Section 13(a) or 15(d) of the Exchange Act. Upon
effectiveness of this registration statement, the Company will
file annual and quarterly reports with the Securities and
Exchange Commission ('SEC"). The public may read and copy any
materials filed by the Company with the SEC at the SEC's Public
Reference Room at 150 Fifth Street, N.W., Washington, D.C. 20549.
The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The Company
is an electronic filer and the SEC maintains an Internet site
that contains reports and other information regarding the Company
which may be viewed at http://www.sec.gov.
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Item 2. Plan of Operation
For a complete understanding, this Plan of Operations should
be read in conjunction with Part I, Item 1, Description of
Business and Part F/S - Financial Statements to this Form 10-SB.
Because the Company is still testing and developing its
software, it expects that operating losses will continue until
such time as sales generate sufficient revenue to fund continuing
operations. The Company will not market and sell its software
until testing and development based on testing results is
completed. Based on initial feedback from the brokerage houses
testing the software, the Company believes this could occur by
the end of the first quarter 2001. The Company does not know,
however, how long it will take to generate sufficient sales to
fund the Company's continuing operations or to produce net
income.
The Company recently delivered pre-production versions of
its software to 12 offshore brokerage houses for testing to
determine how well the software will function in actual
application, what additional features brokerages may want, and
what type of demand there may be for the Company's software. To
date, the Company has received only initial feedback from these
brokerages. The feedback has been primarily positive. Several
brokerages have suggested additional features to enhance the
software. The Company is, where practicable, investigating and
implementing the changes. The Company expects testing to be
completed by the fourth quarter 2000. Clearly, feedback from
these brokerage houses will have a significant effect on the
Company's operations for the next twelve months.
If feedback from the brokerages is positive, and limited
changes to the Company's software are required, the Company
anticipates having a production version of its software ready for
distribution by the end of the first quarter of 2001. The
Company will then focus its efforts on marketing the software.
The Company anticipates needing approximately $500,000 to $600,00
during the ensuing twelve months to meet its marketing,
production and operational needs in this scenario.
If feedback from the brokerages indicates that there is only
limited need or interest in the Company's software or that
significant additional research and development is needed, the
Company will need to reevaluate its business plan to determine
what, if any market exists for the Company's software. If this
is the case, the Company may be forced to changes its business
focus or even to discontinue operations.
Additionally, because the computer software industry is
intensely competitive and rapidly evolving, the Company may need
to continue improving its software to keep pace with its
competitors. This could require additional capital to fund the
cost of ongoing research and development.
Once the Company receives final feedback from the brokerages
and has a better understanding of its future needs, the Company
will formulate specific plans for raising additional capital.
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The Company will explore all avenues of financing available
including equity financing through the sale of additional
securities and debt financing through loans and lines of credit.
Given the Company's lack of operations and revenue, there is no
guarantee the Company will be able to obtain additional capital
to meet its needs. If additional capital cannot be obtained, or
if a market for the Company's software does not develop, the
Company's business, financial condition and results of operations
will be adversely effected and may force the Company to cease
operations.
As of March 31, 2000, the Company had no cash on hand. As
of March 31, 2000, the Company had accumulated deficit of
($2,629,212) funded by paid-in capital. During the nine months
ended March 31, 2000, and the years ended June 30, 1998 and 1999,
the Company had losses from operations of ($7,023), ($606,358)
and ($280,230) respectively. The Company expects that operating
losses will continue until such time as product sales generate
sufficient revenue to fund its continuing operations, as to which
there can be no assurance.
Finally, the report from the Company's independent
accountants includes an explanatory paragraph which describes
substantial doubt concerning the ability of the Company to
continue as a going concern without additional contributions to
capital. See "Financial Statements - Report of Independent
Accountants" and Note 2 - Going Concern.
Item 3. Description of Property
In June 1998, the Company exchanged 6,400,000 shares of
common stock of the Company for the licensing rights to the
Island Product Management Investor Account Manager ("IAM")
software.
Property & Facilities
The Company currently leases 500 square feet of office space
located at Salina 149-B Willemsted, Curacao in the Netherlands,
Antilles. The Company pays $500 per month on a year lease
agreement which expires December 31, 2000, after which, the lease
is renewable for another year at the same rate. The Company
believes this lease to be no more or less favorable than the
current market rates. The Company's officers and directors are
currently paying the rental expenses. The Company is not
obligated to repay the officers and directors for this expense.
Investment Policies
Currently the Company does not own any real property. In
addition, the Company has no intention to purchase any real
property at this time. Therefore, the Company does not have any
policies with respect to investments in real estate or interests
in real estate, real estate mortgages, or securities of/or
interests in persons primarily engaged in real estate activities.
The Company, however, may pursue the purchase of real property if
the need arises. These properties would not be pursued for
investment purposes. Rather, they will be used to carry out the
business of the Company.
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Item 4. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth as of September 1, 2000, the
name and the number of shares of the Company's Common Stock, par
value $.001 per share, held of record or beneficially by each
person who held of record, or was known by the Company to own
beneficially, more than 5% of the 11,023,609 issued and
outstanding shares of the Company's Common Stock, and the name
and shareholdings of each director and of all officers and
directors as a group.
Title of Name and Address of Amount and Nature
Class Beneficial Owner of Beneficial
Ownership(2) Percentage of Class
Common Ronald J. McFadyen(1)(2) 4,996,000 45.32%
2001 Leeward Highway
Turks & Caicos Isles, B.W.I.
Common Ronald J.McFadyen (1) 4,288,000 38.90%
Island Product Management
2001 Leeward Highway
Turks & Caicos Isles, B.W.I.
Common Ronald J.McFadyen (1)(2) 708,000 6.42%
Temple Trust
2001 Leeward Highway
Turks & Caicos Isles, B.W.I.
Common Andrew Dong (3)(4) 1,210,000 10.98%
2001 Leeward Highway
Turks & Caicos Isles, B.W.I.
Common Andrew Dong (4) 1,210,000 10.98%
BSA Development LTD
2001 Leeward Highway
Turks & Caicos Isles, B.W.I.
Common Hugh Bright(5) 704,000 6.39%
Alan Cole (5)
Interval Vacation Centre, LTD
2001 Leeward Highway
Turks & Caicos Isles, B.W.I.
Common Marlene Ma (6) 704,000 6.39%
Lavin International LTD
2001 Leeward Highway
Turks & Caicos Isles, B.W.I.
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Common Crawford Ward (7) 704,000 6.39%
Portorford Communications LTD
2001 Leeward Highway
Turks & Caicos Isles, B.W.I.
Common William Jones 0 0.00%
Salina 149-B
Willemstad, Curacao
Netherlands, Antilles
______________________________________________________________________
Common Officers, Directors and
Nominees as a Group: 1,210,000 10.98%
______________________________________________________________________
The term "beneficial owner" refers to both the power of
investment (the right to buy and sell) and rights of ownership
(the right to received distributions from the company and
proceeds from sales of the shares). Inasmuch as these rights or
shares may be held by more than one person, each person who has a
beneficial ownership interest in shares is deemed the beneficial
owners of the same shares because there is shared power of
investment or shared rights of ownership.
(1) Ronald J. McFadyen has voting power over the Company
securities held by Island Product Management and Temple Trust.
Therefore, the shares attributed to Mr. McFadyen are the
4,288,000 shares held by Island Product Management and the
708,000 shares beneficially owned by Temple Trust. Mr. McFadyen
holds no shares in his own name.
(2) Temple Trust is the beneficial owner of Temple Mortgage
Corporation LTD, record holder of 198,000 shares, and Temple
Securities LTD, record holder of 510,000 shares. Therefore,
shares held by Temple Mortgage Corporation LTD and Temple
Securities LTD are counted as shares for Temple Trust.
(3) Officer and/or Director of the Company
(4) Andrew Dong is a beneficial owner of BSA Development LTD.
Therefore, the 1,210,000 attributed to Mr. Dong are the same
1,210,000 shares held in the name of BSA Development LTD. Mr.
Dong holds no shares in his own name.
(5) Mr. Bright and Mr. Cole each own 50% of the shares held by
Interval Vacation Centre, Ltd., therefore they each have voting
power over the Company shares held by Interval.
(6) Ms. Ma has voting power over the Company shares held by
Lanvin International Ltd.
(7) Mr. Ward has voting power over the Company securities held by
Portorford Communications, Ltd.
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The Company knows of no arrangements which would result in a
change in control of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons
Name Age Position(s) Director or Officer Since
William D. Jones 40 CEO/President January 2000
Secretary
Treasurer
Director
Andrew Dong 38 Director June 1996
The following sets forth certain biographical information
relating to the Company's Officers and Directors:
William D. Jones, CEO/President, Secretary, Treasurer and
Director, age 40. Mr. Jones was appointed CEO/President of the
Company in January 2000, when the then controlling management of
the Company, whose primary expertise was in the areas of finance
and accounting, determined that it was in the best interest of
the Company to obtain the services of an individual experienced
in information technology and computer networking. From 1996 to
December 1999, Mr. Jones served as the president of OSIA, a
company he founded in 1996. During that time, Mr. Jones also
founded IsleASP and ASPen, related companies to OSIA. OSIA,
IsleASP and ASPen provide information technology and computer
network consulting services. In 1994, Mr. Jones co-founded
Network Technology Professionals, Inc., ("NTP") and served as its
president from 1994 to 1996. NTP also specialized in providing
information technology and computer network consulting services.
While with NTP, Mr. Jones designed and implemented a large LAN
server in Canada, which currently services more than 7,000 end
users. From 1990 to 1994, Mr. Jones worked as the Senior Systems
Engineer for ComputerCorp, which later became CrownTek Canada.
As Senior Systems Engineer, Mr. Jones was responsible for
information technology design, implementation and support for
Fortune 1000 companies. Mr. Jones holds advanced technical
certifications from Novell, Compaq, Microsoft and Cisco.
Mr. Jones is dedicating 100% of his time to Company affairs.
Mr. Jones resides in Curacao, Netherlands Antilles.
Andrew Dong, Director, age 38. Mr. Dong received his
Bachelor of Math degree in 1985 from the University of Waterloo,
Waterloo, Ontario. Mr. Dong worked for eleven years in the
Information Systems field. In 1988 he began working at Saville
Systems, a Galaway, Ireland based company that creates
telecommunications billing software. He worked in software sales
and customer relations. He also worked in the Product
Development, Research and Development and Consulting Services
departments of Saville. When he retired from Saville in 1996,
Mr. Dong was a Vice President of Business Development. Since his
retirement in 1996 Mr. Dong has served as a Director of Net:X
America, Inc.
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Mr. Dong currently dedicates about 50% of his time to
Company affairs. Mr. Dong will dedicate up to 100% of his time
to the Company as the need arises. Mr. Dong currently resides in
Turks and Caicos Islands, B.W.I.
Dependence Upon Key Personnel
The Company believes that its success will depend
significantly upon the efforts and abilities of William Jones and
Andrew Dong. The loss of their services could have a material
adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company's future success
will depend upon its ability to continue to attract and retain
qualified personnel. There can be no assurance that the Company
will be successful in attracting and retaining such personnel.
Family Relationships
None.
Item 6. Executive Compensation
The following chart sets forth certain summary information
concerning the compensation paid or accrued for each of the
Registrant's last three completed fiscal years to the
Registrant's or its principal subsidiaries' chief executive
officers and each of its other executive officers that received
compensation in excess of $100,000 during such period (as
determined at June 30, 1999, the end of the Registrant's last
completed fiscal year).
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Other Awards Payouts
Rest- All
Name Annual ricted Other
and Principal Bonus Compen- Stock Options Compen-
Position Year Salary $ sation Awards /SARs LTIP sation
____________________________________________________________________________
William D. Jones 1999 0 0 0 0 0 0 0
CEO/President,
Secretary 1998 0 0 0 0 0 0 0
Treasurer and
Director 1997 0 0 0 0 0 0 0
Andrew Dong 1999 0 0 0 0 0 0 0
Director 1998 0 0 0 100,000(1) 0 0 0
1997 0 0 0 0 0 0 0
Jerry Joiner 1999 $20,000 0 0 0 0 0 0
Former-CEO/
President 1998 $60,000 0 0 0 300,000(1) 0 0
Former-Director 1997 0 0 0 0 0 0 0
Ronald J. McFadyen 1999 0 0 0 0 0 0 0
Former-Secretary/ 1998 0 0 0 0 200,000(1) 0 0
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Treasurer 1997 0 0 0 0 0 0 0
Former-Director
(1) Stock Options were granted by the Company on August 21, 1998
at an exercise price of $0.11 per share. These options were
granted for a period of one year beginning August 21, 1998. The
Company received no money for these options. They have since
expired without being exercised.
Compensation of Directors
None
Employment Contracts and Termination of Employment and Change in
Control Arrangement
None.
Item 7. Certain Relationships and Related Transactions
The Company is not expected to have significant dealings
with affiliates. If there are such dealings, however, the
parties will attempt to deal on terms competitive in the market
and on the same terms that either party would deal with a third
person.
Item 8. Description of Securities
The Company's authorized capital stock consists of
200,000,000 shares of common stock with $.001 par value. The
Company has11,023,609 outstanding shares of its common stock, all
of which are validly issued, fully paid and nonassessable.
Holders of the common stock are entitled to receive dividends
when and as declared by the Board of Directors out of funds
legally available therefore. Any such dividends may be paid in
cash, property, or shares of the Company's common stock.
All shares of the Company's common stock have equal voting
rights and, when validly issued and outstanding, will have one
vote per share on all matters to be voted upon by the
shareholders.
The Company has appointed Interwest Transfer Company, Inc.
as the transfer agent and registrar for the Company's securities.
PART II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and other Shareholder Matters.
The Company's common stock is listed on the Over the Counter
14
<PAGE>
Bulletin Board ("OTCBB"), under the symbol "NXAME". As of
September 1, 2000 the Company had 109 shareholders holding
11,023,609 shares of common stock. Of the issued and outstanding
common stock 4,599,849 are free trading, the balance are
restricted stock as that term is used in Rule 144. The Company
has never declared a dividend on its common Stock.
CLOSING BID
CLOSING ASK
HIGH LOW HIGH LOW
Third Quarter
Jan. 1, 1998-
March 31, 1998 .31 .10 1.88 .75
Fourth Quarter
April 1, 1998-
June 30, 1998 .20 .01 .75 .75
First Quarter
July 1, 1998-
Sept. 30,1998 .12 .01 .28 .28
Second Quarter
Oct.1, 1998-
Dec. 31, 1998 .30 .03125 .51 .15
Third Quarter
Jan. 1, 1999-
March 31, 1999 .30 .04 .51 .125
Fourth Quarter
April 1, 1999-
June 30, 1999 .0625 .02 .15 .05
First Quarter
July 1, 1999-
Sept. 30, 1999 .20 .02 .35 .05
Second Quarter
Oct.1, 1999-
Dec. 31, 1999 .07 .06 .11 .08
Third Quarter
Jan. 1, 2000-
Mar. 31, 2000 .25 .02 .20 .125
The quotations listed above have been retroactively restated to
15
<PAGE>
reflect a five shares for one reverse split effected by the
Company on April 24, 1998.
The above quotations, as provided by the National Quotation
Bureau, LLC., represent prices between dealers and do not include
retail markup, markdown or commission. In addition, these
quotations do not represent actual transactions.
Item 2. Legal Proceedings.
None.
Item 3. Changes in and Disagreements with Accountants
None.
Item 4. Recent Sales of Unregistered Securities
a. Date Title Amount Sold
February 25, 1997 Common 48,755
August 27, 1997 Common 191,061
June 12, 1998 Common 4,000,000
June 12, 1998 Common 6,400,000
The number of shares issued have been retroactively restated to
reflect the two-for-one forward stock split and the one-for-five
reverse stock split.
b. February 25, 1997 - 48,755 common shares were issued to
accredited investors for $121,888. The shares were issued
without registration under the Securities Act in reliance on an
exemption from registration provided by Section 3(b) and Rule 504
of Regulation D promulgated under the Securities Act and from
similar applicable states securities laws, rules and regulations
exempting the offer and sale of these securities by available
state exemptions. No general solicitation was made in connection
with the offer or sale of these securities, and the aggregate
offering price of securities offered for sale by the Company in
the twelve months preceding the offering did not exceed
$1,000,000.
August 27, 1997 - 191,061 common shares were issued to
accredited investors for $475,653. The shares were issued
without registration under the Securities Act in reliance on an
exemption from registration provided by Section 3(b) and Rule 504
of Regulation D promulgated under the Securities Act and from
similar applicable states securities laws, rules and regulations
exempting the offer and sale of these securities by available
state exemptions. No general solicitation was made in connection
with the offer or sale of these securities and the
16
<PAGE>
aggregate offering price of securities offered for sale by the Company in
the twelve months preceding the offering did not exceed
$1,000,000.
June 12, 1998 - 4,000,000 common shares were issued to
accredited investors for $400,000. The shares were issued
without registration under the Securities Act in reliance on an
exemption from registration provided by Section 3(b) and Rule 504
of Regulation D promulgated under the Securities Act and from
similar applicable states securities laws, rules and regulations
exempting the offer and sale of these securities by available
state exemptions. No general solicitation was made in connection
with the offer or sale of these securities and the aggregate
offering price of securities offered for sale by the Company in
the twelve months preceding the offering did not exceed
$1,000,000.
June 12, 1998 - 6,400,000 common shares were issued to
acquire the licensing rights to Island Product Management's
Investor Account Manager (IAM) software. These shares were
valued at $0.25 per share. The shares were issued without
registration under the Securities Act in reliance on an exemption
from registration provided by Rule 4(2) of the Securities Act.
The Company also granted stock options to purchase up to
1,000,000 shares of Company common stock at an exercise price of
$0.11 per share to seven individuals on August 21, 1998 for no
consideration. These options were granted for a period of one
year beginning August 21, 1998. All of the options expired
without being exercised.
Item 5. Indemnification of Directors and Officers
The statutes, charter provisions, bylaws, contracts or other
arrangements under which controlling persons, directors or
officers of the registrant are insured or indemnified in any
manner against any liability which they may incur in such
capacity are as follows:
The Company's bylaws provide that the corporation shall
indemnify any individual made a party to a proceeding because
such individual was a director of the corporation to the extent
permitted by and in accordance with Section 60.387, et. Seq. of
the Oregon Revised Statutes or any amendments of successor
section of like tenor.
The Company's bylaws also provide that the board of
directors may authorize the corporation to indemnify and advance
expenses to any officer, employee, or agent of the corporation
who is not a director of the corporation to the extent permitted
by the Oregon Revised statutes.
Section 60.391 of the Oregon Revised Statutes provides that
directors may be indemnified:
(1) Except as provided in subsection (4) of this section, a
corporation may indemnify an individual made a party to a
proceeding because the individual is or was a director against
liability incurred in the proceeding if:
(a) The conduct of the individual was in good faith;
17
<PAGE>
(b) The individual reasonably believed that the individual's
conduct was in the best interests of the corporation, or at least
not opposed to its best interests; and
(c) In the case of any criminal proceeding, the individual
had no reasonable cause to believe the individual's conduct was
unlawful.
(2) A director's conduct with respect to an employee benefit
plan for a purpose the director reasonably believed to be in the
interests of the participants in and beneficiaries of the plan is
conduct that satisfies the requirement of subsection (1)(b) of
this section.
(3) The termination of a proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent is not, of itself, determinative that the director did
not meet the standard of conduct described in this section.
(4) A corporation may not indemnify a director under this
section:
(a) In connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to the
corporation; or
(b) In connection with any other proceeding charging
improper personal benefit to the director in which the director
was adjudged liable on the basis that personal benefit was
improperly received by the director.
(5) Indemnification permitted under this section in
connection with a proceeding by or in the right of the
corporation is limited to reasonable expenses incurred in
connection with the proceeding. [1987 c.52 s.95]
Section 60.394 of the Oregon Revised Statutes provides for
mandatory indemnification of directors in the following
circumstances:
Unless limited by its articles of incorporation, a
corporation shall indemnify a director who was wholly successful,
on the merits or otherwise, in the defense of any proceeding to
which the director was a party because of being a director of the
corporation against reasonable expenses incurred by the director
in connection with the proceeding.
Pursuant to ORS 60.397, the Company may reimburse directors
for reasonable expenses incurred by a director who is a party to
a proceeding in advance of final disposition of the proceeding
if:
(a) The director furnishes the corporation a written
affirmation of the director's good faith belief that the director
has met the standard of conduct described in ORS 60.391; and
(b) The director furnishes the corporation a written
undertaking, executed personally or on the director's behalf, to
repay the advance if it is ultimately determined that the
director did not meet the standard of conduct.
(2) The undertaking required by subsection (1)(b) of this
section must be an unlimited general obligation of the director
but need not be secured and may be accepted without reference to
financial ability to make repayment.
18
<PAGE>
(3) Any authorization of payments under this section may be
made by provision in the articles of incorporation, or bylaws, by
a resolution of the shareholders or board of directors or by
contract.
A director of the Company who is a party to a proceeding may
apply for indemnification to the court conducting the proceeding
or to another court of competent jurisdiction pursuant to ORS
60.401. On receipt of an application, the court after giving any
notice the court considers necessary may order indemnification if
it determines:
(1) The director is entitled to mandatory indemnification
under ORS 60.394, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to
obtain court-ordered indemnification; or
(2) The director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances,
whether or not the director met the standard of conduct set forth
in ORS 60.391 or was adjudged liable as described in ORS 60.391
(4), whether the liability is based on a judgment, settlement or
proposed settlement or otherwise.
The Company may not indemnify a director under ORS 60.391
unless authorized in the specific case after a determination has
been made that indemnification of the director is permissible in
the circumstances because the director has met the standard of
conduct set forth in ORS 60.391.
(2) A determination that indemnification of a director is
permissible shall be made:
(a) By the board of directors by majority vote of a quorum
consisting of directors not at the time parties to the
proceeding;
(b) If a quorum cannot be obtained under paragraph (a) of
this subsection, by a majority vote of a committee duly
designated by the board of directors consisting solely of two or
more directors not at the time parties to the proceeding.
However, directors who are parties to the proceeding may
participate in designation of the committee;
(c) By special legal counsel selected by the board of
directors or its committee in the manner prescribed in paragraph
(a) or (b) of this subsection or, if a quorum of the board of
directors cannot be obtained under paragraph (a) of this
subsection and a committee cannot be designated under paragraph
(b) of this subsection, the special legal counsel shall be
selected by majority vote of the full board of directors,
including directors who are parties to the proceeding; or
(d) By the shareholders.
(3) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as
the determination that indemnification is permissible, except
that if the determination is made by special legal counsel,
authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under
subsection (2)(c) of this section to select counsel.
19
<PAGE>
The Company may indemnify its officers, employees and agents
as follows:
(1) An officer of the corporation is entitled to mandatory
indemnification under ORS 60.394, and is entitled to apply for
court-ordered indemnification under ORS 60.401, in each case to
the same extent as a director under ORS 60.394 and 60.401.
(2) The corporation may indemnify and advance expenses under
ORS 60.387 to 60.411 to an officer, employee or agent of the
corporation to the same extent as to a director. See ORS 60.407.
The Company may purchase and maintain insurance on behalf of
an individual against liability asserted against or incurred by
the individual who is or was a director, officer, employee or
agent of the corporation or who, while a director, officer,
employee or agent of the corporation, is or was serving at the
request of the corporation as a director, officer, partner,
trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise. The corporation may purchase and
maintain the insurance even if the corporation has no power to
indemnify the individual against the same liability under ORS
60.391 or 60.394. See ORS 60.411.
The indemnification and provisions for advancement of
expenses provided herein shall not be deemed exclusive of any
other rights to which directors, officers, employees or agents
may be entitled under the corporation's articles of incorporation
or bylaws, any agreement, general or specific action of its board
of directors, vote of shareholders or otherwise, and shall
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person. Specifically and
not by way of limitation, a corporation shall have the power to
make or agree to make any further indemnification, including
advancement of expenses, of:
(a) Any director as authorized by the articles of
incorporation, any bylaws approved, adopted or ratified by the
shareholders or any resolution or agreement approved, adopted or
ratified, before or after such indemnification or agreement is
made, by the shareholders, provided that no such indemnification
shall indemnify any director from or on account of acts or
omissions for which liability could not be eliminated under ORS
60.047 (2)(d); and
(b) Any officer, employee or agent who is not a director as
authorized by its articles of incorporation or bylaws, general or
specific action of its board of directors or agreement. Unless
the articles of incorporation, or any such bylaws, agreement or
resolution provide otherwise, any determination as to any further
indemnity under this paragraph shall be made in accordance with
ORS 60.404.
(2) If articles of incorporation limit indemnification or
advance of expenses, any indemnification and advance of expenses
are valid only to the extent consistent with the articles of
incorporation.
(3) The Company's may also pay or reimburse expenses
incurred by a director in connection with the director's
appearance as a witness in a proceeding at a time when the
20
<PAGE>
director has not been made a named defendant or respondent to a
proceeding. See ORS 60.414.
PART F/S
The following financial statements of the Company are filed
as a part of this report:
Report of Independent Accountants
Balance Sheets as of June 30, 1999, and the interim
period through March 31, 2000 (unaudited);
Statements of Operations for the years ended June 30,
1999, 1998, and the interim period ended March 31, 2000
(unaudited);
Statements of Stockholders' Equity for the years ended
June 1998, 1999, and the interim period through March
31, 2000 (unaudited);
Statements of Cash Flows for the years ended June 1998,
1999, and the interim period through March 31, 2000,
(unaudited);
Notes to Financial Statements.
PART III
Item 1. Index to Exhibits
Exhibit
Number Title of Document Location
2.01 Articles of Incorporation As Filed
2.02 Amendments to the Articles of Incorporation As Filed
2.03 By-laws As Filed
12.01 Stock Option Plan As Filed
23.01 Consent of Independent Auditors Attached
27.01 Financial Data Schedule As Filed
Item 2. Description of Exhibits
See Item 1.
21
<PAGE>
NET:X AMERICA, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
March 31, 2000 and June 30, 1999 and 1998
<PAGE>
C O N T E N T S
Independent Auditors' Report 3
Balance Sheets 4
Statements of Operations 5
Statements of Stockholders' Equity (Deficit) 6
Statements of Cash Flows 7
Notes to the Financial Statements 8
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Net:X America, Inc.
(A Development Stage Company)
Netherlands, Antilles
We have audited the accompanying balance sheet of Net:X
America, Inc. (a development stage company) as of June 30,
1999 and the related statements of operations, stockholders'
equity (deficit), and cash flows for the years ended June 30,
1999 and 1998. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Net:X America, Inc. (a development stage company)
as of June 30, 1999 and the results of its operations and its
cash flows for the years ended June 30, 1999 and 1998, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
As discussed in Note 2 to the financial statements, the
Company is a development stage company with recurring losses
which raises substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial
statements do not include any adjustments that might result
from the outcome of this uncertainty.
/S/JONES,JENSEN & COMPANY
Jones, Jensen & Company
Salt Lake City, Utah
May 30, 2000
3
<PAGE>
NET:X AMERICA, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
March 31, June 30,
2000 1999
____________ __________
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ - $ 950
____________ __________
Total Current Assets - 950
TOTAL ASSETS $ - $ 950
____________ __________
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 11,468 $ 13,243
____________ __________
Total Current Liabilities 11,468 13,243
____________ __________
STOCKHOLDERS' EQUITY
Common stock; 200,000,000 shares
authorized of $0.001 par value,
11,023,609 and 11,023,609 shares
issued and outstanding, respectively 11,024 11,024
Additional paid-in capital 2,608,220 2,600,403
Deficit accumulated during the
development stage (2,630,712) (2,623,720)
____________ __________
Total Stockholders' Equity (Deficit) (11,468) (12,293)
____________ __________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ - $ 950
____________ __________
4
<PAGE>
NET:X AMERICA, INC.
(A Development Stage Company)
Statements of Operations
From
Inception on
For the June 22,
Nine Months Ended For the Years Ended 1987 Through
March 31, June 30, March 31,
________________________ _____________________ 2000
2000 1999 1999 1998
_____________ __________ _________ __________ _____________
(Unaudited) (Unaudited) (Unaudited)
REVENUES $ - $ 20,000 $ 20,000 $ - $ 20,000
EXPENSES
Research and
development - 68,597 91,463 8,650 100,113
Impairment loss
(Note 5) - - - 1,600,000 1,600,000
General and
administrative 7,023 251,668 534,895 271,580 955,015
Total Expenses 7,023 320,265 626,358 1,880,230 2,655,128
Loss From
Operations (7,023) (300,265) (606,358) (1,880,230) (2,635,128)
OTHER INCOME
Interest income 31 3,661 4,385 - 4,416
Total Other
Income 31 3,661 4,385 - 4,416
NET LOSS $ (6,992) $(296,604) $(601,973)$(1,880,230)$ (2,630,712)
BASIC LOSS
PER SHARE $ (0.00) $ (0.03) $ (0.05)$ (0.60)
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 11,023,609 11,023,609 11,023,609 3,118,037
5
<PAGE>
NET:X AMERICA, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Common Stock Additional During the
__________________________ Paid-In Development
Shares Amount Capital Stage
____________ ____________ _____________ _________________
Balance,
June 22, 1987 - $ - $ - $ -
Common stock
issued for
cash on
July 1,
1995 at
$0.0025
per share 480,000 480 720 -
Common stock
issued for
cash and
revenue rights
on July 9, 1996
at $2.50 per
share 14,000 14 34,986 -
Common stock
issued for cash
at $0.40 per
share 57,195 57 142,931 -
Stock offering
costs - - (16,700) -
Loss from
inception on
June 22, 1987
through June 30,
1997 - - - (141,517)
____________ ____________ _____________ _________________
Balance,
June 30, 1997 551,195 551 161,937 (141,517)
Common stock
canceled (360,000) (360) 360 -
Common stock
issued for
services
and cash
at $0.31
per share 432,414 433 540,083 -
Common stock
issued to
acquire an
exclusive
license agreement
for certain
software
products 6,400,000 6,400 1,593,600 -
Stock offering
costs - - (54,052) -
Net loss for
the year ended
June 30, 1998 - - - (1,880,230)
____________ ____________ _____________ _________________
Balance,
June 30,1998 7,023,609 7,024 2,241,928 (2,021,747)
Common stock
issued for
cash at
$0.10 per
share 4,000,000 4,000 396,000 -
Stock offering
costs - - (37,525) -
Net loss for
the year ended
June 30, 1999 - - - (601,973)
____________ ____________ _____________ _________________
Balance,
June 30, 1999 11,023,609 11,024 2,600,403 (2,623,720)
Contributed
capital
(unaudited) - - 7,817 -
Net loss for
the nine months
ended March 31,
2000 (unaudited) - - - (6,992)
____________ ____________ _____________ _________________
Balance,
March 31,
2000
(unaudited) 11,023,609 $ 11,024 $ 2,608,220 $ (2,630,712)
6
<PAGE>
NET:X AMERICA, INC.
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
For the June 22,
Nine Months Ended For the Years Ended 1987 Through
March 31, June 30, March 31,
________________________ _____________________ 2000
2000 1999 1999 1998
_____________ __________ _________ __________ _____________
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (6,992) $(296,604) $(601,973) $(1,880,230)$ (2,630,712)
Adjustments
to reconcile
net loss to
net cash used
by operating
activities:
Common stock
issued for
services - - - 192,188 210,488
Impairment loss - - - 1,600,000 1,600,000
Changes in operating
assets and
liabilities:
Increase (decrease)
in accounts
payable (1,775) 7,169 10,771 2,472 11,468
_____________ __________ _________ __________ _____________
Net Cash (Used)
by Operating
Activities (8,767) (289,435) (591,202) (85,570) (808,756)
_____________ __________ _________ __________ _____________
CASH FLOWS FROM
INVESTING
ACTIVITIES - - - - -
CASH FLOWS FROM
FINANCING
ACTIVITIES
_____________ __________ _________ __________ _____________
Contributed
capital 7,817 - - - 7,817
Sale of common
stock - 70,625 362,475 294,276 800,939
_____________ __________ _________ __________ _____________
Net Cash Provided
by Financing
Activities 7,817 70,625 362,475 294,276 808,756
_____________ __________ _________ __________ _____________
NET INCREASE
(DECREASE) IN
CASH (950) (218,810) (228,727) 208,706 -
CASH AT
BEGINNING OF
PERIOD 950 229,677 229,677 20,971 -
_____________ __________ _________ __________ _____________
CASH AT END OF
PERIOD $ - $ 10,867 $ 950 $ 229,677 $ -
_____________ __________ _________ __________ _____________
Cash paid during the year for:
Interest $ - $ - $ - $ - $ -
Income taxes $ - $ - $ - $ - $ -
NON-CASH FINANCING
Common stock
issued for
services $ - $ -$ - $ 192,188 $ 210,488
7
<PAGE>
NET:X AMERICA, INC.
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and June 30, 1999 and 1998
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. History
The Company was organized on June 22, 1987 as a
corporation in the State of Oregon under the name of
WESTAQ Network, Inc. On June 20, 1996, the Company
changed its name to Net:X America, Inc. The Company was
organized for the purpose of engaging in the business of
providing electronic information services and any other
lawful activities.
The Company has had no significant operations since
inception on June 22, 1987 and has been in the
development stage since inception. The Company will
remain in the development stage until principal
operations commence.
b. Accounting Method
The Company's financial statements are prepared using the
accrual method of accounting. The Company has elected a
June 30 year end.
c. Use of Accounting Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make certain estimates and assumptions that
affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ form
those estimates.
d. Basic Loss Per Share
The basic loss per share of common stock is based on the
weighted average number of shares issued and outstanding
during the period of the financial statements.
e. Income Taxes
As of June 30, 1999, the Company has a net operating loss
carryforward for federal income tax purposes of
approximately $2,600,000 that may be used in future years
to offset taxable income. The net operating loss
carryforward will expire in 2019. The tax benefit of the
cumulative carryforwards has been offset by a valuation
allowance of the same amount.
f. Cash and Cash Equivalents
For purposes of financial statement presentation, the
Company considers all highly liquid investments with a
maturity of three months or less, from the date of
purchase to be cash equivalents.
8
<PAGE>
NET:X AMERICA, INC.
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and June 30, 1999 and 1998
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
g. Revenue Recognition
During the year ended June 30, 1999, the Company recorded
interest income of $4,385. The Company maintained a
money market account and a trust fund during the year
ended June 30, 1999 that earned interest at an
approximate rate of 4% per annum. In addition, the
Company received $20,000 in licensing fees during the
year related to its IAM software. These fees were a one-
time charge for use of the software. Accordingly, the
entire $20,000 was recorded as revenue during the year
ended June 30, 1999 as there was no future obligation of
the Company related to the software. The Company has had
no other revenues from the licensing of its software
through March 31, 2000.
The Company currently has no source of revenues. Revenue
recognition policies will be determined when principal
operations begin.
h. Unaudited Financial Statements
The accompanying unaudited financial statements include
all of the adjustments which, in the opinion of
management, are necessary for a fair presentation. Such
adjustments are of a normal, recurring nature.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using
generally accepted accounting principles applicable to a
going concern which contemplates the realization of
assets and liquidation of liabilities in the normal
course of business. The Company has not yet established
an ongoing source of revenues sufficient to cover its
operating costs and allow it to continue as a going
concern. The ability of the Company to continue as a
going concern is dependent on the Company obtaining
adequate capital to fund operating losses until it
becomes profitable. If the Company is unable to obtain
adequate capital, it could be forced to cease operations.
In order to continue as a going concern, develop a
reliable source of revenues, and achieve a profitable
level of operations, the Company will need, among other
things, additional capital resources. Management's
plans to continue as a going concern include (1) raising
additional capital through sales of common stock, the
proceeds of which would be used to market and develop the
existing software and related rights, hiring of
administrative, sales and marketing personnel and (2) the
use of stock options to pay for employee compensation and
marketing services. However, management cannot provide
any assurances that the Company will be successful in
accomplishing any of its plans.
The ability of the Company to continue as a going concern
is dependent upon its ability to successfully accomplish
the plans described in the preceding paragraph and
eventually secure other sources of financing and attain
profitable operations. The accompanying financial
statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going
concern.
9
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NET:X AMERICA, INC.
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and June 30, 1999 and 1998
NOTE 3 - STOCK OPTION PLAN
On June 16, 1998, the Company approved the Net:X America,
Inc., 1998 Stock Option Plan whereby the Board of
Directors could issue options to purchase up to 2,000,000
shares of the Company's common stock. On August 21,
1998, the Company issued options to purchase up to
1,000,000 shares of the Company's common stock to seven
individuals. The options had an exercise price of $0.11
per share and had a one year term beginning on August 21,
1998. The options expired without being exercised.
NOTE 4 - STOCK ACTIVITY
Effective August 19, 1997, the Company effected a two-for-
one forward stock split of its issued and outstanding
common stock. Effective April 26, 1998, the Company
effected a one-for-five reverse stock split of its issued
and outstanding common stock. All shares outstanding have
been retroactively restated to reflect these stock
splits.
On July 9, 1996, the Company issued 14,000 shares for
$35,000 cash and certain future revenue rights, in
perpetuity, for all revenues generated from any
transactions that use the NetX system. The Company is no
longer using the NetX system and does not expect to
generate any revenues related to their revenue right
agreement. The Company has no obligation under the share
issuance to pursue the development of the NetX system.
The revenue rights were recorded at a $-0- value at the
time the shares were issued.
NOTE 5 - LICENSING RIGHTS
In May 1998, the Company entered into an agreement with
Island Product Management (IPM) under which the Company
issued 6,400,000 shares of its outstanding common stock
in exchange for the licensing rights to IPM's Investor
Account Manager (IAM) software. These rights were
exclusive, but were restricted to the territory within
the geographic confines of the Caribbean and Latin
America. The rights were royalty-free, and the Company
is able to relicense, rent or sell the software within
the territory together with all its related intellectual
property rights, title and interests. The software
offers reporting and account management capabilities and
when integrated with the Company's proprietary StockEx
software, will enable brokerage houses to offer online
stock trading. The 6,400,000 shares were valued at $0.25
per share or $1,600,000, based upon the market price of
the stock on the date of issuance.
The $1,600,000 cost of the rights was expensed during the
year ended June 30, 1998 because the Company has had no
subsequent significant revenues from the sale of the
software and licensing rights, and currently does not
have the resources to initiate a marketing plan for the
software. The amount has been recorded as an impairment
loss for the year ended June 30, 1998.
The Company has also developed other software programs
including the StockEx software. These costs have been
expensed as incurred pursuant to SFAS 86, "Accounting for
the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed", as the future use of the software is
currently uncertain.
10
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act
of 1934, the registrant caused this registration statement to be
signed on its behalf, thereunto duly authorized.
NET:X AMERICA, INC.
Date: September 11, 2000 By:/S/WILLIAM D. JONES
William D. Jones, CEO
President and Chief Accounting Officer
22
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