<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
____________
Form 10-SB/A-1
____________
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>
<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.
2
</Page>
<PAGE>
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.
3
</Page>
<PAGE>
Products
--------
The Company's software product is made up of two software programs,
StockEX and Investor Account Manager ("IAM"). The Company purchased the
licensing rights to the IAM software 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. During this time, 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. 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.
"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.
4
</Page>
<PAGE>
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.
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.
5
</Page>
<PAGE>
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 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.
6
</Page>
<PAGE>
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 be able to get a
better understanding of 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
---------
The Company currently has no employees. The day-to-day affairs of the
Company are currently being handled by its officers and directors. William
Jones, the Company's CEO/President currently 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.
-------------------
7
</Page>
<PAGE>
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.
8
</Page>
<PAGE>
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. 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.
9
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<PAGE>
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.
Item 4. Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
The following table sets forth as of June 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.
<TABLE>
<CAPTION>
Title of Name and Address of Amount and Nature of Percentage
Class Beneficial Owner Beneficial Ownership(2) of Class
-------- ------------------------------ ------------------------- ----------
<S> <C> <C> <C>
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.
</Page>
<PAGE>
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%
Lanvin International LTD
2001 Leeward Highway
Turks & Caicos Isles, B.W.I.
Common Crawford Ward(7) 704,000 6.39%
Portorford Communications LTD
2001 Leeward Highway
Turks & Caicos Isles, B.W.I.
------------------------------------------------------------------------------------
Common Officers, Directors and
Nominees as a Group: 1,210,000 10.98%
------------------------------------------------------------------------------------
</TABLE>
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.
(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,
shares that are in the registered name of BSA Development LTD are counted
as shares for Mr. Dong.
(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.
11
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<PAGE>
(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.
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
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name Age Position(s) Director or Officer Since
------------------ --- ---------------------- -------------------------
<S> <C> <C> <C>
William D. Jones 40 CEO/President January 2000
Secretary
Treasurer
Director
Andrew Dong 38 Director June 1996
</TABLE>
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.
12
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<PAGE>
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.
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).
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------
Awards Payouts
-------- --------
Annual Compensation Other Restr- All
Name -------------------------- Annual icted Other
and Principal Bonus Compen- Stock Options LTIP Compen-
Position Year Salary $ sation Awards /SARs sation
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
13
</Page>
<PAGE>
Andrew Dong 1999 0 0 0 0 0 0 0
Director 1998 0 0 0 0 100,000 0 0
(1)
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 0 0
(1)
Former-Director 1997 0 0 0 0 0 0 0
Ronald J. McFadyen1999 0 0 0 0 0 0 0
Former-Secretary/ 1998 0 0 0 0 200,000 0 0
(1)
Treasurer 1997 0 0 0 0 0 0 0
Former-Director
------------------------------------------------------------------------------------
</TABLE>
(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.
14
</Page>
<PAGE>
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 Bulletin
Board ("OTCBB"), under the symbol "NXAME". As of June 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.
<TABLE>
<CAPTION>
CLOSING BID CLOSING ASK
----------------------- -----------------------
HIGH LOW HIGH LOW
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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
--------------------------------------------------------------------------
15
</Page>
<PAGE>
The quotations listed above have been retroactively restated to
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.
16
</Page>
<PAGE>
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 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.
17
</Page>
<PAGE>
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;
(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:
18
</Page>
<PAGE>
(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.
(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;
19
</Page>
<PAGE>
(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.
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:
20
</Page>
<PAGE>
(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 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 As Filed
27.01 Financial Data Schedule Attached
Item 2. Description of Exhibits
See Item 1.
21
</Page>
<PAGE>
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: August 11, 2000 By: /s/ William D. Jones
------------------------
William D. Jones, CEO,
President and Chief Accounting Officer
22
</Page>
<PAGE>
NET:X AMERICA, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
March 31, 2000 and June 30, 1999 and 1998
</Page>
<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
</Page>
<PAGE>
/Letterhead/
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
</Page>
<PAGE>
NET:X AMERICA, INC.
(A Development Stage Company)
Balance Sheets
</TABLE>
<TABLE>
<CAPTION>
ASSETS
------
March 31, June 30,
2000 1999
------------ ------------
<S> <C> <C>
(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
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
4
</Page>
<PAGE>
NET:X AMERICA, INC.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
From
Inception
On June
Nine Months Ended For the Years Ended 22, 1987
March 31, June 30, Through
------------------------ ------------------------March 31,
2000 1999 1999 1998 2000
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ 20,000 $ 20,000 $ - $ 20,000
----------- ----------- ----------- ----------- -----------
EXPENSES
Research and
development - 68,597 91,463 8,650 100,113
General and
administrative 7,023 251,668 534,895 271,580 953,515
----------- ----------- ----------- ----------- -----------
Total Expenses 7,023 320,265 626,358 280,230 1,053,628
Loss From Operations (7,023) (300,265) (606,358) (280,230) (1,033,628)
----------- ----------- ----------- ----------- -----------
OTHER INCOME
Interest income 31 3,661 4,385 - 4,416
Impairment loss
(Note 5) - - - (1,600,000) (1,600,000)
----------- ----------- ----------- ----------- -----------
Total Other
Income 31 3,661 4,385 (1,600,000) (1,595,584)
----------- ----------- ----------- ----------- -----------
NET LOSS $ (6,992) $ (296,604) $ (601,973)$(1,880,230) $(2,629,212)
=========== =========== =========== =========== ===========
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
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
5
</Page>
<PAGE>
<PAGE> NET:X AMERICA, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
<TABLE><CAPTION> Deficit
Accumulated
Common Stock Additional During the
------------------------ Paid-In Development
Shares Amount Capital Stage
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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)
=================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
6
</Page>
<PAGE>
<PAGE> NET:X AMERICA, INC.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION> From
Inception
On June
Nine Months Ended For the Years Ended 22, 1987
March 31, June 30, Through
----------------------- -----------------------March 31,
2000 1999 1999 1998 2000
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of these financial statements
7
</Page>
<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>
<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 a $20,000 licensing fee during the year related to its IAM
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 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.
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