UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 0-24977
MIZAR ENERGY COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Colorado 33-0231238
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
2400 E. Commercial Blvd., Suite 221
Ft. Lauderdale, FL 33308
(Address of principal executive offices, including zip code)
(954) 938-8010
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
requirements for the past 90 days.
YES [X] NO [ ]
The number of issued and outstanding shares of the Registrant's Common Stock,
$0.001 par value, as of March 31, 2000 was 1,430,700.
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MIZAR ENERGY COMPANY
PART I - FINANCIAL INFORMATION
<TABLE>
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PAGE
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<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999.........................3
Consolidated Statements of Operations for the Three Months Ended March 31,
2000 and 1999...................................................................................4
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999.........................................................................5
Notes to Consolidated Financial Statements...................................................6-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................................11-17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..............................................................................18
Item 2. Changes in Securities..........................................................................18
Item 3. Defaults Upon Senior Securities................................................................18
Item 4. Submission of Matters to a Vote of Security Holders............................................18
Item 5. Other Information..............................................................................18
Item 6. Exhibits and Reports on Form 8-K...............................................................20
Signatures.......................................................................................................24
</TABLE>
2
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MIZAR ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months Period from inception
ended (December 11, 1996)
March 31, through
2000 March 31, 2000
---- --------------
<S> <C> <C>
Revenues $ - $ -
Expenses
Lease operating costs 8,162
General and administrative 20 18,341
Impairment of oil and gas properties - 17,876
-------- --------
Total Expenses 20 44,379
-------- --------
Net Loss $ (20) (44,379)
======== ========
Earning per share
Net Loss per Common Share ($0.00001) ($0.03099)
</TABLE>
See notes to financial statements.
3
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MIZAR ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited) (Audited)
----------- ---------
Assets
<S> <C> <C>
Current assets
Cash 490 $ 510
-------- --------
$ 490 $ 510
======== ========
Liabilities and Stockholders' Equity
Liabilities $ - $ -
Stockholders' Equity
Common stock no par value; 25 million shares
authorized; 1,430,700 issued and outstanding 44,869 44,869
Preferred stock no par value; 10 million shares
authorized; no shares issued or outstanding -
Deficit accumulation during the development stage (44,379) (44,359)
-------- --------
490 510
-------- --------
$ 490 $ 510
======== ========
</TABLE>
See notes to financial statements.
4
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MIZAR ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 11, 1996 (DATE OF INCEPTION)
TO MARCH 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Deficit accumulated
Common Stock through the
Shares Amount Development stage TOTAL
---------------------------------------------------------
<S> <C> <C> <C> <C>
Issuance of common stock to founders for the period
ended December 1996, in exchange for $30,000 in cash 1,400,000 $ 30,000 $ - $ 30,000
Issuance of common stock according to the private
offering in effect, through December 1997 ($ 1 per share) 4,100 4,100 4,100
Net loss for the year (24,278) (24,278)
---------------------------------------------------------
Balance - December 31, 1997 1,404,100 34,100 (24,278) 9,822
Issuance of common stock according to the private
offering in effect, through December 1998 net of
offering cost of $ 15,831. ($1 per share) 26,600 10,769 10,769
Net loss for the year (14,263) (14,263)
---------------------------------------------------------
Balance - December 31, 1998 1,430,700 44,869 (38,541) 6,328
Net loss for the year (5,818) (5,818)
---------------------------------------------------------
Balance - December 31, 1999 (Audited) 1,430,700 44,869 (44,359) 510
Net loss for the three months ended March 31, 2000 (20) (20)
---------------------------------------------------------
Balance - March 31, 2000 (Unaudited) 1,430,700 $ 44,869 ($ 44,379) $ 490
=========================================================
</TABLE>
See notes to financial statements.
5
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MIZAR ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months Period from inception
ended (December 11, 1996)
March 31, through
2000 March 31, 2000
---- --------------
<S> <C> <C>
Cash flows from operating activities
Net Loss $ (20) $ (44,379)
-------- --------
Adjustments to reconcile net income to net cash used in operating activities:
Amortization 446
Impairment of oil and gas properties 17,876
Increase in organization costs (446)
Decrease in reclamation costs (3,500)
-------- --------
Total adjustments - 14,376
-------- --------
Net cash used by operating activities (20) (30,003)
-------- --------
Cash flow from investing activities:
Purchase of oil and gas properties (17,876)
Proceeds from sale of oil and gas equipment 3,500
-------- --------
Net cash used by investing activities - (14,376)
-------- --------
Cash flow from financing activities:
Proceeds from issuance of common stock 44,869
Proceeds from shareholders' loan 10,423
Principal payment on shareholders' loan (10,423)
-------- --------
Net cash provided by financing activities - 44,869
-------- --------
Net increase (decrease) in cash and cash equivilents (20) 490
Cash and cash equivalents, beginning of the period 510 -
-------- --------
Cash and cash equivalents, end of period $ 490 $ 490
======== ========
</TABLE>
See notes to financial statements.
6
<PAGE>
MIZAR ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 1 UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 310(b) of Regulation SB.
Accordingly, they do not include all of the information and
footnote disclosures normally included in complete financial
statements prepared in accordance with generally accepted
accounting principles. For further information, such as
significant accounting policies followed by the Company, refer
to the notes to the Company's audited financial statements.
In the opinion of management, the unaudited financial
statements include all necessary adjustments (consisting of
normal, recurring accruals) for a fair presentation of the
financial position, results of operations and cash flow for
the interim periods presented. The results of operations for
the three-month periods ended March 31, 2000 and 1999 are not
necessarily indicative of operating results to be expected for
a full year.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description
--------------------
Mizar Energy Company (the Company) was incorporated in the
state of Colorado on December 11, 1996, and had no previous
operations. From its inception through December 28, 1999, the
Company was involved in the business of acquiring, developing
and operating oil and gas properties. On December 28, 1999,
the Company's founders sold 60% of the Company's issued and
outstanding common stock to HBOA.Com., Inc., a District of
Columbia corporation. Pursuant to this stock sale, there was a
change in the Company's business and management team. The
Company will now be focusing on developing the premier
Internet portal through which home based business owners
obtain the products, services and information necessary to
start, expand and profitably run their businesses.
The Company is considered to be in the development stage and
the accompanying financials represent those of a development
stage company.
Cash and Cash Equivalents
-------------------------
For purposes of the statement of cash flows, the Company
treats all short-term investments with maturities of three
months or less at acquisition to be cash equivalents.
7
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MIZAR ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Advertising Costs
-----------------
Advertising and marketing costs are expensed as incurred.
During the three months ended March 31, 2000, there were no
advertising cost expenses.
Basic Loss Per Share and Diluted Loss Per Share
-----------------------------------------------
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share (SFAS No. 128), which specifies the
computation, presentation and disclosure requirements for
earnings per share. SFAS No. 128 supercedes Accounting
Principle Board Opinion No. 15 entitled Earnings Per Share.
Basic earnings per share are computing by dividing income
available to common stockholders (the numerator) by the
weighted-average number of common shares (the denominator) for
the period. The computation of diluted earnings per share is
similar to basic earnings per share, except that the
denominator is increased to include the number of additional
common shares that would have been outstanding if the
potentially dilutive common shares had been issued.
The numerator in calculating basic earnings per share is
reported net loss. The denominator is based on the following
weighted-average number of common shares:
Basic 1,430,700
Concentration of Risk
---------------------
Financial instruments that potentially subject the Company to
credit risk include cash on deposit with one financial
institution amounting to $490 at March 31, 2000, which was
insured for up to $100,000 by the U.S. Federal Deposit
Insurance Corporation.
8
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MIZAR ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000
NOTE 3 INCOME TAXES
At March 31, 2000, the Company had a net operating loss
carryforward for income tax purposes of approximately $44,379
available to offset future income taxes, expiring through
2020.
NOTE 4 RELATED PARTY TRANSACTIONS
The Company is providing office space on a rent-free basis
from HBOA.Com, Inc. (see Note 6).
NOTE 5 GOING CONCERN
The Company's financial statements are prepared using the
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.
However, the Company has no current source of revenue. Without
realization of additional capital it would be unlikely for the
Company to continue as a going concern. It is Management's
plan to seek additional capital through a merger with an
existing operating company (see Note 6).
NOTE 6 SUBSEQUENT EVENT
By the end of June 2000, the Company intends to merge
HBOA.Com, Inc., a District of Columbia corporation ("HBOA"),
with and into a company that is a wholly owned subsidiary of
the Company (the "Florida-Sub"). Pursuant to the stock
purchase agreement dated December 28, 2000, HBOA.Com, Inc., a
District of Columbia corporation, owns approximately 60% of
the Company's issued and outstanding common stock.
In the aggregate, HBOA's shareholders will receive 8,569,300
shares of the Company's common stock in the merger. After the
merger, the Company will have 10,000,000 shares of its common
stock issued and outstanding and HBOA's operations will be
consolidated into the Company's business. Furthermore, after
the merger, the Company will have access to the cash resources
of HBOA. As of March 27, 2000, HBOA had raised approximately
$2 million in a private offering.
9
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
THE FOLLOWING INFORMATION HAS BEEN DERIVED FROM OUR FINANCIAL
STATEMENTS AND SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND
RELATED NOTES THERETO INCLUDED IN PART 1-ITEM 1 OF THIS 10-QSB. THE DISCUSSION
FOLLOWING CONTAINS FORWARD LOOKING STATEMENTS THAT THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR
IMPLIED IN THESE FORWARD- LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS,
INCLUDING THOSE SET FORTH UNDER THE SECTION ENTITLED "RISK FACTORS" UNDER
MATERIAL CHANGES IN FINANCIAL CONDITION, RESULTS OF OPERATIONS AND LIQUIDITY
HEREIN.
Overview
Mizar Energy Company, a Colorado company (the "Company") was
incorporated in the state of Colorado on December 11, 1996. From its inception
through December 28, 1999, the Company was involved in the business of
acquiring, developing and operating oil and gas properties. On December 28,
1999, the Company's founders sold 60% of the Company's issued and outstanding
common stock to HBOA.Com, Inc., a District of Columbia corporation, which
engaged in the sale of products and services to the owners of home based
businesses through its Internet web site ("HBOA"). Pursuant to this stock sale,
there was a change in the Company's business and management team. The Company is
now focusing on developing the premier Internet portal through which home based
business owners obtain the products, services and information necessary to
start, expand and profitably run their businesses.
By the end of June 2000, the Company intends to merge with and into a
wholly owned subsidiary of the Company. In the aggregate, the HBOA shareholders
will receive 8,569,300 shares of the Company's common stock. After the merger,
the Company will have 10 million shares of its common stock issued and
outstanding HBOA's operations will be consolidated into the Company's business.
Except where the context indicates otherwise, the term "Company" shall
refer to the Company and HBOA. As previously noted, HBOA intends to complete its
merger with a Florida company that is a subsidiary of the Company by the end of
June 2000
Results of Operations
The Company is a development stage company and, as a result, operating
expenses have totaled $44,379 from the period from inception (December 11, 1996)
through March 31, 2000. Operating expenses consist of lease operating costs
totaling $8,162, general and administrative expenses totaling $18,341 and
impairment of oil and gas properties totaling $17,876. The Company's interest in
oil and gas wells expired on January 15, 1999, so the Company entered into an
agreement in December 1999 which released it from any obligations, so the
Company no longer anticipates incurring any expenses for the impairment of oil
and gas properties.
As a result of the forgoing, the Company's net loss was $44,379 for the
period from inception December 31, 1996 through March 31, 2000.
10
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Plan of Operations
HBOA is focusing on developing its web site (www.hboa.com) into the
premier Internet portal through which home based business owners can obtain the
products, services and information necessary to start, expand and profitably run
their businesses. HBOA expects to generate revenues from three sources: (1) the
sale of products and services from its Internet web site, (2) advertising
revenues and (3) fees to be a member of the HBOA web site. In order to develop
these sources of revenues, HBOA plans on taking the following actions:
*HBOA intends to increase the scope of products and services that it
offers on its web site. HBOA currently has nine categories of products and
services, which are as follows (1) Advice, (2) Advocacy, (3) Reference, (4)
Products, (5) Services, (6) Insurance, (7) Shipping, (8) Communications and (9)
Business Mall.
*HBOA intends to enter into co-branding and vendor agreements with a
wide variety of companies.
*HBOA plans on increasing its membership base. HBOA currently has three
levels of membership: (1) Free (no cost), (2) Executive Level ($50 annually) and
(3) Board Level ($125 annually.)
*HBOA plans on increasing the quality and scope of its content on its
web site by (1) retaining outside content providers, (2) entering into strategic
relationships with content providers and (3) developing content in-house.
*HBOA intends to hire a team of senior managers who have experience
with Internet companies.
Liquidity and Capital Resources
As of March 31, 2000, the Company had cash on hand of $490. The Company
will have more operating capital after HBOA is merged into the Company's Florida
subsidiary. As of May 11, 2000, HBOA has raised approximately $2 million in a
private offering. After the merger, the combined Company and HBOA expect that
the proceeds from the Offering will last approximately 12 months. During the
next twelve months, the Company and HBOA do not intend to spend significant
amounts on research and development. However, HBOA intends to make significant
expenditures in the further development of its web site. Additionally, HBOA
expects to hire a significant number of additional employees.
In fiscal 1999, the Company financed its working capital requirements
from cash that it had on hand. In June 1998, the Company completed an offering
of 30,700 shares of its common stock for $30,700 in cash. In November-December
1997, the Company raised $4,100 in a small private offering. In December 1996,
the Company sold 1,400,000 shares of its common stock to its officers and
directors for $30,000 in cash.
The Company's financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business. To keep itself
viable and in existence as a going concern, the Company intends to merge HBOA
with and into a Florida corporation, that is a wholly-owned subsidiary of
11
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the Company. After the merger is completed, the Company will have access to the
cash resources of HBOa. As of May 11, 2000, HBOA had raised $2 million in a
private offering.
Year 2000 Readiness
The Company has not incurred any material costs nor experienced any
operational problems as a result of the Year 2000 issues. The Company has
reviewed its internal computer systems and products and their capability of
recognizing the year 2000 and years thereafter. The Company expects that any
costs relating to ensuring such systems to be year 2000 compliant will not be
material to the financial condition or results of operations of the Company.
Risk Factors
In evaluating the Company, HBOA and their combined business the
following risk factors should be considered:
The Company has a limited operating history and therefore historical results may
not be indicative of future performance
Mr. Davis and Mr. Lee's sale of 850,000 shares of the Company's common
stock to HBOA resulted in a change in control of the Company and a change in the
Company's management. The Company has a limited operating history, and its
historical results of operations are not useful as a basis for predicting future
operating results of the Company. No assurances can be given that the future
operations of the Company will be successful.
The Company has a history of operating losses and expectation of future losses,
even after the merger of HBOA with a subsidiary of the Company
For the period from inception through March 31, 2000, the Company had a
net loss of $44,379. The Company does not anticipate that it will earn a profit
during the 2000 fiscal year. In fiscal 2000, the Company will merge HBOA, an
Internet portal, into a wholly-owned Florida subsidiary. Management of the
combined companies of HBOA and the Company does not anticipate that the combined
companies will make a profit, due, in part to start up costs associated with the
further development of HBOA's web site, significant advertising costs and a
substantial increase in staff. Furthermore, there can be no assurances that the
combined business strategy of the Company and HBOA will enable the combined
companies to achieve profitable operations in the future.
Need for Additional Capital
As of December 31, 1999, the Company had cash on hand of $510. After
the Company completes the merger of HBOA with and into its wholly-owned Florida
subsidiary, the Company will have additional operating capital. As of May 11,
2000, HBOA has raised $2 million in a private offering. Management of the
combined operations of the Company and HBOA expect that the proceeds from this
private offering will last approximately 12 months. In the event the Company
and/or HBOA's plans change or its assumptions prove to be inaccurate (due to
unanticipated expenses, difficulties, delays or otherwise) the Company and HBOA
could be required to seek additional financing. There can be no assurances that
any additional financing will be available to the Company and HBOA when needed,
on commercially reasonable terms, or at all. Any inability
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to obtain additional financing when needed would have a material adverse effect
on the Company and HBOA's business, financial operations and results of
operations.
Our Methods of Generating Revenue are Relatively New and Largely Untested
After the merger is completed, the Company and HBOA intend to generate
revenue through (1) membership fees, (2) the facilitation of electronic commerce
and (3) advertising revenues. These methods of revenues generation are
relatively new and largely untested.
A portion of HBOA revenues for the foreseeable future are expected to
be derived from the use of electronic commerce transactions. HBOA will facility
electronic commerce by directing users who ask a shopping question to electronic
commerce merchants, some of who will compensate HBOA for the referral. The
market for Internet products and services has only recently begun to develop and
is rapidly changing. Therefore, the success of the business of HBOA and the
Company depends upon the adoption of the Internet as a medium for commerce for a
broad base of customers. If this market fails to develop or develops more slowly
than expected, or if electronic commerce services to not achieve market
acceptance, the combined operations of HBOA and the Company could suffer.
Substantial Competition
The industry in which HBOA competes is highly competitive and highly
fragmented. The industry is characterized by the frequent introduction of new
web sites often accompanied by major advertising and promotional programs.
HBOA's primary competition at the present time is various associations' sites,
which generally have been formed to promote such things as books/tapes, speaking
engagements or selling business opportunities. These include the American
Association of Home Based Businesses, American Home Business Association, Fran
Tarkenton Small Business Network, Home Business Institute and the Home Office
Association of America. None of the existing sites have the level of content
anticipated to be provided by HBOA. Additionally, HBOA faces competition from a
number of small businesses sites currently on the web or in various states of
development. New entrants to this market include Staples, Office Depot and Onvia
further validating the marketplace. While many of these competitors have
significantly greater financial, technical and marketing resources than HBOA,
none focuses on the home business owner. HBOA offers a "single source"
vertically integrated portal for home based businesses which gives it a distinct
competitive advantage. HBOA believe providing a user friendly technically rich
and product/service complete site will attract and retain home business owners.
However, HBOA always faces the risk that competitors will introduce better
services and resources. This could also affect HBOA's ability to keep existing
customers or acquire new customers and could result in lower net revenue and/or
profits.
Security Risks
A party who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in HBOA's Internet
operations. HBOA may be required to expend significant capital and resources to
protect against the threat of such security breaches or to alleviate problems
caused by such breaches. Consumer concern over Internet security has been, and
could continue to be, a barrier to commercial activities requiring consumers to
send their credit card information over the Internet. Computer viruses,
break-ins, or other security problems could lead to misappropriation of
proprietary information and interruptions, delays, or cessation in service to
HBOA's customers. Moreover, until more comprehensive security technologies are
developed, the
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security and privacy concerns of existing and potential customers may inhibit
the growth of the Internet as a merchandising medium.
Governmental Regulation and Legal Uncertainties
HBOA is not currently subject to direct federal, state, or local
regulation, and laws or regulations applicable to access to or commerce on the
Internet, other than regulations applicable to businesses generally. However,
due to the increasing popularity and use of the Internet and other online
services, it is possible that a number of laws and regulations may be adopted
with respect to the Internet or other online services covering issues such as
user privacy, "indecent" materials, freedom of expression, pricing, content and
quality of products and services, taxation, advertising, intellectual property
rights and information security. The adoption of any such laws or regulations
might also decrease the rate of growth of Internet use, which in turn could
decrease the demand for HBOA's products and services or increase the cost of
doing business or in some other manner have a material adverse effect on HBOA's
business, results of operations, and financial condition. In addition,
applicability to the Internet of existing laws governing issues such as property
ownership, copyrights and other intellectual property issues, taxation, libel,
obscenity, and personal privacy is uncertain. The vast majority of such laws
were adopted prior to the advent of the Internet and related technologies and,
as a result, do not contemplate or address the unique issues of the Internet and
related technologies. HBOA does not believe that such regulations, which were
adopted prior to the advent of the Internet, govern the operations of HBOA's
business nor have any claims been filed by any state implying that HBOA is
subject to such legislation. There can be no assurance, however, that a state
will not attempt to impose these regulations upon HBOA in the future or that
such imposition will not have a material adverse effect on HBOA's business,
results of operations, and financial condition.
Several states have also proposed legislation that would limit the uses
of personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues, including some recently proposed changes, could create uncertainty in
the marketplace that could reduce demand for the services of HBOA or increase
the cost of doing business as a result of litigation costs or increased service
delivery costs, or could in some other manner have a material adverse effect on
the HBOA's business, results of operations, and financial condition. In
addition, because HBOA's services are accessible worldwide, and HBOA facilitates
sales of goods to users worldwide, other jurisdictions may claim that HBOA is
required to qualify to do business as a foreign corporation in a particular
state or foreign country. HBOA is qualified to do business in Florida, and
failure by the HBOA to qualify as a foreign corporation in a jurisdiction where
it is required to do so could subject the HBOA to taxes and penalties for the
failure to quality and could result in the inability of the HBOA to enforce
contracts in such jurisdictions. Any such new legislation or regulation, or the
application of laws or regulations from jurisdictions whose laws do not
currently apply to HBOA's business, could have a material adverse effect on
HBOA's business, results of operations, and financial condition.
Potential Liability for Sales and Other Taxes
HBOA does not currently collect sales or other similar taxes in respect
of the delivery of its products into states other than California where HBOA
collects sales taxes for sales of tangible products. New state tax regulations
may subject HBOA to the assessment of sales and income taxes
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in additional states. Although the Internet Tax Freedom Act precludes for a
period of three years the imposition of state and local taxes that discriminate
against or single out the Internet, it does not impact currently existing taxes.
Tax authorities in a number of states are currently reviewing the appropriate
tax treatment of companies engaged in Internet retailing and are currently
considering an agreement with certain of these companies regarding the
assessment and collection of sales taxes.
HBOA is not a party to any such discussions.
Rapid Technological Change
The market in which HBOA competes is characterized by frequent new
product introductions, rapidly changing technology, and the emergence of new
industry standards. The rapid development of new technologies increases the risk
that current or new competitors will develop products or services that reduce
the competitiveness and are superior to HBOA's products and services. HBOA's
future success will depend to a substantial degree upon its ability to develop
and introduce in a timely fashion new products and services and enhancements to
its existing products and services that meet changing customer requirements and
emerging industry standards. The development of new, technologically advanced
products and services is a complex and uncertain process requiring high levels
of innovation, as well as the accurate anticipation of technological and market
trends. There is a potential for product development delay due to the need to
comply with new or modified standards. There can be no assurance that HBOA will
be able to identify, develop, market, support, or manage the transition to new
or enhanced products or services successfully or on a timely basis, that new
products or services will be responsible to technological changes or will gain
market acceptance, or that HBOA will be able to respond effectively to
announcements by competitors, technological changes, or emerging industry
standards. HBOA's business, results of operations, and financial condition would
be materially and adversely affected if HBOA were to be unsuccessful, or to
incur significant delays in developing and introducing new products, services,
or enhancements.
Dependence on Continued Growth In Use of the Internet
Our market is new and rapidly evolving. Our business would be adversely
affected if Internet usage does not continue to grow, particularly usage by home
business owners. A number of factors may inhibit Internet usage, including
inadequate network infrastructure, security concerns, inconsistent quality of
service, and lack of availability of cost-effective, high-speed service. If
Internet usage grows, the Internet infrastructure may not be able to support the
demands placed on it by this growth and its performance and reliability may
decline. In addition, web sites have experienced interruptions in their service
as a result of outages and other delays occurring throughout the Internet
network infrastructure. If these outages or delays frequently occur in the
future, Internet usage, as well as the usage of our web sites, could grow more
slowly or decline.
Our Liability for Information Retrieved from the Web
Because users of HBOA's web site may distribute our content to others,
third parties might sue HBOA for defamation, negligence, copyright or trademark
infringement, personal injury or other matters. These types of claims have been
brought, sometimes successfully, against online services in the past. Others
could also sue HBOA for the content that is accessible from our web site through
links to other web sites or through content and materials that may be posed by
members in chat rooms or bulletin boards. HBOA also intends to offer e-mail
services, which may subject the HBOA to potential risks, such as liabilities or
claims resulting from unsolicited e-mail (spamming), lost or
15
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misdirected messages, illegal or fraudulent use of e-mail or interruptions or
delays in e-mail service.
HBOA also may enter into agreements with commerce partners and
sponsors that entitle the HBOA to receive a share of any revenue from the
purchase of goods and services through direct links from HBOA's web sites to
their web sites. Such arrangements may subject HBOA to additional claims,
including potential liabilities to consumers of such products and services,
because HBOA provide access to such products or services, even if HBOA does not
provide such products or services itself. While HBOA's agreements with these
parties often provide that HBOA will be indemnified against such liabilities,
such indemnification, if available, may not be adequate. HBOA's insurance may
not adequately protect the Company against these types of claims.
E-Commerce and Potential Product Liability
HBOA plans to develop a range of products targeted specifically at home
business owners. HBOA also may foster relationships with manufacturers or
companies to offer such products directly on its web site. Such a strategy
involves numerous risks and uncertainties. HBOA has very limited experience in
the sale of products online and the development of relationships with
manufacturers or suppliers of such products. Consumers may sue HBOA if any of
the products that it sells are defective, fail to perform properly or injure the
user. HBOA's agreements with manufacturers will typically contain provisions
intended to limit HBOA's exposure to liability claims. These limitations may not
however prevent all potential claims. Liability claims could require HBOA to
spend significant time and money in litigation or to pay significant damages. As
a result, any such claims, whether or not successful, could seriously damage our
reputation and our business.
Reliability of Web Site and Technology; Risk of Capacity Constraints
The performance, reliability and availability of HBOA's web site,
systems and network infrastructure will be critical to HBOA's business and its
ability to promote the business of the HBOA. HBOA's web site is hosted by a
server owned and operated by a third party, limiting the extent to which HBOA
will have control over, or the ability to cure, technical problems, which may
arise. Any systems problems that result in the unavailability of HBOA's web site
or interruption of information or access of information to members through the
web site would diminish its effectiveness as a means of promoting HBOA's
business.
If the volume of traffic on HBOA's web site is greater than
anticipated, HBOA will be required to expand and upgrade its web site and
related infrastructure. Although HBOA intends that its systems will be designed
for scalability, the can be no assurance that the systems will be fully
scalable. Any inability to add additional software and hardware to accommodate
increased usage may cause unanticipated systems disruptions and degradation in
levels of service to customers. There can be no assurance that HBOA will be able
to effectively upgrade and expand its web site in a timely manner or to
integrate smoothly any newly developed or purchased technology with its existing
systems. Any inability to do so would have a material adverse effect on HBOA's
business, prospects, financial condition and results of operations.
Dependence on Key Personnel
The Company and HBOA will be dependent upon the services of the
executive officers and principal employees and consultants of the Company
(particularly Gary Verdier) for management of the Company and HBOA and
implementation of its business strategy. The loss of services of Gary
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<PAGE>
Verdier could have a material adverse effect on the business operations,
financial conditions and results of operations of the Company or HBOA. If its
operations expand, the Company and HBOA will also be dependent upon its ability
to attract and retain additional qualified employees and consultants. There is
significant competition for qualified personnel, and there can be no assurances
that the Company and HBOA will be successful in recruiting, retaining or
training the management personnel it requires.
No Private or Public Market for Shares
There is currently no private or public market for the Shares. To date,
there has not been an active market in the Company's stock. The Company cannot
predict the extent to which investor interest in the Company will lead to the
development of a trading market or how liquid that trading market might become.
If a trading market does not develop or is not sustained, it may be difficult
for investors to sell shares of the Company's common stock at a price that is
attractive. As a result, an investment in the Company's common stock may be
totally illiquid and investors may not be able to liquidate their investment
readily or at all when he/she desires to sell. First Level Capital, Inc., a NASD
registered broker-dealer, has agreed to file a Form 15c-211 application to have
the Company's shares of common stock listed on the OTC Bulletin Board. However,
there can be no assurances, that the NASD will approve the Company's Form
15c-211 application.
Dilution. The Company's Articles of Incorporation authorizes the
issuance of 25,000,000 shares of common stock. As of March 27, 2000, the Company
had 1,430,700 shares of its common stock issued and outstanding. In the merger
of HBOA and HBOA.Com, the Company will issue 8,569,300 shares of its common
stock to the HBOA shareholders. This issuance and any other issuances may result
in a reduction of the book value or market price, if any of the outstanding
common or preferred shares. Issuance of additional common stock will reduce the
proportionate ownership and voting power of the then existing shareholders.
Anti-Takeover Provisions. The foregoing provision in the Company's
Articles of Incorporation (namely the ability, without further shareholder
approval) to issue additional shares of common stock could be used as
anti-takeover measures. These provisions could prevent or discourage or delay a
non-negotiated change in control and result in shareholders receiving less for
their common stock than they otherwise might in the event of a takeover attempt.
No Dividends
The Company anticipates that all future, earnings, if any, will be
retained for the development of its business and will not be distributed to
shareholders as cash dividends. The declaration and payment of cash dividends,
if any, at some future time will depend upon the Company's results of
operations, financial condition, cash requirements, future prospects,
limitations imposed by credit agreements or senior securities and any other
factors deemed relevant by the Company's Board of Directors. The declaration and
payment of cash dividends, if at all, by the Company will be at the discretion
of the Board of Directors.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits
27.1 Financial Data Schedule
B. Reports on Form 8-K
The Company field a Report on Form 8-K with the SEC on March 16, 2000
reporting information required under Item 4 - Change in Registrant's Certifying
Accountant.
18
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 11, 2000 MIZAR ENERGY COMPANY
By /s/ Gary Verdier
-----------------------------
Gary Verdier
President and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
accompanying financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 510
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 510
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 510
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1,430,700
<OTHER-SE> 44,869
<TOTAL-LIABILITY-AND-EQUITY> 510
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 5,818
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,818)
<EPS-BASIC> (.004)
<EPS-DILUTED> (.004)
</TABLE>
