SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1999
Commission File Number 000-24977
MIZAR ENERGY COMPANY.
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(Exact Name of Registrant as Specified in Charter)
Colorado 33-0231238
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(State or other jurisdiction of (I.R.S. Employer ID. Number)
incorporation or organization)
5200 N.W. 33rd Avenue, Suite 215
Ft. Lauderdale, Florida 33309
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 739-0607
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Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
Check whether the issuer (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 filing requirements for
the past ninety (90) days. Yes |X| No | |
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and if no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB. |X|
Issuer's revenues for the most recent fiscal year were $0.
The aggregate market value of the voting stock held by non-affiliates
of the Registrant
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was $0. There are approximately 30,700 shares of common voting stock of the
Registrant held by non-affiliates. During the past five years, there has been no
"public market" for the shares of the Registrant's common stock, so the
Registrant has arbitrarily valued these shares.
The approximate number of shares outstanding of the Registrant's common
stock on March 27, 2000 was 1,430,700.
DOCUMENTS INCORPORATED BY REFERENCE: None
Transitional Small Business Disclosure Format (check one): Yes | | No |X|
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PART I
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-KSB for
Mizar Energy Company (the "Company") constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Exchange Act. Such statements include,
but are not limited to statements about (a) the Company's growth strategies, (b)
anticipated trends in the Company's industry, (c) the Company's future financing
plans, (d) the completion of the merger of HBOA.Com, Inc., a District of
Columbia corporation that owns 60% of the Company's issued and outstanding
common stock with a subsidiary of the Company by the end of April 2000 and (e)
management's expectations and objectives regarding the Company's future
financial position and operating results. These statements are subject to risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company be materially different from any future results,
performance or achievements expressed or implied by such for-ward-looking
statements. Some of these risks and uncertainties are defined in "Plan of
Operations - Risk Factors" on pages 12 through 19 of this Form 10-KSB.
The Company cautions readers that these forward-looking statements
speak only as of the date hereof. The Company hereby expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
such statements to reflect any change in the Company's expectations or any
changes in events, conditions or circumstances on which such statement is based.
ITEM 1. DESCRIPTION OF BUSINESS
Description of Business
Mizar Energy Company (the "Company") was formed under the laws of the
state of Colorado on December 11, 1996 to engage in the development, production
and sale of oil and gas and to buy and sell oil and gas leases. Since its
inception, the Company has had no significant operations.
On January 27, 1997, the Company acquired one (1) oil and gas lease
located in Barton County, Kansas covering 160 acres, more or less, at an auction
in consideration of $16,000. The lease expired on January 2, 1998. On January
15, 1998, the Company successfully negotiated a new lease covering the same oil
and gas lease in Barton County, Kansas ("Kansas Oil and Gas Lease") for one
thousand six hundred dollars ($1,600) in cash.
On April, 2 1998, the Company sold its interest in the Kansas Oil and
Gas Lease to an unaffiliated oil and gas company in consideration of a two
percent (2%) overriding royalty interest in the property. However, the Company
maintained its rights to all surface equipment on
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the property. In July 1998, the Company sold one pumping unit for three thousand
five hundred dollars ($3,500) and continued looking for a buyer to whom it could
sell the balance of the equipment. The renewal of the Kansas Oil and Gas Lease
expired on January 15, 1999; however, the Company had an obligation to remove
the remaining surface equipment from the property and plug certain open wells.
On December 13, 1999, the Company sold the remaining surface equipment to
Infinity Oil Company ("Infinity") pursuant to a quit-claim deed. Infinity also
agreed to plug the remaining open wells and signed a release releasing the
Company from any and all liability relating to any clean-up costs associated
with the property.
Changes in Control, Management and Business
On December 28, 1999, Philip Davis and John Lee, the Company's founders
and principal shareholders, sold 850,000 shares of common stock of the Company,
to HBOA.Com, Inc., a District of Columbia business ("HBOA"). HBOA is engaged in
the sale of products and services to the owners of home based businesses through
its Internet web site. After the acquisition, HBOA owned approximately 60% of
the Company's issued and outstanding common stock.
On December 28, 1999, Mr. Lee and Mr. Davis, resigned from their
positions as officers and directors of the Company and Gary Verdier, the
principal shareholder of HBOA took their place. Since that date, Mr. Verdier has
served as the Chief Executive Officer, Treasurer, Secretary and Chairman of the
Company.
During fiscal 2000, new management of the Company intends to focus all
of its efforts on developing HBOA's home based business Internet portal. See
"Plan of Operations." Additionally, new management intends to change the
Company's name to a name that is more descriptive of a company that has an
Internet portal for home based businesses.
Merger of HBOA with a Wholly Owned Subsidiary of the Company
After purchasing 850,000 shares of the Company's common stock from Mr.
Davis and Mr. Lee, HBOA owns approximately 60% of the Company's issued and
outstanding common stock. By the end of April 2000, HBOA intends to merge with a
Florida company, which is a wholly owned subsidiary of the Company (the "Florida
Subsidiary"). All shareholders of HBOA have already approved the merger. The
merger will be an "A" reorganization under the Internal Revenue Code. At the
effective time of the merger, the separate corporate existence of HBOA will
terminate and each issued and outstanding shares of HBOA common stock will be
converted into the right to receive one share of the Company's common stock. In
the aggregate, HBOA's shareholders will received 8,569,300 shares of the
Company's common stock. 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.
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Business
Except where the context indicates otherwise, the term "Company" shall
refer to the "Company" and "HBOA." As previously noted in "Business - Merger of
HBOA with a Wholly Owned Subsidiary of the Company", HBOA intends to complete
its merger with a Florida company that is a subsidiary of the Company by the end
of April 2000.
The Company intends to be 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
exceptionally well positioned to exploit the Internet revolution that is
transforming the worlds of business and communications. Through the Internet,
HBOA provides 27 million home based business owners with the essential products,
services and information necessary to start, expand and profitably run their
businesses. The Company consolidates the business function typically found in
large institutions into one convenient business portal. This eliminates
duplication, provides easier access to the many services that were heretofore
found primarily only in large companies. The small business owners should expect
to be better able to grow revenues while reducing costs. Up to this time, only
corporate giants have had this facility at their fingertips.
Historically, when you operate a business out of your home either full
or part time you are truly "Home Alone." No one is there to supervise, motivate,
brainstorm with, and most importantly assist you. In the corporate world
shipping packages, buying office supplies, calling your attorney, checking with
your accountant, doing market research, checking credit, having access to
various forms of insurance, purchasing a computer, selecting a phone carrier,
and a host of other tasks seem almost mundane. When you operate your business on
your own, these tasks can seem monumental, overwhelming, and very time
consuming. The success of the Company will focus squarely on our ability to
insure that our client base never feels that they are "Home Alone." The Company
is committed to insuring that the customers (members) of the HBOA.com family
feel as if they have a staff of experts to call on in the office next to theirs.
The Company will supply them with a support staff at their beck and call, a
shipping department at their fingertips, and technical and research assistants
on-call. The Company will provide the members of the HBOA.com family all of
these services and a great many more, twenty-four hours a day, through HBOA's
Virtual Office.
Test Marketing
The Company has conducted a limited but highly successful test
marketing campaign. Full page color ads have been placed in the Home Business
Journal, a publication with a small (25,000) but highly targeted subscriber
base. This publication is geared exclusively to home- based owners. In addition
to its subscriber base, the magazine is sold in leading book stores. This has
been the only advertising HBOA has done to direct potential customers (members)
to its
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web site. Even though HBOA is still in a "development" phase and has yet to
begin a coordinated marketing campaign, traffic to the "test" site has increased
significantly. From June 1999 through December 1999, traffic to HBOA's sites
grew from 14,000 hits per month to over 60,000 in December. Initial analysis of
the data shows approximately 80% of those visitors exploring the site further,
thereby demonstrating a high level of interest in the content. HBOA has elected
to wait until the site was technically rich with content and user friendly
before allocating any further marketing expenditures.
Products and Services
HBOA has created a new standard as a single source from which home
based business owners can obtain the necessary products, services and
information required to operate their businesses. Currently the key component
include:
<TABLE>
<S> <C>
1. Products 2. Shipping (rate, packaging and tracking for:)
*Office supplies *FedEx
*Computer *Airbonre
*Office Furniture *UPS
*Trade show displays *UPS Postal
3. Insurance 4. Advocacy
*Medical *Legislative Issues
*Dental *Contact your Senator
*Business owner *Contact your Representative
*Health *Learn about HBOA's efforts
&Life
5. Advise 6. Communications
*Legal advisor *Chat Rooms
*CPA advisor *Seminars on-line
*Marketing advisor *Business Opportunity Reports
*Technical advisor *Comments
*"Ask HBOA" (general information)
7. References 8. Business Mail
*Newswire *Member Stores
*Business Directory *Flea Market
*Business Reference
*Business Links
*"How To" Information
*Book Store
9. Services
*Credit Card Processing
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*Incorporation Services
&Communications (long distance,
cellular, paging)
*Credit Reports
*Web site Design
*Public Relations
*Fulfillment Services
*Travel Services
</TABLE>
The Company is engaged on daily basis in efforts to expand its existing
line of products and services. Research indicates that at the present time, no
one company has developed as wide of an array of offerings to home based
business owners as HBOA.
Strategic Partnerships
The Company has entered into co-branding and vendor agreements with a
wide variety of nationally recognized companies. The Company's efforts to expand
the products and services offered to HBOA customers (members) is an ongoing and
integral element in the future development of the Company. The following
represents a partial list of companies that HBOA either has existing agreements
with, or whose agreements are in the various stages of negotiations:
Amazon.com Home Business Journal
Accesslegal National Shippers Warehouse
Alliance Health Onvia
Company Corporation Paymentech
BizSupplies.com Pitney Bowes
Ehealthinsurance.com Protective Life
Freeagent.com Skybusiness
Go Daddy Unum Telecommunications
IBM United States Chamber of Commerce
Magazine Outlet National Business Opportunity Bureau
MCI General Electric Insurance
Med Perks U.S. Merchants
MARKETING STRATEGY
The Company believes that its one stop shop concept combined with the
affinity it will develop with its customers (members), will revolutionize the
purchasing habits of home based business owners. The Company is committed to
saving home based business owners time and money, as well as providing them with
a wide range of services and information they have been previously been unable
to source from a single supplier. HBOA's marketing and advertising campaign will
creatively drive home the message of the Company's unique approach to servicing
its member needs.
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Marketing/Advertising Plan
The Company believes that its perceived value to prospective customers
will provide competition with significant challenges. The Company anticipates
that its advocacy assistance programs will generate significant publicity on a
national level. Once awareness has been created, HBOA has allocated significant
amounts of capital to create brand name recognition. The Company plans on
utilizing a wide variety of media, as well as several proprietary programs to
obtain members. The initial thrust will be in the following areas:
Affinity Groups
Millions of Americans who work from their home are enrolled in direct
sales organizations such as Amway, Nuskin and Tupperware to name a few. Direct
sales organizations, sometimes referred to as MLM (Multi-Level Marketing)
companies generally offer little in the way of benefits, support services or
education to their members. HBOA will work in consort with well-established and
reputable direct sales organizations to provide their members with the Company's
wide range of products and services. Management believes that this marketplace
will allow the Company to enroll substantial numbers of members (in the tens of
thousands plus) on a very cost effective basis.
Internet Marketing
HBOA will utilize traditional as well as proprietary methods of
Internet marketing. The Company will employ a method of cyber marketing that
will utilize chat rooms, making it easy for people to e-mail content to friends
(with a single mouse click and an embedded link back to HBOA) and by leveraging
devices like content night e-mail newsletters. These methods of viral marketing
in addition to search engine registration can be highly effective at the nominal
cost.
The Company will conduct a comprehensive banner advertising campaign in
conjunction with companies such as Flycast, 24/7 and Double Click.
The Company is in negotiations with several companies whose sites have
substantial traffic (over 500,000 unique visitors per month), to create direct
links to HBOA.COM.
Print Media
Due to the success of the Company's initial print advertising campaign
resources will be allocated to a wide variety of publications. Print advertising
is currently scheduled for USA Today, Entrepreneur Magazine and the Home
Business Journal.
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Opt-In E-mail
Opt-in E-mail will be sent to individuals who have requested
information regarding home based businesses. The Company will obtain a list of
individuals who fit these criteria from a wide range of sources.
Data Base Marketing
The Company will develop a database that tracts the needs and wants of
each member, which in turn created marketing opportunities that are driven by
specific knowledge of its members needs.
Chapter Presidents Program
HBOA has established a grass roots marketing program to create State
and Local Chapters each to be headed by a Chapter President. The Chapter
President recruits members, chairs meetings with local members of the
association, and acts as a local sales representative for the Companies products
and services. The Chapter President pays the Company $495.00, and in return
receives commissions from the sale of membership and products. The Company has
conducted a successful pilot program in Tennessee, and intends to place
considerable emphasis on future expansion of this program.
Alliances
The Company is in preliminary negotiations with several national
retailers to create strategic marketing alliances. In theory the retailer will
offer their customers an HBOA membership as an inducement to purchase a given
product. Programs such as these will expose HBOA to a potentially large number
of consumers who may not have been previously been aware of the Company, at a
very nominal cost.
PROJECTED SOURCES OF REVENUE
Membership
The Company anticipates deriving a significant percentage of its income
from the sale of memberships. Management believes that HBOA will create a
membership base in the hundreds of thousands over the next twelve to eighteen
months. Currently HBOA offers the following three categories of membership:
Free - Nothing has proven more successful in E-Commerce marketing than
the word "free". HBOA is currently providing non-paying members with access to
relevant reference material, the ability to purchase products and services, as
well as the ability to research a wide variety of business opportunities. By
offering a free category of membership the Company is
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encouraging as many potential users as possible to purchase products and
services from its Virtual Office. Free members will not have access to certain
services offered to paying members, and will not be entitled to certain
discounts on products and services.
Executive Level - The cost of this level of membership is currently
Fifty Dollars ($50.00) annually. Executive members receive a free vision plan, a
free subscription to the Home Business Journal, free web hosting, reduced ISP
cost and free E-mail.
Board Level - The cost of a Board membership is currently One Hundred
Twenty-five Dollars ($125.00) annually. Board members receive all of the
benefits of Executive Level membership along with access to the "Advise Center",
which provides them with free legal, marketing, accounting and technical advice.
Board members will also have the ability to attend Company sponsored online
seminars.
Sales of Products and Services
HBOA believes that once a home based business owner becomes a member,
he or she should purchase a high percentage of their needs from the Company's
Virtual Office. The Company's web site has been designed to be seamless, and all
other sites within the HBOA site are looped eliminating the need for members to
move to different sites throughout the course of their workday. The Company
receives commissions ranging from 3% to 30% on products and services purchased
by members. The Company is currently in negotiation with General Electric
Insurance to provide members with various forms of life insurance. Life
insurance and the sale of certain business opportunities provide HBOA with a
significantly higher payout than 30%, and in addition create a back end revenue
stream for the Company.
Advertising
Once the Company has achieved a critical mass of members (75,000 to
100,000) it will be able to develop significant amount of revenue from the sale
of banner advertising. Since the Company focuses on a substantial niche market,
it anticipates that it will be able to market its banner space at higher prices
than industry averages.
Competition
HBOA faces competition from a number of small business sites currently on
the web or in various states of development. Additionally, various association
sites have been formed which generally promote such things as books/tapes,
speaking engagements or selling business opportunities. HBOA differentiates
itself in its completeness as a "single source" vertically integrated portal for
home based businesses. It provides under friendly, technically rich and
product/service complete content, which will attract and retain home based
business owners.
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Employees
The Company is a development stage company and did not have any
employees in fiscal 1999. However, as the Company's business develops during
fiscal 2000, the Company intends to hire employees.
ITEM 2. DESCRIPTION OF PROPERTY
During most of fiscal 1999, the Company's offices were located at 5459
South Iris Street, Littleton, Colorado, the home of the Company's previous
president. Effective as of April 1, 2000, HBOA has subleased 4,984 square feet
of space located at 2400 E. Commercial Boulevard, Suite 221, Ft. Lauderdale,
Florida from an unrelated party. The terms of the lease call for a one year term
at a monthly rental of $10,012.74 per month, which includes taxes and CM
expense. HBOA has paid a one month security deposit and six months advance rent,
leaving 5 months rent to be paid during the balance of the term of the lease.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material litigation presently pending
nor, to the best knowledge of the Company, have any such proceedings been
threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of the calendar
year covered by this report.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
At this time, no market exists for the Company's securities and there
is no assurance that a regular trading market will develop, or if developed,
that it will be sustained. Management does not expect any expanded public market
to develop unless and until the Company's common stock is approved for quotation
on the over-the-counter Bulletin Board. In any event, no assurances can be given
that any market for the Company's common stock will develop or be maintained.
First Level Capital, Inc., an NASD registered broker-dealer, intends to
submit a Form 211 application to the National Association of Securities Dealers,
Inc. (the "NASD") requesting that the Company's securities be listed for trading
on the Bulletin Board operated by the NASD. However, no assurances can be given
that the NASD will approve the Company's application on
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Form 211 and that a market for the Company's common stock will develop or be
maintained.
When and if a public market develops in the future, the sale of
"unregistered" and "restricted" shares of common stock pursuant to Rule 144 of
the Securities and Exchange Commission by members of management or others may
have a substantial adverse impact on any such public market.
Holders
As of March 26, 2000, the Company had over 50 holders of records of its
common stock. These numbers do not include an indeterminate number of
shareholders whose shares may be held by brokers in street name.
Dividend Policy
The Company has never paid cash dividends on its Common Stock. Payment
of dividends will be within the sole discretion of the Company's Board of
Directors and will depend, among other factors, upon earnings, capital
requirements and the operating and financial condition of the Company. At the
present time, the Company's anticipated financial capital requirements are such
that it intends to follow a policy of retaining earnings in order to finance the
development of its business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following analysis of the Company's results of operation and
financial condition should be read in conjunction with the Company's financial
statements and notes elsewhere in this Form 10-KSB.
Results of Operations
The Company did not generate any revenues in fiscal 1999 or fiscal
1998. The Company's lease operating costs were $0 in fiscal 1999 and $2,780 in
fiscal 1998. The Company's interest in its Kansas Oil & Gas Lease expired on
January 15, 1999, as a result it did not have any operating expenses in 1999.
The Company's general and administrative expenses were $5,818 in fiscal
1999 and $11,483 in fiscal 1998. The Company operations were not as active
during fiscal 1999. As a result, the Company's general and administrative
expenses decreased by $5,665 in fiscal 1999 compared to fiscal 1998.
As a result of the foregoing, the Company's net loss was $5,818 in
fiscal 1999 and
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$14,263 in fiscal 1998.
Plan of Operations
Overview
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.
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.
HBOA owns approximately 60% of the Company's issued and outstanding
common stock. It is expected that HBOA will be merged with HBOA, Inc., a Florida
company, which is a wholly owned subsidiary of the Company by the end of April
2000. After the merger, HBOA's operations will be consolidated into the
Company's business. See "Proposed Merger." During the past fifteen months, HBOA
has been developing its web site (www.hboa.com), negotiating with and entering
into strategic alliance with vendors for products and services (IBM, Amazon.com,
Onvia, Freeagent.com, etc), creating or obtaining reference material for
customers, staffing, test marketing and researching new business opportunities.
During the next twelve months, the Company intends to make its Internet
portal the premiere site for home based businesses. To achieve this goal, the
Company intends to increase the scope of products and services that it offers on
its web site. The Company also intends to enter into more strategic
relationships with other Internet providers.
The Company 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.
Liquidity and Capital Resources
As of December 31, 1999, the Company had cash on hand of $510. The
Company will have more operating capital after HBOA is merged into HBOA, Inc.,
the Company's Florida subsidiary. As of March 25, 2000, HBOA has raised
approximately $2 million in a private offering. The Company expects that the
proceeds from this offering will last approximately 12 months.
During the next twelve months, the Company does not intend to spend
significant amounts on research and development. The Company does however intend
to have significant expenditures in the further development of its web site.
Additionally, the Company expects to
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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.
Going Concern Qualification
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. The Company
reported net operating losses of $14,263 in fiscal 1998 and $5,818 in fiscal
1999, respectively. The Company has taken several actions to keep itself viable
and in existence as a going concern. On December 28, 1999, the founders of the
Company sold a controlling interest in the Company to HBOA.Com, Inc., a District
of Columbia corporation. HBOA is engaged in the sale of products and services to
the owners of home based businesses through its Internet web site. After the
acquisition, HBOA owned approximately 60% of the Company's issued and
outstanding common stock.
HBOA has raised over $2 million in a private offering. The Company
intends to merge HBOA with and into a Florida corporation, that is a
wholly-owned subsidiary of the Company. The merger will increase the Company's
operating capital. Additionally, the Company plans on having new persons join
its board of directors.
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 and its 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
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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
For the fiscal year ended December 31, 1999, the Company had a net loss
of $5,818. The Company does not anticipate that it will earn a profit during the
2000 fiscal year due, in part to start up costs associated with the further
development of the Company's web site, significant advertising costs and a
substantial increase in the Company's staff. Furthermore, there can be no
assurances that the Company's business strategy will enable it 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 Florida subsidiary,
the Company will have additional operating capital. As of March 27, 2000, HBOA
has raised $2 million in a private offering. The Company expects that the
proceeds from this private offering will last approximately 12 months. In the
event the Company's plans change or its assumptions prove to be inaccurate (due
to unanticipated expenses, difficulties, delays or otherwise) the Company could
be required to seek additional financing. There can be no assurances that any
additional financing will be available to the Company when needed, on
commercially reasonable terms, or at all. Any inability to obtain additional
financing when needed would have a material adverse effect on the Company's
business, financial operations and results of operations.
Our Methods of Generating Revenue are Relatively New and Largely Untested
The Company intends 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 the Company's revenues for the foreseeable future are
expected to be derived from the use of electronic commerce transactions. The
Company will facility electronic commerce by directing users who ask a shopping
question to electronic commerce merchants, some of who will compensate the
Company 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
Company's business 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 Company's business could suffer.
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Substantial Competition
The industry in which the Company 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.
The Company'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 The Company. Additionally, the
Company 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 the Company, none focuses on the home business owner.
The Company offers a "single source" vertically integrated portal for home based
businesses which gives it a distinct competitive advantage. The Company believe
providing a user friendly technically rich and product/service complete site
will attract and retain home business owners. However, the Company always faces
the risk that competitors will introduce better services and resources. This
could also affect the Company'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 the Company's
Internet operations. The Company 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 the Company's customers. Moreover, until more
comprehensive security technologies are developed, the 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
The Company 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
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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 the Company's
products and services or increase the cost of doing business or in some other
manner have a material adverse effect on the Company'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. The Company does not believe that such regulations, which were
adopted prior to the advent of the Internet, govern the operations of the
Company's business nor have any claims been filed by any state implying that the
Company is subject to such legislation. There can be no assurance, however, that
a state will not attempt to impose these regulations upon the Company in the
future or that such imposition will not have a material adverse effect on the
Company'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 the Company of
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 Company's business, results of operations, and financial
condition. In addition, because the Company's services are accessible worldwide,
and the Company facilitates sales of goods to users worldwide, other
jurisdictions may claim that the Company is required to qualify to do business
as a foreign corporation in a particular state or foreign country. The Company
is qualified to do business in Florida, and failure by the Company to qualify as
a foreign corporation in a jurisdiction where it is required to do so could
subject the Company to taxes and penalties for the failure to quality and could
result in the inability of the Company 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 the
Company's business, could have a material adverse effect on the Company's
business, results of operations, and financial condition.
Potential Liability for Sales and Other Taxes
The Company does not currently collect sales or other similar taxes in
respect of the delivery of its products into states other than California where
the Company collects sales taxes for sales of tangible products. New state tax
regulations may subject the Company to the assessment of sales and income taxes
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
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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. The Company is not a party to any such discussions.
Rapid Technological Change
The market in which the Company 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 the Company's products and services. The
Company'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 the Company 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 the Company will be able to respond effectively to announcements by
competitors, technological changes, or emerging industry standards. The
Company's business, results of operations, and financial condition would be
materially and adversely affected if the Company 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 the Company's web site may distribute our content to
others, third
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parties might sue the Company 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 the Company 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. The Company also intends to
offer e-mail services, which may subject the Company to potential risks, such as
liabilities or claims resulting from unsolicited e-mail (spamming), lost or
misdirected messages, illegal or fraudulent use of e-mail or interruptions or
delays in e-mail service.
The Company also may enter into agreements with commerce partners and
sponsors that entitle the Company to receive a share of any revenue from the
purchase of goods and services through direct links from the Company's web sites
to their web sites. Such arrangements may subject the Company to additional
claims, including potential liabilities to consumers of such products and
services, because the Company provide access to such products or services, even
if the Company does not provide such products or services itself. While the
Company's agreements with these parties often provide that the Company will be
indemnified against such liabilities, such indemnification, if available, may
not be adequate. The Company's insurance may not adequately protect the Company
against these types of claims.
E-Commerce and Potential Product Liability
The Company plans to develop a range of products targeted specifically
at home business owners. The Company 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. The Company 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 the Company if any of the products that it sells are defective, fail to
perform properly or injure the user. The Company's agreements with manufacturers
will typically contain provisions intended to limit the Company's exposure to
liability claims. These limitations may not however prevent all potential
claims. Liability claims could require the Company 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 the Company's web
site, systems and network infrastructure will be critical to the Company's
business and its ability to promote the business of the Company. The Company's
web site is hosted by a server owned and operated by a third party, limiting the
extent to which the Company will have control over, or the ability to cure,
technical problems, which may arise. Any systems problems that result in the
unavailability of The Company'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 The Company's business.
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If the volume of traffic on the Company's web site is greater than
anticipated, the Company will be required to expand and upgrade its web site and
related infrastructure. Although the Company 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 the Company 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 the
Company's business, prospects, financial condition and results of operations.
Dependence on Key Personnel
The Company 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 implementation of its business
strategy. The loss of services of Gary Verdier could have a material adverse
effect on the Company's business operations, financial conditions and results of
operations. If its operations expand, the Company 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 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
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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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ITEM 7. FINANCIAL STATEMENTS
Independent Auditors' Report F-1
Balance Sheets F-2
Statement of Operations F-3
Statement of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-7
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During fiscal 1999, the Company did not have any changes in or
disagreements with its accountants, Spicer, Jeffries & Co., an accounting firm
based in Denver, Colorado. However, on March 14, 2000, the Company decided that
it was in its best interest to retain an accounting firm that was based in South
Florida and dismissed Spicer, Jeffries & Co. The Company's decision to change
accountants was based solely on the decision to have a local accounting firm and
was not at all related to the quality of work by Spicer, Jeffries & Co. or any
disagreements with such firm. Effective as of March 14, 1999, the Company
engaged Sewell and Company, P.A. ("Sewell") as its new independent accountants.
Sewell has offices in Hollywood, Florida and Pembroke Pines, Florida. The
Company reported its change in independent accountants in a Form 8-K it filed
with the SEC on March 16, 2000.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS
Current Officers and Directors
The following table sets forth the name and nature of all positions and
offices held by the Company's sole officer and director as of December 31, 1999.
Pursuant to the stock purchase agreement dated December 28, 1999, Mr. Davis and
Mr. Lee, the previous officers and directors of the Company resigned, and Mr.
Verdier became the sole officer and director of the Company on December 28,
1999.
Name Position Term of Office
- ---- -------- --------------
Gary Verdier President, Vice President
Secretary, Treasurer and Director December 28, 1999 - Present
Date
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Mr. Verdier became the President, Vice President, Secretary, Treasurer
and Director of the Company on December 28, 1999. Mr. Verdier also serves as the
Chairman and Chief Executive Officer of HBOA.Com, Inc., a District of Columbia
corporation that owns 60% of the Company's issued and outstanding common stock.
For the past seven years, Mr. Verdier has been the President of Dundas Systems,
Inc. Dundas Systems is a ten million-dollar a year business opportunity company
with a strong and consistent record of profitability. Mr. Verdier has conducted
thousands of seminars to home based business owners throughout the United States
and Dundas Systems has successfully marketed a home based concept to thousands
of American workers. Mr. Verdier has a unique insight to the home based business
market, as well as the needs of the individual operating a home based business.
The significant growth of Internet users combined with Mr. Verdier's
understanding of the products and services home based business owners need to
compete in today's business environment provided the catalyst for the creation
of the Company.
Officers and Directors of HBOA.Com, Inc.
HBOA.Com, Inc., a District of Columbia corporation, owns 60% of the
Company's issued and outstanding common stock. By the end of April 2000, the
Company expects to complete the merger of HBOA with and into HBOA, Inc., a
Florida corporation, which is the wholly owned subsidiary of the Company. The
officers and directors of HBOA are as follows:
Name Position With HBOA
---- ------------------
Gary Verdier CEO and Chairman
James Luger Director
Marion F. Wolf Director
Carl T. Wolf Director
David M. Sullivan Director
Robert C. Fivian Director
HBOA has a well-rounded management team with individuals that
complement each other to provide significant management capability, leadership
and expertise in varied disciplines. Mr. Verdier's biography was described in
"Current Officers and Directors" above. A brief discussion of the other members
of HBOa's management team is as follows:
James K. Luger is a retired executive currently living in Fort
Lauderdale, FL and Minneapolis, M-N. Mr. Luger was President and owner of Luger
Sales, a furniture manufacturer formed in 1938. More recently Mr. Luger was the
chief executive officer of LM Moore Building Supplies, which has sales of over
S70 million dollars a year. Mr. Luger has served on a number of boards including
the National Catholic Conference for International Justice, and is currently a
director of Plan It & Go.com, an Internet based travel company, which is
undergoing merger with Jet America.
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Marion F. Wolf is an adjunct Professor at Rutgers University where she
developed classes in Entrepreneurship, small business management and new
ventures. Previously she was co-founder of Alpine Lace Brands and also served on
the Board of Directors from 1990-1997, Ms. Wolf is currently serving on two
not-for-profit boards, which are assisting the visually impaired and
academically challenged adult and student. In addition, she is a consulting
partner in a firm that specializes in providing integrated marketing solutions
for companies seeking Internet presence. She received her BS Degree from The
College of New Jersey and her MS Degree from CW Post College at Long Island
University. Marion F. Wolf and Carl T Wolf are husband and wife.
Carl T. Wolf was the Chairman/CEO of Alpine Lace Brands, Inc. Mr. Wolf
founded the Company in 1983 and built Alpine Lace into the second most
recognized cheese brand in the United States. Alpine Lace became a public
company in 1986, and in 1997 the Company was sold to Land O'Lakes. Mr. Wolf was
also Chairman/CEO of MCT Danes, which was sold to Land O'Lakes in the Alpine
Lace transaction. Mr. Wolf is currently a Director of Media Bay, formerly known
as the Audio Book Club. Media Bay is one of the fastest growing sites on the
Internet. Mr. Wolf received his MBA from the University of Pittsburgh, and his
BA in Economics from Rutgers University where he was a Henry Rutgers Scholar and
a Woodrow Wilson Nominee. Carl T. Wolf and Marion F. Wolf are husband and wife.
David M. Sullivan is a senior level executive with a broad background
in marketing and sales. He is currently the Vice President, Marketing for Dundas
Systems, Inc. a $IO million dollar direct sales organization, Prior to Joining
Dundas he was the President and Owner of Group I Marketing, Inc. From 1986 to
1993 he was the National Director of Marketing for United Consumers Club, Inc.,
and supervised 63 offices in 27 states.
Robert C. Fivian is the Managing Director of Rosenthal Collins Fox
Asset Management Group ('RCFAMG"), Prior to joining RCFAMG, Mr. Fivian served as
President of LIT Asset Management and Vice Chairman of LIT America, Inc., a
member firm of the New York Stock Exchange and all principal US stock and
futures exchanges. Mr. Fivian has been in the commodities, futures and stock
brokerage business for the past 34 years. Mr. Fivian was Chairman and Chief
Executive Officer of Phoenix Futures Inc. and Phoenix Asset Management, Inc.
from 1985 to 1990. Mr. Fivian was President and Chief Executive Officer at
Heinold Commodities, Inc. and Executive Vice President of Heinold Asset
Management, Inc. for 10 years. He was associated with Bache & Co., Inc. for 17
years holding various positions including account executive, floor manager at
the Chicago Board of Trade, manager of the Chicago Midwest Commodity Department
and First Vice-President of the firm.
Mr. Fivian has held memberships on most of the major US commodity
exchanges and has served on numerous committees of the Chicago exchanges. He is
a past governor of the 26 International Monetary Market and a former director of
the Futures Industry Association. He is currently a member of the Chicago Board
of Trade and the Chicago Mercantile Exchange. Mr. Fivian graduated from the
University of Wisconsin with a degree in Economics and Finance.
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Previous Officers and Directors
Prior to December 28, 1999, Philip Davis and John Lee served as
officers and directors of the Company in the following positions:
Name Position Term of Office
- ---- -------- --------------
Philip J. Davis President, Treasurer, December 11, 1996 -
Director December 28, 1999
John C. Lee Secretary, Director December 11, 1996-
December 28, 1999
Mr. Davis was a co-founder of the Company and its former President,
Treasurer and Director of the Company. From December 1992 to the present, Mr.
Davis was a self-employed consultant. During the past ten years, Mr. Davis has
been a principal officer and director of several "shell" companies that have
entered into business combinations with operating companies. From August 1996 to
the present, Mr. Davis has been the President and a member of the Board of
Directors Medical Management Systems, Inc., a Colorado corporation, that is a
reporting company under the Exchange Act. In October 1992, Mr. Davis filed for
protection under Chapter XIII of the United State Bankruptcy Act. In July 1994,
the action was voluntarily dismissed by the Bankruptcy Court. On December 2,
1994, Mr. Davis filed a petition for bankruptcy pursuant to Chapter VII of the
United States Bankruptcy Act. Mr. Davis was granted a discharge in March 1995.
John C. Lee was a co-founder of the Company and its former Secretary
and Director. Since November 1992, Mr. Lee has been engaged in the practice of
investing his personal funds in securities. During the past eight years, Mr. Lee
has been a principal officers and director of several "shell" companies that
have entered into business combinations with operating companies. From August
1996 to the present, Mr. Davis has been the President and a member of the Board
of Directors Medical Management Systems, Inc., a Colorado corporation, that is a
reporting company under the Exchange Act.
Director Compensation
Directors serve until the next annual meeting of shareholders or until
their successors are elected and qualified. Officers serve at the discretion of
the Board of Directors. Directors receive no additional compensation for
services rendered as members of the Company's Board of Directors. However, the
Company has agreed to obtain directors and officers insurance for each member of
the Board.
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Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires
officers, directors and persons who own more than ten percent of a registered
class of a company's equity securities to file initial reports of beneficial
ownership and to report changes in ownership of those securities with the
Securities and Exchange Commission and the National Association of Securities
Dealers. There are also required to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based solely on a
review of the copies of Forms 3,4 and 5 furnished to the Company or written
representations that no other transactions were required, the Company has
determined that the pertinent officers, directors and principal shareholders
have complied with all applicable Section 16(a) requirements during fiscal 2000.
ITEM 10. EXECUTIVE COMPENSATION
The Summary Compensation Table sets forth compensation paid by the
Company to Gary Verdier, its current President, and Philip J. Davis, its former
President for its three fiscal years ended December 31, 1999, 1998 and 1997. No
other principal executive officer received a total annual salary and bonus from
the Company which exceeded $100,000.
Other
Name and Position Year Salary Bonus Compensation
- ----------------- ---- -------------------------------------
Gary Verdier 1999 $ 0 0 0
President, Vice President 1998 $ 0 0 0
Treasurer, Secretary and 1997 $ 0 0 0
Director
Philip J. Davis 1999 $ 0 0 0
Former President, 1998 $ 0 0 0
Treasurer and Director 1997 $ 0 0 0
Officer(3)
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the number
of shares of common stock beneficially owned by (i) each director of the
Company, (ii) the executive officers named in the Summary Compensation Table,
(iii) all directors and officers of the Company as a group and (iv) each
shareholder known by the Company to be a beneficial owner of more than 5% of any
class of Company's voting securities as of March 1, 2000. Except as otherwise
indicated, each of the shareholders listed below has voting and investment power
over the shares beneficially owned. As of March 1, 2000, the Company had
1,430,700 shares of its common stock issued and outstanding. An asterisk
indicates beneficial ownership of less than 1% of the Company's outstanding
common stock.
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Name of Individuals or Number Amount and Nature of
of Persons in Group Beneficial Ownership Percentage of Class
- --------------------------------------------------------------------------------
Gary Verdier
c/o HBOA.Com, Inc.
5200 NW 33rd Avenue, Suite 215
Ft. Lauderdale, FL 33309 850,000(1) 59.4
Philip Davis
5459 South Iris Street
Littleton, CO 80123 275,000 19.2
John Lee
5410 East Long Place
Littleton, CO 80122 275,000 19.2
All Executive Officers and
Directors as a Group ( 1 person) 850,000 59.4
(1) Represents 850,000 shares held by HBOA.Com, Inc., a company in which Mr.
Verdier is a controlling shareholder and an officer and director.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past two fiscal years, the Company has not engaged in any
transactions with management or others in which the amount involved exceeded
$60,000.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
3.1 Articles of Incorporation (filed as an Exhibit to the
Company's Registration Statement on Form 10-SB filed and
incorporated herein by this reference).
3.2 Bylaws (filed as an Exhibit to the Company's Registration
Statement on Form 10-SB filed and incorporated herein by this
reference).
10.1 Oil and gas lease (filed as an Exhibit to the Company's
Registration Statement on Form 10-SB filed and incorporated
herein by this reference).
10.2 Contract for sale of lease filed as an Exhibit to the
Company's Registration Statement on Form 10-SB filed and
incorporated herein by this reference).
10.3 Acquisition Agreement between the Company and HBOA.Com, Inc.
dated November 17, 1999 (filed as an Exhibit to the Company's
Report on Form 8-K dated December 28, 1999 and incorporated
herein by this reference).
10.4 Amendment to Acquisition Agreement between the Company and
HBOA.Com, Inc.
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dated December 28, 1999 (filed as an Exhibit to the Company
Report on Form 8-K dated December 28, 1999 and incorporated
herein by this reference).
16.1 Letter on Change in Certifying Accountant (filed as Exhibit 16
to the Company's Form 8-K dated and incorporated hereby by
this reference).
27.1 Financial Data Schedule (filed electronically herewith).
B. Reports on Form 8-K
1. The Company filed a Report on Form 8-K dated December 28, 1999
reporting the acquisition by HBOA.Com, Inc. of a controlling interest in the
Company. The Report on Form 8-K contained information required under Item 1 -
Change in Control of Registrant.
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities and Exchange Act of 1934, the Company has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on this
30th day of March, 2000.
MIZAR ENERGY COMPANY
/s/ Gary Verdier
-----------------------------------
Gary Verdier, President, Treasurer
and Secretary
In accordance with the Exchange Act, this Report on Form 10-KSB has
been signed by the following persons on behalf of the Company in the capacities
and on the dates indicated.
Date: March 30, 2000 /s/ Gary Verdier
-----------------------------------
Gary Verdier
(Principal Executive Officer and
Principal Financial and Accounting
Officer)
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MIZER ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
MIZER ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 1999
CONTENTS
Page
----
Independent Auditors' Report F-1
Balance Sheets F-2
Income Statements F-3
Statement of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders
Mizer Energy Company (A Development Stage Company)
Littleton, Colorado
We have audited the accompanying balance sheet of Mizer Energy Company (a
development stage company) as of December 31, 1999, and the related statements
of income, changes in stockholders' equity, and cash flows for the year ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements of Mizer
Energy Company as of December 31, 1998, were prepared by other auditors whose
report dated March 1, 1999, expressed an unqualified opinion with an explanatory
paragraph that described the Company's recurring losses from operations
discussed in Note 5 of those statements.
We conducted our audit 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 audit provides 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 Mizer Energy Company (a
development stage company) as of December 31, 1999, and the results of its
operations, and its cash flows for the year ended December 31, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 6 to the financial
statements, the Company has no established source of revenue. This raises
substantial doubt about its ability to continue as a going concern. Management's
plan in regard to these matters is also described in Note 6. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
SEWELL AND COMPANY, PA
Hollywood, Florida
March 8, 2000
F-1
<PAGE>
MIZAR ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------------ -------------------
<S> <C> <C>
Assets
Current assets
Cash $ 510 $ 9,828
------------------ -------------------
$ 510 $ 9,828
================== ===================
Liabilities and Stockholders' Equity
Liabilities
Reserve for reclamation costs $ - $ 3,500
------------------ -------------------
Total current liabilities - 3,500
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 (44,359) (38,541)
------------------ -------------------
510 6,328
------------------ -------------------
$ 510 $ 9,828
================== ===================
</TABLE>
See auditors' report and notes to financial statements.
F-2
<PAGE>
MIZAR ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
INCOME STATEMENTS
<TABLE>
<CAPTION>
Period from inception
(December 11, 1996)
For the years ended December 31, through
1999 1998 December 31, 1999
------------------- -------------------- ----------------------
<S> <C> <C> <C>
Revenues $ - $ - $ -
Expenses
Lease operating costs - 2,780 8,162
General and administrative 5,818 11,483 18,321
Impairment of oil and gas properties - - 17,876
------------------- -------------------- ---------------------
Total Expenses 5,818 14,263 44,359
------------------- -------------------- ---------------------
Net Loss $ (5,818) $ (14,263) (44,359)
=================== ==================== =====================
Earning per share
Net Loss per Common Share $ (0.004) $ (0.010) $ (0.031)
</TABLE>
See auditors' report and notes to financial statements.
F-3
<PAGE>
MIZAR ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 11, 1996 (DATE OF INCEPTION)
TO DECEMBER 31, 1999
<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 1,430,700 $ 44,869 $ (44,359) $ 510
=====================================================================
</TABLE>
See auditors' report and notes to financial statements.
F-4
<PAGE>
MIZAR ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from inception
(December 11, 1996)
For the years ended December 31, through
1999 1998 December 31, 1999
-------------------- -------------------- -----------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net Loss $ (5,818) $ (14,263) $ (44,359)
-------------------- -------------------- -----------------------
Adjustments to reconcile net income to net cash
used in operating activities:
Amortization 357 446
Impairment of oil and gas properties 17,876
Increase in organization costs (446)
Decrease in reclamation costs (3,500) (3,500)
-------------------- -------------------- -----------------------
Total adjustments (3,500) 357 14,376
-------------------- -------------------- -----------------------
Net cash used by operating activities (9,318) (13,906) (29,983)
-------------------- -------------------- -----------------------
Cash flow from investing activities:
Purchase of oil and gas properties (17,876)
Proceeds from sale of oil and gas equipment 3,500 3,500
-------------------- -------------------- -----------------------
Net cash provided (used) in investing activities - 3,500 (14,376)
-------------------- -------------------- -----------------------
Cash flow from financing activities:
Proceeds from issuance of common stock 26,600 44,869
Proceeds from shareholders' loan 10,423
Principal payment on shareholders' loan - (10,423) (10,423)
-------------------- -------------------- -----------------------
Net cash provided by financing activities - 16,177 44,869
-------------------- -------------------- -----------------------
Net increase (decrease) in cash and cash equivilents (9,318) 5,771 510
Cash and cash equivalents, beginning of the period 9,828 4,057 -
-------------------- -------------------- -----------------------
Cash and cash equivalents, end of period $ 510 $ 9,828 $ 510
==================== ==================== =======================
</TABLE>
See auditors' report and notes to financial statements.
F-5
<PAGE>
MIZAR ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
Supplemental Cash Flow disclosure:
Shareholders' Equity Note
- -------------------------
During the years ended December 31, 1997 and 1998, the Company issued 30,700
shares of common stock pursuant to a private offering.The proceeds from the
offering were $14,869 in cash, net of offering cost of $15,831.
See auditors' report and notes to financial statements.
F-6
<PAGE>
MIZER ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description:
Mizer 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.
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 Cost:
Advertising and marketing costs are expensed as incurred. During the year ended
December 31, 1999, a total of $733 was expensed.
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 computed 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.
F-7
<PAGE>
MIZER ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic Loss per Share and Diluted Loss per Share (continued):
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:
1999 1998
---- ----
Basic 1,430,700 1,421,592
Concentration of Credit Risk:
Financial instruments that potentially subject the Company to credit risk
include cash on deposit with one financial institution amounting to $510 at
December 31, 1999, which was insured for up to $100,000 by the U.S. Federal
Deposit Insurance Corporation.
2. STOCKHOLDERS' EQUITY
Common Stock:
Authorized 25,000,00 shares of common stock, no par value per share. Issued and
outstanding 1,430,700 shares of common stock.
Preferred Stock:
Authorized 10,000,000 shares of preferred stock, no par value per share. None
issued.
The Company issued 1,400,000 shares of common stock to its founders for $30,000
in December 1996.
During November and December 1997, 4,100 shares were issued in connection with a
private offering at a price of $1.00 per share.
During 1998, the Company completed its private offering by selling an additional
26,600 shares at a price of $1.00 per share.
At December 31, 1999 and 1998, the total shares of commons stock were as
follows:
1999 1998
---- ----
Shares of common stock issued and outstanding 1,430,700 1,430,700
F-8
<PAGE>
MIZER ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
3. OIL AND GAS PROPERTIES
In 1997, the Company acquired oil and gas mineral leases. In April 1998, the
Company sold its working interest in these leases for an overriding royalty
interest. The Company retained the rights to the surface equipment in this
transaction. On December 31, 1997, the Company adjusted its investment in the
royalty interest to its net realizable value. In 1999, the Company's underlying
interest in oil and gas property expired. In connection with this interest, the
Company paid reclamation costs of $2,900 in exchange for a quit claim deed.
4. INCOME TAXES
At December 31, 1999, the Company had a net operating loss carryforward for
income tax purposes of approximately $44,359 available to offset future income
taxes, expiring through 2019.
5. RELATED PARTY TRANSACTIONS
For the year ended December 31, 1997, two of the Company's major shareholders
advanced $10,423 to the Company; in 1998, the Company repaid these advances. In
addition, the Company is providing office space on a rent-free basis from one of
these shareholders.
6. 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 7)
7. SUBSEQUENT EVENT
By the end of April 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.
F-9
<PAGE>
MIZER ENERGY COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
7. SUBSEQUENT EVENT (continued)
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 tot he cash resources of HBOA. As of
March 27, 2000, HBOA had raised approximately $2 million in a private offering.
F-10
<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-01-1999
<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>
