<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
August 17, 2000
------------------------------------------------
Date of Report (date of earliest event reported)
NetSalon Corporation
(Formerly "Makepeace Capital Corp.")
----------------------------------------------------
Exact name of Registrant as Specified in its Charter
Delaware 333-63015 84-1472120
--------------------------- --------------- ---------------------------
State or Other Jurisdiction Commission File IRS Employer Identification
of Incorporation Number Number
5215 North O'Conner Road, Suite 200, Irving, Texas 75039
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Address of Principal Executive Offices Zip Code
(972) 443-9825
--------------------------------------------------
Registrant's Telephone Number, Including Area Code
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The following
financial statements of NetSalon, LLC are filed herewith:
Page
Independent Auditors' Report ............................. F-1
Balance Sheets as of December 31, 1999 and 1998 .......... F-2
Statements of Income and Members' Equity for the
Year Ended December 31, 1999 and period November 17,
1998 (Inception) to December 31, 1998 ................... F-3
Statements of Cash Flows for the Year Ended
December 31, 1999 and period November 17,
1998 (Inception) to December 31, 1998 ................... F-4
Notes to Financial Statements ............................ F-5
Unaudited Balance Sheet as of June 30, 2000 .............. F-9
Unaudited Income Statement for the Six Months
Ended June 30, 2000 ..................................... F-10
(b) PROFORMA FINANCIAL INFORMATION. The following pro forma financial
statements are filed herewith:
Consolidated Pro Forma Balance Sheet as of June 30,
2000 .................................................... F-11
Consolidated Pro Forma Income Statement for the Six
Months Ended June 30, 2000 .............................. F-12
(c) EXHIBITS.
Exhibit 10 Share Exchange Agreement between Makepeace Capital
Corp. and NetSalon Corporation (previously filed)
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, hereunto duly authorized.
NETSALON CORPORATION
Dated: October 31, 2000 By:/s/ Jan R. Thurman
Jan R. Thurman, CEO
3
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SAVILLE, DODGEN & COMPANY
(A professional corporation)
CERTIFIED PUBLIC ACCOUNTANTS
1750 Univision Center
2323 Bryan Street, Lock Box 145
Dallas, Texas 75201-2698
214/922-9727 Fax 214/922-9041
INDEPENDENT AUDITORS' REPORT
To the Owners
NetSalon, LLC
Dallas, Texas
We have audited the accompanying balance sheets of NetSalon, LLC, a
limited liability corporation, (the Company) as of December 31, 1999 and 1998,
and the related statements of income and members' equity, and cash flows for
the year ended December 31, 1999 and period November 17, 1998 (inception) to
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted nducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of NetSalon, LLC as
of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the year ended December 31, 1999 and period November 17, 1998
(inception) to December 31, 1998 in conformity with generally accepted
accounting principles.
/s/ Saville, Dodgen & Company
Dallas, Texas
July 19, 2000
October 30, 2000 (Investor payable settled litigation)
F-1
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NETSALON, LLC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
YEAR ENDED DECEMBER 31, 1999 AND 1998
1999 1998
--------- ---------
ASSETS
CURRENT ASSETS
Cash $ 22,205 $ 35,041
Prepaid expenses - -
--------- ---------
Total current assets 22,205 35,041
Property and equipment, net 24,474 -
--------- ---------
TOTAL ASSETS $ 46,679 $ 35,041
========= =========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Note payable - Synet 25,000 -
Investor payable 601,700 -
Accounts payable and accrued expenses 101,673 6,209
Member expense payable 25,213 -
Commissions payable 28,150 -
--------- ---------
Total current liabilities 781,735 6,209
--------- ---------
LONG-TERM LIABILITIES
Related party note payables 112,500 100,000
--------- ---------
Total long-term liabilities 112,500 100,000
--------- ---------
TOTAL LIABILITIES 894,235 106,209
MEMBERS' EQUITY
Deficit accumulated during the
developmental stage (847,556) (71,168)
--------- ---------
TOTAL LIABILITIES AND MEMBERS' EQUITY $ 46,679 $ 35,041
========= =========
See accompanying independent auditors' report and notes.
F-2
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NETSALON, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF INCOME AND MEMBERS EQUITY
YEAR ENDED DECEMBER 31, 1999
AND PERIOD NOVEMBER 17, 1998 (INCEPTION) TO DECEMBER 31, 1998
1999 1998
---------- --------
REVENUE
Affiliate license fees $ 937,906 $ -
NetSalon institutes fees 158,710 -
Product sales 51,913 -
---------- --------
Total revenue 1,148,529 -
COST OF REVENUES 150,640 -
---------- --------
GROSS PROFIT 997,889 -
OPERATING COSTS AND EXPENSES
Research and development 565,804 25,000
Selling and marketing 769,264 6,209
General and administrative 444,844 39,959
---------- --------
Total operating costs and expenses 1,779,912 71,168
---------- --------
INCOME (LOSS) FROM OPERATIONS (782,023) (71,168)
Other income (expenses) 5,635 -
---------- --------
NET INCOME (LOSS) (776,388) (71,168)
ACCUMULATED DEFICIT, beginning of year (71,168) -
---------- --------
ACCUMULATED DEFICIT, end of year $ (847,556) $(71,168)
========== ========
See accompanying independent auditors' report and notes.
F-3
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NETSALON, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF INCOME AND MEMBERS EQUITY
YEAR ENDED DECEMBER 31, 1999
AND PERIOD NOVEMBER 17, 1998 (INCEPTION) TO DECEMBER 31, 1998
1999 1998
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(776,388) $ (71,168)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 4,222 0
Changes in operating accounts:
Accounts payable and accrued expenses 95,463 6,209
Member expense payable 25,213 0
Commissions payable 28,150 0
--------- ---------
Net cash used by operating activities (623,340) (64,959)
========= =========
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (28,696) 0
--------- ---------
Net cash used by investing activities (28,696) -
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related party 12,500 100,000
Proceeds from investor payable 601,700 0
Note payable - Synet 25,000 0
--------- ---------
Net cash provided by financing activities 639,200 100,000
--------- ---------
NET INCREASE (DECREASE) IN CASH (12,836) 35,041
CASH, beginning of year 35,041 -
--------- ---------
CASH, end of year $ 22,205 $ 35,041
========= =========
See accompanying independent auditors' report and notes.
F-4
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NETSALON, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
ORGANIZATION
NetSalon, LLC (the Company), a Limited Liability Company organized on
November 17, 1998 under the laws of the state of Delaware, is in the business
of developing internet-based sales channels hosting web sites for small
businesses and selling consumer and professional products directed toward the
end-consumer market. Generally, these sales channels are made through a
network of independent distributors.
The Company is subject to risks and uncertainties common to
technology-based companies, including rapid technological change, growth of
the internet and electronic commerce, new product development, actions of
competitors, and availability of sufficient capital and a limited operating
history.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The balance sheet has been prepared using the accrual basis of accounting
consistent with generally accepted accounting principles.
Use of Estimates
----------------
The preparation of the balance sheet 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. Actual results could differ from these estimates.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid instruments purchased with
original maturities of three months or less to be cash equivalents. For this
report, cash and cash equivalents is solely comprised of the amount available
in checking accounts.
Property and Equipment
----------------------
Property and equipment are stated at cost and depreciated over estimated
useful lives of three to seven years using the straight-line method.
Maintenance and repairs are charged to expense as incurred; major renewals and
betterments are capitalized.
See accompanying independent auditors' report.
F-5
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NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Research and Development Costs
------------------------------
A significant investment was made during 1999 into web application
development (research and development costs), which the Company uses to sell
products and rights for the use of portal sites by small businesses. This
investment equaled $565,804 and $25,000 in 1999 and 1998, respectively. All
of the costs associated with this development, principally programming fees
charged by an ex-member, were expensed as incurred as required by SFAS 86
Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed.
Long-Term Liabilities
---------------------
Long-term notes payable at December 31, 1999 and 1998 represent related
party notes that are to be paid out of earnings and profits in future years.
Income Taxes
------------
The Company has elected to be treated as a Limited Liability Company
taxed as a partnership whereas the owners are taxed directly for income
arising from operations. Accordingly, no provision for federal income taxes
has been made in the Company's financial statements.
Revenue Recognition
-------------------
The Company derives revenue from sales of web sites (portals), affiliated
training, and products sold through those web sites and through its
independent representatives. Substantially all of the Company's revenues are
earned when received. Independent representatives earn commissions based upon
sales volume established and through sales volume attained through certain
other independent representatives.
PROPERTY AND EQUIPMENT
Property and equipment was composed of the following at December 31, 1999
and 1998:
1999 1998
------- -------
Computer equipment $20,141 $ 0
Furniture and fixtures 8,555 0
------- -------
Property and equipment, gross 28,696 0
Less accumulated depreciation 4,222 0
------- -------
Property and equipment, net $24,474 $ 0
======= =======
See accompanying independent auditors' notes.
F-6
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NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
COMMITMENTS AND CONTINGENCIES
Investor payable, at December 31, 1999 in the amount of $401,700,
represents certain funds provided by an investor as advanced capital in
anticipation of the issuance of future stock in a public offering.
Approximately $200,000 was also provided for portal sites. This investor
entered into litigation with the Company wanting to redeem cash investments
and payments. The lawsuit was subsequently settled for $601,700.
Certain disagreements exist between the Company and 4N International
(4N), an unrelated document production organization, concerning certain
marketing and other products created by 4N. 4N stipulates that the Company
owes them approximately $40,000. The Company's management believes that 4N
owes them an unspecified amount. Management believes that the Company will be
successful in this dispute.
SUBSEQUENT EVENTS
The Company was acquired by Makepeace Capital Corporation (Makepeace) on
August 16, 2000. Management of the Company has been elected to be management
of the merged entity. The merged entity will continue operations of the
Company.
Subsequent to December 31, 1999, an ex-employee of the Company has sued
for approximately $53,000 allegedly owed pursuant to an employment agreement.
The Company disputes the claims and has retained legal counsel for defense.
RELATED PARTY TRANSACTIONS
The composition of ownership originally included three members. Two
members sold their interest in the Company to the residual member in May,
2000. Certain funds are due to one such terminated member amounting to
$112,500 and $100,000 at December 31, 1999 and 1998, respectively. Member
expense payable represents an amount payable to a certain member for business
expenses paid on behalf of the Company.
Programming and development for the Company's web site was primarily
performed by Synet Corporation (Synet), a related company of one of the
owners. The Company paid Synet approximately $565,804 and $25,000 in 1999 and
1998, respectively, for said programming and development efforts. The Company
also paid Synet approximately $88,000 for site setup fees for sold portal
sites as of December 31, 1999; setup fees are included in cost of goods sold.
See accompanying independent auditors' notes.
F-7
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NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
DEVELOPMENTAL STAGE OPERATIONS
The Company was formed on November 17, 1998. From November 17, 1998
through December 31, 1999, operations were devoted primarily to raising
capital, constructing the Company's web presence, obtaining affiliate
licenses, organizing a management structure and defining target markets.
Cumulative revenues and expenses since inception were $1,148,529 and
$2,001,720, respectively, as of December 31, 1999. Cumulative outflows of
cash used in operating and investing activities were $688,299 and $28,698,
respectively, as of December 31, 1999. Cumulative inflows of cash from
financing activities amounted to $739,200 as of December 31, 1999.
F-8
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<PAGE>
NetSalon, LLC
Balance Sheet
June 30, 2000
Cash $ 58,700
Accounts Receivable, related party -
Other assets -
Investments-Held to Maturity 100,000
Available for sales securities -
-----------
Current Assets 158,700
Property and Equipment 26,696
Accumulated Depreciation (7,389)
-----------
Property and Equipment Net 19,307
Total Assets 178,007
===========
Accounts Payable 8,015
Member Expense Payable 64,443
Investor Payable 601,700
Related party loan payable -
-----------
Total Current Liabilities 674,158
Loan Payable - Don Dinger 227,692
Loan Payable - Mark Manuel 100,000
-----------
Total Long-term Liabilities 327,692
Preferred Stock -
Common Stock -
APIC -
LLC Capital Contributions 473,551
Subscriptions to common stock -
Retained earnings (1,297,394)
-----------
Total Equity (823,843)
Total Liabilities and Equity 178,007
===========
F-9
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NetSalon LLC
Income Statement
Six Months Ended June 30, 2000
Sales $ 135,742
Cost of Sales 108,824
---------
Gross Profit 26,918
Research and Development 17,515
Selling and Marketing 156,533
General & Administrative Expenses 302,466
---------
Total Expenses 476,514
Net Loss Before Other Income/Expenses (449,596)
Other (Income)/Expenses 240
---------
Net loss (449,836)
F-10
<PAGE>
Makepeace Consolidated (Proforma)
Balance Sheets
June 30, 2000
<TABLE>
<CAPTION>
Makepeace NetSalon,
Capital, Inc. LLC Eliminations Consolidated
------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Cash $ 19,473 $ 58,700 $ $ 78,173
Accounts Receivable, related party 1,812 0 1,812
Other assets 6,359 0 6,359
Investments-Held to Maturity 0 100,000 100,000
Available for sales securities 125,000 0 125,000
-------- ---------- ----- ----------
Current Assets 152,644 158,700 0 311,344
Property and Equipment 6,870 26,696 33,566
Accumulated Depreciation (4,048) (7,389) (11,437)
-------- ---------- ----- ----------
Property and Equipment Net 2,822 19,307 0 22,129
Total Assets $155,466 $ 178,007 $ 0 $ 333,473
======== ========== ===== ==========
Accounts Payable 19,322 8,015 27,337
Member Expense Payable 0 64,443 64,443
Investor Payable 0 601,700 601,700
Related party loan payable 52,694 0 52,694
-------- ---------- ----- ----------
Total Current Liabilities 72,016 674,158 0 746,174
Loan Payable - Don Dinger 0 227,692 227,692
Loan Payable - Mark Manuel 0 100,000 100,000
-------- ---------- ----- ----------
Total Long-term Liabilities 0 327,692 0 327,692
Preferred Stock 0 0
Common Stock 3,857 0 3,857
APIC 525,273 0 525,273
LLC Capital Contributions 0 473,551 473,551
Subscriptions to common stock 28,500 0 28,500
Retained earnings (474,180) (1,297,394) (1,771,574)
-------- ---------- ----- ----------
Total Equity 83,450 (823,843) 0 (740,393)
Total Liabilities and Equity $155,466 $ 178,007 $ 0 $ 333,473
======== ========== ===== ==========
</TABLE>
F-11
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Makepeace Consolidated (Proforma)
Income Statements
Six Months Ended June 30, 2000
<TABLE>
<CAPTION>
Makepeace NetSalon,
Capital, Inc. LLC Eliminations Consolidated
------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 0 $ 135,742 $ $ 135,742
Cost of Sales 0 108,824 108,824
--------- ---------- ----- ----------
Gross Profit 0 26,918 0 26,918
Research and Development 0 17,515 17,515
Selling and Marketing 0 156,533 156,533
General & Administrative Expenses 223,758 302,466 526,224
--------- ---------- ----- ----------
Total Expenses 223,758 476,514 0 700,272
Net Loss Before Other Income/Expenses (223,758) (449,596) 0 (673,354)
Other (Income)/Expenses (76) 240 164
--------- ---------- ----- ----------
Net loss $(223,682) $ (449,836) $ 0 $ (673,518)
========= ========== ===== ==========
</TABLE>
F-12
