U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to
FORM 10-SB
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Exchange Act of 1934
CONTESSA CORPORATION
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(Name of Small Business Issuer in Its Charter)
Delaware 65-0656268
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(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
11 Chambers Street
Princeton, New Jersey 08542
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(Address of Principal Executive Offices) (Zip Code)
(609) 252-0657
(Registrant's Telephone Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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None None
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.0001 per share
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(Title of Class)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 1. Description of Business.
a) Business Development.
Contessa Corporation (hereinafter referred to as the "Company" and/or the
"Issuer"), a Delaware corporation, was formed on March 7, 1996 under the name
United Health Management, Inc. to operate as a managed health care provider. On
September 16, 1997, the board of directors of the Company changed the business
of the Company to that of a holding company, and subsequently changed its name
to Contessa Corporation. In September of 1997, the Company acquired all of the
issued and outstanding shares of Gastronnomia Bocca Di Rossa, Inc. ("GBDR"), a
Florida corporation, in exchange for 562,500 shares of its common stock, $.0001
par value (the "Acquisition"). As a result, GBDR became the wholly-owned
subsidiary of the Company. Prior to the Acquisition, GBDR was a wholly owned
subsidiary of Giuditta Investments, Inc. an affiliate of Mr. Pietro Bortolatti,
and a corporation organized under the laws of Florida. As noted below,
subsequent to the period covered by this report, the Company signed an Agreement
and Plan of Merger to acquire Fullcom Inc., a New Jersey corporation ("Old
Fullcomm"), disposed of its interest in GBDR, and consummated the acquisition of
Old Fullcomm pursuant to a merger which became effective on March 1, 2000.
(b) Business of the Issuer.
The Company is a holding company, the principal assets of which were
formerly the capital stock of Gastronnomia Bocca Di Rosa, Inc. ("GBDR"), and
which are now the capital stock of Fullcomm. At the time of its acquisition,
GBDR was to be the basis for the Company's restaurant operations. Development of
the restaurant operations proceeded behind schedule and the Company incurred
greater costs than it had anticipated. As a result, the Company has abandoned
the restaurant development effort. The Company entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement") under which Mr. Bortolatti would
receive back the shares of GBDR formerly held by his affiliate, Giuditta
Investments, Inc. and in exchange therefor, would surrender the shares of the
Company that he received in the Acquisition. The consummation of the Stock
Purchase Agreement was subject to several contingencies and conditions which now
have been satisfied. The sale of the GBDR shares was consummated on February 23,
2000 and as a result, GBDR is no longer a subsidiary of the Company, and Mr.
Bortolatti's shares have been reacquired by the Company. The GBDR disposition
was reported in an 8-K filed on March 9, 2000.
GBDR was to be engaged in the operation of an Italian delicatessen/cafe,
to be called "Bocca Di Rosa Gastronnomia" ("Gastronnomia"). Gastronnomia was
intended to be an informal restaurant/ delicatessen/bakery/ featuring take-out,
catering, deliveries, as well as on site dining. The restaurant was to offer
both indoor and outdoor dining in a rustic setting, with an open, elevated
kitchen. The opening of Gastronnomia was originally scheduled for November 30,
1998. Due to
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unforeseen delays and difficulties of various types, Gastronnomia has never
opened. According to Mr. Bortolatti, successfully bringing the project to
completion would require additional investment by the Company of approximately
$200,000. The Company determined that it is not in its best interest to continue
the development process and has therefore abandoned its restaurant operations.
Base lease payments of $63,204 plus additional lease payments in respect of
allocated real estate taxes and insurance remain the obligation of GBDR,
however, the Company has no interest in GBDR, and consequently, has no
obligation with respect to that lease.
Acquisition of Old Fullcomm - The Old Fullcomm Merger
On January 28, 2000, the Company entered into an Agreement and Plan of
Merger among Old Fullcomm, Fullcomm Acquisition Corp. ("Acquisition"), a wholly
owned subsidiary of Contessa, and the principal shareholders of Contessa and Old
Fullcomm. An Amended and Restated Agreement and Plan of Merger dated as of
January 28, 2000 was later entered into (such Amended and Restated Agreement and
Plan of Merger being the "Merger Agreement"). Under the terms of the Merger
Agreement, Old Fullcomm was to be merged with and into Acquisition which would
be the remaining Delaware corporation (the "Merger"). Acquisition will continue
as a wholly-owned subsidiary under the name of "Fullcomm, Inc." and the former
shareholders of Old Fullcomm, the New Jersey "disappearing" corporation received
shares in Contessa, the public, parent company. The respective shareholders of
Contessa and Old Fullcomm under the Merger Agreement received the following
merger consideration; the (i) 4,601,100 shares of Old Fullcomm issued and
outstanding prior to the Merger were cancelled, and a like number of Contessa
shares issued to the former Old Fullcom shareholders on a "one for one" basis
and (ii) a stock dividend of 695,944 shares was declared and issued with respect
to the 2,304,006 shares of Contessa common stock issued and outstanding prior to
the Merger, thereby resulting in 3,000,000 shares held by the prior shareholders
of Contessa. Taking only these two issuances only into account, the former
shareholders of Old Fullcomm held 4,601,100 shares of 7,601,100, or 60.5% of the
issued and outstanding shares and the former shareholders of Contessa held
3,000,000 shares of the 7,601,100, or 39.5% of the issued and outstanding
shares. As noted herein, a number of shares were issued or are issuable to non-
shareholders pursuant to various agreements entered into in conjunction with the
Merger.
The transaction was reviewed and approved by Acquisition's Board of
Directors and submitted to Contessa Corporation, its sole stockholder, for its
approval which was given by stockholder consent under the Delaware General
Corporation Law. The Merger was also approved via by unanimous shareholder
consent under the provisions of the New Jersey Business Corporation Law. The
Merger was effectuated by the filing of Certificates of Merger with the Delaware
and New Jersey Secretaries of State, and was effective, on March 1, 2000. The
Merger Agreement has been filed as Exhibit 2 hereto.
As the Merger was given unanimous approval by all shareholders entitled to
vote on the Merger, there were no dissenting shareholders and therefore no
dissenting shareholder rights under the relevant corporation statutes of
Delaware or New Jersey. All shares issued to former shareholders of Old Fullcomm
were issued under the exemptions from registration afforded by Rule
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506 of Regulation D, and/or the "private placement" exemption under Section 4(2)
of the Securities Act of 1933, as amended (the "Securities Act"), and the
dividend shares issued to Contessa shareholders are exempt from registration by
reason of the statutory exemption found in Section 3(a)(9) of the Securities
Act.
The Business of Fullcomm
Products and Services and Market Potential
Fullcomm is a development stage company that is engaged in the research,
production and development of proprietary hardware and software encryption
components for digital data transfer.
For those who wish to download content from websites or engage in two-way
communication via the Internet, privacy is a key issue. Fullcomm's technology
aims to meet these needs. The Fullcomm technology is threefold: client-side
security hardware, server-side security software, and authentication party
software. These three cooperate in a fashion that facilitates the secure
transmission of any and all digital data via the Internet or over VPN's (Virtual
Private Networks). By focusing on the described near-term applications, Fullcomm
believes it can enter the market with relatively modest development costs.
Digital rights management (DRM) platforms serve as a foundation for providers of
digital information, technology, and commerce services to participate in a
global e-commerce system. DRM technologies manage rights and interests in
digital information. Fullcomm provides consulting, applied research and product
development services related to commercial security and encryption solutions.
These solutions enable the secure exchange of information among a wide array of
information systems and provide a framework for a broad range of transactions.
Fullcomm intends to earn revenue from licensed technology products, transaction
fees and information services delivered over the Internet, private Intranets or
other networks.
Fullcomm's technology is strategically positioned to reap the benefits of the
exponential growth of online transactions. The size of the markets for the
following applications are expected to range from $2.5 billion to more than $20
billion in the next few years. These markets include:
o E-commerce - greater security for online financial transactions and
business information;
o Audio - distribution of music over the Internet;
o Video - distribution of movies and television programming for sale
or rental online;
o Internet Publishing - distribution of books, newspapers, and
periodicals online;
o Software Distribution - enhanced security for the sale or rental of
software online;
Voice over Internet Protocol Telephony - enhanced security for voice
communication over the Internet; and
o Wireless Data - secure transmission of information for the rapidly
expanding wireless data market.
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Fullcomm's product research and development efforts ementation consists of
essentially five key steps:
o design;
o prototyping;
o testing;
o certification; and
o manufacturing
Fullcomm currently has com pleted the design and is developing the working
prototype. The design includes two key elements: server side security software
and user side security hardware.
Financing of Product Development
Fullcomm has undertaken a private placement offering of not less than $1
Million of equity securities at an offering price of $2.50 per share. R.K Grace
and Company, a registered broker/dealer has agreed to act as placement agent for
the equity securities under a Memorandum of Understanding re: Placement Agent.
As of March 29, $1.1 Million of subscriptions have been received and thus the
minimal levels needed to break escrow under the terms of the offering will have
been met. Net of placement agency commissions and other expenses of offering,
Fullcomm will have available to it net offering proceeds of at least $850,000.
Fullcomm intends to continue with the private placement and under the stated
terms of the offering will be able to raise up to $3 Million in gross offering
proceeds.
Strategic Marketing Alliances
The ultimate commercial success of any new technology depends not only
upon that technology's technical capabilities but on a successful marketing and
product implementation campaign which will provide the necessary level of market
penetration and product acceptance. Contessa and Fullcomm have entered into
Consulting Agreements with C. Bradley Tashenberg and Gregory Creekmoore who are
principals in Bradmark Technologies Inc., a firm with an existing institutional
client base of approximately 10,000 customers. Bradmark, located in Houston, TX,
was cited as a "Software 500" Company by Software Magazine in its 1999 industry
review. Under the terms of their agreements, Messrs. Tashenberg and Creekmoore
have agreed to make themselves available from time to time over the next two
years for consultation, marketing, and technical advice. Under the terms of
their Consulting Agreements, Messrs. Tashenberg and Creekmoore receive no direct
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cash payments but instead have been awarded equity stakes in Contessa of 175,000
shares apiece, which shares may not be sold until the passage of at least 3
years. Fullcomm has also entered into a binding agreement to establish a master
distributorship relationship with Creative Web Solutions, Inc., a subsidiary of
Bradmark. Creative Web Solutions will aim to provide particular marketing focus
to the "business to business" applications sector.
Item 2. Managements Discussion and Analysis and Plan of Operation
The Company is considered a development stage company with no operations
or income since inception. The costs and expenses associated with the
preparation and filing of this report and other operations of the Company have
been paid for by shareholders of the Company. Unlike many development stage
companies, and as a result of the recent private placement offering which has
raised in excess of $850,000 of net offering proceeds, the Company enjoys
capital resources sufficient to meet its anticipated capital outlays for the
next 12 months.
The statements contained in this Report on Form 10-K that are not historical
facts are forward- looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) that involve risks and uncertainties.
Such forward-looking statements may be identified by, among other things, the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy that involve risks and
uncertainties. From time to time, the Company or its representatives have made
or may make forward-looking statements, orally or in writing. Such
forward-looking statements may be included in various filings made by the
Company with the Securities and Exchange Commission (the "SEC"), or press
releases or oral statements made by or with the approval of an authorized
executive officer of the Company. These forward-looking statements, such as
statements regarding anticipated future revenues, capital expenditures, and
other statements regarding matters that are not historical facts, involve
predictions. The Company's actual results, performance or achievements could
differ materially from the results expressed in, or implied by, these
forward-looking statements. Potential risks and uncertainties that could affect
the Company's future operating results include, but are not limited to: (i)
economic conditions, including economic conditions related to entry into any new
business venture; (ii) the availability of equipment from the Company's vendors
at current prices and levels; (iii) the intense competition in the markets for
the Company's new products and services; (iv) the Company's ability to integrate
acquired companies and businesses in a cost- effective manner; (v) the Company's
ability to effectively implement its branding strategy; and (vi) the Company's
ability to develop, market, provide, and achieve market acceptance of new
service offerings to new and existing clients.
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the Period from inception (March 7, 1996) to December 31, 1999.
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Development Stage Activities
The Company has been a development stage enterprise since its inception
March 7, 1996 to December 31, 1999. During this period, management had devoted
the majority of its efforts to construction of the restaurant, pursuing and
finding a management team to continue the process of completing its marketing
goals, and obtaining sufficient working capital through officer loans, and
through the completion of the sale of a private placement. These activities were
funded by the Company's management aggregating $176,656 through December 31,
1999 and investments from stockholders aggregating $318,902 through December 31,
1999. The Company has expended funds to purchase restaurant equipment
aggregating $132,148, paid out $133,975 in restaurant pre-opening expenses, paid
security deposits of $10,533 and paid $355,217 in general and administrative
expenses for the period from inception, March 7, 1996, through December 31,
1999. The Company has not yet generated sufficient revenues during its limited
operating history to fund its ongoing operating expenses, repay outstanding
indebtedness or to fund its product development expenses.
Results of operations
Results of Operations for the period from the Company's inception March 7, 1996
through December 31, 1999.
For the period from the Company's inception March 7, 1996 through December
31, 1999, a period of approximately 45 months, the Company has not generated any
net sales, any gross profits, or any net profits.
The Company's overhead costs aggregated approximately $355,217 for the
period from inception March 7, 1996 through December 31, 1999. Of these initial
start up costs, $155,362 is attributed to consulting contracts for an unrelated
business operated prior to the Company's entrance into the restaurant business,
$133,975 in restaurant pre-opening expenses, and an aggregate of $54,228 in rent
and real estate taxes and an additional $11,690 related to administrative costs
of organizing the building of the new restaurant.
Liquidity and Capital Resources
The Company increased liquidity by $1 from a cash balance at the Company's
inception of $-0-. The Company has been funded through the process of selling
shares of common stock through various private placements aggregating $301,037
for the period, March 7, 1996 to December 31, 1999 including $18,902 during
1998, and received loans from officers amounting to $176,656 through December
31, 1998, and a loan of $10,000 from an unrelated entity.
The Company expended an aggregate of $132,148 for equipment and
furnishings, $10,533 in security deposits, and paid an aggregate of $133,927 in
pre-opening expenses which has been
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charged to operations.
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of $355,217 for the period from inception March 7, 1996 to December 31, 1999.
These factors indicate that the Company's continuation as a going concern is
dependent upon its ability to obtain adequate financing. The Company will
require substantial additional funds to finance its business activities on an
ongoing basis and will have a continuing long-term need to obtain additional
financing. The Company plans to engage in such ongoing financing efforts on a
continuing basis. The Company's capital needs and plans with respect to Fullcomm
are discussed under "Financing of Product Development" under Item 1 "The
Business of Fullcomm".
The Company anticipates that with the balance of funds raised to date,
together with the existing cash resources which Contessa provided in the Merger,
that it will be able to meet operational expenses for the next twelve months.
The Company anticipates that it may need additional capital beyond this one year
forecast and it will seek such financing either through a public offering, a
private placement, or by allying itself with a strategic partner who is able to
provide development capital. There is no assurance given the Company's present
state of product development that such financing will be available or
forthcoming, or if it is available, that it will be available on terms which are
commercially reasonable or advantageous.
Item 3. Description of Properties.
The Company's executive offices are currently located at 11 Chambers
Street, Princeton, New Jersey 08542. The Company occupies approximately 1000
square feet of space at a monthly rent of $2,400. The current lease term ends on
April 30, 2000. The Company believes it could secure comparable space in the
event it needs to move.
The Company's formerly wholly owned subsidiary, GBDR, had entered into a
ten year lease dated July 1, 1997 with Carolyn Meredith for 1,832 square feet of
retail space at 2808 Bird Avenue and 916 square feet of retail space at 2806
Bird Avenue both in Coconut Grove, Florida.
The annual rent for Premises A for the first three years is $42,136,
payable in equal monthly installments of $3,511.33. Beginning on May 1, 1998,
the annual rent for Premises B for the first three (3) years is $21,068, payable
in equal monthly installments of $1,755.66. The lease also required the lessee
to pay additional rent, which amount represents the lessee's proportionate share
of real estate taxes and insurance. The amount of additional rent owed by the
lessee for the first year of the lease was $10,764, payable in equal monthly
installments of $897.00. The lessee's share of the aggregate additional rent is
31.5% of the total yearly costs for real estate taxes and insurance. The Company
has paid a security deposit of $10,533.99. As noted previously, the Company has
disposed of GBDR. As a result, the lease obligations will remain the obligation
of GBDR and the
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Company has no further obligations with respect to that lease.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners.
<TABLE>
<CAPTION>
Name and Amount and
Title of Address of Nature of Percentage
Class Beneficial Owner Beneficial Ownership of Class*
------------ ------------------------- --------------------- -----------
<S> <C> <C> <C>
Common Stock, par Anthony Markofsky(1)(2) 300,000 shares 3.46%
value $.0001 per share c/o Contessa Corporation Direct
Common Stock, par Viking Investment Group II, 525,000
value $.0001 per share Inc.; 630 Third Avenue Shares (2)
New York, NY 10017 Direct 6.00%
Common Stock, par Parenteau Corporation 525,000 shares (2) 6.00%
value $.0001 per share 4446 St. Laurent Blvd.
Suite 801 Direct
Quebec, Canada W2W 125
----------------------
</TABLE>
* Based on 8,741,100 shares issued and outstanding immediately after the Merger,
shares issued in connection with the Merger, and the minimum number of shares
issuable under the private placement offering.
(1) Ian Markofsky is the President and sole shareholder of Viking Investment
Group II, Inc. Mr. Markofsky is the father of Anthony Markofsky.
(2
The Company has not contacted stock brokerage firms holding shares of the
Company's Common Stock in "street name" to determine whether there are
additional substantial shareholders of the Company.
(b) Security Ownership of Management.
The number of shares of Common Stock of the Issuer owned by the Directors
and Executive Officers of the Issuer is as follows:
<TABLE>
<CAPTION>
Name and Amount and
Title of Address of Nature of Percentage
Class Beneficial Owner Beneficial Ownership of Class*
------------ ------------------------- --------------------- -----------
<S> <C> <C> <C>
Common Stock, par Thomas Knudson 0 shares 0
value $.0001 per share
Common Stock, par David Rector 0 shares 0
</TABLE>
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<TABLE>
<S> <C> <C> <C>
value $.0001 per share Director
c/o Contessa Corporation
Common Stock, par Anthony Markofsky 300,000 shares 3.43%
value $.0001 per share Secretary & Director
c/o Contessa Corporation
Common Stock, par Adam S. Gottbetter (3) 50,000 shares 0.57
value, $.0001 per share Assistant Secretary
Kaplan Gottbetter & Levenson, LLP Indirect
630 Third Avenue, 5th Floor
New York, NY 10017
Common Stock, par All Officers and Directors 350,000 shares 4.00%
value $.0001 per share (4 persons)
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</TABLE>
* Based on 8,741,100 shares currently issued and outstanding immediately
after the Merger, shares issued in connection with the Merger, and the minimum
number of shares issued under the private placement offering.
(1) Mr. Ian Markofsky holds his shares through an affiliated corporation, Viking
Investment Group II, Inc.
(3) Mr. Gottbetter is a partner in the law firm of Kaplan Gottbetter &
Levenson, LLP, which owns 50,000 shares of common stock of the
Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
(a) The Directors and Executive Officers of the Company are as follows.
Directors of the Company serve for a term of one year or until their successors
are elected. Officers are appointed by, and serve at the pleasure of, the Board.
Thomas E. Knudson, 42, President, Treasurer and Director.
Mr. Knudson has served as a director of the Company since inception
and has served as President of the Company since July 1996. Prior to that time,
Mr. Knudson was a principal of several entrepreneurial ventures including
serving as Secretary of Leadville Development Corp., a commercial real estate
developer (1990 until June 1996), President and owner of Cocobianco, a clothing
importer and retailer (1986 to 1996) and Principal of Fast Incorporated, a BMW
dealership, all located in and around Sun Valley, Idaho. Mr. Knudson served as
Vice President of Sales of Tamboril Cigar Company ("Tamboril") from June 1996 to
August 4, 1998, and served as a Director of Tamboril from October 1996 to August
4, 1998.
Anthony Markofsky, 30, Secretary and Director
Mr. Markofsky has served as Secretary and a Director of the Company since
inception. During the period April 1997 to January, 1999, Mr. Markofsky served
as President and Chief
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Executive Officer of Tamboril. Mr. Markofsky served as a Director of Tamboril
from October 1996 to January 1999. Prior to these positions with Tamboril, Mr.
Markofsky served as Vice President and Sales Administration Manager of Tamboril
from March 1996 to April 1997. From April 1995 to January 1996, Mr. Markofsky
served as a consultant to Intercare Inc., a medical management company. From
April 1991 to April 1995, he held various positions with CareFlorida Inc., a
health maintenance organization. Mr. Markofsky's father is Ian Markofsky,
President and sole shareholder of Viking Investment Group II., Inc., an
affiliate of the Company by virtue of its shareholdings in the Company.
Adam S. Gottbetter, 30, Assistant Secretary
Adam S. Gottbetter has served as the Assistant Secretary of the Company
since inception. Mr. Gottbetter received his J.D. from the Benjamin N. Cardozo
School of Law and his B.S. in Finance from the School of Business and Economics
at Lehigh University. Since 1992, Mr. Gottbetter has developed, negotiated,
structured and closed equity and debt investments with both public and private
companies on behalf of both issuers and investors. From 1992 to 1993 he was an
associate with the law firm of Paul B. Gottbetter, Esq. in New York. In 1993,
Mr. Gottbetter co- founded the law firm of Kaplan & Gottbetter, predecessor to
Kaplan Gottbetter & Levenson, LLP, which was formed in 1996. As an attorney, Mr.
Gottbetter specializes in corporate finance and securities matters for public
companies and private companies which may be candidates for the public market.
Mr. Gottbetter k is a member of the Finance Committee for Compost America
Holding Company, Inc., a publicly-traded waste management company. He is
admitted to the practice of law in the States of New York and Connecticut.
David S. Rector, 51, Director.
Mr. Rector has served as a Director of Contessa Corporation since June
1998. Mr. Rector was a director of Tamboril Cigar Company ("Tamboril") from
August, 1996 to January 1999. From August 1996 to March 1997, Mr. Rector was
also Executive Vice President and General Manager of Tamboril, where he was
instrumental in organizing Tamboril's operations and administration. Mr. Rector
was appointed Secretary of Tamboril in June of 1997. Over the past two decades,
Mr. Rector has served as a business consultant to, and held senior positions in,
a variety of ventures. From July of 1995 until July 1996, Mr. Rector was
principal of David Stephen Group, a business consulting firm. Mr. Rector was
Chief Operating Officer of Headstrong Group, a manufacturer and distributor of
recreational safety helmets, from July to November 1995. From January to June of
1995 Mr. Rector was General Manager of Bemiss-Jason, a distributor of paper
products. From June 1992 to April 1994 he was President of Supercart
International, a distributor of shopping carts. From April 1986 to June 1992 he
was principal of Blue Moon, a distributor of garment buttons. From 1980 to 1985,
Mr. Rector served as President of Sunset Designs, a designer of leisure time
craft. From 1972 to 1980, Mr. Rector held various managerial sales and marketing
positions with Crown Zellerbach Corporation, a multi-billion dollar manufacturer
of paper and forest products.
Significant Employees
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Richard T. Case, 50, CEO and Director of Fullcomm
Mr. Case has over 28 years of executive line managment experience with
Fortune 500 companies and as a consultant. He has served as a consultant since
1981 to numberous industries in raising capital, turnarounds, strategic
planning, acquisitions and mergers, operational analysis, product development,
strategic marketing, international market development, organizational behavior
and company culture change. Prior to that he was an executive with three Fortune
500 companies, Baxter Labohratories, Corning Glass Works and American Hospital
Supply Corporation.
Mr. Case received his MBA degree from the University of Southern
California where he graduated first in his class and his BS degree in management
and finance from Bradley University. He is a published author, has hosted a
weekly business radio program, has received The Wall Street Journal Achievement
Award, and is listed in Who's Who in American Business.
(b) Although not an employee of the Company, Pietro Bortolatti's
participation in GBDR was significant to the Company's development efforts for
the Coconut Grove restaurant it attempted to develop. Pietro Bortolatti has
served as the President of GBDR since its inception. Mr. Bortolatti has over 30
years experience in the retail food industry. Mr. Bortolatti currently manages
two other restaurants in Miami under the Bocca Di Rosa name, one of which is
located across the street from GBDR's location. Neither the Company nor GBDR has
an employment agreement with or any "key man" life insurance on Mr. Bortolatti.
(c) Anthony Markofsky, Vice President and a Director of the Issuer, is
the son of Ian Markofsky, the President and the sole shareholder of Viking
Investment Group II, Inc., which is a principal shareholder of the Issuer. Ian
Markofsky was instrumental in the founding of the Issuer and plays a significant
role in promoting the Issuer to the investment community.
Item 6. Executive Compensation.
To date, there has been no compensation paid to any executive officer of
the Company.
The Company currently does not have any stock option or stock incentive
plans.
Item 7. Certain Relationships and Related Transactions.
In March 1996, the Company issued an aggregate of 2,100,000 shares of
common stock to its founders, Messrs. Rudy Roig, Anthony Markofsky, Viking
Investment Group II, Inc., and Parenteau Corporation in connection with the
organization and early development stage of the Company, as follows: Rudy Roig
was issued 750,000 shares, Anthony Markofsky was issued 300,000 shares, Viking
Investment Group II, Inc. was issued 525,000 shares and Parenteau
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Corporation was issued 525,000 shares. In consideration for said shares, the
founders paid an aggregate of $3,710, consisting of $500 in organization
expenses and $3,000 in office equipment. In September 1996, the Company issued
to Kaplan & Gottbetter, predecessor of Kaplan Gottbetter & Levenson, LLP, 50,000
shares of its common stock in consideration for legal services valued at $10,000
or $.20 per share.
In July 1996, Rudy Roig was removed as an officer and director of the
Company for breach of his fiduciary duties to the Company. In connection
therewith, pursuant to an escrow agreement dated July 9, 1996 between the
Company and Mr. Roig, Mr. Roig's shareholdings in the Company were returned to
the Company for cancellation in September 1996.
On September 26, 1997, the Company acquired all of the issued and
outstanding capital stock of GBDR consisting of 500 shares, in exchange for
562,500 shares of the common stock, $.0001 par value of the Company (the
"Acquisition"). As a result of the Acquisition, GBDR, became the wholly-owned
subsidiary of the Company. Prior to the Acquisition, GBDR was a wholly owned
subsidiary of Giuditta Investments, Inc., a corporation organized under the laws
of Florida.
Item 8. Legal Proceedings.
The Issuer is not party to any pending legal proceeding, nor is its
property the subject of any pending legal proceeding.
Item 9. Market Price of and Dividends on the Registrant's Common Equity
and Related Shareholder Matters.
The Issuer's Common Stock is listed on the National Association of
Securities Dealers, Inc. Electronic Bulletin Board under the trading symbol of
"CONT". The Common Stock became listed on October 8, 1998, but prior to March 1,
2000 there was no established bid price for the Common Stock and the stock did
not trade. Since the March 1, 2000 date of initial trading, the high and low bid
prices have been $4.25 and $ , respectively.
Item 10. Recent Sales of Unregistered Securities.
In March 1996, the Company issued an aggregate of 2,100,000 shares to its
founders, Messrs. Rudy Roig, Anthony Markofsky, Viking Investment Group II,
Inc., and Parenteau Corporation in connection with the organization and early
development stage of the Company, as follows: Rudy Roig was issued 750,000
shares, Anthony Markofsky was issued 300,000 shares, Viking Investment Group II,
Inc. was issued 525,000 shares and Parenteau Corporation was issued 525,000
shares. In consideration for said shares, the founders paid an aggregate of
$210, consisting of $500 in organization expenses and $3,000 in office
equipment. In September 1996, the Company issued to Kaplan & Gottbetter,
predecessor of Kaplan Gottbetter & Levenson, LLP, 50,000 shares of the common
stock in consideration for legal services valued at $10,000 or $.20 per share.
12
<PAGE>
In July 1996, Rudy Roig was removed as an officer and director of the
Company for breach of his fiduciary duties to the Company. In connection
therewith, pursuant to an escrow agreement dated July 9, 1996 between the
Company and Mr. Roig, Mr. Roig's shareholdings in the Company were returned to
the Company for cancellation in September 1996.
On September 26, 1997, the Company entered into an acquisition agreement,
whereby the Company acquired 500 shares of GBDR, being all of the issued and
outstanding shares of GBDR, in exchange for 562,500 shares of the common stock,
$.0001 par value of the Company (the "Acquisition"). The Company became the
parent company of a wholly-owned subsidiary: Gastronnomia Bocca Di Rosa, Inc., a
Florida corporation formed on June 12, 1997 ("GBDR"). Prior to the Acquisition,
GBDR was a wholly owned subsidiary of Giuditta Investments, Inc., a corporation
organized under the laws of Florida. Each of the foregoing sales of stock by the
Company were transactions "not involving a public offering" and therefore were
exempted transactions under section 4(2) of the Securities Act. All securities
purchasers received legended, restricted stock and are sophisticated investors.
All such transactions were arms-length transactions where such purchasers were
given the opportunity to conduct all the due diligence they deemed necessary
before injecting their capital. This included opportunity to examine documents,
meet with other business principals, and the opportunity to ask any questions
they deemed advisable. None of these transactions involved any advertising,
general solicitations of interest, or dissemination of information outside of
the circle of these individuals.
In October 1996, the Company sold 850,000 shares of its common stock, at a
price of $0.3529411 per share, aggregating $300,000, pursuant to Rule 504 of
Regulation D promulgated under the Act.
In July 1998, the Company, sold 54,006 shares of its common stock, at a
price of $0.35 per share, aggregating $18,902, pursuant to Rule 504 of
Regulation D promulgated under the Act.
Item 11. Description of Securities.
Common Stock
The only security of the Issuer outstanding is its Common Stock, par value
$.0001 per share. The Company is authorized to issue up to 20,000,000 shares of
Common Stock, par value $.0001 per share, of which 2,866,506 were outstanding on
December 31, 1999. Holders of Common Stock are entitled to one vote for each
share held of record on each matter submitted to a vote of stockholders. There
is no cumulative voting for election of directors. Subject to the prior rights
of any series of preferred stock which may from time to time be outstanding, if
any, holders of Common Stock are entitled to receive ratably, dividends when,
as, and if declared by the Board of
13
<PAGE>
Directors out of funds legally available therefor and, upon the liquidation,
dissolution, or winding up of the Company, are entitled to share ratably in all
assets remaining after payment of liabilities and payment of accrued dividends
and liquidation preferences on the preferred stock, if any. Holders of Common
Stock have no preemptive rights and have no rights to convert their Common Stock
into any other securities. The outstanding Common Stock is validly authorized
and issued, fully paid, and nonassessable.
Preferred Stock
Under the Company's Certificate of Incorporation, as amended (the
"Certificate"), the Board of Directors of the Company is authorized to
designate, and cause the Company to issue, up to five million (5,000,000) shares
of preferred stock of any class or series, having such rights, preferences,
powers and limitations as the Board of Directors shall determine.
Item 12. Indemnification of Directors and Officers.
The Issuer's Certificate and By-laws contain provisions eliminating the
personal liability of a director to the Issuer and its stockholders for certain
breaches of his or her fiduciary duty of care as a director. This provision does
not, however, eliminate or limit the personal liability of a director (i) for
any breach of such director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Delaware
statutory provisions making directors personally liable, under a negligence
standard, for unlawful dividends or unlawful stock repurchases or redemptions,
or (iv) for any transaction from which the director derived an improper personal
benefit. This provision offers persons who serve on the Board of Directors of
the Company protection against awards of monetary damages resulting from
breaches of their duty of care (except as indicated above), including grossly
negligent business decisions made in connection with takeover proposals for the
Company. As a result of this provision, the ability of the Company or a
stockholder thereof to successfully prosecute an action against a director for a
breach of his duty of care has been limited. However, the provision does not
affect the availability of equitable remedies such as an injunction or recision
based upon a director's breach of his duty of care. The Securities and Exchange
Commission (the "Commission") has taken the position that the provision will
have no effect on claims arising under the federal securities laws.
In addition, the Certificate and By-Laws provide mandatory indemnification
rights, subject to limited exceptions, to any person who was or is party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by reason of the fact that such person is or was a director
or officer of the Company, or is or was serving at the request of the Company as
a director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise. Such indemnification rights include
reimbursement for expenses incurred by such person in advance of the final
disposition of such proceeding in accordance with the applicable provisions of
the Delaware General Corporation Law.
14
<PAGE>
Item 13. Financial Statements.
Registrant's Consolidated Financial Statements as of December 31, 1998,
for the years ended December 31, 1997 and December 31, 1998, and for the period
from March 7, 1996 (inception) to March 31, 1998, and the independent auditor's
report of Thomas P. Monahan, independent certified public accountant, with
respect to certain of those financial statements, appear on pages F-1 to F-13 of
this Form 10-SB.
Item 14. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.
None.
Item 15. Financial Statements and Exhibits.
(a) The Company's Consolidated Financial Statements, the financial
statements of Old Fullcomm, and the Company's Pro Forma Consolidated Financial
Statements (unaudited ) which give effect to the Merger are included in pages
F1-F _.
(b) Exhibits
Exhibit No. Description
----------- -----------
2.1 Acquisition Agreement and Plan of Reorganization
dated as of dated September 26, 1997 by and between
Contessa Corporation and Gastronnomia Bocca Di
Rosa, Inc. (Previously filed)
2.2 Amended and Restated Agreement and Plan of
Merger dated as of January 28, 2000 (Incorporated by
reference to Exhibit 2 in Form 10-KSB filed on April
4, 2000)
3.1 Certificate of Incorporation, as amended of
Registrant (Previously filed)
3.2 By-laws of Registrant (Previously filed)
3.3 Shareholders Agreement (Incorporated by reference to
Exhibit 9 in Form 10-KSB filed on April 4, 2000)
15
<PAGE>
6.1 Memorandum of Understanding re: Placement Agent
(Incorporated by reference to Exhibit 10.1 in Form
10-KSB filed on April 4, 2000)
6.2 Tashenberg Consulting Agreement ( Incorporated
by reference to Exhibit 10.2 in Form 10-KSB filed on
April 4, 2000)
6.3 Creekmoore Consulting Agreement ( Incorporated
by reference to Exhibit 10.3 in Form 10-KSB filed on
April 4, 2000)
6.4 Letter Agreement re: Master Distribution
(Incorporated by reference to Exhibit 10.4 in Form
10-KSB filed on April 4, 2000)
21 List of Subsidiaries of the Registrant (Incorporated
by reference to Exhibit 21 in Form 10-KSB filed on
April 4, 2000)
27 Financial Statement Schedule
16
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
CONTESSA CORPORATION
Date: April 5, 2000 By: /s/ Thomas Knudson
--------------------------------------
Thomas Knudson
President and Treasurer
Date: April 5, 2000 By: /s/ Anthony Markofsky
--------------------------------------
Anthony Markofsky
Vice President and Secretary
<PAGE>
CONTESSA CORPORATION
Proforma Consolidated Financial Statements
(Unaudited)
The following unaudited proforma consolidated financial statements present
a combined balance sheet and related statements of income, cash flows and
stockholders' equity of Contessa Corporation (the "Company"), Fullcomm
Acquisition Corp. ("Acquisition") and Fullcomm, Inc. ("Fullcomm") giving effect
to the reverse acquisition and using the pooling method of accounting for the
proposed combination pursuant to Merger Agreement and Plan of Merger
("Agreement"), which was dated on January 28, 2000.
The combination with Fullcomm is reflected is being accounted for as a
transfer and is accounted for at historical cost as a pooling of interests with
the recording of the net assets acquired at their historical book value whereby
the Company will issue 5,136,100 shares of common stock in exchange for all of
the issued and outstanding shares of Fullcomm and the issuance of a stock
dividend of 695,994 shares of common stock to the present shareholders of the
Company as consideration for the merger.
The proforma consolidated financial statements of the Company consist of
the balance sheet as at February 26, 1000 subsequent to the effect of
transferring the assets and liabilities of the Company's restaurant subsidiary
to Gastronnomia Bocca Di Rosa, Inc., which is controlled by Pietro Bortolatti,
project manager and the cancellation of 562,500 shares of common stock giving
effect to the proposed transactions as if they had been in effect throughout the
periods presented. The information shown is based upon numerous assumptions and
estimates and is not necessarily indicative of the results of future operations
of the uncombined entities or the actual results that would have occurred had
the transaction been consummated during the periods indicated. These statements
should be read in conjunction with the consolidated financial statements of the
Company.
F-1
<PAGE>
CONTESSA CORPORATION
PROFORMA CONSOLIDATED BALANCE SHEET
MARCH 1, 2000
<TABLE>
<CAPTION>
Contessa Fullcomm, Contessa
Corporation Inc. Adjustments Corporation
----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $1 $1,439 1,440
-------- ------- -------
Total current assets 1 1,439 1,440
Property and equipment-net 14,594 14,594
Other assets
Patent costs 1,917 1,917
----- -----
Total other assets 1,917 1,917
------- -------
Total assets $1 $17,950 $17,951
======== ======= =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued
expenses $57,168 $57,168
Loan payable 25,315 25,315
------ ------
Total current liabilities 82,483 82,483
Stockholders' equity
Preferred stock- authorized
5,000,000 shares. $.001 par value
each. At March 31, 2000, the
number of shares outstanding was
-0-.
Common Stock authorized 20,000,000 231 250,236 (249,582) 815
shares, $.0001 par value each. At 70
March 1, 2000, there are 2,304,006
shares outstanding prior to the
issuance of 5,136,100 for the
acquisition and 695,994 shares
issued as a stock dividend respectively.
Additional paid in capital 310,806 (310,806) 249,652
249,582
(70)
Deficit accumulated during
development stage (311,036) (314,769) 310,806 (314,769)
-------- ------- ------- -------
Total stockholders' equity 1 (64,533) -0- (64,532)
-------- ------- ------- -------
Total liabilities and
stockholders' equity $1 $17,950 $-0- $17,951
======== ======= ======= =======
</TABLE>
See accompanying notes to proforma financial statements.
F-2
<PAGE>
CONTESSA CORPORATION
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
MARCH 1, 2000
<TABLE>
<CAPTION>
Contessa Fullcomm, Contessa
Corporation Inc. Adjustments Corporation
----------- ---------- ----------- -----------
<S> <C> <C> <C>
Revenue $ -0- $ -0- $ -0-
Costs of goods sold -0- -0- -0-
--------- ----------- -----------
Gross profit -0- -0- -0-
Operations:
General and administrative -0- 295,163 295,163
Research and development -0- 18,000 18,000
Depreciation and amortization -0- 1,622 1,622
--------- ----------- -----------
Total expense -0- 314,785 314,785
Loss from operations -0- (314,785) (314,785)
Other income and expenses
Interest income -0- 562 562
Interest expenses -0- (546) (546)
Total other Income -0- 16 16
Net income (loss) $ -0- $ (314,769) $ (314,769)
--------- ----------- -----------
Net income (loss) per share-basic $ -0- $ (0.04) $ (0.04)
--------- ----------- -----------
Number of shares outstanding-basic 8,136,100 8,136,100 8,136,100
--------- ----------- -----------
</TABLE>
See accompanying notes to proforma financial statements.
F-3
<PAGE>
CONTESSA CORPORATION
PROFORMA CONSOLIDATED STATEMENT OF CASH FLOWS
MARCH 1, 2000
<TABLE>
<CAPTION>
Contessa Fullcomm, Contessa
Corporation Inc. Adjustments Corporation
----------- ---------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $-0- $(314,769) $(314,769)
Adjustments to reconcile net loss to cash used in operating
activities
Depreciation 1,622 1,622
Accounts payable and accrued expenses 57,168 57,168
---- --------- ---------
TOTAL CASH FLOWS FROM OPERATIONS (255,979) (255,979)
CASH FLOWS FROM FINANCING ACTIVITIES
Loan payable 25,315 25,315
Sale of common stock-net of offering expenses 250,236 250,236
---- --------- ---------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 275,551 275,551
CASH FLOWS FROM INVESTING ACTIVITIES
Patent costs (1,917) (1,917)
Purchase of fixed assets (16,216) (16,216)
---- --------- ---------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (18,133) (18,133)
NET INCREASE (DECREASE) IN CASH -0- 1,439 1,439
CASH BALANCE BEGINNING OF PERIOD 1 -0- 1
---- --------- ---------
CASH BALANCE END OF PERIOD $ 1 $ 1,439 $ 1,440
---- --------- ---------
</TABLE>
See accompanying notes to proforma financial statements
F-4
<PAGE>
CONTESSA CORPORATION
PROFORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
MARCH 1, 2000
<TABLE>
<CAPTION>
Deficit
Common Common Additional accumulated during
Date Stock Stock paid in capital development stage Total
---- ----- ----- --------------- ----------------- -----
<S> <C> <C> <C> <C> <C>
Initial issuance of shares 2,100,000 $ 210 $ 210
Issuance of shares for legal 50,000 5 9,995 10,000
services
Cancellation of shares (750,000) $ (75) $ (75)
Sale of shares 850,000 85 299,915 300,000
Net loss $ (155,362) $ (155,362)
--------- ------ ---------- ---------- ----------
Balance 12-31-1996 2,250,000 $ 225 $ 291,910 (155,362) $ 136,773
Issuance of shares for acquisition 562,000 $ 56 $ 196,644 196,700
Net loss (21,298) (21,298)
--------- ------ ---------- ---------- ----------
Balance 12-31-1997 2,812,000 $ 281 $ 488,554 (176,660) $ 312,175
Sale of shares under rule 504 54,006 6 18,896 18,902
Net loss (114,866) (114,866)
--------- ------ ---------- ---------- ----------
Balance 12-31-1998 2,866,506 287 507,450 (291,526) 216,211
Net loss 12-31-1999 (63,691) (63,691)
--------- ------ ---------- ---------- ----------
Balance 12-31-1999 2,866,506 287 507,450 $ (355,217) 152,520
Sale of discontinued subsidiary (562,500) (56) (196,644) (44,181) (152,519)
2-23-2000 (1)
--------- ------ ---------- ---------- ----------
Balance 2-23-2000 2,304,006 231 310,806 $ (311,036) $ 1
Capital restructuring (2) (310,806) $ 310,806
Issuance of shares for reverse 5,136,100 514 249,722 $ (314,769) $ (64,533)
merger(2)
Stock dividend 695,994 70 (70) -0-
--------- ------ ---------- ---------- ----------
Balance 3-1-2000 8,136,100 815 249,652 $ (314,999) $ (64,532)
========= ====== ========== ========== ==========
</TABLE>
(1) Gives effect to the discontinuance of restauarnt subsidiary and sale of
operations to Pietro Bortolatti
(2) Gives effect to the pooling method of accounting for the reverse merger
and recapitalization
(3) Gives effect to the stock dividend
See accompanying notes to proforma financial statements
F-5
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
Note 1. Organization of Company and Issuance of Common Stock
a. Creation of the Company
Contessa Corporation (the "Company") was first formed under the laws of
Delaware on March 7, 1996 under the name United Health Management, Inc. with an
initial capitalization of 20,000,000 shares of common stock, $.0001 par value
each and 1,000,000 shares of blank check preferred stock, .001 par value each.
On March 26, 1996, the Company amended its certificate of incorporation to
change its name to United Health Partners, Inc. On September 17, 1997, the
Company amended its certificate to change its name to Contessa Corporation and
increase the authorized number of shares of preferred shares to 5,000,000, $.001
par value each.
b. Description of the Company
Contessa Corporation was formed under the name United Health Management,
Inc. to operate as a managed health care provider. On September 16, 1997, the
board of directors of the Company changed the name of the Company to Contessa
Corporation. On September 26, 1997, the Company entered into an acquisition
agreement, whereby the Company acquired all of the issued and outstanding shares
of Gastronnomia Bocca Di Rosa, Inc., a Florida corporation formed on June 12,
1997 ("GBDR") in exchange for 562,500 shares of the common stock. The Company
became the parent company of GBDR, a wholly-owned subsidiary. Prior to the
Acquisition, GBDR was a wholly owned subsidiary of Giuditta Investments, Inc., a
corporation organized under the laws of Florida.
On February 23, 2000, the management of the Company effectuated the
transfer to Pietro Bortolatti, project manager the assets related to GBDR in
consideration for his assumption of all related liabilities and return of the
562,500 shares of common stock used to purchase GBDR.
On March 1, 2000, the Company entered into a Merger Agreement and Plan of
Merger (the "Agreement") with Fullcomm, Inc.("Fullcomm"), a New Jersey
corporation, whereby the Company issued 5,136,100 shares of common stock in
exchange for all of the issued and outstanding shares of Fullcomm. The
combination with Fullcomm is reflected is being accounted for as a transfer and
is accounted for at historical cost as a pooling of interests with the recording
of the net assets acquired at their historical book value.
Fullcomm is a development stage company that was organized as a successor
to Fullcomm, LLC ("Fullcomm, LLC") to commercially exploit technology developed
in connection with the secure transmission of digital media and other data on
the Internet.
The combination with Fullcomm is reflected is being accounted for as a
transfer and is accounted for at historical cost as a pooling of interests with
the recording of the net assets acquired at their historical book value whereby
the Company will issue 5,136,100 shares of common stock in exchange for all of
the issued and outstanding shares of Fullcomm and the issuance of a stock
dividend of 695,994 shares of common stock to the present shareholders of the
Company as consideration for the merger
F-6
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
c. Issuance of Shares of Common Stock
On February 23, 2000, the Company cancelled 562,500 shares of common stock
originally issued to GBDR in connection with the purchase of the assets of GBDR
valued at $196,644 or $0.35.
On March 1, 2000, the Company issued 5,136,100 shares of common stock in
consideration for and outstanding shares of Fullcomm. The shares were valued at
an aggregate of $250,236 or $0.05 per share.
The Company issued a stock dividend of 695,994 shares of common stock to
the present shareholders of the Company as consideration for the merger valued
at $70 or $0.0001 per share.
Note 2 - Summary of Significant Accounting Policies
a. Basis of Financial Statement Presentation
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of $355,217 for the period from inception March 7, 1996 to December 31, 1999.
These factors indicate that the Company's continuation as a going concern is
dependent upon its ability to obtain adequate financing. The Company is
anticipating that with the completion of a private placement and with the
increase in working capital, the Company will be able to complete the research
and development and bring into production its technology and experience an
increase in sales. The Company will require substantial additional funds to
finance its business activities on an ongoing basis and will have a continuing
long-term need to obtain additional financing. The Company's future capital
requirements will depend on numerous factors including, but not limited to,
continued progress developing its source of inventory, continued research and
development and initiating marketing penetration. The Company plans to engage in
such ongoing financing efforts on a continuing basis.
The proforma consolidated financial statements presented at March 1, 2000,
consist of the consolidated balance sheet of the Company as at December 31, 1999
and the related consolidated statements of operations, stockholders equity and
cash flows for the year ended December 31, 1999 and gives effect to the sale of
the assets and the assumption of liabilities by Pietro Bortolatti on February
23, 2000 and the return of the shares of common stock; and the balance sheet of
Fullcomm at December 31, 1999 and the statements of operations, stockholders
equity and cash flows for the year ended December 31, 1999.
F-7
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
b. Cash and cash equivalents
The Company treats temporary investments with a maturity of less than
three months as cash when purchased with cash.
c. Loss Per Share:
Basic loss per common share is computed by dividing the loss by the
weighted average number of common shares outstanding during the period. For the
year ended December 31, 1999, there were no dilutive securities outstanding. The
calculation of the shares used in computing basic and diluted EPS include the
shares of common stock issued for the sale of GBDR, the stock dividend and the
shares issued for the reverse merger.
Shares used in calculating basic and diluted net income per share were as
follows:
March 1,
2000
---------
Total number common
shares outstanding 8,136,100
---------
Shares used in calculating
per share amounts - Diluted 8,136,100
=========
d. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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.
e. Significant Concentration of Credit Risk
At December 31, 1999, the Company has concentrated its credit risk by
maintaining deposits in several banks. The maximum loss that could have resulted
from this risk totaled $-0- which represents the excess of the deposit
liabilities reported by the banks over the amounts that would have been covered
by the federal insurance.
F-8
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
f. Research and Development Expenses
Research and development expenses are charged to operations when incurred.
g. Patent Costs
Costs incurred to acquire exclusive licenses of patentable technology or
costs incurred to patent technologies are capitalized and amortized over the
shorter of a five year period or the term of the license or patent. The portion
of these amounts determined to be attributable to patents is amortized over
their remaining lives and the remainder is amortized over the estimated period
of benefit but not more than 40 years on a straight line basis.
h. Comprehensive Income
On January 1, 1998, the Company adopted Statements of Financial Accounting
Standards for reporting and presentation of comprehensive income and its
components an a full set of financial statements. The statement requires only
additional disclosures in the consolidated financial statements; it does not
affect the Company's financial position or results of operations. No relevant
effects resulted from the application from the application of this statement.
Note 3 - Discontinued Operations
On February 23, 2000, the Company transferred to Pietro Bortolatti,
project manager the assets related to GBDR in consideration for his assumption
of all related liabilities and return of the 562,500 shares of common stock used
to purchase GBDR. The transaction was treated as a sale of assets net of related
liabilities with the gain on the transfer accounted for as discontinued
operations.
Note 4 - Transfer of Assets
The Company is a development stage company that was organized as a
predecessor to Fullcomm, LLC ("Fullcomm") to commercially exploit technology
developed in connection with the secure transmission of digital media and other
data on the Internet.
Fullcomm, Inc. entered into an Agreement and Plan of Merger (the
"Agreement") on May 14, 1999 which was consummated on May 18, 1999, with
Fullcomm, LLC, pursuant to which the Company exchanged all the membership
interests in Fullcomm, Inc. for an aggregate of 4,536,750 shares of common stock
of the Company. The shares of common stock were divided amongst the Members of
Fullcomm, LLC in the same ratio as the Membership interests.
F-9
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
The transaction has been accounted for as a transfer and is accounted for
at historical cost as if a pooling of interests had occurred with the recording
of the net assets acquired at their historical book value. The financial
statements of the Fullcomm, Inc. have been retroactively restated to include the
combined statements of operations and cash flows for the period from inception,
May 13, 1999, to December 31, 1999 and the statements of operations and cash
flows of Fullcomm, L.L.C. for the period from January 15, 1999 to December 31,
1999.
Note 5 - Property, Plant and Equipment
Property Plant and Equipment consists of the following at December 31,
1999:
Furniture and fixtures 16,216
Less accumulated depreciation 1,622
-------
Property Plant and Equipment-net $14,594
=======
Note 6 - Related Party transactions
a. Leased Office Space
Fullcomm has entered into a sub lease agreement with Phillip O. Escaravage
for the lease of office space located at 11 Chambers Street, Princeton, New
Jersey for a monthly rent of $ 2,400 per month.
Rent paid pursuant to this lease agreement for the period from inception
to December 31, 1999 is $13,080.
b. Officer Salaries
No officer has received a salary in excess of $100,000.
c. Loan Payable-Shareholder
On December 10, 1999, Philip O. Escaravage and an entity that is
controlled by him The Umbrella Project, Inc., pursuant to a short term loan
agreement loaned an aggregate of $25,000 to the Company due within one year from
date and with interest at prime plus 2%. As of December 31, 1999, the balance
due is $25,000 with accrued interest of $315.
Note 7 - Preferred Stock
The Board of Directors of the Company has the authority to establish and
designate any shares of stock in series or classes and to fix any variations in
the designations, relative rights, preferences and limitations between series as
it deems appropriate, by a majority vote.
F-10
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
The preferred stock may be issued in series, each of which may vary, as
determined by the board of directors, as to the designation and number of shares
in such series, voting power of the holders thereof, dividend rate, redemption
terms and prices, voluntary and involuntary liquidation preferences, and
conversion rights and sinking fund requirements, if any, of such series.
The number of shares of preferred stock outstanding at December 31, 1999
and March 1, 2000 is -0- and -0- respectively.
Note 8 - Income Taxes
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of March 1, 2000, the Company had no
material current tax liability, deferred tax assets, or liabilities to impact on
the Company's financial position because the deferred tax asset related to the
Company's net operating loss carryforward and was fully offset by a valuation
allowance.
At March 1, 2000, the Company has net operating loss carry forwards for
income tax purposes of $314,999. This carryforward is available to offset future
taxable income, if any, and expires in the year 2010. The Company's utilization
of this carryforward against future taxable income may become subject to an
annual limitation due to a cumulative change in ownership of the Company of more
than 50 percent.
The proforma components of the net deferred tax asset as of March 1, 2000
are as follows:
Deferred tax asset:
Net operating loss carry forward $ 105,752
Valuation allowance $(105,752)
---------
Net deferred tax asset $ -0-
The Company recognized no income tax benefit for the loss generated in the
period from inception, March 7, 1996, to December 31, 1999.
SFAS No. 109 requires that a valuation allowance be provided if it is more
likely than not that some portion or all of a deferred tax asset will not be
realized. The Company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income. Because the Company has
yet to recognize significant revenue from the sale of its products, the Company
believes that a full valuation allowance should be provided.
F-11
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
Note 9 - Commitments and Contingencies
a. Engineering Services Agreement
On April 29, 1999, Fullcomm entered into an agreement with System Design
Group ("SDG") whereby, SDG is contracted to provide Fullcomm with a project
specifications document for the Fullcomm's Internet Media Security board that
will detail the functionality of certain items under development. The cost of
the project is $18,000. The work product of SDG is the property of Fullcomm.
As of December 31, 1999, Fullcomm has paid an aggregate of $9,000.
b. Marketing Consulting Agreement
On August 11, 1999, Fullcomm entered into a marketing consulting agreement
with The Management Network Group, Inc. for a daily consulting fee of $2,000 per
day plus out of pocket expenses, subject to adjustments for other services.
As of December 31, 1999, Fullcomm has paid an aggregate of $2,955.
c. Financial Consulting Agreement
On May 12, 1999, Fullcomm entered into a financial consulting agreement
with Steven Katz & Associates, Inc. to provide strategic, financing and/or its
management to Fullcomm for an hourly fee of $255 per hour plus out of pocket
expenses.
As of December 31, 1999, Fullcomm has paid an aggregate of $33,329.
d. Stock Dividend
Subsequent to December 31, 1999, Fullcomm's board of directors passed a
resolution that upon the consummation of the Fullcomm's second private placement
of Fullcomm's shares of common stock, each investor in Fullcomm's first private
placement will be entitled to receive an additional number of shares of
Fullcomm's shares of common stock equal to 20% of their current holdings. Such
shares have not been issued, but if and when the second private placement
closes, such investors will be entitled to receive shares of Contessa
Corporation as a result of the merger. The aggregate number of shares to be
issued is 16,850.
As of March 1, 2000, the Company has reserved 16,850 shares of common
stock pending completion of the private placement by the Company.
Note 10 - Business and Credit Concentrations
The amount reported in the financial statements for cash approximates fair
market value. Because the difference between cost and the lower of cost or
market is immaterial, no adjustment has been recognized and investments are
recorded at cost
F-12
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
Note 11 - Development Stage Company
The Company is considered to be a development stage company with little
operating history. The Company is dependent upon the financial resources of the
Company's management and from the net proceeds of a private placement for its
continued existence. The Company will also be dependent upon its ability to
raise additional capital to complete is research and development, prototype
development, production scheduling, sourcing inventory and its marketing
program, acquire additional equipment, management talent, inventory and working
capital to engage in any profitable business activity. Since its organization,
the Company's activities have been limited to the preliminary development of its
new products, filing of a patent application, hiring personnel and acquiring
equipment and office space, conducting research and development of its
technology and preparation of documentation and the sale of a private placement
offering.
F-13
<PAGE>
THOMAS P. MONAHAN
CERTIFIED PUBLIC ACCOUNTANT
208 LEXINGTON AVENUE
PATERSON, NEW JERSEY 07502
(973) 790-8775
Fax (973) 790-8845
To The Board of Directors and Shareholders
of Fullcomm, Inc. (a development stage company)
I have audited the accompanying balance sheet of Fullcomm, Inc. (a development
stage company) as of December 31, 1999 and the related statements of operations,
cash flows and shareholders' equity for the period from inception, May 13, 1999,
to December 31, 1999. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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 and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fullcomm, Inc. (a
development stage company) as of December 31, 1999 and the results of its
operations, shareholders equity and cash flows for period from inception, May
13, 1999, to December 31, 1999 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that Fullcomm,
Inc. (a development stage company) will continue as a going concern. As more
fully described in Note 2, the Company has incurred operating losses since the
date of reorganization and requires additional capital to continue operations.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans as to these matters are described in Note
2. The financial statements do not include any adjustments to reflect the
possible effects on the recoverability and classification of assets or the
amounts and classifications of liabilities that may result from the possible
inability of Fullcomm, Inc. (a development stage company) to continue as a going
concern.
-----------------------------------
Thomas P. Monahan, CPA
January 19, 2000
Paterson, New Jersey
F-14
<PAGE>
FULLCOMM, INC.
BALANCE SHEET
DECEMBER 31, 1999
Assets
Current assets
Cash and cash equivalents....................................... 1,439
-------
Total current assets............................................ 1,439
Property and equipment-net........................................ 14,594
Other assets
Patent costs.................................................... 1,917
-------
Total other assets................................................ 1,917
-------
Total assets...................................................... $17,950
-------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses........................... $57,168
Loan payable.................................................... 25,315
-------
Total current liabilities........................................ 82,483
Stockholders' equity
Common Stock authorized 10,000,000 shares, no par value each.... 250,236
At December 31, 1999, there are 4,584,250 shares outstanding......
Retained earnings deficit....................................... (314,769)
-------
Total stockholders' equity........................................ (64,533)
-------
Total liabilities and stockholders' equity........................ $17,950
-------
See accompanying notes to financial statements.
F-15
<PAGE>
FULLCOMM, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, MAY 13, 1999 TO DECEMBER 31, 1999
Revenue ........................................................ $ -0-
Costs of goods sold ............................................ -0-
---
Gross profit ................................................... -0-
Operations:
General and administrative ................................... 295,163
Research and development ..................................... 18,000
Depreciation and amortization ................................ 1,622
-------
Total expense ................................................ 314,795
Loss from operations ........................................... (314,785)
Other income and expenses
Interest income .............................................. 562
Interest expenses ............................................ (546)
---
Total other Income ............................................. 16
Net income (loss) .............................................. $(314,769)
-------
Net income (loss) per share - basic ............................ $(0.07)
----
Number of shares outstanding - basic ........................... 4,500,000
---------
See accompanying notes to financial statements.
F-16
<PAGE>
FULLCOMM, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION, MAY 13, 1999 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Net income (loss) ...................................................... $(314,769)
Adjustments to reconcile net loss to cash used in operating activities
Depreciation ........................................................... 1,622
Accounts payable and accrued expenses .................................. 57,168
--------
TOTAL CASH FLOWS FROM OPERATIONS ......................................... (255,979)
CASH FLOWS FROM FINANCING ACTIVITIES
Loan payable ........................................................... 25,315
Sale of common stock-net of offering expenses .......................... 250,236
--------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES ............................... 275,551
CASH FLOWS FROM INVESTING ACTIVITIES
Patent costs ........................................................... (1,917)
Purchase of fixed assets ............................................... (16,216)
--------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES ............................... (18,133)
NET INCREASE (DECREASE) IN CASH .......................................... 1,439
CASH BALANCE BEGINNING OF PERIOD ......................................... -0-
--------
CASH BALANCE END OF PERIOD ............................................... $1,439
--------
</TABLE>
See accompanying notes to financial statements
F-17
<PAGE>
FULLCOMM, INC.
STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Common Common Retained
Date Stock Stock earnings deficit Total
---- ------ ------ --------------- -----
<S> <C> <C> <C> <C>
Sale of initial shares 4,500,000 $60,000 $60,000
Sale of shares through private 84,250 252,750 252,750
placement
Offering expenses $(62,514) (62,514)
Net loss (314,769) (314,769)
--------- -------- --------- --------
4,584,250 $250,236 $(314,769) $(64,533)
========= ======== ========= ========
</TABLE>
See accompanying notes to financial statements
F-18
<PAGE>
FULLCOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 1 - Formation of Company and Issuance of Common Stock
a. Formation and Description of the Company
Fullcomm, Inc. (the "Company"), was formed under the laws of the State of
New Jersey on May 13, 1999 and authorized to issue to 10,000,000 shares of
common stock, no par value.
b. Description of Company
The Company is a development stage company that was organized as a
predecessor to Fullcomm, LLC ("Fullcomm") to commercially exploit technology
developed in connection with the secure transmission of digital media and other
data on the Internet.
c. Issuance of Shares of Common Stock
In January, 1999, the Company sold an aggregate of 4,500,000 shares of
common stock for an aggregate of cash consideration of $60,000 or $0.013 per
share.
As of December 31, 1999, the Company sold 84,250 shares of common stock
through a private placement at $3.00 per share for an aggregate consideration of
$252,750 less offering costs aggregating $62,514 for net proceeds of $190,236.
Note 2-Summary of Significant Accounting Policies
a. Basis of Financial Statement Presentation
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of $314,769 for the period from inception, January 13, 1999, December 31, 1999.
These factors indicate that the Company's continuation as a going concern is
dependent upon its ability to obtain adequate financing. The Company is
anticipating that with the completion of a private placement and with the
increase in working capital, the Company will be able to complete the research
and development and bring into production its technology and experience an
increase in sales. The Company will require substantial additional funds to
finance its business activities on an ongoing basis and will have a continuing
long-term need to obtain additional financing. The Company's future capital
requirements will depend on numerous factors including, but not limited to,
continued progress developing its source of inventory, continued research and
development and initiating marketing penetration. The Company plans to engage in
such ongoing financing efforts on a continuing basis.
The financial statements presented at December 31, 1999 consist of the
balance sheet as at December 31, 1999 and the statements of operations, cash
flows and stockholders equity for the period from inception, January 15, 1999,
to December 31, 1999.
F-19
<PAGE>
FULLCOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
b. Cash and Cash Equivalents
Cash and Cash Equivalents - Temporary investments with a maturity of less
than three months when purchased are treated as cash
d. Loss Per Share:
Basic loss per common share is computed by dividing the loss by the
weighted average number of common shares outstanding during the period. During
the period from inception on January 13, 1999 through December 31, 1999, there
were no dilutive securities outstanding.
e. Revenue recognition
Revenue is recognized when products are shipped or services are rendered.
f. Research and Development Expenses
Research and development expenses are charged to operations when incurred.
g. Patent Costs
Costs incurred to acquire exclusive licenses of patentable technology or
costs incurred to patent technologies are capitalized and amortized over the
shorter of a five year period or the term of the license or patent. The portion
of these amounts determined to be attributable to patents is amortized over
their remaining lives and the remainder is amortized over the estimated period
of benefit but not more than 40 years on a straight line basis.
h. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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.
i. Asset Impairment
The Company adopted the provisions of SFAS No. 121, Accounting for the
impairment of long lived assets and for long-lived assets to be disposed of
effective January 1, 1996. SFAS No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the estimated undiscounted cash flows to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. Long-
lived assets and certain
F-20
<PAGE>
FULLCOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
identifiable intangibles are reviewed for impairment whenever events or changes
in circumstances indicate that full recoverability is questionable. There was no
effect of such adoption on the Company's financial position or results of
operations.
j. Significant Concentration of Credit Risk
At December 31, 1999, the Company has concentrated its credit risk by
maintaining deposits in several banks. The maximum loss that could have resulted
from this risk totaled $-0- which represents the excess of the deposit
liabilities reported by the banks over the amounts that would have been covered
by the federal insurance.
k. Recent Accounting Standards
Accounting for Derivative Instruments and Hedging Activities
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133) was issued in June
1998. It is effective for all fiscal years beginning after June 15, 1999. The
new standard requires companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivatives and whether they qualify for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
The Company does not currently engage in derivative trading or hedging activity.
The Company will adopt SFAS 133 in the fiscal year ending December 31, 2000,
although no impact on operating results or financial position is expected.
Note 3 - Transfer of Assets
The Company entered into an Agreement and Plan of Merger (the "Agreement")
on May 14, 1999 which was consummated on May 18, 1999, with Fullcomm, pursuant
to which the Company exchanged all the membership interests in Fullcomm for an
aggregate of 4,536,750 shares of common stock of the Company. The shares of
common stock were divided amongst the Members of Fullcomm in the same ratio as
the Membership interests.
The transaction has been accounted for as a transfer and is accounted for
at historical cost as if a pooling of interests had occurred with the recording
of the net assets acquired at their historical book value. The financial
statements of the Company have been retroactively restated to include the
combined statements of operations and cash flows for the period from inception,
May 13, 1999, to December 31, 1999 and the statements of operations and cash
flows of Fullcomm, L.L.C. for the period from January 15, 1999 to December 31,
1999.
F-21
<PAGE>
FULLCOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 4 - Related Party transactions
a. Leased Office Space
The Company has entered into a sub lease agreement with Phillip O.
Escaravage for the lease of office space located at 11 Chambers Street,
Princeton, New Jersey for a monthly rent of $ 2,400 per month.
Rent paid pursuant to this lease agreement for the period from inception
to December 31, 1999 is $13,080.
b. Officer Salaries
No officer has received a salary in excess of $100,000.
c. Loan Payable-Shareholder
On December 10, 1999, Philip O. Escaravage and an entity that is
controlled by him The Umbrella Project, Inc. , pursuant to a short term loan
agreement loaned an aggregate of $25,000 to the Company due within one year from
date and with interest at prime plus 2%. As of December 31, 1999, the balance
due is $25,000 with accrued interest of $315.
Note 5 - Property Plant and Equipment
Property Plant and Equipment consists of the following at December 31,
1999:
Furniture and fixtures 16,216
Less accumulated depreciation 1,622
-------
Property Plant and Equipment-net $14,594
=======
Note 6 - Income Taxes
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 1999, the Company had
no material current tax liability, deferred tax assets, or liabilities to impact
on the Company's financial position because the deferred tax asset related to
the Company's net operating loss carry forward and was fully offset by a
valuation allowance.
F-22
<PAGE>
FULLCOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
At December 31, 1999, the Company has net operating loss carry forwards
for income tax purposes of $314,769. These carry forward losses are available to
offset future taxable income, if any, and expire in the year 2010. The Company's
utilization of this carry forward against future taxable income may become
subject to an annual limitation due to a cumulative change in ownership of the
Company of more than 50 percent.
The components of the net deferred tax asset as of December 31, 1999 are
as follows:
Deferred tax asset:
Net operating loss carry forward $ 107,021
Valuation allowance $ (197,021)
----------
Net deferred tax asset $ -0-
The Company recognized no income tax benefit for the loss generated for
the period from inception, January 15, 1999, to December 31, 1999.
The Company recognized no income tax benefit from the loss generated for
the period from inception, January 13, 1999 to December 31, 1998. SFAS No. 109
requires that a valuation allowance be provided if it is more likely than not
that some portion or all of a deferred tax asset will not be realized. The
Company's ability to realize benefit of its deferred tax asset will depend on
the generation of future taxable income. Because the Company has yet to
recognize significant revenue from the sale of its products, the Company
believes that a full valuation allowance should be provided.
Note 7 - Commitments and Contingencies
a. Engineering Services Agreement
On April 29, 1999, the Company entered into an agreement with System
Design Group ("SDG") whereby, SDG is contracted to provide the Company with a
project specifications document for the Company's Internet Media Security board
that will detail the functionality of certain items under development. The cost
of the project is $18,000. The work product of SDG is the property of the
Company.
As of December 31, 1999, the Company has paid an aggregate of $9,000.
b. Marketing Consulting Agreement
On August 11, 1999, The Company entered into a marketing consulting
agreement with The Management Network Group, Inc. for a daily consulting fee of
$1,850 plus out of pocket expenses, subject to adjustments for other services.
As of December 31, 1999, the Company has paid an aggregate of $2,955.
F-23
<PAGE>
FULLCOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
c. Financial Consulting Agreement
On May 12, 1999, the Company entered into a financial consulting agreement
with Steven Katz & Associates, Inc. to provide strategic, financing and/or its
management to the Company for an hourly fee of $255 per hour plus out of pocket
expenses.
As of December 31, 1999, the Company has paid an aggregate of $33,329.
Note 8 - Business and Credit Concentrations
The amount reported in the financial statements for cash approximates fair
market value. Because the difference between cost and the lower of cost or
market is immaterial, no adjustment has been recognized and investments are
recorded at cost.
Note 9 - Development Stage Company
The Company is considered to be a development stage company with little
operating history. The Company is dependent upon the financial resources of the
Company's management and from the net proceeds of a private placement for its
continued existence. The Company will also be dependent upon its ability to
raise additional capital to complete is research and development, prototype
development, production scheduling, sourcing inventory and its marketing
program, acquire additional equipment, management talent, inventory and working
capital to engage in any profitable business activity. Since its organization,
the Company's activities have been limited to the preliminary development of its
new products, filing of a patent application, hiring personnel and acquiring
equipment and office space, conducting research and development of its
technology and preparation of documentation and the sale of a private placement
offering.
F-24
<PAGE>
THOMAS P. MONAHAN
CERTIFIED PUBLIC ACCOUNTANT
208 LEXINGTON AVENUE
PATERSON, NEW JERSEY 07502
(973) 790-8775
To The Board of Directors and Shareholders
of Contessa Corporation (a development stage company)
I have audited the accompanying consolidated balance sheet of Contessa
Corporation (a development stage company) as of December 31, 1999 and the
related consolidated statements of operations, cash flows and shareholders'
equity for the years ending December 31, 1998 and 1999. These consolidated
financial statements are the responsibility of the company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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 and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Contessa
Corporation (a development stage company) as of December 31, 1999 and the
related consolidated statements of operations, cash flows and shareholders'
equity for the years ending December 31, 1998 and 1999 in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that Contessa Corporation ( a development stage company) will continue
as a going concern. As more fully described in Note 2, the Company has incurred
operating losses since inception and requires additional capital to continue
operations. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans as to these matters are
described in Note 2. The financial statements do not include any adjustments to
reflect the possible effects on the recoverability and classification of assets
or the amounts and classifications of liabilities that may result from the
possible inability of Contessa Corporation (a development stage company) to
continue as a going concern.
/s/ Thomas P. Monahan
-------------------------------------
Thomas P. Monahan, CPA
February 19,2000
Paterson, New Jersey
F-25
<PAGE>
December 31,
1999
-----------
Assets
Current assets
Cash and cash equivalents $ 1
--------
Total current assets 1
Capital assets 132,148
Other assets
Excess of purchase paid over book values 196,644
Security deposits 10,533
--------
Total other assets 207,177
--------
Total assets $339,326
========
Liability and Stockholders' Equity
Current liabilities
Loans payable related party $176,656
Loan payable 10,150
--------
Total liabilities 186,806
Stockholders equity
Preferred stock-$.001 par value, authorized
5,000,000 shares. The number of shares
outstanding at December 31, 1999 is -0-.
Common stock-$.0001 par value, authorized
20,000,000 shares. The number of shares
outstanding at December 31, 1999 was 2,866,506 287
Additional paid in capital 507,450
Accumulated deficit during development stage (355,217)
--------
Total stockholders equity 152,520
--------
Total liabilities and stockholders equity $339,326
========
F-26
<PAGE>
CONTESSA CORPORATION
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
For the
period
For the For the from inception
year ended year ended March 7, 1996 to
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ----------------
Income $ -0- $ -0- $ -0-
Costs of goods sold - -0- -0- -0-
---------- ---------- ----------
Gross profit -0- -0- -0-
Operations:
General and 114,866 63,691 355,217
administration
Depreciation and
amortization -0- -0- -0-
---------- ---------- ----------
Total expense 114,866 63,691 355,217
Net Profit (Loss)
from operations $ (114,866) $ (63,691) $ (355,217)
========== ========== ==========
Net income per
share-basic $ (.04) $ (.02) $ (.12)
========== ========== ==========
Total number of
shares outstanding 2,812,000 2,866,506 2,866,506
========== ========== ==========
F-27
<PAGE>
CONTESSA CORPORATION
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the
period
For the For the from inception
year ended year ended March 7, 1996 to
December 31, December 31, December 31,
1998 1999 1999
------------- ------------- -----------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net profit (loss) $(114,866) $(63,691) $(355,217)
Depreciation and amortization -0- -0- -0-
Non-cash transactions 10,056
--------- -------- ---------
Total Cash Flows from
Operations (114,866) (63,691) (345,161)
Cash Flows from Financing Activities
Loan payable 10,150 10,150
Loan payable-affiliated parties 49,224 176,656
Sale of stock 18,902 301,037
--------- -------- ---------
Total Cash Flows from
Financing Activities 18,902 59,374 487,843
Cash Flows from Investing Activities
Capital assets (29,878) (132,148)
Security deposit (7,022) (10,533)
--------- -------- ---------
Total Cash Flows from
Investing Activities (31,400) (142,681)
Net Increase(Decrease)in Cash (23,818) (4,317) 1
Cash Balance Beginning
of Period 28,136 4,318 -0-
--------- -------- ---------
Cash Balance End of Period $ 4,318 $ 1 $ 1
========= ======== =========
</TABLE>
F-28
<PAGE>
CONTESSA CORPORATION
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
during
Preferred Preferred Common Common Additional development
Date Stock Stock Stock Stock paid in stage Total
<S> <C> <C> <C> <C> <C>
Initial issuance of shares 2,100,000 $210 $ 210
Issuance of shares
for legal services 50,000 5 9,995 10,000
Cancellation of shares (750,000) (75) (75)
Sale of shares 850,000 85 299,915 300,000
Net loss (155,362) (155,362)
--------- ---- -------- --------- --------
Balance 12-31-1996 2,250,000 225 291,910 (155,362) 136,773
Issuance of shares
for acquisition 562,000 56 196,644 196,700
Net loss (21,298) (21,298)
--------- ---- -------- --------- --------
12-31-1997 2,812,000 $281 $488,554 (176,660) $312,175
Sale of shares
under rule 504 54,006 6 18,896 18,902
Net loss (114,866) (114,866)
--------- ---- -------- --------- --------
Balance 12-31-1998 2,866,506 $287 $507,450 (291,526) $216,211
Net loss (63,691) (63,691)
--------- ---- -------- --------- --------
Balance 12-31-1999 2,866,506 $287 $507,450 $(355,217) $152,520
========= ==== ======== ========= ========
</TABLE>
F-29
<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Note 1. Organization of Company and Issuance of Common Stock
a. Creation of the Company
Contessa Corporation (the "Company") was first formed under the laws of
Delaware on March 7, 1996 under the name United Health Management, Inc. with an
initial capitalization of 20,000,000 shares of common stock, $.0001 par value
each and 1,000,000 shares of blank check preferred stock, .001 par value each.
On March 26, 1996, the Company amended its certificate of incorporation to
change its name to United Health Partners, Inc. On September 17, 1997, the
Company amended its certificate to change its name to Contessa Corporation and
increase the authorized number of shares of preferred shares to 5,000,000, $.001
par value each.
b. Description of the Company
Contessa Corporation was formed under the name United Health Management,
Inc. to operate as a managed health care provider. On September 16, 1997, the
board of directors of the Company changed the business of the Company to
Contessa Corporation. On September 26, 1997, the Company entered into an
acquisition agreement, whereby the Company acquired all of the issued and
outstanding shares of Gastronnomia Bocca Di Rosa, Inc., a Florida corporation
formed on June 12, 1997 ("GBDR") in exchange for 562,500 shares of the common
stock. The Company became the parent company of GBDR, a wholly-owned subsidiary.
Prior to the Acquisition, GBDR was a wholly owned subsidiary of Giuditta
Investments, Inc. and controlled by Mr. Pietro Bortolatti, a corporation
organized under the laws of Florida.
On February 26, 2000, the Company agreed to transfer to Pietro Bortolatti,
project manager the stock of GBDR in consideration for his assumption of all
related liabilities and return of the 562,500 shares of common stock used to
purchase GBDR.
c. Issuance of Capital Stock
In March, 1996, the Company sold 2,100,000 shares of common stock for an
aggregate consideration of $210 and issued shares as follows: 750,000 shares to
Rudy Roig, 300,000 shares
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<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
to Anthony Markofsky, 525,000 shares to Viking Investment Group II, Inc. and
525,000 shares to Fancois Parenteau Corp.
On September 16, 1996, pursuant to an escrow agreement between the Company
and Rudy Roig, Mr. Roig returned his shares to the Company for cancellation.
In April, 1996, the Company issued 50,000 shares of common stock in
consideration for legal services valued at $10,000 or $0.20 per share pursuant
to Rule 701 of the Securities Act of 1933, as amended.
In October, 1996, the Company sold 850,000 shares of common stock for an
aggregate consideration of $300,000 or $0.3529411 per share pursuant to Rule 504
of Regulation D, under the Securities Ac t of 1933, as amended.
On September 30, 1997, the Company issued 562,000 shares of common stock
for the acquisition of GBDR. valued at $196,700 or $0.35 per share.
Pursuant to a private placement under Rule 504 of the Securities Act of
1933, as amended, (Rule 504), the Company offered in June, 1998, 100,000 shares
of common stock at $0.35 per share. As of June 30, 1998, the Company had sold
54,006 shares common stock for an aggregate consideration of $18,902.
Note 2-Summary of Significant Accounting Policies
a. Basis of Financial Statement Presentation
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of $355,217 for the period from inception March 7, 1996 to December 31, 1999.
These factors indicate that the Company's continuation as a going concern is
dependent upon its ability to obtain adequate financing. The Company is
anticipating that with the funds raised from the completion of its private
placement and with additional loans from officers of the Company and credit
extended by equipment and food vendors and with the increase in working capital
from operations once the store is opened, the
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<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Company will complete the restaurant and experience an increase in sales. The
Company will require substantial additional funds to finance its business
activities on an ongoing basis and will have a continuing long-term need to
obtain additional financing. The management of the Company believes that it has
sufficient resources to fund operations for the next 12 months. The Company's
future capital requirements will depend on numerous factors. The Company plans
to engage in such ongoing financing efforts on a continuing basis.
The financial statements presented consist of the consolidated balance
sheet of the Company as at December 31, 1999 and the related consolidated
statements of operations, stockholders equity and cash flows for the years ended
December 31, 1998 and 1999 and the related consolidated statements of
operations, stockholders equity and cash flows for the period from inception,
March 7, 1996, to December 31, 1999.
b. Cash and cash equivalents
The Company treats temporary investments with a maturity of less than
three months as cash.
c. Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed over the estimated useful lives using the straight line
methods over a period of five years. Maintenance and repairs are charged against
income and betterment's are capitalized.
d. Earnings per share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE
("Statement No. 128"). Statement No. 128 applies to entities with publicly held
common stock or potential common stock and is effective for financial statements
issued for periods ending after December 15, 1997. Statement No. 128 replaces
APB Opinion 15, Earnings per Share ("EPS"). Statement No. 128 requires dual
presentation of basic and diluted earnings per share by entities with complex
capital
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<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
structures. Basic EPS includes no dilution and is computed by dividing net
income by the total number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution of securities that could dilute the shares
in computing the earnings of the Company such as common stock which may be
issuable upon exercise of outstanding common stock options or the conversion of
debt into common stock.
Pursuant to the requirements of the Securities and Exchange Commission,
the calculation of the shares used in computing basic and diluted EPS include
the shares of common stock issued for the acquisition of GBDR .
Shares used in calculating basic and diluted net income per share were as
follows:
Year ended Year ended
December 31, December 31,
1998 1999
-------------------------
Total number common
shares outstanding 2,866,506 2,866,506
--------- ---------
Shares used in calculating
per share amounts - Diluted 2,866,506 2,866,506
========= =========
e. Revenue recognition
Revenue is recognized when products are shipped or services are rendered.
f. Selling and Marketing Costs
Selling and Marketing - Selling and marketing costs are expensed in the
period in which the cost is incurred.
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<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
g. 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.
h. Significant Concentration of Credit Risk
At December 31, 1999, the Company has concentrated its credit risk by
maintaining deposits in several banks. The maximum loss that could have resulted
from this risk totaled $-0-which represents the excess of the deposit
liabilities reported by the banks over the amounts that would have been covered
by the federal insurance.
i. Asset Impairment
The Company adopted the provisions of SFAS No. 121, Accounting for the
impairment of long lived assets and for long-lived assets to be disposed of
effective January 1, 1996. SFAS No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the estimated undiscounted cash flows to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. There
was no effect of such adoption on the Company's financial position or results of
operations.
j. The Company has adopted the provisions of SOP 98-5 requiring that
certain expenses classified as pre-opening expenses accumulated in connection
with the activities of the restaurant prior to its opening be charged as
incurred, As of December 31, 1999, the Company has charged $84,554 to
operations.
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<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Note 3 - Capital Assets
Capital Assets consisted of the following at December 31, 1999:
Asset Accumulated
Cost Depreciation Total
Store equipment $132,148 $-0- $132,148
-------- ---- --------
Note 4 - Preferred Stock
The Board of Directors of the Company has the authority to establish and
designate any shares of stock in series or classes and to fix any variations in
the designations, relative rights, preferences and limitations between series as
it deems appropriate, by a majority vote.
The preferred stock may be issued in series, each of which may vary, as
determined by the board of directors, as to the designation and number of shares
in such series, voting power of the holders thereof, dividend rate, redemption
terms and prices, voluntary and involuntary liquidation preferences, and
conversion rights and sinking fund requirements, if any, of such series.
The number of shares of preferred stock outstanding at December 31, 1999
is -0-.
Note 5 - Related Party transactions
a. Issuance of Shares of Capital Stock
In March, 1996, the Company sold 2,100,000 shares of common stock for an
aggregate consideration of $210 and issued shares as follows: 750,000 shares to
Rudy Roig, 300,000 shares to Anthony Markofsky, 525,000 shares to Viking
Investment Group II, Inc. and 525,000 shares to Fancois Parenteau Corp.
On September 16, 1996, Rudy Roig returned his shares to the Company for
cancellation.
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<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
On September 30, 1997, the Company issued 562,000 shares of common stock for the
acquisition of GBDR. valued at $196,700 or $0.35 per share.
b. Officer Compensation
For the period from inception, March 7, 1996 to December 31, 1999, the
Company has not paid any officer in excess of $100,000.
Note 6 - Income Taxes
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 1999, the Company had
no material current tax liability, deferred tax assets, or liabilities to impact
on the Company's financial position because the deferred tax asset related to
the Company's net operating loss carryforward and was fully offset by a
valuation allowance.
At December 31, 1999, the Company has net operating loss carry forwards
for income tax purposes of $355,217. This carryforward is available to offset
future taxable income, if any, and expires in the year 2010. The Company's
utilization of this carryforward against future taxable income may become
subject to an annual limitation due to a cumulative change in ownership of the
Company of more than 50 percent.
The components of the net deferred tax asset as of December 31, 1999 are
as follows:
Deferred tax asset:
Net operating loss carry forward $ 120,771
Valuation allowance $(120,771)
---------
Net deferred tax asset $ -0-
=========
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<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The Company recognized no income tax benefit for the loss generated in the
period from inception, March 7, 1996, to December 31, 1999.
SFAS No. 109 requires that a valuation allowance be provided if it is more
likely than not that some portion or all of a deferred tax asset will not be
realized. The Company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income. Because the Company has
yet to recognize significant revenue from the sale of its products, the Company
believes that a full valuation allowance should be provided.
Note 7 - Business and Credit Concentrations
The amount reported in the financial statements for cash, trade accounts
receivable and investments approximates fair market value. Because the
difference between cost and the lower of cost or market is immaterial, no
adjustment has been recognized and investments are recorded at cost.
Financial instruments that potentially subject the company to credit risk
consist principally of trade receivables. Collateral is generally not required.
Note 8 - Commitments and Contingencies
a. Lease agreement for Restaurant Space
On July 1, 1997, GBDR leased 1,812 square feet of space to used for the
restaurant. The lease is for 10 years with the option to extend the lease for
additional 10 years upon written notice 18 months prior to the termination date
of the lease. Rent for the first 3 years is $3,511 per month or $42,136 per year
plus GBDR's allocated share of real estate taxes and insurance. For the year
ending December 31, 1999, this amounts to an additional $598 per month added to
the monthly rent. The rent payable for years 4 through 20 is incremented by a
cost of living increase. GBDR has paid a security deposits aggregating of
$10,533. As of December 31, 1999, the location has not been placed into
operations.
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<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Note 9 - Development Stage Company
The Company is considered to be a development stage company with little
operating history. The Company is dependent upon the financial resources of the
Company's management for its continued existence. The Company will also be
dependent upon its ability to raise additional capital to complete the
construction of the restaurant and complete its marketing program, acquire
additional equipment, management talent, inventory and working capital to engage
in profitable business activity. Since its organization, the Company's
activities have been limited to the acquisition of the restaurant location,
construction, hiring personnel, and the preparation of documentation and the
sale of a private placement offering.
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