<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
Amendment No. 2
(Mark One)
[X] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_______________________to________________________
COMMISSION FILE NUMBER_____________________________________
OMNINET INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
OMNINET INTERNATIONAL LTD.
(Translation of Registrant's name into English)
BERMUDA
(Jurisdiction of incorporation or organization)
Richmond House,
5th Floor, 12
Par-la-Ville Road, Hamilton, Bermuda HM11
(Address of principal executive offices)
-------------------
Securities registered or to be registered pursuant to Section 12(b) of the Act.
None
Securities registered or to be registered pursuant to Section 12(g) of the
Act.
Name of each exchange on
Title of each class which registered
------------------- -----------------------
Common Stock, U.S. $0.001 Par Value None
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act. None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [ ]
Indicate by check mark which financial statement item the registrant has elected
to follow. Item 17 [ ] Item 18 [X]
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1. DESCRIPTION OF BUSINESS.
Omninet International Ltd. was originally organized under the laws of
Bermuda on March 24, 1998. We amended our memorandum of association on June 30,
1998, in order to increase the amount of our authorized common stock to
25,000,000 shares, par value $0.001. We are filing this Form 20-F on a voluntary
basis under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
in order to become eligible for quotation on the OTC Bulletin Board.
Omninet is a Bermuda exempted company. A Bermuda exempted company is
legislatively exempt from Bermuda's usual requirement that Bermuda-formed
businesses be 60% owned by Bermuda citizens. A Bermuda exempted company may
reside in Bermuda, but must carry on its business transactions in other
countries. Bermuda exempted companies may not hold real estate in Bermuda. There
is no income tax, withholding tax, capital gains tax, capital transfer tax,
estate duty or inheritance tax payable by a Bermuda exempted company or its
shareholders, other than shareholders ordinarily resident in Bermuda.
A Bermuda exempted company is required to pay an annual fee to the
Bermuda Registrar by January 31 of each year. Annual fees are calculated based
upon the total number of shares the exempted company is authorized to issue as
of August 31 of the prior year. Exempted companies with authorized shares of
between 0 - 12,000, 12001 - 120,000 and 120,001 - 12,000,000 must pay fees of
$1695, $3460 and $5,340, respectively. Annual fees continue to increase as the
number of shares authorized increases above 12,000,000. As of August 31, 1999,
we had 25,000 shares authorized. Accordingly, our annual fee for the Year 2000
was $3,460. If an exempted company fails to timely pay its annual fee, the
Bermuda Registrar will charge that company $300 as a late fee in addition to the
annual fee. In extreme cases, the Bermuda Registrar may cause the exempted
company's charter to be suspended or revoked so that it is no longer permitted
to operate in Bermuda. The Bermuda Registrar has indicated to us that rates for
annual fees will be increased on April 1, 2000, however, the amount of the
increase has not been determined. Although there can be no assurance that
annual fees will not significantly increase, we do not anticipate that such
increase will have a material adverse effect on our operations.
In addition, a Bermuda exempted company may apply under the Exempted
Undertakings Tax Protection Act, 1966 for an assurance from the Bermuda
government that any tax imposing legislation will not be applied to the company
until after March 2016. Omninet was granted such tax assurance on March 30,
1998.
Except as described above, Omninet is subject to the laws and
regulations applicable to Bermuda-based corporations. Although Bermuda law at
present is structured to encourage foreign investment, there is no guarantee
that future laws and regulations will not have a material negative impact on our
operations. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Factors That Could Affect Operating
Results - Risks Inherent in International Operations" on page 10. At present, we
are not aware of any special country risks, such as existing or probable
government regulations, that could materially affect Omninet's operations.
Omninet is a development stage company. We are not presently engaged in
any business. Our only plan of operation is seeking viable businesses to
acquire. At present, we have not identified another business suitable for
acquisition. Over the next 12 months, we intend to become listed on the OTC
Bulletin Board and to continue our search to acquire an operating entity.
In general, we identify potential acquisitions through research and
referrals. Once identified, we screen the target to determine whether or not it
might be suitable for acquisition. The initial screening consists of an
evaluation of the candidate's potential, and may include factors such as
estimated future growth of the candidate's industry. If a candidate is
identified as a potential target, we conduct a detailed analysis of the cost of
acquisition, the target's fair market value, the prospective rate of return on
an investment in the target and the likelihood of achieving such return. The
detailed analysis may vary for each target and include criteria such as an
evaluation of the target against comparable companies in the same industry,
scrutiny of the target's financial condition and future earnings potential and
discounted cash flow analysis. Target evaluations are conducted without the use
of outside experts or analysts. We are particularly interested in identifying
and acquiring an Internet-related business due to the recent growth in that
industry, however, a more detailed plan of operations is not available because
we are not engaged in any particular business and because we have not identified
a suitable acquisition target. If we decide that a company is a suitable
acquisition candidate, we anticipate that we will enter into an agreement to
acquire such target, subject to obtaining any financing and approvals necessary
to carryout the transaction. We anticipate that any financing necessary to
complete an acquisition will be raised through a private placement of
securities.
It is likely that we will need additional financing or future
profitability to continue as a going concern beyond 12 months. We will also need
additional capital in order to acquire an operating company. We plan to raise
such additional funds through a private placement of common stock or by
borrowing from a lending institution. There is no guarantee that we will be able
to raise such additional funds. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 7.
Since its formation, Omninet has explored entering into certain
businesses but commenced operations in only one business. In particular:
- In the Spring of 1998, Omninet explored providing Internet
services to users in the United Kingdom. On July 2, 1998, we
acquired all of the issued and outstanding shares (254,453
shares) of the common stock of Colloquium Ltd., a Scotland based
provider of connectivity and value-added Internet services to
the United Kingdom, in exchange for 954,964 shares of our
common stock.
Colloquium generated net operating losses from the date of its
acquisition to May 26, 1999. As Colloquium's losses increased,
it became clear that additional financing would be required in
order to fund its operations, and we were not certain when, if
ever, Colloquium would achieve profitability. These factors,
among others, led to disagreement between the management of
Omninet and that of Colloquium. In order to avoid continuing
liabilities our Board of Directors determined to sell
Colloquium even if that involved realizing a one-time loss. On
May 26, 1999, Omninet contributed $24,000 to the capital of
Colloquium and thereafter sold all of the issued and
outstanding shares of Colloquium to Brian McMillan and others
in exchange for 479,988 Omninet shares held by the purchasers.
Omninet incurred a loss upon the sale of Colloquium because
Colloquium's poor operating performance negatively impacted the
subsidiary's value.
- On September 8, 1998, Omninet entered into a Plan and Agreement
of Merger - Reorganization with E&M Management, Inc. whereby,
subject to numerous terms and conditions, E&M was to be merged
with and into Omninet, with Omninet being the surviving
corporation. E&M was a development stage company originally
incorporated in Nevada on November 2, 1992. E&M was not engaged
in any operations. However, trades in E&M's common stock were
quoted on the OTC Bulletin Board. As of October 15, 1999, E&M
had not obtained the requisite approval of the merger by its
shareholders as required by Nevada law and, on November 2, 1999,
the companies terminated the merger agreement by executing a
Mutual Termination Agreement and Release. We do not believe that
Omninet assumed any liabilities due to its termination of the
merger.
2. DESCRIPTION OF PROPERTY.
Omninet has no material assets except for cash in the amount of
$84,239. Omninet has no office facilities or real property holdings. We
currently occupy office space at Richmond House, 5th Floor, 12, Par-la-Ville
Road, Hamilton, Bermuda HM11. This office space is provided by Milligan-Whyte &
Smith, our Bermuda legal counsel, on a month-to-month, rent free basis.
Milligan-Whyte & Smith can terminate this arrangement for any reason. We believe
that our existing facilities are adequate to meet our current needs and do
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not anticipate any difficulty in finding other satisfactory space if existing
facilities become unavailable.
3. LEGAL PROCEEDINGS.
Other than as described below, there are no pending legal proceedings
to which Omninet, our directors or officers are a party. Except as described in
this Item 3, no legal proceedings are known to us to be contemplated, or
threatened by or against Omninet, by any party including any governmental
authority.
Omninet has commenced litigation in Bermuda against Colloquium Ltd.,
Brian McMillan and Catherine Matherson (two former directors) in relation to
the withdrawal of $50,691 from Omninet's bank account and for the return of the
approximately $24,000 paid by Omninet into Colloquium's treasury as part of the
May 26, 1999 agreement referred to in Item 1 above. We claimed that the
withdrawal of funds was unauthorized and that the $24,000 payment made to
Colloquium under the May 26, 1999 agreement was made in error after a material
default under that agreement by Brian McMillan and Colloquium. A default
judgment was obtained in Bermuda against the defendants for $74,691, plus
interest and costs. On June 29, 1999, we initiated an interdict proceeding in
the Court of Session in Scotland seeking an injunction to prevent the disposal
of assets and seeking the repayment of $50,691. We initiated the interdict
proceeding in Scotland because the defendants and their assets are located in
that country. Colloquium, Brian McMillan and Catherine Matherson have appealed
the judgment in Bermuda, seeking to set aside the default judgment on the
grounds that the defendants were improperly served notice of the Bermuda
proceedings and that the default judgment was obtained in error. There can be
no assurance as to the outcome of the appeal or that the judgment will be
collectible, in whole or in part, from all or any of Colloquium, Brian McMillan
and Catherine Matherson.
4. CONTROL OF REGISTRANT.
(a) Omninet is not controlled or owned by another corporation or
foreign government.
(b) The following table sets forth certain information regarding the
ownership of Omninet's common stock as of December 1, 1999, by each shareholder
known by us to be the beneficial owner of more than 10% of Omninet's common
stock and all executive officers and directors as a group. Unless otherwise
indicated by footnote, each of the shareholders named in the table has sole
voting and investment power with respect to the shares of common stock
beneficially owned.
<TABLE>
<CAPTION>
TITLE OF CLASS NAME AND ADDRESS NO. OF SHARES OWNED % OF CLASS
-------------- ---------------- ------------------- ----------
<S> <C> <C> <C>
Common Eric Kohn 297,120 26.44
Chemin de Carabot, 10a
CH-1213 Onex
Switzerland
</TABLE>
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<TABLE>
<CAPTION>
TITLE OF CLASS NAME AND ADDRESS NO. OF SHARES OWNED % OF CLASS
-------------- ---------------- ------------------- ----------
<S> <C> <C> <C>
Common Estate of Sir Ian MacGregor(*) 134,094 11.93
21 Mount Windham Drive
Hamilton, CR 04
Bermuda
Common Christopher Tilley 134,094 11.93
15 Chemin de la Praly
Case Postale 139
CH-1222 vesenaz
Switzerland
Common Valor Invest, SA 211,774 18.84
29 Quai des Bergues
CH-1201 Geneva
Switzerland
</TABLE>
(*) Omninet has been advised that beneficial ownership of these
shares has been transferred to ValueInvest Ltd. and will be
transferred on the company's books subject to receipt of approval from
the Bermuda Monetary Authority. ValueInvest's address is Letzigraben
89, Zurich CH 8040, Switzerland.
(c) No arrangements presently exist which would result in a change
in control of Omninet.
5. NATURE OF TRADING MARKET.
Omninet's common stock is not presently listed on any national or
foreign securities exchange. There is currently no established trading market
for Omninet's common stock and there is no assurance that a trading market will
develop or, if such a market develops, that it will continue. High and low sales
prices for Omninet's common stock are not available.
As of November 17, 1999, Omninet had no shareholders of record and no
shares of common stock located in the United States.
6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS.
Omninet does not believe there are any decrees or regulations under the
laws of Bermuda applicable to it restricting the import or export of capital or
affecting the remittance of dividends or other payments to nonresident holders
of our common stock.
There are no restrictions under Omninet's Bye-Laws or Memorandum of
Association or under Bermuda law as currently in effect that limit the right of
nonresident owners to hold or vote Omninet's Common Stock or to receive
dividends thereon. However, the permission of the Bermuda Monetary Authority is
required before shares of Omninet's Common Stock can be
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transferred or issued to any other person. Once Omninet is a reporting company
under the Exchange Act, we may seek a waiver of this requirement from the
Bermuda Monetary Authority.
The Company is organized under the laws of Bermuda. There is
uncertainty as to whether the Courts of Bermuda would (i) enforce judgments of
United States Courts obtained against Omninet or our directors and officers
predicated upon the civil liability provisions of the federal securities laws of
the United States or (ii) entertain original actions brought in Bermuda Courts
against Omninet or such persons predicated upon the federal securities laws of
the United States. There is no treaty in effect between the United States and
Bermuda providing for such enforcement.
7. TAXATION.
Omninet is organized under the laws of Bermuda. At present, there is no
Bermuda income on profits tax, withholding tax, capital gains tax, capital
transfer tax, estate duty or inheritance tax payable by our United States
shareholders, except shareholders ordinarily resident in Bermuda. There is
currently no reciprocal tax treaty between Bermuda and the United States
regarding withholding. See "Description of Business" on page 2.
8. SELECTED FINANCIAL DATA.
The following table summarizes selected consolidated financial data and
operating information of Omninet.
The following selected consolidated financial data for the year ended
February 28, 1999 and the period from February 1, 1997 to February 28, 1998 has
been derived from Omninet's audited Consolidated Financial Statements included
elsewhere in this Registration Statement. The information should be read in
conjunction with the Consolidated Financial Statements and Notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Registration Statement.
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Omninet's Consolidated Financial Statements have been prepared in
accordance with accounting standards generally accepted in the United States.
<TABLE>
<CAPTION>
Thirteen months
Year ended ended
February 28, February 28,
1999 1998
---- ----
<S> <C> <C>
Revenues $ - $ -
Selling, general and administrative expenses (112,817) -
--------- ---------
Operating loss from continuing operations (112,817) -
Loss from discontinued operations (167,785) (147,136)
--------- ---------
Net loss $(280,602) $(147,136)
========= =========
Net loss per share
Continuing operations (0.13) -
Discontinued operations (0.19) (0.40)
Total - Basic and diluted $ (0.32) $ (0.40)
========= =========
BALANCE SHEET DATA:
Working capital $(100,317) $ -
Net liabilities of discontinued segment $(174,651) $(114,081)
Total assets - continuing operations $ 8,967 $ -
Total liabilities - continuing operations $ 109,284 $ -
Total Shareholders' Equity $(377,610) $(206,567)
<CAPTION>
Six months Six months
ended August ended August
31, 1999 31, 1998
-------- --------
<S> <C> <C>
Revenues $ - -
Bad debt expense (50,691) -
Selling, general and administrative expenses (112,932) (27,656)
--------- ---------
Operating loss (163,623) (27,656)
Interest expense (1,566) -
Loss from continuing operations (165,189) (27,656)
Loss from discontinued operations (1,945) (36,321)
--------- ---------
Net loss $(167,134) $ (63,977)
========= =========
BALANCE SHEET DATA:
Working capital $ 61,463
Total assets $ 85,988
Total liabilities $ 24,525
Total Shareholders' Equity $ 61,463
</TABLE>
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9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion is based on our audited consolidated financial
data for the year ended February 28, 1999 and the period from February 1, 1997
to February 28, 1998, and our unaudited consolidated financial data for the six
months ended August 31, 1999 and 1998. In the period between July 2, 1998 and
May 26, 1999, Omninet was engaged in the business of providing connectivity and
value added Internet services through its subsidiary Colloquium. Omninet
discontinued its Internet-related operations on May 26, 1999 when it sold
Colloquium due to increasing net operating losses. See "Description of Business"
on page 2. We are not presently engaged in that or any other business, and our
sole activity is seeking operating companies to acquire. We have not begun new
operations since selling Colloquium because we have not acquired another
operating entity.
PLAN OF OPERATION
Our plan of operation for the next 12 months is to acquire viable
operating companies. We anticipate that we can satisfy our current cash
requirements for a period of 12 months and do not anticipate that we will have
to raise additional funds in the next 12 months. If we require additional
capital to acquire an operating company, we plan to raise such additional funds
through a private placement of common stock. However, there is no assurance that
such a private offering will be successful. If we are unable to raise additional
capital through a private offering, we will likely seek financing from
alternative sources, such as lending institutions. Additional financing from
alternative sources may not be available on acceptable terms or at all. A lack
of financing may require Omninet to delay or abandon plans for acquisitions. We
will satisfy legal and accounting costs associated with filing reports under the
Exchange Act through our cash reserves. We anticipate that we will research a
number of potential target companies during the next 12 months to determine
their suitability as investments. For a more detailed explanation of our plan of
operation, see "Description of Business" on page 2. At present we have not
identified a suitable acquisition target and there are no expected material
purchases.
LIQUIDITY AND CAPITAL RESERVES
Total net proceeds from the sale of equity securities in the period
between our formation and August 31, 1999 amounted to approximately $375,000.
We will require additional capital for future acquisitions and we plan to raise
such capital through private offerings of securities. Future private offerings
may not be successful. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 7.
CASH FLOW
Operating activities used cash of $7,644 in the year ended February
28, 1999. In the six months ended August 31, 1999, operating activities used
cash of $255,230, predominantly for our former Internet related business.
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Net Cash provided by financing activities was $12,500 in the year
ended February 28, 1999 and $360,101 in the six months ended August 31, 1999.
WORKING CAPITAL
Omninet's working capital, defined as the excess of our current assets
over our current liabilities, was $(266,504) at February 28, 1999 compared to
$(205,660) at February 28, 1998. Omninet's working capital as of August 31,
1999 was $61,463.
Omninet does not presently have any borrowing facility established with
a financial institution. We anticipate that our current cash reserves of $84,239
will be sufficient to fund our operations through December 31, 2000. If Omninet
requires additional capital to fund our operations, we anticipate raising such
additional capital through a private offering of Omninet's securities.
IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS
Omninet does not believe that inflation or currency fluctuations have
had a material adverse effect on revenues and results of operations. However,
demand for Omninet's services was for the periods indicated above, and likely
will be if an operating entity is acquired in the future, influenced by general
economic conditions, including inflation and currency fluctuations. Periods of
economic recession, high inflation or the devaluation of currencies in countries
in which Omninet operates could have a material adverse effect on our results of
operations.
FACTORS THAT COULD AFFECT OPERATING RESULTS
Forward Looking Statements. This Registration Statement on Form 20-F
contains forward-looking statements. Additional written and oral forward-looking
statements may be made by Omninet from time to time in SEC filings and
otherwise. Results predicted by forward-looking statements, including, without
limitation, those relating to our future business prospects, revenues, working
capital, liquidity, capital needs, interest costs, and income are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward-looking statements, due to the
following factors, among other risks and factors identified from time to time in
Omninet's filings with the SEC.
Omninet Has a History of Losses and Cannot Be Certain to Achieve
Positive Cash Flow. For the thirteen months ended February 28, 1998 and the year
ended February 28, 1999, Omninet had net losses and negative cash flows. For the
six months ended August 31, 1999, we had a net loss of $167,134. In addition, we
had an accumulated deficit of $824,474 as of August 31, 1999. Omninet presently
has no revenue producing operations and anticipates monthly operating expenses
of $1,000.00 excluding any litigation.
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Even if Omninet acquires an operating entity, we cannot be certain that
we will achieve or sustain positive cash flow or profitability from our
operations. Our net losses and negative cash flow are likely to continue even
longer than we currently anticipate if we do not acquire a viable operating
entity and if we do not attract and retain qualified personnel. Our ability to
achieve our objectives is subject to financial, competitive, regulatory, legal,
technical and other factors, many of which are beyond our control.
Omninet's Limited Operating History Makes it Difficult to Assess Past
Performance and Future Prospects. There is only limited historical operating and
financial information on which to base an evaluation of Omninet's performance
and prospects. We have acquired and disposed of one company since our inception
in March 1998. This limits the comparability of our operating and financial
information from period to period.
Omninet Is Subject to Risks As We Make Acquisitions and Engage in Strategic
Alliances. As part of Omninet's business strategy, we intend to acquire, make
investments in, or enter into strategic alliances with as yet unidentified
operating companies. Any such future acquisitions, investments or strategic
alliances would involve risks, such as:
- incorrect assessment of the value, strengths and weaknesses of
acquisition and investment opportunities;
- underestimating the difficulty of integrating the operations and
personnel of newly acquired companies;
- the potential disruption of any ongoing business, including
possible diversions of resources and management time; and
- the threat of impairing relationships with employees and customers
as a result of changes in management or ownership.
We cannot assure you that Omninet will be successful in overcoming
these risks. Moreover, we cannot be certain that any desired acquisition,
investment or strategic alliance could be made in a timely manner or on terms
and conditions acceptable to us. Neither can we assure you that Omninet will be
successful in identifying attractive acquisition candidates. Omninet expects
that competition for such acquisitions may be significant. We may compete with
others who have similar acquisition strategies, many of whom may be larger and
have greater financial and other resources than Omninet.
An additional risk associated with acquisitions is that many attractive
acquisition candidates do not have audited financial statements and have varying
degrees of internal controls. Although we may believe that the available
financial information for a particular business is reliable, we cannot guarantee
that a subsequent audit would not reveal matters of significance, including with
respect to liabilities, contingent or otherwise. We expect that, from time to
time in the future, we will enter into acquisition agreements, the pro forma
effect of which is not known and cannot be predicted.
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Omninet Does Not Expect to Pay Dividends. Omninet does not anticipate
paying cash dividends in the foreseeable future.
Risks Inherent in International Operations. Omninet is not currently
conducting business. In the future, however, we may acquire an operating
company located outside of the United States. If we acquire a non-U.S.
operating company, it is possible that a substantial portion of Omninet's
business may be conducted outside of the United States. In this event, our
operations could be subject to various risks such as the possibility of the
loss of revenue, property or equipment due to expropriation, nationalization,
war, insurrection, terrorism or civil disturbance, the instability of foreign
economies, currency fluctuations, and devaluations, adverse tax policies and
governmental activities that may limit or disrupt markets, restrict payments or
the movement of funds or result in the deprivation of contract rights.
Additionally, Omninet's ability to compete could be adversely affected by
foreign governmental regulations that encourage or mandate the hiring of local
contractors, or by regulations that require foreign contractors to employ
citizens of, or purchase supplies from vendors in, a particular jurisdiction.
Omninet could also be subject to taxation in a number of jurisdictions, and the
final determination of our tax liabilities might involve the interpretation of
the statutes and requirements of various domestic and foreign taxing
authorities. Any of these risks could have an adverse effect on Omninet.
Dependence on Key Employees. Omninet's growth and profitability are
dependent upon, among other things, the abilities and experience of Omninet's
management team including Mr. Eric F. Kohn, Omninet's Chairman and Director. If
the services of Mr. Kohn or Omninet's other directors or executive officers were
no longer available to the company, our business, financial condition and
results of operations could be adversely affected.
Rights of Shareholders Under Bermuda Law. Omninet is incorporated under
the laws of Bermuda. Principles of law relating to such matters as the validity
of corporate procedures, the fiduciary duties of Omninet's management and
directors and the rights of our shareholders, are governed by Bermuda law and
our Memorandum of Association and Bye-laws. Such principles of law may differ
from those that would apply if we were incorporated in a jurisdiction in the
United States. In addition, there is uncertainty as to whether the courts of
Bermuda would enforce (i) judgments of United States courts obtained against
Omninet or our officers and directors predicated upon the civil liability
provisions of the securities laws of the United States or any state or (ii) in
original actions brought in Bermuda, liabilities against Omninet or such persons
predicated upon the securities laws of the United States or any state.
9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable. Omninet is not presently engaged in business. The
company has no notes payable and is not subject to interest rate risk.
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10. DIRECTORS AND OFFICERS OF REGISTRANT.
The following sets forth Omninet's directors, executive officers and
key employees, positions and offices held by each such person, and the period
each such person has held such position. Directors are elected at the company's
annual meeting, and serve a term of one year or until their successors are
appointed and duly elected to office. Omninet's initial organizational meeting
was held following the company's formation on March 24, 1998, and its first
annual meeting was held May 20, 1999. We have not set a date for our next
annual meeting, however, we anticipate that it will be held on or before March
31, 2000.
<TABLE>
<CAPTION>
Name Position Held and Term
- ---- ----------------------
<S> <C>
Eric F. Kohn Chairman and Director since March 24, 1998.
Marlin J. Horst Director since March 24, 1998.
Jeffrey Conyers Director since May 20, 1999.
Michael R. Schroter Director since May 20, 1999.
Lynda Milligan-Whyte Director Since March 24, 1999.
</TABLE>
(b) There are no family relationships among Omninet's directors and
executive officers.
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11. COMPENSATION OF DIRECTORS AND OFFICERS.
(a) During the fiscal year ended February 28, 1999, Colloquium, a
wholly-owned subsidiary of Omninet prior to its sale on May 26, 1999, paid
$43,743 to Brian McMillan and Catherine Matherson for services rendered as
directors of that company.
Except as described above, Omninet's officers and directors did not
receive compensation for services in any capacity during the fiscal year ended
February 28, 1999. Each of our directors and officers has elected to forego
further payments under this arrangement for an indefinite period of time so that
we can devote our cash resources to seeking and acquiring an operating business.
We expect that our directors and officers will begin to receive compensation for
their services in such capacities after we acquire an operating entity and are
generating revenues from operations. The directors and officers are not
presently accruing any compensation pursuant to any agreement with Omninet.
(b) We have not adopted any plan to provide pension, retirement or
similar benefits for our directors and officers.
12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
As of December 1, 1999, there were no outstanding warrants or options
to purchase shares of Omninet's common stock. There are no outstanding options
to purchase Omninet common stock.
13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
(a) Milligan-Whyte & Smith is our Bermuda legal counsel. We utilize
Milligan-Whyte & Smith's services from time to time on an as needed basis.
Milligan-Whyte & Smith charges us on an hourly basis and at market rate for
work performed. One of our directors, Lynda Milligan-Whyte, is a partner of
Milligan-Whyte & Smith and, as such, has an indirect interest in any fees paid
to that law firm.
On May 26, 1999, our Board of Directors voted unanimously to divest
Omninet of its wholly-owned subsidiary, Colloquium. This action was subsequently
approved by Omninet's shareholders and an agreement was struck between Omninet,
Colloquium, Brian McMillan and Eric Kohn, whereby each Omninet shareholder was
given the option to exchange all of his or her shares of Omninet common stock
for a pro rata portion of all of the outstanding common stock of Colloquium.
See "Description of Business" on page 2. In addition, Omninet contributed
$24,000 to Colloquium's treasury. The following 6 Omninet shareholders
exchanged their Omninet shares for shares of Colloquim: Robert Watson; Michael
Coggins; Pymen Bell; Brian McMillan; David Cooke; and Rod Evans. Brian McMillan
was a director of Colloquium at the time of the exchange. The six shareholders
participating in the exchange tendered an aggregate of 479,988 shares of
Omninet common stock, which shares were returned to treasury.
In 1998 and 1999, Mr. Kohn, our Chairman and Director, loaned Omninet
$16,014 and $25,695, respectively. We used the proceeds of the loans from Mr.
Kohn to fund our business operations. The loans were non-interest bearing and
payable on demand. Both loans have been repaid in full.
(b) None of our directors, officers or associates of any such directors
or officers was indebted to Omninet or our subsidiaries at any time during the
last three years.
12
<PAGE> 13
PART II
14. DESCRIPTION OF SECURITIES TO BE REGISTERED
Our Memorandum of Association authorizes the issuance of 25,000,000
shares of Omninet common stock, par value $0.001 per share. There were 1,123,851
shares of Omninet's common stock outstanding as of December 1, 1999.
Omninet may sell shares of common stock as our Board of Directors
determines, including as fully paid and non-assessable, but subject to future
payment on agreed terms, or subject to future call. The Board may from time to
time make calls upon any shareholders purchasing subject to future call, and
such shareholders are liable for any moneys unpaid on their shares. If a
shareholder fails to pay a call when made, the Board may declare forfeit those
shares as to which payment is outstanding. Joint holders of shares may be held
jointly and severally liable for calls made with respect to those shares. In
addition, our Board of Directors can prevent the transfer of any shares that are
not fully paid.
All shares of Omninet's common stock are entitled to one vote at any
shareholders meeting or other authorized vote of the shareholders. All shares of
Omninet's common stock are equal to one another with respect to dividends and
liquidation rights. Holders of Omninet's common stock are entitled to receive
such dividends as may be declared by the Board of Directors out of funds legally
available for dividends, and upon liquidation, are entitled to participate
pro-rata in a distribution of assets available for such distribution to
shareholders. There are no conversion, preemptive, option, or subscription
privileges with respect to any shares. Omninet 's common stock does not have
cumulative voting rights which means that the holder of more than 50% of the
shares voting for the election of directors may elect all of the directors if
they choose to do so.
Reference is made to our Memorandum of Association, as amended, and
Bye-laws, as well as to the applicable statutes of Bermuda, for additional
details on the rights, privileges, and liabilities of holders of Omninet's
common stock.
PART III
15. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED SECURITIES AND
USE OF PROCEEDS.
Not Applicable.
13
<PAGE> 14
PART IV
17. FINANCIAL STATEMENTS.
Omninet has elected to furnish the financial statements specified by Item 18.
18. FINANCIAL STATEMENTS.
<TABLE>
<S> <C>
Financial statements which appear herein at the page indicated:
Report of Independent Auditors Public Accountants..............................F-1
Consolidated Statements of Operations for the year ended
February 28, 1999 and the period from February 1, 1997
to February 28, and 1998.......................................................F-2
Consolidated Balance Sheets as of
February 28, 1999 and 1998.....................................................F-3
Consolidated Statements of Cash Flows for the year ended
February 28, 1999 and the period from February 1, 1997
to February 28, 1998...........................................................F-4
Consolidated Statements of Stockholders' Equity................................F-5
Notes to the Consolidated Financial Statements as of and
for the year ended February 28, 1999 and the period
from February 1, 1997 to February 28, 1998.....................................F-6
Unaudited Consolidated Statements of Operations for the six months
ended August 31, 1999 and 1998................................................F-14
Unaudited Consolidated Balance Sheets as at August 31, 1999 and
February 28, 1999.............................................................F-15
Unaudited Consolidated Statements of Stockholders' equity for the
six months ended August 31, 1999..............................................F-16
Unaudited Consolidated Statements of Cash Flows for the six months
ended August 31, 1999 and 1998................................................F-17
Notes to the Unaudited Consolidated Financial Statements as at
August 31, 1999...............................................................F-18
</TABLE>
14
<PAGE> 15
19. FINANCIAL STATEMENTS AND EXHIBITS.
The financial statements listed in Item 18 are incorporated by reference to this
Item.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------------------------------------------------------------
<C> <S>
1.1 Memorandum of Association of Omninet, as amended
by that certain Certificate of Deposit of
Memorandum of Increase of Share Capital dated
June 30, 1998 (filed herewith).
1.2 Bye-laws of Omninet (filed as Exhibit 1.2 to
Omninet's Form 20FR12G filed as of December 16,
1999, No. 001-15559, and incorporated herein by
reference).
3.1 Agreement between Omninet and Nicholas
Boakes and Others dated June 23, 1998,
regarding Omninet's purchase of Colloquium
(filed as Exhibit 3.1 to Omninet's Form 20FR12G
filed as of December 16, 1999, No. 001-15559,
and incorporated herein by reference).
3.2 Agreement and Plan of Merger-Reorganization
dated September 8, 1998, between Omninet and
E&M Management, Inc. (filed as Exhibit 3.2 to
Omninet's Form 20FR12G filed as of December 16,
1999, No. 001-15559, and incorporated herein by
reference).
3.3 Agreement dated May 26, 1999, between
Omninet and Colloquium Ltd., regarding the
sale of Colloquium. (filed as Exhibit 3.3 to
Omninet's Form 20FR12G filed as of December 16,
1999, No. 001-15559, and incorporated herein by
reference).
3.4 Mutual Termination Agreement and Release
dated October 27, 1999, between Omninet and
E&M Management, Inc. (filed as Exhibit 3.4 to
Omninet's Form 20FR12G filed as of December 16,
1999, No. 001-15559, and incorporated herein by
reference).
27.1 Financial Data Schedule (filed herewith).
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, we certify that we meet all of the requirements for filing on Form
20-F and have duly caused this Registration Statement to be signed on Omninet's
behalf by the undersigned duly authorized officer.
OMNINET INTERNATIONAL LTD.
Dated: March 14, 2000 By: /s/ Eric F. Kohn
-------------------------------
Eric F. Kohn
Chairman and Director
15
<PAGE> 16
OMNINET INTERNATIONAL LIMITED
FINANCIAL STATEMENTS
INDEX
<TABLE>
<CAPTION>
PAGE
AUDITED FINANCIAL STATEMENTS
<S> <C>
Report of Moore Stephens, Independent Chartered Accountants 1
Consolidated Statements of Operations for the year ended February 28,
1999 and the period from February 1, 1997 to February 28, 1998 2
Consolidated Balance Sheets as of February 28, 1999 and 1998 3
Consolidated Statements of Cash Flows for the year ended February
28, 1999 and the period from February 1, 1997 to February 28, 1998 4
Consolidated Statements of Stockholders' Equity 5
Notes to the Consolidated Financial Statements as of and for the year
ended February 28, 1999 and the period from February 1, 1997 to
February 28, 1998 6
UNAUDITED INTERIM FINANCIAL STATEMENTS
Unaudited Consolidated Statements of Operations for the six months
ended August 31, 1999 and 1998 14
Unaudited Consolidated Balance Sheets as at August 31, 1999 and 1998 15
Unaudited Consolidated Statements of Stockholders' equity for the
six months ended August 31, 1999 16
Unaudited Consolidated Statements of Cash Flows for the six months
ended August 31, 1999 and 1998 17
Notes to the Unaudited Consolidated Financial Statements as at
August 31, 1999 18
</TABLE>
<PAGE> 17
OMNINET INTERNATIONAL LIMITED
(A DEVELOPMENT STAGE COMPANY)
REPORT AND
FINANCIAL STATEMENTS
YEAR ENDED FEBRUARY 28, 1999 AND
THE PERIOD FROM FEBRUARY 1, 1997 TO FEBRUARY 28, 1998
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Omninet International Limited
We have audited the accompanying consolidated balance sheets of Omninet
International Limited and subsidiary as of February 28, 1999 and 1998, and the
related consolidated statements of operations, and cash flows for the year ended
February 28, 1999 and the period from February 1, 1997 to February 28, 1998.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Omninet
International Limited as of February 28, 1999 and 1998 and the consolidated
results of their operations and their cash flows for the periods then ended, in
conformity with accounting principles generally accepted in the United States.
/s/ Moore Stephens
Moore Stephens
Chartered Accountants
St. Paul's House
London EC4P 4BN December 14, 1999
- 1 -
<PAGE> 19
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1999 AND THE
PERIOD FROM FEBRUARY 1, 1997 TO FEBRUARY 28, 1998
<TABLE>
<CAPTION>
Cumulative Thirteen months
during the Year ended ended
Development February 28, February 28,
Stage 1999 1998
----- ---- ----
<S> <C> <C> <C>
Revenues - $ - $ -
Selling, general and
administrative expenses (112,817) (112,817) -
-------- -------- --------
Operating loss from
continuing operations (112,817) (112,817) -
Loss from discontinued
operations (559,744) (167,785) (147,136)
-------- -------- --------
Net loss $ (672,561) $ (280,602) $ (147,136)
======== ======== ========
Earnings per share -
Basic and Diluted
Continuing operations (0.13) -
Discontinued operations (0.19) (0.40)
-------- --------
$ (0.32) $ (0.40)
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
- 2 -
<PAGE> 20
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS OF FEBRUARY 28, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,856 $ -
Trade accounts receivable, net 4,111 -
-------- --------
8,967 -
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 98,624 $ -
Advances from related parties 10,660 -
-------- --------
109,284 -
-------- --------
Net liabilities of discontinued segment 174,651 114,081
-------- --------
Commitments and Contingencies - -
Redeemable preferred stock of discontinued segment,
50,000 shares issued and outstanding 102,642 92,486
Stockholders' Equity:
Common stock, $.001 par value, 25,000,000
shares authorised; 1,003,002 and 740,592
shares issued and outstanding as of February
28, 1999 and 1998, respectively 1,003 955
Additional paid-in capital 310,270 188,496
Accumulated deficit during the development stage (686,895) (396,137)
Accumulated other comprehensive income:
Cumulative translation adjustment (1,988) 119
-------- --------
(377,610) (206,567)
-------- --------
$ 8,967 $ -
======== ========
</TABLE>
Approved by the Board on December 14,1999
The accompanying notes are an integral part of these
consolidated financial statements
- 3 -
<PAGE> 21
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED FEBRUARY 28, 1999 AND THE
PERIOD FROM FEBRUARY 1, 1997 TO FEBRUARY 28, 1998
<TABLE>
<CAPTION>
Cumulative
during the
Development
Stage 1999 1998
----- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Loss from continuing operations (112,817) $ (112,817) $ -
Changes in operating assets and liabilities:
Accounts receivable (4,111) (4,111) -
Accounts payable 98,624 98,624 -
Other liabilities 10,660 10,660 -
-------- --------- ---------
Net cash used in operating activities (7,644) (7,644) -
-------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 12,500 12,500 -
-------- --------- ---------
Net cash provided by financing activities 12,500 12,500 -
-------- --------- ---------
Net cash inflow from continuing operations 4,856 4,856 -
Net cash inflow from discontinued segment 184 184
-------- --------- ---------
Net increase (decrease) in cash and
cash equivalents 5,040 5,040 -
Cash and cash equivalents, beginning of period - - -
-------- --------- ---------
Cash and cash equivalents, end of period $ 5,040 $ 5,040 $ -
======== ========= =========
Discontinued segment 184 -
Continuing operations 4,856 -
--------- ---------
$ 5,040 $ -
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
- 4 -
<PAGE> 22
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other
------------ Paid-in Accumulated Comprehensive
Shares Amount Capital Deficit Income
------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C>
$ $ $ $
Balance, February 1, 1997 954,964 955 188,496 (236,949) 2,212
Preferred stock dividends (7,106)
Accreted mandatory
redemption premium
of preferred stock (4,946)
Net loss (147,136)
Translation adjustment (2,093)
--------- -------- ------- -------- -------
Balance, February 28, 1998 954,964 955 188,496 (396,137) 119
Issuance of additional
common stock 48,038 48 12,752
(March 24, 1998)
Recapitalisation adjustment - - 109,022
Preferred stock dividends (6,628)
Accreted mandatory
redemption premium
of preferred stock (3,528)
Net loss (280,602) (280,602)
Translation adjustment (2,107)
Comprehensive income
--------- -------- ------- -------- -------
Balance, February 28, 1999 1,003,002 1,003 310,270 (686,895) (1,988)
--------- -------- ------- -------- -------
<CAPTION>
Total
Comprehensive Stockholders'
Income Equity
------ ------
<S> <C> <C>
$ $
Balance, February 1, 1997 (234,737) (45,286)
Preferred stock dividends (7,106)
Accreted mandatory
redemption premium
of preferred stock (4,946)
Net loss (147,136) (147,136)
Translation adjustment (2,093) (2,093)
-------- --------
Balance, February 28, 1998 (383,966) (206,567)
Issuance of additional
common stock 12,800
(March 24, 1998)
Recapitalisation adjustment 109,022
Preferred stock dividends (6,628)
Accreted mandatory
redemption premium
of preferred stock (3,528)
Net loss (280,602)
Translation adjustment (2,107) (2,107)
Comprehensive income (282,709)
-------- --------
Balance, February 28, 1999 (666,675) (377,610)
-------- --------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
- 5 -
<PAGE> 23
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1998 AND 1999
1. ORGANISATION AND DESCRIPTION OF THE COMPANY
THE COMPANY
Omninet International Limited (the "Company") was incorporated in Bermuda on
March 24, 1998. After the initial issuance of stock, the Company acquired all of
the issued and outstanding shares of Colloquium Limited, an internet service
provider incorporated in 1995 under the laws of Scotland. The shareholders of
Colloquium Limited contributed all of the outstanding shares of Colloquium
Limited in consideration for 954,964 common shares of the Company. For
accounting purposes, the transaction was accounted for as a reverse acquisition,
thus the historical financial statements of Colloquium, the accounting acquirer,
are reflected.
In 1997, Colloquium Limited changed its statutory accounting reference date from
January 31 to February 28. The consolidated statement of operations is therefore
presented for the year ended February 28, 1999 and the thirteen months ended
February 28, 1998.
Subsequent to the balance sheet date, on May 26, 1999 the Company disposed of
all of the issued and outstanding shares of Colloquium Limited to, amongst
others, Brian Macmillan and Catherine Matheson, former directors of the Company,
in exchange for 479,988 Company shares held by those individuals. Only 479,988
shares of the Company were cancelled, whereas 954,964 were originally issued,
because Colloquium's poor operating performance negatively impacted the
subsidiary's value upon sale. Company management was uncertain when, if ever,
Colloquium would achieve profitability, and in order to avoid continuing
liabilities the Company's board determined to sell Colloquium even if that
involved realizing a one-time loss. The Company has no continuing trading
activity and is seeking acquisition and merger opportunities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of the Company and
its wholly owned subsidiary. All significant intercompany accounts and
transactions have been eliminated.
MANAGEMENT'S 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 these estimates.
- 6 -
<PAGE> 24
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1998 AND 1999
FOREIGN CURRENCY TRANSLATION
The Company's functional currency was Pounds Sterling as the majority of
revenues were received in Pounds Sterling and the majority of operating
expenditures were made in Pounds Sterling. Transactions during the year are
translated into United States Dollars at the rates of exchange in effect at the
date of transaction. Foreign currency monetary assets and liabilities are
re-converted using rates of exchange prevailing at the balance sheet date.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Assets are depreciated on the
straight-line or reducing balance methods over their estimated useful lives,
which range from 3 to 5 years.
RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Research and development costs are expensed as incurred. The Company accounts
for its software development costs in accordance with SFAS No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed".
The statement provides for capitalisation of certain software development costs
once technological feasibility is established by completion of a working model
and ending when a product is available for general release to customers. The
costs capitalised are then amortised on a straight-line basis over the estimated
product life (generally eighteen months to three years), or on the ratio of
current revenue to total projected product revenue, whichever is greater. To
date, completion of a working model of the Company's products and general
release have substantially coincided. Accordingly, the Company has not
capitalised any software development costs.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
initial maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION
The Company recognises revenues when services are provided. Services are
generally billed one month in advance. Advance billings and collections relating
to future access services are recorded as deferred revenue and recognised when
earned.
- 7 -
<PAGE> 25
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1998 AND 1999
CREDIT RISK
The Company's accounts receivable potentially subjected the Company to credit
risk, as collateral was generally not required. The Company's risk of loss was
limited due to advance billings to customers for services, the use of
pre-approved charges to customer credit cards, and the ability to terminate
access on delinquent accounts. The concentration of credit risk was mitigated by
the large number of customers comprising the customer base. The carrying amount
of the Company's receivables approximates their fair value.
INVENTORY
Inventory consists of starter kits and purchased equipment for resale and is
stated at the lower of cost or market using a specific identification method.
Starter kits consist of diskettes, manuals and other printed material.
INCOME TAXES
Deferred income taxes are recorded using enacted tax laws and rates for the
years in which the taxes are expected to be paid. Deferred income taxes are
provided for items when there is a temporary difference in recording such items
for financial reporting and income tax reporting.
ISSUANCE OF STOCK FOR SERVICES
Shares of the Company's common stock issued for services are recorded in
accordance with SFAS No. 123, "Accounting for Stock-Based Compensation" at the
fair market value of the stock issued or the fair market value of the services
provided, whichever value is more clearly evident.
SOURCES OF SUPPLIES
The Company relied on local telephone companies and other companies to provide
data communications capacity. Although alternative telecommunications facilities
could be found in a timely manner, any disruption of these services could have
had an adverse effect on operating results.
Although the Company attempted to maintain multiple vendors for each required
product, its modems, terminal savers, and high-performance routers, which were
important components of its network, were each acquired from only one source. In
addition, some of the Company's suppliers had limited resources and production
capacity. If the suppliers were unable to meet the Company's needs as it builds
out its network infrastructure, then delays and increased costs in the expansion
of the Company's network infrastructure could have resulted, which would have
affected operating results adversely.
- 8 -
<PAGE> 26
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1998 AND 1999
3. LOSS FROM DISCONTINUED OPERATIONS
On May 26, 1999 the Company disposed of all of the issued and outstanding shares
of Colloquium Limited. The Company has booked a net gain of $215,000 as a credit
to paid in capital in the subsequent period. Assets and liabilities attributable
to Colloquium Limited as at February 28, 1999 and 1998 comprised:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents 184 -
Trade accounts receivable, net 45,868 35,206
Prepaids and other receivables 18,385 26,355
Inventories 10,416 10,694
------- -------
Total current assets 74,853 72,255
Property and equipment, net 111,095 113,594
Other assets - 7,279
------- -------
$ 185,948 $ 193,128
======= =======
Liabilities
Current liabilities:
Accounts payable 87,669 102,406
Bank overdraft 32,944 28,004
Current portion of notes payable 10,828 8,311
Accrued and other liabilities 194,881 123,180
Advances from related parties 15,035 16,014
------- -------
Total current liabilities 341,357 277,915
------- -------
Notes payable, net of current portion 19,242 29,294
------- -------
$ 360,599 $ 307,209
======= =======
Net liabilities $(174,651) $(114,081)
======= =======
</TABLE>
- 9 -
<PAGE> 27
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1998 AND 1999
4. EARNINGS PER SHARE
<TABLE>
<CAPTION>
Thirteen
Year ended months ended
February 28, February 28,
1999 1998
---- ----
<S> <C> <C>
Net loss $ (280,602) $ (147,136)
Preferred stock dividends (6,628) (7,106)
Accreted mandatory redemption
premium of preferred stock (3,528) (4,946)
-------- --------
Net income available to common
stockholders $ (290,758) $ (159,188)
-------- --------
Average common shares issued
and outstanding 915,006 401,256
Earnings per share - basic and diluted $ (0.32) $ (0.40)
=========== ===========
</TABLE>
5. RELATED PARTIES TRANSACTIONS
Amounts payable to stockholders and related parties consist of advances made by
related parties and the stockholders of the Company to finance the development
of the Company's operations. The advances are non-interest bearing and are due
on demand.
Selling, general and administrative services costs in the year ended February
28, 1999 includes $26,723 paid to Eric Kohn, a director, in respect of
travelling costs and $4,835 in respect of disbursements paid to Barons Financial
Services (UK) Limited, a company connected with Mr. Kohn. Emoluments paid by
Colloquium Limited to Brian MacMillan and Catherine Matheson (formerly directors
of the Company) amounted to $43,743.
6. PREFERRED STOCK
On September 30, 1996, Colloquium Limited issued 50,000 shares of its Pound
Sterling1 par value cumulative redeemable participating preferred stock to the
Renfrewshire Business Growth Fund Limited (the "Preferred Shareholder") in
exchange for total consideration of Pound Sterling50,000 ($78,250 at date of
issuance).
- 10 -
<PAGE> 28
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1998 AND 1999
6. PREFERRED STOCK (CONTINUED)
The Preferred Shareholder is entitled to a cumulative dividend of 8% per annum
payable on January 31 and July 31. To date, no preferred stock dividends have
been declared by Colloquium Limited. The Preferred Shareholder is also entitled
to a participating dividend of up to 7.5% per annum of Colloquium's net income.
The Preferred Shareholder has been granted an option to be exercised at any time
on or before December 31, 2002 to purchase 10% of the share capital of
Colloquium Limited for Pound Sterling1 per share.
The preferred shares are redeemable at Pound Sterling1.20 per share, together
with all arrears and accruals of dividends on the following dates:
25,000 preferred shares on December 31, 2000
25,000 preferred shares on December 31, 2001
Colloquium Limited is obligated to redeem immediately all of the preferred
shares at a price of Pound Sterling1.20 per share on the date upon which either
1) its common stock is listed on a public exchange, or 2) a purchase of 50% or
more of its common stock is completed.
In the event of the liquidation of Colloquium Limited, whether voluntary or
involuntary, the Preferred Shareholder is entitled to receive a preferential
distribution of Pound Sterling1.20 per share, plus any arrears or accruals of
dividends.
7. TAXATION
Under Bermuda law the company is not required to pay any taxes in Bermuda on
either income or capital gains. The company has received an undertaking from the
Minister of Finance in Bermuda that in the event of any such taxes being imposed
the company will be exempted from taxation until the year 2016.
Colloquium Limited is subject to United Kingdom corporation tax at rates of up
to 30 per cent. Colloquium Limited has net operating loss carry forwards, which
may be used to offset future taxable income.
8. SUBSEQUENT EVENTS
The Company has commenced litigation against Colloquium Limited, Brian Macmillan
and Catherine Matheson (two former directors) in relation to the withdrawal of
$50,691 from the Company's bank account. Management have booked an expense of
$50,691 in the six months ended August 31, 1999. A default judgement has been
obtained in Bermuda against Colloquium Limited, Brian Macmillan and Catherine
Matheson for the recovery of $50,691 and $24,000 paid to Colloquium Limited as
part of the divestiture settlement, plus interest and legal costs. Litigation is
continuing in Scotland.
- 11 -
<PAGE> 29
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1998 AND 1999
8. SUBSEQUENT EVENTS (CONTINUED)
Subsequent to the balance sheet date, Barons Financial Services (UK) Limited
were granted warrants for the issue of 14,938 common shares at $0.01 per share.
These warrants were exercised on November 3, 1999. The company has booked a
compensation expense of $10,000.
- 12 -
<PAGE> 30
OMNINET INTERNATIONAL LIMITED
(A DEVELOPMENT STAGE COMPANY)
AUGUST 31, 1999
<PAGE> 31
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 AND 1998
<TABLE>
<CAPTION>
Cumulative
during the Six months Six months
Development ended August ended August
Stage 31, 1999 31, 1998
----- -------- --------
<S> <C> <C> <C>
Revenues - $ - -
Bad debt expense (50,691) (50,691) -
Selling, general and
administrative expenses (225,749) (112,932) (27,656)
-------- -------- -------
Operating loss (276,440) (163,623) (27,656)
Interest expense (1,556) (1,566) -
-------- -------- -------
Loss from continuing operations (277,996) $ (165,189) (27,656)
Loss from discontinued operations (546,478) (1,945) (36,321)
-------- -------- -------
Net loss $ (824,474) $ (167,134) $ (63,977)
======== ======== =======
Earnings per share -
Basic and Diluted $ (0.20) $ (0.06)
Continuing operations - (0.02)
Discontinued operations (0.20) (0.04)
-------- -------
$ (0.20) $ (0.06)
-------- -------
</TABLE>
The accompanying notes are an integral part of these
unaudited consolidated financial statements
- 14 -
<PAGE> 32
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED BALANCE SHEETS
AS AT AUGUST 31, 1999
<TABLE>
<CAPTION>
August 31, February 28,
1999 1999
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 84,239 $ 4,856
Trade accounts receivable, net 1,749 4,111
-------- --------
Total current assets $ 85,988 $ 8,967
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,525 $ 98,624
Advances from related parties - 10,660
-------- --------
Total current liabilities 24,525 109,284
Net liabilities of discontinued segment - 174,651
Commitments and Contingencies - -
Redeemable preferred stock of discontinued
segment, 50,000 shares issued and outstanding - 102,642
Stockholders' Equity:
Common stock, $.001 par value, 25,000,000
shares authorised; 628,926 and 1,003,002
shares issued and outstanding as of August
31, 1999 and February 28,1999 respectively 629 1,003
Additional paid-in capital 885,308 310,270
Accumulated deficit during the development
stage (824,474) (686,895)
Cumulative translation adjustment - (1,988)
-------- --------
61,463 (377,610)
-------- --------
$ 85,988 $ 8,967
======== ========
</TABLE>
The accompanying notes are an integral part of these
unaudited consolidated financial statements
- 15 -
<PAGE> 33
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED AUGUST 31, 1999
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other
------------ Paid-In Accumulated Comprehensive
Shares Amount Capital Deficit Income
<S> <C> <C> <C> <C> <C>
$ $ $ $
Balance, February 28, 1999 1,003,002 1,003 310,270 (654,935) (3,739)
Issuance of additional common
stock (May 10, 1999) 105,912 106 359,995 - -
Cancellation of 479,988 shares (479,988) (480) - - -
Net loss - - - (167,134) -
Preferred stock dividends - - - (1,657) -
Accreted mandatory redemption
premium of preferred stock - - - (748) -
Translation adjustment - - - - 3,739
Gain on disposition of subsidiary - - 215,043 - -
--------- ----- ------- -------- -------
Balance, August 31, 1999 628,926 629 885,308 (824,474) -
--------- ----- ------- -------- -------
<CAPTION>
Total
Comprehensive Stockholders'
Income Equity
<S> <C> <C>
$ $
Balance, February 28, 1999 (636,466) (347,401)
Issuance of additional common
stock (May 10, 1999) - 360,101
Cancellation of 479,988 shares - (480)
Net loss (167,134) (167,134)
Preferred stock dividends - (1,657)
Accreted mandatory redemption
premium of preferred stock - (748)
Translation adjustment 3,739 3,739
Gain on disposition of subsidiary - 215,043
-------- --------
Balance, August 31, 1999 (799,861) 61,463
-------- --------
</TABLE>
The accompanying notes are an integral part of these
unaudited consolidated financial statements
- 16 -
<PAGE> 34
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 31, 1999
<TABLE>
<CAPTION>
Cumulative
during the Six months Six months
Development ended August ended August
Stage 31, 1999 31, 1998
----- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Loss from continuing operations (278,006) $ (165,189) (27,656)
Changes in operating assets and liabilities:
Trade accounts receivable, net (1,749) 2,362
Accounts payable 24,525 (74,099) 21,656
Other liabilities - (10,660) 6,000
------- ------- --------
Net cash used in operating activities (255,230) (247,586) -
------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of
common stock, net 372,601 360,101 -
------- ------- --------
Net cash provided by financing activities 372,601 360,101 -
------- ------- --------
Net cash inflow from continuing segment 117,371 112,515 -
Cash paid on disposal of subsidiary (24,115) (24,115) -
Net cash outflow from discontinued
segment (9,017) (9,201) -
------- ------- --------
Net increase (decrease) in cash
and cash equivalents 84,239 79,199 -
Cash and cash equivalents,
beginning of period - 5,040 -
------ ------- --------
Cash and cash equivalents, end of period $84,239 $ 84,239 $ -
====== ======= ========
</TABLE>
The accompanying notes are an integral part of these
unaudited consolidated financial statements
- 17 -
<PAGE> 35
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1999
1. INTERIM ACCOUNTING POLICY
In the opinion of management of Omninet International Limited (the "Company"),
the accompanying unaudited consolidated financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly in accordance with accounting principles generally accepted in
the US the financial position of the Company and the results of operations and
cash flows for the six months ended August 31, 1999. Although the Company
believes that the disclosure in these financial statements is adequate to make
the information presented not misleading, certain information and footnote
information normally included in interim financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Results of operations for the six months ended August 31, 1999 are
not necessarily indicative of what operating results may be for the full year.
In addition, these unaudited consolidated financial statements and notes thereto
should be read in conjunction with the audited consolidated financial statements
presented herein.
2. COMMITMENTS AND CONTINGENCIES
The Company has commenced litigation against Colloquium Limited, Brian Macmillan
and Catherine Matheson (two former directors) in relation to the withdrawal of
$50,691 from the Company's bank account. Management have booked an expense of
$50,691 in the six months ended August 31, 1999.
A Default Judgement has been obtained in Bermuda against Colloquium Limited,
Brian MacMillan and Catherine Matheson for the $50,691 and the $24,000 paid to
Colloquium Limited as part of the divestiture settlement, plus interest and
legal costs. Litigation is continuing in Scotland.
3. DISPOSITION OF SUBSIDIARY
On May 26, 1999 the Company agreed to transfer the issued shares of Colloquium
Limited to Brian Macmillan, Catherine Matheson and others in exchange for the
cancellation of their 479,988 shares in Omninet International Limited and a cash
payment by the Company into Colloquium Limited's treasury of $24,000. The assets
and liabilities of Colloquium Limited at the date of disposition were:
<TABLE>
<CAPTION>
Pound Sterling $
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents 72 115
Trade accounts receivable, net 31,679 50,781
Prepaids and other receivables 7,028 11,266
Inventories 6,501 10,421
------ ------
Total current assets 45,280 72,583
Property and equipment, net 67,934 108,898
------ -------
Pound Sterling 113,214 $ 181,481
======= =======
</TABLE>
-18 -
<PAGE> 36
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1999
3. DISPOSITION OF SUBSIDIARY (CONTINUED)
<TABLE>
<S> <C> <C>
LIABILITIES
Current liabilities:
Accounts payable 65,206 104,525
Bank overdraft 22,085 35,402
Current portion of notes payable 1,695 2,717
Accrued and other liabilities 102,160 163,762
Advances from related parties - -
-------- -------
Total current liabilities 191,146 306,406
Notes payable, net of current portion 4,879 7,821
-------- -------
196,025 314,227
-------- -------
Redeemable preferred stock, 50,000
shares issued and outstanding 66,311 106,297
-------- -------
Equity stockholders' deficit Pound Sterling (149,122) $ (239,043)
======== =======
The gain on disposition of the subsidiary was:-
Equity Stockholders' deficit 239,043
Less: Cash payment 24,000
----------
$ 215,043
----------
The impact on cash flows was:-
Cash and cash equivalents on disposal 115
Add: Cash payment 24,000
----------
Net cash outflow $ 24,115
----------
</TABLE>
4. SUBSEQUENT EVENTS
Subsequent to the balance sheet date, Barons Financial Services (UK) Limited
were granted warrants for the issue of 14,938 common shares at $0.01 per share.
These warrants were exercised on November 3, 1999. The company has booked a
compensation expense of $10,000.
- 19 -
<PAGE> 37
EXHIBIT 1.1
FORM NO. 7a REGISTRATION NO. 24681
[BERMUDA LOGO]
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF INCREASE OF SHARE CAPITAL
THIS IS TO CERTIFY that a Memorandum of Increase of Share Capital
of
OMNINET INTERNATIONAL LTD.
was delivered to the Registrar of Companies on the 10th day of JUNE, 1998 in
accordance with section 45(3) of THE COMPANIES ACT 1981 ("the Act").
Given under my hand this 30TH
day of JUNE, 1998.
/s/ [SIG]
for REGISTRAR OF COMPANIES
Capital prior to increase: US$12,000.00
Amount of increase: US$13,000.00
Present Capital: US$25,000.00
<PAGE> 38
Exhibit 1.1
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF
COMPANY LIMITED BY SHARES
(SECTION 7(1) AND (2))
MEMORANDUM OF ASSOCIATION
OF
OMNINET INTERNATIONAL LTD.
(hereinafter referred to as "the Company"
1. The liability of the members of the Company is limited to the amount (if
any) for the time being unpaid on the shares respectively held by them.
2. We, the undersigned, namely,
NAME/ADDRESS BERMUDIAN STATUS NATIONALITY NUMBER OF SHARES
SUBSCRIBED
(YES/NO)
Please see attached.
1
<PAGE> 39
3. We, the undersigned, namely.
<TABLE>
<CAPTION>
NAME/ADDRESS BERMUDIAN NATIONALITY NUMBER OF
(YES/NO) STATUS SHARES
SUBSCRIBED
<S> <C> <C> <C>
International Finance Ltd.
Bermuda Commercial Bank Bldg.
First Floor A Local Company 11,997
44 Church Street
Hamilton HM 12
Bermuda
Orlando A. Smith
Bermuda Commercial Bank Bldg.
First Floor Yes British 1
44 Church Street
Hamilton HM 12
Bermuda
John Milligan-Whyte
Bermuda Commercial Bank Bldg.
First Floor Yes British 1
44 Church Street
Hamilton HM 12
Bermuda
Lynda Milligan-Whyte
Bermuda Commercial Bank Bldg.
First Floor Yes British 1
44 Church Street
Hamilton HM 12
Bermuda
</TABLE>
do hereby respectively agree to take such number of shares as may be allotted to
us respectively by the provisional directors of the Company, not exceeding the
number of shares for which we have respectively subscribed, and to satisfy such
calls as may be made by the directors, provisional directors or promoters of the
Company in respect of the shares allotted to us respectively.
2
<PAGE> 40
3. The Company is to be an exempted Company as defined by the Companies Act
1981.
4. The Company has power to hold land situated in Bermuda not exceeding in
all, including the following parcels-
N/A
5. The authorised share capital of the Company is US$12,000.00 divided into
12,000 shares of par value US$1.00 each. The minimum subscribed share
capital of the Company is $12,000.00
6. The objects for which the Company is formed and incorporated are -
(i) to carry on the business if developing, designing, marketing,
selling, researching and dealing in information technology, office
automation, electronic equipment, computers and computer programmes,
data transmission products and systems and related equipment and
supplies of all kinds;
(ii) to provide management services by the accomation, maintenance,
supervision and management of computer installations, computer
hardware and software and all appurtenances thereof, as agent for the
buyer or hirer of such installations and equipment;
(iii) to act as consultants, managers and advisors in connection with the
business described in objects (i) and (ii); and
(iv) as set forth in paragraphs (b) to (n) and (p) to (u) inclusive of the
Second Schedule to the Companies Act, 1981.
7. The Company shall have the additional powers as set out in the Schedule
annexed hereto.
Signed by each subscriber in the presence of at least one witness attesting the
signature thereof -
/s/ L. MILLIGAN-WHYTE /s/ (ILLEGIBLE SIGNATURE)
- ---------------------------------------- ------------------------------------
On behalf of International Finance, Ltd.
/s/ ORLANDO A. SMITH /s/ (ILLEGIBLE SIGNATURE)
- ---------------------------------------- ------------------------------------
Orlando A. Smith
3
<PAGE> 41
/s/ JOHN MILLIGAN-WHYTE /s/ (ILLEGIBLE SIGNATURE)
- ---------------------------------------- ------------------------------------
John Milligan-Whyte
/s/ L. MILLIGAN-WHYTE /s/ (ILLEGIBLE SIGNATURE)
- ---------------------------------------- ------------------------------------
Lynda Milligan-Whyte
(Subscribers) (Witnesses)
SUBSCRIBED THIS 16TH DAY OF MARCH, 1998.
4
<PAGE> 42
THE SCHEDULE
(REFERRED TO IN CLAUSE NO. 7 OF THE MEMORANDUM OF ASSOCIATION)
(a) To borrow and raise money in any currency or currencies and to secure or
discharge any debt or obligation in any manner and in particular (without
prejudice to the generality of the foregoing) by mortgages of or charges
upon all or any part of the undertaking, the Company or by the creation and
issue of securities.
(b) To enter into any guarantee, contract of indemnity or suretyship and in
particular (without prejudice to the generality of the foregoing) to
guarantee, support or secure, with or without consideration, whether by
personal obligation or by mortgaging or charging all or any part of the
undertaking, property and assets (present and future) and uncalled capital
of the Company or both such methods or in any other manner, the performance
of any obligations or commitments, of, and the repayment or payment of the
principal amounts of and premiums, interest, dividends and other moneys
payable on or in respect or any securities or liabilities of, any person
including (without prejudice to the generality of the foregoing) any
company which is for the time being a subsidiary or a holding company of
the Company or another subsidiary or a holding company of the Company or
otherwise associated with the Company.
(c) To accept, draw, make, create, issue, execute, discount, endorse, negotiate
bills of exchange, promissory notes, and other instruments and securities,
whether negotiable or otherwise.
(d) To sell, exchange, mortgage, charge, let or rent, share of profit, royalty
or otherwise, grant licenses, easements, options, servitudes and other
rights over, and in any other manner deal with or dispose of, all or any
part of the undertaking, property and assets (present and future) of the
Company for any consideration and in particular (without prejudice to the
generality of the foregoing) for any securities.
(e) To issue and allot securities of the Company for cash or in payment or part
payment for any real or personal property purchased or otherwise acquired
by the Company or any services rendered to the Company or as security for
any obligation or amount (even if less than the nominal amount of such
securities) or for any other purpose.
(f) To grant pensions, annuities, or other allowances, including allowances on
death, to any directors, officers or employees or former directors,
officers or employees of the Company or any company which at any time is or
was a subsidiary or a holding company or another subsidiary of a holding
company of the Company or otherwise associated with the Company or of any
predecessor in business of any of them, and to the relations, connections
or dependants of any such persons, and
5
<PAGE> 43
to other persons whose service or services have directly or indirectly
been of benefit to the Company or whom the Company considers have any moral
claim on the Company or to their relations, connections or dependants, and
to establish or support any associations, institutions, clubs, schools,
building and housing schemes, funds and trusts, and to make payments toward
insurance or other arrangements likely to benefit any such persons or
otherwise advance the interests of the Company or of its Members, and to
subscribe, guarantee or pay money for any purpose likely, directly or
indirectly to further the Interests of the Company or of its Members for
any national, charitable, benevolent, educational, educational, social,
public, general or useful object.
(g) To purchase its own shares in accordance with the provisions of Section 42A
of The Companies Act 1981.
(h) To issue preference shares redeemable at the option of the holder, in
accordance with the provisions of Section 42 of the Companies Act 1981.
6
<PAGE> 44
THE COMPANIES ACT 1981
AS AMENDED
SECOND SCHEDULE (SECTION 11(2))
A company may by reference include in its memorandum any of the following
objects that is to say the business of:
(a) [Intentionally Stricken]
(b) packaging of goods of all kinds;
(c) buying, selling and dealing in goods of all kinds;
(d) designing and manufacturing of goods of all kinds;
(e) mining and quarrying and exploration for metals, minerals, fossil
fuels and precious stones of all kinds and their preparation for sale
or use;
(f) exploring for, the drilling for, the moving, transporting and refining
petroleum and hydro carbon products including oil and oil products;
(g) scientific research including the improvement, discovery and
development of processes, inventions, patents and designs and the
construction, maintenance and operation of laboratories and research
centres;
(h) land, sea and air undertakings including the land, ship and air
carriage of passengers, mails and goods of all kinds;
(i) ships and aircraft owners, managers, operators, agents, builders and
repairers;
(j) acquiring, owning, selling, chartering, repairing or dealing in ships
and aircraft;
(k) travel agents, freight contractors and forwarding agents;
(l) dock owners, wharfingers, warehousemen;
(m) ship chandlers and dealing in rope, canvas oil and ship stores of all
kinds;
(n) all forms of engineering;
(o) [Intentionally Stricken]
7
<PAGE> 45
(p) farmers, livestock breeders and keepers, graziers, butchers, tanners
and processors of and dealers in all kinds of live and dead stock,
wool, hides, tallow, grain, vegetables and other produce;
(q) acquiring by purchase or otherwise and holding as an investment
inventions, patents, trade marks, trade names, trade secrets, designs
and the like;
(r) buying, selling, hiring, letting and dealing in conveyances of any
sort;
(s) employing, providing, hiring out and acting as agent for artists,
actors, entertainers of all sorts, authors, composers, producers,
directors, engineers and experts or specialists of any kind;
(t) to acquire by purchase or otherwise and hold, sell, dispose of and
deal in real property situated outside Bermuda and in personal
property of all kinds wheresoever situated; and
(u) to enter into any guarantee, contract of indemnity or suretyship and
to assure, support or secure with or without consideration or benefit
the performance of any obligation of any person or persons and to
guarantee the fidelity of individuals filling or about to fill
situations or trust or confidence.
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> FEB-28-1999
<CASH> 4,856
<SECURITIES> 0
<RECEIVABLES> 4,111
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,967
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,967
<CURRENT-LIABILITIES> 109,284
<BONDS> 174,651
102,642
0
<COMMON> 1,003
<OTHER-SE> (378,613)
<TOTAL-LIABILITY-AND-EQUITY> 8,967
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 112,817
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (112,817)
<DISCONTINUED> (167,785)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (280,602)
<EPS-BASIC> 0
<EPS-DILUTED> (0.32)
</TABLE>
