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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 29, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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)
22 Church Street,
3rd Floor - Washington Mall I,
Hamilton, Bermuda HMII
(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. 1,123,852 shares of common stock as of February 29, 2000.
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 [x] 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.
We were 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. On April 10, 2000, we further amended our memorandum of
association to increase the amount of our authorized common stock to
150,000,000 shares, par value $.000167.
We are 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 exempted company's assessable capital (authorized share capital plus
any share premiums) as of August 31 of the prior year. Exempted companies with
assessable capital of between $0 - $12,000, $12,001 - $120,000 and $120,001 -
$1,200,000 must pay fees of $1,695, $3,460 and $5,340, respectively. Annual
fees continue to increase as the amount of assessable capital increases above
$1,200,000. As of August 31, 1999, we had assessable capital of $25,000
(25,000,000 authorized shares of common stock with par value of $.001).
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.
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. We were granted such tax assurance on March 30, 1998.
Except as described above, we are subject to the laws and regulations
applicable to Bermuda-based corporations. Although Bermuda law at present is
structured to encourage foreign investment, there can be no assurance that
future laws and regulations will not have a 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 our operations.
We are 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 company 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 will need additional financing or future profitability to continue
as a going concern. We will also need additional capital in order to acquire an
operating company. We plan to raise such funds through a private placement of
common stock or by borrowing from a lending institution. There can be no
assurance that we will be able to raise such funds. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on page 7.
Since our formation, we have explored entering into certain businesses
but commenced operations in only one business. In particular:
- In the Spring of 1998, we 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 our management 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, we
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 of our shares
held by the purchasers. We incurred a loss upon the sale of
Colloquium because Colloquium's poor operating performance
negatively impacted the subsidiary's value.
- On September 8, 1998, we 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 us and we would be 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
we assumed any liabilities due to termination of the merger
agreement.
2. DESCRIPTION OF PROPERTY.
We have no material assets except for cash in the amount of
$31,542. We have no office facilities or real property holdings. Our
registered office is located at 22 Church Street, Third Floor-Washington Mall
I, Hamilton, Bermuda HM11. Our registered office address is provided by Forum
Fund Services Ltd., our corporate Secretary, in exchange for an annual fee of
$4000. Forum Fund Services Ltd. can terminate this arrangement for any reason.
We believe that our existing arrangement is adequate to meet our current needs.
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3. LEGAL PROCEEDINGS.
Other than as described below, there are no pending legal proceedings
to which we, 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 us, by any party including any governmental
authority.
We have commenced litigation in Bermuda against Colloquium Ltd., Brian
McMillan and Catherine Matherson (two former directors) in relation to the
withdrawal of $50,691 from our bank account and for the return of the
approximately $24,000 paid by us 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) We are not controlled or owned by another corporation or foreign
government.
(b) The following table sets forth certain information regarding the
ownership of our common stock as of August 10, 2000, by each shareholder known
by us to be the beneficial owner of more than 10% of our 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(1)
-------------- ---------------- ------------------- ----------
<S> <C> <C> <C>
Common Eric Kohn 1,752,720(2) 25.99
</TABLE>
(1) On April 14, 2000, our shareholders approved a 6-to-1 forward split of our
common stock. As of August 10, 2000, there were 6,743,112 shares of our
common stock issued and outstanding.
(2) Does not include 90,000 shares of our common stock being issued to Mr. Kohn
in exchange for services rendered as our director.
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<TABLE>
<CAPTION>
TITLE OF CLASS NAME AND ADDRESS NO. OF SHARES OWNED % OF CLASS(1)
-------------- ---------------- ------------------- ----------
<S> <C> <C> <C>
Common Estate of Sir Ian MacGregor(3) 804,564 11.93
Common Christopher Tilley 804,564 11.93
Common ValorInvest, SA 1,270,644 18.84
Common Officers and Directors as a group 1,752,720(4) 25.99
</TABLE>
(3) We have been advised that ValueInvest Ltd. has agreed to purchase these
shares. We will transfer these shares on our records upon receiving
approval from the Bermuda Monetary Authority. The Authority has conditioned
grant of such approval upon the listing of our common stock on the OTC
Bulletin Board.
(4) Not including 210,000 shares being issued to certain directors as
compensation.
(c) No arrangements presently exist which would result in a change
of control.
5. NATURE OF TRADING MARKET.
We intend to obtain a listing for our common stock on the OTC Bulletin
Board. To this end, an OTC Bulletin Board listing application has been filed
with the National Association of Securities Dealers on our behalf. The NASD's
review of our listing application is pending and our common stock is not
presently listed on any national or foreign securities exchange. There is
currently no established trading market for our 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 our common stock are not
available.
As of August 10, 2000, we had no shareholders of record located in the
United States.
6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS.
We do not believe there are any decrees or regulations under the laws
of Bermuda applicable to us that restrict the import or export of capital or
affect the remittance of dividends or other payments to nonresident holders of
our common stock.
There are no restrictions under our 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 our Common Stock or to receive dividends
thereon. However, the permission of the Bermuda Monetary Authority is required
before shares of our Common Stock can be
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transferred or issued to any other person. The Bermuda Monetary Authority has
agreed to waive this requirement once our common stock becomes listed on a
securities exchange, including the OTC Bulletin Board.
We are 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 us 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 us 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.
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 our selected consolidated financial data
and operating information.
The following selected consolidated financial data for the years ended
February 29, 2000 (our Annual Report reflects a fiscal year end of February 29,
2000 rather than February 28, 2000 due to the leap year) and February 28, 1999
has been derived from our 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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Our Consolidated Financial Statements have been prepared in accordance
with accounting standards generally accepted in the United States.
<TABLE>
<CAPTION>
Year ended Year ended
February 29, February 28,
2000 1999
---- ----
<S> <C> <C>
Revenues $ - $ -
Bad debt expense (50,691) -
Selling, general and administrative expenses (129,826) (112,817)
--------- ---------
Operating loss from continuing operations (180,517) (112,817)
Loss from discontinued operations (1,945) (167,785)
--------- ---------
Net loss $(182,462) $(280,602)
========= =========
Net loss per share
Continuing operations (0.25) (0.13)
Discontinued operations - (0.19)
Total - Basic and diluted $ (0.25) $ (0.32)
========= =========
BALANCE SHEET DATA:
Working capital $ 24,324 $(100,317)
Net liabilities of discontinued segment $ - $(174,651)
Total assets - continuing operations $ 110,530 $ 8,967
Total liabilities - continuing operations $ 86,206 $ 109,284
Total Shareholders' Equity $ 24,324 $(377,610)
</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 years ended February 29, 2000 and February 28, 1999. In the period
between July 2, 1998 and May 26, 1999, we were engaged in the business of
providing connectivity and value added Internet services through our subsidiary
Colloquium. We discontinued our Internet-related operations on May 26, 1999 when
we 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 locate viable
operating companies for acquisition. We will have to raise additional funds to
continue as a going concern and to carry out our plan of operation. We
anticipate that we can satisfy our cash requirements for the next year through
cash reserves and by raising additional capital. 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. Financing
from alternative sources may not be available on acceptable terms or at all. A
lack of financing may require us to delay or abandon plans for acquisitions. We
intend to satisfy legal and accounting costs associated with filing reports
under the Securities Exchange Act of 1934 through our cash reserves and by
raising additional funds as described above. 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 February 29, 2000 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.
CASH FLOW
Operating activities used cash of $193,472 in the year ended February
29, 2000, compared to $7,644
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in the year ended February 28, 1999. Our operating activities during the fiscal
year ended February 29, 2000 were higher primarily due to costs associated with
the selling of our Internet related business. Net Cash provided by financing
activities was $285,250 in the year ended February 29, 2000 and $12,500 in the
year ended February 28, 1999.
WORKING CAPITAL
Our working capital, defined as the excess of our current assets over
our current liabilities, was $24,324 at February 29, 2000 compared to
($100,317) at February 28, 1999.
We do not presently have any borrowing facility established with a
financial institution. We will require additional capital to fund our operations
in the future. We anticipate raising such additional capital through a private
offering of our securities or by borrowing from a lending institution.
IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS
We do not believe that inflation or currency fluctuations have had a
material adverse effect on revenues and results of operations. However, demand
for our services was, 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 we operate in the future could
have a material adverse effect on our results of operations.
FACTORS THAT COULD AFFECT OPERATING RESULTS
Forward Looking Statements. This Annual Report on Form 20-F contains
forward-looking statements. Additional written and oral forward-looking
statements may be made by us 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 our
filings with the SEC.
We Have a History of Losses and Cannot Be Certain to Achieve Positive
Cash Flow. For the year ended February 28, 1999, we had net losses and negative
cash flows. For the year ended February 29, 2000, we had a net loss of
$182,462. In addition, we had an accumulated deficit of $871,762 as of February
29, 2000. At present we do not have any revenue producing operations and we
anticipate monthly operating expenses of approximately $500, excluding any
litigation.
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Even if we acquire 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.
Our 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 our 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.
We are Subject to Risks As We Make Acquisitions and Engage in Strategic
Alliances. As part of our 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 we 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 we will be
successful in identifying attractive acquisition candidates. We expect
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 us.
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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We Do Not Expect to Pay Dividends. We do not anticipate paying cash
dividends in the foreseeable future.
Risks Inherent in International Operations. We are 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 our 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, our 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. We 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 our operations.
Dependence on Key Employees. Our growth and profitability are dependent
upon, among other things, the abilities and experience of our management team
including Mr. Eric F. Kohn, our President, Treasurer, Chairman and Director. If
the services of Mr. Kohn or our other directors or executive officers became
unavailable, our business, financial condition and results of operations could
be adversely affected.
Rights of Shareholders Under Bermuda Law. We are incorporated under the
laws of Bermuda. Principles of law relating to such matters as the validity of
corporate procedures, the fiduciary duties of our 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 us 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 us 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. We are not presently engaged in business. We have 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 our 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 general meeting, and serve a term of one year or until their successors
are appointed and duly elected to office. Executive officers are elected by our
Board of Directors and serve a term of one year or until their successors are
appointed. We held our 1999 annual general meeting on June 5, 2000. We have not
set a date for our next annual meeting, however, we anticipate that it will be
held on or before December 31, 2000.
<TABLE>
<CAPTION>
Name Position Held and Term
---- ----------------------
<S> <C>
Eric F. Kohn President and Treasurer since May 12, 2000;
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.
Forum Fund Services Ltd. Secretary Since May 12, 2000.
</TABLE>
(b) Ede Conyers, the wife of our director, Jeffrey Conyers, is the
General Manager of our corporate Secretary Forum Fund Services Ltd. There are no
other family relationships among our directors and executive officers.
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11. COMPENSATION OF DIRECTORS AND OFFICERS.
(a) Through the fiscal year ended February 29, 2000, Colloquium, our
wholly-owned subsidiary prior to its sale on May 26, 1999, paid a total of
$43,743 to Brian McMillan and Catherine Matherson for services rendered as
directors of that company.
Except as described above, our officers and directors did not receive
compensation for services in any capacity during the fiscal year ended February
29, 2000. On June 5, 2000, our shareholders approved the following issuances of
our common stock as compensation for services rendered as directors:
(i) 60,000 shares to Michael Schroter;
(ii) 60,000 shares to Jeffrey Conyers; and
(iii) 90,000 shares to Eric Kohn.
(b) We did not set aside any amounts during the last fiscal year to
provide pension, retirement or similar benefits for our directors and officers.
On June 5, 2000, our shareholders approved our 2000 Outside Directors' Stock
Option Plan and set aside 100,000 shares of our common stock for issuance
thereunder. Under the terms of the Outside Directors' Plan, each non-employee
director will automatically be eligible to receive an option to purchase 5,000
shares of our common stock for each year that he serves as our director. Our
shareholders also approved our 2000 Stock Incentive Plan and set aside 1,100,000
shares of our common stock for issuance thereunder. The Stock Incentive Plan
allows our Board of Directors to grant certain of our key employees options to
purchase our common stock, and is intended to enhance our ability to attract and
retain key personnel. As of the date of this Annual Report no options have been
granted pursuant to the Outside Directors' Plan or the Stock Incentive Plan.
12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
There are no outstanding options to purchase our 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. Our former director, Lynda Milligan-Whyte, is a partner of
Milligan-Whyte & Smith and, as such, had an indirect interest in any fees paid
to that law firm during the fiscal year ended February 29, 2000. In addition,
our director Marlin Horst is a former partner of Milligan-Whyte & Smith and, as
such, had an indirect interest in any fees paid to that law firm during the
fiscal year ended February 29, 2000.
On May 26, 1999, our Board of Directors voted unanimously to divest us
of our wholly-owned subsidiary, Colloquium. This action was subsequently
approved by our shareholders and we reached an agreement with Colloquium, Brian
McMillan and Eric Kohn, whereby each of our shareholders was given the option to
exchange all of his or her shares of our 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, we contributed $24,000 to Colloquium's treasury. The
following shareholders exchanged our 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 our common stock, which shares were returned to treasury.
In 1998 and 1999, Mr. Kohn, our Chairman and Director, loaned us
$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.
As of February 29, 1999, we had borrowed $6,000 from Sir Ian MacGregor,
whose estate now beneficially owns more than ten percent of our common stock.
The loan was non-interest bearing and has been repaid in full.
During the fiscal year ended February 29, 2000, we completed a private
placement pursuant to which we raised $360,100. In exchange for its services as
placement agent in the offering, Baron's Financial Services (UK) Limited
received a warrant to purchase 8% of the total number of shares sold in the
offering (14,938 shares) at a purchase price of $0.01 per share. Our President,
Eric F. Kohn, is an executive officer of Baron's. In addition, First Bermuda
Securities Ltd., a financial services firm, received a placement fee of $17,500
in connection with the offering. Our directors, Jeffrey Conyers and Michael
Schroter, are executive officers of First Bermuda Securities.
We paid Baron's Financial Services (UK) Limited $2,000 for performing
accounting services during the fiscal year ended February 29, 2000.
On May 12, 2000, Forum Fund Services Ltd. was appointed as our
corporate Secretary. Forum Fund Services receives an annual fee of $4,000 and is
entitled to additional fees for certain services performed on a fee-for-service
basis. At present, we owe Forum Fund Services fees of $10,000. Ede Conyers,
spouse of our director Jeffrey Conyers, is the General Manager of Forum Fund
Services.
(b) None of our directors, officers or associates of any such directors
or officers was indebted to us or our subsidiaries at any time during the
last three years.
12
<PAGE> 13
PART II
14. DESCRIPTION OF SECURITIES TO BE REGISTERED
Not Applicable.
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.
We have 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 Moore Stephens, Independent Chartered Accountants....................F-1
Consolidated Statements of Operations for the years ended
February 29, 2000 and February 28, 1999........................................F-2
Consolidated Balance Sheets as of
February 29, 2000 and February 28, 1999.......................................F-3
Consolidated Statements of Cash Flows for the years ended
February 29, 2000 and February 28, 1999........................................F-4
Consolidated Statements of Stockholders' Equity................................F-5
Notes to the Consolidated Financial Statements
for the years ended February 29, 2000 and February 28, 1999....................F-6
</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 Amended and Restated Bye-laws of Omninet
International Ltd.(filed as Exhibit C to
our Form 6-K filed with the Commission
August 11, 2000, 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 Annual Report to be signed on our behalf by the
undersigned duly authorized officer.
OMNINET INTERNATIONAL LTD.
Dated: August 28, 2000 By: /s/ Eric F. Kohn
-------------------------------
Eric F. Kohn
President, Treasurer, 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 F-1
Consolidated Statements of Operations for the years ended February 29,
2000 and February 28, 1999 F-2
Consolidated Balance Sheets as of February 29, 2000 and February 28, 1999 F-3
Consolidated Statements of Cash Flows for the years ended February
29, 2000 and February 28, 1999 F-4
Consolidated Statements of Stockholders' Equity F-5
Notes to the Consolidated Financial Statements for the years
ended February 29, 2000 and February 28, 1999 F-6
</TABLE>
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Omninet International Limited
We have audited the accompanying consolidated balance sheets of Omninet
International Limited and subsidiary (a development stage company) as of
February 29, 2000 and February 28, 1999, and the related consolidated statements
of operations, and cash flows for the years then ended. 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 29, 2000 and February 28, 1999 and the
consolidated results of their operations and their cash flows for the years 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 August 25, 2000
F-1
<PAGE> 18
OMNINET INTERNATIONAL LIMITED AND SUBSIDIARY(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
<TABLE>
<CAPTION>
Cumulative
during the Year ended Year ended
Development February 29, February 28,
Stage 2000 1999
----- ---- ----
<S> <C> <C> <C>
Revenues $ - $ - $ -
Bad debt expense (50,691) (50,691) -
Selling, general and
administrative expenses (242,643) (129,826) (112,817)
---------- ---------- ------------
Operating loss from
continuing operations (293,334) (180,517) (112,817)
Loss from discontinued
operations (561,689) (1,945) (167,785)
---------- ---------- ------------
Net loss $ (855,023) $ (182,462) $ (280,602)
========== ========== ============
Earnings per share -
Basic and Diluted $ (0.25) $ (0.32)
Continuing operations (0.25) (0.13)
Discontinued operations - (0.19)
---------- ------------
$ (0.25) $ (0.32)
========== ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-2
<PAGE> 19
OMNINET INTERNATIONAL LIMITED AND SUBSIDIARY(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS OF FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 31,542 $ 4,856
Trade accounts receivable, net 3,988 4,111
Deferred Costs 75,000 -
------- ------
$ 110,530 $ 8,967
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 86,206 $ 98,624
Advances from related parties - 10,660
------ -------
Total current liabilities 86,206 109,284
------ -------
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; 643,864 and 1,003,002
shares issued and outstanding as of February
29, 2000 and February 28, 1999 respectively 644 1,003
Additional paid-in capital 895,442 310,270
Accumulated deficit during the development stage (871,762) (686,895)
Accumulated other comprehensive income:
Cumulative translation adjustment - (1,988)
------- -------
24,324 (377,610)
------- -------
$ 110,530 $ 8,967
======= =======
</TABLE>
Approved by the Board on August 25,2000
The accompanying notes are an integral part of these
consolidated financial statements
F-3
<PAGE> 20
OMNINET INTERNATIONAL LIMITED AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
<TABLE>
<CAPTION>
Cumulative
during the
Development
Stage 2000 1999
----- ---- ----
$ $ $
<S> <C> <C> <C>
Cash flows from operating activities:
Loss from continuing operations (293,334) (180,517) (112,817)
Non cash items: Stock warrants 10,000 10,000 -
Changes in operating assets
and liabilities:
Accounts receivable (3,988) 123 (4,111)
Accounts payable 86,206 (12,418) 98,624
Other liabilities - (10,660) 10,660
-------- ------- -------
Net cash used in operating activities (201,116) (193,472) (7,644)
-------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of common
stock, net 372,750 360,250 12,500
Listing Costs (75,000) (75,000) -
-------- ------- -------
Net cash provided by financing activities 297,750 285,250 12,500
-------- ------- -------
Net cash inflow from continuing
segment 96,634 91,778 4,856
Cash paid on disposal of subsidiary (24,115) (24,115) -
Net cash outflow from discontinued
segment (40,977) (41,161) 184
-------- ------- ------
Net increase in cash and
cash equivalents 31,542 26,502 5,040
Cash and cash equivalents,
beginning of period - 5,040 -
-------- ------- ------
Cash and cash equivalents, end of period 31,542 31,542 5,040
======== ======= ======
Discontinued segment - 184
Continuing operations 31,542 4,856
------- ------
31,542 5,040
======= ======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-4
<PAGE> 21
OMNINET INTERNATIONAL LIMITED AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other Total
------------ Paid-in Accumulated Comprehensive Comprehensive Stockholders'
Shares Amount Capital Deficit Income Income Equity
------ ------ ------ ------- ------ ------ ------
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 28, 1998 954,964 955 188,496 (396,137) 119 (383,966) (206,567)
Issuance of additional
common stock 48,038 48 12,752 12,800
(March 24, 1998)
Recapitalisation adjustment - - 109,022 109,022
Preferred stock dividends (6,628) (6,628)
Accreted mandatory
redemption premium
of preferred stock (3,528) (3,528)
Net loss (280,602) (280,602) (280,602)
Translation adjustment (2,107) (2,107) (2,107)
--------
Comprehensive income (282,709)
--------- ------ ------- -------- ------- --------- ---------
Balance, February 28, 1999 1,003,002 1,003 310,270 (686,895) (1,988) (666,675) (377,610)
Issuance of additional common
Stock (May 10, 1999) 105,912 106 359,995 - - - 360,101
Cancellation of 479,988 shares (479,988) (480) - - - - (480)
Stock warrants exercised
(November 3, 1999) 14,938 15 10,134 - - - 10,149
Net loss - - - (182,462) - (182,462) (182,462)
Preferred stock dividends - - - (1,657) - - (1,657)
Accreted mandatory redemption
premium of preferred stock - - - (748) - - (748)
Translation adjustment - - - - 1,988 1,988 1,988
Gain on disposition of subsidiary - - 215,043 - - - 215,043
--------
Comprehensive income (180,474)
--------- ------ ------- -------- ------- --------- ---------
Balance, February 29, 2000 643,864 644 895,442 (871,762) - (847,149) (24,324)
--------- ------ ------- -------- ------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-5
<PAGE> 22
OMNINET INTERNATIONAL LIMITED AND SUBSIDIARY COMPANY (A DEVELOPMENT STAGE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1999 AND FEBRUARY 29, 2000
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. As at the
date of the acquisition, the stockholders' deficit in Colloquium amounted to
$78,405. For accounting purposes, the transaction was accounted for as a
reverse acquisition, thus the historical financial statements of Colloquium,
the accounting acquirer, are reflected.
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. 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.
DEVELOPMENT STAGE
The Company has been in the development stage since its formation on March
24,1998. The Company has no continuing trading activity and is seeking
acquisition and merger opportunities.
F-6
<PAGE> 23
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1999 AND FEBRUARY 29, 2000
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.
F-7
<PAGE> 24
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1999 AND FEBRUARY 29, 2000
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.
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.
DEFERRED COSTS
Stock issuance and listing costs are deferred in circumstances where the Company
anticipates raising equity finance within the forseeable future.
F-8
<PAGE> 25
OMNINET INTERNATIONAL LIMITED AND SUBSIDIARY COMPANY (A DEVELOPMENT STAGE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1999 AND FEBRUARY 29, 2000
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 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
======== ========
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)
======== ========
</TABLE>
F-9
<PAGE> 26
OMNINET INTERNATIONAL LIMITED AND SUBSIDIARY COMPANY (A DEVELOPMENT STAGE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1999 AND FEBRUARY 29, 2000
3. DISPOSITION OF SUBSIDIARY (CONTINUED)
<TABLE>
<S> <C>
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. EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year ended Year ended
February 29, February 28,
2000 1999
---- ----
<S> <C> <C>
Net loss $ (182,462) $ (280,602)
Preferred stock dividends (1,657) (6,628)
Accreted mandatory redemption
premium of preferred stock (748) (3,528)
---------- ---------
Net income available to common
stockholders $ (184,867) $ (290,758)
---------- ---------
Average common shares issued
and outstanding 727,292 915,006
Earnings per share - basic and diluted $ (0.25) $ (0.32)
========== =========
</TABLE>
F-10
<PAGE> 27
OMNINET INTERNATIONAL LIMITED AND SUBSIDIARY COMPANY (A DEVELOPMENT STAGE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1999 AND FEBRUARY 29, 2000
5. RELATED PARTIES TRANSACTIONS
Selling, general and administrative services costs in the year ended February
29, 2000 includes $823 paid to Barons Financial Services S.A. in respect of
expense reimbursement and $2,000 in respect of accounting services paid to
Barons Financial Services (UK) Limited. Both companies are connected with Mr.
Eric Kohn, a director.
In exchange for its services as placement agent in the private placement, Barons
Financial Services (UK) Limited received a warrant to purchase 8% of the total
number of shares sold in the offering (14,938 shares) at a purchase price of
$0.01 per share.
Legal fees in respect of services provided by Milligan-Whyte & Smith in the year
ended February 29,2000 amount to $78,539. $10,181 relate to listing costs
debited to additional paid in capital and $68,358 are included in selling,
general and administrative services costs. There are fees of $26,988 outstanding
as at February 29, 2000. Lynda Milligan-Whyte, a former director of Omninet
International Limited, is a partner of Milligan-Whyte & Smith.
Selling, general and administrative services costs in the year ended February
29, 2000 includes $17,500 paid to First Bermuda Securities Ltd., in respect of
placement fees. Two of the directors, Jeffrey Conyers and Michael Schroter are
connected with this company.
6. STOCK WARRANTS
Barons Financial Services (UK) Limited was granted stock warrants for the issue
of 14,938 common shares at $0.01 per share. The warrants were exercised on
November 3, 1999. The company has booked a compensation expense of $10,000.
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.
8. 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 year ended February 29,2000.
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.
9. SUBSEQUENT EVENTS
A resolution was passed dated April 10, 2000 to sub-divide the authorised share
capital of 25,000,000 shares, par value of $0.001 into 150,000,000 shares, par
value of $0.000167 each, on a 6:1 ratio.
At a special general meeting held on June 5. 2000 the shareholders approved the
2000 Outside Directors' Stock Option Plan and reserved 100,000 shares of common
stock for issuance thereunder, approved the 2000 Stock Incentive Plan and
reserved 1,100,000 shares of common stock for issuance thereunder and approved
compensation to certain directors for past services.
The 2000 Outside Directors' Stock Option Plan grants non-employee directors an
option to purchase 5,000 shares of common stock each year at an exercise price
equal to the market value of the common stock as at the date the option is
granted. The option may be exercised within ten years from the date of grant or
upon the happening of certain events.
F-11
<PAGE> 28
OMNINET INTERNATIONAL LIMITED AND SUBSIDIARY COMPANY (A DEVELOPMENT STAGE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1999 AND FEBRUARY 29, 2000
9. SUBSEQUENT EVENTS (CONTINUED)
The 2000 Stock Incentive Plan permits a committee of the Board of Directors to
make awards of a variety of equity-based incentives to employees.
210,000 shares have been granted to three directors as compensation for
services provided after February 29,2000.
F-12
