As filed with the Securities and Exchange Commission on August 3, 1999
Registration No. 000-26307
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934
NETGEN 2000, INC.
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(Name of Small Business Issuer in its charter)
Florida 65-0873448
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
224 Datura Street, Suite 402
West Palm Beach, Florida 33401
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(Address of principal executive offices) (zip code)
(Registrant's telephone number, including area code) (561) 655-5351
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Securities to be registered pursuant to 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
n/a n/a
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock; $.01 per share and Warrants
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(Title of Class)
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TABLE OF CONTENTS
PART I
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ITEM 1. DESCRIPTION OF BUSINESS .............................................. 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION ................................................. 8
ITEM 3. DESCRIPTION OF PROPERTY .............................................. 12
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT ................................................ 12
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS .................................................. 14
ITEM 6. EXECUTIVE COMPENSATION ............................................... 16
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ....................... 17
ITEM 8. DESCRIPTION OF SECURITIES ............................................ 18
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS .......................... 19
ITEM 2. LEGAL PROCEEDINGS .................................................... 19
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ........................ 19
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES .............................. 19
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS ............................ 20
PART F/S
FINANCIAL STATEMENTS ................................................................... F1
PART III
ITEM 1. INDEX TO EXHIBITS .................................................... 21
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Explanatory Note:
Unless otherwise indicated or the context otherwise requires, all
references herein to the "Company", "we" and "our" are to Netgen 2000 Inc., a
Florida corporation. The Company is filing this Form 10-SBA voluntarily. The
Company's Common Stock has not traded on the OTC Bulletin Board but the Company
intends to apply for listing. The Company believes the market for its stock will
be enhanced by being a reporting company.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF THE COMPANY'S BUSINESS.
Company Overview
Netgen 2000, Inc. was incorporated in Florida in October 1998. We are
an internet marketing services company that specializes in designing, creating
and marketing cost-effective Internet web and image sites, products and custom
software. We strive to provide businesses, of all sizes (our clients), with
interactive Internet image sites along with marketing services, to create
exposure to vast audiences of prospective consumers. We advertise our web site
as a Community Information Center, which offers free information to internet
users who click on our web site (our visitors). After accessing the free
information, visitors can, if they so desire, contact our client who specializes
in the area of interest to the visitor, by typing in their (the visitor's) zip
code, which, in turn will bring up the client's image site. Image sites are one
page web sites that only consist of web images and text. The image site has no
further links. Thus, our marketing services, by first offering an array of free
information to visitors to our web site, assists clients in enhancing their
business enterprise by directing these Internet visitors to the clients' image
site - be it health care, legal services, or business - in their local area. In
addition, we intend to provide visitors to our web-site with "shopping-cart"
access to a variety of health care consumer products. The shopping-cart program
is proprietary to the Company, and will not be available to clients. Our
e-commerce retail business plan anticipates being setup with secure socket layer
and will be using cyber cash to take orders.
We will also assist clients in improving their Internet presence in the
event they offer products, in addition to, services. We use technology for the
creation of our web site which increases the chances that the our clients' image
sites are seen by an Internet user irrespective of the search engine used. The
majority of our current revenues will be derived from custom web and image site
design, servicing fees and product advertising.
We were initially capitalized with a $30,000 investment by our founder,
for which 3,000,000 shares of common stock were issued. On March 25, 1999, we
conducted a private offering of a maximum of 300,000 units, each Unit consisting
of one (1) share of common stock, $.01 par value, and one (1) warrant at an
offering price of $1.00 per Unit. As part of the offering we also converted an
outstanding convertible debt of $39,000 into 390,000 shares of common stock. We
also issued 830,000 options to purchase common stock to certain consultants and
authorized the issuance of up to 1,000,000 B warrants for future consultants or
broker-dealers from which $8500 has been raised. In total, gross proceeds from
the offering as of the date of this filing are $237,000.
We believe the securities given to the consultants fairly approximates
the value of the services performed by them, although no independent third party
assessment has been performed. The consulting agreements were executed in
January 1999, at a time when the Company had no operations and was still in its
planning stages, with limited funds. The consultants assisted the
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Company in raising early seed money, enabling it to hire attorneys and other
professionals. They assisted in structuring the private placement and consulting
with legal counsel. They have assisted in enhancing our business concepts
including marketing technique and web site appearance. They have and will
continue, to introduce the Company into the financial community.
Web Site
Between January 31, 1999 and March 9, 1999, our web site,
Netgen2000.com, experienced more than forty-six thousand (46,000) visitor hits
to its entire site. The user profile report was prepared on March 9, 1999 by
Webtrends, an internet marketing analysis company.
Business Strategy
Our mission is to become a predominant service provider within our
market niche. The critical success factors are: understanding, developing and
applying information technology to the Internet, interactive media markets, and
data access and software tools; narrowing market focus while consummating
strategic alliances to complement product and service offerings; investing in
strategic Internet or interactive media investments or acquisitions and, most
importantly, a continued understanding of clients' needs.
We expect to utilize our expertise in database design/development and
project management to create a suite of product and service offerings, that will
enable sophisticated direct interactive marketing environments. We believe these
new products will enable us to take advantage of the demand for data management
services created from the Internet and interactive media, while continuing to
grow and invest in the design and development of web sites. Additionally, in
fiscal year 1999, the Company plans to continue to develop and refine the
products and services of its business, with the goal of increasing revenue as
new products are commercially introduced.
Additionally, we will seek to expand our participation in Internet, and
interactive media industries, and increase market share. Key elements of this
strategy include:
* Utilize the Latest Technology Available to the Internet,
Including Java, Java Script, Neoweb Script, Tcl/tk and Shockwave,
to Achieve Optimum Internet Presence. We will build web sites
without the use of HTML editors. While editors often don't
support many new additions to the web and use codes designed for
one particular kind of web server that could present problems,
the Company is adding to the HTML code to enhance its versatility
for the web server. We will constantly increase our technological
capabilities through the enhancement of existing software and the
re-engineering of our proprietary database software in order to
allow the our clients greater ability to access, analyze and
update their own databases through the use of our services and
software.
* Continue to Enhance And Expand The Company's Products And
Services. We intend to invest resources in new business ideas or
investments which seek to
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capitalize on opportunities surrounding the growth of the
Internet and the interactive marketing industry. We intend to
continue to pursue the growth and development of our technologies
and services and continue to introduce products commercially.
Additionally, we intend to evaluate new opportunities to further
our investment opportunities and also to seek out opportunities
to realize increased stockholder value through the acquisition of
compatible companies.
* Provide The Highest Level of Customer Service. We plan to create
an Internet presence that adds value to our clients'
organizations.
* Pursue Innovative Advertising Solutions. We are actively seeking
to develop innovative ways for advertisers to effectively reach
their target audiences through the Internet. We will design and
offer customized packages which include the ability to change
advertisements quickly and frequently, to link a specific search
term to an advertisement, to conduct advertising test campaigns
with rapid result delivery and to track daily usage statistics.
We are continuing our development of software that will provide
it with the ability to target ads based on demographics and usage
patterns. In particular, we will use banner ads, E-mail campaign
programs, link exchanges, news groups and over three hundred
fifty (350) of the most popular search engines. We must emphasize
that these advertising concepts are only in the planning stage,
and there can be no assurance that these concepts, when and if
implemented, will be successful.
* Cross-sell Products And Services. We are involved in many aspects
of the direct marketing sales cycle.
Custom Image Site Development
We develop high-end custom image sites, encompassing original graphics
and innovative layouts. Our business strategy is to develop and design consumer
friendly image sites that achieve growth and organizational optimization for our
clients by creating more efficient navigation, utilizing interactive databases,
and by using technology to increase the likelihood of being found at or near the
top of search engines. Activity on our clients' image sites are to be enhanced
initially by attracting visitors to our web site and providing specific and
detailed information in the fields of medicine, law and business, at no charge
to the visitor. At this point, our web site data will not include or identify
our clientele. Visitors may then type in their zip code, and will be linked, by
professional or business specialty, to the individual sites of the Company's
clients--doctors, health care professionals, lawyers business advisors, etc. in
their local area. Visitors attracted by the latest intelligence in these various
fields will be directed to the client's comprehensive profile on their specially
designed site. Clients may include pictures, biographical data and personal
messages explaining distinctive elements of the client's business (for eg.
physicians may include information regarding individuals procedures, new
treatments medications, etc.) Only one client image site per specialty per zip
code is created. Prospective consumers seeking services in the client's local
area will be referred only to that client.
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Divisions
The Company provides medical and legal information free but does not
hold itself out as offering nor does it intend to provide legal or medical
advise.
Legal. We develop image sites and products for attorneys and
law firms. We expect attorneys and law firms to utilize this division to
increase their exposure to prospective clients who are in need of specific
specializations. We believe this will also increase likelihood of
placement/selection of these legal specializations on search engines.
Medical. This site is designed to assist visitors in locating
quality healthcare providers or specialists in the visitors local or specified
area. It will provide valuable information on the practice and will link the
visitor to the physician's office to make an appointment for further
consultation. Our site covers sixteen (16) different health topics with over one
hundred eighty (180) categories of resource information.
Business. Our Business Guide is a reference guide designed to
furnish visitors with easy to use resource information on local businesses in
various business categories. Visitors will discover, locate and identify
businesses ready to serve them in their local market area by being offered
relevant information about the business, including photos of the business, its
history, specializations and maps to their location.
The Market
There are twenty-eight thousand (28,000) zip codes in the United
States. There are approximately one hundred eighty (180) health topics, one
hundred twenty (120) legal areas and twenty (20) business categories. Currently
we offer sixteen (16) medical specialities; eleven (11) law related topics; and
seventeen (17) business topics. The practitioner or business is offered
exclusivity for his/her/its particular area or speciality in the zip code of his
choosing. In addition, we plan to offer products or product lines associated
with these various enterprises.
Growth
Our growth will largely be influenced by the growth of the Internet.
Although estimates vary widely, we are of the opinion that more than three
hundred million (300,000,000) persons will be using the Internet by the year
2002 for the purpose of purchasing goods and services.
Products
Research And Development. We intend to develop and market a variety of
Internet related products. This will include both proprietary and
non-proprietary products typically associated with our three divisions. We are
presently exploring the feasibility of offering health related products such as
holistic vitamins and supplements, legal forms and software related products. In
addition, we believe additional sources of revenue can be derived from
advertising and business brokerage. These areas are all characterized by rapid
technological development. We believe that our future success will largely
depend upon our ability to continue the enhancement of our existing products and
services and the development of other products and services which complement
existing ones. To date, we have incurred nominal research and development
expenses. In order to respond to rapidly changing competitive and technological
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conditions, we expect to incur significant research and development expenses
during the initial development phase of new products and services as well as on
an on-going basis with established products.
Web Server. We intend to develop a proprietary internet server which
will provide our clients immediate, constant and efficient access to a web site
other than the internet's alternative servers. In time, we intend to become an
internet service provider to our clients by providing them with discs or
diskettes to access the internet at no additional cost. We are hopeful that this
type of offering will help maintain a loyal client base.
Intellectual Property and Proprietary Rights. The Company regards its
technology as proprietary and attempts to protect it by relying on common law
trademark, service mark, copyright and trade secret laws and restrictions on
disclosure and transferring title and other methods. However we currently have
no patents or patents pending and have not filed for patent protection. Nor do
we anticipate that patents will become a significant part of our intellectual
property in the future. We intend to enter into confidentiality agreements with
respect to our proprietary technology and limit access to, and distribution of
our proprietary information.
Marketing Strategy
Marketing ourselves involves the use of Internet technology. We utilize
"search engines", such as IMAST, which has included us on 1300 search engines. A
"search engine" is the primary computerized technique used to locate and
identify particular web sites or their subject-matter. In addition, we intend to
market ourselves through "banner ads" (advertisements which appear on other web
sites) and "reciprocal links" (shortcuts enabling the visitor to travel from one
web site to another). In addition to the Internet exposure, we will use direct
marketing and direct mail, to promote our products particularly to new residents
in their local areas. We will also use TV, newspapers ads and target mailers.
Employees
The Company employs a total of six (6) full-time persons, and two
commissioned employees. None of the Company's employees or commission-based
personnel are represented by a union and the Company believes its relationship
with its employees is very good.
The Company intends to enter into non-disclosure and non-competition
agreements with its key personnel which provide that upon the termination of
employment with the Company for any reason, the individual will not compete with
the Company for two years. With the exception of two senior officers, salaries
are not yet fixed. We intend to offer only modest salaries along with incentives
based upon revenues.
Derek Dunn, the Company's president, resigned from his prior employer
on May 1, 1999, and will be employed on a full-time basis.
Impact of Year 2000
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of our
computer programs that have
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time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. We believe our operations are Year 2000 compliant. However,
variability of definitions of "compliance" with the Year 2000 and of different
combinations of software, firmware, and hardware may lead to lawsuits against
us. The outcomes of any such lawsuits and the impact are not estimable at this
time. The Year 2000 may affect our internal systems, however we believe the
effect will be minimal as we have purchased the majority of our hardware systems
within the last year and a half.
We anticipate no further costs associated with Year 2000 compliance. We
have assessed the readiness of our systems for Y2K. Our equipment is new; our
server is on a UNIX box; and based upon representations of our third party
software suppliers, the software we use is Y2K compliant. However, there can be
no guarantee that the systems of other companies on which our operations rely
will be timely converted and will not have an adverse effect on our operations.
Any Year 2000 compliance problems affecting us could have a material adverse
effect on our business, results of operations and financial condition. In the
event of a Y2K problem, we will mirror our web site to another location. This
will insure secondary coverage by a subsidiary server in the event the main
server goes down.
Government Regulation and Legal Uncertainties
There are currently few laws or regulations directly applicable to
access to or commerce on the Internet. Due to the increased popularity and the
use of the Internet, it is possible that laws and regulations may be adopted,
covering issues such as user privacy, defamation, pricing, taxation, content
regulation, quality of products and services, and intellectual property
ownership and infringement. Such legislation could expose us to substantial
liability. Such legislation could also dampen the growth in use of the web,
decrease the acceptance of the web as a communications and commercial medium, or
require us to incur significant expense in complying with any new regulations.
Other nations, including Germany, have taken actions to restrict the free flow
of material considered to be objectionable on the web. The European Union has
recently adopted privacy and copyright directives that may impose additional
burdens and costs on international operations. In addition, several
telecommunication carriers, including America's Carriers Telecommunications
Association, are seeking to have telecommunications over the web regulated by
the FCC in the same manner as other telecommunication services. In addition,
because the growing popularity and use of the Internet have burdened the
existing telecommunications infrastructure and many areas with high web use have
begun to experience interruptions in phone service, certain local telephone
carriers have petitioned governmental bodies to regulate Internet service
providers ("ISPs") and online service providers ("OSPs") in a manner similar to
long distance telephone carriers and to impose access fees on ISPs and OSPs. If
any of these petitions or the relief sought therein is granted, the costs of
communicating on the Internet could increase substantially, potentially
adversely affecting the growth in use of the
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Internet. Further, due to the global nature of the Internet, it is possible
that, although transmissions relating to our solutions originate in the State of
Florida, the governments of other states or foreign countries might attempt to
regulate our transmissions or levy sales or other taxes relating to our
activities. There can be no assurance that violations of local laws will not be
alleged or charged by state or foreign governments, that we might not
unintentionally violate such laws or that such laws will not be modified, or new
laws enacted, in the future. Any of the foregoing developments could have a
material adverse affect on our business, results of operations and financial
condition. A number of proposals have been made at the federal, state, and local
level that would impose additional taxes on the sale of goods and services
through the Internet. Such proposals, if adopted, could substantially impair the
growth of electronic commerce and could adversely affect opportunity to derive
financial benefit from such activities. Also, Congress recently passed, and the
President has signed into law, the Digital Millennium Copyright Act, which is
intended to reduce the liability of online service providers for listing or
linking to third party web sites that include materials that infringe copyrights
or rights of others. Congress also recently passed, and the President has signed
into law, the Children's Online Protection Act and Children's Online Privacy
Act, which will restrict the distribution of certain materials deemed harmful to
children and to impose additional restrictions on the ability of online services
to collect user information from minors. We do not believe this legislation will
have any adverse affect on us. However, there can be no assurance that such
legislation will not impose significant additional costs to our business or
subject it to additional liabilities. In addition a number of other countries
are considering additional regulation.
Environmental Impact
The Company believes that none of its activities utilize any hazardous
materials or result in the discharge of any pollutants into the environment. The
Company believes it complies fully with all state and federal environmental laws
and regulations.
Competition
The market for clients, visitors and related products and services are
intensely competitive and such competition is expected to continue to increase.
There are no substantial barriers to entry in this market and we believe that
our ability to compete depends upon many factors within and beyond its control,
including the timing and market acceptance of new solutions and enhancements to
existing solutions developed by us and our competitors, customer service and
support, sales and marketing efforts, and the ease of use, performance, price
and reliability of the Company's solutions. We also compete with many Internet
content providers and ISPs, including web directories, search engines, shareware
archives, content sites, commercial online services and sites maintained by
Internet service providers, as well as thousands of Internet sites operated by
individuals and government and educational institutions. These companies have
longer operating histories, longer customer relationships, and substantially
greater financial, management, technical development, sales, marketing, and
other resources. Many nationally known companies and regional local companies
across the country are involved in Internet and Intranet applications, including
the development and support of web sites and Internet applications, and the
number of these companies is increasing. The companies that offer competitive
products or services, include, among others:
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- web site service boutique firms;
- communications, telephone and telecommunication companies;
- computer hardware and software companies;
- established online service companies;
- advertising agencies;
- direct access Internet and Internet-services and access providers;
- specialized integrated marketing communications firms;
- internal information technologies departments of prospective and
current clients; and
- web site "yellow pages".
We know of at least one directly competitive company - Medconsult.com,
which specializes in the location of medical professionals.
We believe that our principal methods of competition in attracting
clients include the volume of traffic on our web site, brand recognition,
customer service, the demographics of our clients and viewers, our ability to
offer our clients targeted audiences, and the overall cost-effectiveness of the
products and services we offer. We believe that the principal competitive
factors in attracting search engines to a customer's web site include our
design, title, meta tags descriptions and key words. We also offer marketing
support to our clients in assisting the client in obtaining exclusivity in its
market area. Finally, by directing prospective consumers to an exclusive image
site, we will give our clients a limited ability to block competition in their
specialized area.
We believe that the number of Internet companies relying on revenues
from their web site will increase substantially in the future. In turn, we will
likely face increased competition, resulting in increased pricing pressures on
our web site design rates which could in turn have a material, adverse effect on
our business, results of operations and financial condition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
We are an internet marketing services company specializing in the
design, creation and marketing of advertising sites for service oriented
companies and service professionals (our clients) and cost-effective Internet
products and custom software. We strive to provide our clients, with interactive
Internet image sites along with marketing services. In addition, we provide a
subscription service to clients for the servicing and publication of their image
sites in strategic zip code locations. This assists clients in enhancing their
Internet presence and advertising their services. We began to achieve limited
revenues from operations in June, 1999.
In January, 1999, bridge loans necessary for the expenses of this
Offering, and for other immediate working capital needs in the approximate sum
of $39,000, were advanced by five (5) lenders ("Lenders"). The Lenders received
convertible notes which required the loans be repaid within twelve (12) months
or, at the option of the Lenders, be converted into the Company's common shares
at the rate of $.10 per share for a maximum 390,000 shares. These loans were
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converted on April 2, 1999. Capital of $190,000 was raised pursuant to a private
placement of our securities in April, 1999. Finally, certain of the Company's B
Warrants were also purchased, resulting in an additional $8,500 paid to the
Company.
In April, 1999, the Company entered into a one (1) year employment
agreement with its Chief Financial Officer, in which the Company agreed to pay
compensation in the form of 60,000 shares of the Company's common stock at the
rate of 5,000 shares per month. The shares have been issued and are being held
in escrow by the Company, subject to the monthly disbursements. The expense will
be accounted for on the financial statement as consultation fees. At May 31,
1999, ten thousand (10,000) shares were disbursed to the Chief Financial
Officer, and compensation of $10,000 for services have been recorded in the
financial statements as consultation fees at F12.
Our plan to achieve profitability anticipates the establishment of a
marketing operation in the following markets by the end of the 1999 fiscal
year.-
*Florida: West Palm Beach, Ft. Lauderdale, Orlando, Jacksonville,
Tampa, Gainesville
*North Carolina: Charlotte, Raleigh
*Pennsylvania: Pittsburgh, Philadelphia
*Ohio: Columbus
*Tennessee: Memphis, Nashville
*Illinois: Chicago
*Michigan: Detroit
*Texas: Austin, Dallas, Houston
*Massachusetts: Boston
*New York: Long Island
We intend to have Area Directors with sales persons in each market
area. The primary source of revenue will be derived from the sales of image
sites. Income is also anticipated from on-line product sales. Once our presence
is established in a number of market areas, we intend to offer the advertising
of unaffiliated web sites.
There can be no assurance that this goal will be timely achieved, if at
all. Currently, we have established our marketing in the West Palm Beach area,
and expect to be up and running in Charlotte and Gainesville by the end of June,
1999. It is anticipated that the Company's capital along with revenues generated
from the sale of subscriptions to local businesses in these markets, will be
sufficient to satisfy overhead demands plus yield a small profit. If this plan
is successful, we expect to file an initial public offering sometime during the
year 2000, the funds from which will be employed to expand our markets, increase
marketing and take advantage of improving technology. There can, however, be no
assurance when the Company will be profitable, if at all.
The Company's current cash condition (assuming no additional revenues)
will expire in approximately three months. In the short term (approximately
twelve months), the Company anticipates its capital requirements to be
approximately $300,000, including $50,000 for further development of the
Company's web site and for advertising our sales program, i.e., the
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marketing network. In the long term, the Company will need substantial funding
(sourced from the IPO financing) - estimated to be between $2,000,000 and
$5,000,000 - to establish its marketing networks. This will enable the Company
to offer its sales program to businesses when we have an established presence.
Based upon available funding, the first priority is the further development of
the Company's web site. Second, is the establishment of the marketing networks;
and third is the advertising of the sales programs.
Currently, the Company's product research and development will be
devoted to the continued upgrading of information on its web site; enhancing the
design of the web site to maximize visitor interest; and making it visitor
friendly. The Company will also design more links to client image sites in
addition to the current "zip code" method. The Company does not expect to
purchase or sell any plant or significant equipment nor does it expect any
immediate change in the number of its employees. As the Company opens new market
areas, however, additional commissioned marketing personnel will be engaged.
The development of Internet products and services is in constant flux.
We are constantly reviewing our services. For example, we continuously revamp
our web-site in order to improve its marketability, accessibility to visitors
and speed of operation. On the technical side of our business, it is imperative
that we maintain a vigil on all new developments which may affect our
operations.
One of our largest capital expenditures involves the purchase of state
of the art computer equipment. Enhancements and replacements of equipment is
necessary if we are to maintain a competitive force in this sector of the
Internet market. While we have no current plans to make significant equipment in
the near future, the changing technology may require unanticipated purchases.
As we explore and expand into new markets, it will be necessary for us
to increase our sales force and operations staff. Currently, there are three (3)
employees involved in sales. This will increase by seven (7) employees by the
time we establish the twenty-one targeted markets.
Inflation has not had a material effect upon our operations to date. In
the event the rate of inflation should accelerate in the future, it is expected
that costs in connection with the provision by the Company of its services and
products will increase, and, to the extent such increased costs are not offset
by increased revenues, the operations of the Company may be adversely affected.
The Year 2000 problem concerns the inability of certain computer
systems to appropriately recognize the Year 2000 when the last two digits of the
year are entered in the date field. The Company's date critical functions
related to the Year 2000 and beyond, such as sales, purchasing, inventory
control, merchandise, planning and replenishment, facilities, and financial
systems, may be adversely affected unless these computer systems are or become
Year 2000 compliant. Moreover, variability of definitions of "compliance" with
the Year 2000 and of different combinations of software, firmware, and hardware
may lead to lawsuits against the Company. The outcomes of any such lawsuits and
the impact on the Company are not estimable at this time. The Year 2000 may
affect the Company's internal systems, however management
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believes the effect will be minimal as the Company purchased the majority of its
hardware systems within the last year and a half. Management does not believes
it will incur additional out of pocket costs associated with Year 2000. The
Company has assessed the readiness of its systems and those of its licensees for
handling the Year 2000 and finds them to be compliant. However, there can be no
guarantee that the systems of other companies on which the Company's operations
rely will be timely converted and will not have an adverse effect on the
Company's operations. Any Year 2000 compliance problems of the Company could
have a material adverse affect on the Company's business, results of operations
and financial condition.
The Company's Year 2000 compliance is partially dependent upon key
third parties also being Year 2000 compliant on a timely basis. The Company
could be adversely affected by the Year 2000 problem if computer systems of
third parties such as banks, suppliers and others with whom the Company does
business fail to address the Year 2000 problem successfully. For example, the
Company may be adversely affected by, among other things, warranty and other
claims made by the Company's suppliers related to product failures caused by the
Year 2000 problem, the disruption or inaccuracy of data provided to the Company
by non-Year 2000 compliant third parties, and the failure of the Company's
service providers to become Year 2000 compliant.
The Company's management believes that the purchasing patterns of
customers and prospective customers might be affected by Year 2000 issues. Many
companies may need to modify or upgrade their information systems to address the
Year 2000 problem. The effects of this issue and of the efforts by other
companies to address it are unclear. Many companies are expending significant
resources to correct their current software systems for Year 2000 compliance.
These expenditures might result in reduced funds available to purchase services
and products such as those that the Company offers.
The Company has no reason to believe that its exposure to the risks of
lack of supplier and customer Year 2000 readiness is any greater than the
exposure to such risks that affect its competitors generally. However, if a
significant number of the Company's key suppliers and customers experience
business disruptions as a result of their lack of Year 2000 readiness, their
problems could have a material adverse effect on the financial position and
operations of the Company. In addition, if all Year 2000 issues within the
Company's business are not properly identified, there can be no assurance that
the Year 2000 issue will not have a material adverse effect on the Company's
results of operations or financial position.
The Company is not exposed to material risk based on interest rate
fluctuation, exchange rate fluctuation, or commodity price fluctuation.
-11-
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTY
The Company currently maintains its executive and administrative
offices at 224 Datura Street, Suite 402, West Palm Beach, Florida 33401. The
premises are leased from a non-affiliated party. It consists of approximately
six hundred (600) square feet under a one (1) year lease ending October 31, 1999
at an annual rental of $4,134 with no right of renewal. The Company also leases
approximately 2,400 square feet on a month to month basis from a non-affiliate
at 324 Datura Way for $1,800 per month. These premises are used for its
marketing activities. In the event these locations are not renewed, the Company
does not expect difficulty in relocating to suitable space. The Company believes
that these facilities are adequate for its current needs and anticipated future
needs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of May 3, 1999, with
respect to the number of shares of Common Stock (the only class of stock issued
by the Company) beneficially owned by individual directors, by all directors and
officers of the Company as a group, and by persons known to own more than 5% of
the Company's Common Stock. The Company has no other class of voting stock
outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNER PERCENTAGE OF CLASS
- ------------------- ---------------------------- --------------------------
(All security holders) Shares prior to Shares after Prior to After
exercise of exercise of exercise of exercise of
Warrants Warrants Warrants Warrants(3)
-------------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Derek Dunn and Millie Dunn(4)
6252 Moneile Dr.
Austin, TX 78729 500,000 11.34
Julien S. Ferretti (1)
8994 Wendy Lane
West Palm Beach, FL 33411 30,000 280,000 .68 5.14
Jennifer Dunn(4)
1111 New Parkview Place
West Palm, Beach, FL 350,000 7.94
Christopher Dunn(4)
113 Cortes Ave.
Royal Palm Beach, FL 350,000 7.94
Jeanette Dunn(4)
1111 New Parkview Place
West Palm Beach, FL 1,100,000 24.94
Kevin Dunn(4)
1111 New Parkview Place
West Palm, Beach, FL 350,000 7.94
</TABLE>
-12-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Lynn Dunn, Jr.(4)
196 McGregor Drive
McMurray, PA 350,000 7.94
Fidelity MFG Inc.(1)
8994 Wendy Lane
West Palm Beach, FL 400,000 9.07
Regal Advisors Inc.(2)
PO Box 3174
Tortola, British Virgin Isds. 300,000 450,000 6.8 8.26
STJ Trust c/o Selma Dresner, Tee.(2)
PO Box 15515
West Palm Beach, FL 150,000 3.4
U.S. Realty Group, Inc.(2)
PO Box 15515
West Palm Beach, FL 220,000 4.99
EZ Mortgage Finance(2)
PO Box 15515
West Palm Beach, FL 250,000 5.67
</TABLE>
- --------------------------------------------------------------------------------
(1) Fidelity MFG, Inc. is controlled and its securities are beneficially owned
by Julian Ferretti.
(2) STJ Trust, U.S. Realty Group, Inc. and EZ Mortgage Finance, Inc. are under
the common control of Edward Muller. STJ Trust and U.S. Realty are owned by
members of Mr. Muller's family. EZ Mortgage is 80% owned by U. S. Realty Group,
Inc.
(3) The Warrants may not be exercised until July 23, 2000, and shall expire on
or before the close of business two years thereafter, July 23, 2002, unless
extended.
(4) Jennifer, Christopher, Kevin and Lynn Dunn Jr. are siblings to Derek Dunn,
the Company's president. Millie Dunn is Derek's wife. Jeanette Dunn is their
mother.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNER PERCENTAGE OF CLASS
- ------------------- -------------------------------- -----------------------------
(Management) Shares prior to Shares after Prior to After
exercise of exercise of exercise of exercise of
Warrants Warrants Warrants Warrants (2)
---------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Derek Dunn(3)
6252 Moneile Dr.
Austin, TX 78729 500,000 11.34
Julien S. Ferretti (1)
8994 Wendy Lane
West Palm Beach, FL 33411 430,000 680,000 9.75 12.48
Jennifer Dunn(3)
1111 New Parkview Place
West Palm Beach, FL 350,000 7.94
All Officers &Directors
as a Group
(six persons) 1,330,000 (4)(5) 30.16
</TABLE>
-13-
<PAGE>
- --------------------------------------------------------------------------------
(1) Includes 400,000 shares owned by Mr. Ferritti's corporation, Fidelity MFG,
Inc.
(2)The Warrants may not be exercised until July 23, 2000, and shall expire on or
before the close of business two years thereafter, July 23, 2002, unless
extended.
(3) Derek and Jennifer Dunn, Jr. are siblings.
(4) Includes 60,000 shares payable at 5000 shares per month to Arvind B.
Ajinkya, the CFO.
(5) Does not include 1,100,000 shares issued to Jeanette Dunn, the wife of Lynn
Dunn, for which the latter disclaims beneficial ownership.
The Company is not aware of any arrangement which might result in a
change in control in the future.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following sets forth certain information with respect to directors
and executive officers of the Company with the year in which each director's
term expires in parentheses.
Position with
Name Age the Company Term
- ---- --- ----------- ----
Derek G. Dunn 32 President, Director 1999-2000
Julian S. Ferretti 53 Chairman 1999-2000
James E. Devey 29 Vice-President 1999-2000
Jennifer Dunn 28 Secretary 1999-2000
Lynn Dunn 61 Vice-President-Operations, 1999-2000
Director
Arvind B. Ajinkya 54 Treasurer, CFO 1999-2000
Derek G. Dunn has been the President of the Company since its
incorporation in 1998. Mr. Dunn has been a software engineer and programmer for
the past twelve years. He has performed computer related tasks with prior
employers since 1986. From 1986 to 1994 Mr. Dunn was employed as systems
administrator with Freedom Travel in West Palm Beach, Florida. From 1994 to
1996, he was an IBM software consultant and technical lead to Keane Inc. in Boca
Raton, Florida. In this capacity he provided on-line technical support for IBM
corporate and domestic accounts and supervised co-workers in solving
installation issues. Mr. Dunn was a systems analyst for AmSouth Hoover AL/CDI
Inc. in Atlanta from 1997 to April 1998. Mr. Dunn was a software engineer and
programmer for Healthway Interactive in Austin, Texas from April 1998 to 1999.
Mr. Dunn resigned from Healthway Interactive on May 1, 1999 and is employed with
the Company on a full-time basis. Mr. Dunn will be responsible for the overall
operations of the Company.
Julian S. Ferretti is the Company's Board Chairman. Since 1989 to the
present he has been the president of Fidelity Manufacturing Co., a wholesale
food broker. In addition to being Board Chairman, Mr. Feretti will be involved
with corporate acquisitions.
-14-
<PAGE>
James E. Devey is Vice-President of the Company and will be in charge
of sales. Prior to joining the Company, Mr. Devey was employed as a commodity
salesman for Infinity Trading Group, from January 1998 to April 1998. From 1996
to 1998 he was in the restaurant business as an owner/operator and managed a
restaurant from September 1995 to December 1995. From January 1991 to December
1994 Mr. Devey attended Palm Beach Community College.
Jennifer A. Dunn has been the Company's Secretary since 1998. She is
the sister of the Company's president, Derek Dunn. Prior to joining the Company,
Ms. Dunn was employed by Freedom Travel from 1987 to 1990 as its office manager
where she also created graphic designs for promotional work. From 1990 to 1992
she was employed by Sign-A-Rama as manager. From 1992 to 1994 Ms. Dunn was
employed as a secretary by Spector Marketing, from 1994 to 1996 she was a
secretary with the Simmons Veterinary Clinic and from 1996 to 1998, once again,
with Sign-A-Rama. Ms. Dunn was educated at South College in West Palm Beach,
Florida but did not receive a degree. In 1992 and 1990 she attended the ITT
Institute and System One, respectively, for computer studies. Ms. Dunn will be
responsible for maintaining corporate records and minutes at Board of Director
meetings.
Lynn Dunn is the father of Derek and Jennifer Dunn. Mr. Dunn is a
Vice-President in charge of the Company's operations. For the past 28 years he
has been involved with businesses involving new technologies and marketing
concepts. From 1990 to 1998 he has acted as an independent marketing consultant.
In 1986, Mr. Dunn founded Freedom Travel Network, which established the first
full-service computer linked travel network, and was involved in the management
of the company until 1990. From 1978 to 1985, Mr. Dunn was president of Cordaq
Marketing Group, a company which managed trade shows for U.S. owned technology
companies in Taiwan, pursuant to a U.S government contract.
Arvind B. Ajinkya is the Company's Treasurer and Chief Financial
Officer. From 1986 to the present, Mr. Ajinkya owned and operated A.J.'s
International Inc., a public accounting firm. Between 1981 and 1986 he was a
vice-president with Fidelity Federal Savings of Florida and acted in the
position of internal auditor. In 1964 he graduated from Bombay University in
India with a Bachelor of Commerce degree. He was licensed as a Chartered
Accountant in 1964 by the Institute of Chartered Accountants of India, and holds
other professional certificates as well.
Directors serve for a term of one year or until their successors are
elected and qualified.
Executive officers are appointed by and serve at the will of the Board
of Directors. As described above, there are family relationships among the
directors and executive officers of the Company.
-15-
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the
company to the Chief Executive Officer and the most highly compensated Executive
Officers and key employees, whose total remuneration exceeded $100,000 for
services rendered in all capacities to the company during the last three
completed fiscal years.
Regulation S-B
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
a) b) c) d) e) f) g) h) i)
Other Restricted Securities All
Name & Annual Stock Underlying Other
Principal Bonus($) Compen- Award(s) Options/ LTIP Compensation
Position Year Salary($) (In 000$) sation($) ($) SARs(#) Payouts($) ($)
- -------- ---- --------- ---------- ---------- ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Derek Dunn 1999 30,000 5% of 1,000 N/A N/A N/A N/A N/A N/A
Pres./Director 4% of 1,000-2,000
3% of 2,001-3,000
2% of 3,001-4,000
1% over 4,000
Lynn Dunn 1999 30,000 5% of 1,000 N/A N/A N/A N/A N/A
VPres./Diector 4% of 1,001-2,000
3% of 2,001-3,000
2% of 3,001-4,000
1% over 4,000
Jennifer Dunn 1999 -0- -0- N/A N/A N/A N/A N/A
Secretary
Arvind B. Ajinkya 1999 (1) -0- N/A N/A N/A N/A N/A
Treasurer/CFO
</TABLE>
- --------------------------------------------------------------------------------
(1) Compensation under April 14, 1999 written employment agreement to be 5000
shares of restricted common stock per month for one year.
-16-
<PAGE>
There are no employment agreements with any other executive officer or employee.
Director Compensation
Directors currently receive no cash compensation for their services in that
capacity. Reasonable out of pocket expenses may be reimbursed to directors in
connection with attendance at meetings.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January, 1999, bridge loans of $39,000 were obtained from five (5)
non-affiliated lenders ("Lenders") which were used for the expenses relating to
our private placement, and for other immediate working capital needs. The
Lenders received convertible notes which required the loans be repaid within
twelve (12) months or, at the option of the Lenders, be converted into the
Company's common shares at the rate of $.10 per share for a maximum 390,000
shares. These notes were converted in April 1999.
In January 1999, we engaged U.S. Realty Group, Inc. as a consultant
regarding the management and operations of the Company, future financings, and
for potential acquisitions. The consultant is to devote up to one day per month
at the request of the Company for advice and assistance. In exchange for the
consultant's services we have granted the consultant options to purchase four
hundred thousand (400,000) shares of our common stock at a price of $.01 per
share An identical consulting agreement was entered with Fidelity MFG, Inc. for
400,000 options. Fidelity MFG, Inc. is wholly-owned by Julien Ferretti, the
Company's board chairman. Mr. Ferretti received an additional 30,000 options
also exercisable at $.01 per share, upon joining the Company. These 830,000
options were exercised in April, 1999.
In addition, the Company has agreed to pay these consultant(s) additional
compensation, if by virtue of consultant's introduction, the Company consummates
a financing transaction. Consultant(s) shall be entitled to a finder's fee of 3%
on the first $1,000,000, 2% of the next $1,000,000 and 1% of the next
$1,000,000.
On April 5, 1999, the Company issued B Warrants in the following amounts at
$0.01 per warrant to consultants and to others for services rendered to the
Company:
-17-
<PAGE>
David Brandes 200,000
E-Z Mortgage Finance Co. 300,000(1)
Julian Ferretti 250,000
Doug Meyers 50,000
Sherri Simpson 50,000
- --------------------------------------------------------------------------------
(1)E-Z Mortgage is 80% owned by U.S. Realty Group, Inc.
The Company has issued a total of 1,040,000 warrants and B warrants. The
options and warrants (and their underlying shares) were valued at $0.01 per
share at the time of issuance. The total consultation fees expensed were
$12,093.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue six million (6,000,000) shares of Common
Stock, $.01 par value per share of which 4,410,000 are outstanding as of May 3,
1999. The holders of Common Stock have one vote per share on all matters
(including election of directors) without provision for cumulative voting. Thus,
except as is otherwise required by law, holders of more than 50% of the shares
voting for the election of directors can elect all of the directors, and approve
any matter required to be voted on by the shareholders. The Common Stock is not
redeemable and has no conversion or preemptive rights. There are no sinking fund
provisions. In the event of liquidation of the Company, the holders of Common
Stock will share equally in any balance. Common stockholders are entitled to
receive dividends, as and when declared by the Board of Directors from funds
legally available therefrom. The Company has paid no cash or other dividends on
its Common Stock to date. The common shareholders are entitled to receive the
Company's assets remaining after payment of liabilities, proportionate to their
pro rata ownership of the outstanding Common Stock. All common shares now
outstanding are, and the shares to be outstanding following completion of this
Offering, will be fully paid and non-assessable.
We have issued Warrants to investors in our private placement, and B
Warrants to certain consultants and others in exchange for services. The
warrants are redeemable by the Company, on 30 days written notice at a price of
$.0001 per Warrant, beginning one year from the Extended Termination Date of
this Offering, i.e., July 23, 1999, subject to prior exercise, should the common
stock trade at a closing bid price of at least $3.00 per share for twenty (20)
consecutive trading days. The notice of redemption may not be given prior to
July 23, 2000. In the event that the Company gives notice of redemption of the
Warrants, the holder would be forced to either exercise his Warrants or accept
the redemption price. The Warrants may not be exercised for one (1) year from
July 23, 2000, and shall expire on or before the close of business two (2) years
thereafter, July 23, 2002, unless extended. The Company may also offer up to
one million (1,000,000) B Warrants to consultant(s), service providers and/or
registered broker-dealers at a per warrant price of $.01. The B Warrants are
exercisable and redeemable under the same terms as the Warrants.
-18-
<PAGE>
The warrants will be issued in registered form. The warrants do not confer
upon the holders any voting, preemptive or other rights as shareholders of the
Company.
The exercise price of the warrants and the number and kind of shares of
Common Stock to be obtained upon exercise of the warrants are subject to
adjustment under certain circumstances, including stock-splits, stock dividends,
any subdivision, combination or recapitalization of the Company's common stock,
or the sale of all or substantially all of the Company's assets or the merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving Company.
No fractional shares will be issued upon the exercise of the warrants. If,
however, a Warrant Holder exercised all of such holder's warrants, the Company
will pay to such Warrant Holder an amount in cash based upon the then fair value
of the fractional interest of the Company's common stock as determined by the
Company in lieu of issuing any fractional shares.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
There is no public market for our common shares. The Company has twenty-six
(26) total common shareholders. Holders of Common Stock are entitled to
dividends when, as, and if declared by the Board of Directors, out of funds
legally available therefor. The Company has never paid cash dividends on its
Common Stock. The Board of Directors does not anticipate paying cash dividends
in the foreseeable future as it intends to retain future earnings to finance the
growth of the Company's businesses. The payment of future cash dividends will
depend on such factors as earnings levels, anticipated capital requirements, the
operating and financial condition of the Company and its subsidiaries and such
other factors that the Board of Directors of the Company may deem relevant.
ITEM 2. LEGAL PROCEEDINGS
There are no legal proceedings presently pending or threatened against the
Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes or disagreements with accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
At the time of the Company's formation in October 1998, we issued 3,000,000
shares of common stock to Derek Dunn in exchange for $30,000 and services
rendered. This transaction was in reliance on Section 4(2) of the Securities Act
of 1933 as it did not involve a public offering.
-19-
<PAGE>
In January 1999, $39,000 of bridge loans were advanced by five (5) lenders
("Lenders"). The Lenders received convertible notes which required the loans be
repaid within twelve (12) months or, at the option of the Lenders, be converted
into the Company's common shares at the rate of $.10 per share for a maximum
390,000 shares. On April 2, 1999, the Lenders exercised their conversion rights.
This transaction was in reliance on Regulation D, Rule 504.
In January 1999, we engaged U.S. Realty Group, Inc. as a consultant
regarding the management and operations of the Company, as well as future
financings, and acquisitions. The consultant is to devote up to one day per
month at the request of the Company for advice and assistance. In exchange for
the consultant's services, we have granted the consultant options to purchase
four hundred thousand (400,000) shares of our common stock at a price of $.01
per share. These options were exercised on March 31,1999. An identical
consulting agreement was entered with Fidelity MFG, Inc. for 400,000 options.
Fidelity MFG is solely owned by Julien Ferretti, the Company's board chairman.
We also issued Mr. Ferretti an additional 30,000 options exercisable at $.01 per
share, upon joining the Company. These options were exercised on April 2, 1999.
These transactions were in reliance on Regulation D, Rule 504.
On March 25, 1999, we commenced a private placement of 300,000 Units, Each
Unit consists of one (1) share of common stock, $.01 par value, and one (1)
redeemable Warrant, which when exercised entitles the holder to one (1) share of
common stock at an exercise price of one ($1.00) dollar, subject to adjustment
under certain circumstances. The Warrants are redeemable by the Company at any
time after one year from July 23, 2000, on thirty (30) days written notice
(which notice may not be given prior to the one year period) at a price of
$.0001 per Warrant, subject to prior exercise, should the common stock trade at
a closing bid price of at least three ($3.00) dollars per share for twenty (20)
consecutive trading days. The Warrants may not be exercised for one (1) year
from July 23, 2000, and shall expire on or before the close of business two (2)
years thereafter, July 23, 2002, unless extended. To date we have sold 190,000
Units resulting in net proceeds to the Company of $190,000. This private
placement was in reliance on Regulation D, Rule 504.
On April 5, 1999, the Company issued B Warrants in the following amounts at
$0.01 per warrant and for services rendered to the Company, in reliance on
Regulation D, Rule 504:
David Brandes 200,000
E-Z Mortgage Finance Co. 300,000
Julian Ferretti 250,000
Doug Meyers 50,000
Sherri Simpson 50,000
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation of the Company allow for the indemnification
of directors and officers to the fullest extent permitted by Florida law. Under
a provision in the Articles of Incorporation, the Company will indemnify and pay
the expenses of any person who is or was made, or threatened to be made, a party
to an action or proceeding by reason of the fact that such
-20-
<PAGE>
person is or was a director or officer of the Company or is or was serving at
the request or with the prior approval of the Company as a director or officer
of another corporation, against any liability asserted against such person and
incurred by such person in any capacity arising out of that person's status as
such.
Insofar as indemnification for liabilities arising out of the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provision, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with any securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
2-a Articles of Incorporation
2-b Articles of Amendment to Articles of Incorporation
2-c By-laws
6-a Employment Agreement between Netgen 2000 and Arvind Ajinkya
6-b Financial Consulting Agreement between
Netgen 2000 and US Realty Group
6-c Financial Consulting Agreement between Netgen 2000 and Fidelity MFG
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
NETGEN 2000, INC.
a Florida corporation
Date: August 2, 1999 By: /s/
-----------------------------
Derek G. Dunn, President
Chief Executive Officer
-21-
<PAGE>
PART F/S
FINANCIAL STATEMENTS
The following financial statements are filed as part of this
registration statement on Form 10-SB/A.
Index to Financial Statements:
Table of Contents ............................................F2
Independent Auditors Report for the period
October 22, 1998 (inception) to December 31, 1998 ............F3
Balance Sheet as of December 31, 1998 ........................F4
Statement of Income for the period
October 22, 1998 (inception) to December 31, 1998 ............F5
Statement of Stockholders' Equity for the period
October 22, 1998 (inception) to December 31, 1998 ............F6
Statement of Cash Flows for the period
October 22, 1998 (inception) to December 31, 1998 ............F7
Notes to Financial Statements, December 31, 1998 .............F8 - F9
Table of Contents to Unaudited Financial Statements
For the period January 1, 1999 to May 31, 1999 ...............F10
Balance Sheet as of May 31, 1999 .............................F11
Statement of Income for the period
January 1, 1999 to May 31, 1999 ..............................F12
Statement of Stockholders' Equity for the period
January 1, 1999 to May 31, 1999 ..............................F13
Statement of Cash Flows for the period
January 1, 1999 to May 31, 1999 ..............................F14
Notes to Financial Statements May 31, 1999 ...................F15 - F16
F1
<PAGE>
NETGEN 2000, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 1998
TABLE OF CONTENTS
Page
----
INDEPENDENT AUDITOR'S REPORT F3
BALANCE SHEET F4
STATEMENT OF INCOME F5
STATEMENT OF STOCKHOLDERS' EQUITY F6
STATEMENT OF CASH FLOWS F7
NOTES TO FINANCIAL STATEMENTS F8
F2
<PAGE>
Mark Escoffery, P.A.
Certified Public Accountant
4241-A Northlake Boulevard Tel (561) 627-1404
Palm Beach Gardens, FL 33410 Fax (561) 627-3844
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Netgen 2000, Inc.
224 Datura Street, Suite 402
West Palm Beach, FL 33401
I have audited the accompanying Balance Sheet of Netgen 2000, Inc. (a
Development Stage Company) as of December 31, 1998 and related Statements of
Income, Stockholders' Equity and Cash Flows for the period October 22, 1998
(inception) to December 31, 1998. These financial statements are the
responsibility of the Company's Management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards,
those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Netgen 2000, Inc. (a Development
Stage Company) as of December 31, 1998, and the results of its operations and
its cash flows for the period then ended in conformity with generally accepted
accounting principles.
/s/ Mark Escoffery, P.A.
------------------------
Palm Beach Gardens
Florida
July 27, 1999
MEMBER: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS AND FLORIDA INSTITUTE
OF CERTIFIED PUBLIC ACCOUNTANTS
F3
<PAGE>
NETGEN 2000, INC.
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
- ------
Cash $ -
Property & Equipment 3,500
-------
TOTAL ASSETS $ 3,500
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities $ -
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value
6,000,000 shares authorized
3,000,000 shares issued and
outstanding 30,000
Additional Paid-In Capital 700
Retained Deficit (27,200)
-------
Total Stockholders' Equity 3,500
-------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 3,500
=======
See Notes to Financial Statements
F4
<PAGE>
NETGEN 2000, INC.
(A Development Stage Company)
STATEMENT OF INCOME
FOR THE PERIOD
OCTOBER 22, 1998 (INCEPTION) TO DECEMBER 31, 1998
TOTAL REVENUE $ -
EXPENSES:
Start Up Costs 27,000
--------
TOTAL EXPENSES 27,000
--------
NET LOSS $(27,000)
========
See Notes to Financial Statements
F5
<PAGE>
NETGEN 2000, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD
OCTOBER 22, 1998 (INCEPTION) TO DECEMBER 31, 1998
ADDITIONAL
COMMON STOCK PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
------ ------ ------- --------- -----
Beginning
Balance - $ - $ - $ - $ -
Issuance of
Common Stock 3,000,000 30,000 700 - 30,700
Net (Loss) - - - (27,200) (27,200)
--------- ------- ---- -------- ---------
Balance at
End of Year 3,000,000 $30,000 $700 $(27,200) $ (3,500)
========= ======= ==== ======== ========
See Notes to Financial Statements
F6
<PAGE>
NETGEN 2000, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD
OCTOBER 22, 1998 (INCEPTION) TO DECEMBER 31, 1998
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss $(27,200)
--------
NET CASH U8ED FOR OPERATING ACTIVITIES (27,000)
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property & Equipment (3,500)
--------
NET CASH USED BY INVESTING ACTIVITIES (3,500)
CASH FLOWS FROM FINANCING ACTIVITIES:
Equity Contributions and net
cash Provided by Financing
Activities 30,700
--------
NET INCREASE IN CASH -
CASH AT OCTOBER 22, 1998 -
--------
CASH AT DECEMBER 31, 1998 $ -
========
See Notes to Financial Statements
F7
<PAGE>
NETGEN 2000, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Netgen 2000, Inc. ("the Company") was incorporated in the State of
Florida on October 22, 1998. The Company specializes in designing,
creating and marketing cost effective internet web and image sites,
products and custom software.
NOTE B - DEVELOPMENT STAGE OPERATIONS
From the inception of the Company on October 22, 1998 to December 31,
1998 the operations of the Company were devoted primarily to developing
a corporate web site, raising capital, obtaining financing, marketing
and administrative functions.
The Company was capitalized initially with a $30,000 investment from
its Founder and Sole Stockholder at December 31, 1998.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and at December 31, 1998
comprised of the following:
Computer Equipment $ 3,500
=======
NOTE D - START UP COSTS
Start Up Costs consist of the following:
Organization Costs $ 6,300
Software Design 8,200
Product Costs 12,700
-------
$27,200
=======
F8
<PAGE>
NETGEN 2000, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE D - START UP COSTS (Continued)
In accordance with Statement of Position 98-5 Reporting on the Costs of
Start-Up Activities effective for fiscal year after December 15, 1998
the start up costs have been expensed.
NOTE E - SUBSEQUENT EVENTS
In January 1999 loans of $39,000 were obtained from five (5) non
affiliated lenders and used for private placement and working capital
purposes. The lenders received convertible notes which required the
loans to be repaid within twelve (12) months or at the option of the
lenders be converted into common stock at $0.10 per share. The lenders
exercised their options and received 390,000 shares in April 1999.
Between January and April 1999 the Company granted consultant options
of 400,000 shares at an option price of $.01 per share to a management
company in exchange for services to be rendered.
In addition the Company entered into a consulting agreement with a
company controlled by the Chairman of the Board of Directors. The
agreement granted the Company options of 400,000 shares of common stock
in exchange for consulting services. In addition the Chairman received
an option to purchase 30,000 shares on joining the Company. The options
were exercised in April 1999 at $0.01 per share.
During 1999 the Company authorized a total of 2,000,000 Warrants and B
Warrants at a par value of $0.01. At May 31, 1999 the Company had
issued 1,040,000 Warrants and B Warrants which has increased Paid-In
Capital by $10,400. These Warrants were issued to consultants for
services to be rendered to the Company. The Warrants expire on July 23,
2002.
In April 1999, the Company issued 60,000 shares to the Chief Financial
Officer in exchange for services rendered under a one (1) year
employment agreement.
NOTE F - RELATED PARTY TRANSACTIONS
See Note E.
F9
<PAGE>
NETGEN 2000, INC.
(Unaudited)
(A Development Stage Company)
FINANCIAL STATEMENTS
MAY 31, 1999
PAGE
----
BALANCE SHEET F11
STATEMENT OF INCOME F12
STATEMENT OF STOCKHOLDERS' EQUITY F13
STATEMENT OF CASH FLOWS F14
NOTES TO FINANCIAL STATEMENTS F15
F10
<PAGE>
NETGEN 2000, INC.
(Unaudited)
(A Development Stage Company)
BALANCE SHEET
MAY 31, 1999
ASSETS
- ------
Cash and Cash Equivalents $109,030
Property & Equipment 8,385
Deposits 2,000
--------
TOTAL ASSETS $119,415
========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities $ -
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value
6,000,000 shares authorized
4,420,000 shares issued and
outstanding 54,100
Additional Paid-In Capital 203,600
Retained Deficit (138,285)
--------
Total Stockholders' Equity 119,415
--------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $119,415
========
See Notes to Financial Statements
F11
<PAGE>
NETGEN 2000, INC.
(Unaudited)
(A Development Stage Company)
STATEMENT OF INCOME
FOR THE PERIOD
JANUARY 01, 1999 TO MAY 31, 1999
REVENUE:
Dividends $ 54
TOTAL REVENUE $ 54
EXPENSES:
Office Supplies $ 1,965
Graphic Design Exp. 6,858
Website/Internet Service 6,787
Secretarial Services 6,590
Professional Fees 30,275
Consultation Fees 22,093
Rent 5,570
Telephone 3,499
Research/Production Exp. 3,480
Equipment Rental 431
Contract Labor 15,675
Telemarketing/Associate Prog. 7,492
Travel & Seminar 364
Dues 60
-------
TOTAL EXPENSES 111,139
---------
NET LOSS $(111,085)
=========
See Notes to Financial Statements
F12
<PAGE>
NETGEN 2000, INC.
(Unaudited)
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD
JANUARY 01, 1999 TO MAY 31, 1999
ADDITIONAL
COMMON STOCK PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
------ ------ ------- --------- -----
Beginning
Balance 3,000,000 $30,000 $ 700 $ (27,200) $ 3,500
Issuance of
Common Stock 1,420,000 24,100 192,500 - 216,600
Issuance of
Warrants - - 10,400 - 10,400
Net (Loss) - - - (111,085) (111,085)
--------- ------- ------- --------- --------
Balance at
May 31, 1999 4,420,000 $54,100 $203,600 $(138,285) $119,415
========= ======= ======== ========= ========
See Notes to Financial Statements
F13
<PAGE>
NETGEN 2000, INC.
(Unaudited)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD
JANUARY 01, 1999 TO MAY 31, 1999
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss and net cash used in
Operating Activities $(111,085)
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Purchase of Property & Equipment (4,885)
Amounts used for deposits (2,000)
---------
NET CASH USED IN INVESTING ACTIVITIES (6,885)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Issuance of Common Stock 216,600
Issuance of Warrants 10,400
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 227,000
NET INCREASE IN CASH 109,030
CASH AT JANUARY 01, 1999 -
---------
CASH AT MAY 31, 1999 $ 109,030
=========
See Notes to Financial Statements
F14
<PAGE>
NETGEN 2000, INC.
(Unaudited)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
--------------------
Netgen 2000, Inc. ("the Company") was incorporated in the State of
Florida on October 22, 1998. The Company specializes in designing,
creating and marketing cost effective internet web and image sites,
products and custom software.
Cash and Cash Equivalents
-------------------------
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less
to be cash equivalents.
NOTE B - DEVELOPMENT STAGE OPERATIONS
From the inception of the Company on October 22, 1998 to May 31, 1999
the operations of the Company were devoted primarily to developing a
corporate web site, raising capital, obtaining financing, marketing and
administrative functions.
The Company was capitalized initially with a $30,000 investment from
its Founder and Sole Stockholder at December 31, 1998.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and at May 31, 1999 is
comprised of the following:
Computer Equipment $7,980
Furniture & Fixtures 405
------
$8,385
======
F15
<PAGE>
NETGEN 2000, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE D - STOCK OPTIONS AND WARRANTS
In January 1999 loans of $39,000 were obtained from five (5) non
affiliated lenders and used for private placement and working capital
purposes. The lenders received convertible notes which required the
loans to be repaid within twelve (12) months or at the option of the
lenders be converted into common stock at $0.10 per share. The lenders
exercised their options and received 390,000 shares in April 1999.
Between January and April 1999 the Company granted consultant options
of 400,000 shares at an option price of $.01 per share to a management
company in exchange for services to be rendered.
During 1999 the Company authorized a total of 2,000,000 Warrants and B
Warrants at a par value of $0.01. At May 31, 1999 the Company had
issued 1,040,000 Warrants and B Warrants which has increased Paid-In
Capital by $10,400. These Warrants were issued to consultants for
services to be rendered to the Company. The Warrants expire on July 23,
2002.
Consulting fee expenses relating to these options and warrants are
approximately $12,000 for the period to May 31, 1999.
NOTE E - RELATED PARTY TRANSACTIONS
The Company entered into a consulting agreement with a company
controlled by the Chairman of the Board of Directors. The agreement
granted the Company options of 400,000 shares of common stock in
exchange for consulting services. In addition the Chairman received an
option to purchase 30,000 shares on joining the Company. The options
were exercised in April 1999 at $0.01 per share. Consulting expenses
relating to these options were approximately $5,000 for the period to
May 31, 1999.
In April 1999, the Company issued 60,000 shares to the Chief Financial
Officer in exchange for services rendered under a one (1) year
employment agreement. Five Thousand (5,000) shares are to be issued
monthly for services. At May 31, 1999 10,000 shares have been issued to
the Chief Financial Officer and compensation of $10,000 for these
services have been recorded in the financial statements.
F16
