U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A-3
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUER UNDER SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
ZIASUN TECHNOLOGIES, INC.
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Name of Small Business Issuer in Its Charter
NEVADA 84-1376402
- ---------------------------------- --------------------
(State or other Jurisdiction of (IRS Employer
of Incorporation or Organization) Identification No.)
000-27349
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SEC File No.
462 Stevens Avenue, Suite 106, Solana Beach, California 92075
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (619) 350-4060
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Securities to be registered pursuant to Section 12(b) of the Act:
NONE
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value Per Share
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Title of Class
<PAGE>
PART I.
Item 1. Description of Business
(a) Business Development
ZiaSun Technologies, Inc. (the "Company") was organized under the laws of
the State of Nevada on March 19, 1996, under the name "Carlisle Enterprises,
Inc." The Company was incorporated for the purpose of executive search and
recruitment of employees for businesses. The Company was initially authorized to
issue a total of 50,000,000 shares of common stock having a par value of $0.001
per share. A copy of the Company's initial Articles of Incorporation are
attached hereto and incorporated herein by reference. See the Exhibit Index,
Part III.
All shares set forth in this registration statement have been restated to
reflect (i) the 1-for-2 reverse split of the issued and outstanding common stock
of the Company which became effect September 10, 1998, and (ii) the 2-for-1
forward stock split of the issued and outstanding common stock of the Company
which became effective May 14, 1999.
At the Company's inception, the Board of Directors authorized the issuance
of 50,000 "unregistered" and "restricted" (post split adjusted) shares of its
common stock at a price of $0.10 per share to Jennifer C. McMinn, a former
executive officer of the Company.
Following the Company's incorporation, the Company, pursuant to an
exemption provided by Rule 504 of Regulation D and Section 4(6) of the
Securities Act of 1933 (the "1933 Act"), offered and sold an aggregate total of
750,000 (post split adjusted) shares of its common stock to approximately 50
non-U.S. investors at a price of $0.10 per share. The offering was completed
with the Company receiving aggregate proceeds of $75,000 before payment of
legal, accounting and printing expenses. On April 9, 1996, the Company's common
stock became quoted on the OTC Bulletin Board under the trading symbol "CLEP."
Following completion of this offering, the Company initially evaluated acquiring
exclusive North American distribution rights for beverage centers and other
products of Fountain Fresh International ("FFI"), a Utah corporation.
On January 6, 1997 the Company sold 5,000,000 (post split adjusted)
restricted shares of its common stock pursuant to Regulation S of the 1933 Act
to several non-U.S. foreign corporations, at a price of $0.10 per share, for
total cash consideration to the Company of $500,000.
On February 3, 1997, the Company sold 10,000,000 (post split adjusted)
restricted shares of its common stock pursuant to the exemption from
registration provided by Regulation S and Section 4(2) of the 1933 Act, to
several non-U.S. foreign corporations, at a price of $0.10 per share, for total
cash consideration to the Company of $1,000,000.
On April 17, 1997, the Company acquired all right, title and interest of
Katori Consultants, Ltd. ("Katori"), of that certain License Agreement between
Katori and FFI. Under the terms of that License Agreement, the Company, as the
Licensee acquired the exclusive USA distribution rights for the beverage centers
and other products of FFI. In exchange for these distribution rights, the
Company agreed to pay a total of $5,000,000 in annual payments through the year
2016, with a $15,000 royalty fee for the first year and a $30,000 royalty fee
for the second year. Copies of that License Agreement and Assignment of License
Agreement are attached hereto and incorporated herein by reference. See the
Exhibit Index, Part III.
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On April 29, 1997 the Board of Directors, in accordance with Section
78.315(2) of the Nevada Revised Statutes, authorized a company name change to
BestWay, USA. A copy of the Certificate of Amendment of the Articles of
Incorporation changing the name of the Company is attached hereto and
incorporated herein by reference. See the Exhibit Index, Part III.
During July 1997, the Company authorized the private placement of 1,000,000
(post split adjusted) shares of the Company's common stock at a price of $2.50
per share. The Company sold a total of 129,994 (post split adjusted) shares and
received $324,984 in cash from this private placement.
On September 2, 1997, the Company qualified to do business in the State of
Utah as a foreign corporation. On October 31, 1997, the Company qualified to do
business in the State of California as a foreign corporation. On September 4,
1998, following written consent of the Company's stockholders and in accordance
with Section 78.320(2) of the Nevada Revised Statutes, the Articles of
Incorporation were amended to: (a) authorize a 1-for-2 reverse split of issued
and outstanding common stock of the Company, and (b) change the name of the
Company to its current name "ZiaSun Technologies, Inc." The reverse split and
name change became effective upon the filing of the Certificate of Amendment of
the Articles of Incorporation with the Secretary of State of Nevada on September
10, 1998. A copy of the Certificate of Amendment of the Articles of
Incorporation effecting the reverse stock split and name change are attached
hereto and incorporated herein by this reference. See the Exhibit Index, Part
III.
During 1998, the Company identified numerous design problems with the
beverage centers manufactured by FFI which would require major redesign before
those beverage centers could be successfully reintroduced into the marketplace.
Accordingly, on December 30, 1997, the Company wrote down the License Agreement
between FFI and the Company from $3,296,234 to its then estimated value of
$50,000, resulting in a reduction of $1,703,766 which represented the ramaining
amount due to FFI for the license. The loss recognized on the write dowm of the
license asset was $3,246,234 in 1997. There was no write down of the license
asset in 1998. This reduction resulted from the mutual agreement of FFI to
cancel the remaining obligation on the license due to the failure of the
technology, which left nothing due and owing to FFI. The Company transferred the
License Agreement to a newly formed, wholly-owned subsidiary of the Company
named BestWay Beverages, Inc. ('BestWay"), a Nevada Corporation. Currently
BestWay is inactive, pending the completion of design modifications and
successful testing of the new beverage center now being developed by BEVEX (FFI
was renamed BEVEX Inc. in August 1998).
During the last quarter of 1998 and first half of 1999, the Company
undertook several acquisitions and/or mergers to diversify and enter some
technology-based arenas.
Acquisition of Momentum Internet
--------------------------------
On October 5, 1998, the Company acquired Momentum Internet Incorporated,
("Momentum Internet"), a corporation organized under the laws of the British
Virgin Islands in a stock-for-stock exchange, whereby the Company issued
1,130,000 (post split adjusted) shares of restricted common stock in exchange
for all capital stock of Momentum Internet, thereby making Momentum Internet a
wholly-owned subsidiary of the Company. Momentum Internet, whose main offices
are located in Hong Kong and Manila in the Philippines, has a range of Internet
products and services, including an international online stock trading portal, a
premium web-based e-mail service, an Internet advertising banner network, a
finance website, and an Asia-focused search engine. The acquisition of Momentum
Internet was, for accounting purposes treated as a purchase. A copy of the
Acquisition Agreement and Plan of Reorganization is attached hereto and
incorporated herein by this reference. See the Exhibit Index, Part III.
Acquisition of Momentum Asia
----------------------------
On October 5, 1998, the Company acquired Momentum Asia, Inc.,
("Momentum Asia"), a corporation organized under the laws of the Republic of the
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Philippines in a stock-for-stock exchange, whereby the Company issued
4,000,000 (post-split adjusted) shares of restricted common stock in exchange
for all capital stock of Momentum Asia, thereby making Momentum Asia a wholly-
owned subsidiary of the Company. Momentum Asia, whose main offices are located
in the Clark Economic Zone, in the Philippines, provides a wide range of
compatible graphic design, copy writing, printing, database management, and
e-mail customer service operations. The acquisition of Momentum Asia was, for
accounting purposes treated as a purchase of Momentum Asia. A copy of the
Acquisition Agreement and Plan of Reorganization is attached hereto and
incorporated herein by this reference. See the Exhibit Index, Part III.
Acquisition of Asia4sale
------------------------
On March 25, 1999, the Company entered into an Acquisition Agreement and
Plan of Reorganization, under which the Company would acquire Asia4sale.com,
Ltd., ("Asia4sale"), a Hong Kong Registered Company. In exchange for 99 of the
100 shares of Asia4sale, the Company issued 100,000 (post-split adjusted) shares
of restricted common stock and paid $15,000 cash to the majority holder of the
capital stock of Asia4sale, thereby virtually making Asia4sale a wholly-owned
subsidiary of the Company. In addition, the Company made an unsecured loan of
$50,000 to Asia4sale upon closing of the acquisition and agreed to issue one (1)
additional share of restricted common stock for each one dollar ($1.00)
(post-split adjusted) of actual earnings of Asia4sale for the period from April
1, 1999, through September 31, 2000. Actual earnings of Asia4sale which are
defined as net income before income taxes, depreciation and interest expense
were zero from April 1, 1999 through September 30, 1999. Asia4sale is in the
business of Internet related international e-commerce. In addition, the Company
was granted the option to repurchase the 100,000 (post split adjusted) shares
issued in the acquisition of Asia4sale for a period of one (1) year at a price
of $1.50 (post-split adjusted) per share in the event that Asia4sale fails to
reach positive cash flow from its operations by September 30, 2000. As of the
date of this registration statement, Asia4sale has not yet reached positive cash
flow. The acquisition was completed on May 12, 1999. The acquisition of
Asia4sale was accounted for as a purchase. The contingent shares are not
recorded as being issued in accordance with APB 16., paragraphs 79 and 80.
Copies of the Acquisition Agreement and Plan of Reorganization, Unsecured
$50,000 Note and the Stock Option are attached hereto and incorporated herein by
this reference. See the Exhibit Index, Part III.
Acquisition of Online Investors Advantage, Inc.
-----------------------------------------------
On March 31, 1999, the Company entered into an Acquisition Agreement and
Plan of Reorganization, under which the Company would acquire Online Investors
Advantage Incorporated ("OIA"), a Utah corporation. OIA is in the business
training individuals how to effectively use the financial planning and
investment tools available on the internet to manage their own investment
portfolios. The training is structured around a five-step discipline, which
includes searching for an investment, evaluating the investment and assessing
the risk, timing the purchase, establishing an exit point and monitoring the
investment. This is done through live workshops, and video-based, self-directed
home learning programs, which include the use of OIA's proprietary website
www.investortoolbox.com. In exchange for all of the capital stock of OIA, the
Company issued 1,000,000 (post-split adjusted) shares of restricted common stock
and paid $400,000 in cash, all of which was distributed pro-rata to the
shareholders of OIA, thereby making OIA a wholly-owned subsidiary of the
Company. In addition, the Company issued 5,000,000 (post-split adjusted) shares
pro-rata to the shareholders of OIA. Those shares are currently being held in
escrow in accordance with the terms of the adjustment provision set forth in the
acquisition agreement, based on anticipated earnings of at least $2,500,000 for
OIA for the period from April 1, 1999, through March 31, 2000. As set forth in
the terms of the acquisition agreement, in the event that the actual earnings of
OIA are less than $2,500,000, for the specified period, then the total number of
shares being held in escrow shall be reduced on a two share (post-split
adjusted) basis for each $1.00 of actual earnings of OIA less than $2,500,000.
In the event that the actual earnings of OIA is greater than $2,500,000, then
the Company shall issue such additional shares on the basis of two additional
(post-split adjusted) shares for each $1.00 of actual earnings of OIA greater
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than $2,500,000. The acquisition was completed on April 7, 1999. The actual
earnings which are defined as net income before income taxes, depreciation and
interest expense, were approximately $3,700,000 through April 1, 1999. The
acquisition of OIA was accounted for as a purchase. The shares were issued as
contingent shares being held in escrow and have not been recorded. A copy of the
Acquisition Agreement and Plan of Reorganization is attached hereto and
incorporated herein by this reference. See the Exhibit Index, Part III.
On February 12, 1999, the Company entered into an agreement with Global
Direct Marketing, Ltd., (Global), a corporation organized under the laws of the
British Virgin Islands, whereby Global was to be paid 150,000 (post split
adjusted) shares of restricted common stock upon the successful conclusion of
negotiations to acquire OIA. Global had introduced the Company to OIA. Under
this agreement, the shares are to be issued exactly nine months after the date
of formal acquisition of OIA, (i.e. December 7, 1999). A copy of the Agreement
is attached hereto. See Exhibit Index, Part III.
As stated above, on April 9, 1999, the Board of Directors, by written
consent, declared a 2-for-1 forward stock split for all shareholders of record
as of May 14, 1999. A copy of the Certificate Pursuant to Nevada Revised Statute
Section 78.207, whereby the Company effectuated this forward stock split, is
attached hereto and incorporated herein by this reference. See the Exhibit
Index, Part III.
On July 15, 1999, by written consent of the Stockholders, and in accordance
with Section 78.320(2) of the Nevada Revised Statutes, the Company restated its
Articles of Incorporation and Bylaws. Copies of the Restated Articles of
Incorporation and Restated Bylaws are attached hereto and .incorporated herein
by this reference. See the Exhibit Index, Part III.
Operating Strategy and Business Revenue Model
---------------------------------------------
(b) Business of Issuer
------------------
The Company currently owns Internet based operations and holdings. The
Company believes the continuing shift of consumers from conventional shopping
practices and distribution channels to internet-based services, along with the
huge growth potential of Asian Internet usage will provide significant future
growth opportunities for its various e-commerce activities. For the six months
ended June 30, 1999 internet services made up approximately $7,594,000 of the
total revenue and non-internet services were approximately $339,000.
The Company actively seeks to acquire, structure, manage and consolidate
other select holdings through its wholly-owned subsidiaries operating in the
U.S. and in foreign markets. The objective is to acquire holdings which will
provide marketing and operating synergy with one another, are well positioned
and profitable in their targeted markets, and/or have demonstrated technical
expertise in certain areas of e-commerce. While the Company pursues certain
business opportunities, alliances and joint ventures, which will enhance
profitable growth and development, and help maximize the shareholders' equity,
the company does not typically openly advertise to attract such opportunities.
The two basic challenges in effectively implementing this strategy, while
preserving and continually developing the Company's core technology, are: 1)
Maintaining an active pipeline of potentially desirable, acquirable companies
through various business contacts and financial institutions, and 2) Maintaining
the financial wherewithal to move quickly enough, when an opportunity for a
synergistic acquisition arises, to complete the acquisition, and effectively
integrate the acquired entity into the Company's holdings at minimum cost and/or
disruption to the other entities. In some instances this will include the
challenge of effectively restructuring the acquired entities with one or more
existing entities to maximize their contribution to the Company's revenues and
profits.
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The relative infancy of users of online financial services in the foreign
markets is another key to the Company's future growth. The Company is focused on
capturing a large market share of these foreign users and a significant
percentage of the growing number of U.S. users of Internet tools and services.
The U.S. domestic market is also projected to sustain its growth in domestic
e-commerce and online financial services usage, and is still developing in terms
of the number of educated users of these services.
The Company's business model is simple and proven in the Internet market
and presents continued long-term growth prospects. Substantial front-end revenue
is created by selling packages of Internet educational and e-commerce services
to businesses and/or consumers worldwide. The services and products sold contain
features designed to cross promote other portals, products and services of the
Company. These other products and services rely on backend commissions, fees,
profit sharing, and high-traffic to create revenue and operate with very low
overhead. This is expected to result in high profit margins for the Company.
Profit created by front-end sales of services, combined with net cash flow
generated by gains on investments and non-Internet groups, is being invested in
the further development of the high profit margin Internet groups. As this
operating model grows, the Company's base of loyal users, subscribers and
visitors to their websites and services will also grow. It will also build the
credibility necessary to establish further relationships, strategic alliances,
co-branding and licensing agreements with Internet companies with similar
interests.
The Company is diversified enough to not be dependent on any single product
or service. Rather, the wholly-owned subsidiaries publish, market and service
many web products and services, and maintain the necessary value-added support
for these products and services. Therefore, any of the Company's groups,
Internet products or services, or joint ventures could be a stand-alone company.
This creates opportunities for sale or spin off of any holdings in order to
maximize shareholder equity.
The Company may divest or "spin off" equity interest in one or more of its
entities when it is strategically and economically advantageous to shareholders.
Such a divestiture or spin-off would allow the Company to focus on its core
operations and holdings, once it has adequately entrenched itself in the most
profitable targeted markets. It is expected that stock dividends or warrants
resulting from a spin off or stock exchange, or cash dividends resulting from a
cash sale, would be issued to company shareholders if and when the Company
divests itself of any given entity.
(1) Principal products or services and their markets.
The Company's primary revenues are derived from their subsidiaries'
respective products and services, organized into the following groups:
Internet Consumer Services Group
--------------------------------
<TABLE>
<CAPTION>
Revenue From Operating Subsidiary Product/Service
------------ -------------------- ---------------
<S> <C> <C>
Online Education OIA Investors Toolbox
Off line Education OIA Live Workshops, Home Study
E-Commerce Sales Momentum Internet Asia4sale.com
Online Financial Services Momentum Internet/ Swiftrade
</TABLE>
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This is the Company's largest revenue producing group. It constitutes 81%
of net revenues for the six months ended June 30, 1999. Education and training
constitute the major portion of the Company's current business. Front-end
revenues are generated from memberships, subscriptions, attendance fees for live
workshops in major cities worldwide; and sales of Internet, audio, and video
home-study programs. At the same time, OIA helps build loyalty for, and cross
promotes other Internet Consumer Services offered by the Company. The Company's
online financial services portal, Swiftrade, generates front-end revenue from
referral fees per trading account; but projects substantially higher future
revenues from backend fees from transactions (orders), and profit sharing
agreements with its broker/dealer partners on various stock exchanges. Asia4sale
will generate front-end revenue from sales of regional e-commerce franchises,
while building a substantial free retail franchise structure to serve as the
distribution base for the products and services offered by the Asia4sale
"store."
Internet Media Sales
--------------------
<TABLE>
<CAPTION>
Primary
Revenue From Operating Subsidiary Product/Service
------------ -------------------- ---------------
<S> <C> <C>
Advertising on Websites Momentum Internet All Websites
Banner Advertising Momentum Internet PINmail/MediaHits
E-Mail List Rental Momentum Internet All Websites
Online Marketing Momentum Internet All Websites
</TABLE>
The company generates flat fees and fees per impression, visit,
click-through, or sign up for online advertisers of all types. Impressions are
generated by high traffic to the Company's websites, swiftrade.com, a portal for
stock trading in the USA, Hong Kong and the UK; mfinance.com, allows some 10,000
registered subscribers to access certain Asian business and financial news fed
by AFX-Asia a joint venture with France Presse and the "Financial Times" of
London; searchdragon.com, an Asia business directory listing more than 5,000
Asian business websites; mediahits.com, an advertising banner network, and by a
large volume of banners placed on those PINmail pages used by the general
public. It constitutes 11% of net revenues for the six months ended June 30,
1999.
Internet Support Services
-------------------------
<TABLE>
<CAPTION>
Primary
Revenue From Operating Subsidiary Product/Service
------------ -------------------- ---------------
<S> <C> <C>
E-Mail Customer Service Momentum Asia ServiceLive
Telephone Customer Service Momentum Asia ServiceLive
Database Management Momentum Asia ServiceLive/
Momentum Direct
</TABLE>
The support services furnished by this group include responding to e-mail
and telephone inquiries via return e-mail and telephone. Those inquiries
typically include questions regarding; trading accounts, password information,
billing and technical questions for PINmail accounts, MediaHits, Mfinance
subscribers and AsiaForSale stores. This group also responds to inquiries for
banner advertising and co-branded websites. Working from internet databases,
where customer information is stored, the customer service personnel are trained
to answer frequently asked questions regarding opening new accounts. Future
revenue will be derived from monthly fees paid by non-related customers. The
support services are being offered to webmasters of other websites, which are
currently being serviced from high-cost areas of the world. The Company has
space for substantial expansion, operates out of a very low-cost region, and is
negotiating with several potentially large users of the service, including
E*Trade Group, GE Capital, and Asia Pre-Press Technologies, a US-based company.
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The proposal for E*Trade Group has been submitted to the Vice President of
Service Quality. According to E*Trade management, the proposal is temporarily on
hold until they reach capacity in their new customer service facility in
Atlanta. The proposal for GE Capital is in process, and responses are being
prepared to numerous questions regarding the Company's ability to handle their
back office and technical support requirements. There is a verbal agreement in
place with Asia Pre-Press Technologies to e-mail customer service and database
encoding services. APPT has numerous U.S.-based customers. Quantifiable cost
savings can be achieved by client users of ServiceLive, at the same time
allowing the Company to generate positive cash flow due to its established low
cost base. It makes up 5% of net revenues for the six months ended June 30,
1999.
Printing and Direct Mail
------------------------
<TABLE>
<CAPTION>
Primary
Revenue From Operating Subsidiary Product/Service
------------ -------------------- ---------------
<S> <C> <C>
List Rental Momentum Asia Momentum Direct
Design/layout Momentum Asia Momentum Direct
Printing Momentum Asia Momentum Direct
Lettershop Momentum Asia Momentum Direct
</TABLE>
The wholly-owned subsidiary Momentum Asia has a substantial base of
clients, for which it provides printing and direct mail services. Momentum
Direct, a newly formed division of Momentum Asia is actively marketing these
services to large multi-national corporations. This division is profitable, and
will continue to grow by the addition of new clients and makes up 3% of net
revenues for the six months ended June 30, 1999.
Internet Investment Ventures
----------------------------
This group is managed through the Company and its subsidiary Momentum Asia,
and has a portfolio of holdings in public and private companies, held as
Marketable Securities and Investments Held to Maturity, depending on the
Company's strategy at the time of acquisition. This group continues to
aggressively pursue further investments in startup Internet related companies
with solid management and realistic business plans. Both short-term and
long-term gains are available from this group.
Summary:
--------
The Company is currently increasing its front-end sales revenues from
non-Internet related operations and cash gains on sales of investments. It is
anticipated that sales from these areas will continue to increase substantially
in the next two years. However, the Company's business plan projects backend
revenue in the form of commissions, transaction fees, and profit sharing from
its Internet Consumer Services Group (e-commerce and online financial services)
will outgrow and exceed front-end revenue within the next two years.
The Company's Subsidiaries and the Nature of Products and Services Offered
- --------------------------------------------------------------------------
"OIA" provides in-depth consumer training in the optimum use of Internet
investment and financial management tools and services via workshops, home
study, and online subscriptions OIA recently expanded into the International
marketplace. In addition, OIA currently has a working relationship with
Optioninvestor.com and Telescan. OIA and its data providers have formed
"Investors Toolbox" (www.investorstoolbox.com), a proprietary website for its
subscribers and members for ongoing investment analysis.
Optioninvestor.com is an online investment newsletter purchased at
wholesale to provide to OIA subscribers. Telescan is a financial and investment
news and data provider. OIA procures Telscan's services and custom tailors the
data to OIA's needs.
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"Momentum Internet", either publishes its own online publications or enters
into Joint Venture agreements with strategic partners, who have positive cash
flow, and will provide marketing and operating synergy with Momentum Internet in
their targeted markets. The company then develops, hosts, manages and promotes
its own websites. Most sales are in U.S. Dollars, and the Asian economic crisis
has had a positive impact on operations due to favorable exchange rates and
lower facility costs. Momentum Internet manages all online activities for its
clients, including Barclays International Funds Asia from its Manila and Hong
Kong main offices. Following is Momentum Internet's mix of products and
services:
SWIFTRADE (www.swiftrade.com) is an online trading and financial services
portal, which provides Internet access for retail and institutional users to
international electronic stock trading. Currently, the Swiftrade site is
utilized in a joint venture with West America Securities Corporation, a fully
registered broker dealer located in the United States, which provides users
direct electronic access to trading of stocks, options, mutual funds and other
financial instruments available on U.S. markets and exchanges. West America
Securities has agreed to pay Swiftrade, (a wholly-owned subsidiary of Momentum
Internet, incorporated under the laws of the British Virgin Islands) referral
fees for each new account. It is the first online trading system designed
specifically for, and targeted at, overseas investors trading in the U.S. stock
markets. Trades are cleared through West America Securities and its clearing
agent, Emmett A. Larkin, Inc.
Swiftrade plans to facilitate online trading from a single Internet portal
on several of the world's largest stock markets, including London, Hong Kong
Sydney, Singapore, and Frankfurt in 1999, with others to be added in the future.
The Company, through its subsidiaries, earns a $40.00 account fee for each
account referred from its website exposure to West America Securities. This fee
includes the cost of new account customer service via e-mail, which is provided
by the Company's Internet Support Group. In addition to the joint venture with
West America Securities for the U.S. markets, Momentum Internet has entered into
strategic partnership agreements in the brokerage industries in Hong Kong and
London. Swiftrade's proprietary software, developed by Momentum Internet for the
purpose of linking Swiftrade users with stock exchanges in London and Hong Kong,
provides a direct link to the floor of these and other non-U.S. Stock Exchanges.
Swiftrade utilizes a news and data feed from Reuters Hong Kong Limited ("Reuters
HK") which, through links with the Company's proprietary software, allows the
Company to provide instantaneous online links between the real-time data feed
provided by Reuters, the orders place by users, and the brokerage trading desk.
The software, complete with live feeds from the exchange floors, , ensures
accurate trade execution, instant confirmation of trades and accurate balances
and positions. Momentum Internet receives transaction (order) fees from its
partner brokerages in London and Hong Kong.
Neither the Company or any of its subsidiaries is directly involved in the
brokerage business, or owns or operates an "online brokerage." The Company is in
the business of web site creation, management and introduction. The Company
introduces the web site to the general public using a variety of methods,
including some of its own high traffic Internet technology.
Swiftrade can represent more than one broker in each market and be readily
positioned in any other market where the Company sees growth opportunities.
Minimal spending is required for advertising and infrastructure that brokerage
house typically must spend to maintain market share. Swiftrade shares in
transaction fees without the burden of increasing costs.
"PINMAIL" (www.pinmail.com) gives all websites the ability to offer
web-based e-mail from their pages, as do major sites like Netscape and Yahoo!.
PINmail also provides customized corporate versions and premium e-mail accounts
for individuals.
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"PINmail for Webmasters" is the free system for those who wish to add
e-mail service to their own website This service is completely free to
webmasters and users. Webmasters can add this service to any website by simply
downloading some HTML code and pasting it onto their pages.
"PINmail for Corporations", is a completely customized system using
corporate logos and colors. The Company's software interface is custom designed
to suit the clients' needs. This tailored corporate account will then operate
with any client's unique domain name. There is no setup charge for this service.
However, a monthly, tiered rate is charged for the number of e-mail users
registered for the service at the end of each month.
"PINmail for Individuals" is a premium version for business travelers and
others who need their e-mail in a single easily managed location. A small annual
fee is charged, and users of the premium service enjoy three PINmail addresses,
auto-forwarding to other e-mail accounts, and an auto-responder, which can be
set to answer messages when the user is offline.
"MFINANCE" (www.mfinance.com) is an online financial publication providing
comprehensive data on US, Asian, and European stock markets, plus additional
finance and investment information for individual investors in Europe and Asia.
MFinance is continually being upgraded, and additional news feeds and stock data
from Reuters On-Line S.A. ("Reuters Online") will enhance the site's position as
a world-class resource for financial and investment information. Revenue comes
from subscriptions to a premium service and advertising. Regular advertisers
include Barclays International Funds Asia and the Far Eastern Economic Review.
"SEARCH DRAGON" (www.searchdragon.com), an online business directory and
search engine, is a popular destination for those looking for information on the
Asian region. The website now covers Hong Kong, Indonesia, Macau, Malaysia, the
Philippines, Singapore, Taiwan and Thailand. The Company's proprietary software
allows webmasters of business related sites to submit their own listings and
update them whenever necessary. SearchDragon is essentially a marketing tool for
Swiftrade banner advertisements, and not an independent revenue generator.
All websites are hosted on dedicated high-speed servers in Los Angeles,
California, directly connected to the Internet backbone with 24-hour technical
support.
"Momentum Asia" is a second subsidiary which provides a wide range of
compatible graphic design, copy writing, printing, database management, and
e-mail customer service operations. Through its service known as ServiceLive,
this subsidiary, provides compatible e-mail response service and database
management for the high-traffic websites and services managed by Momentum
Internet and other subsidiaries of the Company.
A Partial List of Momentum Asia's International Customer Base Includes:
Federal Express (United States)
Enron Power (United States)
Neo-Art, Inc. (Netherlands)
IDESS Maritime Training Schools (Norway)
Ritchie Brothers Auctioneers, Ltd. (Canada)
Metroplex Casinos (Malaysia)
The Philippine Government (Philippines)
Subic Telecommunications Co., Inc. (Philippines)
(A joint venture between AT&T (U.S.). and PLDT (Philippines)
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None of these customers except Neo-Art is expected to contribute more than
$50,000.00 per year to Momentum Asia. Neo-Art is expected to contribute
approximately $75,000.00 to gross revenues in printing and design fees.
"Asia4sale" is a wholly-owned subsidiary of the Company which is a
three-part e-commerce facility serving the global market:
1. Part 1 provides Home Shopping, so online shoppers anywhere in the
world will be able to order goods direct from manufacturers in Asia,
and have these purchases delivered direct to their door. The Company's
revenue from this service is derived from the difference between the
wholesale price paid to suppliers and retail prices paid by the
buyers.
2. Part 2 provides Business-To-Business Barter. To provide a truly
professional service Asia4sale.com has acquired the assets of Pacific
Barter Ltd., a company specializing in barter in Asia. The Company's
revenue from this service is derived from commissions from the parties
involved in the barter transaction.
3. Part 3 provides Industrial Auctions. Businesses, dealers or
individuals all over the world will be able to buy or sell heavy
equipment, vehicles, machinery, stock lots, etc. in the Asian region,
through online auctions. The Company's revenue from this service is
derived from commissions from sales on the internet, as well as the
spread between the purchase costs and selling prices of equipment
owned by Asia4Sale. Additionally, revenue is derived from a 10% equity
position in Auctioneers Asia International, a Philippines-based
equipment auction company.
"BestWay Beverages" also a wholly-owned subsidiary is currently inactive.
However, it still holds the exclusive distribution franchise in the USA, Canada
and Mexico for a patented in-store beverage bottling center manufactured by
BEVEX, Inc. BestWay Beverages consists of what was formerly the core business of
BestWay USA before the recapitalization of Momentum Internet and Momentum Asia.
TARGET MARKETS
--------------
Internet-based business is perhaps the most dynamic industry the world has
ever seen. It is rapidly becoming the primary worldwide medium for data
exchange, commerce, education and news. Moreover, the Company believes the
international growth rate of both business and individual Internet users will
increase dramatically over the next five years.
As the number of Internet users rapidly increases over the next few years,
the Company intends to continue developing investment and finance management
products, services and technologies, which will effectively fulfill the
information, commerce and education needs of these users to maximize their
beneficial use of all the features the Internet has to offer.
The Company has selected three categories of international, Internet-based
business as their primary target market(s).
1. International online stock trading and investment services with unique
educational capabilities and ongoing investor support services.
The Company believes there are several primary factors, which attract
Internet users to online investing. These include: ease of use, low transaction
fees, real-time, comprehensive information and a self-service environment.
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OIA, a pioneer in financial/investment training for consumers in the US
market, is already moving into key international markets as well. As the
popularity of online trading grows, the demand for OIA's products and services
is expected to grow accordingly.
Swiftrade, an online trading service, facilitates international online
trading. The Company expects Swiftrade to become an international online trading
network in the future.
The synergy between OIA and Swiftrade effectively positions the Company to
capitalize on the stock trading and investment services market. The Company
believes the Internet will continue to attract additional online investors,
especially as those investors who have completed the OIA training program
realize that effectively self-managing their investment portfolio is made
possible by following the guidelines developed by OIA.
As stock exchanges around the world move to the Internet, the Company
expects to continually strengthen its competitive position in the international
marketplace, and to be on the ground floor to service these markets.
2. E-commerce to facilitate the purchase and/or sale of goods and services
between and/or among businesses and individuals throughout the Pacific Rim.
The Company believes e-commerce will probably become the major vehicle for
the sale and/or barter of goods and services on an international basis.
Accordingly, the Company and its subsidiaries have developed products and
services like SearchDragon, Mfinance and the e-commerce based Asia4Sale. The
ability to effectively market these products and services will be enhanced by
the increasing bandwidth capabilities and reduced transmission times, which are
becoming more readily available for the Internet on an international level. The
increasing use of, DSL lines and low-orbiting satellite direct digital
communications, are significantly increasing the megabits per second, which can
be transmitted, considerably beyond the capacity of standard telephone and ISDN
lines. According to Pacific Bell, data transfers on a DSL line are up to 50
times faster than a 28.8 modem connection, and 16 or more kb/sec. faster than an
ISDN line. Further, because the potential market is so large, the Company
believes it could establish and maintain a profitable operation from a
relatively small percentage of that market.
Emerging global procurement will require international vendor expertise to
create and manage complex electronic supply chains composed of thousands of
manufacturers, distributors, forwarders and buyers located throughout the world.
The overlap between e-commerce in the Pacific Rim and e-commerce in the USA is
substantial. American companies continually outsource many labor-intensive
manufacturing processes in this region.
The Company believes the business futures of the two regions are
inextricably linked. In various conversations with clients and/or potential
clients in the Pacific Rim, those clients have identified the effective use of
the Internet as a primary key to restoring their international competitive
position. Moreover, it appears their expenditures on Internet services are
rising at a pace that outstrips even that of the US.
The Company's e-commerce products and services provide:
o A worldwide shopping service, which offers a wide variety of
Asian-made products to wholesalers, retailers, and franchise
storefronts, which can be owned and managed by anyone, anywhere, with
a computer and an Internet connection
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o Auction and barter sites aimed specifically at the rapidly growing
Pacific Rim business-to-business market.
The Company believes Internet-based business in the Pacific Rim is going to
expand rapidly. Moreover, long-term links will be established with global
procurement networks over the next five years. The products and services the
Company has developed thus far, along with other products and services currently
in the planning stage, should give the Company a strong presence early on in
this fast-growing area of e-commerce.
3. Web-based and non web-based marketing development and support services
for Internet-oriented companies, who do not have the wherewithal internally for
the development of same.
Every day, an increasing number of businesses around the world are
expanding their marketing and sales activities into cyberspace. In order to do
so, many of these companies have had to retain the services of specialists in
website development and management.
As more and more companies utilize the Internet for global marketing, the
demand for Internet-based marketing, customer service and sales support systems
is increasing. This seems to be particularly true in the Pacific Rim, where use
of the Internet is growing rapidly. The Company intends to establish itself on
the ground floor of this rapidly growing market niche.
The Company is currently developing a mix of web marketing and compatible
support services for this niche. Because this subsidiary is in the Philippines,
they are able to provide services, which are equivalent to US-based competitors,
at much lower prices.
This subsidiary has had ongoing operations in the Pacific Rim for several
years now. As a result, they have specific knowledge regarding the prevailing
business principles and practices in this region of the world. The company
believes this business experience, along with the contact network, which has
already been developed, gives the Company a potential advantage over many
US-based companies who have little or no experience doing business in the
Pacific Rim. The Company expects this to be a beneficial leverage point in
establishing a presence in this niche market.
There is a challenge for the Company in effectively identifying and
positioning the Company in the most beneficial markets and/or market segments at
the optimum time. The Company expects to meet this challenge through aggressive
marketing, supported by equally aggressive ongoing media and investor relations
programs. The Company has active programs in place to continually increase the
awareness of the Company in both the financial/investment community and the
marketplace they serve.
Marketing Plan
The Company's marketing plan is a combination of vertical integration and
cross-pollination. It is intended to build exposure and market share while
maintaining profitable operations. This differs from some Internet-based
companies who have focused significant effort on establishing a customer base,
but given minimal thought to ensuring return on investment.
While this latter approach generates a considerable amount of web traffic,
it does not necessarily contribute significant revenues. The Company's plan
emphasizes both aggressive pursuit of a user base and market share, along with
the marketing of value added products to this user base.
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The ongoing successful implementation of the marketing plan presents some
continuing challenges, not the least of which is effectively presenting the
Company's products and services, so the potential customer perceives them as the
clear value-added choice among the alternative products and services in the
marketplace. Since it is a crowded marketplace, the Company expends a
considerable amount of time and effort focusing their marketing message on those
significant points of differentiation the Company's products and services
provide over the competitors products and services.
Another challenge in this arena is keeping the marketing message and
materials up to date in one of the most dynamic markets, which has ever existed.
The Company expects to accomplish this by utilizing the services of certain
consultants, who are specialists and forward looking in the Internet arena, so
the Company has constantly updated, current knowledge of regarding what is going
on in the marketplace they serve. The company clearly recognizes the importance
of being the first to introduce a new beneficial product or service to the
marketplace.
The Marketing Plan includes three levels of marketing activity:
LEVEL 1.
--------
The first level follows the traditional Internet paradigms, wherein several
of the Company's products include free services to attract the largest possible
number of users. PINmail which receives approximately 83,500 impressions per
month Media Hits receives approximately 250,000 impressions per month, are the
major products in this category. Search Dragon and Mfinance are expected to
attract a lesser numbers of users.
LEVEL 2.
--------
The second level includes two categories:
(1) Those products and services marketed primarily to individuals, which
include the online and offline financial services education capabilities of OIA,
the online trading capability of Swiftrade, and the Asia4Sale e-commerce
operation. Asia4sale is promoted to both potential customers and potential
operators of franchised stores. Asia4sale and Swiftrade are expected to be
low-cost operations with good contributions to margin.
(2) Those products and services marketed primarily to businesses, which
include the database management, direct mail, and telephone e-mail customer
service products offered by the Company's ServiceLive and Momentum Direct
Internet support. The relatively low facility and labor costs in the Company's
Asian operations allows the Company to offer these products and services at very
competitive prices and generate targeted margins.
LEVEL 3.
--------
The third level includes backend revenues generated by commissions, fees
and profit sharing agreements. These revenues, which are generated automatically
as services are used, increase in proportion with the use of services provided.
This requires minimal additional overhead spending or monitoring.
The same direct marketing capacity the Company offers to contract customers
is used to promote the Company's frontline revenue generators. Impressions on
the high-traffic free sites are recorded and classified in a tailored database,
which is in itself a valuable asset. The sales force then selectively and
directly promotes the appropriate services to each category of net user. While
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the Company's revenue-earning services also use the more traditional marketing
methods employed by their competitors, the large base of potential customers
developed by the Company's high-traffic sites should provide a leverage point
over competition.
The Company's marketing plan also relies heavily on cross-pollination at
every level of the vertical integration program. The Company's products and
services are clustered into compatible groups, each of which will be served by a
single web portal. For example, a Swiftrade customer will immediately be exposed
to the compatible services offered by OIA. The two are combined with an advanced
Reuters news/data feed in the Company's Stock Trading & Finance Portal.
Swiftrade and other services will in turn be promoted at OIA seminars and in OIA
marketing materials.
OIA video-based home-study programs, which cost $1,995.00 and live 2-day
workshops, which cost $2,995.00 if the attendee registers at the live preview,
or $3,995.00 if the participant registers after the fact, are promoted both
online and through a traditional multistage marketing program. The multistage
marketing program includes direct mail, radio, television, newspaper, free
"Introduction to Online Investing seminars" via the internet, and word-of-mouth
incentives wherein prior seminar attendees are allowed to attend a refresher
workshop at no charge, or extend their subscription to www.investorstoolbox.com
for six months at no charge if they induce some other party to register for an
OIA workshop. This incentive is a $495.00 value. Television commercials are used
to advertise OIA's free online trading seminars, and attract both two-day
workshop attendees and home study candidates. OIA's brochures and audio tapes
are used to build further interest and customer loyalty. The two-day workshops
are OIA's principal revenue generator.
Those introduction seminar attendees, who do not elect to attend the
two-day training workshops, are candidates for video-based educational
materials. OIA is well positioned to continue providing both
financial/investment education and services, while developing a growing customer
base for itself, Swiftrade and other compatible products and services.
Individuals and businesses interested in doing business in the Pacific Rim
will be drawn to the Pacific Rim business portal at Dragonasia.com, where they
will find the Search Dragon search engine, the Dragon Warehouse Store, Mfinance
and Asian-specific co-branded editions of OIA and Swiftrade.
The Company's web marketing and support services are grouped under the
Logistical Internet Media Essentials (www.limesystems.com) site. These include a
variety of services aimed at businesses developing a web presence and a
compatible sales support system. Included are the PINmail free e-mail service,
the MediaHits advertising banner network, business Internet showrooms (in
cooperation with Asia4Sale), and the database management, direct mail, and
telephone and e-mail customer service products offered by the Company's
ServiceLive and Momentum Direct Internet support services. Any customer who is
drawn to one service will be immediately presented with a wide range of
compatible services, with interconnections to the other portals.
This cross-pollination will be initiated by grouped exposure of compatible
products. It will also be aggressively promoted via the same direct marketing
system used to facilitate the vertical integration program. At every step of the
process, tailored databases will be maintained. Also, the sales staff will
select and present services which are likely to add customer value at
competitive prices.
The combination of vertical integration, diversification, and
cross-pollination places the Company in a unique position among web companies.
It provides a broad enough base to withstand competition, a mechanism by which
the growth of any one component can be quickly capitalized upon by others and
the capacity to rapidly and flexibly adapt to changing market conditions. By
presenting customers with compatible packages of useful, value-oriented goods
and services, the Company enhances its own revenue-generating capabilities.
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(2) Distribution methods of the products or services.
Management will seek out and investigate business opportunities through
every reasonably available fashion, including personal contacts, professionals,
securities broker dealers, venture capital personnel, members of the financial
community and others who may present unsolicited proposals. Strategic Alliances
The Company will continue to seek high-profile, interrelated companies as
strategic business partners to enter new markets or territories. On August 18,
1999, the Company's subsidiary OIA entered into an agreement with
"investorweb.com" of Melbourne, Australia, to be represented by Investor Web
under its license with the Australia Securities and Investment Commission, and
incorporate investorweb's financial website into OIA's workshops in Australia.
Investorweb.com has the requisite license for an Internet-based financial
services provider in Australia. This allows OIA to legally conduct business in
Australia.
(3) Status of any publicly announced new product or services.
As of the date of this registration statement, all new products and
services discussed herein have been launched.
Acquisition of Momentum Internet and Momentum Asia - On October 28, 1998
the Company announced the completion of its first two acquisitions, the
acquisition of Momentum Internet a diversified Internet services firm and
Momentum Asia, a provider of graphic design, prepress, printing, database
management and direct mail services in the Philippines.
Swiftrade - On February 2, 1999, the Company announced that its subsidiary,
Momentum Internet Incorporated, launched their "Plus and Play" online trading
software, a program designed to allow brokerage houses around the world to offer
secure online stock trading. The program was developed to work in almost any
market with brokerage firms through their own websites and under their own brand
names, or through the Swiftrade website operated by Momentum Internet. The
program has been contracted for use by brokerages in Hong Kong and the U.K.
Opening of Manila Office - On February 25, 1999, Momentum Internet
announced that it opened a new Internet development facility in Manila,
Philippines, in order to access a large pool of local, well educated,
technically skilled design and marketing talent. The focus of the Manila office
is the development of Internet platforms for global online stock treading,
web-based e-mail applications, online auction and barter software and
international financial news delivery systems.
Acquisition of Asia4sale and launch of Asian e-Commerce Portal - On March
24, 1999, the Company announced the launch of an Asian oriented e-commerce
portal Asia4sale, through the acquisition of Asia4sale.com, Ltd. Asia4sale is a
three-part e-commerce facility which caters to the global market offering home
shopping, industrial auctions and business barter.
Intention to Offer Free E-Mail to all Websites - On March 29, 1999, the
Company announced that it plans to provide an e-mail service free to every
website on the Internet. The new system is based on the Company's existing
e-mail program, PINmail, which is offered through its subsidiary Momentum
Internet. The new PINmail service is intended to give all websites the ability
to offer web-based e-mail, from their pages, in the same manner as major sites
like Netscape and Yahoo!, free of charge to webmasters and users.
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ServiceLive.com - On April 1, 1999, the Company announced the launch of its
new Internet customer service program, ServiceLive, a 24-hour e-mail and
telephone response center, developed by the Company in the Philippines. The
service is being offered on a contract basis to Internet companies worldwide.
Acquisition of Online Investors Advantage Inc. - On April 8, 1999, the
Company announced the acquisition of Online Investors Advantage, Inc., a Utah
based company ("OIA") specializing in online stock trading education and
training. OIA teaches investors who wish to trade securities by computer, how to
access and use the tools available on the Internet for optimum investing
results.
Approval by London Stock Exchange of Swiftrade - On April 14, 1999, the
Company announced that the London Stock Exchange gave approval for its live
stock price feed to be made available through the Company's online trading
system, Swiftrade.
Investors Toolbox - On May 27, 1999, the Company announced that its
subsidiary, OIA launched a comprehensive financial website, developed by
Telescan, Inc., for the exclusive use of OIA's students and graduates. Investors
Toolbox offers an in-depth range of financial information and tools which are
available on the web and was created by Telescan for the exclusive use of
individuals who complete OIA's workshops.
Agreement with First Ecom and Bank of Bermuda - On July 23, 1999,
Asia4sale, a subsidiary of the Company announced that it reached an agreement
with First Ecom to handle its multi-currency credit card web processing. First
Ecom operating under a license from the Bank of Bermuda will be able to process
MasterCard and Visa Card payments for the purchase of goods and services in a
variety of major currencies.
Global Launch of Online Investing Education Seminars - On July 29, 1999 the
Company announced that OIA, was launching its Online investing seminars and
workshops in Australia and New Zealand. OIA held workshops in Melbourne and
Sydney, Australia, in August and in Auckland and Wellington, New Zealand, in
August and September 1999.
Free E-mail Service for All Websites Available - On August 11, 1999, the
Company announced that Momentum Internet launched its new service which will
provide free e-mail to webmaster and users. This new service will give websites
the ability to offer web-based e-mail from their web pages. In return for the
free service each website will carry banner ads on the e-mail pages, which will
be hosted and controlled from the Company's recently upgraded servers in
California.
Receipt of Purchase Bid for Asia4Sale.com - On August 31, 1999, the
Company announced that it had received and is considering a proposal for the
purchase of Asia4sale.com, a subsidiary of the Company. As of the date of this
Registration Statement, the company is evaluating the proposal and no decision
has been made.
One proposal was received from Internet Ventures Ltd., , a Taiwan based
company wherein they would acquire 80% of Asia4sale, for US$5,000,000.
The company has also received two letters of intent, one from Rich
First Finance Company, and one from Eupa Corporation Inc., both Taiwanese
companies. Both have indicated intent to purchase up to 35% of Asia4sale.
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Discussions are ongoing with all parties while they complete their due
diligence prior to preparing and submitting a proposal.
(4) Competitive business conditions and the Company's competitive position
in the industry and methods of competition.
There are hundreds of thousands of companies that are engaged in endeavors
similar to those engaged in by the Company; many of these companies have
substantial current assets and cash reserves. Competitors also include thousands
of other publicly held companies whose business operations have proven
unsuccessful, and whose only viable business opportunity is that of providing a
publicly held vehicle through which a private entity may have access to the
public capital markets. There is no reasonable way to predict the competitive
position of the Company or any other entity in these endeavors; however, the
Company will no doubt, be at a competitive disadvantage in competing with
entities which have recently completed IPO's, have significant cash resources,
and have operating histories when compared with the lack of substantive
operations.
(5) Sources and availability of raw materials and names of principal
suppliers.
The Company does not utilize any specialized raw materials. All necessary
required materials, if any, are readily available. The Company is not aware of
any existing or future problem that will materially affect the source and
availability of any materials which would be required by the Company.
(6) Dependence on one or a few major customers.
The Company believes that the diversity of the products and services
offered alleviates the dependence on any customer. Through the widespread use of
the Company's and its subsidiaries' products and services, in multimedia,
electronic commerce, publishing, Internet and other developing industries, the
Company will develop a wide base of customers. However, one customer, Portfolio
Oil & Gas accounted for approximately 26% of the Company's revenues for the year
ended December 31, 1998. Another customer, Torquay Associates, Ltd., accounted
for approximately 24% of the Company's net sales in 1998. No customer is 1999
accounts for more than 10% of the net sales. Both of these customers purchased
graphic design, writing, database management, direct marketing and e-mail
customer services from the Company
(7) Patents, trademarks, license, franchises, concessions, royalty
agreements or labor contracts.
PATENTS, COPYRIGHTS AND TRADEMARKS
-----------------------------------
Neither the Company nor any of its subsidiaries presently holds any
patents, copyrights or trademarks for their products or services offered or the
names under which they operate. However, the Company and its subsidiaries are
currently in the process of seeking copyright and trademark protection of its
trade names and website addresses.
LICENSES AND ROYALTY AGREEMENTS
--------------------------------
The Company has entered into license and royalty agreements with the
following entities:
On April 18, 1997 the Company, as the assignee, entered into an Assignment
of License Agreement with Katori Consultants, Ltd., a British Virgin Island, as
the assignor, under which Katori assigned all of its rights and interest in the
License Agreement dated April 17, 1997, between Katori and FFI (now known as
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Bevex, Inc.). Bevex is the developer and manufacturer of a patented in-store,
self service pressure fill, mini bottling unit (the "Beverage Center"). Pursuant
to the terms of the License, the Company obtained the rights to be Bevex's
distributor for the Beverage Centers and optional equipment associated with the
Beverage Centers on an exclusive basis in the United States. These rights
include the placement, service, repair, marketing and promotion of the Beverage
Centers. Copies of the License Agreement between Katori and Bevex and the
Assignment of License Agreement between Katori and the Company are attached
hereto and incorporated herein by this reference. See Exhibit Index, Part III.
OTHER AGREEMENTS
----------------
The Company has entered into the following agreements:
On March 29, 1999, Asia4sale entered into an agreement with Hong Kong
Telecom IMS (now known as Cable & Wireless HKT ("HKT"). HKT provided, in
consideration of a payment by Asia4Sale to HKT of the sum of HK$34,200
(approximately US$4,685), a basic program to enable Asia4Sale to recruit store
owners and provide its members with virtual storefronts and unique URL
addresses. This basic program has since been enhanced by programmers from
Momentum Internet. HKT will promote the on-line shopping to subscribers of the
their Netvigator service. Netvigator is the Internet portal operated by HKT.
Under the terms of the agreement Asia4Sale will pay HKT a commission of three
percent (3 %) of all sales made by Netvigator subscribers. A copy of the
agreement with HKT is attached hereto and incorporated herein by this reference.
See Exhibit Index, Part III.
On April 1, 1999, Momentum Internet entered into a Consulting Agreement
with Hays Business Systems ("Hays") under which Hays will provide all
administrative, promotional and technical support as required for Momentum
Internet to carry on its Internet publishing and marketing operations,
including, but not limited to, the assistance in the Internet publishing and
marketing of Momentum Internet's products Swiftrade, Mfinance, PINmail,
MediaHits, Search Dragon and such others as developed by Momentum Internet from
time to time. Momentum Internet shall pay Hays a monthly service fee US$2,000
per month from April 1, 1999, forward unless the agreement is terminated by
either party on one-month written notice. A copy of the Agreement with Hays is
attached hereto and incorporated herein by this reference. See Exhibit Index,
Part III.
On April 22, 1999, Momentum Internet entered into a Reuters Investor
Distribution Agreement with Reuters On-Line S.A. ("Reuters On-line") of Geneva,
Switzerland, under which Momentum Internet would have access to the Reuters
Investor Service, which includes without limitation, certain news, information,
database, stock and securities market information and general company, political
sports and market information compiled and developed by Reuters Online. Momentum
Internet's information service users and subscribers to its various sites (i.e.
Swiftrade, etc.) would have the right to access and view such content. Under the
terms of the agreement, Momentum Internet shall pay access fees equal to US$9.60
per Access ID (i.e. User or Subscriber of Momentum Internet who accesses the
site), with a minimum month payment of US$9,000 per calendar month. In
additional Momentum Internet shall pay a start up charge of HK$14,000 (i.e.
approximately US$1,900). A copy of the Reuters Investor Distribution Agreement
is attached hereto and incorporated herein by this reference. See Exhibit Index,
Part III.
On May 1, 1997, Momentum Asia entered into a Loan Agreement with Touchstone
Transport Services, Inc., a Philippines corporation under which Momentum Asia
made a loan of US$250,000) to Touchstone. Said loan is secured by a Real Estate
Mortgage against certain real property located in the City of Olongapo,
Philippines. The loan accrues interest of five percent (5.0%) per annum payable
at the end of each year. The loan has a maturity date of five (5) years from the
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date of the loan. After the first anniversary date of the loan, the principal of
the loan or fifty percent (50%) of the appraised value of the property which is
the security for said loan shall be due and payable on demand. Based on this
demand provision and the value of the property securing said loan Momentum Asia
determined that the loan was a good use of the cash resources of Momentum Asia.
On August 20, 1999, Momentum Asia agreed to extend the loan repayment date by an
additional ten years, and consented to the real estate being leased to an
outside developer. The borrower agreed to pay Momentum Asia, US$75,000 for the
extension and consent by September 30, 1999. Copies of the Loan Agreement and
Real Estate Mortgage are attached hereto and incorporated herein by this
reference. See Exhibit Index, Part III.
On May 3, 1999, Momentum Internet entered into a Market Datafeed Service
Agreement with Stock Exchange Information Services Limited ("SEIS"), a
wholly-owned subsidiary of the Stock Exchange of Hong Kong Limited, under which
SEIS granted to Momentum Internet a non-exclusive license to use stock
information compiled by The Stock Exchange of Hong Kong or SEIS, through Reuters
Hong Kong Limited ("Reuters HK") for the onward transmission of said information
to subscribers of Momentum Internet's information services. Under the terms of
the agreement, Momentum Internet shall pay a standard minimum subscriber fee of
no less than HK$6,000 (i.e. approximately US$820) per month, along with an
annual port Fee of no less than HK$24,000 (i.e. approximately US$3,280).
Momentum Internet has paid a deposit to SEIS in the amount of HK$200,000 (approx
US$25,870). A copy of the Market Datafeed Service Agreement is attached hereto
and incorporated herein by this reference. See Exhibit Index, Part III.
On May 18, 1999, Momentum Internet entered into an Agreement with Options
Direct (Europe), a stock broker duly licensed under the laws of England, under
which Momentum Internet would provide Internet connectivity, technical support,
design and construction of Option's Direct web pages to be hosted on Momentum
Internet's Swiftrade websites. Momentum Internet will also host Option's Direct
trading and portfolio management software on Swiftrade's website. The term of
this agreement is for a period of five (5) years. As compensation for the
services to be provided by Momentum Internet, Options Direct agrees to pay 15%
of the gross commissions earned by Options Direct arising directly or indirectly
from the utilization of the services developed by Momentum Internet for Options
Direct for the first 50 trades per trading day, and 25% of the gross commissions
earned by Options Direct on trades over 50 per day. A copy of the Agreement with
Options Direct is attached hereto and incorporated herein by this reference. See
Exhibit Index, Part III.
On June 25, 1999, Asia4sale entered into an Agreement with Karrex (Hong
Kong) Ltd., a Hong Kong corporation in the business of sales of Music CDs,
worldwide, exclusive of North America. Under the terms of the agreement Karrex
will supply music products to Asia4sale for the sale and distribution of said
goods through its e-commerce interactive website. A copy of the Agreement with
Karrex is attached hereto and incorporated herein by this reference. See Exhibit
Index, Part III.
On June 29, 1999 Momentum Internet entered into an Agreement with United
Mok Ying Kie Limited ("UMYK"), a broker and registered dealer in Hong Kong,
under which Momentum Internet would provide Internet technical support, design
and construction of UMYK's web pages on Momentum Internet's Swiftrade websites,
as well as the hosting of UMYK's web pages on the Internet. The term of this
agreement is for a period of five (5) years. As compensation for the services to
be provided by Momentum Internet, UMYK agrees to pay 40% of the gross
commissions earned by UMYK arising directly or indirectly from the utilization
of the services developed by Momentum Internet for UMYK. A copy of the Agreement
with United Mok Ying Kie Limited is attached hereto and incorporated herein by
this reference. See Exhibit Index, Part III.
On June 30, 1998, Momentum Asia entered into a Subscribers Agreement with
Torquay Associates Ltd., a direct marketing consulting firm with offices in Hong
Kong, Thailand and the U.K., under which Momentum Asia will provide 540 square
meters of office space, along with furniture, equipment, computer network,
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database software, telecommunications, Internet service, mailing services and
employees as required by and for Torquay's business operations. The term of the
agreement is for a period from June 30, 1998, through June 30, 2003. Under the
terms of this agreement, Torquay shall pay Momentum Asia US$20,000 payable
monthly. A copy of the Subscribers Agreement with Torquay Associates Ltd., is
attached hereto and incorporated herein by this reference. See Exhibit Index,
Part III.
On June 30, 1999, Momentum Internet entered into a Services Contract with
Reuters Hong Kong Limited ("Reuters HK"), under which Reuters HK will provide
stock, futures and commodities information to Momentum Internet for the onward
transmission of said information to subscribers of Momentum Internet's
information services. A copy of the Reuters Services Contract is attached hereto
and incorporated herein by this reference. See Exhibit Index, Part III.
On July, 1999, Swiftrade entered into an Online Stock Trading Agreement
with WdoT.rade, Inc., a division of West American Securities Corporation ("West
America"), a registered broker-dealer and member of the NASD. Under the terms of
the agreement Swiftrade will design, host and manage a website for WdoT.rade as
an online trading portal to provide international investors with 24-hour direct
access to the United States Securities market through West America.
WdoT.rade/West America shall pay Swiftrade a referral fee of $40 per account
opened through the services and facilities provided by Swiftrade. A copy of the
Online Stock Trading Agreement is attached hereto and incorporated herein by
this reference. See Exhibit Index, Part III.
(8) Need for Government approval.
With the exception of the requirement that the Company and its subsidiaries
be registered or qualified to do business in the States and foreign countries in
which they will do business, the products and services provided through use of
the Company's technology are not subject to approval of any government
regulation.
(9) Effect of existing or probable governmental regulations on the
business.
The Company has voluntarily filed this Registration Statement on Form 10-SB
in order to register its common stock pursuant to Section 12(g) of the
Securities Exchange Act of 1934.
As a result of the effectiveness of its Registration Statement on Form
10-SB, the Company shall be subject to Regulation 14A of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), which regulates proxy solicitations.
Section 14(a) requires all companies with securities registered pursuant to
Section 12(g) thereof to comply with the rules and regulations of the Commission
regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted
to stockholders of the Company at a special or annual meeting thereof or
pursuant to a written consent will require the Company to provide its
stockholders with the information outlined in Schedules 14A or 14C of Regulation
14; preliminary copies of this information must be submitted to the Commission
at least 10 days prior to the date that definitive copies of this information
are forwarded to stockholders.
The Company will also be required to file annual reports on Form 10-KSB and
quarterly reports on Form 10-QSB with the Commission on a regular basis, and
will be required to timely disclose certain events (e.g., changes in corporate
control; acquisitions or dispositions of a significant amount of assets other
than in the ordinary course of business; and bankruptcy) in a Current Report on
Form 8-K.
The Company's Management believes that it is in the Company's best interest
to become subject to the periodic reporting requirements as set forth above, in
order to provide a mechanism for the disclosure and publication of material
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information about the Company and its financial condition to its shareholders
and the financial community. In the event that the Company's obligation to file
periodic reports is suspended under the Securities Exchange Act, it is the
intention of the Company to continue to voluntarily file period reports as if so
required to do so.
Management believes that these reporting obligations will increase the
Company's annual legal and accounting costs, but it is expected that revenues
will be sufficient to meet these costs.
The Company is not aware of any other governmental regulations now in
existence or that may arise in the future that would have an effect on the
business of the Company.
In the recent years Federal and State securities laws, rules and
regulations have made the participation in or the conducting of an Initial
Public Offering ("IPO") substantially easier for certain small and developmental
stage companies, reducing the time constraints previously involved, the legal
and accounting costs and the financial periods required to be included in the
financial statements. The integrated disclosure system for small business
issuers adopted by the Securities and Exchange Commission in Release No.
34-30968 and effective as of August 13, 1992, substantially modified the
information and financial requirements of a "Small Business Issuer," defined to
be an issuer that has revenues of less than $25 million; is a U.S. or Canadian
issuer; is not an investment company; and if a majority owned subsidiary, the
parent is also a small business issuer; provided, however, an entity is not a
small business issuer if it has a public float (the aggregate market value of
the issuer's outstanding securities held by non-affiliates) of $25 million or
more.
The Securities and Exchange Commission, state securities commissions and
the North American Securities Administrators Association, Inc., ("NASAA") have
expressed an interest in adopting policies that will streamline the registration
process and make it easier for a small business issuer to have access to the
public capital markets. The present laws, rules and regulations designed to
promote availability for the small business issuer to these capital markets and
similar laws, rules and regulations that may be adopted in the future may
substantially limit the demand for companies like the Company.
(10) Estimate of the amount spent during each of the last two fiscal years
on research and development activities.
Research and Development ("R&D") costs approximated $73,062 and $33,657 for
each of the years 1999 and 1998, respectively. In some cases (as described
above), customer contracts require direct payment for specific design of
websites. In general, R&D activities will be recovered through the application
of a burden rate to all quotes.
(11) Costs and effects of compliance with environmental laws (Federal,
State and Local)
The Company does not plan to manufacture the products that are derived from
the application and use of its technology. The Company does not feel that it is
effected by any rules which have been enacted or adopted regulating the
discharge of material into the environment. However, environmental laws, rules
and regulations may have an adverse effect on any business venture viewed by the
Company as an attractive acquisition, reorganization or merger candidate, and
these factors may further limit the number of potential candidates available to
the Company for acquisition, reorganization or merger.
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(12) Number of total employees and number of full time employees.
At the present time the Company and its subsidiaries cumulatively employ a
total of 91 persons of which 60 are full time employees. These full time
employees include, but are not limited to, D. Scott Elder, Ross, W. Jardine,
Allen D. Hardman and Anthony Tobin, who are also officers and directors of the
Company.
RISK FACTORS
------------
Consideration should be given to the risks described below before making an
investment decision in the company. The risks and uncertainties described below
are not the only ones facing the company and there may be additional risks that
are not presently known or are currently deem immaterial. All of these risks may
impair business operations.
Forward Looking Statements. When used in this Registration Statement, the
words or phrases "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "projected", "intends to" or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act. Such statements are subject to certain
risks and uncertainties, including but not limited to, market conditions,
competition, factors affecting the Company's ability to implement its growth
strategy, the Company's dependence on future financing, fluctuations in
operating results, the Company's ability to sustain levels of growth,
diversification of the Company's business, contingent risks, state and federal
regulation and licensing requirements, and environmental concerns that could
cause the Company's actual results to differ materially from those presently
anticipated or projected. Such factors, which are discussed in "Risk Factors,"
"Business," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the notes to consolidated financial statements, could
affect the Company's financial performance and could cause the Company's actual
results for future periods to differ materially from any opinions or statements
expressed with respect to future periods in this Registration Statement. As a
result, all parties are cautioned not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The Company's
independent accountants have not examined or compiled the accompanying
forward-looking statements and, accordingly, do not provide any assurance with
respect to such statements.
The Company's present and proposed business operations will be highly
speculative and subject to the same types of risks inherent in any new or
unproven venture, as well as risk factors particular to the industries in which
it will operate, and will include, among other things, those types of risk
factors outlined below.
In any business venture, there are substantial risks specific to the
particular enterprise which cannot be ascertained until a potential acquisition,
reorganization or merger candidate has been identified; however, at a minimum,
the Company's present and proposed business operations will be highly
speculative and subject to the same types of risks inherent in any new or
unproven venture, and will include those types of risk factors outlined below.
RISK OF "PENNY STOCK." The Company's common stock may, at some future time,
be deemed to be "penny stock" as that term is defined in Rule 3a51-1 of the
Exchange Act of 1934. Penny stocks are stocks (i) with a price of less than five
dollars per share; (ii) that are not traded on a "recognized" national exchange;
(iii) whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ-listed stocks must still meet requirement (i) above); or (iv) of an
issuer with net tangible assets less than US$2,000,000 (if the issuer has been
in continuous operation for at least three years) or US$5,000,000 (if in
continuous operation for less than three years), or with average annual revenues
of less than US$6,000,000 for the last three years.
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A principal exclusion from the definition of a penny stock is an equity
security that has a price of five dollars ($5.00) of more, excluding any broker
or dealer commissions, markups or markdowns. As of the date of this Registration
Statement the Company's common stock has a price in excess of $5.00 and would
not be deemed a penny stock.
If the Company's Common Stock were deemed a penny stock, section 15(g) and
Rule 3a51-1 of the Exchange Act of 1934 would require broker-dealers dealing in
the Company's Common Stock to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Potential investors in the Company's common
stock are urged to obtain and read such disclosure carefully before purchasing
any shares that are deemed to be "penny stock."
Moreover, Rule 15g-9 of the Exchange Act of 1934 Commission requires
broker-dealers in penny stocks to approve the account of any investor for
transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker-dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the
investor has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the investor
with a written statement setting forth the basis on which the broker-dealer made
the determination in (ii) above; and (iv) receive a signed and dated copy of
such statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
the Company's common stock to resell their shares to third parties or to
otherwise dispose of them.
COMPETITION. There are numerous corporations, firms and individuals which
are engaged in the type of business activities in which the Company is presently
engaged. Many of those entities are more experienced and possess substantially
greater financial, technical and personnel resources than the Company or its
subsidiaries. Many of the Company's competitors have longer operating histories
and significantly greater financial, technical, marketing and other resources
than the Company. In addition, many of the Company's competitors offer a wider
range of services and financial products than the Company, and thus may be able
to respond more quickly to new or changing opportunities, technologies and
customer requirements. Many of the Company's competitors also have greater name
recognition and larger customer bases that could be leveraged, thereby gaining
market share from the Company. Such competitors may conduct more extensive
promotional activities and offer better terms and lower prices to customers than
the Company can. Moreover, certain competitors have established cooperative
relationships among themselves or with third parties to enhance their services
and products. Accordingly, it is possible that new competitors or alliances
among existing competitors may significantly reduce the Company's market share.
General financial success within the securities industry over the past several
years has strengthened existing competitors. The Company believes that such
success will continue to attract new competitors to the industry, such as banks,
software development companies, insurance companies, providers of online
financial and information services and others, as such companies expand their
product lines. The current trend toward consolidation in the commercial banking
industry could further increase competition in all aspects of our business.
While the Company cannot predict the type and extent of competitive services
that commercial banks and other financial institutions ultimately may offer, or
whether legislative barriers will be modified, the Company may be adversely
affected by such competition or legislation. To the extent the Company's
competitors are able to attract and retain customers based on the convenience of
one-stop shopping, the Company's business or ability to grow could be adversely
affected. In many instances, the Company is competing with such organizations
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for the same customers. In addition, competition among financial services firms
exists for experienced technical and other personnel. There can be no assurance
that the Company will be able to compete effectively with current or future
competitors or that such competition will not have a material adverse effect on
the Company's business, financial condition and operating results. While the
Company hopes to be competitive with other similar companies, there can be no
assurance that such will be the case.
VOLATILE MARKET FOR COMMON STOCK. The Company's common stock is quoted on
the OTC Bulletin Board of the National Association of Securities Dealers, Inc.
(the "NASD") under the symbol "ZSUN." The market price of the Company's Common
Stock has been and is likely to continue to be highly volatile and subject to
wide fluctuations due to various factors, many of which may be beyond the
Company's control, including: quarterly variations in operating results;
announcements of technological innovations or new software, services or products
by the Company or its competitors; and changes in financial estimates and
recommendations by securities analysts. In addition, there have been large price
and volume fluctuations in the stock market which have affected the market
prices of securities of many technology and services companies, often unrelated
to the operating performance of such companies. These broad market fluctuations,
as well as general economic and political conditions, may adversely affect the
market price of the Company's common stock. In the past, volatility in the
market price of a company's securities has often led to securities class action
litigation. Such litigation could result in substantial costs and aversion of
the Company's attention and resources, which could have a material adverse
effect on the Company's business, financial condition and operating results.
DEPENDENCE ON KEY EMPLOYEES. Historically, the Company and its subsidiaries
have been heavily dependent on the ability of D. Scott Elder, Ross W. Jardine,
Anthony Tobin, Eric Montandon, Allen D. Hardman, Scott Harris, David McCoy and
Peter Graham Daley, who contribute essential technical and management
experience. In the event of future growth in administration, marketing,
manufacturing and customer support functions, the Company may have to increase
the depth and experience of its management team by adding new members. The
Company's success will depend to a large degree upon the active participation of
its key officers and employees. Loss of services of any of the current officers
and directors could have a significant adverse effect on the operations and
prospects of the Company. There can be no assurance that it will be able to
employ qualified persons on acceptable terms to replace officers that become
unavailable.
DISCRETIONARY USE OF PROCEEDS. Because of management's broad discretion
with respect to the acquisition of assets, property or business, the Company may
be deemed to be a growth oriented company. Although management intends to apply
substantially all of the proceeds that it may receive through the issuance of
stock or debt to suitable acquisitions. such proceeds will not otherwise be
designated for any more specific purpose. The Company can provide no assurance
that any allocation of such proceeds will allow it to achieve its business
objectives.
UNASCERTAINABLE RISKS ASSOCIATED WITH POTENTIAL FUTURE ACQUIRED BUSINESSES.
To the extent that the Company may acquire a business in a highly risky
industry, the Company will become subject to those risks. Similarly, if the
Company acquires a financially unstable business or a business that is in the
early stages of development, the Company will become subject to the numerous
risks to which such businesses are subject. Although management intends to
consider the risks inherent in any industry and business in which it may become
involved, there can be no assurance that it will correctly assess such risks.
RISKS ASSOCIATED WITH ACQUISITIONS, STRATEGIC RELATIONSHIPS. The Company
may acquire other companies or technologies in the future, and the Company
regularly evaluates such opportunities. Acquisitions entail numerous risks,
including: difficulties in the assimilation of acquired operations and products;
diversion of management's attention from other business concerns; amortization
of acquired intangible assets; and potential loss of key employees of acquired
companies. The Company has limited experience in assimilating acquired
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organizations into our operations. No assurance can be given as to the Company's
ability to integrate successfully any operations, personnel, services or
products that might be acquired in the future. Failure to successfully
assimilate acquired organizations could have a material adverse effect on the
Company's business, financial condition and operating results. The Company has
established a number of strategic relationships with online and Internet service
providers and software and information service providers. There can be no
assurance that any such relationships will be maintained, or that if they are
maintained, they will be successful or profitable. Additionally, the Company may
not develop any new such relationships in the future. Due to the foregoing
factors, quarterly revenues and operating results are difficult to forecast. The
Company believes that period-to-period comparisons of the Company's operating
results will not necessarily be meaningful and you should not rely on them as
any indication of future performance. The Company's future quarterly operating
results may not consistently meet the expectations of securities analysts or
investors, which in turn may have an adverse effect on the market price of the
Company's Common Stock. Additionally, to the extent that the Company may acquire
a business in a highly risky industry, the Company will become subject to those
risks. Similarly, if the Company acquires a financially unstable business or a
business that is in the early stages of development, the Company will become
subject to the numerous risks to which such businesses are subject. Although
management intends to consider the risks inherent in any industry and business
in which it may become involved, there can be no assurance that it will
correctly assess such risks.
UNCERTAIN STRUCTURE OF FUTURE ACQUISITIONS. Management has had no
preliminary contact or discussions regarding, and there are no current plans,
proposals or arrangements to acquire any other specific assets, property or
business. Accordingly, it is unclear whether such any such acquisition would
take the form of an exchange of capital stock, a merger or an asset acquisition.
CONFLICTS OF INTEREST; RELATED PARTY TRANSACTIONS. Although the Company has
not identified any new potential acquisition targets and management does not
believe there is any "present potential" for such transactions, the possibility
exists that the Company may acquire or merge with a business or company in which
the Company's executive officers, directors, beneficial owners or their
affiliates may have an ownership interest. Although there is no formal bylaw,
stockholder resolution or agreement authorizing any such transaction, corporate
policy does not forbid it and such a transaction may occur if management deems
it to be in the best interests of the Company and its stockholders, after
consideration of the above referenced factors. A transaction of this nature
would present a conflict of interest to those parties with a managerial position
and/or an ownership interest in both the Company and the acquired entity, and
may compromise management's fiduciary duties to the Company's stockholders. An
independent appraisal of the acquired company may or may not be obtained in the
event a related party transaction is contemplated. Furthermore, because
management and/or beneficial owners of the Company's common stock may be
eligible for finder's fees or other compensation related to potential
acquisitions by the Company, such compensation may become a factor in
negotiations regarding such potential acquisitions. It is the Company's
intention that all future transactions be entered into on such terms as if
negotiated at arms length, unless the Company is able to received more favorable
terms from a related party.
RISKS ASSOCIATED WITH SYSTEM FAILURES. Many of the services and products
offered by the Company and its subsidiaries are through and over Internet,
online service providers and touch-tone telephone. Thus, the Company depends
heavily on the integrity of the electronic systems supporting this activity,
including the Company's internal software programs and computer systems. The
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company's systems or any other systems of third parties whom the we utilize
could slow down significantly or fail for a variety of reasons including:
undetected errors in the Company 's internal software programs or computer
systems; the Company's inability to effectively resolve any errors in the
Company's internal software programs or computer systems once they are detected;
or heavy stress placed on the Company's system during certain peak hours of
usage of either the Company's own or its third party provider systems. If the
Company's systems or any other systems which the Company relies on slow down
significantly or fail even for a short time, the Company's customers would
suffer delays and dissatisfaction. The Company could experience future system
failures and degradations. The Company could experience a number of adverse
consequences as a result of these systems failures including the loss of
existing customers and the inability to attract or retain new customers. There
can be no assurance that the Company 's network structure or those of third
party service providers will operate appropriately in any of the following
events: subsystem, component or software failure; a power or telecommunications
failure; human error; an earthquake, fire or other natural disaster; or an act
of God or war. There can be no assurance that in any such event, we will be able
to prevent an extended systems failure. Any such systems failure that interrupts
the Company's operations could have a material adverse effect on the Company's
business, financial condition and operating results.
RISKS ASSOCIATED WITH ENCRYPTION TECHNOLOGY. A significant barrier to
online commerce is the secure transmission of confidential information over
public networks. The Company rely on encryption and authentication technology to
provide secure transmission of confidential information. There can be no
assurance that advances in computer and cryptography capabilities or other
developments will not result in a compromise of the encryption and
authentication technology we use to protect customer transaction data. If any
such compromise of the Company 's security were to occur, it could have a
material adverse effect on the Company's business, financial condition and
operating results.
RISKS ASSOCIATED WITH SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING
RESULTS. The Company expects to experience large fluctuations in future
quarterly operating results that may be caused by many factors, including the
following: the timing of introductions or enhancements to online investing
services and other products by the Company or its competitors; market acceptance
of online investing services and products; the pace of development of the market
for online commerce; changes in trading volume in securities markets; trends in
securities markets; domestic and international regulation of the brokerage
industry; changes in pricing policies by the Company or its competitors; changes
in strategy; the success of or costs associated with acquisitions, joint
ventures or other strategic relationships; changes in key personnel; seasonal
trends; the extent of international expansion; the mix of international and
domestic revenues; changes in the level of operating expenses to support
projected growth; and general economic conditions. The Company have also
experienced fluctuations in the average number of customer transactions per day.
Thus, the rate of growth in customer transactions at any given time is not
necessarily indicative of future transaction activity.
RISKS ASSOCIATED WITH MANAGEMENT OF A CHANGING BUSINESS. The Company has
grown rapidly and the Company's business and operations have changed
substantially since the Company began offering online investing services and
products, and the Company expects this trend to continue. Such rapid change and
expansion places significant demands on the Company's administrative,
operational, financial and other resources. The Company expects operating
expenses and staffing levels to increase substantially in the future. In
particular, the Company intends to hire a significant number of additional
skilled personnel, including persons with experience in both the computer and
brokerage industries. Competition for such personnel is intense, and there can
be no assurance that the Company will be able to find or keep additional
suitable senior managers or technical persons in the future. the Company also
expects to expend resources for future expansion of the Company's accounting and
internal information management systems and for a number of other new systems
and procedures. In addition, the Company expects that future expansion will
continue to challenge the Company's ability to successfully hire and retain
associates. If the Company's revenues do not keep up with operating expenses,
the Company's information management systems do not expand to meet increasing
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demands, the Company fails to attract, assimilate and retain qualified
personnel, or the Company fails to manage the Company's expansion effectively,
there would be a material adverse effect on the Company's business, financial
condition and operating results. The rapid growth in the use of the Company's
services may strained the Company's ability to adequately expand
technologically. As the Company acquires new equipment and applications quickly,
the Company has less time and ability to test and validate hardware and
software, which could lead to performance problems. The Company also relies on a
number of third parties to process the Company's transactions, including online
and Internet service providers, back office processing organizations, service
providers and market-makers, all of which will need to expand the scope of the
operations they perform for us. Any backlog caused by a third party's inability
to expand sufficiently to meet the Company needs could have a material adverse
effect on our business, financial condition and operating results. As trading
volume increases, the Company may have difficulty hiring and training qualified
personnel at the necessary pace, and the shortage of licensed personnel could
cause a backlog in the processing of orders that need review, which could lead
to not only unsatisfied customers, but also to liability for orders that were
not executed on a timely basis.
RISKS ASSOCIATED WITH EARLY STAGE OF MARKET DEVELOPEMENT; DEPENDENCE ON
ONLINE COMMERCE AND THE INTERNET. The market for online investing services,
particularly over the Internet, is at an early stage of development and is
rapidly evolving. Consequently, demand and market acceptance for recently
introduced services and products are subject to a high level of uncertainty. For
the Company, this uncertainty is compounded by the risks that consumers will not
adopt online commerce and that commerce on the Internet will not adequately
develop or flourish to permit the Company to succeed. Sales of many of the
Company's services and products will depend on consumers adopting the Internet
as a method of doing business. This may not occur because of inadequate
development of the necessary infrastructure, such as a reliable network
infrastructure, or complementary services and products such as high-speed modems
and communication lines. The Internet has grown and is expected to grow both in
number of users and amount of traffic. There can be no assurance that the
Internet infrastructure will continue to be able to support the demands placed
on it by this continued growth. In addition, the Internet could lose its
viability due to slow development or adoption of standards and protocols to
handle increased Internet activity, or due to increased governmental regulation.
Moreover, critical issues including security, reliability, cost, ease of use,
accessibility and quality of service remain unresolved and may negatively affect
the growth of Internet use or commerce on the Internet. Because use of the
Internet for commerce is new and evolving, there can be no assurance that the
Internet will prove to be a viable commercial marketplace. If these critical
issues are not resolved, if the necessary infrastructure is not developed, or if
the Internet does not become a viable commercial marketplace, the Company
business, financial condition and operating results will be materially adversely
affected. Adoption of online commerce by individuals that have relied upon
traditional means of commerce in the past will require such individuals to
accept new and very different methods of conducting business. Moreover, the
Company 's online trading and investing services over the Internet involve a new
approach to investing research and trading which will require intensive
marketing and sales efforts to educate prospective customers regarding the
Internet's uses and benefits. For example, consumers who trade with more
traditional brokerage firms, or even discount brokers, may be reluctant or slow
to change to obtaining brokerage services over the Internet. Also, concerns
about security and privacy on the Internet may hinder the growth of online
investing research and trading, which could have a material adverse effect on
the Company 's business, financial condition and operating results.
RISKS ASSOCIATED WITH SECURITIES INDUSTRY; CONCENTRATION OF SERVICES. Most
of the Company's revenue in the past have been from the Company's online
investor services and products, and the Company expects this business to
continue to account for most of the Company's revenue in the foreseeable future.
The Company, like other companies in the Internet securities industry, are
directly affected by economic and political conditions, broad trends in business
and finance and changes in volume and price levels of securities and futures
transactions. In recent months, the U.S. securities markets have fluctuated
considerably and a downturn in these markets could effect customers interest in
our products and services and adversely affect the Company's operating results.
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In October 1987 and October 1989, the stock market suffered major declines, as a
result of which many company's and firms suffered financial losses, and the
level of individual investor trading activity decreased after these events.
Reduced trading volume and prices have historically resulted in reduced revenues
to company's such as the Company's. When trading volume is low and investor and
customer interest or use of the Company's products and services diminishes, the
Company's operating results may be adversely affected because the Company's
overhead remains relatively fixed. Severe market fluctuations in the future
could have a material adverse effect on the Company's business, financial
condition and operating results. Some of the Company's competitors with more
diverse product and service offerings might withstand such a downturn in the
securities industry better than the Company would.
RISKS ASSOCIATED WITH DELAYS IN INTRODUCTION OF NEW SERVICES AND PRODUCTS.
The Company's future success depends in part on the Company's ability to develop
and enhance the Company's services and products. There are significant technical
risks in the development of new services and products or enhanced versions of
existing services and products. There can be no assurance that the Company will
be successful in achieving any of the following: effectively using new
technologies; adapting the Company's services and products to emerging industry
standards; developing, introducing and marketing service and product
enhancements; or developing, introducing and marketing new services and
products. The Company may also experience difficulties that could delay or
prevent the development, introduction or marketing of these services and
products. Additionally, these new services and products may not adequately meet
the requirements of the marketplace or achieve market acceptance. If the Company
is unable to develop and introduce enhanced or new services and products quickly
enough to respond to market or customer requirements, or if they do not achieve
market acceptance, the Company's business, financial condition and operating
results will be materially adversely affected.
RISKS ASSOCIATED WITH DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS. Neither
the Company or any of its subsidiaries presently holds any patents, copyrights
or trademarks for their products or services offered or the names under which
they operate. However, the Company and its subsidiaries are currently in the
process of seeking copyright and trademark protection of its trade names and
website addresses. The Company's success and ability to compete are dependent to
a degree of the Company's and its subsidiary's name and product recognition.
Accordingly, the Company will primarily rely on copyright, trade secret and
trademark law to protect our product, services and brand names offer or under
which the Company and its subsidiaries conduct their business. Effective
trademark protection may not be available for the Company's trademarks. There
can be no assurance that the Company will be able to secure significant
protection for the Company's trademarks. The Company's competitors or others may
adopt product or service names similar to the Company's, thereby impeding the
Company's ability to build brand identity and possibly leading to customer
confusion. The Company's inability to adequately protect our product, brand,
trade names and trademarks would have a material adverse effect on the Company's
business, financial condition and operating results. Despite any precautions the
Company takes, a third party may be able to copy or otherwise obtain and use the
Company's software or other proprietary information without authorization or to
develop similar software independently. Policing unauthorized use of the
Company's technology is made especially difficult by the global nature of the
Internet and difficulty in controlling the ultimate destination or security of
software or other data transmitted on it. The laws of other countries may afford
us little or no effective protection for the Company's intellectual property.
There can be no assurance that the steps the Company takes will prevent
misappropriation of the Company's technology or that agreements entered into for
that purpose will be enforceable. In addition, litigation may be necessary in
the future to enforce the Company's intellectual property rights; protect the
Company's trade secrets; determine the validity and scope of the proprietary
rights of others; or defend against claims of infringement or invalidity. Such
litigation, whether successful or unsuccessful, could result insubstantial costs
and diversions of resources, either of which could have a material adverse
effect on the Company's business, financial condition and operating results.
29
<PAGE>
RISKS ASSOCIATED WITH INFRINGEMENT. The Company may in the future receive
notices of claims of infringement of other parties' proprietary rights. There
can be no assurance that claims for infringement or invalidity (or any
indemnification claims based on such claims) will not be asserted or prosecuted
against the Company. Any such claims, with or without merit, could be time
consuming and costly to defend or litigate, divert the Company's attention and
resources or require the Company to enter into royalty or licensing agreements.
There can be no assurance that such licenses would be available on reasonable
terms, if at all, and the assertion or prosecution of any such claims could have
a material adverse effect on the Company's business, financial condition and
operating results.
RISKS ASSOCIATED WITH ENTERING NEW MARKETS. One element of our strategy is
to leverage the Company's brand names and services that the Company and its
subsidiaries provide. No assurance can be given that the Company will be able to
successfully adapt the Company's products and services for use in other markets.
Even if the Company does adapt the Company's to other markets, no assurance can
be given that the Company will be able to compete successfully in any such new
markets. There can be no assurance that the Company's marketing efforts or the
Company's pursuit of any new opportunities will be successful. If the Company's
efforts are not successful, the Company could realize less than expected
earnings, which in turn could result in a decrease in the market value of the
Company's Common Stock. Furthermore, such efforts may divert management
attention or inefficiently utilize the Company's resources.
RISKS ASSOCIATED WITH INTERNATIONAL STRATEGY. One component of the
Company's strategy is a planned increase in efforts to attract additional
international customers and to expand the Company's OIA seminars, services and
products into international markets. To date, the Company has limited experience
in providing investment services internationally. There can be no assurance that
the Company's and the Company's subsidiaries will be able to market the
Company's branded services and products successfully in international markets.
In addition, there are certain risks inherent in doing business in international
markets, such as: unexpected changes in regulatory requirements, tariffs and
other trade barriers; difficulties in staffing and managing foreign operations;
political instability; fluctuations in currency exchange rates; reduced
protection for intellectual property rights in some countries; seasonal
reductions in business activity during the summer months in Europe and certain
other parts of the world; and potentially adverse tax consequences. Any of the
foregoing could adversely impact the success of the Company's international
operations. Under these agreements, the Company relies upon third parties for a
variety of business and regulatory compliance matters. The Company has limited
control over the management and direction of these third parties. The Company
runs the risk that their action or inaction could harm the Company's operations
and/or the goodwill associated with the Company's brand names. As a result, the
risk to our operations and goodwill is higher. There can be no assurance that
one or more of the factors described above will not have a material adverse
effect on the Company's future international operations, if any, and,
consequently, on our business, financial condition and operating results.
EQUITY PRICE RISK. The Company through its subsidiary Momentum Asia holds a
small portfolio of marketable-equity traded securities that are subject to
market price volatility. Equity price fluctuations of plus or minus 15 percent
would not have a material impact on the Company. For its working capital and
reserves that are required to be segregated under Federal or other regulations,
the Company invests in money market funds, resale agreements, certificates of
deposit, and commercial paper. Money market funds do not have maturity dates and
do not present a material market risk. The other financial instruments are fixed
rate investments with short maturities and do not present a material interest
rate risk.
30
<PAGE>
YEAR 2000 INFORMATION
---------------------
Year 2000 Issues - Uncertainty Of The Effects Of The Year 2000 On Computer
Programs And Systems.
---------------------------------------------------------------------------
Many currently installed computer systems and software programs were
designed to use only a two digit date field. These date code fields will need to
accept four digit entries to distinguish 21st century dates from 20th century
dates. Until the date fields are updated, the systems and programs could fail or
give erroneous results when referencing dates following December 31, 1999. Given
that the Company's products operate on certain hardware platforms and within
certain software operating systems and environments, the Company must rely upon
the efforts of the hardware and software vendors and manufacturers to be in the
vanguard with respect to operating systems and platform issues relating to the
Year 2000 compliance.
Present Year 2000 Status.
-------------------------
The Company has assessed the impact of the year 2000 issue on the Company's
products, services, platforms systmes and internal information systems in use,
and has found them to be Year 2000 compliant. The Company does not expect the
Company's financial results to be materially affected by the need to address
year 2000 issues, but if the costs associated with addressing these issues are
greater than planned, the Company's earnings and results of operations could be
affected. Due to the Company's dependence on computer technology to conduct the
Company's business, the nature and impact of year 2000 processing failures on
the Company's business, financial condition and operating results could be
material.
However, the Company has Y2K compliance declarations from their major
service providers. The declaration for Cable & Wireless Hong Kong Telecom may be
found at http://www.cwhkt.com/ABOUT/community/2000/progress/9909.html.
The declaration for Concentric Network USA may be found at
http://www.concentric.com/2000.html.
OIA, the Company's subsidiary has received a letter from Telescan one of
its material vendors indicating that Telescan has and continues to test and
complete remidiation efforts. Telescan's Y2K statement can be found at
http://www.telescan.com/Telescan_y2k.html.
Business Continuity and Contingency Planning.
---------------------------------------------
The Company continues the process of identifying the reasonably likely year
2000 problem failures that the Company could experience with the goal of
revising, to the extent practical, the Company's existing business continuity
and contingency plans to address the internal and external issues specific to
those problems. Thus far, the Company has focused as planned on reviewing the
Company's critical business processes and although the Company conducted tests
on the various and Platform systems in use, and has found them to be Year 2000
compliant, the Company's expect to continuously review, test and revise the
Company's existing business continuity and contingency plans to ensure that all
systems are and maintain year 2000 compliant. This will include as required
repairing or obtaining replacement systems; changing suppliers; and reducing or
suspending certain non-critical aspects of our operations.
The Company has completed Y2K remediation at the corporate office for both
the network server and the 10 workstations, and the telephone system server. The
cost for this remediation was some $2,642.00. Remediation was not necessary for
the Momentum Asia and Momentum Internet operations as their computer systems
were purchased Y2K compliant. Moreover, the Company does not expect to spend any
additonal monies on Y2K remediations issues. OIA is also Y2K compliant.
31
<PAGE>
Possible Consequences of Year 2000 Problems
-------------------------------------------
The Company believes that the Company has put in place the processes and
are devoting the resources necessary to achieve a level of readiness to meet the
Company's year 2000 challenges in a timely and appropriate manner. However,
there can be no assurance that the Company's internal systems or the systems of
others on which we rely will be year 2000 ready in a timely and appropriate
manner or that the Company's contingency plans or the contingency plans of
others on which the Company reles will mitigate the effects of year 2000 problem
failures. Currently, the Company believes the most reasonably likely worst case
scenario would be a sustained, concurrent failure of multiple critical systems
(internal and external) that support the Company's operations. While the Company
does not expect that scenario to occur, that scenario if it occurs could, even
despite the successful execution of the Company's business continuity and
contingency plans, result in the reduction or suspension of a material portion
of our operations and accordingly have a material adverse effect on the
Company's business and financial condition.
The preceding "Year 2000 Information" discussion contains various
forward-looking statements that represent the Company's beliefs or expectations
regarding future events. When used in the "Year 2000 Information" discussion,
the words "believes," "expects," "estimates," "plans," "goals," and similar
expressions are intended to identify forward-looking statements. Forward-looking
statements include, without limitation, the Company's expectations as to when
the Company will complete the identification and assessment, remediation
planning, remediation, and testing activities of the Company's year 2000 program
as well as the Company's year 2000 contingency planning; the Company's estimated
cost of achieving year 2000 readiness; and the Company's belief that the
Company's internal systems and equipment will be year 2000 ready in a timely and
appropriate manner. All forward-looking statements involve a number of risks and
uncertainties that could cause the actual results to differ materially from the
projected results. Factors that may cause those differences include availability
of information technology resources; customer demand for the Company's products
and services; continued availability of materials, services, and data from the
Company's suppliers; the ability to identify and remediate all date sensitive
lines of computer code and to replace embedded computer chips in affected
systems and equipment; the failure of others to timely achieve appropriate year
2000 readiness; and the actions or inaction of governmental agencies and others
with respect to year 2000 problems.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
December 31, 1999 and December 31, 1998
- ---------------------------------------
Changes in Financial Condition
- ------------------------------
On March 25, 1999 the Company acquired Asia4sale by issuing restricted
common stock of the Company for virtually all of the stock of Asia4sale and
$15,000 cash. On December 31, 1999 the Company sold Asis4sale for $5,000,000
cash and 300,000 shares of Internet Ventures, Ltd. On March 31, 1999 the Company
also acquired Online Investors Advantage (OIA) for restricted common stock of
the Company and $400,000 cash. These acquisitions were accounted for as
purchases. The acquisition of OIA has made a substantial, positive contribution
to the financial condition of the Company through year-end. The balance of
current assets at December 31, 1999 was $13,740,981 compared to a balance of
$2,261,618 at December 31,1998. The balances of current liabilities are
$4,230,620 and $600,013 for the same periods respectively. The resulting current
ratio at December 31, 1999 is 3.2:1. The current ratio at December 31, 1998 was
3.8:1.
The increase of current assets at December 31, 1999 over December 31, 1998
is due primarily to the increase of cash from $517,781 to $11,652,505, an
increase of $11,134,724, or 2,150%. This increase is due primarily to the cash
generated from the sale of Asia4sale, $5,000,000, positive cash flow generated
from the operations of OIA, approximately $4,000,000 at year end, and the cash
generated from the sale of equity securities. (See further discussion of income
below.)
32
<PAGE>
Current assets at December 31, 1999 also increased due to the increase of
prepaid expenses from $7,370 to $375,710, an increase of $368,340, or 4,998%.
The increase in prepaid expenses is primarily due to the advance payments by OIA
for costs such as newspaper, radio and television advertising for future
seminars. Additionally, accounts receivable increased $254,414 or 28%, from
$899,879 at December 31, 1998, to $1,154,293 at December 31, 1999. The balance
of accounts receivable at December 31, 1999 includes primarily OIA's
pre-approved seminar payments not yet charged to credit cards of approximately
$744,000 and the trade receivables of MAI of approximately $323,000. The
substantial portion of these balances was collected subsequent to year-end. The
increases in current assets were offset somewhat by the decrease in marketable
securities from $786,588 in 1998 to $540,234 in 1999, a decrease of $246,354 or
31%. This decrease is due primarily to the sale of Chequemate stock.
The balance of current liabilities at December 31, 1999 is $4,230,620 and
at December 31, 1998 is $600,013. The increase of $3,630,607, or 605%, is due
primarily to the income taxes payable at December 31, 1999 of $2,083,763
relating to the U.S. earnings of OIA. Momentum Internet is a British Virgin
Islands company, Momentum Asia is a Philippine company and Asia4sale is a Hong
Kong company. These companies are subject to income taxation of the respective
countries of their registration. OIA is a Utah corporation, and therefore
subject to United States income tax. There were no income taxes payable at
December 31, 1998. Current liabilities at December 31, 1999 also increased for a
related party payable of $690,000, convertible to common stock at the trading
value of the shares on the date of conversion. Accounts payable and accrued
expenses increased $782,744, or 130%, from $600,013 at December 31, 1998 to
$1,382,757 at December 31, 1999. The increase is primarily due to the OIA
balance of approximately $718,000 at December 31, 1999.
The balance of equipment (net) increased from $503,779 to $795,219, an
increase of $270,164, or 58% from December 31, 1998 to 1999. Purchases during
1999 primarily included the office-related equipment of OIA of $250,000 and
printing equipment of MAI of $100,000. Depreciation expense for the current year
was $205,263 compared to $89,885 for the prior year.
Other assets increased $1,711,815, or 43% from $3,962,770 at December 31,
1998 to $5,674,585 at December 31, 1999. The increase is due primarily to the
addition of $2,538,567 of goodwill, (net) resulting from the acquisition of OIA.
Goodwill is the book value given to the difference between the purchase price
and the estimated fair market value of the net assets of OIA, and is amortized
over the estimated life of 10 years. The increase of other assets attributable
to goodwill was offset by the net decrease in the receivable from related party
of $645,586 resulting from the substantial collection of that balance in 1999.
Additionally, other assets decreased at December 31 1999, $49,356 for equity
losses in Bevex and $158,457 for sales of investments in restricted stock.
At December 31, 1999 the Company has no long-term debt. The Company has
sufficient cash flow from operations to meet its current cash obligations.
During 1999 the Company also generated substantial cash flow from the sale of
Asia4sale and from the sale of investments in securities. The Company
anticipates continued positive cash flow from existing operations during the
next twelve months, and will continue to look for ways to invest its cash flow
in acquisitions of companies and other investments that will contribute in a
positive way to the Company's operating strategy.
Results of Operations
- ---------------------
During 1998 the company was winding down its activities with the beverage
centers. By January 1999 those operations had entirely ceased. The operations of
Momentum Asia and Momentum Internet are not included until the fourth quarter of
1998. The December 31, 1999 operations include Momentum Asia and Momentum
Internet from January 1, 1999 forward and the operations of Online Investors and
Asia4sale from April 1, 1999 forward.
33
<PAGE>
As explained previously, the Company acquired OIA on March 31, 1999. This
acquisition has had considerable impact on the operating income of the Company
since that date.
Sales for the year ended December 31, 1999 were $27,220,240 compared to
$760,529 for 1998 resulting in an increase of $26,459,711, or 3,479%. Cost of
goods sold for the year was $17,031,019, or 63% of sales, resulting in gross
profit of $10,189,221, or 37% of sales. Cost of sales for 1998 was $341,277, or
45% of sales resulting in a gross margin of $419,252, or 55% of sales.
Operating expenses include primarily depreciation and amortization expense
and general and administrative expenses. Depreciation and amortization expense
for the year ended December 31, 1999 includes depreciation of $205,263 and
amortization of goodwill of $468,450. The Company recorded goodwill for the
October, 1998 acquisitions of Momentum Asia and Momentum Internet and the March,
1999 acquisitions of Asia4sale and OIA. For the year ended December 31, 1998 the
Company had depreciation expense of $89,885. General and administrative expenses
were $4,632,905 or 17% of sales for the twelve months ended December 31, 1999
and $492,936 or 65% of sales for the same period in 1998, resulting in an
increase of $4,139,969 or 840%. The increase is due to the twelve months of
operating expenses of MAI and MII and the operating expenses of OIA from April 1
to December 31, 1999.
Other income increased from $971,049 in 1998 to $5,442,330 in 1999, an
increase of $4,471,281 or 460%. The increase is due primarily to the gain of
$4,778,596 from the sale of Asia4sale on December 31, 1999. This increase is
offset somewhat by the decrease in realized and unrealized gains on marketable
securities from $1,248,239 in 1998 to $584,980 in 1999, a decrease of $663,259
or 53%.
Item 3. Description of Property
The Nature and Extent of The Company's Facilities
Lease No. 1 - Solana Beach, California Office
---------------------------------------------
The Company's main office is located at 462 Stevens Avenue, Suite 106,
Solana Beach, California 92075. This leased office facility serves as the
corporate headquarters for the Company and houses the corporate offices of the
BestWay Beverages, Inc., a wholly owned subsidiary. The leased premises consists
of approximately 4,658 square feet and is on an initial lease term of 60 months.
The Company leases this space from Propco, L.P., a California Limited
Partnership. Propco L.P., is not affiliated in any way with the Company or its
subsidiaries and the terms of the lease were negotiated at arms-length.
A summary of the terms of the lease are as follows:
---------------------------------------------------
Lease Term: 60 Months commencing January 1, 1998.
34
<PAGE>
Security Deposit: $50,000 Letter to Credit which shall be reduced to
$10,000 after the 36th month of the lease provided there have been no
defaults by ZiaSun.
Rental rate: Months 01-12.........$8,384 per month;
Months 13-24.........$8,720 per month;
Months 15-36.........$9,069 per month;
Months 37-48.........$9,431 per month;
Months 49-60.........$9,809 per month;
Option to Renew: One option to renew the lease for a period of five (5)
years provided that written notice of the Company's intent to renew is
delivered to Landlord at least six (6) months before expiration of the
initial term. Monthly rent during the renewal term will be fair market
rental value of the leased premises, as determined pursuant to the
terms of the lease.
Real Property Taxes
and other Expenses: As additional rent, the Company is responsible for the
payment of 9.25% of the Direct Expenses associated with operation and
maintenance of the leased premises.
Personal
Property Taxes: The Company shall pay all taxes assessed against and levied
upon trade fixtures, furnishings, equipment and all other personal
property of the Company contained in the premises.
Utilities: The Company shall pay for all gas, heat, light, power telephone
and other utilities and services supplied to the premises, together
with any taxes thereon.
Subleasing: Consent of Landlord is required.
Copies of the Office Lease and Addendum to Office Lease for the premises
located at 462 Stevens Avenue, Suite 106, Solana Beach, California 92075, are
attached hereto and incorporated herein by reference. See the Exhibit Index,
Part III.
Lease No. 2 - Wanchai, Hong Kong Office - (Momentum Associates Limited)
-----------------------------------------------------------------------
Momentum Associates Limited ("MAL") a Hong Kong registered company and
wholly subsidiary of Momentum Internet leases the corporate facilities located
at the 12th Floor, First Pacific Bank Centre, 56 Gloucester Road, Wanchai, Hong
Kong. This office space comprises 2,000 square feet and is leased until November
30, 2000. This office is occupied by Anthony Tobin, the Company's President and
is shared by Momentum Internet administration and development staff. These
facilities are leased from Hong Kong Finance Property Company Limited which is
not affiliated in any way with the Company or its subsidiaries and the terms of
the lease were negotiated at arms-length.
A summary of the terms of the lease are as follows:
--------------------------------------------------
Lease Term: Two years commencing December 1, 1998.
Security Deposit: HKD$133,297 (i.e. approximately US$17,173).
35
<PAGE>
Rental rate: HKD$55,000 (i.e. approximately US$7,085) per month.
Option to Renew: One option to renew the lease for a period of five (5)
years provided that written notice of our intent to renew is delivered
to Landlord at least six (6) months before expiration of the initial
term. Monthly rent during the renewal term will be fair market rental
value of the leased premises, as determined pursuant to the terms of
the lease.
Additional Rent: As additional rent MAL pays HKD$11,649 (i.e. approximately
US$1,500) per month for management and air conditioning charges.
Personal
Property Taxes: MAL shall pay all taxes assessed against and levied upon
trade fixtures, furnishings, equipment and all other personal property
of MAL contained in the premises.
Utilities: MAL shall pay for all gas, heat, light, power telephone and
other utilities and services supplied to the premises, together with
any taxes thereon.
Subleasing: Consent of Landlord is required.
A copy of the Wanchai, Hong Kong Office Lease for the premises located at
12th Floor, First Pacific Bank Centre, 56 Gloucester Road, Wanchai, Hong Kong,
entitled "Tenancy Agreement", is attached hereto and incorporated herein by
reference. See the Exhibit Index, Part III.
Lease No. 3 - Pasig City, Philippines Office - (Momentum Internet
Phils, Inc.)
------------------------------------------------------------------
Momentum Internet Phils, Inc., ("MIP") a Philippines registered company and
wholly subsidiary of Momentum Internet Incorporated, a wholly owned subsidiary
of the Company, leases offices located at Pearl Drive Corner Gold Loop Street,
Ortigas Center, Pasig City, Philippines. The initial term of this lease is from
January 1, 1999, through December 31, 1999, and is subject to renewal by mutual
agreement of the parties. This office space is leased from Rebecca A, Ynares,
who is not affiliated in any way with the Company or its subsidiaries and the
terms of the lease were negotiated at arms-length.
A summary of the terms of the lease are as follows:
---------------------------------------------------
Lease Term: One year (January 1, 1999 through December 31, 1999.
Security Deposit: Two Months Rent - P$180,000 Pesos (i.e. US$4,500)
Rental rate: P$90,000 Pesos (i.e. US$2,250 per month.
Option to Renew: MIP can renew this lease upon providing the Landlord 60
days prior notice to renew before the expiration of the lease and MIP
are able to negotiate mutually acceptable renewable lease terms with
the landlord.
CAM (Common
Area Charges): As additional rent MIP pays P$20.00 Pesos ($US0.50) per
square meter of the total leased are.
36
<PAGE>
Personal
Property Taxes: MIP shall pay all taxes assessed against and levied upon
trade fixtures, furnishings, equipment and all other personal property
of MIP contained in the premises.
Utilities: MIP shall pay for all gas, heat, light, power telephone and
other utilities and services supplied to the premises, together with
any taxes thereon.
Subleasing: Consent of Landlord is required.
Copies of the Contract of Lease and First Amendment to the Contract of
Lease for the office space located at Pearl Drive Corner Gold Loop Street,
Ortigas Center, Pasig City, Philippines, are attached hereto and incorporated
herein by reference. See the Exhibit Index, Part III.
Lease No. 4 - Clark Field, Philippines Office - (Momentum Asia Inc.)
--------------------------------------------------------------------
Momentum Asia leases a 30,500 square foot office/industrial property
located in the Clark Special Economic Zone, Philippines (former Clark Air Base),
located at building PTI-07 at Mitchell Highway 1961st Are, Clark Field,
Pampanga. This facility houses all operations of Momentum Asia, and is leased
until November 30, 2016. Current rent is US $5,300 per month until November 30,
2000, with an annual 6.0% escalation thereafter. Substantial tenant improvements
have been completed by Momentum Asia at its own expense. These facilities are
subleased from Philexcel Textiles, Incorporated (PTI), a Philippines corporation
which is not affiliated in any way with the Company or its subsidiaries and the
terms of the lease were negotiated at arms-length.
A summary of the terms of the lease as amended are as follows:
Lease Term: Twenty years commencing December 1, 1996.
Security and
Rental Deposit: US$15,000 Security Deposit and US$5,000 Rental Deposit
Rental rate: Currently US$5,300 per month with an increase of six percent
(6.0% every year compounded annually except for year 3 from December
1, 1999 through November 30, 2000.
Option to Renew: Momentum Asia can renew this lease provided Momentum Asia
is able to negotiate mutually acceptable renewable lease terms with
the landlord and subject to approval and consent of the original
lessor.
Personal
Property Taxes: Momentum Asia shall pay all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other
personal property of Momentum Asia contained in the premises.
Utilities: Momentum Asia shall pay for all gas, heat, light, power
telephone and other utilities and services supplied to the premises,
together with any taxes thereon.
37
<PAGE>
Subleasing: Consent of Landlord is required and as a condition to any
sublease, we must pay the landlord 10% of the gross proceeds of any
sublease proceeds Momentum Asia receives.
Copies of the Sublease Agreement and Amended Sublease Agreement between
Momentum Asia, Inc., and Philexcel Textiles, Inc., for the premises located at
building PTI-07 at Mitchell Highway 1961st Are, Clark Field, Pampanga. are
attached hereto and incorporated herein by reference. See the Exhibit Index,
Part III.
Lease No. 5 - Provo, Utah Office Lease - (OIA)
----------------------------------------------
OIA, a wholly owned subsidiary of the Company, leases offices located at
5252 North Edgewood Drive, Provo Utah 84604. The leased premises consists of
approximately 3,340 square feet net rentable area. OIA leases this space from
EsNET Properties L.C., a Utah limited liability company which is not affiliated
in any way with the Company or its subsidiaries and the terms of the lease were
negotiated at arms-length.
A summary of the terms of the lease are as follows:
---------------------------------------------------
Lease Term: August 1, 1999 through July 20, 2004
Security Deposit: Two Months of current base rent.
Base Rental rate: Year 1 .............. Letter of Credit
against first 12 Months Rent;
Year 2............... $4,157 per month;
Year 3............... $4,282 per month;
Year 4............... $4,410 per month;
Year 5............... $4,542 per month;
Pursuant to the terms of the Lease, if lieu of OIA paying Landlord
regular monthly rent payments during the fist 12 months of the lease,
OIA deposited with Landlord a letter of credit in the amount of
$72,265 which is the amount of rents from commencement of the lease
and a prepayment of rents for the balance of the first year, including
12% interest paid on the first year's rent. If OIA fails to pay
Landlord the full amount due as of rental consideration for the first
12 months of occupancy by April 15, 2000, then Landlord may drawn down
on said line of credit.. In the event that OIA pays said amount due
without Landlord having to drawn down on said line of credit, the OIA
shall deposit a security deposit equal to two months of the then
current base rent.
Additional Rent: OIA shall pay as additional rent that amount equal to (a)
the Net Rentable Area of the leased premises multiplied by (b) the
Operating Expense of the building, divided by the Net Rentable Are of
the Building.
Option to Renew: OIA has the option to renew the lease for one additional
term of 5 years provided there has been no event of default. In the
event of a renewal the Base Rental rate would be as follows:
38
<PAGE>
Option Term Base Rental Rate:
----------------------------
Year 6 .............. $4,679 per month;
Year 7 .............. $4,819 per month;
Year 8 .............. $4,964 per month;
Year 9 .............. $5,112 per month;
Year 10 ............. $5,266 per month;
Personal
Property Taxes: OIA shall pay all taxes assessed against and levied upon
trade fixtures, furnishings, equipment and all other personal property
of OIA contained in the premises.
Utilities: OIA shall pay for all gas, heat, light, power telephone and
other utilities and services supplied to the premises, together with
any taxes thereon.
Subleasing: Consent of Landlord is required.
A copy of the Lease Agreement for the premises located at 5252 North
Edgewood Drive, Provo Utah 84604, is attached hereto and incorporated herein by
reference. See the Exhibit Index, Part III.
Lease No. 6 - Orem, Utah Office Lease - (OIA.)
----------------------------------------------
OIA, a wholly owned subsidiary of the Company, also leases offices located
at 852 North 1430 West, Unit #3, Westpoint Business Park, Orem Utah 84057. The
leased premises consists of approximately 1,940 square feet and is for a term of
three (3) years. OIA leases this space from DC Mason , Ltd., which is not
affiliated in any way with the Company or its subsidiaries and the terms of the
lease were negotiated at arms-length.
A summary of the terms of the lease are as follows:
----------------------------------------------------
Lease Term: Three (3) years (November 1, 1998 through October 31, 2001
Security Deposit: $1,100.00
Base Rental rate: Year 1 .............. $1,100 per month;
Year 2............... $1,133 per month;
Year 3............... $1,167 per month;
Additional Rent: OIA shall pay as additional rent all Common Area
Maintenance Charges associated with the leased premises estimated to
be $40.00 per month.
Option to Renew: The lease does not provide us with the right to renew and
as such any such renewal would be on mutually acceptable terms to both
parties.
Real Property Taxes
and other Expenses: OIA shall pay all real estate taxes levied and
assessed against the lease premises which are estimated to be $46 per
month.
Personal
Property Taxes: OIA shall pay all taxes assessed against and levied upon
trade fixtures, furnishings, equipment and all other personal property
of OIA contained in the premises.
39
<PAGE>
Utilities: OIA shall pay for all gas, heat, light, power telephone and
other utilities and services supplied to the premises, together with
any taxes thereon.
Subleasing: Consent of Landlord is required.
A copy of the Lease Agreement for the premises located at located at 852
North 1430 West, Unit #3, Westpoint Business Park, Orem Utah 84057., is attached
hereto and incorporated herein by reference. See the Exhibit Index, Part III.
Lease No. 7 - Orem, Utah Office Lease - (OIA)
---------------------------------------------
OIA, a wholly owned subsidiary of the Company, also leases offices located
at Turnberry Office Park, 211 East 840 South, Unit #15, Orem Utah 85058. The
leased premises consists of approximately 2,000 square feet. OIA leases this
space from Gordon Jacobson, who is not affiliated in any way with the Company or
its subsidiaries and the terms of the lease were negotiated at arms-length.
A summary of the terms of the lease are as follows:
---------------------------------------------------
Lease Term: Month to Month with 60 days notice to terminate
Security Deposit: $1,900
Base Rental rate: $1,900 per month
Option to Renew: Month to Month lease
Real Property Taxes
and other Expenses: OIA shall pay our proportionate amount of the real
property taxes for any given year which are in excess of the real
property taxes for the fiscal year ended as of the beginning of our
lease.
Personal
Property Taxes: OIA shall pay all taxes assessed against and levied upon
trade fixtures, furnishings, equipment and all other personal property
of OIA contained in the premises.
Utilities: OIA shall pay for all gas, heat, light, power telephone and
other utilities and services supplied to the premises, together with
any taxes thereon.
Subleasing: Consent of Landlord is required.
A copy of the Lease Agreement for the premises located at located at
Turnberry Office Park, 211 East 840 South, Unit #15, Orem Utah 85058, is
attached hereto and incorporated herein by reference. See the Exhibit Index,
Part III.
40
<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
The following table sets forth security ownership information as of the
close of business on November 15, 1999, for any person or group, known by the
Company to own more than five percent (5%) of the Company's voting securities,
based on a total of 27,055,000 shares issued and outstanding as of such date.
<TABLE>
<CAPTION>
Title of Name of Amount of Percent of
Class Beneficial Owner Ownership Class
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock D. Scott Elder 2,100,000 7.76%
1156 East 100 North
Orem, UT 84097
Common Stock Ross W. Jardine 2,100,000 7.76%
116 S. Pfeifferhorn Drive
Alpine, Utah 84004
Common Stock Momentum Media Ltd. 3,499,980 12.93%
304 Dominion Centre
43 Queen's Road
East Wanchai
Hong Kong
</TABLE>
(b) Security Ownership of Management
The following table sets forth security ownership information as of the
close of business on November 15, 1999, for any director, executive officer or
group of the Company's voting securities:
<TABLE>
<CAPTION>
Title of Name of Amount of Percent of
Class Beneficial Owner Ownership Class
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock D. Scott Elder 2,100,000 7.76%
1156 East 100 North
Orem, UT 84097
Common Stock Ross W. Jardine 2,100,000 7.76%
116 S. Pfeifferhorn Drive
Alpine, Utah 84004
Common Stock Anthony L. Tobin(1) 1,000,000 3.69%
12A Pacific Bank Centre
56 Gloucester Road
Wanchai, Hong Kong
Common Stock Allen D. Hardman 12,500 0.04%
462 Stevens Avenue
Suite 106
Solana Beach, CA 92075
Common Stock Alfredo Alex S. Cruz III 4 nil
405 One Magnificent Mile
San Miguel Avenue
Pasig City, Philippines 1605
</TABLE>
41
<PAGE>
(b) Security Ownership of Management (continued)
<TABLE>
<CAPTION>
Title of Name of Amount of Percent of
Class Beneficial Owner Ownership Class
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock All Directors and Officers
as a Group (6 persons) 5,212,504 19.27%
</TABLE>
Each of the persons listed in the above table possesses sole investment
power and sole voting power over the shares set forth in the above table.
--------------------------------------------------
(1) Anthony L. Tobin does not direct own any shares of the Company.
However, indirectly Mr. Tobin, as the sole director of Vulcan
Consultants Ltd., the owner of 1,000,000 (post split adjusted) shares
as stated above, has sole voting power over said shares.
Except as set forth above, no other Officer or Director of the Company owns
any shares directly or indirectly.
(c) Change in Control.
There are no present arrangements or pledges of the Company's securities
which may result in a change in control of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons
(a) Identity of Directors and Executive Officers.
<TABLE>
<CAPTION>
Name and Address Age Position Term Served Since
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
D. Scott Elder 41 CEO 1 Year June 1, 1999 to present
825 North 1430 West Chairman of the Board 1 Year June 1, 1999 to present
Orem, UT 84057 Director 1 Year May 11, 1999 to present
Anthony L. Tobin 53 President 1 Year November 19, 1998 to present
12A, Pacific Bank Centre Director 1 Year October 5, 1998 to Present
56 Gloucester Road CEO October 5, 1998 to June 1, 1999
Wanchai, Hong Kong
Allen D. Hardman 58 Vice President 1 Year October 5, 1998 to Present
452 Stevens Avenue Director 1 Year October 5, 1998 to Present
Suite 106 CFO October 5, 1998 to April 15, 1999
Solana Beach, CA 92075
Ross W. Jardine 38 Director 1 Year April 7, 1999 to present
116 S. Pfeifferhorn Drive
Alpine, Utah 84004
Alfredo Alex S. Cruz III 39 Secretary 1 Year June 1, 1999 to present
15 Kalinga Street
La Vista Subdivision
Quezon City, Philippines
</TABLE>
42
<PAGE>
There are no arrangements or understandings between any of the directors or
executive officers, or any other person or person pursuant to which they were
selected as directors and/or officers.
D. Scott Elder, 41, was elected as the Chairman of the Board and Chief
Executive Officer of the Company in June 1999. From 1994 to 1997, Mr. Edler
owned and operated two consulting businesses, D.Scott Elder & Associates and The
Business Alliance Company, which developed marketing and training programs. In
1998 Mr. Edler continued to operate the consulting business of D.Scott Elder &
Associates and founded OIA with Ross W. Jardine. Mr. Elder served as the
President of OIA until his appointment as the CEO and Chairman of the Board of
the Company in June 1999. Mr. Elder has a degree in Communications from Brigham
Young University and an M.B.A. from the University of Phoenix in 1997. Mr. Elder
is also currently the Vice President of Online Investors Advantage, Inc., a Utah
Corporation ("OIA"), a company he co-founded with Ross Jardine in 1997. OIA
provides educational workshops and video-based home study training programs that
teach people how to use its Investor Toolbox web site in order to make sound
stock investing decisions and manage their own stock investments. OIA was
recently acquired by the Company.
Before devoting full time to OIA, Mr. Elder was the owner of The Business
Alliance Company, which developed joint-venture marketing and training programs.
Some of the companies Mr. Elder has developed joint-venture projects with
include General Mills, Procter & Gamble, Rubbermaid, and Zane Publishing, a
company that markets educational programs through Amway.
Mr. Anthony Tobin, 53, was appointed as a Director of the Company on
October 5, 1998 and as the President on November 19, 1999. Mr. Tobin is also
President of Momentum Internet. From 1994 through November 1997, Mr. Tobin was
the Managing Director of Momentum Campaigns Ltd., Hong Kong, an advertising and
public relations consultancy company. In November 1997 Momentum Internet
Incorporated, was formed to specialize in Internet projects. Mr. Tobin has
served as the President of Momentum Internet from 1997 to present. In May 1998
Momentum Associates Ltd., a subsidiary of Momentum Internet was formed to handle
the operations of Momentum Internet in Hong Kong. Mr. Tobin has more than 25
years experience in Asia (Hong Kong, Singapore, and the Philippines) -- in
journalism publishing, public relations, marketing, advertising, government
information. and the Internet. He was the former senior information
communications officer in the Hong Kong and Singapore governments. Mr. Tobin
reported to the Prime Minister's office in Singapore, advising on domestic and
international publicity policies and implementing new strategies in the Ministry
of Information. He has spent the last three years developing and marketing the
Momentum Internet Incorporated product roster.
Mr. Tobin is also a Director and Manager of Crossbow Consultants Ltd., an
Internet publishing company which has a consulting contract with Momentum
Internet Incorporated, a subsidiary of the Company.
Allen D. Hardman, 58, was appointed as a Director and the Vice President of
the Company on October 5, 1999. Mr. Hardman earned an Industrial Engineering
Technical Diploma from the University of Utah in 1966, and a Bachelors Degree in
Business Administration from California State University in 1975. Mr. Hardman
services as the Managing Director of Business Relations for Roeslein &
Associates from June 1993 through June 1997. Mr. Hardman was the Vice President
of Operations of Bestway USA from July 1997 until the Company's spin-off of
Bestway USA in October 1998. Mr. Hardman has 35 years of varied business
experience, some with small companies and some with mid-to-large corporations.
His work experience includes president for a company furnishing pre-assembled
manufacturing systems on a global basis., director of business development for
industrial manufacturing systems, national sales manager for systems products,
manufacturing engineering, product and systems engineering, consulting
engineering, operations management, project management for multi-million dollar
projects installed worldwide, manufacturing quality control and customer service
management.
43
<PAGE>
During the last several years, and particularly the last two years, Mr.
Hardman has restructured several small businesses to either establish their
viability as an enterprise and/or increase their operating proficiency and
potential for profitability. He has also been intimately involved in identifying
and establishing some strategic partner alliances and/or joint ventures. This
allowed the companies involved to improve their respective competitive
position(s) in the marketplace through improved product or intellectual property
designs, which resulted from the synergy realized by combining their individual
product offerings.
Ross W. Jardine, 38, was appointed as a director of the Company on April 7,
1999 and is also the President of Online Investors Advantage, Inc., a Utah
Corporation ("OIA") a wholly owned subsidiary of the Company. Mr. Jardine
graduated cum laude from Brigham Young University in 1987 with a degree in
communications. In 1990 Mr. Jardine founded Jacobson & Jardine, Inc. a Sports
Marketing and Promotion company. Mr. Jardine served as President until August
1994 during which time Mr. Jardine was responsible for operations and the
developed and marketed licensed products for major sporting events. These
clients included National Football League, Indy 500, Kentucky Derby, America's
Cup 1992, Nabisco, Albertsons, Coca Cola, Fisher Price, American Home Products,
RJ Reynolds and many others. In 1994 he became interested in the Internet and
moved his business online. This experience led him to start a consulting
business focused on teaching other business owners how to get their own
businesses online. Mr. Jardine founded Electronic Marketing Services (later
renamed iMALL, Inc) in 1994 and served as President until January 1996. From
January 1996 through August 1997 Mr. Jardine served as speaker/consultant for
iMALL. iMALL went public in 1996 was recently sold to Excite@home for $425
million.
In 1997 Mr. Jardine left iMALL to focus on creating a program to train
investors in using the Internet to invest. Together with D. Scott Elder, Mr.
Jardine founded OIA, (www.i-advantage.com), a company focused on teaching people
how to invest using their personal computers and the Internet. The Company
quickly established itself as a leader in online investor education, and is
highly recommended by the Security Blanket.com, www.thesecurityblanket.com. OIA
conducts dozens of workshops and seminars in cities around the country where
investors learn to use the most advanced investment tools available on the
Internet. Mr. Jardine serves as President of OIA and conducts many of the
training programs put on by OIA.
Alfredo Alex S. Cruz III, the Secretary of the Company also serves as a
director of Momentum Asia, Inc., and Momentum Internet Incorporated, both of
which are wholly owned subsidiaries of the Company. Mr. Cruz was admitted to the
Philippine Bar in 1987 having received his Bachelor of Law degree from the
University of the Philippines in 1986 and an A.B. in Economics from the
University of the Philippines in 1982. Mr. Cruz is a founding partner of the law
firm of Bocobo Rondain Mendiola Cruz & Formoso located in Pasig Metro Manila,
Philippines. Mr. Cruz's practice concentration and experience is in the areas of
mergers and acquisitions, joint ventures, incorporations, administrative
licensing, and corporate housekeeping; general exposure in trial and appellate
litigation in Contract, Corporate, Domestic Relations, Entertainment, Insurance,
Injunction, and Libel Law. Mr. Cruz is fluent in English and Filipino.
(1) Directorships
No Director of the Company or person nominated or chosen to become a
Director holds any other directorship in any company with a class of securities
registered pursuant to section 12 of the Exchange Act or subject to the
requirements of section 15(d) of such Act or any other company registered as an
investment company under the Investment Company Act of 1940.
44
<PAGE>
(a) Identity of Significant Employees.
In addition to the executive officers of the Company, the Company or its
subsidiaries rely on the services and expertise of Peter Graham Daley of
Momentum Associates Limited, Brian Hodgson, the President of Asia4sale.com, Ross
W. Jardine, the President of OIA, Scott Harris and David McCoy employees of OIA
and Eric Montandon, the President of Momentum Asia, all of which persons make a
significant contributions to the business of the Company and its subsidiaries.
(b) Family Relationships.
There are no family relationships between any directors or executive
officers of the Company, either by blood or by marriage.
(c) Involvement in Certain Legal Proceedings.
During the past five years, no present or former director, executive
officer or person nominated to become a director or an executive officer of the
Company:
(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the bankruptcy or
two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or
(4) was found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading Commission
to have violated a Federal or state securities or commodities law, and the
judgment has not been reversed, suspended or vacated.
45
<PAGE>
Item 6. Executive Compensation.
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the periods indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
---------------------------
Long Term Compensation
--------------------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------------------
Securities All
Other Underlying Other
Annual Restricted Options/ LTIP Compen-
Name and Year or Compen- Stock SAR's Payouts sation
Principal Period Salary Bonus sation) Awards (#) ($) ($)
Position Ended ($) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anthony L. Tobin(1) 1998 $121,8000 0 $31,200 0 0 0 0
President 1997 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0
Allen D. Hardman(2) 1998 $132,0000 0 0 100,000 0 0 0
Vice President 1997 $120,0000 0 0 100,000 0 0 0
1996 N/A N/A N/A N/A N/A N/A N/A
D. Scott Elder(3) 1998 $31,500 0 0 0 0 0 174,127
Chairman of 1997 $0 0 0 0 0 0 0
the Board 1996 N/A N/A N/A N/A N/A N/A N/A
and CEO
Ross D. Jardine(4) 1998 $0 0 0 0 0 0 208,520
President of OIA 1997 $0 0 0 0 0 0 0
1996 N/A N/A N/A N/A N/A N/A N/A
Peter Graham
Daley(5) 1998 $24,000 0 0 0 0 0 0
Employee of 1997 N/A N/A N/A N/A N/A N/A N/A
Momentum Associates 1996 N/A N/A N/A N/A N/A N/A N/A
Limited
</TABLE>
- ---------------------------------------
(1) Mr. Tobin is the owner of Crossbow Consultants Limited which receives
$10,000 per month from the Company's subsidiary, Momentum Internet
Incorporated, for the services provided by Crossbow Consultants. Mr.
Tobin through his employment agreement with Momentum Associates
Limited, a subsidiary of Momentum Internet Incorporated, receives a
month housing allowance of approximately $2,600 and a management fee
of approximately $150 per month.
(2) Mr. Hardman, the Vice President of the Company is currently subject to
and Employment Agreement with the Company. See Employment Contracts /
Stock Incentive Plans" below.
(3) Mr. Elder received a base salary of $31,500, consulting fees of
$24,127, and $150,000 in payment of deferred compensation, from OIA
during 1998, for total compensation of $205,627.
(4) Mr. Jardine received consulting fees of $58,520 and $150,000 in
payment of deferred compensation from OIA during 1998, for total
compensation of $208,520.
(5) Mr. Daley through his employment agreement Momentum Associates
Limited, a subsidiary of Momentum Internet Incorporated, receives a
month housing allowance of approximately $2,000 and a management fee
of approximately $150 per month.
46
<PAGE>
There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as director. No additional
amounts are payable to the Company's directors for committee participation or
special assignments.
There are no arrangements pursuant to which any of the Company's directors
was compensated during the Company's last completed fiscal year for any service
provided as director.
There are no employment contracts, compensatory plans or arrangements,
including payments to be received from the Company, with respect to any director
or executive officer of the Company which would in any way result in payments to
any such person because of his or her resignation, retirement or other
termination of employment with the Company or its subsidiaries, any change in
control of the Company, or a change in the person's responsibilities following a
change in control of the Company.
Nor are there any agreements or understandings for any director or
executive officer to resign at the request of another person; none of the
Company's directors or executive officers is acting on behalf of or will act at
the direction of any other person.
EMPLOYMENT CONTRACTS / STOCK INCENTIVE PLANS
--------------------------------------------
Allen D. Hardman. Allen D. Hardman, the Vice President and a director of
the Company has an Employment Agreement with the Company which commenced on July
1, 1997 for a term of 5 years at an initial salary of $120,000 per year.
Pursuant to the terms of the agreement, the Company's board of directors may, in
its sole discretion, grant raises, bonuses, etc. in an amount not less that the
cost of living increase for the greater San Diego area. Additionally, Mr.
Hardman's Employment Agreement contains a stock option which entitles Mr.
Hardman the option to one hundred thousand (100,000) (post split adjusted)
shares of the Common Stock of the Company, at $2.00 per share, (subject to
adjustment for splits), in equal installments of twenty-five (25,000) (post
split adjusted) shares each beginning after one (1) year of employment for 4
consecutive years. On April 15, 1999 the Board of Directors of the Company
authorized the amendment to Mr. Hardman's Employment Agreement and the Stock
Option contained therein such that the Employment Agreement, as amended and
Stock Option were broken out into two separate agreements. Copies of Mr.
Hardman's Employment Agreement, Amendment to Employment Agreement and
Non-Qualified Stock Option Agreement are attached hereto and incorporated herein
by reference. See the Exhibit Index, Part III.
Peter Graham Daley. Momentum Associates Limited ("MAL"), a Hong Kong
registered company and wholly-owned subsidiary of Momentum Internet
Incorporated, which is a wholly owned subsidiary of the Company has an
employment agreement with Peter Graham Daley under which Mr. Daley will provide
administrative, promotional and technical support services to MAL to enable MAL
to carry on its business as a facilitator of Internet marketing and publishing
service,. Under the terms of this agreement Mr. Daley shall be paid a housing
allowance of HK$15,000 (approximately US$2,000) per month for a period from June
1, 1998, through May 31, 1999. The agreement is subject to automatic renewal
unless terminated by either party on one months prior notice. The agreement has
been renewed. A copy of this Employment Agreement with Mr. Daley is attached
hereto and incorporated herein by reference. See the Exhibit Index, Part III.
Anthony L. Tobin. Mr. Anthony L. Tobin, the President and a Director of the
Company has an Employment Agreement with MAL. Under the terms of this agreement
Mr. Tobin is to provide administrative, promotional and technical support
services to MAL to enable MAL to carry on its business as a facilitator of
Internet marketing and publishing service,. Under the terms of this agreement
Mr. Tobin shall be paid a housing allowance of HK$19,000 per month plus a
management fee of HK$1,112 per month for a period from June 1, 1998, through May
31, 1999. The agreement is subject to automatic renewal unless terminated by
either party on one months prior notice. The agreement has been renewed. A copy
of this Employment Agreement with Mr. Tobin is attached hereto and incorporated
herein by reference. See the Exhibit Index, Part III.
Crossbow Consultants, Limited. Mr. Tobin is also the sole owner of Crossbow
Consultants Limited. See
47
<PAGE>
Item 7. "Certain Relationships and Related Transactions."
STOCK INCENTIVE AWARDS
----------------------
Other than the stock options and rights to acquire additional shares of
common stock of the Company as set forth in Item 8. below, Description of
Securities "Options, Warrants and Rights to Acquire Additional Shares of the
Companies Common Stock," there are no other outstanding options, warrants or
rights to acquire additional shares of common stock of the Company.
Any incentive awards, stock options or warrants shall be made at the
discretion of the board of directors or a committee designed by the board of
directors.
Item 7. Certain Relationships and Related Transactions
TRANSACTIONS WITH MANAGEMENT AND OTHERS
---------------------------------------
On January 19, 1998, Fountain Fresh International Inc., a Utah Corporation
("FFI"), (Since renamed to BEVEX Inc.) ceased operations due to financial
insolvency.
On May 13, 1998, New Age Publications, a Philippine Corporation ("NAP"),
(Since renamed to Momentum Asia, Inc.), who had no ownership interest in FFI at
that time, and BetterStuff AG, a Swiss Corporation ("BSAG"), the designated
European distributor for FFI, who had a significant vested interest in the
success of FFI and was particularly interested in preserving FFI and their
beverage center technology, entered into a joint venture agreement known as
"Beverage Center Joint Venture" (BCJV) to acquire a majority ownership of the
outstanding shares of FFI. Some 12,800,000 shares of BEVEX were issued and
outstanding that that time.
Accordingly, on May 20, 1998, the BCJV, through the equal joint
contributions by NAP and BSAG, did acquire 20,000,000 newly issued shares of FFI
for $1,400,000.00, increasing the total shares issued and outstanding to
32,264,000. Under the terms of the BCJV agreement NAP would own 10,000,000
shares and BSAG would own 10,000,000 shares. Following the acquisition, BCJV
beneficially owned some 62% of the total FFI shares issued and outstanding.
In accordance with the terms of the BCJV, the remaining money was used to
complete a creditor workout, wherein some $1,900,000 of overdue FFI trade debt
was settled for $520,000. In addition, an outstanding judgment against FFI for
$426,000 was settled for $280,000. The balance of the money has been, and is
being applied to redesign of the FFI beverage center, because after intensive
design critique by qualified engineers in both Europe and the USA, it was
determined the existing design had too many shortcomings to be successful in the
marketplace for which it was intended.
In February 1999, following the failure of the BCJV to reach a Milestone
established by the joint venture agreement which resulted in BEVX requiring
additional funding, BSAG elected not to provide further funded and to deliver
its shares of BEVX to its shareholders. According, BSAG, a Swiss Corporation,
delivered to 13 of its shareholders, 9,000,000 of the 10,000,000 shares of BVEX
acquired through the BCJV. As a result of the delivery of these shares by BSAG,
the 20,000,000 BEVEX (BVEX) shares acquired by BCJV are now beneficially owned
by the following entities:
Entity Shares Owned
------ ------------
Momentum Asia 10,000,000
Hugues Monteil 2,523,174
Jorg E. Meyerhans 1,058,105
Hannes Gubler 1,058,105
Heinz Almstalden 1,058,105
Rudolf Wild AG 982,817
Jacques Deublebeiss 813,927
Marc Bruhwiler 284,875
Walter Nietlispach 284,875
Fredy Amstalden 244,178
Wemer Kiesinger 244,178
Lisa Pfenniger 162,785
Monika Deublebeiss 162,785
Marco Wyss 122,091
BetterStuff AG 1,000,000
-----------------------------------------------------------------------
Total Shares 20,000,000
48
<PAGE>
Having fulfilled its purpose to preserve FFI (Now known as BEVEX Inc.),
BCJV was formally terminated on June 13, 1999.
Following an intensive review of beverage mixing, proportioning and filling
technologies in Europe over the last several months, testing is now underway on
those certain technologies deemed most successful and applicable to self-fill
beverage centers of the type BEVEX Inc. believes will have the highest
probability of success in the targeted markets. Moreover, BEVEX has been
successful in obtaining German Government backed technology development funding
to continue the beverage center redesign and introduction to the marketplace.
In August 1998 the Company's subsidiary, Momentum Asia, Inc. made a loan of
$70,000 to Vulcan Consultants Limited, a British Virgin Islands Corporation,
which loan was due and payable in one year, in cash or securities acceptable to
Momentum Asia, Inc. In December 1998, Vulcan Consultants delivered as full
payment of said loan, 65,000 restricted shares of the Company which Vulcan
Consultants received as the sole shareholder of Momentum Internet Incorporated,
through the acquisition by the Company of Momentum Internet Incorporated Mr.
Anthony L. Tobin, the President of the Company is the sole director of Vulcan
Consultants Limited and has sole voting power over the shares owned by Vulcan.
Acquisition of Momentum Internet
--------------------------------
On October 5, 1998, the Company acquired Momentum Internet Incorporated,
("Momentum Internet"), a corporation organized under the laws of the British
Virgin Islands in a stock-for-stock exchange, whereby the Company issued
1,130,000 (post split adjusted) shares of restricted common stock in exchange
for all capital stock of Momentum Internet, thereby making Momentum Internet a
wholly-owned subsidiary of the Company. Momentum Internet, whose main offices
are located in Hong Kong and Manila in the Philippines, has a range of Internet
products and services, including an international online stock trading portal, a
premium web-based e-mail service, an Internet advertising banner network, a
finance website, and an Asia-focused search engine. The acquisition of Momentum
Internet was, for accounting purposes treated as a purchase. A copy of the
Acquisition Agreement and Plan of Reorganization is attached hereto and
incorporated herein by this reference. See the Exhibit Index, Part III.
Acquisition of Momentum Asia
----------------------------
On October 5, 1998, the Company acquired Momentum Asia, Inc., ("Momentum
Asia"), a corporation organized under the laws of the Republic of the
Philippines in a stock-for-stock exchange, whereby the Company issued 4,000,000
(post-split adjusted) shares of restricted common stock in exchange for all
capital stock of Momentum Asia, thereby making Momentum Asia a wholly- owned
subsidiary of the Company. Momentum Asia, whose main offices are located in the
Clark Economic Zone, in the Philippines, provides a wide range of compatible
graphic design, copy writing, printing, database management, and e-mail customer
service operations. The acquisition of Momentum Asia was, for accounting
purposes treated as a purchase of Momentum Asia. A copy of the Acquisition
Agreement and Plan of Reorganization is attached hereto and incorporated herein
by this reference. See the Exhibit Index, Part III.
Acquisition of Asia4sale
------------------------
On March 25, 1999, the Company entered into an Acquisition Agreement and
Plan of Reorganization, under which the Company would acquire Asia4sale.com,
Ltd., ("Asia4sale"), a Hong Kong Registered Company. In exchange for 99 of the
100 shares of Asia4sale, the Company issued 100,000 (post-split adjusted) shares
of restricted common stock and paid $15,000 cash to the majority holder of the
capital stock of Asia4sale, thereby virtually making Asia4sale a wholly-owned
subsidiary of the Company. In addition, the Company made an unsecured loan of
$50,000 to Asia4sale upon closing of the acquisition and agreed to issue one (1)
additional share of restricted common stock for each one dollar ($1.00)
(post-split adjusted) of actual earnings of Asia4sale for the period from April
1, 1999, through September 31, 2000. Asia4sale is in the business of Internet
related international e-commerce. In addition, the Company was granted the
option to repurchase the 100,000 (post split adjusted) shares issued in the
acquisition of Asia4sale for a period of one (1) year at a price of $1.50
(post-split adjusted) per share in the event that Asia4sale fails to reach
positive cash flow from its operations by September 30, 2000. As of the date of
49
<PAGE>
this registration statement, Asia4sale has not yet reached positive cash flow.
The acquisition was completed on May 12, 1999. The acquisition of Asia4sale was
accounted for as a purchase. The contingent shares are not recorded as being
issued in accordance with APB 16., paragraphs 79 and 80. Copies of the
Acquisition Agreement and Plan of Reorganization, Unsecured $50,000 Note and the
Stock Option are attached hereto and incorporated herein by this reference. See
the Exhibit Index, Part III.
Acquisition of Online Investors Advantage, Inc.
-----------------------------------------------
On March 31, 1999, the Company entered into an Acquisition Agreement and
Plan of Reorganization, under which the Company would acquire Online Investors
Advantage Incorporated ("OIA"), a Utah corporation. Online Investor's Advantage
is in the business training individuals how to effectively use the financial
planning and investment tools available on the internet to manage their own
investment portfolios. The training is structured around a five-step discipline,
which includes searching for an investment, evaluating the investment and
assessing the risk, timing the purchase, establishing an exit point and
monitoring the investment. This is done through live workshops, and video-based,
self-directed home learning programs, which include the use of OIA's proprietary
website www.investortoolbox.com. In exchange for all of the capital stock of
OIA, the Company issued 1,000,000 (post-split adjusted) shares of restricted
common stock and paid $400,000 in cash, all of which was distributed pro-rata to
the shareholders of OIA, thereby making OIA a wholly-owned subsidiary of the
Company. In addition, the Company issued 5,000,000 (post-split adjusted) shares
pro-rata to the shareholders of OIA. Those shares are currently being held in
escrow in accordance with the terms of the adjustment provision set forth in the
acquisition agreement, based on anticipated earnings of at least $2,500,000 for
OIA for the period from April 1, 1999, through March 31, 2000. As set forth in
the terms of the acquisition agreement, in the event that the actual earnings of
OIA are less than $2,500,000, for the specified period, then the total number of
shares being held in escrow shall be reduced on a two (post-split adjusted)
share basis for each $1.00 of actual earnings of OIA less than $2,500,000. In
the event that the actual earnings of OIA is greater than $2,500,000, then the
Company shall issue such additional shares on the basis of two additional
(post-split adjusted) shares for each $1.00 of actual earnings of OIA greater
than $2,500,000. The acquisition was completed on April 7, 1999. The actual
earnings which are defined as net income before income taxes, depreciation and
interest expense, were approximately $3,700,000 through April 1, 1999. The
acquisition of OIA was accounted for as a purchase. The shares were issued as
contingent shares being held in escrow and have not been recorded. A copy of the
Acquisition Agreement and Plan of Reorganization is attached hereto and
incorporated herein by this reference. See the Exhibit Index, Part III.
Commencing April 1, 1999, pursuant to an oral agreement between Momentum
Associates Limited, a Hong Kong registered company and wholly subsidiary of
Momentum Internet Incorporated, a wholly owned subsidiary of the Company,
Asia4sale.com Limited, a wholly-owned subsidiary of the Company subleases and
utilizes for its operations, part of the leased premises located at the 12th
Floor, First Pacific Bank Centre, 56 Gloucester Road, Wanchai, Hong Kong.
Asia4sale.com, Limited pays Momentum Associates Limited monthly rent of HK$5,000
(i.e. approximately US$685) per month, on an unlimited basis terminable by
either party upon one months prior notice.
On April 1, 1999, Momentum Internet Incorporated, a wholly-owned subsidiary
of the Company entered into a Consulting Agreement with Crossbow Consultants
Limited, a personal services corporation owned by the Company's President,
Anthony L. Tobin. Under the terms of this agreement, Crossbow will provide all
administrative, promotional and technical support, as required, for Momentum
Internet to carry on its Internet publishing and marketing operations, including
but not limited to the assistance in the Internet publishing and marketing of
Momentum Internet's products Swiftrade, Mfinance, PINmail, MediaHits, Search
Dragon and such others as developed by Momentum Internet from time to time.
Under the terms of this agreement Momentum Internet pays Crossbow a monthly fee
of US$10,000 per month. A copy of the Agreement with Crossbow Consultants
Limited is attached hereto and incorporated herein by this reference. See
Exhibit Index, Part III.
50
<PAGE>
On March 25, 1999, Momentum Internet Incorporated, a wholly-owned
subsidiary of the Company entered into an agreement with Asia4sale.com, Ltd.,
also a wholly-owned subsidiary of the Company under which Momentum Internet
would provide promotional services to Asia4sale and its internet related barter
and auction site and service. In consideration for the services provided by
Momentum Internet, Asia4sale.com agrees to spilt equally with Asia4sale.com and
Momentum Internet all paid receipts, after deducting all fees paid by Asia4sale
to suppliers, shop franchisees and credit card transaction fees. Payments shall
be made at mutually agreed upon times subject to an account being taken after
receipt of annual audited financial statements for Asia4sale. A copy of the
Agreement between Momentum Internet and Asia4sale.com, Ltd., is attached hereto
and incorporated herein by this reference. See Exhibit Index, Part III.
Other than the transactions set forth above, there have been no material
transactions, series of similar transactions, currently proposed transactions,
or series of similar transactions, to which the Company or any of its
subsidiaries was or is to be a party, in which the amount involved exceeded
$60,000 and in which any director or executive officer, or any security holder
who is known to the Company to own of record or beneficially more than five
percent of the Company's common stock, or any member of the immediate family of
any of the foregoing persons, had a material interest.
There have been no further or additional preliminary contact or discussion
by any of the Company's officers, directors, promoters, their affiliates or
associates with any representatives of the owners of any business or company
regarding the possibility of any acquisitions or mergers transactions, and there
are no present plans, proposals, arrangements or understandings with any person
or company regarding the possibility of any additional acquisitions or merger
transaction.
TRANSACTIONS WITH PROMOTERS
---------------------------
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeded $60,000 and in which any promoter or founder, or any member of
the immediate family of any of the foregoing persons, had a material interest.
However, see the caption "Transactions with Management and Others" of this
Registration Statement Item 8. Description of Securities.
Item 8. Description of Securities.
Common Stock
------------
The Company has one class of security authorized, consisting of 50,000,000
authorized shares of one mill ($0.001) par value common voting stock. The
holders of the Company's common stock are entitled to one vote per share on each
matter submitted to a vote at a meeting of stockholders. The shares of common
stock do not carry cumulative voting rights in the election of directors.
Stockholders of the Company have no pre-emptive rights to acquire
additional shares of common stock or other securities. The common stock is not
subject to redemption rights and carries no subscription or conversion rights.
In the event of liquidation of the Company, the shares of common stock are
entitled to share equally in corporate assets after satisfaction of all
liabilities. All shares of the common stock now outstanding are fully paid and
non-assessable.
As of November 15, 1999 there were 27,055,000 shares of Common Stock issued
and outstanding.
51
<PAGE>
OUTSTANDING STOCK OR RIGHTS TO
ACQUIRE ADDITIONAL SHARES OF THE COMPANIES COMMON STOCK.
--------------------------------------------------------
The company currently has three agreements by which certain individuals
have options to purchase or rights to acquire shares of the Company's Common
Stock.
Allen D. Hardman - Stock Option. Pursuant to the Employment Agreement of
Allen D. Hardman, the Vice President and a Director of the Company, the Company
has granted Mr. Hardman an option to purchase one hundred thousand (100,000)
(post split adjusted) shares of the common stock of the Company, at a purchase
price of $2.00. The right to exercise his option to purchase the one hundred
thousand shares shall vest in four (4) equal installments of twenty five
thousand (25,000) (post split adjusted) shares each on the completion of each
successive year of employment from date of contract.
Asia4sale.com - Acquisition Consideration Adjustment. Pursuant to the terms
of the Acquisition Agreement and Plan of Reorganization under which the Company
acquired 99 of the 100 shares of Asia4sale, thereby making Asia4sale virtually a
wholly owned subsidiary of the Company, the Company agreed to issue one (1)
additional share of restricted common stock for each one dollar ($1.00)
(post-split adjusted) of actual earnings of Asia4sale for the period from April
1, 1999, through September 31, 2000.
Online Investors Advantage Acquisition Consideration Adjustment. Pursuant
to the terms of the Acquisition Agreement and Plan of Reorganization under which
the Company acquired all of the capital stock of OIA, the Company in addition to
the 1,000,000 (post-split adjusted) shares of restricted common stock issued and
the $400,000 in cash paid to the shareholders of OIA, thereby making OIA a
wholly-owned subsidiary of the Company, the Company issued an additional
5,000,000 (post-split adjusted) shares pro-rata to the shareholders of OIA which
shares are being held in escrow pursuant to the terms of the adjustment
provision set forth in the acquisition agreement, based on anticipated earnings
of $2,500,000 for OIA for the period from April 1, 1999 through March 31, 2000.
Pursuant to the terms of the acquisition agreement, in the event that the actual
earnings of OIA are less than $2,500,000, for the specified period then the
total number of shares being held in escrow shall be reduced on a one share
basis for each $1.00 of actual earnings of OIA less than $2,500,000. In the
event that the actual earnings of OIA is greater than $2,500,000, then the
Company shall issue a such additional shares on the basis of one additional
shares for each $1.00 of actual earnings of OIA greater than $2,500,000.
Global Direct Marketing Limited - Pursuant to the terms of the Agreement
between the Company and Global Direct Marketing Limited, the Company agreed to
issue 150,000 (post-split adjusted) restricted shares of its common stock to
Global Direct in consideration of its referral of OIA to the Company. According
to the terms of this Agreement, these shares are to be issued only in the event
that the Company completes the acquisition of OIA in which event said shares are
to be issue 9 months from the consummation of any said acquisition. The
acquisition of OIA was completed on April 7, 1999, and, therefore, said shares
are to be issued to Global Direct on December 7, 1999.
There are no other outstanding options, warrants or rights to acquire
additional shares of Common Stock of the Company.
CHANGE IN CONTROL
-----------------
There is no provision in the Company's Articles of Incorporation, as
amended, or Bylaws, as amended, that would delay, defer, or prevent a change in
control of the Company.
52
<PAGE>
OUTSTANDING STOCK OR RIGHTS TO
ACQUIRE ADDITIONAL SHARES OF THE COMPANIES COMMON STOCK.
--------------------------------------------------------
The company currently has three agreements by which certain individuals
have options to purchase or rights to acquire shares of the Company's Common
Stock.
Allen D. Hardman - Stock Option. Pursuant to the Employment Agreement of
Allen D. Hardman, the Vice President and a Director of the Company, the Company
has granted Mr. Hardman an option to purchase one hundred thousand (100,000)
(post split adjusted) shares of the common stock of the Company, at a purchase
price of $2.00. The right to exercise his option to purchase the one hundred
thousand shares shall vest in four (4) equal installments of twenty five
thousand (25,000) (post split adjusted) shares each on the completion of each
successive year of employment from date of contract.
Asia4sale.com - Acquisition Consideration Adjustment. Pursuant to the terms
of the Acquisition Agreement and Plan of Reorganization under which the Company
acquired 99 of the 100 shares of Asia4sale, thereby making Asia4sale virtually a
wholly owned subsidiary of the Company, the Company agreed to issue one (1)
additional share of restricted common stock for each two dollars ($2.00) of
actual earnings of Asia4sale for the period from April 1, 1999, through
September 31, 2000.
Online Investors Advantage Acquisition Consideration Adjustment. Pursuant
to the terms of the Acquisition Agreement and Plan of Reorganization under which
the Company acquired all of the capital stock of OIA, the Company in addition to
the 1,000,000 (post-split adjusted) shares of restricted common stock issued and
the $400,000 in cash paid to the shareholders of OIA, thereby making OIA a
wholly-owned subsidiary of the Company, the Company issued an additional
5,000,000 (post-split adjusted) shares pro-rata to the shareholders of OIA which
shares are being held in escrow pursuant to the terms of the adjustment
provision set forth in the acquisition agreement, based on anticipated earnings
of $2,500,000 for OIA for the period from April 1, 1999 through March 31, 2000.
Pursuant to the terms of the acquisition agreement, in the event that the actual
earnings of OIA are less than $2,500,000, for the specified period then the
total number of shares being held in escrow shall be reduced on a one share
basis for each $1.00 of actual earnings of OIA less than $2,500,000. In the
event that the actual earnings of OIA is greater than $2,500,000, then the
Company shall issue a such additional shares on the basis of one additional
shares for each $1.00 of actual earnings of OIA greater than $2,500,000.
Dividends
---------
The Company has not declared any cash dividends with respect to its common
stock, and does not intend to declare dividends in the foreseeable future. The
future dividend policy of the Company cannot be ascertained with any certainty,
and if and until the Company completes any acquisition, reorganization or
merger, no such policy will be formulated. There are no material restrictions
limiting, or that are likely to limit, the Company's ability to pay dividends on
its securities.
Item 2. Legal Proceedings
ZiaSun Technologies, Inc. v. Floyd D. Schneider, et al.
-------------------------------------------------------
The company was a party Plaintiff in the matter of ZiaSun Technologies,
Inc. v. Floyd D. Schneider, et al., United States District Court, Western
District of Washington, C99-1025. This action arises from the defendants alleged
defamatory campaign against the Company and its officers and directors, This
alleged cybersmear campaign involved the defendants postings of statements about
the Company and its offices and directors which are alleged to be false and
defamatory.. The Company alleges that the defendants were and are knowingly
posting false statements with the intent on negatively impacting the Company's
stock prices in order for defendants to benefit financially in short selling. To
protect the Company, its shareholders and its officers and directors, on June
24, 1999, the Company filed a civil action in the United States District Court
of Washington seeking damages and injunction relief, alleging among other
things, Securities Fraud through the defendants posting of false and misleading
defamatory statements, violation of the Washington Consumer Protection Act,
Intentional Interference with Business Expectancy, Violation of Federal RICO
Statute 28 USA Sec. 1962, and violation of Washington's Criminal Profiteering
Act. The matter is pending at present time.
53
<PAGE>
ZiaSun Technologies, Inc. v. Financialweb.Com, Inc., et al.
-----------------------------------------------------------
The company was a party Plaintiff in the matter of ZiaSun Technologies,
Inc. v. Financialweb.Com, Inc., et al., Circuit Court of Seminole County,
Florida, 990-1136-CA-16-G. This action arises from the defendants posting of
alleged false and defamatory article about the Company on its website known as
"The Stock Detective." The defendants allegedly knowingly posted the false and
defamatory article with the intent on negatively impacting the Company's stock
prices in order for defendants to benefit financially. The Company requested
that defendant publish a retraction but defendant has refused to do so. To
protect the Company, its shareholders and its officers and directors, on June 3,
1999, the Company filed a civil action in the Circuit Court of Seminole County
Florida, seeking damages and injunction relief. The matter is pending at present
time.
With the exception of the legal proceedings set forth above, the Company is
not a party to any pending legal proceeding. No federal, state or local
governmental agency is presently contemplating any proceeding against the
Company. No director, executive officer or affiliate of the Company or owner of
record or beneficially of more than five percent of the Company's common stock
is a party adverse to the Company or has a material interest adverse to the
Company in any proceeding.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There has been no change of the independent auditors of the Company and
there are no disagreements with the independent auditors of the Company or its
subsidiaries.
Item 4. Recent Sales of Unregistered Securities
The following transactions describe the sales of the Company's securities
over the last three years:
Transaction #1: On January 6, 1997, the Company sold 10,000,000 (post-split
adjusted) restricted shares of its common stock pursuant to Regulation
S of the Securities Act of the 1933 Act to non-U.S. foreign
corporations, at a price of $0.10 per share, for total cash
consideration to the Company of $500,000. This transaction is deemed
exempt from registration pursuant to the provisions of Regulation S
adopted by the Securities and Exchange Commission. No underwriters
were used and each certificate contained a restrictive legend. To the
best of the Company's knowledge non of the foreign corporations are
five percent beneficial owners of the Company's shares.
Transaction #2: On February 3, 1997, the Company sold 20,000,000
(post-split adjusted) "unregistered" and "restricted" shares of its
common stock to several non-U.S. foreign corporations, at a price of
$0.10 per share, for total cash consideration to the Company of
$1,000,000. No underwriters were used. The securities were sold
pursuant to an exemption from registration provided under Regulation S
and Section 4(2) of the Securities Act of 1933. The purchasers of
above referenced shares were non-U.S. purchasers, were accredited
investors who had full access to information on the Company necessary
for it to make and informed investment decision. The certificate
representing the shares contained a restricted legend. To the best of
the Company's knowledge non of the foreign corporations are five
percent beneficial owners of the Company's shares.
Transaction #3: In July 1997 the Company authorized the private placement
of 2,000,000 (post-split adjusted) shares of the Company's common
stock at a price of $2.50 per share. The Company sold a total of
259,988 (post-split adjusted) shares and received $324,984 in cash
from this private placement. No underwriters were used. The securities
were sold to non-U.S> purchasers, pursuant to an exemption from
registration provided by Regulation S and Section 4(2) of the
Securities Act of 1933. Each of the purchasers of above referenced
shares non-U.S. residents, were accredited investors and had and
possession information on the Company necessary for them to make an
informed investment decision. The certificate representing the shares
contained a restricted legend.
54
<PAGE>
Transaction #4: On October 5, 1998, in conjunction with the acquisition of
Momentum Internet Incorporated, a corporation organized under the laws
of the British Virgin Islands ("Momentum Internet"), the Company
issued in a stock-for-stock exchange 1,130,000 (post-split adjusted)
shares of restricted common stock in exchange for all capital stock of
Momentum Internet thereby making Momentum Internet a wholly owned
subsidiary of the Company. No underwriters were used. The transaction
is deemed exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933. The recipients of the shares in this
transaction were shareholders of Momentum Internet, and possessed more
information regarding the business of ZiaSun than any other person.
The certificates representing each of the issued shares bear an
appropriate restrictive legend.
Transaction #5. On October 5, 1998, in conjunction with the acquisition of
Momentum Asia, Inc., ("Momentum Asia"), a corporation organized under
the laws of the Republic of the Philippines, the Company issued in a
stock-for-stock exchange 4,000,000 (post-split adjusted) shares of
restricted common stock in exchange for all capital stock of Momentum
Asia, thereby making Momentum Asia a wholly-owned subsidiary of the
Company. No underwriters we used. The transaction is deemed exempt
from registration pursuant to Section 4(2) of the Securities Act of
1933. The recipients of the shares in this transaction were
shareholders of Momentum Asia, and possessed more information
regarding the business of ZiaSun than any other person. The
certificates representing each of the issued shares bear an
appropriate restrictive legend.
Transaction #6. On March 25, 1999, in conjunction with the acquisition of
Asia4sale.com, Ltd., ("Asia4sale"), a Hong Kong Registered Company, in
exchange for 99 of the 100 shares of Asia4sale, the Company issued
100,000 (post split adjusted) shares of restricted common stock and
paid $15,000 cash to the majority holder of the capital stock of
Asia4sale, thereby making Asia4sale virtually a wholly-owned
subsidiary of the Company. No underwriters were used. The transaction
is deemed exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933. The recipients of the shares in this
transaction were shareholders of Asia4sale and possessed more
information regarding the business of ZiaSun than any other person.
The certificates representing each of the issued shares bear an
appropriate restrictive legend.
Transaction #7. On March 31, 1999, in conjunction with the acquisition of
Online Investors Advantage Incorporated, ("Online Investors"), a Utah
Corporation, In exchange for all of the capital stock of Online
Investors, the Company issued 1,000,000 (post split adjusted) shares
of "restricted" common stock and paid $400,000 in cash, all of which
was distributed pro-rata to the shareholders of Online Investors,
thereby making Online Investors a wholly-owned subsidiary of the
Company. In addition, the Company issued an additional 5,000,000 (post
split adjusted) shares (the "Escrow Shares") pro-rata to the
shareholders of Online Investors. The Escrow Shares are being held in
escrow pursuant to the terms of the adjustment provision set forth in
the acquisition agreement. No underwriters were used. The transaction
is deemed exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933. The recipients of the shares in this
transaction were shareholders of Online and possessed more information
regarding the business of ZiaSun than any other person. The
certificates representing each of the issued shares bear an
appropriate restrictive legend.
55
<PAGE>
Item 5. Indemnification of Directors and Officers
Pursuant to Article 9., of the Restated Articles of Incorporation, the
Company shall indemnify its directors, officers, employee, fiduciaries and
agents as those terms are defined in, and to the fullest extent permitted by
under the Nevada Revised Statutes.
Section 78.751(1) of the Nevada Revised Statutes ("NRS") authorizes a
Nevada corporation to indemnify any director, officer, employee, or corporate
agent "who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the corporation" due to his corporate role. Section 78.751(1) extends this
protection "against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful."
Section 78.751(2) of the NRS also authorizes indemnification of the
reasonable defense or settlement expenses of a corporate director, officer,
employee or agent who is sued, or is threatened with a suit, by or in the right
of the corporation. The party must have been acting in good faith and with the
reasonable belief that his actions were not opposed to the corporation's best
interests. Unless the court rules that the party is reasonably entitled to
indemnification, the party seeking indemnification must not have been found
liable to the corporation.
To the extent that a corporate director, officer, employee, or agent is
successful on the merits or otherwise in defending any action or proceeding
referred to in Section 78.751(1) or 78.751(2), Section 78.751(3) of the NRS
requires that he be indemnified "against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense."
Section 78.751 (4) of the NRS limits indemnification under Sections 78.751
(1) and 78.751(2) to situations in which either (1) the stockholders, (2) the
majority of a disinterested quorum of directors, or (3) independent legal
counsel determine that indemnification is proper under the circumstances.
Pursuant to Section 78.751(5) of the NRS, the corporation may advance an
officer's or director's expenses incurred in defending any action or proceeding
upon receipt of an undertaking. Section 78.751(6)(a) provides that the rights to
indemnification and advancement of expenses shall not be deemed exclusive of any
other rights under any bylaw, agreement, stockholder vote or vote of
disinterested directors. Section 78.751(6)(b) extends the rights to
indemnification and advancement of expenses to former directors, officers,
employees and agents, as well as their heirs, executors, and administrators.
Regardless of whether a director, officer, employee or agent has the right
to indemnity, Section 78.752 allows the corporation to purchase and maintain
insurance on his behalf against liability resulting from his corporate role.
Article VIII., of the Company's Amended and Restated Bylaws restates the
above-referenced indemnification provisions of the NRS. This right to
indemnification continues as to persons who have ceased to be agents of the
Company and inures to the benefit of such persons' heirs, executors and
administrators.
56
<PAGE>
PART F/S
--------
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
CONTENTS
--------
Page
----
Independent Auditors' Report............................................. 58
Consolidated Balance Sheet............................................... 59
Consolidated Statements of Operations.................................... 61
Consolidated Statements of Stockholders' Equity.......................... 62
Consolidated Statements of Cash Flows.................................... 63
Notes to the Consolidated Financial Statements........................... 65
57
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
ZiaSun Technologies, Inc. and Subsidiaries
Solana Beach, California
We have audited the accompanying consolidated balance sheet of ZiaSun
Technologies, Inc. and Subsidiaries as of December 31, 1999 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended December 31, 1999 and 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ZiaSun Technologies,
Inc. and Subsidiaries as of December 31, 1999 and the results of their
operations and their cash flows for the years ended December 31, 1999 and 1998
in conformity with generally accepted accounting principles.
Jones, Jensen & Company
Salt Lake City, Utah
March 25, 2000
58
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
ASSETS
------
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
CURRENT ASSETS
Cash $ 11,652,505
Trade receivables, net (note 2): 1,145,960
Interest receivable 8,333
Inventory (Note 2) 18,239
Marketable securities (Note 2) 540,234
Prepaid expenses (Note 2) 375,710
------------
Total Current Assets 13,740,981
------------
EQUIPMENT (Note 2)
Printing equipment 289,443
Machinery and equipment 393,091
Office equipment 153,734
Vehicles 17,163
Leasehold improvements 138,841
Less: accumulated depreciation (197,053)
------------
Total Equipment 795,219
------------
OTHER ASSETS
Equity investment (Note 11) 254,195
Goodwill - net 4,667,623
Receivables - related parties (Note 6) 88,679
Other assets (Note 3) 664,088
------------
Total Other Assets 5,674,585
------------
TOTAL ASSETS $ 20,210,785
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 1,382,757
Related party payable (Note 6) 690,000
Taxes payable (Note 5) 2,083,763
Deferred income 74,100
------------
Total Current Liabilities 4,230,620
------------
Total Liabilities 4,230,620
------------
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY
Common stock: 50,000,000 shares authorized of $0.001
par value, 22,205,018 shares issued and outstanding 22,205
Additional paid-in capital 12,494,547
Treasury stock, 63,200 shares (34,030)
Other comprehensive income 54,230
Deferred compensation (30,000)
Retained earnings 3,473,213
------------
Total Stockholders' Equity 15,980,165
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 20,210,785
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
SALES, NET $ 27,220,240 $ 760,529
COST OF GOODS SOLD 17,031,019 341,277
------------ ------------
Gross Margin 10,189,221 419,252
------------ ------------
OPERATING EXPENSES
Depreciation and amortization expense 673,713 89,885
Bad debt expense 132,586 18,160
Consulting fees - related party (Note 6) 190,060 20,000
General and administrative 4,632,905 492,936
------------ ------------
Total Operating Expenses 5,629,264 620,981
------------ ------------
Gain (Loss) from Operations 4,559,957 (201,729)
------------ ------------
OTHER INCOME (EXPENSE)
Loss on equity investment (Note 12) (49,356) (165,449)
Interest expense (22,299) -
Realized gain on marketable securities (Note 10) 470,185 535,801
Unrealized gain on marketable securities (Note 10) 114,795 712,438
Rental income - 17,379
Interest and dividend income 111,749 6,524
Loss on write off of assets (6,340) (135,644)
Gain on sale of subsidiary (Note 1) 4,778,596 -
Management fees 45,000 -
------------ ------------
Total Other Income (Expense) 5,442,330 971,049
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 10,002,287 769,320
INCOME TAXES (Note 5) (3,784,110) -
------------ ------------
NET INCOME 6,218,177 769,320
------------ ------------
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment 15,436 (2,967)
------------ ------------
NET COMPREHENSIVE INCOME $ 6,233,613 $ 766,353
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 21,769,583 17,022,767
============ ============
BASIC INCOME PER SHARE $ 0.29 $ 0.05
============ ============
FULLY DILUTED WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 25,717,500 17,122,767
============ ============
FULLY DILUTED INCOME PER SHARE $ 0.24 $ 0.04
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Other
Common Stock Additional Compre- Deferred
-------------------------- Paid-in Treasury hensive Compen- Retained
Shares Amount Capital Stock Income sation Earnings Total
------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1997 15,800,000 $ 15,800 $ 3,576,129 $ - $ - $ (40,000) $ (3,514,284) $ 37,645
Purchase of Momentum
ASIA, Inc. and
Momentum Internet, Inc. 5,130,000 5,130 5,347,265 (70,000) 41,761 - - 5,324,156
Currency translation
adjustment - - - - (2,967) - - (2,967)
Net income for the
year ended
December 31, 1998 - - - - - - 769,320 769,320
------------ ------------ ----------- ------------ ------------ ------------ ------------ ----------
Balance,
December 31, 1998 20,930,000 20,930 8,923,394 (70,000) 38,794 (40,000) (2,744,964) 6,128,154
Purchase of
ASIA4Sale.com, Ltd. 100,000 100 249,900 - - - - 250,000
Purchase of
Online Investors
Advantage, Inc. 1,150,000 1,150 2,873,850 - - - - 2,875,000
Exercise of stock
option at $2.00
per share 25,000 25 39,975 - - 10,000 - 50,000
Proceeds from the
sale of the Company's
common stock by a
Subsidiary - - 407,428 35,970 - - - 443,398
Adjustment for
forward stock split 18 - - - - - - -
Currency translation
adjustment - - - - 15,436 - - 15,436
Net income for
the year ended
December 31, 1999 - - - - - - 6,218,177 6,218,177
------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------
Balance,
December 31, 1999 22,205,018 $ 22,205 $ 12,494,547 $ (34,030) $ 54,230 $ (30,000) $ 3,473,213 $15,980,165
============ ============ =========== ============ ============ ============ ============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 6,218,177 $ 769,320
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 673,713 89,885
Bad debt expense 132,586 18,160
Loss on equity investment 49,356 165,449
Unrealized gain on marketable securities (114,795) (712,438)
Realized gain on marketable securities (470,185) (535,801)
Gain on sale of subsidiary (4,778,596) -
Loss on write off of assets 6,340 135,644
Currency translation adjustment (15,436) 2,967
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (387,000) (564,890)
(Increase) decrease in inventory 31,761 (22,409)
(Increase) decrease in prepaids (368,340) (3,685)
Payment of rental deposits (26,647) -
Increase (decrease) in accounts payable and
accrued expenses 332,842 (17,362)
Increase (decrease) in taxes payable 2,083,763 -
Increase (decrease) in deferred income 74,100 -
(Increase) decrease in receivable - related party receivable 645,586 -
------------ ------------
Net Cash Provided by (Used In) Operating Activities 4,087,225 (675,160)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of subsidiary 5,000,000 -
Purchase of marketable securities (445,446) -
Sale of marketable securities 1,435,237 1,248,239
Purchases of property and equipment (405,813) (301,625)
------------ ------------
Net Cash Provided by Investing Activities 5,583,978 946,614
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of the Company's common stock by a subsidiary 443,398 -
Proceeds from borrowings - related parties 690,000 -
Cash acquired in purchase of subsidiaries 280,123 173,298
Proceeds from exercise of stock options 50,000 -
------------ ------------
Net Cash Provided by Financing Activities 1,463,521 173,298
------------ ------------
NET INCREASE (DECREASE) IN CASH 11,134,724 444,752
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 517,781 73,029
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 11,652,505 $ 517,781
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Paid For:
Interest $ 22,299 $ -
Income taxes $ - $ -
Schedule of Non-Cash Financing Activities:
Purchase of subsidiaries for common stock $ 3,125,000 $ 5,534,156
Conversion of note receivable to treasury stock $ - $ 70,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
The financial statements presented are those of ZiaSun Technologies, Inc.
(formerly BestWay U.S.A., Inc.) (the "Company"). The Company was
incorporated in the State of Nevada on March 19, 1996. The Company is a
holding company in the business of acquiring companies and operations with
business models developed around the Internet. The Company was considered a
development stage company as defined in SFAS No. 7 until the acquisition of
Momentum Asia, Inc. and Momentum Internet, Inc. in 1998. The Company
changed its name to "BestWay U.S.A., Inc." on April 17, 1997 and,
subsequently, changed its name to Ziasun Technologies, Inc. during 1998. On
September 10, 1998 in connection with the agreement and plan of
reorganization described below, the shareholders of the Company authorized
and the Company completed a reverse stock split of 1-for-2. On May 14,
1999, the Company's common stock was forward split on a 2 shares for 1
share basis. All references to shares of common stock have been
retroactively restated.
Momentum Internet, Inc. (MII), a wholly-owned subsidiary, was incorporated
under the laws of the British Virgin Islands on November 7, 1997. MII
controls a range of Internet products and services, including a copyrighted
international on-line stock trading web-site, a premium web-based e-mail
service, an advertising banner network, a finance web-site and an
Asia-focused search engine. MII has its main offices in Hong Kong.
Momentum Asia, Inc. (MAI), a wholly-owned subsidiary, was incorporated in
Manilla, Philippines on September 6, 1994 under the name of New Age
Publications, Inc. On June 17, 1998, the name was changed to Momentum Asia,
Inc. MAI provides a wide range of compatible graphic design, writing,
printing, database management, direct mailing and e-mail customer service
operations.
BestWay Beverages, Inc. (BBI), a wholly-owned subsidiary, was incorporated
in the State of Nevada on September 23, 1998. BBI holds the exclusive
distribution franchise rights in the U.S. and Mexico for a patented
in-store beverage center. BBI is a U.S. based corporation.
On October 5, 1998, the Company completed an agreement and plan of
reorganization whereby Ziasun issued 5,130,000 shares of its common stock
in exchange for all the outstanding common stock of MAI and MII. 4,000,000
shares were issued for MAI and 1,130,000 shares were issued for MII. The
reorganization was accounted for as a purchase of MAI and MII. At the time
of the acquisition, Ziasun had 15,800,000 shares outstanding. The financial
statements of Ziasun reflected a license valued at $50,000 and minimal
liabilities.
Swiftrade, Inc. (SI), a wholly-owned subsidiary of MII, was incorporated
under the laws of the British Virgin Islands in 1998 to operate an online
trading and financial website. It was inactive in 1998 and 1999.
Online Investors Advantage, Inc. (Online) was incorporated under the laws
of the State of Utah in 1997 to engage in the business of providing
workshops to individuals regarding investing in the stock market.
65
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS (Continued)
On March 31, 1999, the Company entered into an Acquisition Agreement and
Plan of Reorganization under which the Company acquired Online Investors
Advantage, Inc. (OIA), a Utah corporation. OIA is in the business of
training individuals how to effectively use the financial planning and
investment tools available on the internet to manage their own investment
portfolios. The training is structured around a five-step discipline, which
includes searching for an investment, evaluating the investment and
assessing the risk, timing the purchase, establishing an exit point and
monitoring the investment. This is done through live workshops, and
video-based, self-directed home learning programs, which include the use of
OIA's proprietary website, www.investortoolbox.com. In exchange for all of
the capital stock of OIA, the Company issued 1,000,000 (post-split
adjusted) shares of restricted common stock and paid $400,000 in cash, all
of which was distributed pro-rata to the shareholders of OIA, thereby
making OIA a wholly-owned subsidiary of the Company. In addition, the
Company issued 5,000,000 (post-split adjusted) shares pro-rata to the
shareholders of OIA. Those shares are currently being held in escrow in
accordance with the terms of the acquisition agreement, in the event that
the actual earnings of OIA are less than $2,500,000, for the period from
April 1, 1999 through March 31, 2000, then the total number of shares being
held in escrow shall be reduced on a one-share basis for each $0.50 of
actual earnings of OIA less than $2,500,000. In the event that the actual
earnings of OIA is greater than $2,500,000, the Company shall issue such
additional shares on the basis of one additional share for each $0.50 of
actual earnings of OIA greater than $2,500,000. The acquisition was
completed on April 7, 1999. The acquisition of OIA was accounted for as a
purchase. The contingent shares are not recorded as being issued in
accordance with APB 16, paragraphs 79 and 80.
Asia4sale was incorporated on April 9, 1996, duly organized, validly
existing and in good standing under the laws of Hong Kong. Asia4sale was
organized to buy and sell merchandise over the internet, buying and selling
goods directly from manufacturers in Asia. To be competitive in the Asian
market, the Company has acquired the assets of Pacific Barter, Ltd., a
company specializing in barter in Asia.
On March 25, 1999, the Company entered into an Acquisition Agreement and
Plan of Reorganization, under which the Company acquired Asia4sale.com,
Ltd., ("Asia4sale"). In exchange for 99 of the 100 shares of Asia4sale, the
Company issued 100,000 (post-split adjusted) shares of restricted common
stock and paid $15,000 cash to the majority holder of the capital stock of
Asia4sale, thereby virtually making Asia4sale a wholly-owned subsidiary of
the Company. In addition, the Company made an unsecured loan of $50,000 to
Asia4sale upon closing of the acquisition and agreed to issue one(1)
additional share of restricted common stock for each dollar ($1.00) of
actual earnings of Asia4sale for the period from April 1, 1999 through
September 30, 2000. Asia4sale is in the business of Internet related
international e-commerce. In addition, the Company was granted the option
to repurchase the 100,000 shares issued in the acquisition of Asia4sale for
a period of one (1) year at a price of $1.50 per share in the event that
Asia4sale fails to reach positive cash flow from its operations by
September 30, 2000. The acquisition was completed on May 12, 1999. The
acquisition of Asia4sale was accounted for as a purchase. The contingent
shares are not recorded as being issued in accordance with APB16,
paragraphs 79 and 80.
On December 31, 1999, the Company sold Asia4Sale for $5,000,000 cash and
300,000 shares of Internet Ventures, Ltd (IVL) a Samoan investment company.
No value was attributed to the shares of IVL because it is a private
company. The Company realized a gain of $4,778,596 on the sale.
66
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year end.
b. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
c. Inventory
Inventories of raw materials are stated at the lower of cost or market. The
cost of the inventory includes the purchase price and direct costs such as
freight-in.
d. Accounts Receivable
Accounts receivable are shown net of the allowance for doubtful accounts.
The allowance was $43,906 and $36,320 at December 31, 1999 and 1998,
respectively.
e. 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
financials statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
f. Foreign Operations
The Company currently conducts printing, database management, customer
service and direct mailing activities in the Philippines, a country with a
developing economy. The Philippines have experienced recently, or are
experiencing currently, economic or political instability. Hyperinflation,
volatile exchange rates and rapid political and legal change, often
accompanied by military insurrection, have been common in this and certain
other emerging markets in which the Company may conduct operations. The
Company may be materially adversely affected by possible political or
economic instability in any one or more of those countries. The risks
include, but are not limited to terrorism, military repression,
expropriation, changing fiscal regimes, extreme fluctuations in currency
exchange rates, high rates of inflation and the absence of industrial and
economic infrastructure. Changes in investment policies or shifts in the
prevailing political climate in any of the countries in which the Company
conducts exploration and development activities could adversely affect the
Company's business. Operations may be affected in varying degrees by
government regulations with respect to production restrictions, price
controls, export controls, income and other taxes, expropriation of
property, maintenance of claims, environmental legislation, labor, welfare
benefit policies, land use, land claims of local residents, water use and
safety. The effect of these factors cannot be accurately predicted.
67
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful life or lease term of
the related asset. Estimated useful lives are as follows:
Printing equipment 7 years
Machinery and equipment 5 years
Office equipment 5 years
Vehicles 10 years
Leasehold improvements 5 years
h. Marketable Securities
The Company has classified its marketable securities as "trading"
securities. Trading securities are stated at fair value. Realized and
unrealized gains and losses are included in other income.
Marketable securities at December 31, 1999 and 1998 were $540,234 and
$786,588 respectively and have been included in current assets.
i. Basic Income per Share of Common Stock
The basic income per share of common stock is based on the weighted average
number of shares issued and outstanding at the date of the consolidated
financial statements. Fully diluted income per share of common stock as
disclosed in the accompanying consolidated statements of operations
includes the stock options discussed in Note 9, the convertible debt
discussed in Note 6 and the contingent shares disclosed in Note 1 as common
stock equivalents.
<TABLE>
<CAPTION>
December 31,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
Basic EPS Computation
---------------------
Numerator $ 6,218,177 $ 769,320
------------ ------------
Denominator:
Weighted common shares outstanding 21,769,583 17,022,767
------------ ------------
Basic EPS $ 0.29 $ 0.05
============ ============
Diluted EPS Computation
-----------------------
Numerator $ 6,218,177 $ 769,320
------------ ------------
Denominator:
Weighted common shares outstanding 21,769,583 17,022,767
Employee options 75,000 100,000
Purchase of subsidiaries (contingent) 3,847,917 -
Convertible debt 103,500 -
------------ ------------
Total Shares 25,796,000 17,122,767
------------ ------------
Diluted EPS $ 0.24 $ 0.04
============ ============
</TABLE>
68
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
j. Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies are
translated into United States dollars at the period and exchange rate.
Non-monetary assets are translated at the historical exchange rate and all
income and expenses are translated at the exchange rates prevailing during
the period. Foreign exchange currency translation adjustments are included
in the stockholders' equity section.
k. Fair Value of Financial Instruments
As of December 31, 1999 and 1998, the fair value of cash, accounts
receivable and accounts and advances payable, including amounts due to and
from related parties, approximate carrying values because of the short-term
maturity of these instruments.
l. Advertising
Advertising costs are expensed as incurred except for those costs which
relate to seminars which are capitalized as explained in Note 2t.
m. Research and Development
The Company expenses immediately research and development costs incurred
for its own benefit. Research and development costs approximated $73,062
and $33,657 in 1999 and 1998, respectively. These costs are included in
general and administrative expense. The cost of research and development
performed for customers is included in the cost of sales.
n. Principles of Consolidation
The consolidated financial statements include the Company and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
o. Change in Accounting Principle
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to record
derivatives as assets or liabilities, measured at fair market value. Gains
or losses resulting from changes in the values of those derivatives would
be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. The key criterion for hedge accounting is
that the hedging relationship must be highly effective in achieving
offsetting changes in fair value or cash flows. SFAS No. 133 is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management believes the adoption of this statement will have no material
impact on the Company's financial statements.
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTANT POLICIES (Continued)
p. Stock Options
The Company accounts for its employee stock options under the fair value
method of Statement of Financial Accounting Standards No. 123.
q. Treasury Stock
The Company accounts for its investment in treasury stock using the cost
method. The proceeds are charged to paid-in capital.
r. Revenue Recognition Policy
The Company recognizes revenue upon delivery of the product and acceptance
of the product or services by the customer. Fees received for seminars are
deferred until the seminar is completed.
s. Goodwill
The Company has recorded goodwill on the purchases of MAI, MII, Online and
Asia4sale for the excess of the purchase price over the fair value of the
assets acquired and the liabilities assumed. The goodwill is amortized
using the straight-line method over 10 years. The goodwill is evaluated
annually for any impairment. If an impairment is recognized it is charged
to expense in that period. Goodwill related to the purchase of Asia4sale
has been charged to the sale of Asia4sale on December 31, 1999.
t. Prepaid Expenses and Deferred Revenues
The Company capitalizes costs incurred in preparing for its seminars. These
costs include advertising, education materials and meeting site costs. The
advance fees the Company receives are also deferred until the seminar is
completed. At the end of the seminar, the fees are recognized as revenues
and the costs are expensed. The detail of these capitalized prepaid
expenses are summarized as follows:
December 31,
1999
------------
Radio and television $ 196,307
Newspaper advertising 47,631
Travel 5,854
Postage 43,436
Instructor salary 3,675
Meeting costs 9,067
Prepaid insurance 54,750
Prepaid rent 11,859
Other 3,131
------------
Total $375,710
70
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 3 - OTHER ASSETS
Other assets consisted of the following at December 31, 1999:
Memberships in country clubs $ 142,857
Prepaid rental deposits 54,818
Mortgage note receivable 250,000
License 50,000
Investment in restricted common stock 166,413
------------
Total $ 664,088
============
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company currently leases a large facility under a 20 year
non-cancelable operating lease in the Philippines. The Company also leases
office space in California and Hong Kong under 5-year renewable leases
which began in 1998. Rent expense for the years ended December 31, 1999 and
1998 was $395,873 and $198,788 respectively.
Future minimum lease commitments are as follows:
2000 $ 331,308
2001 244,282
2002 242,749
2003 107,543
2004 80,294
Thereafter 1,435,820
------------
Total $ 2,441,996
============
The Company has an employment agreement with an officer for 5 years
beginning on July 1, 1997. The minimum salary is $120,000 per year, which
is to be evaluated annually.
NOTE 5 - INCOME TAXES
For the years ended December 31, 1999 and 1998, the provision for U.S. and
foreign income taxes consisted of the following:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Current:
U.S. $ 3,756,410 $ -
Foreign 27,700 -
Deferred:
U.S. - -
Foreign - -
------------ ------------
$ 3,784,110 $ -
============ ============
</TABLE>
71
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 5 - INCOME TAXES (Continued)
A reconciliation of income taxes at the federal statutory rate to the
effective tax rate is as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Income taxes computed at the U.S. statutory
rate $ 4,000,915 $ 307,700
Benefit of net income not subject to taxing
jurisdictions (74,600) (307,700)
Benefit of operating loss carryforward (142,205) -
------------ ------------
Taxes on income $ 3,784,110 $ -
============ ============
</TABLE>
The Company has no deferred tax liabilities or assets. The permanent
difference due to income not being subject to taxing jurisdictions pertains
to the British Virgin Islands where there is no income tax.
NOTE 6 - RELATED PARTY TRANSACTIONS
a. Receivables
During 1998 the Company had a receivable from a related party in the amount
of $734,265. The full amount was collected in 1999. At December 31, 1999
the Company had related party receivables of $88,679. The receivables are
non-interest bearing, due on demand and unsecured.
b. Officer Compensation
The Company's president is compensated for his services under a consulting
contract with a company which he controls. The contract provides for
$10,000 per month in consulting fees. Other officers of the Company were
paid a total of $70,060 in consulting fees in addition to their base
salaries during 1999.
c. Convertible Debt
In 1999, the Company received $690,000 in advances from shareholders. The
advances were non-interest bearing and unsecured. In 2000, the Company
agreed to convert the advances to common stock at the trading value of the
shares on the date of conversion.
NOTE 7 - ECONOMIC DEPENDENCE AND MAJOR CUSTOMERS
During 1998 the Company's marketing arrangement with one customer accounted
for approximately 26% of the Company's revenue. Sales to another customer
made up approximately 24% of the net sales in 1998. During 1999 the Company
had no customers which made up more than 10% of net sales.
72
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 8 - STOCK OPTIONS
On May 30, 1997, the Company gave its vice-president the option to purchase
100,000 shares of its common stock at $2.00. At the time of the granting of
the option, the stock was trading at approximately $2.40 per share. The
Company values the options at fair market value. Fair market value is
determined using the Black-Scholes option pricing model. The following
assumptions were used: risk free interest rate of 6%, four year expected
life, 35% expected volatility, and no expected dividends. Accordingly,
deferred compensation and contributed capital of $40,000 was recorded
during 1998. The options vest in 25,000 share increments for each year of
service beginning in 1999. The Company will record as expense $10,000 per
year for the next 4 years as the options vest.
NOTE 9 - BUSINESS SEGMENTS
Effective December 31, 1998, the Company adopted SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information." Prior period
amounts have been related to conform to the requirements of this statement.
The Company conducts its operations principally in the industry of graphic
design, writing, printing, database management, direct mailing and e-mail
customer service operations through its Momentum Asia, Inc. subsidiary,
e-commerce through its Momentum Internet, Inc, and Asia4sale, Ltd.
subsidiaries and online and offline investor education services through its
Online Investors Advantage, Inc. subsidiary.
Certain financial information concerning the Company's operations in
different industries is as follows:
<TABLE>
<CAPTION>
Online
For the Investors
Years Ended Momentum Momentum Advantage Asia4sale Corporate
December 31, Asia, Inc. Internet, Inc. Inc. .com, Ltd Unallocated Total
------------ ------------ -------------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Net sales 1999 $ 1,791,528 $ 1,739,960 $23,562,420 $ 69,162 $ 57,170 $27,220,240
1998 312,195 448,334 - - - 760,529
Operating income (loss)
applicable to industry
segment 1999 (128,400) (482,428) 6,305,004 62,097 (1,196,316) 4,559,957
1998 (196,883) 148,306 - - (153,152) (201,729)
General corporate
expenses not allocated
to industry segment 1999 - - - - 1,196,316 1,196,316
1998 - - - - 153,152 153,152
Other income
(expenses) including
interest and gain
on sale of securities 1999 682,215 12,217 37,350 67,654 4,642,894 5,442,330
1998 1,106,693 - - - (135,644) 971,049
Operating assets 1999 4,314,785 638,464 5,328,819 59,740 9,868,977 20,210,785
</TABLE>
73
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 9 - BUSINESS SEGMENTS (Continued)
The corporate unallocated column represents the costs incurred by the
parent company which are unrelated to the operations of the subsidiaries.
Such costs included administrative salaries, professional services and
gains on sales of subsidiary.
NOTE 10 - MARKETABLE SECURITIES
The following is a summary of the Company's activity in marketable
securities for the year ended December 31, 1999:
<TABLE>
<CAPTION>
Beginning Ending
Balance Realized Balance
Dec. 31, Gain Unrealized Dec. 31,
1998 Transfer Purchases Sales (Loss) Gain 1999
----------- ----------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Marketable
Securities
Titan - 35,760 - (25,423) (10,337) - -
Chequemate 774,723 - - (688,588) (46,843) 96,420 135,712
Other 11,865 - 445,446 (96,226) 25,062 18,375 404,522
----------- ----------- ----------- ----------- ----------- ----------- ------------
Total 786,588 35,760 445,446 (810,237) (32,118) 114,795 540,234
----------- ----------- ----------- ----------- ----------- ----------- ------------
Restricted
Common Stock
Laraca 289,110 - - (625,000) 502,303 - 166,413
Titan 35,760 (35,760) - - - - -
----------- ----------- ---------- ----------- ----------- ----------- ------------
Total 324,870 (35,760) - (625,000) 502,303 - 166,413
----------- ----------- ---------- ----------- ----------- ----------- ------------
$470,185 $ 114,795
=========== ===========
</TABLE>
NOTE 11 - EQUITY INVESTMENT
The Company accounts for its investment in Bevex, Inc. using the equity
method of accounting. The Company owned 6,700,000 shares at December 31,
1999 and 1998.
Cost $ 469,000
Losses - 1998 (165,449)
- 1999 (49,356)
--------------
Net $ 254,195
==============
74
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 12 - PURCHASE OF SUBSIDIARIES
A summary of the purchase of Asia4sale and Online Investors Advantage, Inc.
is as follows:
<TABLE>
<CAPTION>
Finders
Total Shares Asia4sale Online
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Goodwill $ 3,245,467 $ 375,000 $ 265,000 $ 2,605,467
Current assets =========== - - 648,023
Property and equipment - - 95,612
Other assets - - 800
Current liabilities - - (449,902)
----------- ------------ ------------
Total Purchase Price $ 375,000 $ 265,000 $ 2,900,000
=========== ============ ============
Cash $ - $ 15,000 $ 400,000
Common stock (at $2.50 per share) 375,000 250,000 2,500,000
----------- ------------ ------------
Total Purchase Price $ 375,000 $ 265,000 $ 2,900,000
=========== ============ ============
</TABLE>
These purchases were valued at the trading price of the of the Ziasun
shares at the date of acquisition.
The accompanying proforma statement of operations has been prepared as
though Online was acquired on January 1, 1999. The summarized statement of
operations of the Company includes the operations of Online from April 1,
1999 through December 31, 1999. The summarized statements of operations of
Online for the three months ended March 31, 1999 is included below as a
proforma adjustment.
75
<PAGE>
ZIASUN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 12 - PURCHASE OF SUBSIDIARIES (Continued)
<TABLE>
<CAPTION>
Ziasun Proforma
Technologies Adjustments
Inc. and Increase Proforma
Subsidiaries Online (Decrease) Consolidated
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
REVENUES $ 27,220,240 $ 4,701,227 $ - $ 31,921,467
COST OF SALES 17,031,019 3,490,707 - 20,521,726
------------ ------------ -------------- ------------
GROSS PROFIT 10,189,221 1,210,520 - 11,399,741
------------ ------------ -------------- ------------
OPERATING EXPENSE
Depreciation and amortization 673,713 6,133 74,512 754,358
General and administrative 4,955,551 302,600 - 5,258,151
------------ ------------ -------------- ------------
Total Operating Expenses 5,629,264 308,733 74,512 6,012,509
------------ ------------ -------------- ------------
OPERATING INCOME (LOSS) 4,559,957 901,787 (74,512) 5,387,232
------------ ------------ -------------- ------------
OTHER INCOME
Loss on equity investment (49,356) - - (49,356)
Gain on marketable securities 584,980 - - 584,980
Gain on sale of security 4,778,596 - - 4,778,596
Other income (expense) 128,110 3,022 - 131,132
------------ ------------ -------------- ------------
Total Other Income 5,442,330 3,022 - 5,445,352
------------ ------------ -------------- ------------
INCOME BEFORE INCOME TAXES 10,002,287 904,809 (74,512) 10,832,584
INCOME TAXES (3,784,110) (176,800) - (3,960,910)
------------ ------------ -------------- ------------
NET INCOME $ 6,218,177 $ 728,009 $ (74,512) $ 6,871,674
============ ============ ============== ============
The proforma financial statements are prepared to include operations from
January 1, 1999 to March 31, 1999.
Amortization expense $ 74,512
Accumulated amortization - goodwill (74,512)
------------
$ -
============
To record 1 year of amortization expense based on a ten-year life.
($2,980,467 x 3/120)
</TABLE>
76
<PAGE>
ONLINE INVESTORS ADVANTAGE, INC.
FINANCIAL STATEMENTS
March 31, 1999 and December 31, 1998
Contents
Independent Auditors' Report .................................. 78
Balance Sheets ................................................ 79
Statements of Operations ...................................... 80
Statements of Stockholders' Equity (Deficit) .................. 81
Statements of Cash Flows ...................................... 82
Notes to the Financial Statements ............................. 83
77
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Online Investors Advantage, Inc.
Orem, Utah
We have audited the accompanying balance sheets of Online Investors Advantage,
Inc. as of December 31, 1998 and March 31, 1999 and the related statements of
operations, stockholders' equity (deficit) and cash flows from inception on
August 27, 1997 through December 31, 1997, for the year ended December 31, 1998
and for the three months ended March 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Online Investors Advantage,
Inc., as of December 31, 1998 and March 31, 1999 and the results of its
operations and its cash flows from inception on August 27, 1997 through December
31, 1997, for the year ended December 31, 1998 and for the three months ended
March 31, 1999 in conformity with generally accepted accounting principles.
Jones, Jensen & Company
Salt Lake City, Utah
March 1, 2000
78
<PAGE>
ONLINE INVESTORS ADVANTAGE, INC.
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
December 31, March 31
1998 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 326,247 $ 211,757
Prepaid expenses 45,758 437,901
Deferred tax asset (Note 3) 237,415 -
------------ ------------
Total Current Assets 609,420 649,658
------------ ------------
PROPERTY AND EQUIPMENT (Note 2) 46,970 94,777
------------ ------------
TOTAL ASSETS $ 656,390 $ 744,435
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 146,604 $ 115,794
Accrued expenses - related party (Note 4) 716,000 -
Deferred income - 92,850
Accrued payroll expense 12,243 64,457
Income taxes payable - current (Note 3) 51,068 12,850
------------ ------------
Total Current Liabilities 925,915 285,951
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: $0.001 par value, 2,500,000 shares
authorized 2,500,000 shares issued 2,500 2,500
Additional paid-in capital 16,849 16,849
Retained earnings (288,874) 439,135
------------ ------------
Total Stockholders' Equity (Deficit) (269,525) 458,484
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 656,390 $ 744,435
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
79
<PAGE>
ONLINE INVESTORS ADVANTAGE, INC.
Statements of Operations
<TABLE>
<CAPTION>
From
Inception on
August 23, For the For the Three
1997 through Year Ended Months Ended
December 31, December 31, March 31,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE
Workshop revenues earned (Note 1) $ - $ 3,462,881 $ 4,349,218
Home study revenue - 49,617 352,008
------------ ------------ ------------
NET REVENUES - 3,512,498 4,701,226
------------ ------------ ------------
EXPENSES
Cost of services - 2,360,918 3,126,707
Consulting fees - related party (Note 4) - 716,000 364,000
Depreciation - 9,074 6,133
General and administrative expenses - 901,727 302,600
------------ ------------ ------------
TOTAL EXPENSES - 3,987,719 3,799,440
------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS - (475,221) 901,786
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income - - 3,023
------------ ------------ ------------
Total Other Income (Expense) - - 3,023
------------ ------------ ------------
INCOME LOSS BEFORE INCOME
TAXES - (475,221) 904,809
INCOME TAX (EXPENSE)
BENEFIT (Notes 1 and 3) - 186,347 (176,800)
------------ ------------ ------------
NET INCOME (LOSS) $ - $ (288,874) $ 728,009
============ ============ ============
BASIC INCOME (LOSS) PER SHARE $ 0.00 $ (0.12) $ 0.29
============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 2,500,000 2,500,000 2,500,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
80
<PAGE>
ONLINE INVESTORS ADVANTAGE, INC.
Statements of Stockholders' Equity (Deficit)
From Inception on August 23, 1997 through March 31, 1999
<TABLE>
<CAPTION>
Common Stock Additional
--------------------------- Paid-In Retained
Shares Amount Capital Earnings
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, August 23, 1997 - $ - $ - $ -
Net loss from inception on
August 23, 1997 through
December 31, 1997 - - - -
------------ ------------ ------------ ------------
Balance, December 31, 1997 - - - -
Common stock issued for services 2,500,000 2,500 16,849 -
Net loss for the year ended
December 31, 1998 - - - (288,874)
------------ ------------ ------------ ------------
Balance, December 31, 1998 2,500,000 2,500 16,849 (288,874)
Net income for the three months
ended March 31, 1999 - - - 728,009
------------ ------------ ------------ ------------
Balance, March 31, 1999 2,500,000 $ 2,500 $ 16,849 $ 439,135
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
81
<PAGE>
ONLINE INVESTORS ADVANTAGE, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
From
Inception on
August 23, For the For the Three
1997 through Year Ended Months Ended
December 31, December 31, March 31,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ - $ (288,874) $ 728,009
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation - 9,074 6,133
Issuance of stock for services - 19,349 -
Changes in operating assets and liabilities:
(Increase) in prepaid expenses - (45,758) (392,143)
Increase in accounts payable - 146,604 (30,810)
Increase in accrued expenses
- related party - 716,000 (716,000)
Increase in income taxes payable - 51,068 (38,218)
Increase in payroll payable - 12,243 52,214
Increase in deferred income - - 92,850
(Increase) decrease in deferred
tax benefit - (237,415) 237,415
------------ ------------ ------------
Net Cash Provided by Operating Activities - 382,291 (60,550)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets - (56,044) (53,940)
------------ ------------ ------------
Net Cash Used by Investing Activities - (56,044) (53,940)
------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES - - -
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH - 326,247 (114,490)
CASH, BEGINNING OF PERIOD - - 326,247
------------ ------------ ------------
CASH, END OF PERIOD $ - $ 326,247 $ 211,757
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes $ - $ - $ 163,950
Interest $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
82
<PAGE>
ONLINE INVESTORS ADVANTAGE, INC.
Notes to the Financial Statement
March 31, 1999 and December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Online Investors Advantage, Inc. (the Company) is engaged in the business
of providing workshops to individuals regarding investing in the stock
market. The Company was incorporated under the laws of the State of Utah on
August 23, 1997 but did not become active until 1998. The Company's
accounting policies conform to generally accepted accounting policies for
this industry.
a. Revenue and Cost Recognition
Revenue is recognized upon completion of the workshops or upon delivery of
the Company's home study course. The Company requires prepayment of fees
before the commencement of the workshops. The Company obtains preapproval
of charges to participants' credit cards before the commencement of the
workshops. Upon completion of the workshops the participants' credit cards
are charged once attendance has been verified. Prepayments from
participants are recorded as deferred income until the seminar is
completed. As of December 31, 1998 there were no deferred revenues due to
the Company's policy of not providing seminars the last two weeks of
December.
b. Depreciation
Depreciation is provided principally on the declining balance method over
the estimated useful lives of the assets, which are generally from five to
seven years.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with
maturities of three months or less at the time of acquisition.
d. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
e. Basic Income (Loss) Per Share
The computations of, basic income loss per share of common stock are based
on the weighted average number of common shares outstanding during the
period of the consolidated financial statements.
f. Reclassification
Certain reclassifications have been made to the 1998 financial statements
to conform to the current year's presentation.
83
<PAGE>
ONLINE INVESTORS ADVANTAGE, INC.
Notes to the Financial Statement
March 31, 1999 and December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
h. Prepaid Expenses and Deferred Revenues
The Company capitalizes costs incurred in preparing for its seminars. These
costs include advertising, education materials and meeting site costs. The
advance fees the Company receives are also deferred until the seminar is
completed. At the end of the seminar, the fees are recognized as revenues
and the costs are expensed. The capitalized prepaid expenses included
prepaid radio and television advertising of $45,758 at December 31, 1998
and $309,901 as of March 31, 1999.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment is detailed in the following summary:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1999 Accumulated Net Book
Cost Cost Depreciation Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Computers, projectors $ 83,562 $ 36,690 $ 12,298 $ 71,264
Office equipment 19,052 11,984 2,869 16,183
Leasehold improvements 7,370 7,370 40 7,330
------------ ------------ ------------ ------------
$ 109,984 $ 56,044 $ 15,207 $ 94,777
============ ============ ============ ============
</TABLE>
Depreciation expense is computed on the declining balance method in amounts
sufficient to write off the costs of depreciable assets over their
estimated useful lives. Depreciation expense for the year ended December
31, 1998 was $9,074 and for the three months ended March 31, 1999 was
$6,133.
NOTE 3 - INCOME TAXES
Deferred income taxes arise from reporting certain income and expenses for
income tax purposes in different periods from those in which such items are
recognized for financial reporting purposes. These items result from the
filing of Federal and State income tax returns on a cash basis.
84
<PAGE>
ONLINE INVESTORS ADVANTAGE, INC.
Notes to the Financial Statement
March 31, 1999 and December 31, 1998
NOTE 3 - INCOME TAXES (Continued)
The provision for taxes on earnings from continuing operations consisted of
the following:
<TABLE>
<CAPTION>
December 31, Ended March 31,
1998 1999
------------ ------------
<S> <C> <C>
Current
Federal $ (43,004) $ (167,477)
State (8,064) (9,323)
------------ ------------
(51,068) (176,800)
------------ ------------
Deferred
Current 237,415 -
Non-current - -
------------ ------------
237,415 -
------------ ------------
Total income tax (expense) benefit $ 186,347 $ (176,800)
============ ============
The net deferred tax liabilities in the accompanying balance sheet include the
following components:
For the For the
Year Ended Three Months
December 31, Ended March 31,
1998 1999
------------ ------------
Deferred tax liabilities $ - $ -
Deferred tax asset 237,415 -
------------ ------------
Net deferred tax assets $ 237,415 $ -
============ ============
Current deferred tax liability $ - $ -
Long-term deferred liability - -
------------ ------------
Net deferred tax liabilities $ - $ -
============ ============
</TABLE>
NOTE 4 - RELATED PARTY TRANSACTIONS
The stockholders of the Company have entered into consulting agreements to
provide marketing methods, develop course content, establish strategic
alliances and to provide proper administration of the Company. The terms of
the services range from April 1998 to March 1999. The agreed upon fees
consist of $22,000 per month for two of the shareholders and $30,000 per
month for the remaining two shareholders. Total expense associated with
these consulting agreements for 1998 was $716,000 and for 1999 the fees
were $364,000.
85
<PAGE>
ONLINE INVESTORS ADVANTAGE, INC.
Notes to the Financial Statement
March 31, 1999 and December 31, 1998
NOTE 5 - FINANCIAL INSTRUMENT
Concentration of Credit Risk
The Company places its temporary cash with high quality financial
institutions. At times such cash accounts may be in excess of the FDIC
insurance limit.
Operating Leases
The Company leases its office space under a non-cancelable lease agreement
accounted for as an operating lease expiring through October 2001. Real
estate taxes, insurance and maintenance expenses are obligations of the
Company.
Minimum rental payments under the non-cancelable operating lease are as
follows:
Years Ending
December 31,
------------
1999 $ 9,900
2000 13,596
2001 14,004
------------
$ 37,500
============
Rent expense was approximately $2,200 for the year ended December 31, 1998
and $2,475 for the three months ended March 31, 1999.
NOTE 6 - SALE OF COMPANY
On March 31, 1999 the shareholders of the Company exchanged all of the
outstanding common stock of the Company for $400,000 and 6,000,000 shares
of common stock of Ziasun Technologies, Inc. (Ziasun), a public company.
1,000,000 of the shares of Ziasun were issued immediately and the remaining
5,000,000 shares are held in escrow. The escrow agreement stipulates that
the issuance of the shares depends upon the earnings of the Company for the
twelve month period ending March 31, 2000. If the earnings are different
than estimated, the shares in escrow may be increased or decreased by the
difference between the estimated earnings and actual.
86
<PAGE>
PART III.
Item 1. Index to Exhibits
The following exhibits are filed as part of this Registration Statement:
Exhibit
Number Description
- --------------------------------------------------------------------------------
2.1(+) Acquisition Agreement and Plan of Reorganization between ZiaSun
Technologies, Inc. and Momentum Internet Incorporated dated October 5,
1998
2.2(+) Acquisition Agreement and Plan of Reorganization between ZiaSun
Technologies, Inc. and Momentum Asia, Inc. dated October 5, 1998
2.3(+) Acquisition Agreement and Plan of Reorganization between ZiaSun
Technologies, Inc. and Asia4sale.com, Ltd., dated March 25, 1999.
2.4(+) Acquisition Agreement and Plan of Reorganization between ZiaSun
Technologies, Inc. and Online Investors Advantage, Inc., dated March
31, 1999.
3.1(a)(+) Original Articles of Incorporation.
3.1(b)(+) Certificate of Amendment to Articles of Incorporation filed April 29,
1997.
3.1(c)(+) Certificate of Amendment to Articles of Incorporation filed September
10, 1998 changing the name of the Company to ZiaSun Technologies, Inc.
3.1(d)(+) Certificate filed pursuant to NRS Section 78.207.
3.1(e)(+) Restated Article of Incorporation filed August 16, 1999.
3.2(+) Amended and Restated By-laws.
10.1(+) License Agreement between Fountain Fresh International and Katori
Consultants, Ltd. dated April 17, 1997.
10.2(+) Assignment of License Agreement by Katori Consultants Ltd., to the
Company dated April 18, 1999.
10.3(+) Unsecured Promissory Note for $50,000 from Asai4sale.com in favor of
the Company dated March 31, 1999.
10.4(+) Stock Option Agreement between Brian Hodgson and the Company dated
March 25, 1999.
10.5(+) Agreement between the Company and Global Direct Marketing Limited
dated February 12, 1999.
10.6(+) Agreement between Asia4sale.com, Ltd., and Hong Kong Telecom IMS dated
March 29, 1999.
10.7(+) Agreement between Momentum Internet, Inc., and Hays Business Systems
dated April 1, 1999.
10.8(+) Loan Agreement between Momentum Asia, Inc. (formerly New Age
Publications, Inc.) and Touchstone Transport Services, Inc.
10.9(+) Real Estate Mortgage Momentum Asia, Inc. (formerly New Age
Publications, Inc.) and Touchstone Transport Services, Inc.
10.10(+) Subscribers Agreement between Momentum Asia, Inc., (formerly New Age
Publications, Inc.), and Torquay Associates Ltd.
10.11(+) Reuters Investor Distribution Agreement with Momentum Internet Inc.,
dated April 22, 1999.
10.12(+) Market Datafeed Service Agreement with Stock Exchange Information
Services Limited dated May 3, 1999.
10.13(+) Agreement between Momentum Internet, Inc., and Options Direct dated
May 18, 1999.
10.14(+) Agreement between Asia4sale.com, Ltd., and Karrex dated June 25, 1999.
87
<PAGE>
10.15(+) Agreement between Momentum Internet, Inc., and United Mok Ying Kie
Limited dated June 29, 1999.
10.16(+) Reuters Service Contract with Momentum Internet Inc.
10.17(+) Online Stock Trading Agreement between Swiftrade, Inc. and WdoT.rade
Inc. dated July 1, 1999.
10.18(+) Lease Agreement between the Company and Propco L.P.
10.19(+) Addendum to Lease between the Company and Propco L.P.
10.20(+) Tenancy Agreement between Momentum Associates Limited and Hong Kong
Finance Property Company Limited dated December 1, 1998.
10.21(+) Contract of Lease between Rebecca A. Ynares and Momentum Internet
(Philippines) Inc. dated December 1998.
10.22(+) First Amendment to Contract of Lease between Rebecca A. Ynares and
Momentum Internet (Philippines) Inc.
10.23(+) Contract of Lease between Philippine International Trading Corporation
and Momentum Internet (Philippines) Inc.
10.24(+) Sublease Agreement between Philexcel Textiles Incorporated and
Momentum Asia, Inc. (formerly New Age Publications, Inc.)
10.25(+) Amended Sublease Agreement between Philexcel Textiles Incorporated and
Momentum Asia, Inc. (formerly New Age Publications, Inc.)
10.26(+) Lease Agreement between EsNET Properties L.C. and Online Investors
Advantage, Inc., dated May 25, 1999.
10.27(+) Lease Agreement between Dc Mason Ltd., and Online Investors Advantage,
Inc., dated October 7, 1998.
10.28(+) Lease Agreement between Gordon Jacobson and Online Investors
Advantage, Inc., dated June 22, 1999.
10.29(+) Employment Agreement and Stock Option between the Company and Allen D.
Hardman dated July 1, 1997.
10.30(+) Amendment to Employment Agreement between the Company and Allen D.
Hardman.
10.31(+) Non-Qualified Stock Option Agreement between the Company and Allen D.
Hardman.
10.32(+) Agreement between Momentum Associates Limited and Peter Graham Daley.
10.33(+) Agreement between Momentum Associates Limited and Anthony L. Tobin.
10.34(+) Agreement between Momentum Internet Inc., and Crossbow Consultants
Limited.
10.35(+) Agreement between Asia4sale.com Ltd., and Momentum Internet Inc.,
dated March 25, 1999.
21(+) Subsidiaries of the Registrant
24(+) Power of Attorney
27(+) Financial Data Schedule
* Summaries of all exhibits contained within this Registration Statement
are modified in their entirety by reference to these exhibits.
(+) Previously filed.
88
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Company has caused this Registration Statement to be signed on its behalf by the
undersigned , thereunto duly authorized.
ZiaSun Technologies, Inc.
Dated: April 4, 2000 /S/ D. Scott Elder
-----------------------------------
By: D. Scott Elder
Its: Chief Executive Officer
Dated: April 4, 2000 /S/ Allen D. Hardman
-----------------------------------
By: Allen D. Hardman
Its: Vice President
89
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 11,652,505 517,781
<SECURITIES> 540,234 786,588
<RECEIVABLES> 1,198,199 899,879
<ALLOWANCES> 43,906 0
<INVENTORY> 18,239 50,000
<CURRENT-ASSETS> 13,740,981 2,261,618
<PP&E> 992,272 713,297
<DEPRECIATION> (197,053) (209,518)
<TOTAL-ASSETS> 20,210,785 6,728,167
<CURRENT-LIABILITIES> 4,230,620 600,013
<BONDS> 0 0
0 0
0 0
<COMMON> 22,205 20,930
<OTHER-SE> 15,957,960 6,107,224
<TOTAL-LIABILITY-AND-EQUITY> 20,210,785 6,728,167
<SALES> 27,220,240 760,529
<TOTAL-REVENUES> 27,220,240 760,529
<CGS> 17,031,019 341,277
<TOTAL-COSTS> 5,629,264 620,981
<OTHER-EXPENSES> (5,464,629) (971,049)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 22,299 0
<INCOME-PRETAX> 10,002,287 769,320
<INCOME-TAX> 3,784,110 0
<INCOME-CONTINUING> 6,218,177 769,320
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,218,177 769,320
<EPS-BASIC> 0.29 0.05
<EPS-DILUTED> 0.24 0.04
</TABLE>