U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 2000
ComputerXpress.com, Inc.
(Name of Small Business Issuer in its charter)
Nevada 86-0853156
---------------------------------- ------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) ID. No.)
79811A Country Club Dr.
Bermuda Dunes, CA 92201
---------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code 760-345-2400
---------------------------------- ------------------
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of each class to be so registered
Common Stock
Check whether the issuer (1) filed all reports to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and
no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendments to this Form 10-KSB. [ ]
The issuer's revenues for the Fiscal Year ended March 31, 2000
were $2,360,079.
The aggregate market value of the voting stock (which consists
solely of shares of Common Stock) held by non-affiliates of the
issuer as of December 31, 1999 computed by reference to the close
price as at March 31, 2000 of 49,800,060 of the registrant's
Common Stock as quoted on the NQB pink sheets on such date, was
approximately $2,512,203. As at March 31, 2000, there were
45,915,060 shares of the issuer's common stock outstanding.
Transitional Small Business Disclosure Format (check one)
Yes No X
----- -----
PART 1
------
Statements contained in the annual report that are not historical
facts are forward-looking statements as that term is defined in
the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and
uncertainties, which could cause actual results to differ
materially from estimated results. Such risks and uncertainties
are detailed in filings with the Securities and Exchange
Commission, including without limitation in Item 1. "BUSINESS"
and Item 6 "MANAGEMENT'S DISCUSSION AND DESCRIPTION OR PLAN OF
OPERATION" below.
TABLE OF CONTENTS
PART I
------
Item 1 Description of Business ............. 1
Item 2 Description of Property.............. 20
Item 3 Legal Proceedings ................... 20
Item 4 Submission of Matters to a
Vote of Security Holders............ 20
PART II
Item 5 Market for Common Equity and
Related Stockholder Matters ....... 22
Item 6 Management's Discussion and
Analysis of Financial Condition
and Results of Operations .......... 23
Item 7 Financial Statements and
Supplementary Data ................. 35
Item 8 Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure ............... 61
PART III
Item 9 Directors and Executive Officers
of the Registrant .................. 61
Item 10 Executive Compensation ............. 61
Item 11 Security Ownership of Certain
Beneficial Owners and Management ... 61
Item 12 Certain Relationships and
Related Transactions ............... 61
Item 13 Exhibits and Reports on Form 8-K ... 61
SIGNATURES
.........................................................63
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
The Company was incorporated in the State of Nevada on January
15, 1997, under the original name of Stop-N-Sock, Ltd. Its
predecessor entity, Stock-N-Sock "SEED", was a California Limited
Partnership formed in 1996 to develop a high-tech driving range.
Up until March 1, 1999, the Company was engaged in the business
of development of its Coachella Valley real estate into a driving
range. On March 1, 1999, consistent with the Company's agreement
to purchase the assets of another Nevada corporation,
COSTPLUSFIVE.COM, INC., which was incorporated on January 25,
1999, and is now defunct (hereinafter referred to as "CP1." The
Company attempted to change its name to CostPlusFive.com, Inc.
and changed its business to a wholesale buying club, specializing
in the sale of high quality, multimedia computer systems, and
peripherals (external hardware items, such as modems) via the
Internet. The Company entered into an agreement on February 16,
1999, to acquire the assets of CP1 Inc." for 17 million shares of
Company common stock. CP1 was a corporation, separate and apart
from the Company. The assets consisted of goodwill, and inventory
and equipment located in nine separately owned retail computer
stores; as follows: one store in Rockville, Maryland, owned by
Bill Barker; one store in Tuscon, AZ, owned by Frank Scivally;
three stores in Houston, Texas, jointly owned by Lee Jackson and
Tom Mitchell, respectively; one store in Boise, Idaho, owned by
Paul Graham; two stores in Grapevine and Bedford, Texas, owned by
Mahlon Meier; one store in Windham, Maine owned by John Fecteau;
and one store in Phoenix, AZ, owned by Don Smallman. On March 1,
1999, the Company issued 6,984,000 of the 17 million shares in
performance of the agreement. Shortly thereafter, the Company
discovered that the charter of CP1's corporate charter had been
revoked for non payment of fees to the Secretary of the State of
Nevada, and that financial statements presented to the Company
during the due diligence process, did not represent the true
financial condition of two stores owned by Lee Jackson. As a
result, the Company rescinded the contract after it discovered
that the state of Texas was preparing to close Mr. Jackson's two
stores in Houston for non payment of taxes. The Company
rescinded the asset purchase contract because the discovery of
the financial discrepancies on the two Houston stores made all of
the financial statements suspect.
However, Management of the company felt that, given the suspect
nature of the financial statements surrounding two of the retail
locations, it would be best to run the web site with retail
affiliates, instead of purchasing and running the retail stores.
Mr. Scivally and Mr. Smallman have a management background in
computer systems building and sales, and the Company's management
had none. The web site being developed by Smallman and Scivally
was generating a lot of traffic. The decision was made to
salvage the agreement by acquiring the web site, the trade name,
and the expert management team needed to run the company's new
business. The retail locations at one time used the trade name,
but, as has been disclosed, there were conflicting claims made on
the name and the company abandoned it. The plan was proposed to
the owners of each store, to affiliate with the store owner,
whereby those owners wishing to affiliate with the Company, but
retain the responsibility of managing their own stores could do
so in exchange for 500,000 shares of common stock for which they
would each issue to the company a promissory note in the sum of
$125,000. Thereupon, the Company rescinded the asset purchase
agreement and offered to instead enter into an agreement to
acquire the web site from Frank Scivally and Donald Smallman, and
to acquire the domain name, Costplusfive.com, and affiliate with
each of the remaining store owners in exchange for a position
with the Company. Frank Scivally, Don Smallman, Mahlon Meier, and
Bill Barker agreed, but Lee Jackson, Tom Mitchell, Paul Graham
and John Fecteau refused. 500,000 shares each in exchange for
$125,000 promissory notes were issued to Scivally, Barker, Meier
and Smallman, for a total of 2,000,000 shares. The Company
canceled 1,240,000 shares of the 6,984,000 issued, and has placed
stop transfer orders and is seeking the return of the remaining
5,744,000 shares.
On April 13, 1999, the Company purchased the right to the
proprietary website "http://www.costplusfive.com" from Frank
Scivally and Donald Smallman by a fully performed oral agreement
that was memorialized in minutes of the Board of Directors dated
April 13, 1999, which are being filed as an exhibit to this
amended registration statement. The terms of the agreement were
simply that the Company was acquiring the web site and domain
name for recited consideration of $10.00. The Company changed its
business to Internet computer sales. The new directors, Frank
Scivally, William Barker, Mahlon Meier and Donald Smallman, were
installed as a new management team to lead the Company in its new
business focus. The web site was roughly developed at the time
of the acquisition. The domain name has been registered to Frank
Scivally on December 3, 1998. The Company acquired the rights to
the domain name and the site in March, 1999, but the domain name
was not registered in the Company's name until April 12, 2000.
Prior to the acquisition, the web site was an informational web
site, which contained information about what products were
offered by CostPlusFive affiliates, and what telephone numbers to
contact to order products. After the Company acquired the web
site, it developed the web site into a fully functional e
commerce site.
The Company agreed to buy the trade name, COST PLUS FIVE.COM,
INC. from CP1 in February, 1999, but then rescinded the
agreement. The domain name, CostPlusFive.com, had been
registered to Franklin Scivally, and owned by Franklin Scivally
and Donald Smallman. The name, CostPlusFive.com was never a
registered trademark or service mark. It was used as the
corporate name of the other Nevada corporation. The Company had
already submitted an amendment to its articles of incorporation
to change its name from Stop-N-Sock, Ltd. to CostPlusFive.com,
Inc., which was filed on March 12, 1999. However, the amendment
was rejected by the Secretary of the State of Nevada almost
immediately after filing. The Company was unaware of the
rejection until April 19, 2000 because it was sent to the
Company's former agent for service of process, who failed to
notify the Company of the rejection. The Company has since
changed its name to ComputerXpress.com, Inc. on , to reflect a
change in its business focus, and also because Lee Jackson and
Tom Mitchell discovered that the Company's amendment to articles
of incorporation had been rejected and filed their own articles
of incorporation for Cost Plus Five.com, Inc. The Company has
also been requested by Cost Plus, who has registered the name,
"Cost Plus," to cease using the name "CostPlusFive.com" as a
trade name, because it was allegedly too similar to the Cost Plus
name as to cause confusion in the minds of the public.
On October 12, 1999, the Company signed a definitive stock
purchase agreement to purchase Beverly Boulevard Associates as a
wholly owned subsidiary in exchange for 3 million shares of
Company common stock. Beverly Boulevard Associates operates two
courier services in Southern California under the names,
"Corporate Couriers" and "Corporate Legal." Beverly operates out
of a two story, 4,000 square foot office building in Los Angeles,
where approximately 100 messengers are dispatched daily
throughout Southern California. Three million shares were issued
(but not delivered) to consummate the purchase, to be exchanged
for 100% of the shares of Beverly Boulevard Associates. However,
one of the contingencies of the consummation of the agreement was
that Beverly Boulevard Associates was to provide financial books
and records suitable for auditing for consolidation with the
Company's financial statements, and it was not able to do this
within a reasonable time, so the transaction was mutually
rescinded, and the 3 million shares have been returned to the
Company treasury for cancellation.
In General
The Company is in the business of sales of high quality,
multimedia computer systems and peripherals through its web site
on the Internet, supported by affiliated retail locations in
Arizona. The Company's products use components from nationally
recognized suppliers as they become available, such as Intel,
Advanced Micro Devices, ASUS, Sony, Yamaha and Creative Labs.
Distribution is accomplished through a drop-ship arrangement with
the Company's suppliers. The product is shipped directly from
the supplier to the customer. Customers are invoiced for and pay
the Company directly for all products ordered before shipping.
The Company's suppliers and the Company have an understanding
that the suppliers will not deal directly with the Company's
customers without the Company's permission, such as is customary
in most retail situations where materials are drop shipped.
Therefore, management believes there is little risk that the
customer and the supplier will make their own purchase
arrangements.
The current operations of the Company are online and telephone
sales of computer systems and hardware. The Company formerly
offered products at 5% over its wholesale cost. However, this
business model did not find acceptance with investors in
particular. The Company has undertaken informal studies of its
customer base, and has found that approximately 70% of all sales
during the past twelve months have come from other businesses, as
opposed to the general consumer. As a result of this study, in
late January 2000, the Board of Directors decided to drop the 5%
over cost business model. The Company will continue to offer
online and telephone sales of computer systems and hardware to
the public, but the Company will focus on a new emphasis;
designing data computer solutions and providing computer systems
and hardware to businesses.
The Company currently has three retail affiliate locations to
support its Internet sales program. These locations offer after
market support and repair services for the Company's customers.
The Company originally had four retail affiliate locations in
Phoenix, Tuscon, Rockville, Maryland and Bedford, Texas. The
Bedford store was closed in September, 1999, and the owner of the
Bedford store and former Company president, Mahlon Meier,
resigned from his post as president and resigned from the Board
of Directors. He subsequently filed a voluntary petition in
bankruptcy. The current three retail locations are in Phoenix,
Arizona, which is owned by Don Smallman; in Tuscon, Arizona,
which is owned by Franklin Scivally; and in Rockville, Maryland,
which is owned by William Barker. The Tuscon location operates
under the name, "PC Exchange," and has been in operation since
September, 1996, and was formerly operated under the name, "Cyber
Exchange." The Rockville location operates under the name,
"Hytec Exchange," and has been in operation since September,
1996, and was formerly operated under the trade name, "Cyber
Exchange." The Phoenix location operates under the name,
"ComputerXpress, from inside a PAC MAIL store, and has been in
operation since September, 1999. A prior Phoenix location at
4206 East Chandler Boulevard, which was in operation since 1996
under the former trade name, "Cyber Exchange," was closed in
September, 1999. The current retail locations are as follows:
1. 5420 East Broadway Blvd., Suite 234, Tuscon, Arizona.
2. 12274-C Rockville Pike, Rockville, Maryland.
3. 3941 East Chandler Blvd., Ste. 106, Phoenix, Arizona.
The Company will seek to expand its affiliated retail locations
in the future, by developing additional locations through the use
of approximately 100 square foot retail kiosks strategically
placed in existing businesses and shopping centers. The kiosks
will offer sales of all computer products offered by the Company,
and service. Operators of retail location where the kiosks are
located will split 50% of gross profits from all sales and
services. The Company is currently seeking affiliates interested
in this type of venture with the Company. There can be no
assurance that the Company will be successful in obtaining these
proposed future affiliated retail locations.
The Company emphasizes business to business sales of computer
systems designed to solve particular business data processing and
computing requirements. The Company also sells its products to
present members of its wholesale buying club at five percent over
wholesale price (the cost the Company pays for the product from
its suppliers, including shipping and handling). Members pay
$39.95 per family or $139.95 per business per year to receive
these discounts on all products the company sells. However, new
memberships are no longer being sold, since the Company has
changed its emphasis to business to business commerce and has
dropped the five percent above wholesale price business model.
The Company will continue to sell to its existing members sales
are also made to non members on a full retail basis. The last
current membership will expire on September 6, 2000. No
memberships will be renewed.
The Industry
Retail sales in computer hardware products is a relatively new
industry, which is in a constant state of change, due to the
advances in microchip technology, which results in the
development of more diversified and technologically advanced
hardware. Internet sales of computer products is a more recent
development. Both of these industries are highly competitive.
During the calendar year 1999, the Company's web site has
received approximately 11,676 "hits." Management feels this is
an indication that the Company has an Internet presence, but does
not believe that "hits" have any direct correlation to sales.
Management formerly believed that the Company's niche in this
industry was the fact that the Company offered a membership,
which stimulates customer loyalty, but has since formed the
opinion that customer service and product support stimulated
customer loyalty with its business customers, and that the
general consuming public who shop online pay more attention to
price when they shop. This, and the fact that there are a
proliferation of Internet computer stores was a factor leading
the Company to put an emphasis on business to business commerce.
Management originally thought that it was the membership program
which stimulated customer loyalty, because, since the Company
initiated the membership program for CostPlusFive.com, the
Company has found that, in approximately 1500 cases, its member
customers will usually call or shop with the Company for
peripheral components and associated hardware. This was mainly
evident when customers call or shop the Company for upgrades of
equipment they have purchased from the Company. Upon reflection
of these statistics, management has changed its opinion and now
feels that it is the Company's service and product support which
accounts for most of the repeat business. Management also
believes that customers of the Company are afforded further
advantages in that they are able to go to affiliated (not owned)
locations in Phoenix, Tuscon, and Rockville, Maryland, for after
market support and repairs. The benefits of membership are that
members can buy products sold by the Company for a price five
percent above the wholesale price paid by the Company. The
Company is not selling any more memberships after March 13, 2000,
but still offers the same price structure to its current members.
Discontinued Business
The Company was formerly known as Stop-N-Sock, Inc. The Company
owned a 32 acre unimproved and undeveloped site in the Coachella
Valley on Miles Avenue between Washington Boulevard near to
Highway 111 in Indian Wells. The driving range was in the
development stages, and never commenced operations. Management
had plans to erect a high-tech golf practice range and teaching
facility plus full pro shop, to feature 60 driving range stations
having climate compensating misters/heaters, full lighting for
night usage, automatic ball spotters, and computer aided video
swing analysis.
The Company discontinued the implementation of its planned
operation of the driving range when its changed its direction to
Internet computer sales. The Company was unable to sell the
undeveloped golf range property to satisfy the secured debt on
the property, and was unable to justify the raising of capital to
service the secured debt. The driving range was in the
development stages, and never commenced operations. The Company
spent a small amount of cash and issued 245,000 shares from its
treasury to purchase the driving range property, subject to a
note and two deeds of trust for $867,000, which the Company was
to service by paying 10% interest payments. The Company was
unable to raise the capital needed to service the debt on the
driving range property as of February, 1999, and determined that
it was in the best interests of the Company to sell the driving
range property. The Company entered into an escrow to sell the
property on February 22, 1999 for a net sales price of
$1,700,000, payable $100,000 by April 22, 1999, with the balance
being paid on or about June 22, 1999. The prospective buyer did
not perform by depositing the $100,000 down payment, and the
escrow was canceled. The Company, facing foreclosure on the
property, with no means to satisfy the ongoing debt, and having
changed its business focus to computer sales, deeded the property
in lieu of foreclosure on June 24, 1999 to the secured lenders
George and Rita White and Terisa Edwards, who were also
stockholders in the Company.
Products
The Company offers a full line of fully customer configurable
multimedia computer systems, which means that, as a seller of
computer systems, the Company can offer its customers who wish to
have a custom made computer system a system of any configuration
they desire, using the specific components they wish to use in
their custom built system. The Company also offers printers,
notebook computers, monitors and scanners, computer cables and
related hardware, computer software and games.
Home Entertainment Computer
The Company introduced a product called HECTOR, or "Home
Entertainment Computer That Operates Remotely," on October 25,
1999. HECTOR really is not so much of a product as it is a
computer system that is designed for home entertainment. HECTOR
is assembled by the Company and shipped to customers who order it
directly from the Company, as opposed to being drop shipped from
its suppliers. HECTOR looks and performs like a regular home
computer, and is assembled by the Company from hardware
components which are readily available. However, HECTOR has
added features that don't come with most home computer systems.
It is intended to act in conjunction with a regular television
screen as a monitor. With HECTOR, which comes with a wireless
mouse and wireless computer keyboard, the user can play computer
games on his or her television; play DVD movies or CD's; record
television programs for later viewing with HECTOR's digital VCR;
edit video tapes and still photos, and send them by e-mail
through the Internet, and multi-task word processing and
television or Internet functions. HECTOR was intended as one
unit that would serve all of the functions of a home computer as
well as CD and DVD players and Video recorders (VCR's), which are
usually purchased as separate components.
The components of HECTOR consist of a computer processor; a video
card with DVD controller and TV tuner; a DVD player, a 10 GB hard
drive; a remote keyboard and mouse; a sound card; surround sound
speakers; and a 56K modem.
49 HECTOR units have been sold by the Company to date.
The Company obtained a large order for 10,400 HECTOR units from
Cal Tech Solutions, but Cal Tech cancelled the order after having
been contacted by Lee Jackson. See "Legal Proceedings."
Marketing
The Company was, until March 13, 2000, vigorously promoting
memberships in its "CostPlusFive.com Buying Club," which enables
members to purchase computers, peripherals and software at five
percent over Company cost. As of March 13, 2000, the Company had
sold 187 memberships, 155 of which were paid for. The Company
has decided to cease sales of new memberships, and emphasize
business to business sales of computer systems and computing
solutions.
The Company was featured on CNBC's .COM program which aired on
December 4, 1999, and repeated on BRAVO on December 6 and
December 10, 1999. The Company paid for this feature in order to
promote its web site and wholesale buying business model, but, in
management's opinion, the feature was not effective in improving
the Company's revenues.
The current operations of the Company are online and telephone
sales of computer systems and hardware. The Company currently
has three retail affiliate locations to support its Internet
sales program. These locations offer after market support and
repair services for the Company's customers.
The Company's management believes that the Company's emphasis is
better placed in marketing its products to businesses, which have
accounted for 70% of the Company's sales in the last year, and
the Company will seek to foster long term relationships and word
of mouth referrals through customer service. The Company
maintains a full time customer service toll free telephone
number, and service maintenance at its affiliated retail
locations. The Company has no ownership interest in the current
retail locations, which are owned by the officers and directors
of the Company, one of which bears the Company name by Company
consent.
As part of its effort to emphasize business to business commerce,
on March 19, 2000, the Company signed an exclusive agreement with
Specialized Leasing, Inc., a Company with directors who include
Russell Nordstrom, the public relations liaison for the
ComputerXpress, and George White, a shareholder of the
ComputerXpress, to be the exclusive supplier to Specialized
Leasing for desktop computer systems, laptop computers, digital
cameras and other electronic peripherals to medical, dental, and
real estate professionals in a special lease program. The Company
has linked its web site to Specialized Leasing's web site at
www.specializedleasing.com. Management is hopeful that this
agreement will bring revenue to the Company, but there can be no
assurance that it will.
Existing Affiliate Program
The Company has an established affiliate program, whereby
participating affiliates execute a standard Affiliate Operation
Agreement, and are paid quarterly commissions for every purchase
from an affiliate's website through a coded "link." Commissions
are paid on a scale of purchases made by the affiliates customer
through the coded link which are completed and delivered.
Affiliated Retail Locations
The Company currently has three affiliated locations. These
locations offer after market support and repair services for the
Company's customers. The Company originally had four retail
affiliate locations in Phoenix, Tuscon, Rockville, Maryland and
Bedford, Texas. The Bedford store was closed in September, 1999.
The current three retail locations are in Phoenix, Arizona, which
is owned by Don Smallman; in Tuscon, Arizona, which is owned by
Franklin Scivally; and in Rockville, Maryland, which is owned by
William Barker. The Company formerly had one other affiliate, in
Bedford, Texas, which was owned by former Company officer and
director, Mahlon Meier, was closed in August, 1999. The Tuscon
location operates under the name, "PC Exchange," and has been in
operation since September, 1996, and was formerly operated under
the name, "Cyber Exchange." The Rockville location operates
under the name, "Hytec Exchange," and has been in operation since
September, 1996, and was formerly operated under the trade name,
"Cyber Exchange." The Phoenix location operates under the name,
"ComputerXpress, from inside a PAC MAIL store, and has been in
operation since September, 1999. A prior Phoenix location at
4206 East Chandler Boulevard, which was in operation since 1996
under the former trade name, "Cyber Exchange," was closed in
September, 1999. The locations are as follows:
1. 5420 East Broadway Blvd., Suite 234, Tuscon, Arizona.
2. 12274-C Rockville Pike, Rockville, Maryland.
3. 3941 East Chandler Blvd., Ste. 106, Phoenix, Arizona.
The affiliates operate pursuant to the same standard operating
agreement, with an addendum that provides that they receive 50%
of gross profits from all sales of Company products. Affiliated
locations and kiosks receive 100% of all repair revenue charged
to customers. The Company will seek to expand its affiliated
retail locations in the future, by developing additional
locations through the use of approximately 100 square foot retail
kiosks strategically placed in existing businesses and shopping
centers. The kiosks will offer sales of all computer products
offered by the Company, and service. Operators of retail
location where the kiosks are located will split 50% of gross
profits from all sales. There is one test marketing of a retail
affiliate kiosk being performed in a PAK Mail franchise in
Phoenix, Arizona. However, there can be no assurance that this
test market will result in an affiliated kiosk location. The
Company is currently seeking affiliates interested in this type
of venture with the Company. There can be no assurance that the
Company will be successful in obtaining these proposed future
affiliated retail locations. All affiliates are authorized to
use the name "ComputerXpress" in conjunction with their own
trade name in the normal conduct of their business. Affiliates
are paid on the 15th day of each month for their share of
revenues generated during the previous month. Affiliates collect
any revenue for repairs made directly from the customer and are
entitled to 100% of all repair revenue.
The current affiliated locations owned by Company officers and
directors have the same agreement with the Company as offered to
other affiliates with regard to profit sharing, and are treated
in the same manner as other affiliates.
Patents
The Company holds no patents for its products. Its trade name
"ComputerXpress" is not a registered trademark. It owns the
right to the domain name, "CostPlusFive.com" for its website.
Raw Materials and Principal Suppliers and Vendors
The Company does not manufacture its products and, therefore,
does not utilize raw materials. Distribution is accomplished
through a drop-ship arrangement with Company suppliers. The
product is shipped directly from the supplier to the customer.
Suppliers are not affiliated with any officer, director or
principal shareholder. The Company's products and its suppliers
are as follows:
Computer Systems, Printers, and peripherals: Total peripherals,
Richardson, TX Computer Systems, Printers and Peripherals: Parts
2PC, Pasadena, CA.
Computer Systems, Printers and Peripherals: Comtech Digital
Systems, Glendale, CA.
Computer cables and related hardware: Cables Unlimited,
Concord, CA.
Computer software and games: HC Distributors, Pflugerville, TX
The suppliers of the Company do not manufacture the individual
components which make up the computer systems the Company sells.
They integrate component parts obtained from various
manufacturers into the system ordered by the customer. This is
the only way to offer the Company's customers a wide range of
choices for custom built computer systems.
Competition
The business of providing wholesale and retail computer sales is
one of intense competition. Other companies with more affiliate
or retail locations than the Company have financial resources
superior to the Company, so there can be no assurance that the
Company's projected income will not be affected by its
competition. There are also many other companies with greater
financial resources that the Company who offer computer sales on
the Internet. There can be no assurance that competing companies
with greater buying power will not be able to undercut the
Company's pricing structure.
Employees
The Company's only employees are its four officers and directors.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases executive offices on a month to month basis
from its former president, Robert T. Yarbray, pursuant to an oral
lease, at the rate of $800 per month. It owns no other property,
other than its website name and trade name, which is not a
registered trademark or service mark. The Company has no
ownership interest in the retail locations, which are owned by
the officers and directors of the Company, and which bear the
Company name by Company consent.
The Company owned a 32 acre unimproved and undeveloped site in
the Coachella Valley on Miles Avenue between Washington Boulevard
near to Highway 111 in Indian Wells. The driving range was in the
development stages, and never commenced operations. Management
had plans to erect a high-tech golf practice range and teaching
facility plus full pro shop, to feature 60 driving range stations
having climate compensating misters/heaters, full lighting for
night usage, automatic ball spotters, and computer aided video
swing analysis. However, the Company determined that it would be
in the best interests of the Company and its shareholders to
abandon the project and to sell the site, due to the fact that
management determined that the Company could not likely raise the
capital required to develop the site to its full potential. The
Company then put in a new management team and shifted its focus
to Internet sales of computer products.
The Company owns a proprietary website at
http://www.costplusfive.com, which is registered to the Company.
ITEM 3. LEGAL PROCEEDINGS
On April 1, 1999, Mary Smith sued the Company and its former
President, Robert T. Yarbray, in the Superior Court of California
for the County of Riverside, Case No. INC 011613, alleging non
payment of a $25,000 promissory note. The Company believed that
the lawsuit has no merit, because the Company executed a first
deed of trust on its real property for $250,000 in exchange for
$225,000 of loan proceeds from Ms. Smith. Therefore, the $25,000
promissory note was extinguished by the subsequent promissory
note for $250,000, secured by a first deed of trust. The lawsuit
was dismissed on May 3, 1999.
On June 18, 1999, the Company filed a lawsuit in federal court
for the Central District of California, Case No. 99-
06010RAP(MANx), against Investor's Equity Corp., Wall Street
Trading Group, and others, seeking to cancel 3,400,000 common
shares the Company issued on a promissory note to the defendants,
who defaulted on the promissory note. Defendants filed a
counterclaim, alleging breach of contract, defamation, fraud and
securities violations.
On January 26, 2000, the lawsuit was settled, and the terms of
the settlement are confidential and may not be disclosed to any
third party. Both the complaint and counterclaim have been
dismissed.
On March 30, 2000, the Company filed a lawsuit, Case No.
RIC841013, in Riverside County, California Superior Court,
against Lee Jackson, Barbara Jackson, Tom Mitchell, Doran
Mitchell, John Facteau, Carol Facteau, Paul Graham, and Wendy
Graham, for fraud, negligent misrepresentation, negligence, trade
libel, tortuous interference with contractual relations, tortuous
interference with contractual relations, tortuous interference
with prospective economic advantage, abuse of process, conspiracy
and injunctive relief. The lawsuit alleges, among other things,
that the defendants defrauded the Company by misrepresenting the
value of the assets of Cost Plus Five.com, Inc., a Nevada
corporation, when the Company and said Nevada corporation entered
into the asset purchase agreement of February 26, 1999, and
defamed the Company by publishing false and misleading statements
on the Raging Bull, Inc.'s Internet message board, and on their
own Internet web site, www.geocities.com/ogravity99, and that the
defendants interfered with the Company's order for 10,400 HECTOR
units by contacting the Company's customer, Cal Tech Solutions,
and making false and misleading statements about the Company.
The lawsuit has been served and the Company's management hopes
that it will have a chilling effect on the defendants' actions,
but there can be no assurance that it will.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 12, 2000, an annual meeting of shareholders was held, at
which time a majority of shares were voted in person and by proxy
to the proposals set forth in the Company's Form 14a, to elect a
board of directors for the current fiscal year, approve the
Company's change in independent accountants, and to ratify
actions of the board of directors taken during the last fiscal
year.
PART II
-------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock has been quoted on the NASD OTC
Bulletin Board ("Bulletin Board"),under the symbol "STSN" in
October, 1998. In March, 1999, it changed its symbol to "USAV."
For a short time, the symbol was "CPFV." On April 5, 2000, its
trading symbol was changed to "CPXP", and the NASD added an "E"
to the symbol, making it "CPXPE," indicating its inclusion on the
NASD's "eligibility list," since March 24, 2000. The Company's
quote on the Bulletin Board was deleted approximately 30 days
later, and it now trades on the National Quotation Bureau's pink
sheets under the symbol "CPXP." The high and low sale prices of
company common stock were 1/8 and 2 1/4, respectively. During the
third and fourth quarters of fiscal year 1998, the high and low
sale prices of the Company's common stock were $.50 and $.16,
respectively. The Company considers its Common stock to be thinly
traded and that any reported bid or sale prices may not be a true
market-based valuation of the Common Stock. As of March 31,
1999, there were 93 record holders of the Company's Common Stock.
As of April 14, 2000, there were 110 record holders of the
Company's common stock. The Company has not paid any cash
dividends since its inception and does not contemplate paying
dividends in the foreseeable future. It is anticipated that
earnings, if any, will be retained for the operation of the
Company's business.
<TABLE>
The following table sets forth the range of high and low bid information for each full
quarterly period of the last fiscal year:
<S> <C> <C>
Period Reported Average High Bid Average Low Bid
Quarter ended December 30, 1998 No data available
Quarter ended March 31, 1999 $0.50 $0.16
Quarter ended June 30, 1999 $0.57 $0.30
Quarter ended September 30, 1999 $0.39 $0.20
Quarter ended December 31, 1999 $0.28 $0.20
Quarter ended March 31, 2000 No data available; last trade was $0.06
Quarter ended June 30, 2000 No data available; last trade was $0.06.
</TABLE>
RECENT SALES OF UNREGISTERED SECURITIES
The Board of Directors, on July 17, 1997, authorized the sale and
issue of a total of $150,000 in convertible debentures which were
unsecured, bear interest at 10%, which is to be accrued and paid
on the first day of the thirteenth month after the day of
issuance. The debentures were sold to Beverly Duke, Sandra
Crosby, James Mitchem, John Slater, Les Peterson, Eleanor Mason,
Bud and Jackie Konard, R.J. DeRecat, William Lockett, Jr., Bill
Hefferman, Anthony Phillips, Richard Secrist, Robert Brunner,
Charles Bradley, and George De Salvo. The debentures, together
with the accrued interest, were convertible into 1,000 shares of
the Company's common stock for each $1,000 principal amount no
sooner than the sixth day of the thirteenth month of the date of
issuance. The debentures were issued in reliance upon the
exemption from registration provided in Section 4(2) of the
Securities Act of 1933, to accredited investors whose accredited
status was determined from referring to representations made on
investors questionnaires. Prior to March 31, 1999, $100,000 of
these debentures have been converted to common stock at the
aggregate purchase price of $.50 per share. The remainder have
been paid in full. The accredited investors' status were
determined as a result of information provided to the Company on
questionnaires completed by the investors.
On April 5, 1999, 1,000,000 common shares were sold to Arrow
Management in exchange for the sum of $100,000, a sophisticated
investor who had access to all corporate information, including
the Company's most recent offering circular and financial
statements, pursuant to Section 4(2) of the Securities Act of
1933, No underwriter was used in the transaction.
On April 15, 1999, 500,000 shares were sold to officer/director
William Barker in exchange for a note in the amount of $125,000,
a sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On April 15, 1999, 500,000 shares were sold to officer/director
Mahlon Meier, in exchange for a note in the amount of $125,000, a
sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On April 15, 1999, 500,000 shares were sold to officer/director
Franklin Scivally in exchange for a note in the amount of
$125,000; a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On April 15, 1999, 500,000 shares were sold to officer/director
Donald Smallman, in exchange for a note in the amount of
$125,000; a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On April 15, 1999, 10,000 shares were issued to William F. Roach
in exchange for administrative services rendered to the company;
a sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On May 23, 1999, 900,000 shares were issued to Richard Swift in
exchange for administrative services rendered the company; a
sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On May 23, 1999, 50,000 shares were issued to Kenneth Eade, in
exchange for legal services rendered the company; a
sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On May 25, 1999, 400,000 shares were issued to R. Nordstrom, in
exchange for public relations, press relations, and investor
relations full time services rendered the company; a
sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On June 1, 1999, 98,000 shares were issued to M. Williams in
exchange for the sum of $15,000; a sophisticated investor who
had access to all corporate information, including the Company's
most recent offering circular and financial statements, pursuant
to Section 4(2) of the Securities Act of 1933, No underwriter was
used in the transaction.
On June 11, 1999, 100,000 shares were issued to John Witkop, in
exchange for $17,000 in cash; a sophisticated investor who had
access to all corporate information, including the Company's most
recent offering circular and financial statements, pursuant to
Section 4(2) of the Securities Act of 1933, No underwriter was
used in the transaction.
On July 9, 1999, 200,000 shares were issued to R. Swift, in
exchange for administrative services; a sophisticated investor
who had access to all corporate information, including the
Company's most recent offering circular and financial statements,
pursuant to Section 4(2) of the Securities Act of 1933, No
underwriter was used in the transaction.
On July 21, 1999, 25,000 shares were issued to Brenda Mason, in
exchange for clerical services rendered the company; an investor
who had access to all corporate information, including the
Company's most recent offering circular and financial statements,
pursuant to Section 4(2) of the Securities Act of 1933, No
underwriter was used in the transaction.
On July 22, 1999, the Company issued 1,875,000 shares of its
common stock to an three independent contractor consultants;
625,000 to Richard Surber, 625,000 to Allan Wolfson, and 625,000
to Jon Roylance, in exchange for consulting services, pursuant to
Rule 701 of the Securities Act of 1933. There was no underwriter
involved in the transaction. The services rendered were
providing general financial advice to corporate management, and
assisting the company in locating, evaluating and effecting a
merger and/or acquisition.
On July 22, 1999, the Company issued 750,000 shares to Delman
Corp., 750,000 shares to Moore & Elrod, Inc. And 1,500,000 shares
to AZ Professional Services, corporations controlled by the
above-referenced independent contractor consultants, in exchange
for consulting services rendered the company; a sophisticated
investor who had access to all corporate information, including
the Company's most recent offering circular and financial
statements, pursuant to Section 4(2) of the Securities Act of
1933, No underwriter was used in the transaction. The exact
services provided were financial advice to management, and
assisting in locating, evaluating and effecting a merger and/or
acquisition.
On September 28, 1999, the company issued 1,100,000 shares to
Farmland Corporation, a former secured creditor of the company,
as a result of the exercise of an option to convert debt to
common stock; a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On September 28, 1999, the company issued 1,500,000 to L.
Hollebrands, a former secured creditor of the company, as a
result of the exercise of an option to convert debt to common
stock; a sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On September 28, 1999, the company issued 1,400,000 shares to
D.C.S., a former secured creditor of the company, as a result of
the exercise of an option to convert debt to common stock; a
sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On September 28, 1999, the Company issued 4,000,000 to George
White, a former officer, a former secured creditor of the
company, as a result of the exercise of an option to convert debt
to common stock; a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On September 28, 1999, the Company issued 100,000 shares to M.
Williams, in exchange for the sum of $15,000; a sophisticated
investor who had access to all corporate information, including
the Company's most recent offering circular and financial
statements, pursuant to Section 4(2) of the Securities Act of
1933, No underwriter was used in the transaction.
On September 28, 1999, the Company 300,000 shares to R. Swift for
administrative services; a sophisticated investor who had access
to all corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On September 29, 1999, the Company issued 1,400,000 shares to
Desert Corporate Services, Inc., in exchange for money owed for
corporate and clerical services. Desert Corporate Services, Inc.
is a company in which Robert T. Yarbray has a beneficial
ownership, a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On October 6, 1999, the Company issued 3,000,000 shares to Mike
Taradash, in consideration of the agreement to acquire all of the
shares of Beverly Associates, which agreement has been rescinded
and the shares returned to the Company for cancellation. Mr.
Tardash is a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On March 3, 2000, the Company issued 1,500,000 shares to Frank
Scivally, a corporate officer and director, in exchange for
services rendered; an sophisticated investor who had access to
all corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On March 3, 2000, the Company issued 1,500,000 shares to Don R.
Smallman, a corporate officer and director, in exchange for
services rendered; an sophisticated investor who had access to
all corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On March 31, 2000, the Company issued 1,000,000 shares to George
White, a former officer, a former secured creditor of the
company, as a result of the exercise of an option to convert debt
to common stock; a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On March 5, 2000, the Company issued 10,000 shares to Michael Ray
Campbell, in exchange for clerical services rendered the Company;
an investor who had access to all corporate information,
including the Company's most recent offering circular and
financial statements, pursuant to Section 4(2) of the Securities
Act of 1933, No underwriter was used in the transaction.
On March 5, 2000, the Company issued 750,000 shares to Robert T.
Yarbray, in exchange for consulting and administrative services
rendered the Company; a sophisticated investor who had access to
all corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On March 5, 2000, the Company issued 750,000 shares to Star
Talent Management, a Company owned by counsel, Kenneth G. Eade,
in exchange for legal services rendered the Company; a
sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On February 22, 1999, the Company sold 2,400,000 shares of its
common stock, to Bruce Dorfman, an unrelated accredited investor
and his two corporate entities, Wall Street Trading Group and
Investors Equity Corp., pursuant to the exemption set forth in
Regulation D, Rule 504, to an unrelated party in exchange for two
promissory notes at a price of $0.25 per share, for total
proceeds of $600,000. On April 6, 1999, the Company sold another
1,000,000 shares to the same unrelated party on a promissory
note, and sporadic payments were made on the notes until May,
1999. The notes were consolidated into one note on May 12,1999.
No underwriter was used in either transaction. The
investor/promisor defaulted on the second payment of the
consolidated note due May 31, 1999. On June 6, 1999, the Company
rescinded the transaction and issued stop transfers on the shares
of common stock sold. The investor failed to return the shares
for cancellation or pay for the shares, so the Company filed a
lawsuit in federal court in the Central District of Los Angeles,
California to obtain cancellation of the shares issued. The
Company requested the Court in the lawsuit to issue a temporary
restraining order prohibiting the investor from selling any more
of his free trading shares, which temporary restraining order was
denied by the Court. During the lawsuit, the Company discovered
that the investor had sold all of the free trading stock. The
lawsuit was settled in January, 2000, in a confidential
settlement, the terms of which the Company has been prohibited to
disclose.
On February 26, 1999, the Company entered into an asset purchase
and sale agreement with a Nevada corporation by the name of Cost
Plus Five.com, Inc., (the "Nevada corporation"), whereby the
Company was to acquire certain assets of the Nevada corporation,
in exchange for 17,000,000 shares of common stock. The Company
issued 6,984,000 shares of the 17,000,000 shares in furtherance
of the agreement. However, it became apparent to the Company
during a due diligence investigation that the Nevada corporation
had issued false and misleading financial statements severely
misstating its assets and liabilities, that its corporate charter
had been revoked by the state of Nevada, and that its nine retail
stores virtually had no assets. Therefore, the Company
terminated negotiations. It subsequently, on April 13, 2000,
acquired the proprietary website, "www.costplusfive.com" from its
owners, Frank Scivally, Mahlon Meier, William Barker and Don
Smallman, the directors of the Company, and changed the Company's
business direction to that of Internet computer sales. Out of
the 6,984,000 shares issued to consummate the terminated
acquisition agreement, the Company has distributed 500,000 to
Franklin Scivally, 500,000 to Don Smallman, 500,000 to William
Barker and 500,000 to Mahlon Meier, in exchange for their
respective interests in the Internet website and domain name, and
3,400,000 restricted shares to Bruce Dorfman and his related
corporate entities, which have been returned to the Company
treasury for cancellation. The Company is seeking the
cancellation of the remaining 4,984,000 shares informally, and
has issued a notice of rescission for them and placed stop
transfer orders with its transfer agent.
PENNY STOCK STATUS
The Company's common stock is a "penny stock," as the term is
defined by Rule 3a51(1)of the Securities Exchange Act of 1934.
This makes it subject to reporting, disclosure and other rules
imposed on broker_dealers by the Securities and Exchange
Commission requiring brokers and dealers to do the following in
connection with transactions in penny stocks:
1. Prior to the transaction, to approve the person's
account for transactions in penny stocks by obtaining information
from the person regarding his or her financial situation,
investment experience and objectives, to reasonably determine
based on that information that transactions in penny stocks are
suitable for the person, and that the person has sufficient
knowledge and experience in financial matters that the person or
his or her independent advisor reasonably may be expected to be
capable of evaluating the risks of transactions in penny stocks.
In addition, the broker or dealer must deliver to the person a
written statement setting forth the basis for the determination
and advising in highlighted format that it is unlawful for the
broker or dealer to effect a transaction in a penny stock unless
the broker or dealer has received, prior to the transaction, a
written agreement from the person. Further, the broker or dealer
must receive a manually signed and dated written agreement from
the person in order to effectuate any transactions is a penny
stock.
2. Prior to the transaction, the broker or dealer must
disclose to the customer the inside bid quotation for the penny
stock and, if there is no inside bid quotation or inside offer
quotation, he or she must disclose the offer price for the
security transacted for a customer on a principal basis unless
exempt from doing so under the rules.
3. Prior to the transaction, the broker or dealer must
disclose the aggregate amount of compensation received or to be
received by the broker or dealer in connection with the
transaction, and the aggregate amount of cash compensation
received or to be received by any associated person of the broker
dealer, other than a person whose function in solely clerical or
ministerial.
4. The broker or dealer who has effected sales of penny
stock to a customer, unless exempted by the rules, is required to
send to the customer a written statement containing the identity
and number of shares or units of each such security and the
estimated market value of the security. The imposition of these
reporting and disclosure requirements on a broker or dealer make
it unlawful for the broker or dealer to effect transactions in
penny stocks on behalf of customers. Brokers or dealers may be
discouraged from dealing in penny stocks, due to the additional
time, responsibility involved, and, as a result, this may have a
deleterious effect on the market for Nortech's stock.
(1) The above quotations reflect inter-dealer prices, without
retail mark up, mark down or commission and may not represent
actual transactions.
(2) Source of information: Stockmaster Stock Quotation Service
(Stockmaster.com) and Freerealtime.com, NASD Bulletin Board.
SECURITY HOLDERS
The approximate number of record holders of shares of the common
stock of Nortech outstanding as of March 31, 2000 was
approximately 110.
DIVIDENDS
No dividends have been declared or paid on the Company's common
stock, and Nortech does not intend to pay dividends in the near
future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS:
In General
The Company is engaged in the business of sales of high quality,
multimedia computer systems and peripherals through its web site
on the Internet, supported by two affiliated retail locations in
Arizona and Maryland. The Company sells its products at five
percent over wholesale price to its membership. However, as of
March 13, 2000, the Company is no longer issuing new memberships.
Its Members pay $39.95 per family or $139.95 per business per
year to receive these discounts on all products the company
sells. The Company will continue to sell to its members at five
percent above wholesale price, and will continue to sell products
to the general public who are not members, but will emphasize
providing business customers with computer hardware solutions to
their data processing, and computing needs. The Company has
financed its operations to date through the sale of its
securities.
The Company was formerly known as Stop-N-Sock, Inc. The Company
owned a 32 acre unimproved and undeveloped site in the Coachella
Valley on Miles Avenue between Washington Boulevard near to
Highway 111 in Indian Wells. The driving range was in the
development stages, and never commenced operations. Management
had plans to erect a high-tech golf practice range and teaching
facility plus full pro shop, to feature 60 driving range stations
having climate compensating misters/heaters, full lighting for
night usage, automatic ball spotters, and computer aided video
swing analysis. However, the Company determined that it would be
in the best interests of the Company and its shareholders to
abandon the project and to sell the site, due to the fact that
management determined that the Company could not likely raise the
capital required to develop the site to its full potential. The
Company then put in a new management team and shifted its focus
to Internet sales of computer products.
The Company entered into an agreement on February 16, 1999, to
acquire the assets of Cost Plus Five.com, Inc., in exchange for
17 million shares. Cost Plus Five.com, Inc. is a Nevada
corporation, which was incorporated on January 25, 1999,
corporation number C1574-99. Enclosed herewith is a copy of the
articles of incorporation. The assets consisted of inventory,
equipment in retail computer stores; as follows: one store in
Rockville, Maryland, owned by Bill Barker; one store in Tuscon,
AZ, owned by Frank Scivally; two stores in Houston, Texas, owned
by Lee Jackson and Tom Mitchell, respectively; one store in
Boise, Idaho, owned by Paul Graham; one store in Grapevine,
Texas, owned by Mahlon Meier; one store in Bedford, Texas, owned
by John Fecteau; and one store in Phoenix, AZ, owned by Don
Smallman. On March 1, 1999, the Company issued 6,984,000 shares
in performance of the agreement. Shortly thereafter, the Company
discovered that the charter of this company had been revoked for
non payment of fees to the Secretary of the State of Nevada, and
that financial statements presented to the Company during the due
diligence process, falsely represented the stores owned by Lee
Jackson, Tom Mitchell, and John Fecteau had been falsified.
Thereupon, the Company rescinded the asset purchase agreement and
offered to enter into an agreement with the owners of the stores
to instead enter into an agreement to acquire the web site from
Frank Scivally and Don Smallman, and to acquire the trade and
domain name, Costplusfive.com, and affiliate with each of the
remaining store owners. Each store owner was to be issued 500,000
shares in exchange for a $125,000 promissory note payable to the
Company on demand. Frank Scivally, Don Smallman, Mahlon Meier,
and Bill Barker agreed, but Lee Jackson, Tom Mitchell, Paul
Graham and John Fecteau refused. 500,000 shares of restricted
shares were issued to Scivally, Barker, Meier and Smallman, for a
total of 2,000,000 shares. The Company canceled 1,240,000 shares
of the 6,984,000, and has placed stop transfer orders and is
seeking the return of the remaining 5,744,000 shares through
informal negotiations.
The Company commenced operations in April, 1999. The Company is
now engaged in sales of computer systems through its Internet
website. During the first quarter of the fiscal year ended March
31, 2000, the Company changed its plan of operations from the
development of a driving range on unimproved real property to
Internet computer sales. Since March, 1999, the Company has
expanded its website to offer "e-commerce" capability, which
enables the Company to accept credit card sales over the
Internet. It has also improved the format of the website and
increased the information available on products offered by the
Company. The Company was vigorously pursuing sales of
memberships in its wholesale buying club until March 13, 2000,
when the Board of Directors determined that a shift in emphasis
to business to business commerce. Since the Company only
recently began its operations, it can only focus on its plans for
the future, which are summarized below. There can be no
assurance that these plans will be realized by the Company.
Results of Operations
Year ended March 31, 1999 as compared to year ended March 31,
2000.
Sales for the year ended March 31, 2000 were $2,360,079, compared
to $0 reported in 1999. The increase in sales is attributed to
the commencement of operations.
Gross profit for the year ended March 31, 2000 was $1,734,019, a
100% increase over the previous year. The increase in gross
profit is attributed to the commencement of operations.
Administrative and marketing expenses decreased from $2,207,322
in the year ended March 31, 1999 to $2,165,732. The decrease was
insignificant.
Interest expense decreased to $19,326 in the year ended March 31,
2000, as compared to $191,474 reported the previous year.
The Company incurred a net income of $686,561, or $.029 per share
for the year ended March 31, 2000, compared to a net loss of
$2,403,082 the previous year. The net profit is attributable to
other income booked, including recovery from litigation and a
gain booked on the distribution of land. It was not attributable
to operations, which resulted in a loss of $461,494.
Liquidity and Capital Resources
At March 31, 2000, the Company had a working capital surplus of
$122,992, as compared to a working capital deficit of $1,332,613.
The creation of the surplus is attributed to the Company's
elimination of the debt on the golf property and its increase in
cash, accounts receivable and inventory.
Net cash flows from operating activities was $686,561, as
compared to $2,403,082 cash used in operating activities in the
previous fiscal year. The Company attributes the change in this
figure to the elimination of the golf range property and the
commencement of operations.
Plan of Operations
There are no known trends, events or uncertainties that have or
are reasonably likely to have a material impact on the Company's
short-term or long-term liquidity, other than the fact that the
Company expects, until it is able to raise additional equity
capital, that it will suffer from cash deficits. The Company has
no sources of liquidity at this time, other than revenues from
operations, which have only recently commenced, either internal
or external. Its operations have just recently commenced, and it
will depend on the raising of additional equity capital to
continue its operations. There are no material commitments for
capital expenditures, other than normal operating expenses, which
the Company intends to satisfy by additional equity financing.
There are no known trends, events or uncertainties that the
Company is aware of that have had or that are reasonably expected
to have a material impact on the net sales or revenues or income
from continuing operations. There are no significant elements of
income or loss that do not arise from the Company's continuing
operations. The most significant change in the financial
condition of the Company in the past 12 months has been the
change in operations from the development to a golf driving range
to selling computer systems over the Company's Internet web site,
which occurred in March, 1999. There are no seasonal aspects
that had a material effect on the financial condition or results
of operation that the Company is aware of.
The Company has cash requirements of approximately $180,000 for
the next 12 months. It estimates that it will be able to satisfy
its cash requirements for the next 12 months through private
placements of its common stock. However, there can be no
assurance that the Company will be successful in raising all of
the capital it needs to satisfy its cash requirements. The
Company intends to raise more capital to fund its operations by
private and public placements of its common stock. However,
there can be no assurance that the Company will be able to
successfully raise the capital required by additional issuance of
Company common stock. The Company does not manufacture its own
products; therefore it does not anticipate product research and
development costs in the next 12 months. It does not expect the
additional purchase or sale of significant equipment, and it does
not expect a significant change in the number of its employees
for the next 12 months.
The Company's plan of operations over the next 12 months includes
maintaining relationships with business customers it has
cultivated in the past twelve months, and emphasizing the
providing of computer systems solutions to businesses' computing
needs, as well as continuing to sell computer systems, and
peripherals via its Internet web site. The Company will seek to
foster long term relationships and word of mouth referrals
through customer service and its affiliated locations, and will
seek to expand the number of affiliated locations through the use
of approximately 100 square foot retail kiosks strategically
placed in existing businesses and shopping centers. The kiosks
will offer sales of all computer products offered by the Company,
and service. Operators of retail locations will split 50% of
gross profits from all sales and services.
The Company plans to seek joint venture or acquisition
opportunities which compliment the Company's expansion plans. In
other words, the Company is seeking to enter into business
arrangements with other companies with national retail locations
who may be interested in forming a venture with the Company
whereby the Company can offer a retail kiosk in the national
retail locations. The Company is also seeking acquisition
candidates with national retail locations who are interested in
possibly becoming a subsidiary of a publicly held OTC Bulletin
Board Company, in exchange for Company common stock.
Forward Looking Statements
This registration statement contains forward-looking statements.
The Company's expectation of results and other forward-looking
statements contained in this registration statement involve a
number of risks and uncertainties. Among the factors that could
cause actual results to differ materially from those expected are
the following: business conditions and general economic
conditions; competitive factors, such as pricing and marketing
efforts; and the pace and success of product research and
development. These and other factors may cause expectations to
differ.
ITEM 7. FINANCIAL STATEMENTS:
The Company's financial statements for the years ended December
31, 1999 and
1998 are included under Item 13.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND
FINANCIAL DISCLOSURE
The former accountant, Julius Otto resigned in January, 2000,
citing delays in receiving financial information from the Company
as his reasons for resignation. The Company appointed a new
independent accountant, Roger G. Castro, which decision was
approved by the Board of Directors, and was ratified by the
shareholders on May 12, 2000. There were no disagreements with
the former accountant on any matter of accounting principle, or
practice, financial statements disclosure or auditing scope or
procedure. The former accountant has indicated his agreement
with the statements made by the Company concerning the change in
the Company's independent accountant. The Company has fully
authorized the former accountant to respond fully to the
inquiries of the successor accountant concerning all of the
Company's financial reports and audits. The new accountant, Roger
G. Castro, was engaged on April 11, 2000.
PART III.
---------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT.
The Executive Officers of the Company, and their ages, are as
follows:
Name Age Position
---- --- --------
Donald R. Smallman 37 Secretary, Director
Franklin R. Scivally 47 President, Treasurer,
Director
James L. Rather 46 Director
Robert M. Daddio 50 Director
Donald Smallman. Mr. Smallman is employed as the Secretary and
Director of the Company, and has been since March 1, 1999. From
June, 1997 through March 1, 1999, he was the owner of a Cyber
Exchange franchise in Phoenix, Arizona. From April 1996 through
June, 1997, he was employed by CDI in Phoenix, Arizona as a
software engineer,/developer. From December, 1994 through
February, 1996, he was employed by First Approach - Energy -
River Bend Nuclear Generating Station, in St. Francisville,
Louisiana as a software engineer/developer, and from March, 1994
through November, 1994, he was employed by Atlantic Group, Inc.
Arizona Public Service Palo Verde Nuclear Generating Station in
Phoenix, Arizona, in various positions, including I&C Procurement
Engineer, Electrical Engineer, and I&C Engineer. He was
previously employed by Bechtel Power Corporation from May, 1991
through November, 1993 at the Palo Verde Nuclear Generating
Station in Phoenix, Arizona, and from August, 1990 through April,
1991, he served as Electrical Engineer for Advanced Technology,
Inc. At the Tennessee Valley Authority Watts Bar Nuclear Plant in
Chattanooga, Tennessee. From October, 1989 through August, 1990,
he was employed by Black & Veatch as an Electrical/I&C Design
Engineer at the Palo Verde Nuclear Generating Station, and from
September, 1982 through October, 1989, he was employed as an
Electrical/I&C Engineer at the Tennessee Valley Authority
Sequotah Nuclear Plant in Chattanooga, Tennessee.
Franklin R. Scivally. Mr. Scivally is the Treasurer and Director
of the Company and has been since March 1, 1999. He has been the
President of The Company since June 1, 1999. He is also the
owner of the CostPlusFive.com affiliated location in Tucson,
Arizona, and has been so employed since March 1, 1999. He is
also the President of Scivally Enterprises, LLC. From January,
1992 through December, 1997 he was employed by Questech, Inc. as
Project Manager. From December, 1997 through March 1, 1999, the
was employed as the owner of a Cyber Exchange franchise in
Tuscon, Arizona. From November, 1971 through December, 1971 he
was a Commissioned Officer in the United States Air Force, in
various positions, including Chief, Quality Assurance Division of
the Tomahawk Cruise Missile Wing, Maintenance Control Officer,
Minuteman & Ground, launch Cruise Missile Launch Officer,
Minuteman Weapon System Launch Analyst, Chief, Maintenance
Control, assignment through the Air Force Institute of Technology
to Hughes Aircraft Company, and Manufacturing Manager for the
MILSTAR program. He holds a Master of Arts/management &
Supervision from Central Michigan University, 1983, a Bachelor of
Science/Business Management, 1980 from the University of LaVerne,
and an Associate of Arts/Electronics, 1978 from Alan Hancock
College.
James L. Rather. Mr. Rather is a director of the Company, and
has served as such since his provisional appointment to the Board
of Directors on March 20, 2000. Since 1981, he has been self
employed as a practicing attorney. From 1974 through 1979 he was
employed as a Revenue Officer for the Internal Revenue Service.
Mr. Rather holds a B.A. from the University of Tennessee, 1974;
an LLM in Taxation from the University of San Diego, 1985; and a
J.D. from Southwestern University School of Law, 1981. He is
licensed to practice law in the states of California, Florida and
Tennessee.
Robert M. Daddio. Dr. Daddio has been a self employed practicing
dentist in the Silicon Valley since 1997. Dr. Daddio holds a
B.S. degree from College of Marin, 1971, and a D.D.S. from
University of the Pacific, 1976.
FAMILY RELATIONSHIPS.
There are no family relationships among directors, executive
officers or other persons nominated or chosen by the Company to
become officers or executive officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
The Company is not aware of any material legal proceedings
involving any director, director nominee, promoter or control
person including criminal convictions, pending criminal matters,
pending or concluded administrative or civil proceedings limiting
one's participation in the securities or banking industries, or
findings of securities or commodities law violations.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires
Nortech's officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission (the "SEC").
Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish Nortech with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received
by it, or written representations from certain reporting persons,
Nortech believes that, during the fiscal year ended March 31,
2000, 1999, all filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were
complied with.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth the cash and non-cash compensation
paid by the Company to its Chief Executive Officer and all other
executive officers for services rendered during the fiscal year
ended March 30. 1999. No salaries are being paid at the present
time. There were no grants of options or SAR grants given to any
executive officers during the last fiscal year.
Annual Compensation
-------------------
Name and Position Salary Bonus Annual Deferred Salary
----------------- ------ ----- ----------------------
None
ITEM 10. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT:
The following table sets forth certain information regarding the
beneficial ownership of the shares of Common Stock of the Company
as of the end of the fiscal year, 1998, by (I) each person who is
known by the Company to be the beneficial owner of more than five
percent () of the issued and outstanding shares of common stock,
(ii) each of the Company's directors and executive officers, and
(iii) all directors and executive officers as a group.
Name and Address Number of Shares Percentage Owned
---------------- ---------------- ----------------
James L. Rather 1,035,000 4.10%
575 Anton Blvd., Suite 300
Costa Mesa, CA 92626
Donald Smallman 1,500,000 2.0
11337 West Olive Drive
Avondale, AZ 85323
Franklin R. Scivally 1,500,000 2.0
200 S. Hampton Hill Court
Tucson, AZ 85711
Robert T. Yarbray(2) 3,600,000 7.23%
46280 Manitou Drive
Indian Wells, CA 92210
Robert M. Daddio 10,010 .04%
973 Sherman Way
Pleasanton, CA 94566
George White 5,000,000 10%
1977 High Schylea Drive
Kamloops, BC V2E 1S2 Canada
AZ Professional Services, Inc.(3) 5,125,000 10.29%
268 West 400 South #300
Salt Lake City, UT 84101
Allan Wolfson(2) 5,125,000 10.29%
268 West 400 South #300
Salt Lake City, UT 84101
Officers and Directors
as a Group 4,045,010 8.12%
----------
(1) This table is based upon 49,800,060 shares issued and
outstanding as of August 17, 2000.
(2) 1,500,000 shares are held by Desert Corporate Services, Inc.,
a company in which Mr. Yarbray is an officer and director.
Yarbray disclaims beneficial ownership of the shares.
(3) 625,000 of the 4,125,000 shares are owned by Allan Wolfson, a
principal of AZ Professional Services, and the remainder are
owned by AZ Professional Services. The 625,000 shares to Wolfson
and 1,500,000 shares issued to AZ Professional Services were
original issue from Company treasury. The Company demanded and
received back these 1,500,000 shares on the grounds of failure of
consideration. AZ acquired the remaining 3,000,000 shares in a
private transaction with shareholder George White.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 26, 1999, the Company signed an agreement for the
purchase of assets of a Nevada corporation by the name of Cost
Plus Five.com, Inc., which purported to own nine retail computer
stores, in exchange for 17 million shares, and issued 6,984,000
of those 17 million shares of its common stock to effectuate the
agreement. However, Shortly thereafter, the Company rescinded
the contract after it discovered that the state of Texas was
preparing to close two stores in Houston owned by Lee Jackson,
for non payment of taxes. The Company rescinded the asset
purchase contract because the discovery of the financial
discrepancies on the two Houston stores made all of the financial
statements suspect. It subsequently, on April 13, 2000, acquired
the proprietary website, "www.costplusfive.com" from its owners,
Frank Scivally, Mahlon Meier, William Barker and Don Smallman,
the directors of the Company, and changed the Company's business
direction to that of Internet computer sales. Out of the
6,984,000 shares, the Company has distributed 500,000 to Franklin
Scivally, 500,000 to Don Smallman, 500,000 to William Barker and
500,000 to Mahlon Meier, in exchange for their respective
interests in the Internet website and domain name, and in
exchange for a $125,000 note payable to the Company from each
officer. The Company intends to seek the cancellation of the
remaining 4,984,000 shares.
The related parties who own the current affiliate locations are
the officers and directors of the Company.
Robert T. Yarbray is the only person who may be considered to be
a founder of the Company. On or about December 1, 1998, Robert
T. Yarbray, who was president of the Company at the time, was
issued 600,000 shares of Company common stock in exchange for and
as a retainer for his services as president. On or about April
13, 1999, outgoing president Robert T. Yarbray was hired as a
consultant to the Company, and compensated for monthly full time
consulting services the amount of 1,000,000 shares of company
common stock, in exchange for 12 months' worth of full time
consulting services. On or about March 9, 2000, Robert T.
Yarbray was issued an additional 750,000 shares of common stock,
in consideration of an annual retainer for consulting services
for the following year. The company leases office space from Mr.
Yarbray at $800 per month.
On April 15, 1999, 500,000 shares were sold to officer/director
William Barker in exchange for a note in the amount of $125,000,
a sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On April 15, 1999, 500,000 shares were sold to officer/director
Mahlon Meier, in exchange for a note in the amount of $125,000, a
sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On April 15, 1999, 500,000 shares were sold to officer/director
Franklin Scivally in exchange for a note in the amount of
$125,000; a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On April 15, 1999, 500,000 shares were sold to officer/director
Donald Smallman, in exchange for a note in the amount of
$125,000; a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On May 23, 1999, 50,000 shares were issued to Kenneth Eade, in
exchange for legal services rendered the company; a
sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On September 28, 1999, the company issued 1,100,000 shares to
Farmland Corporation, a former secured creditor of the company,
as a result of the exercise of an option to convert debt to
common stock; a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On September 28, 1999, the company issued 1,500,000 to L.
Hollebrands, a former secured creditor of the company, as a
result of the exercise of an option to convert debt to common
stock; a sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On September 28, 1999, the company issued 1,400,000 shares to
D.C.S., a former secured creditor of the company, as a result of
the exercise of an option to convert debt to common stock; a
sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On September 28, 1999, the Company issued 4,000,000 to George
White, a former officer, a former secured creditor of the
company, as a result of the exercise of an option to convert debt
to common stock; a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On September 29, 1999, the Company issued 1,400,000 shares to
Desert Corporate Services, Inc., for money owed for corporate and
clerical services rendered; a sophisticated investor who had
access to all corporate information, including the Company's most
recent offering circular and financial statements, pursuant to
Section 4(2) of the Securities Act of 1933, No underwriter was
used in the transaction.
On October 6, 1999, the Company issued 3,000,000 shares to Mike
Taradash, in consideration of the agreement to acquire all of the
shares of Beverly Associates, which agreement has been rescinded
and the shares returned to the Company for cancellation. Mr.
Tardash is a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On February 26, 1999, the Company entered into an asset purchase
and sale agreement with a Nevada corporation by the name of Cost
Plus Five.com, Inc., (the "Nevada corporation"), whereby the
Company was to acquire certain assets of the Nevada corporation,
in exchange for 17,000,000 shares of common stock. The Company
issued 6,984,000 shares of the 17,000,000 shares in furtherance
of the agreement. However, it became apparent to the Company
during a due diligence investigation that the Nevada corporation
had issued false and misleading financial statements severely
misstating its assets and liabilities, that its corporate charter
had been revoked by the state of Nevada, and that its nine retail
stores virtually had no assets. Therefore, the Company
terminated negotiations. It subsequently, on April 13, 2000,
acquired the proprietary website, "www.costplusfive.com" from its
owners, Frank Scivally, Mahlon Meier, William Barker and Don
Smallman, the directors of the Company, and changed the Company's
business direction to that of Internet computer sales. Out of
the 6,984,000 shares issued to consummate the terminated
acquisition agreement, the Company has distributed 500,000 to
Franklin Scivally, 500,000 to Don Smallman, 500,000 to William
Barker and 500,000 to Mahlon Meier, in exchange for their
respective interests in the Internet website and domain name, and
3,400,000 restricted shares to Bruce Dorfman and his related
corporate entities, which the Company is currently seeking to
cancel in the above-referenced lawsuit. The Company intends to
seek the cancellation of the remaining 4,984,000 shares.
On March 3, 2000, the Company issued 1,500,000 shares to Frank
Scivally, a corporate officer and director, in exchange for
services rendered; an sophisticated investor who had access to
all corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On March 3, 2000, the Company issued 1,500,000 shares to Don R.
Smallman, a corporate officer and director, in exchange for
services rendered; an sophisticated investor who had access to
all corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
On March 5, 2000, the Company issued 750,000 shares to Star
Talent Management, a Company owned by counsel, Kenneth G. Eade,
in exchange for legal services rendered the Company; a
sophisticated investor who had access to all corporate
information, including the Company's most recent offering
circular and financial statements, pursuant to Section 4(2) of
the Securities Act of 1933, No underwriter was used in the
transaction.
On March 31, 2000, the Company issued 1,000,000 shares to George
White, a former officer, a former secured creditor of the
company, as a result of the exercise of an option to convert debt
to common stock; a sophisticated investor who had access to all
corporate information, including the Company's most recent
offering circular and financial statements, pursuant to Section
4(2) of the Securities Act of 1933, No underwriter was used in
the transaction.
There have been no other transactions since the beginning of
fiscal year 1998, or any currently proposed transactions, or
series of similar transactions, to which the Company was or is to
be a party, in which the amount involved exceeds $60,000,
inclusive of cash and noncash transactions, and in which any of
the officers, or directors, or holders of over of the Company's
stock have or will have any direct or indirect material interest.
The Company does not currently have any policy toward entering
into any future transactions with related parties.
ITEM 13. INDEX TO EXHIBITS AND REPORTS ON FORM 8-K
(a) Financial Statements (included in Part II of this Report):
Report of Independent Certified Public Accountant
Financial Statements
Balance Sheets
Statement of Loss And Accumulated Deficit
Statements of Cash Flows
Statements of Stockholder's Equity
Notes to Consolidated Financial Statements
(b) Reports on Form 8-K: None
(c) Exhibits
[CAPTION]
Item 13. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Board of Directors and Shareholders
ComputerXpress, Inc.
We have audited the accompanying consolidated balance sheets of
ComputerXpress, Inc. as of March 31, 2000 and the related
statements of operations, shareholders' equity, and cash flows
for the year then ended. 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.
The financial statements of ComputerXpress, Inc.(formerly
CostPlusFive.com, Inc.) as at March 31, 1999 and 1998 were
audited by other auditor whose report dated April 2, 1999,
expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits 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 the Company as of March 31, 2000, and the results of
their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
the Company will continue as going concern. As discussed in Note
I to the financial statements, the Company has an accumulated
deficit at March 31, 2000. These factors raise substantial doubt
about the Company's ability to continue as a going concern.
ROGELIO G. CASTRO, CPA
Oxnard, California
August 14, 2000
<TABLE>
<CAPTION>
ComputerXpress, Inc.
Balance Sheets
As of March 31, 2000 and 1999
<S> <C> <C>
2000 1999
---------- ----------
ASSETS
Current Assets:
Cash in banks $ 105,676 $ 210
Accounts receivable 33,701
Inventory 31,768
Prepaid expenses 4,924
---------- ----------
Total Current Assets 176,069 210
---------- ----------
Property and Equipment (net) 90,348 22,500
Other Assets:
Receivable from litigation 850,000
Land held for future use - 860,555
---------- ----------
Total Other Assets 850,000 860,555
TOTAL ASSETS $ 1,116,417 $ 883,265
---------- ----------
---------- ----------
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 53,077 $ 357,497
Accrued expenses 30,108
Notes payable 9,627 562,500
Advances from officers and stockholders - 352,826
Debentures 57,623 50,000
---------- ----------
Total Current Liabilities 150,435 1,322,823
---------- ----------
Stockholders' Equity:
Common stocks , $.001 par value
Authorized shares-50,000,000 and 25,000,000
Issued and outstanding shares-45,915,060 shares
and 19,842,000 shares, respectively 45,915 19842
Paid in capital 3,388,909 2,721,003
Stock subscription receivable (500,000) (525,000)
Retained deficit (1,968,842) (2,655,403)
Total Stockholders' Equity 965,982 (439,558)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,116,417 $ 883,265
</TABLE>
<TABLE>
<CAPTION>
ComputerXpress, Inc.
Statements of Operations
For the years ended March 31, 2000, 1999, 1998
<S> <C> <C> <C>
2000 1999 1998
---------- ---------- ----------
Sales $ 2,360,079 $ - $ -
Cost of sales 626,060 - -
---------- ---------- ----------
Gross profit 1,734,019 - -
Operating expenses:
General and administrative expenses 2,165,732 2,207,322 119,840
Interest expense 19,326 191,474 129,267
Depreciation 10,455 4,286 3,214
---------- ---------- ----------
Total Expenses 2,195,513 2,403,082 252,321
---------- ---------- ----------
Income (Loss) from operations $ (461,494) (2,403,082) $(252,321)
Other income
Recovery judgement from litigation 850,000 - -
Gain on disposition of land 298,055
Total Other Income 1,148,055 - -
Net income (loss) $ 686,561 (2,403,082) $(252,321)
Earnings (loss) per common shares -
basic and diluted $ 0.029 $ (2.34) $ (7.93)
Weighted average shares outstanding 23,469,445 1,028,844 31,804
</TABLE>
<TABLE>
<CAPTION>
ComputerXpress, Inc.
Statements of Cash Flows
For the years ended March 31, 2000, 1999, and 1998
<S> <C> <C> <C>
2000 1999 1998
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ 686,561 $ (2,403,082) (252,321)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation & amortization 10,455 4,286 3,214
Accounts receivable (33,701)
Inventory (31,768)
Prepaid expense (4,924)
Stocks issued for services 253,735 1,747,498
Receivable from litigation (850,000)
Accounts payable and accruals (266,689) 300,080 57,417
Advances from officers & shareholders (352,826) 323,841 28,985
NET CASH USED BY OPERATING ACTIVITIES (589,157) (27,377) (162,705)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (78,303) - (30,000)
Land - site for future development 860,555 - (860,555)
NET CASH USED BY INVESTING ACTIVITIES 782,252 (890,555)
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable (245,873) (148,769) 861,269
Stocks cancelled (21,756)
Subscriptions receivable 25,000 (525,000)
Stocks issued for cash 155,000 691,400 201,947
NET CASH PROVIDED BY FINANCING ACTIVITIES (87,629) 17,631
1,063,216
INCREASE (DECREASE) IN CASH 105,466 (9,746) 9,956
BEGINNING CASH 210 9,956 -
ENDING CASH $ 105,676 $ 210 9,956
DISCLOSURE FROM OPERATING ACTIVITIES
Interest expense 19,326 $ 191,474 $ 98,563
NON CASH DISCLOSURE
14,994,000 shares of common stocks
issued for services 253,735 1,747,498
100,000 shares issued to convert
debentures payable 100,000
</TABLE>
<TABLE>
<CAPTION>
ComputerXpress, Inc.
Statement of Stockholders' Equity
As of March 31, 2000
<S> <C> <C> <C> <C> <C>
Number
of Common Additional Stocks Retained
Shares Stock Paid-In- Subscription Earnings
Outstanding at Par Value Capital Receivable (Deficit)
----------- ------------ ---------- ------------ --------
Balance at March 31, 1997 - $ - $ - $ - $ -
Net loss - March 31, 1998
Stocks issued for cash 1,850,000 1,850 200,097
----------- ------------ ---------- ------------ --------
Balance at March 31, 1998 1,850,000 1,850 200,097 (252,321)
Net loss - March 31, 1999 (2,403,082)
Shares issued for convertible
debentures payable 100,000 100 99,900
Shares issued for services 14,994,000 14,994 1,732,504
Shares issued in exchanged
for notes receivable 2,100,000 2,100 522,900
Shares issued for cash 300,000 300 74,700
Shares issued for cash 498,000 498 90,902
Common stocks subscribed (525,000)
----------- ------------ ---------- ------------ --------
Balance at March 31, 1999 19,842,000 $ 19,842 2,721,003 (525,000) (2,655,403)
Net income - March 31, 2000 686,561
Shares issued for cash 1,221,000 1,221 153,779
Shares issued for services 23,066,816 23,067 230,668
Shares cancelled (214,756) (215) (214,541)
Subscription receivable 525,000
Common stocks subscribed 2,000,000 2,000 498,000 (500,000)
Balance at March 31, 2000 45,915,060 45,915 3,388,909 (500,000) (1,968,842)
</TABLE>
[CAPTION]
ComputerXpress, Inc.
Consolidated Notes to Financial Statements
For the year ended March 31, 2000
NOTE A DESCRIPTION OF THE BUSINESS AND ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS
ComputerXpress.Com, Inc. (formerly known as "CostPlusFive.com, Inc.")
(The Company) was incorporated under the laws of the state Nevada on
January 15, 1997.
The purpose for which the Corporation is organized is to engage in any
lawful act or activity for which a corporation may be organized under
the General Corporation Law of the State of Nevada including, without
limitation, to engage in the business of selling computer products
through electronic commerce (e-commerce).
SIGNIFICANT ACCOUNTING POLICIES
1. The Company uses the accrual method of accounting.
2. The Company considers all short term, highly liquid investments that
are readily convertible, within three months, to known amounts as cash
equivalents. The Company currently has no cash equivalents.
3. Advertising Costs - The Company expenses the costs of advertising
in the periods in which those costs are incurred. Advertising expense
was approximately $105,080 for the year ended March 31, 2000
4. Earnings Per Share - The Company has adopted Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per
Share." Under SFAS 128, basic earnings per share is computed by dividing
income available to common stockholders by the
Weighted-average number of common shares assumed to be outstanding
during the period of computation. Diluted earnings per share is computed
similar to basic earnings per share except that the denominator is
increased to include the number of additional common shares that would
have been outstanding if the potential common shares had been issued and
if the additional common shares were dilative.
5. Depreciation; the cost of property and equipment is depreciated over
the estimated useful lives of the related assets. The cost of leasehold
improvements is depreciated (amortized) over the lesser of the length of
the related assets or the estimated lives of the assets. Depreciation
is computed on the straight-line method for reporting purposes and for
tax purposes.
ComputerXpress, Inc.
Notes to Financial Statements (continued)
For the year ended March 31, 2000
6. Estimates; The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
7. Income Taxes - The Company accounts for income taxes under Statement
of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for
Income Taxes." Under SFAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. A valuation allowance is provided
for significant deferred tax assets when it is more likely than not
those assets will not be recovered.
8. Revenue Recognition - Sales of goods and services and the related
cost of sales are recognized when orders forms are received and goods
are shipped or services are delivered. Accounts receivable are
periodically reviewed by management to assess collectibility. As of
March 31, 1999 and 1998, the Company has recorded no reserve against
accounts receivable as a result of management's review.
NOTE B - PROPERTY AND EQUIPMENT
The Company capitalizes the purchased and fixtures for major purchases
in excess of $300 per item. Capitalized amounts are depreciated over
the useful life of the assets using the straight-line method of
depreciation.
The following is a summary of property and equipment at cost, less
accumulated depreciation:
2000 1999
-------- --------
Furniture and equipment 105,089 $30,000
Less accumulated depreciation (14,741) (7,500)
------- -------
Total $ 90,348 $22,500
====== =======
NOTE C - CONVERTIBLE SUBORDINATED DEBENTURES PAYABLE
The Board of Directors, on July 17, 1997, authorized the sale and issue
of a total of $150,000 in convertible debentures are unsecured, bear
interest at 10%, which is to be accrued and paid on the first day of the
thirteenth month after the day of issuance.
The debentures, together with the accrued interest, are convertible into
1,000 shares of the Company's common stock for each $1,000 principal
amount no sooner than the sixth day of the thirteenth month
of the date of issuance. Prior to March 31, 1999 $100,000 of these
debentures has been converted to common stock.
NOTE E - RELATED PARTY TRANSACTIONS
Related party payables include a $352,826 payable to a stockholder.
See Note D.
NOTE F - LEASE COMMITMENT AND CONTINGENCIES
The Company leases its office space under a month-to-month lease/rental
agreement. Total rental expense payments for the year ended March 31,
2000 was $56,854.
NOTE G GOING CONCERN
The Company has an accumulated deficit of $1,968,842 and nominal assets
with which to create operating capital. The Company seeks to raise
operating capital with which to seek business opportunities to utilize
the technology it has acquired via placements of its common stock.
However, there can be no assurance that such offering or negotiations
for private capital will be successful. Management plans to raise
additional working capital in subsequent private offerings of its common
stock.
[CAPTION]
Item 14. EXHIBITS, FINANCIAL STATEMENTS
(a) Report of Independent Certified Public Accountant dated
August 14, 2000
Financial Statements
Balance Sheets
Statement of Loss And Accumulated Deficit
Statements of Stockholder's Equity
Statements of Cash Flows
Notes to Consolidated Financial Statements
(b)Reports on Form 8-K: Not Applicable
(c)Exhibits
<TABLE>
Exhibits 3.1 through 16 are incorporated by reference to the Company's Form 10SB12G/A filed
September 18, 2000.
<S> <C> <C>
Exhibit No. Description Location
----------- ----------- ---------
3.1 Articles of Incorporation Exhibit 3(a)Form 10SB12G/A
of Company, filed 9/18/00
3.1a Amendment to Articles of Incorporation Exhibit 3(a)2 Form 10SB12G/A of
Company, filed 9/18/00
3.1b Amendment to Articles of Incorporation Exhibit 3(a)3Form 10SB12G/A of
Company, filed 9/18/00
3.1c Amendment to Articles of Incorporation Exhibit 3(a)4Form 10SB12G/A of
Company, filed 9/18/00
3.1d Amendment to Articles of Incorporation Exhibit 3(s)5 Form 10SB12G/A of
Company, filed 9/18/00
3.2 By-laws Exhibit 3(b)Form 10SB12G/A of
Company, filed 9/18/00
10.1 Asset acquisition agreement Exhibit 10(a) Form 10SB12G/A of
Company, filed 9/18/00
10.2 Affiliation agreement Exhibit 10(b)Form 10SB12G/A of
Company, filed 9/18/00
10.3 Membership agreement Exhibit 10(c)
10.4 Minutes of April 13, 1999 Exhibit 10(d)Form 10SB12G/A of
Company, filed 9/18/00
1O.5 Agreement with Specialized Leasing Exhibit 14 Form 10SB12G/A of
Company, filed 9/18/00
14 Report of Former Independent Accountant Exhibit 16Form 10SB12G/A of
Company, filed 9/18/00
16 Letter of Former Independent Accountant Exhibit 16
27 Financial Data Schedule
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, there unto duly
authorized.
Dated: September 19, 2000
COMPUTERXPRESS.COM, INC.
("Company")
Frank Scivally
______________________________________
Frank Scivally, President, Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
------------------- ------ ----
Franklin R. Scivally Pres., Director September 19, 2000
James Rather Director September 19, 2000
Donald R. Smallman Treasurer/Director September 19, 2000
Robert Daddio
Secretary/Director September. 19, 2000
</TABLE>
[TYPE]EX-27
<SEQUENCE>2
[DESCRIPTION]FINANCIAL DATA SCHEDULE
[ARTICLE] 5
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAR-31-2000
[PERIOD-END] MAR-31-2000
[CASH] 105,676
[SECURITIES] 0
[RECEIVABLES] 33,701
[ALLOWANCES] 31,768
[INVENTORY] 176,069
[CURRENT-ASSETS] 90,438
[PP&E] 10,455
[DEPRECIATION]
[TOTAL-ASSETS] 1,116,417
[CURRENT-LIABILITIES] 150,435
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 45,915
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 1,116,417
[SALES] 2,360,079
[TOTAL-REVENUES] 2,360,079
[CGS] 626,060
[TOTAL-COSTS] 2,165,732
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 19,326
[INCOME-PRETAX] 686,561
[INCOME-TAX] 0
[INCOME-CONTINUING] 686,561
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 686,561
[EPS-BASIC] .029
[EPS-DILUTED] .029
