THE COMPANY INADVERTENTLY OMITTED TO FILE AS AN EXHIBIT THE INDEPENDENT
AUDITORS' CONSENT IN ITS FORM 10-KSB FILED ON SEPTEMBER 28, 2000.
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
----------------------------------
FORM 10KSB/A
----------------------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-26755
DIGITAL BRIDGE, INC.
(Name of Small Business Issuer in its Charter)
Nevada 88-0409147
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1860 El Camino Real, Suite 100, Burlingame, California 94010
(Address of Principal Executive Offices) (Zip Code)
(650) 552-0600
(Issuer's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Exchange Act: NONE
Securities Registered Pursuant to Section 12(g) of the Exchange Act:
Common Stock $0.001 Par Value
Check whether the issuer (1) filed all reports required 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 contained in this Form 10-KSB or any amendment to this
Form 10-KSB. [ ]
The Issuer's revenue for the fiscal year ended June 30, 2000, was $523,502.
<PAGE>
The aggregate market value of the common equity held by non-affiliates of
the Registrant based on the closing price on the Over-the-Counter Bulletin Board
of the common stock on September 25, 2000, was $36,494,545. Directors, Officers
and ten percent or greater stockholders are considered affiliates for purposes
of this calculation but should not necessarily be deemed affiliates for any
other purpose.
The number of shares outstanding of the Issuer's Common Stock as of
September 25, 2000, was 41,692,000.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [x]
Exhibit Index: Page 25
Page 1 of 25
<PAGE>
TABLE OF CONTENTS
PART I
Item 1
Item 2
Item 3
Item 4
PART II
Item 5
Item 6
Item 7
Item 8
Item 9
PART III
Item 10
Item 11
Item 12
Item 13
Independent Auditors' Report
Balance Sheet
Income Statement
Income Statement2
Cash Flow Statement
2
<PAGE>
PART I
ITEM 1. BUSINESS
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-KSB contains forward-looking statements,
including (without limitation) statements concerning possible or assumed future
results of operations of Registrant and those preceded by, followed by or that
include the words "believes," "could," "expects," "anticipates," or similar
expressions. For those statements, Registrant claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You should understand that various events could
cause those results to differ materially from those expressed in such
forward-looking statements: materially adverse changes in economic conditions in
the markets served by the companies; competition from others in the website
development, eBusiness builder, venture technologist, Internet and IT markets
and other industry segments; failure to realize fully expected cost savings from
the mergers and acquisitions described herein; the ability to enter, the timing
of entry and the profitability of entering new markets; greater than expected
costs or difficulties related to the integration of the businesses of Registrant
and the businesses it is acquiring, as described herein; and other risks and
uncertainties as may be detailed from time to time in Registrant's public
announcements and SEC filings.
THE COMPANY
History
-------
The registrant was incorporated in Nevada on July 10, 1996, under the name
of "Black Stallion Management, Inc."("BSM"). From July 10, 1996, until January
21, 2000, BSM had been inactive and had no significant operations. On January
21,2000, BSM entered into a Reorganization and Stock Purchase Agreement
("Purchase Agreement") with a company named Digital Bridge, Inc., pursuant to
which BSM acquired 100% of the issued and outstanding common stock of Digital
Bridge, Inc. The closing of the Purchase Agreement transaction occurred on
January 31, 2000, and resulted in Digital Bridge, Inc. becoming a wholly-owned
subsidiary of BSM.
On February 14, 2000, BSM changed its name to "Digital Bridge, Inc." For the
purposes of this Annual Report on Form 10-KSB, the registrant may be referred to
as "Digital."
eBusiness Builder
------------------
Digital is a global "eBusiness Builder," which provides Internet enterprise
solutions through a suite of applications and professional services, empowering
business from "concept to click". For both emerging and expanding companies,
Digital provides a cost effective technology service through an equity
participation plan entitled Venture Technology. Our Venture Technology portfolio
partners are supplied human capital in the form of technology resources,
intellectual properties and infrastructure. Digital commands expertise in
strategic planning, creative design, corporate brand development, technical
architecture and complex information and integration systems.
Venture Technology
-------------------
Venture Technology is our practice of providing human capital in the form
of a total and instant IT infrastructure in exchange for equity participation.
Through this program, we become our clients' Internet strategy consultant,
interactive agency and technology developer, seamlessly integrated into a
cohesive unit. This model insures Digital's portfolio partners that we will
develop the right solution, not the most costly, while maximizing our revenue
potential through building long term value in our projects.
Our Venture Technology portfolio partners are carefully selected businesses
that must go through a meticulous screening process. We are looking for
innovative and strategic business concepts in broad market segments with rapid
growth potential and seasoned management teams.
Product and Application Development
--------------------------------------
Currently, Digital is developing a complete line of Internet Business
Applications which enable the rapid deployment of eBusiness initiatives spanning
content delivery, e-commerce, customer management, and community building.
Digital presently features two Internet Business Applications, the Digital
Bridge Ad Server and Digital Bridge eCommerce Tools. The Digital Bridge Ad
Server is an ad management system that allows web masters simple management,
reporting, and programming of their ad campaigns. Web masters seeking to
monetize the traffic from their sites through advertising will find the Digital
Bridge Ad Server both affordable and simple to use.
The Digital suite of eCommerce tools is the result of the recently
announced acquisition of N2Plus. Since 1997, N2Plus has developed and sold
various products, all designed to help companies sell their products and service
3
<PAGE>
over the Internet. These products include a shopping cart, payment processing
gateway, web site creation tools, a transaction management system, and site
marketing programs.
The N2Plus product line is currently being integrated into the Digital
organization and undergoing a re-branding campaign.
Recent Acquisitions
--------------------
Since June 30, 2000, the end of our last fiscal year, Digital has acquired
three companies: 24x7 Development.com, Inc. ("24x7"), Online Television Network
Services ("OTVnet") and N2Plus,Inc. ("N2Plus"). 24x7 and N2Plus were acquired
in merger transactions and OTVnet was acquired in a stock-for-stock exchange
transaction, resulting in OTVnet becoming a wholly-owned subsidiary of Digital.
24x7
On September 20, 2000, 24x7 was acquired in a merger transaction in which
Digital exchanged 10,000,000 shares of its $0.001 par value common stock
("Digital Stock") for 100% of 24x7's outstanding common stock. Following the
merger, 24x7 ceased to exist as a separate entity and its assets and liabilities
became combined with Digital's assets and liabilities.
24x7 was incorporated in March 2000 by a group of executive and divisional
management personnel employed by GlobalNetFinancial.com,Inc. ("GlobalNet") for
the purpose of acquiring the Phoenix office and assets of GlobalNet. On May 31,
2000, 24x7 acquired GlobalNet's Phoenix operations in a stock-for-assets
exchange.
The 24x7 team of personnel (most of whom are now employed by Digital) is
experienced in developing global, multi-lingual, high-end, Web businesses. For
almost 18 months, the 24x7 team, while working for GlobalNet, developed and
matured 18 award winning financial media, online trading and corporate web
sites. The 24x7 team has also developed applications to work with sophisticated
securities trading systems, feed integration, automated billing/project
management systems, a content distribution system (being used by Yahoo, MSN,
ON24 and others), remote publishing systems and an advertising server. All of
these technologies are in active use. The largest site in the portfolio is the
award winning money channel for Freeserve (NASDAQ: "FREE") called
"UK-invest.com." Other sites include the money channels for World Online (AEX:
"WRDOL"), one of the largest ISP's in Europe.
As a result of this merger, Digital is now in the business of providing
complete outsourced IT solutions for professional businesses, who engage Digital
to assist with tactical and strategic Internet and technology development,
maintenance and support. These services include Web site development and
maintenance, hardware and software architecture, product research and
development, customer development and services, revenue stream development,
business development programs (technology driven) and other technology
contributions.
At the time of this merger, 24x7 had a staff of 30 people involved in,
among other things, active development and support of GlobalNet's Web sites. As
part of its acquisition agreement with GlobalNet, 24x7 entered into a
development agreement to provide ongoing guidance and development work for
GlobalNet. This agreement is scheduled to run out in November 2000.
OTVnet
On September 19, 2000, OTVnet was acquired in a stock-for-stock transaction
in which Digital exchanged 2,912,000 shares of Digital Stock for 100% of the
outstanding shares of OTVnet common stock. In addition, Digital issued 300,000
shares of Digital Stock to three creditors of OTVnet in exchange for
debt cancellation. As a result of this acquisition, OTVnet became a
wholly-owned subsidiary of Digital.
Founded in 1998, OTVnet designs and manages comprehensive Human Resources
Systems for the unionized construction industry, specifically, the design and
development of benefits-specific Internet sites for multi-employer union
pension, health and welfare trust organizations. OTVnet has created an industry
leading Benefits Trust Web product and is positioning itself to serve unionized
trade organizations on a nationwide basis.
N2Plus
On September 20, 2000, N2Plus was acquired in a merger transaction in which
Digital exchanged 1,000,000 shares of Digital Stock for 100% of N2Plus'
outstanding common stock. Following this merger, N2Plus ceased to exist as a
separate entity and its assets and liabilities became combined with Digital's
assets and liabilities.
N2Plus' flagship product, n2PlusSynergy TM, helps businesses create private
labeled, instant online eCommerce stores in a fully integrated solution.
n2PlusSynergy TM will complement Digital's suite of Internet Business
Applications, enabling business aggregators, portals and web developers to
better serve, monetize and retain their customers. Founded by award winning
technologist Brian Pollack, N2Plus was, prior to the merger, a
business-to-business application service provider.
The combined companies (Digital, 24x7, N2Plus and OTVnet) will focus
primarily on three principal areas of business:
- The further pursuit of Venture Technology partner-clients for the rapid
deployment of complete electronic businesses.
- The further development of our product line of Internet Business
Applications, which will span content, commerce, community, and
communication.
- The further development of wireless applications for conducting remote
electronic business.
In addition, we will offer general eCommerce and eBusiness consulting in the
areas of our expertise, such as:
4
<PAGE>
Strategic planning, creative design, corporate brand development, technical
architecture and complex information and integration systems.
The Common Stock issued by us in the acquisition and merger transactions
described above was issued in reliance on the exemption from the registration
provisions of the Securities Act of 1933, as amended, contained in Regulation D,
Rule 506. No Common Stock was issued to nonaccredited investors in any of the
transactions.
Recent Contracts for Services
--------------------------------
In May 2000, Digital entered into a contract with PlanetLinxs.com
International, Inc. pursuant to which Digital was retained to design, develop,
implement, maintain and host the ChinaReform Website. We expect to complete the
first phase of this agreement during the second quarter of this fiscal year.
Payment for our services on the first phase is expected to equal $350,000 in
cash plus a small amount of capital stock in ChinaReform.com, a British Virgin
Isles corporation. We are in negotiations with PlanetLinxs to obtain an
engagement for the second phase of the project.
In August 2000, we entered into a contract with StoreChoice, Inc. to
design, develop, implement, maintain and host the StoreChoice Convenience
Shopping Portal. We should complete the first phase of this engagement in the
second quarter, as well, with first phase revenues expected to be $250,000 in
cash plus a small amount of equity in StoreChoice, Inc.
Employees
---------
As of September 25, 2000, Digital had 44 employees, six of whom (employees
of OTVnet) are represented by a union. Digital believes its relations with its
employees is good.
Competition
-----------
The Internet, Web development and eBusiness Builder industries are highly
competitive. Our competitors range from development stage companies to major
domestic and international companies, many of whom have:
- substantially greater financial, technical, marketing and human resource
capabilities;
- established relationships with their customers;
- name-brand recognition; and
- established positions in the markets that we have targeted for penetration.
ITEM 2. DESCRIPTION OF PROPERTY
We do not own any real property. However, we are currently leasing the
office space described below:
1. Approximately 3,200 square feet at 1860 El Camino Real, Suite 100,
Burlingame, California, pursuant to a verbal agreement of sublease
with M&A West, Inc., Lessee of the premises. The lease expires
December 31, 2002, and monthly rent is $7,360. M&A West, Inc. is an
affiliate of ours. See Item 12.
--------
2. Approximately 8,500 square feet at 21436 North 20th Avenue, Phoenix,
Arizona, pursuant to a 36 month operating lease initiated in July
2000. As of September 26, 2000, 33 months remain on the lease with
monthly rent at $7,100.
3. Approximately 3,500 square feet at Nancy Ridge Drive, San Diego,
California at $5,800 per month. The lease term will expire on
June 14, 2000.
ITEM 3. LEGAL PROCEEDINGS
We are not directly involved in any pending legal proceedings and are not
aware of any contemplated proceeding by any governmental authority. However,
OTVnet, which we acquired on September 19, 2000, is a party to the lawsuit
described below.
The style of the case is Jonathan Neil & Associates, Inc. (plaintiff) v.
-----------------------------------------------
Online Television Network Services aka Online Television Network Services, Inc.
--------------------------------------------------------------------------------
dba OTVNET. The case is pending in the Los Angeles County Municipal Court,
-----------
having been filed prior to our acquisition of OTVnet.
The plaintiff is seeking damages in the amount of $25,569.32 plus
pre-judgment interest, attorney's fees and court costs for breach of contract
for an executive search or placement ("headhunting")services allegedly supplied
to OTVnet. OTVnet has filed an answer in the suit and intends to vigorously
contest it.
In connection with the acquisition of OTVnet, Kenneth A. Paganini and Jack
Zwart, the majority stockholders of OTVnet (prior to the acquisition) have
agreed to indemnify us in the event OTVnet loses the case.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 31, 2000, the holders of more than a majority (50.8%) of Digital
Stock approved by written consent (a) the merger with 24x7, (b) an amendment to
Digital's Articles of Incorporation, as amended, to increase its authorized
common stock, $0.001 par value, from 31,250,000 shares to 50,000,000 shares; and
(c) the election of two additional persons to the Digital Board of Directors to
fill vacancies on the Board and to comply with the provisions of the 24x7 merger
agreement requiring the election of John C. Flanders, Jr. (the Chief Executive
Officer of 24x7) to the Board upon consummation of the merger. The second
person elected to the Board was Jon Winters, pending closing of the 24x7 merger.
However, Mr. Winters, the former Chief Operating Officer of Digital, left
Digital in August 2000 to pursue other employment.
5
<PAGE>
Under Nevada law, no meeting of the stockholders was required to approve
the 24/7 merger if a majority of the shares of Digital Stock were voted in favor
of the above actions. However, Digital did provide its stockholders with an
Information Statement on Schedule 14C concerning such actions.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
-------------------
On February 11, 2000, Digital Stock began trading on the Over-the-Counter
Bulletin Board regulated by the National Association of Securities Dealers, Inc.
and trades under the symbol "DGBI". The table set forth below presents the high
and low bid prices of Digital Stock for the periods indicated. However, since
the Digital Stock is traded on the Over-the-Counter Bulletin Board, the
following prices may reflect inter-dealer prices, without retail mark-up,
mark-down or commissions and may not necessarily represent actual transactions.
Common Stock High Low
------------- ---- ---
Quarter Ended March 31, 2000 $12 3/4 $3
Quarter Ended June 30, 2000 $5 3/8 $1 1/2
On September 25, 2000, the closing price of the Digital Stock was $2.0625
Holders
-------
As of September 25, 2000, there were approximately 10 holders of record and
1,500 beneficial holders of Digital Stock.
Dividend Policy
----------------
In connection with agreement with Black Stallion Management, Inc. in
January 2000, we forward split our shares of Common Stock and issued to our
stockholders an extra 0.25 shares of Common Stock for each share outstanding.
This forward split was not treated as a dividend. We anticipate that we will
retain any earnings to support operations and to finance the growth and
development of our business. Therefore, we do not expect to pay any dividends
in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements based upon current
expectations that involve risks and uncertainties. When used in this Form
10-KSB, the words "intend," "anticipate," "believe," "estimate," "plan" and
"expect" and similar expressions are included to identify forward-looking
statements. Our actual results and the timing of certain events could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" in
this discussion and elsewhere in this Form 10-KSB.
Overview
--------
Our net revenues are derived primarily from providing professional services
to clients who are creating eBusinesses or are traditional "brick and mortar"
retail businesses rethinking or expanding their existing businesses to integrate
eBusiness capabilities. We expect that our revenues will be driven primarily by
the number and scope of our client engagements and by our professional services
headcount. Net revenues from any given client will vary from period to period.
To the extent that any significant client uses less of our services or
terminates its relationship with us, our net revenues could decline
substantially. As a result, the loss of any significant client could seriously
harm our business and results of operations.
We generally provide our services on a time and materials basis, but we
also provide them on a fixed fee basis. When we provide fixed-fee engagements,
we use an internally developed process to estimate and propose fixed fees. The
estimation process accounts for standard billing rates particular to each
project, the technology environment and application type to be applied, and the
project's timetable and overall technical complexity.
For the year ended June 30, 2000, 100% of net revenues were derived from
time and materials contracts. Net revenues pursuant to time and materials
contracts are generally recognized as services are provided. Net revenues
pursuant to fixed-fee type contracts are generally recognized as services are
rendered using the percentage-of-completion method of accounting (based on the
ratio of costs incurred to total estimated costs). Net revenues exclude
reimbursable expenses charge to clients. For the year ended June 30, 2000, all
of our clients were located within North America and all net revenues were
denominated in U.S. dollars.
Professional services expenses primarily consist of compensation and
benefits for our employees engaged in the delivery of professional services.
Professional services margins reflect net revenues less professional services
expenses which are incurred regardless of whether or not the employee's time is
billed to a client. We expect that our professional services expenses will
increase over time due to wage increases and inflation. Our professional
services margins are affected by trends in the percentage of professional
services employees' time that is billed to clients, and will vary in the future.
Any significant decline in fees billed to clients or the loss of a significant
client would materially adversely affect our professional services margins.
6
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We expect selling, marketing, and general and administrative expenses to
increase in absolute dollars as we expand our sales and marketing efforts and
increase our recruiting efforts in order to attract additional professional
services employees.
Despite growth in our net revenues to date, we have not been profitable.
Our net losses may not decrease proportionately with any future increase in our
net revenues primarily because of our likely increased expenses related to the
expansion of the number of our offices and increased investment in our knowledge
management and operations infrastructure. To the extent that future net
revenues do not increase significantly in the same periods in which operating
expenses increase, our operating results would be adversely affected.
Digital anticipates that a large portion of its future growth and success
will depend on a successful integration of acquired personnel, operations,
products and technologies of Digital, 24x7, N2Plus and OTVnet. The success of
the integration depends upon, among other things, our ability to retain and
motivate key personnel and retain customers of these four firms. We cannot
guarantee that we will be able implement a successful integration and that we
will retain such customers.
Results of Operations
-----------------------
Revenues
--------
Total revenues for the year ended June 30, 2000 was $523,502 and $46,000
for the year ended June 30, 1999. Since our inception, we have generated almost
all of our revenues from services provided to affiliated companies. Sales to
these companies represented 98% of revenues for the year ended June 30, 1999
and 100%% of total revenues for the year ended June 30, 2000. We should have
considerably less reliance on these affiliates in the year ending June 30, 2001.
Cost of Sales
---------------
Cost of sales includes salary allocation of marketing and technical
personnel for time spent on web site development, design, implementation and
market research. Employees' time is tracked internally and expensed against
client projects. Other costs of sales include the gross cost for media
placement, print materials and web hosting services and maintenance. Costs of
sales for the year ended June 30, 1999 was $13,952 and $280,095 for the year
ended June 30, 2000.
Operating Expenses
-------------------
a. Salaries and Benefits consist of compensation and related expenses for
personnel. Salaries and benefits for the year ended June 30, 1999 were
$41,202 and $549,667 for the year ended June 30, 2000. We expect these
costs to increase in absolute dollars in future periods as we expand
our executive and technical staff to support the growth of our
operations.
b. Professional Fees consists of legal, accounting and recruiting fees.
Professional fees were $0 for the year ended June 30, 1999 and
$112,813 for the year ended June 30, 2000.
c. Office Expenses for the year ended June 30, 1999 were $9,125 and
$146,980 for the year ended June 30, 2000. Prior to January 2000,
certain office expenses were incurred by an affiliated company and
were not charged to us.
d. Other Expenses include trade show costs and advertising and sales and
marketing costs. These costs are expensed as incurred and totaled $0
for the year ended June 30, 1999 and $170,416 for the year ended June
30, 2000.
e. Depreciation is calculated on a straight-line basis with assets
recorded at cost and depreciated with a life of five years for
computers and seven years for furniture and equipment.
Income Taxes
-------------
No provision for federal and state income taxes has been recorded because
we have incurred net operating losses since inception. As of June 30, 2000, we
had available for federal and California purposes net operating loss
carryforwards approximating $745,000 and $372,500, respectively. The federal
and California carryforwards are available to offset future taxable income and
expire beginning in fiscal 2019 and 2004, respectively. Deferred income tax
assets arising from such loss carryforwards have been fully reserved as of June
30, 2000 and 1999.
Liquidity and Capital Resources
----------------------------------
Net cash used in operating activities was $737,987 for the twelve months
ended June 30, 2000.
Net cash used in investing activities was $38,863 for the twelve months
ended June 30, 2000 which was primarily used to purchase computer equipment and
office furniture.
Net cash provided by financing activities was $890,592, in the twelve
months ended June 30, 2000 primarily from advances received from two entities.
No repayment terms have been defined. The total amount has been reflected as a
current liability in the financial statements.
We currently anticipate that our available cash resources combined with
proceeds from capital raising transactions will be sufficient to meet
anticipated working capital and capital expenditure requirements through the end
of the our second quarter of the fiscal year ending June 30, 2001. We are
actively seeking to raise additional funds. Prior to the September 20, 2000
acquisition by Digital of 24x7,N2Plus and OTVnet, Digital raised approximately
$264,000 of additional paid-in capital. The combined companies anticipate
7
<PAGE>
raising additional funds to fund expansion, to increase marketing and sales
efforts and to acquire complementary products and technology. If adequate funds
are not available on acceptable terms, our business, results of operation and
financial condition could be materially adversely affected.
Ability to Raise Capital
---------------------------
We currently plan to raise additional capital during our first two quarters
of our fiscal year ending June 30, 2001. We expect to use the proceeds from any
such capital raising transactions for general corporate purposes, including
working capital. A portion of the proceeds may also be used for the acquisition
of businesses and technologies that are complementary to ours. If we do not
successfully address the need to raise capital, our ability to continue to
conduct business would be seriously harmed.
Risk Factors
-------------
We may not realize the synergies and other intended benefits of our recent
acquisitions.
Digital's recent mergers and acquisitions of 24x7, OTVnet and N2Plus
involve the integration of four companies that have previously operated
independently. There can be no assurance that the combined companies will not
encounter significant difficulties in integrating their respective operations or
that the benefits expected from such integration will be realized. In addition,
the achievement of the benefits expected from such integration will require the
combined companies to incur significant costs in connection with, among other
things, network and sales force expansion. The realization of such costs, as
well as other unexpected costs or delays, in connection with such integration,
could have a material adverse effect on the combined companies' business,
financial condition or results of operations.
Among the factors considered by the Digital Board in connection with its
approval of these acquisitions and mergers were the opportunities for revenue
growth and operating cost savings that could result from the combinations.
General economic conditions and other factors beyond the combined companies'
control may limit our ability to achieve these benefits. Accordingly, there can
be no assurance as to whether or in what time frame any revenue growth or
anticipated cost savings will be realized.
We may be unable to compete successfully in a highly competitive market.
The Internet, Web development and eBusiness Builder industries are highly
competitive. Our competitors range from development stage companies to major
domestic and international companies, many of whom have:
- substantially greater financial, technical, marketing and human resource
capabilities;
- established relationships with their customers;
- name-brand recognition; and
- established positions in the markets that we have targeted for penetration.
We may have difficulty overcoming problems associated with rapid expansion and
growth.
As a result of our recent acquisitions and mergers, we intend to further
develop and expand our combined businesses. In order to accomplish these goals,
we will need to implement enhanced operational and financial systems and will
likely require additional management, operational and financial resources. We
cannot assure you that the combined companies will successfully implement and
maintain such operational and financial systems or successfully obtain,
integrate and utilize the management, operational and financial resources
necessary to manage a developing and expanding business in an evolving and
increasingly competitive industry. Failure to implement such systems
successfully or use such resources effectively could have a material adverse
effect on the combined companies' business, financial condition or results of
operations.
We have a limited operating history and have made no profit so far.
We have a limited operating history and have been in business just over a
year. While we are generating revenues, we have not booked any profits so far.
Future acquisitions could result in dilution, operating difficulties and other
harmful consequences.
If appropriate opportunities present themselves, we intend to acquire
businesses, technologies, services or products that we believe are strategic.
The process of integrating any acquisition may create unforeseen operating
difficulties and expenditures and is itself risky. The areas where we may face
difficulties include:
- diversion of management time during the period of negotiation through
closing and further diversion of such time after closing from focus on
operating the businesses to issues of integration and future products and
services;
- decline in employee morale and retention issues resulting from changes in
compensation, reporting relationships, future prospects or the direction of
the business;
- the need to integrate each company's accounting, management information,
human resource and other administrative systems to permit effective
management and the lack of control if such integration is delayed or not
implemented; and
- the need to implement controls, procedures and policies appropriate for a
larger public company at companies that prior to acquisition may have been
smaller, privately-held companies.
Our success depends on attracting and retaining key personnel.
The successful development, marketing and design of our products and
services will depend upon the skills and efforts of a small group of management
and technical personnel, including Aaron Lang, our President, John C. Flanders,
Jr., our Chief Executive Officer, and Brian Pollack, Chief Technology Officer.
8
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The loss of any of our key personnel could adversely impact our ability to
execute our business plan and strategy. Furthermore, recruiting and retaining
qualified executive, technical, marketing and support personnel in our emerging
industry in the future will be critical to our success and we cannot assure you
that we will be able to do so. We do not maintain "key-man" life insurance on
any of our key personnel.
We may be unable to obtain the additional capital needed to operate and grow our
business, thereby requiring us to curtail or cease operations.
Our capital requirements in connection with the development and expansion
of our business have been and will continue to be substantial. We will require
additional funds to design new products and services and to run our operations.
We cannot assure you that we can obtain any significant additional financing on
commercially attractive terms, in a timely fashion, in sufficient amounts or at
all. If adequate funds are not available, we may have to scale back our
operations, including product development and design, as well as marketing
activities, all of which could cause us to lose both customers and market share
and ultimately cease operations.
We are subject to technological changes.
The market for Internet-based products and services is characterized by
rapid technological developments and frequent new product and service
introductions. The emerging character of these products and services and their
rapid evolution will require that we continually monitor new offerings and
improve the performance, features and reliability of our Internet-based products
and services. We cannot assure investors that we will be successful in
responding quickly, cost effectively and sufficiently to these developments.
Our intellectual property rights may be challenged.
We are developing proprietary Internet software and have filed or will file
applications for certain trademarks, service marks, domain names and other
proprietary rights, which we either currently have or may have in the future and
which we believe to be important to our business. Given the uncertain
application of existing copyright and trademark laws to the Internet, we cannot
assure investors that existing laws will provide adequate protection for our
technologies, sites or registered domain names. Policing unauthorized use of our
technologies, content and other intellectual property rights entails significant
expenses and could otherwise be difficult or impossible to do, given, among
other things, the global nature of the Internet. From time to time, we may be
subject to legal proceedings and claims in the ordinary course of business,
including claims of alleged infringement of the trademarks and other
intellectual property of third parties by us or our licensees. Such claims, even
if not meritorious, could result in the expenditure of significant financial and
managerial resources.
We are subject to evolving Internet regulations.
New laws, guidelines and regulations may be adopted covering areas such as
access, content, taxation, encryption, communications and pricing and quality of
Internet products and services. To the extent we provide such Internet products
and services, we may be subject to the provisions of existing and future laws,
guidelines and regulations that could be applied to our operation. Such laws,
guidelines and regulations could limit the growth of the Internet and harm our
business.
Listing on OTC Bulletin Board; Limited Trading Market; "Penny Stock" Regulations
may impose certain restrictions.
Our Common Stock has been quoted on the OTC Bulletin Board since February
11, 2000. Our Common Stock has only a limited trading market. We cannot assure
you that a more active trading market will develop or, if developed, that it
will be maintained. We cannot predict the effect, if any, that the sale of
restricted shares of Common Stock will have on the market price of the Common
Stock. As a result, an investor might find it difficult to dispose of, or to
obtain accurate quotations as to the value of, the Common Stock.
In addition, as the Common Stock has a limited active trading market and
the trading price of the Common Stock is less than $5.00 per share, trading in
the Common Stock is subject to the requirements of Rule 15g-9 promulgated under
the Exchange Act. Under such rule, broker-dealers who recommend low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchase
and receive the purchaser's written consent prior to the transaction. The
Common Stock is also subject to the Securities Enforcement Remedies and Penny
Stock Reform Act of 1990, which requires additional disclosure in connection
with any trades involving a stock defined as a penny stock (generally, according
to recent regulations adopted by the SEC, any equity security not traded on an
exchange or quoted on Nasdaq that has a market price of less than $5.00 per
share, subject to certain exceptions), including the delivery, prior to any
penny stock transaction, of a disclosure schedule explaining the penny stock
market and the risks associated therewith. Such requirements could severely
limit the market liquidity of the Common Stock and the ability of purchasers of
the Common Stock to sell their securities in the secondary market.
9
<PAGE>
Independent Auditors' Report
BOARD OF DIRECTORS
DIGITAL BRIDGE, INC.
Burlingame, California
We have audited the accompanying balance sheet of DIGITAL BRIDGE, INC. as of
June 30, 2000 and 1999 and the related statements of operations, stockholders'
(deficit) equity and cash flows for the years then ended. These financial
statements are the responsibility of Digital Bridge, Inc.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Digital Bridge, Inc. as of June
30, 2000 and 1999, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
The Company has a limited operating history and its prospects are subject to the
risks, expenses and uncertainties frequently encountered by companies in new an
rapidly evolving markets for internet products and services. As discussed in
Note 10 to the financial statements, the Company was only recently formed, and
has not generated sufficient revenues to achieve profitability. Failure to
secure financing or its ability to generate sufficient cash flows through
operations may have a material adverse impact on the Company's operations and
financial position. Management's plans in regards to these matters are also
described in Note 10. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
Hood & Strong LLP
/s/ Hood & Strong LLP
San Francisco, California
September 13, 20000
10
<PAGE>
<TABLE>
<CAPTION>
ITEM 7. FINANCIAL STATEMENTS
DIGITAL BRIDGE, INC
BALANCE SHEET
June 30, 2000 1999
===================================================================================
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 120,542 $ 6,800
Receivables 57,856
Prepaid expenses 30,661 5,000
-----------------------------------------------------------------------------------
209,059 11,800
Furniture and Equipment, net 41,591 6,917
Other Assets 19,744 9,500
-----------------------------------------------------------------------------------
$ 270,394 $ 28,217
===================================================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Trade payables $ 91,223
Accrued expenses 10,606 9,586
Notes payable 700,000
-----------------------------------------------------------------------------------
801,829 9,586
-----------------------------------------------------------------------------------
Stockholders' (Deficit) Equity:
Preferred stock, $.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding;
Common stock, $.001 par value, 31,250,000 and 13,250,000
shares authorized in 2000 and 1999; shares issued and
outstanding: 27,850,000 and 13,250,000 in 2000 and 1999 22,280 $ 13,250
Additional paid-in capital 205,312 23,750
Accumulated deficit (759,027) (18,369)
-----------------------------------------------------------------------------------
(531,435) 18,631
-----------------------------------------------------------------------------------
$ 270,394 $ 28,217
===================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
Digital Bridge, Inc.
Statement of Operations
For the years ended June 30, 2000 1999
================================================================================
<S> <C> <C>
Revenue $ 523,502 $ 46,000
Cost of Sales 280,095 13,952
--------------------------------------------------------------------------------
Gross Profit 243,407 32,048
--------------------------------------------------------------------------------
Operating Expenses:
Salaries and benefits 549,667 41,202
Professional fees 112,813
Office expenses 146,980 9,215
Other 170,416
Depreciation 4,189
--------------------------------------------------------------------------------
984,065 50,417
--------------------------------------------------------------------------------
Net Loss $(740,658) $ (18,369)
================================================================================
Loss per Common Share $ 0.0267 ($0.0014)
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
Digital Bridge, Inc.
Statement of
Shareholders' Equity
=================================================================================================
Number Additional Total
of Shares Common Paid-In Accumulated Stockholders'
Outstanding Stock Capital Deficit Equity
<S> <C> <C> <C> <C> <C>
- $ - $ 0 $ -
Common stock issued 13,250,000 $ 13,250 $ 23,750 $ 37,000
Net loss $ (18,369) (18,369)
-------------------------------------------------------------------------------------------------
13,250,000 13,250 23,750 (18,369) 18,631
Common stock issued,
as recapitalized 14,600,000 9,030 9,030
Additional paid-in capital 181,562 181,562
Net loss (740,658) (740,658)
-------------------------------------------------------------------------------------------------
27,850,000 $ 22,280 $ 205,312 $ (759,027) $ (531,435)
=================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
Digital Bridge, Inc.
Statement of Cash Flows
For the years ended June 30, 2000 1999
================================================================================
<S> <C> <C>
Operating Activities:
Net loss $(740,658) $(18,369)
Adjustments to reconcile net loss to
net cash used by operations:
Depreciation 4,189
Increase in:
Receivables (57,856) -
Prepaid expenses (25,661) (5,000)
Other assets (10,244) (9,500)
Accounts payable 91,223 -
Accrued expenses 1,020 9,586
--------------------------------------------------------------------------------
Net cash used by operating activities (737,987) (23,283)
--------------------------------------------------------------------------------
Investing Activities:
Purchase of furniture and equipment (38,863) (6,917)
--------------------------------------------------------------------------------
Net cash used by investing activities (38,863) (6,917)
--------------------------------------------------------------------------------
Financing Activities:
Proceeds from notes payable 700,000
Proceeds from issuance of common stock
and receipt of additional paid-in capital 190,592 37,000
--------------------------------------------------------------------------------
Net cash provided by financing activities 890,592 37,000
--------------------------------------------------------------------------------
(Decrease) Increase in Cash and Cash Equivalents 113,742 6,800
Cash and Cash Equivalents, beginning of period 6,800 -
--------------------------------------------------------------------------------
Cash and Cash Equivalents, end of period $ 120,542 $ 6,800
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
Notes to Financial Statements
Digital Bridge, Inc.
<S> <C> <C>
Note 1 - Organization: Digital Bridge, Inc. (the Company) is a corporation organized
under the laws of the State of Nevada for the purpose of doing
business as a provider of website development and management
services.
Effective January 31, 2000, the Company and its shareholders
entered into a Reorganization and Stock Purchase Agreement with
Black Stallion Management, Inc. (Black Stallion), a Nevada
corporation. Black Stallion was a publicly traded shell company
which prior to the merger was considered a development stage
company as defined in Statement of Financial Accounting Standards
No. 7. Under the terms of the agreement, the Company's
shareholders agreed to exchange 100% of their common stock for 20
million shares of common stock of Black Stallion. All references
to the Company in these financial statements refer to the merged
entity.
Note 2 - Summary of Significant a. Basis of Presentation:
Accounting Policies: ---------------------
The Company maintains its accounts on the accrual basis of
accounting. The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues
and expenses during the reported period. Actual results could
differ from those estimates.
b. Cash and Cash Equivalents:
-------------------------
For purposes of the statement of cash flows, the Company
considers all highly liquid instruments purchased with a
maturity of three months or less to be cash equivalents (of
which there are none as of June 30, 2000 and 1999).
c. Depreciation:
------------
Fixed assets are recorded at cost. Property and equipment is
depreciated on a straight-line basis over estimated useful
lives ranging from five to seven years.
d. Revenue Recognition:
-------------------
The Company records revenue based upon specific contract rates
for website development and management services rendered.
e. Advertising Costs:
-----------------
The Company expenses all advertising costs, including direct
response advertising costs, as they are incurred.
f. Loss Per Share:
--------------
The computation of loss per share is based on the weighted
average number of shares outstanding during the period
presented in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings Per Share". (See Note 8)
15
<PAGE>
Note 2 - Summary of Significant g. Recently Enacted Accounting Standards:
Accounting Policies -------------------------------------
(continued):
Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income", SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information", SFAS
No. 132, "Employer's Disclosure about Pensions and Other
Postretirement Benefits", SFAS No.133 (as amended by SFAS No.
137 and 138), "Accounting for Derivative Instruments and
Hedging Activities", SFAS No. 134, "Accounting for Mortgage-
Backed Securities ", and SFAS 135, "Rescission of FASB No. 75
and Technical Corrections", were recently issued. SFAS No.
130, 131, 132, 133 (as amended), 134 and 135 have no current
application to the Company or their effect on the financial
statements would not have been significant.
h. Reclassifications:
-----------------
Certain items in the 1999 financial statements have been
reclassified to conform to the fiscal 2000 presentation. Such
reclassifications have no significant effect on either net
income or stockholders' equity.
Note 3 - Furniture and Equipment Furniture and equipment, at cost, is summarized as follows as of
</TABLE>
June 30, 2000 and 1999:
2000 1999
Office equipment $33,210 $6,917
Furniture and fixtures 12,751
----------------------------------------------------------
18,553 6,917
Less accumulated depreciation (4,237) -
----------------------------------------------------------
$41,591 $6,917
==========================================================
Depreciation expense amounted to $4,237 and $0 for the periods ended June 30,
2000 and 1999, respectively.
<TABLE>
<CAPTION>
<S> <C> <C>
Note 4 - Lease Commitments: The Company leases office space under an operating lease which
expires December 31, 2002. Rent expense approximated $44,160 and
0 for the years ended June 30, 2000 and 1999, respectively. As
of June 30, 2000, future minimum lease payments, by fiscal year,
are as follows:
</TABLE>
Year ended May 31,
2001 $ 90,240
2002 94,080
2003 48,000
----------------------------------------------------------
$232,320
==========================================================
<TABLE>
<CAPTION>
<S> <C> <C>
Note 5 - Income Taxes: No provision for federal and state income taxes has been recorded
because the Company has incurred net operating losses since
inception. As of June 30, 2000, the Company has available for
federal and California purposes net operating loss carryforwards
approximating $745,000 and $372,500, respectively. The federal
and California carryforwards are available to offset future
taxable income and expire beginning in fiscal 2019 and 2004,
respectively. Deferred income tax assets arising from such loss
carryforwards have been fully reserved as of June 30, 2000 and
1999.
Note 6 - Notes Payable: Notes payable as of June 30, 2000 consist of advances received
from two entities. No repayment terms have been defined. The
total amount has been reflected as a current liability in the
financial statements.
Note 7 - Stock Options: The Company had drafted a stock incentive plan for directors,
officers, employees and consultants of the Company and affiliated
companies, which would have provided for nonqualified and
incentive stock options. The plan has not been finalized as of
June 30, 2000 and as such, no adjustments to the financial
statements have been made to account for any of the plan's
proposed provisions.
16
<PAGE>
Note 8 - Loss Per Share: The following information reflects the amount used in computing
income (loss) per share:
</TABLE>
For the For
Year Ended Year Ended
June 30, 2000 June 30, 1999
Income (loss) from
continuing
operations available
to common
shareholders
(numerator) $ (740,658) ($18,369)
Weighted average
number of common
shares outstanding
used in loss per
share for the
period (denominator) 27,779,300 13,250,000
======================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
Note 9 - Economic Dependence and Through June 30, 2000, the Company generates the majority of its
Related Party revenues from services provided to affiliated companies. Sales
Transactions: to these companies for the periods ended June 30, 2000 and 1999,
represent 100% and 98%, respectively, of total revenues.
As of June 30, 2000 and 1999, accounts receivable from these
affiliated companies totaled $47,856 and $0, respectively.
During the periods ended June 30, 2000 and 1999, certain expenses
incurred by an affiliated company on behalf of the Company were
not charged to the Company.
Note 10 - Business Risks: The Company's failure to secure financing or its ability to
generate sufficient cash flows through operations may have a
material adverse impact on the Company's future operations and
financial position. Subsequent to June 30, 2000, the Company
entered into several agreements wherein it planned to purchase
100% of three separate non-public companies through the issuance
of common stock with an aggregate estimated value of $29,276,700
(See Note 12 for additional information). The Company may still
need to raise additional funds to develop or enhance their service
offerings and to fund expansion; failure to do so could affect the
Company's ability to pursue future growth.
Note 11 - Reorganization and Effective January 31, 2000, the Company and its shareholders
Stock Purchase entered into a Reorganization and Stock Purchase Agreement with
Agreement: Black Stallion Management, Inc. (Black Stallion), a Nevada
corporation. Under the terms of the agreement, the Company's
shareholders agreed to exchange 100% of their common stock for 20
million shares of common stock of Black Stallion. In addition,
Black Stallion agreed to a post-closing split of 1.25 to 1 forward
stock split on its authorized, issued and outstanding stock,
resulting in 27,750,000 post-closing shares of common stock issued
and outstanding and 31,250,000 shares of common stock authorized.
The Company's financial statements reflect the balances and
activity immediately prior to the above transactions.
17
<PAGE>
Note 12 - Subsequent Events: Subsequent to June 30, 2000 the Company entered into an agreement
to purchase 100% of the outstanding common stock of 24x7
Development.com, Inc., a Delaware corporation, in a merger
transaction pursuant to which the Company will be the surviving
entity. As consideration, the Company will issue to the holders
of 24x7 common stock an aggregate of 10,000,000 shares of the
Company's common stock, with an estimated value of $20,600,000.
Subsequent to June 30, 2000 the Company entered into an agreement
to purchase 100% of the outstanding common stock of N2Plus, Inc.,
a Delaware corporation, in a merger transaction pursuant to which
the Company will be the surviving entity. As consideration the
Company will issue to the holders of the N2Plus, Inc. common stock
an aggregate of 1,000,000 of the Company's common stock with an
estimated value of $2,060,000
Subsequent to June 30, 2000 the Company entered into an agreement
to purchase 100% of the outstanding common stock of Online
Television Network Services, a California corporation, in a stock
for stock transaction, pursuant to which Online Television Network
Services will be a wholly owned subsidiary of the Company. As
consideration, the Company will issue to the holders of the Online
Television Network Services an aggregate of 3,212,000 shares of
the Company's stock with an estimated value of $6,616,700.
</TABLE>
18
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with our independent accountants
since July 1, 1999
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors, Executive Officers, Promoters and Control Persons
------------------------------------------------------------------
The officers, directors, nominees and control persons of Digital are as
follows:
<TABLE>
<CAPTION>
Name Age Position Held Office Since
--------------------------------- ------- ------------------------- -----------------
<S> <C> <C> <C>
Aaron C. Lang 26 President 4/17/00
Director 1/28/00
Kenneth A. Paganini 51 Director 9/20/00
Dawna J. Cilluffo 26 Controller 3/23/00
John C. Flanders, Jr. 32 Chief Exec. Officer 9/20/00
Director 9/20/00
Treasurer 9/20/00
K. David Crowell 47 Chief Operating Officer 9/20/00
Brian M. Pollack 24 Chief Technology Officer 9/20/00
Seth R. Pollack 29 Executive Vice President-
Corporate Development 9/20/00
Curtis L. Lovil 39 Vice President-Technology 9/20/00
Secretary 9/20/00
John C. Flanders, Sr. 51 Vice President-Finance 9/20/00
Scott L. Kelly 36 Control Person n/a
M&A West, Inc. n/a Control Person n/a
</TABLE>
All Digital directors are elected for one-year terms. All officers serve
at the pleasure of the Board of Directors, which shall hold annual elections for
such offices. Aside from the appointment of Mr. Flanders to the Digital's Board
of Directors and to the office of Chief Executive Officer following the merger
with 24x7 and the verbal agreement with M&A West, Inc., to appoint one member to
the Board, there are no arrangements, understandings or contractual obligations
between Digital and any other person requiring the nomination or election of any
other person to Digital's Board of Directors or to any corporate offices.
There exists a fraternal relationship between Seth and Brian Pollack and a
paternal relationship between John C. Flanders, Sr. and John C. Flanders, Jr.
Digital is not aware of any additional family relationships between any
director, executive officer or person nominated or chosen to become a director
or executive officer.
Aaron Lang started his career in public relations, assisting small
companies achieve greater market exposure. His primary focus was constructing
promotional collateral, as well as creating and distributing public
announcements for his clients. In 1997, he was one of the founders of Internet
Marketing Associates ("IMA"), which provided small public and private companies
exposure through the Internet. His team specialized in corporate web development
as well as automating investor relations for public companies. In addition, he
managed Internet marketing campaigns for several small, publicly traded
companies. He assembled and managed a staff of independent web developers across
the country. He has been involved in the Internet since 1994, and has developed
dozens of corporate Internet campaigns for start-up businesses. In 1999, Mr.
Lang renamed IMA to Digital Bridge, Inc. to better reflect the company's
commitment to Internet technologies. Aaron has been Digital's President since
April 17, 2000, and a member of its Board of Directors since January 28, 2000.
He continues to direct the company to further growth through his expertise in
Internet design, e-commerce consulting, corporate imaging and branding, sales
and marketing deployment and public relations.
Dawna Cilluffo joined Internet Marketing Associates, Inc., in July 1999 and
was appointed to the position of Controller of Digital in March 2000. Internet
Marketing Associates, Inc., was acquired by Digital in February 2000. Prior to
joining Digital, Ms. Cilluffo was part of the financial team at MyPoints.com
(NASDAQ: MYPT), from January 1999 to July 1999, where she was involved in that
company's initial public offering and registration of its securities on SEC Form
S-1. From February 1997 to July 1999, Ms. Cilluffo was employed by Montgomery
19
<PAGE>
Financial Services Corporation where she served as Director of Marketing for the
San Francisco Bay Area and also worked as a Senior Associate in client work. At
Montgomery, Ms. Cilluffo had the opportunity to consult with companies in the
biotechnology, public relations, Internet advertising and retail businesses.
During her employment with Montgomery, Ms. Cilluffo also assisted Cohesion
Technologies (NASDAQ: CSON) in establishing accounting guidelines for cost
accounting on FDA clinical trial studies and served as Controller of U. S. based
operations for Kelsey Instruments, Ltd., whose business was supplying aircraft
equipment to U. S. corporations and government entities. From December 1995 to
January 1997, Ms. Cilluffo worked as a sales consultant for Technica, U.S.A., a
leading supplier of consumables to the printed circuit board industry.
Proficient in Italian and Japanese, Ms. Cilluffo lent translation services to
Technica's vendors and clientele. She earned a Bachelor of Arts in
International Studies from Miami University in 1995 and is completing her Juris
Doctorate Degree at Santa Clara University School of Law. Digital's management
believes that Ms. Cilluffo's finance background and her experience in working on
the MyPoints initial public offering represent valuable assets to the Company
and its clients entering public markets.
John C. Flanders, Jr. was elected to the offices of Chief Executive Officer
and Director on September 20, 2000, following the acquisition by Digital of
24x7. Mr. Flanders is a recognized leader in new media technologies. He was
formerly President and Chief Executive Officer of 24x7. Prior to May 31, 2000,
Mr. Flanders was the Chief Technology Officer for GlobalNet Financial.com for
over 18 months. Prior to joining GlobalNet, Mr. Flanders was founder and Chief
Executive Officer of a leading, nationwide developer network, CyberJunction.com
Online, Inc. Prior to launching CyberJunction, he served as Vice President
Sales and Marketing at eMergingMedia, Inc., a San Francisco based interactive
agency. He also served in a management capacity at NETCOM Online Communications
Services and THOR24. Before joining the technology industry, he was President
and Chief Operating Officer of Flanders, Brunetti and Flanders Investment
Management, Inc. Mr. Flanders currently serves on the Boards of Directors of
M&A West, Inc., and Solosearch.com,Inc., both companies with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended. Mr. Flanders also serves on the Boards of Directors of
WiseCapital.com,Inc., a private venture capital firm, and StoreChoice.com,Inc.,
a convenience shopping portal.
K. David Crowell was elected to the office of Chief Operating Officer of
Digital on September 20, 2000, following the merger of 24x7 into Digital. He was
previously the Vice President of Operations for 24x7 and was in senior
management at Globalnet Financial. Mr. Crowell brings over 25 years of
operational management, quality assurance and product management experience to
Digital. Prior to joining Globalnet Financial, Mr. Crowell served as Manager of
Training and Automation for Stratton Travel, where he was responsible for
assisting travel agents by increasing their productivity through a series of
in-house training classes, as well as writing scripts and programming. Prior to
joining Stratton, Mr. Crowell was the Manager of Quality Assurance for Orbit
Network, Inc. He also served as Director of Special Services for THOR24 where he
was responsible for startup and development of new enterprises for the large
travel consortium. As Manager of Training and Automation, he also automated the
hotel program within the airline Global Distribution Systems for ABC Corporate
Services/CSI division.
Brian M. Pollack was elected to the office of Chief Technology Officer of
Digital on September 20, 2000,following the merger of N2Plus into Digital. Mr.
Pollack had five solid years in Internet research and development ("R&D") behind
him, when he founded N2Plus in 1997. Leading N2Plus from a home-based
start-up to a six-person operation, he was also responsible for N2Plus' market
share and revenue, which grew 300% every two quarters from inception. Prior to
forming N2Plus, Mr.Pollack served in lead technical positions for two Internet
Service Providers (ISPs): Primenet/Global Center and Internet Direct, where he
guided R&D, technical support and development. He was in a technology leadership
roll during 3 mergers. One of the companies is now part of Frontier Corp., the
nation's 4th largest telecommunications provider. Internet Direct, a company of
2 employees when Mr.Pollack joined, was acquired in 1995 by Mindspring
Enterprises, the nation's 4th largest ISP. Before that, Mr.Pollack was the
Network Engineer responsible for developing an American Express credit card
automation system with an return on investment of $25 million. In 1992, he was
one of 15 top programmers selected to participate in the USA Computer Olympiad.
Seth R. Pollack became the Executive Vice President-Corporate Development
for Digital following the merger of N2Plus into Digital on September 20, 2000.
Mr. Pollack joined N2Plus in 1998 and was responsible for overall growth of
N2Plus, oversight of general business operations, as well as the financial and
sales, marketing and business development strategies. Prior to joining N2Plus,
Mr. Pollack held an executive management position with Adecco, a staffing
provider with a global network of 3,300 branch offices and more than $10 billion
in annual revenues. Prior to joining Adecco, Mr. Pollack led an intelligence
organization with the U.S. Army and held a Top Secret Security clearance. Seth
received a BS degree from Park College and a MBA from the University of Phoenix.
Curtis L. Lovil was elected to the office of Executive Vice President of
Operations and Secretary of Digital on September 20, 2000, following the
acquisition by Digital of 24x7. His duties for Digital include coordination of
production and programming for all active projects. Mr. Lovil began his career
fifteen years ago as manager of operations for a travel industry corporation.
Mr. Lovil worked with Orbit Network in California as a systems engineer, he then
went on to co-found CyberJunction with John C. Flanders, Jr. Mr. Lovil has
consulted with several companies such as IBM, EDS, PG&E and Fujitsu as a network
systems engineer. Mr. Lovil joined Globalnet Financial as Director of
Operations and then assisted in the founding of 24x7.
John Flanders Sr. was elected to the office of Vice President of Finance of
Digital on September 20, 2000, following the acquisition by Digital of 24x7. Mr.
Flanders began his career as an electrical contractor. He founded and was the
president of G & F Electrical Contractors. Over the past twenty-five years, he
has gained valuable experience in operating a business. He has served as Vice
President of Operations for Crocker Electrical Contractors, Inc. He was one of
20
<PAGE>
the founders of Flanders, Brunetti and Flanders Investment Management
Corporation. Mr. Flanders' extensive accounting and bookkeeping experience
provide a invaluable asset to the daily financial operation of Digital.
Kenneth A. Paganini was elected to our Board of Directors on September 20,
2000, following the merger of OTVnet into Digital. Mr. Paganini was the Chief
Executive Officer of OTVnet prior to the merger with Digital. He is also the
President and Chief Executive Officer of Paganini Electrical Contractors and
Paganini Companies. He also serves as the Governor of District 9 for the
National Electrical Contractors Association.
Charles Bronitsky served Digital in the offices of President, Chief
Executive Officer and Director from April 1999 until his resignation on June 27,
2000.
Section 16(a) Beneficial Ownership Reporting Compliance
------------------------------------------------------------
Based solely upon Digital's review of Forms 3, 4 and 5 and amendments
thereto furnished to Digital under Rule 16a-3(a), except for the persons
indicated below, during the fiscal year preceding the filing of this Annual
Report, Digital is not aware of any person who was a director, officer or
beneficial owner of more than ten percent of Digital's Common Stock and who
failed to file reports required by Section 16(a) of the Securities Exchange Act
of 1934, as amended, in a timely manner. Aaron C. Lang, the President of
Digital, filed his Form 5 on September 25, 2000, which Form 5 was due to have
been filed on August 14, 2000. To the knowledge of Digital, neither Scott L.
Kelly nor M&A West, Inc. has filed a Form 5, which was due on August 14, 2000.
Standing Audit, Nominating and Compensation Committees
-----------------------------------------------------------
Digital presently has three Directors. The Board of Directors held four
meetings during the preceding fiscal year and all directors in office at the
time were in attendance at each such meeting.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to the Chief Executive
Officer of Digital. No other executive officer or director of Digital received
total annual salary and bonuses in excess of $100,000 during the fiscal year
ended June 30, 2000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term Compensation
------------------------------ -----------------------
Awards Securities Payouts
------ -------
Name Under-
and Other Restricted lying All
principal Annual stock options LTIP other
position Year Salary Bonus Comp. award(s) SARs Payouts comp.
-------------- ------ -------- ------- -------- ---- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Charles
Bronitsky 2000 $121,000 -0- -0- -0- -0- -0- -0-
</TABLE>
-------------------
As of September 25, 2000, the following management personnel were receiving
annualized compensation in excess of $100,000 per year: John C. Flanders, Jr.
$200,000, David Crowell $100,000 and Curtis L. Lovil $100,000.
Director and Officer Liability and Indemnification
-------------------------------------------------------
The Nevada Domestic Corporation Laws ("NDCL") permit a Nevada corporation
to indemnify a director, officer, employee or agent for judgments or
settlements, as well as expenses in the context of third-party actions, if such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interest of the corporation or, in the case of a
criminal action, had no reasonable cause to believe his conduct was unlawful.
The NDCL grants express authority to a Nevada corporation to purchase and
maintain insurance for director and officer liability. Such insurance may be
purchased for any officer, director, employee or agent, regardless of whether
that individual is otherwise eligible for indemnification by the corporation.
Article VII of Digital's Restated Articles of Incorporation provides that a
director or officer of shall not be personally liable to Digital or its
stockholders for damages for breach of fiduciary duty as a director or officer,
except for acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, and provides that any modification or repeal of
Article VII shall be prospective only and shall not adversely affect any
limitation on the personal liability of a director or officer of Digital for
acts or omissions prior to such repeal or modification.
Article VIII of Digital's Restated Articles of Incorporation provides that
every person who was or is a party, or is threatened to be made a party to, or
is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is the
legal representative, is or was a director or officer of Digital, or is or was
serving at the request of Digital as a director or officer of another
corporation, or as its representative in a partnership, joint venture, trust or
other enterprise, shall be indemnified and held harmless to the fullest extent
legally permissible under the laws of the State of Nevada against all expenses,
liability and loss (including attorneys' fees, judgments, fines and amounts paid
or to be paid in settlement) reasonably incurred or suffered by him in
connection therewith.
21
<PAGE>
Digital's Bylaws contain similar, redundant provisions regarding
indemnification in Article VII of the Bylaws.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers or
persons controlling Digital pursuant to the provisions of its Articles of
Incorporation or Bylaws, Digital has been informed that in the opinion of the
SEC such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of September 25, 2000, there were 41,692,000 shares of Digital's Common
Stock issued and outstanding. Each share of Common Stock is entitled to one
vote. There is no cumulative voting of shares of Common Stock and stockholders
have no preemptive rights. Digital has never paid dividends on its Common Stock
and does not intend to in the future.
The following table sets forth as of September 25, 2000, certain
information with respect to all persons or groups known by management to be
record or beneficial owners of more than 5% of the Digital's outstanding Common
Stock, by each director of Digital, each named executive officer and by all
current directors and officers as a group. Except as indicated in the footnotes
to the following table, the listed stockholders hold sole voting and investment
power over their respective shares. No shares of preferred stock have been
issued or are outstanding.
<TABLE>
<CAPTION>
No. of Shares Percentage
Name and Address Owned Ownership
----------------------------- ------------- -----------
<S> <C> <C>
Scott Kelly(1) 7,250,000 17.39%
583 San Mateo Avenue
San Bruno, CA 94066
Stockholder
M&A West, Inc. (1) 4,800,000 11.51%
583 San Mateo Avenue
San Bruno, CA 92066
Stockholder
Aaron Lang 6,250,000 15.00%
1860 El Camino Real
Burlingame, CA 94010
President and a Director
John C. Flanders, Jr. (2)(3) 7,851,300 18.83%
16150 N. Arrowhead
Peoria, AZ 85382
Chief Executive Officer
and a Director
Kenneth A. Paganini 1,315,463 3.16%
190 Hubbell Street
San Francisco, CA 94107
A Director
K. David Crowell 100,000 -- % (4)
2377 W. Paradise Lane
Phoenix, AZ 85023
Chief Operating Officer
Brian M. Pollack 318,681 -- % (4)
17691 N. 52nd Drive
Glendale, AZ 85308
Chief Technology Officer
Seth R. Pollack 142,381 -- % (4)
17223 N. Fairway Court
Glendale, AZ 85308
Executive Vice President
Curtis L. Lovil 300,000 -- % (4)
25706 North 68th Drive
Peoria, AZ 85382
Vice President-Technology
John C. Flanders, Sr. 200,000 -- % (4)
6861 West Pontiac Drive
Glendale, AZ 85308
Vice President-Finance
22
<PAGE>
All Officers and Directors
as a group (8 persons) 16,477,675 39.52%
<FN>
------------------------
(1) Scott Kelly is the President and principal stockholder of M&A West,
Inc. Mr. Kelly is the beneficial owner of 2,450,000 shares of Digital
Common Stock and has voting and dispositive control with respect to the
4,800,000 shares owned of record by M&A West, Inc.
(2) John C. Flanders, Jr., is also a director on the Board of M&A West,
Inc. However, Mr. Flanders has no voting or dispositive control over the
shares of Common Stock owned beneficially by M&A West, Inc., as he owns
beneficially only 10,000 shares of M&A West, Inc., common stock.
(3) Mr. Flanders has direct ownership of 6,851,300 shares of Digital Common
Stock and indirect beneficial ownership of the 1,000,000 shares of Digital
Common Stock owned by DotCom Stables, Inc. Wise Capital Group, LLC, of which Mr.
Flanders is a member, owns 1,250,000 shares of Digital Common Stock; however,
Mr. Flanders disclaims in voting or dispositive control over the WiseCapital
shares.
(4) Owns less than one percent (1 %)of outstanding Common Stock.
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Digital requires that all material transactions with affiliates be made on
terms that are no less favorable to Digital than those that can be obtained from
unaffiliated third parties. Such transactions must be approved by a majority of
Digital's directors. For the year ended June 30, 1999 98%% of revenues were
generated from sales to affiliated companies and 100%% of all sales for the year
ended June 30, 2000. During this time frame, Digital was being incubated by M&A
West, Inc., which incubation ended when M&A West, Inc. spun us off in January
2000. We anticipate considerably less reliance on these affiliates in the year
ending June 30, 2001, and have not generated revenues through sales to such
affiliates since June 30, 2000. While the company does not anticipate
generating revenues from affiliates in the first quarter of the fiscal year
ending June 30, 2001, Digital may seek to recover gross costs of advertising in
the amount of $60,000 from an affiliated party. Digital has approached such
affiliate and requested the amount be paid directly to the vendor used in
delivering advertising on behalf of a related party. While Digital anticipates
a favorable resolution, if this matter is not successfully resolved Digital may
have to recognize a vendor debt of $60,000 in the first quarter of its fiscal
year ending June, 30, 2001.
John C. Flanders, Jr., was the largest holder of 24x7 common stock prior to
the merger with Digital. Mr. Flanders also serves on the Board of Directors of
M&A West, Inc., which was the largest holder of Digital Stock prior to the
merger with 24x7. Digital is of the opinion that all dealings and negotiations
with Mr. Flanders and 24x7 were conducted at arm's length.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
--------
Exhibit
No. Description
-------- -----------
2.1 Reorganization and Stock Purchase Agreement with Black Stallion Management,
Inc., effective January 31, 2000 (1)
2.2 Asset Purchase Agreement by and between 24x7 Development.com, Inc. and
GlobalnetFinancial.com, Inc.(2)
2.3 Agreement and Plan of Merger between Digital Bridge, Inc. and 24x7
Development.com, Inc., dated as of July 31, 2000(3)
2.4 Agreement and Plan of Merger between Digital Bridge, Inc., N2Plus, Inc. and
Certain of the Equity Holders of N2Plus, Inc. dated as of August 31,
2000(4)
2.5 Stock Purchase Agreement between Digital Bridge,Inc. and Stockholders of
Online Television Network Services dated as of August 31, 2000(5)
23
<PAGE>
3(i)(1)Certificate of Restated Articles of Incorporation of Digital Bridge,
Inc.(2)
3(i)(2) Articles of Merger of 24x7 Development.com, Inc. into Digital Bridge,
Inc.(2)
3(i)(3) Articles of Merger of N2Plus, Inc. into Digital Bridge, Inc. (2)
3(ii) Bylaws(6)
10.1 Lease Agreement by and between Nancy Ridge Technology Center, Inc.(Lessor)
and Online Television Network Services (Lessee), dated August 25, 1998 (2)
10.2 Standard Industrial Lease Agreement between Thomas Pecht, et al (Lessors)
and 24x7 Development.com, Inc., dated June 1, 2000 (2).
10.3 Standard Office Lease Agreement between Dr. Marco Chaves and George Chaves
(Lessors) and M&A West, Inc., dated November 17, 1999 (2).
10.4 Website Development and Maintenance Agreement by and between Digital
Bridge, Inc. and PlanetLinxs.com International, Inc., dated May 30, 2000
(2).
10.5 Website Development and Maintenance Agreement by and between Digital
Bridge, Inc. and StoreChoice, Inc., dated August 23, 2000 (2).
10.6 Statement re: Computation of Earnings Per Share(2)
21 Subsidiaries of the Company(2)
23.1 Consent of Hood & Strong LLP(2)
27 Financial Data Schedule(2)
-----------------
(1) Filed herewith as an exhibit is Exhibit 2 to Digital's Form 8-K dated
February 9, 2000, and incorporated herein by reference.
(2) Filed herewith.
(3) Filed herewith as an exhibit is Exhibit 2.1 to Digital's Form 8-K dated
September 19,2000, and incorporated herein by reference.
(4) Filed herewith as an exhibit is Exhibit 2.2 to Digital's Form 8-K dated
September 19, 2000, and incorporated here by reference.
(5) Filed herewith as an exhibit is Exhibit 2.3 to Digital's Form 8-K dated
September 19, 2000, and incorporated herein by reference.
(6) Filed herewith as an exhibit is Exhibit 3 to Digital's Form 10-SB12G
Registrant Statement (filed number unavailable)dated July 19, 1999, and
incorporated herein by reference.
(B) REPORTS ON FORM 8-K FILED DURING THE FOURTH QUARTER OF 2000: None.
-----------------------------------------------------------------
24
<PAGE>
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DIGITAL BRIDGE, INC.
By: /s/ Aaron Lang
----------------------------------
Aaron Lang, President and Director
Date: September 26, 2000
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the Registrant in the capacities and on the dates
indicated.
Signature/Date
By: /s/ John C. Flanders, Jr.
----------------------------------
John C. Flanders, Jr.,
Chief Executive Officer and a Director
Date: September 26, 2000
By: /s/ K. David Crowell
----------------------------------
K. David Crowell
Chief Operating Officer
Date: September 26, 2000
By: /s/ Brian M. Pollack
----------------------------------
Brian M. Pollack
Chief Technology Officer
Date: September 26, 2000
By: /s/ Seth R. Pollack
----------------------------------
Seth R. Pollack
Executive Vice President--Corporate Development
Date: September 26, 2000
By: /s/ Curtis L. Lovil
----------------------------------
Curtis L. Lovil
Vice President-Technology
Date: September 26, 2000
By: /s/ John C. Flanders, Sr.
----------------------------------
John C. Flanders, Jr.
Vice President-Finance
Date: September 26, 2000
By: _____________________________
Kenneth A. Paganini Director
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
2.2 Asset Purchase Agreement dated June 5, 2000, by and between 24x7
Development.com, Inc. and GlobalnetFinancial.com, Inc.
3(i)(1) Certificate of Restated Articles of Incorporation of Digital Bridge,
Inc.
3(i)(2) Articles of Merger of 24x7 Development.com, Inc. into Digital Bridge,
Inc.
3(i)(3) Articles of Merger of N2Plus, Inc. into Digital Bridge, Inc.
10.1 Lease Agreement by and between Nancy Ridge Technology Center, Inc. (Lessor)
and Online Television Network Services, dated August 25, 1998.
10.2 Standard Industrial Lease Agreement between Thomas Pecht, et al (Lessors)
and 24x7 Development.com,Inc., dated June 1, 2000.
10.3 Standard Office Lease Agreement between Dr. Marco Chaves and George Chaves
(Lessors) and M&A West, Inc.
10.4 Website Development and Maintenance Agreement by and between Digital
Bridge, Inc. and PlanetLinxs.com International, Inc., dated May 30, 2000.
10.5 Website Development and Maintenance Agreement by and between Digital
Bridge, Inc. and StoreChoice, Inc., dated August 23, 2000.
11 Statement re: Computation of Earnings Per Share
21 Subsidiaries of the Company
23.1 Consent of Hood & Strong LLP
27 Financial Data Schedule
25
<PAGE>
