UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
- --
For the Fiscal Year Ended: September 30, 1999
--------------------
Commission file number: 000-26969
Consolidated Data, Inc.
-----------------------
(Name of small business issuer in its charter)
Colorado, USA 84-1343219
---------------------------- ----------------------------
(State or other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
6912 220th St SW, Suite 320, Mountlake Terrace, Washington 98043
----------------------------------------------------------------
(Address of principal executive offices)
Issuer's Telephone Number, 425-672-6735
-------------
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
10,784,000 Common Shares, no par value.
(Title of Class)
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 report(s), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___
---
Check if 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 amendment to
this Form 10-KSB. ____
State the issuer's revenues for its most recent fiscal year: $27,558
The aggregate market value of the voting and non-voting common equity held by
non-affiliates based upon the average bid and asked price at January 11, 2000
was $4,304,250.
As of January 11, 2000, issuer had 10,864,000 shares of common equity issued and
outstanding.
Transitional Small Business Disclosure Format: Yes ____ No X
---
<PAGE>
CONSOLIDATED DATA, INC.
Form 10-KSB
TABLE OF CONTENTS
PART I
Page
Item 1. Description of Business 3
Item 2. Description of Property 19
Item 3. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Securities Holders 19
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters 20
Item 6. Management's Discussion and Analysis or
Plan of Operation 25
Item 7. Financial Statements 31
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure 31
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons, Compliance With Section 16(a) of the Exchange Act 32
Item 10. Executive Compensation 35
Item 11. Security Ownership of Certain Beneficial Owners and Management 35
Item 12. Certain Relationships and Related Transactions 37
Item 13. Exhibits and Reports on Form 8-K 38
2
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
- --------------------------------
Historical Corporate Development
Consolidated Data Inc. (hereinafter also referred to as the "Company" and/or the
"Registrant") is a Company in the development stage. The Company was
incorporated July 14, 1995 under the laws of the State of Colorado and was
originally known as Attache Holdings, Ltd. In November of 1998, Attache Holdings
Ltd. became Consolidated Data, Inc.
The Company was inactive until it acquired Contractor's Directory,
Inc.("Contractors Directory") on April 17, 1997 via a stock for stock
acquisition in exchange for 1,000,000 shares of the Company's restricted common
stock. From 1997 to the first quarter of 1999, the Company was exclusively
involved in the development of an e-Commerce business designed to fill the needs
of the construction industry. This included development of
"contractors-directory.com". Use of Contractors Directory allows public
information to be downloaded, via the Internet, and reformatted for ease of use
by contractors and suppliers. This includes credit and building permit
information.(See "Contractors Directory") Contractor Directory is a wholly-owned
subsidiary of the Company.
In March 1999 the Company purchased a software system, "YourBankOnline", which
is now the primary focus of the Company. Currently, the Company actively
markets, sells and supports the software to members of the banking industry
while still maintaining "contractors-directory.com".
Banking Software
Historical Development of YourBankOnline Software
- -------------------------------------------------
River City Bank ("River City"), of Sacramento, California originally developed
YourBankOnline in 1996 and 1997, and began offering a range of online services,
resulting from YourBankOnline in September of 1997. The system was developed
internally in order to offer state-of-the-art services to River City customers.
Following the successful implementation at River City, management licensed and
installed the system to three community banks located in northern California,
Citizens Bank, Tri-Counties Bank and Auburn National Bank. River City also acted
as a service bureau for these banks. (i.e.: provided them other computing
3
<PAGE>
capabilities.) In 1998, the management of River City decided to focus on the
traditional banking services and did not expand the online banking system to
additional banks.
DTEK Corporation ("DTEK"), a privately held company located in Boise, Idaho,
purchased YourBankOnline from River City in September 1998 for total
consideration of $410,000. Consideration was a $60,000 down payment and a note
payable of $350,000 due to River City, September 1999.
Prior to the Registrant's purchase of the YourBankOnline software from DTEK in
February 1999, DTEK granted a license to the software. Global Payment Systems
Inc. ("Global"), a subsidiary of National Data Inc., was granted a perpetual
worldwide non-exclusive irrevocable transferable right and license to the
YourBankOnline software. Global's license allows them to modify, customize,
sublicense, resell and distribute the system. Global can also transfer its
rights to a third party. Global retains this right and currently markets and
sells a version of the software to financial institutions. Global is and will
continue to be a competitor of the Company. Global does not have rights to
modifications, revisions, additions or any other changes the Company makes to
the software.
Global agreed to pay DTEK 50% of the first $1,300,000 of license fees received,
plus commissions, plus a final lump sum of $50,000. There is no certain date for
the payment. Global also agreed to operate and maintain the existing
YourBankOnline server sites. Global currently receives an aggregate monthly
licensing fee of $1,100 paid by Citizens Bank, Tri-Counties Bank and Auburn
Bank.
In February 1999 the Company purchased YourBankOnline and all rights related to
it from DTEK. Consideration for the purchase was $640,000 payable as follows:
a. $400,000 through the issuance of 2,000,000 common shares of the
Company's restricted common stock valued at $0.20 per share.
b. $240,000 paid at the rate of a $10,000 payment for each license
sold or through the issuance of 1,200,000 shares of restricted
common stock valued at $0.20 per share. The agreement required the
Company pay the cash or the stock twelve months from the date of
the contract or by March 10, 2000.
On April 12, 1999, the Company authorized and issued 1,200,000 shares of its
restricted common stock in full satisfaction of its agreements with DTEK.
4
<PAGE>
As part of the agreement, DTEK assigned to the Company all rights and title to
the existing software license between DTEK and Global. This includes payments
from River City, subject to DTEK receiving the balance of the initial licensing
revenues as compensation for its consulting and support. Any residual income
will be paid to the Company which management believes will be immaterial to the
on-going operations of the Company.
Description of YourBankOnline Software
- --------------------------------------
YourBankOnline is a browser-based solution designed and developed to help banks
provide a full range of online banking products and services to their commercial
and retail customers. The system allows the bank's customers to view balances
and transfer money, as well as giving users the ability to manage their
financial activity without leaving the bank's website, thus creating a strong
financial relationship between the bank and its customers.
The modular design and flexible technology of YourBankOnline can be changed
quickly and easily to accommodate the needs of all types of customers. This
allows the banks to tailor online services to different segments of their
customer bases.
Key features of YourBankOnline include the following:
a. Customizable User Interface: The bank's customer can choose screen
colors, page lengths, and simplified interface options;
b. Transaction Editing: Bank's customers can modify the description
reference of a transaction to better explain its purpose. They can also
categorize the transaction for reporting purposes;
c. Payment Scheduling and Bill Payment: Bank's customers can schedule
payments to be performed at later dates. The system incorporates a pay
anyone approach, which doesn't limit the customer to specific payees;
d. User Defined Reports: Several detailed and summary reports provided can
be configured in a variety of formats according to the bank's customers
specific preferences;
e. Stop Payment Requests: Back office staff processes and generates a
confirmation letter to the customer for extended stop payment
authorization. (Limited only to what is available through the host
system.);
f. Custom Information Reporting: AR cleared transaction detail, including
extended descriptions for ATM and Debit and Credit Card transactions;
5
<PAGE>
g. Funds Transfer Between Linked Accounts;
h. 24 Hour Access to Statements: Statements can be generated at anytime
throughout the month. The system maintains the statement cycle
information specified within the host system;
i. User Configurable Transaction History: The amount of history maintained
is configurable on the user level.
The software allows banks to provide a number of user-specific financial
services and products to their customers through a dynamic interface between
traditional backend systems of the bank and the bank's customers. The base of
the software is a data warehouse that collects and distributes information
between the bank and the customer. The data warehouse can be linked to the
customer via the Internet, intranet, or Web TV. The design of the data warehouse
allows banks to provide services by user or by group of users and deliver the
information via a medium that is appropriate for each user or group of users.
Banks can choose to link virtually any financial product or service to the data
warehouse. This includes standard balance and account information to insurance
services, loan information, credit and debit card information, and investment
services.
Additionally, the technology can be used to seamlessly connect existing systems
for automating collaborative and administrative processes to provide managers
and key personnel with valuable information for decision-making and targeted
marketing efforts.
Security
- --------
YourBankOnline uses U.S. grade encryption. This encryption, along with unique
Sign-On ID and password security front-end, provides the foundation for a
secure, reliable interface. In addition, a customer-selected name rather than an
account number references customer accounts. This ensures the privacy of account
information should an unauthorized individual gain access.
Individual security control levels are maintained at the customer level by the
financial institution, providing the ability to isolate certain functions of the
system to different levels of security. An example of this implementation would
be to set the security requirement for bill-pay higher than other activities.
This would allow the ability to track bill-pay enabled customers for billing
purposes. Another level could be given to categorization capabilities, thus
providing a way of controlling the customer capabilities based on subscription.
YourBankOnline accommodates 99 user specific levels of security.
Encrypted Messaging provides security for sensitive communication between the
customer and the bank and a detailed audit Trail) is incorporated into
YourBankOnline. All activity is logged by date
6
<PAGE>
and time to a log file that can be analyzed to track individual activity by bank
personnel and end-users.
The entire system is maintained through a single interface with an
administrator-privileged account. The system can be locked down for crisis
management or unscheduled modification requirements. This eliminates the need
for additional applications and management tools and allows an administrator to
control access when the system is available for use from anywhere in the world.
When locked, customers received a customizable screen informing them of the
system availability.
The software utilizes a centralized data warehouse concept of providing
functional interfaces between the bank and its customers. Users use a front-end
interface to access a subset of information collected and maintained separately
from the bank's core system, eliminating virtually all risk of tampering with
vital data.
Database
- --------
The software architecture utilizes current Microsoft established standards for
Client/Server access. The host system runs on an Intel platform microcomputer
running a Microsoft NT Server 4.0 operating system. The system runs as a subset
of Microsoft's Internet Information Server 4.0 Web Server software, which is
shipped with NT Server. A collection of databases and Active Server scripts are
incorporated on the server providing the foundation for the YourBankOnline
system. Five application modules combine to maintain and update the ODBC
databases. These modules are used to maintain timed executions, to query the
host system, update and modify the local databases with the account detail
information, update and modify the local database with the cleared transaction
information, and collect, process, and monitor scheduled payments.
The User Interface is provided through several Active Server scripts and graphic
files maintained on the Microsoft NT server. These scripts are activated through
customer requests and combine with database information to produce the bulk of
the user screens and input forms within YourBankOnline. These scripts and
graphic files provide almost unlimited flexibility and can be modified to
accommodate individual interests and presentation specific to the environment.
They can also be modified to accommodate user controllable variations. Screen
colors, information placement, navigation control visuals and placements can be
modified to give the interface an entirely different and unique look and feel by
individual and by group.
7
<PAGE>
Bank administrative personnel and customers gain access to the YourBankOnline
system through a standard commercial browser over the Internet. This allows the
user to gain access from virtually any system that provides an Internet access
point. This can be a home PC, Office PC, laptop, or even other Internet capable
devices such as Internet Terminals, Web enabled television sets, Internet ready
telephones, etc.
Bill-pay requests are warehoused within the YourBankOnline system up to the date
of processing, allowing the end-user full control of the scheduled transaction.
Following processing, bill-pay transactions are collected in a file and can be
sent to a third party bill payment processor, i.e. Global Payment Systems,
Checkfree, etc., or can be processed internally on Global's PayLink bill payment
module on behalf of the account holder. The flexibility of the PayLink module
enables the bank to not only fulfill in-house bill pay processing but also
leverage the technology to create any type of payment including cashiers checks
and accounts payables checks.
The following table summarizes the technical specifications of YourBankOnline:
<TABLE>
- ---------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Bank Features Modular Design Yes
- ---------------------------- -------------------------------------- --------------------------------------
Overviews Automated Billing for Bank Yes
- ---------------------------- -------------------------------------- --------------------------------------
Voice Response Module Can be accommodated
- ---------------------------- -------------------------------------- --------------------------------------
Credit Card Interface Yes (optional)
- ---------------------------- -------------------------------------- --------------------------------------
Administrative Options According to user rights,
different administrators
can maintain the entire
system from the
administrative area.
- ---------------------------- -------------------------------------- --------------------------------------
Set the interface by user.
- ---------------------------- -------------------------------------- --------------------------------------
Maintain automated billing for each
customer including: grace periods,
promotional pricing and per
transaction pricing.
- ---------------------------- -------------------------------------- --------------------------------------
Send broadcast or user-specific
e-mails.
- ---------------------------- -------------------------------------- --------------------------------------
Turn on and off specific
modules, features, and
functionality by customer.
- ---------------------------- -------------------------------------- --------------------------------------
Setup, modify and delete customers.
- ---------------------------- -------------------------------------- --------------------------------------
Audit Trail Reporting
- ---------------------------- -------------------------------------- --------------------------------------
Technical Information Programming Microsoft Active Data Objects
- ---------------------------- -------------------------------------- --------------------------------------
Hardware Platform (bank) Windows NT
- ---------------------------- -------------------------------------- --------------------------------------
8
<PAGE>
- ---------------------------- -------------------------------------- --------------------------------------
Hardware Platform (user) Platform Independent
- ---------------------------- -------------------------------------- --------------------------------------
Software (bank) Any Internet Browser
- ---------------------------- -------------------------------------- --------------------------------------
Software (user) Any Internet Browser
- ---------------------------- -------------------------------------- --------------------------------------
Communication Network Internet access, private dial-up
access.
- ---------------------------- -------------------------------------- --------------------------------------
Security Security Type Secure Socket Layer
- ---------------------------- -------------------------------------- --------------------------------------
Encryption Independent encryption allows full
range from 40 bit to 128 bit from
any site certificate authority.
- ---------------------------- -------------------------------------- --------------------------------------
User Security Sign On ID and Pass Code
- ---------------------------- -------------------------------------- --------------------------------------
User Security Levels 99 levels of security
- ---------------------------- -------------------------------------- --------------------------------------
End User Functionality Account Access Checking, Savings, Loans, CD and
Others
- ---------------------------- -------------------------------------- --------------------------------------
Real-time Access (bank specified Yes
timing)
- ---------------------------- -------------------------------------- --------------------------------------
Transaction Categorization Yes
- ---------------------------- -------------------------------------- --------------------------------------
Transaction History Unlimited
- ---------------------------- -------------------------------------- --------------------------------------
Research/Reporting Capabilities Date Range, Deposits/Credits,
Category of Transaction, Check, Stop
Payments, Number of Withdrawals
- ---------------------------- -------------------------------------- --------------------------------------
Reports Available Category List, Category Summary,
Category Detail, Payee List,
Electronic Statement, Transaction
Detail, Export Transaction and Custom
(user definable) Reporting.
- ---------------------------- -------------------------------------- --------------------------------------
Export Options Quicken, MS Money and ASCII (custom)
- ---------------------------- -------------------------------------- --------------------------------------
Account Transfers DDA/TDA, Loans/LOC's and Credit card
- ---------------------------- -------------------------------------- --------------------------------------
E-mail Yes
- ---------------------------- -------------------------------------- --------------------------------------
Event Notification E-mail notification
- ---------------------------- -------------------------------------- --------------------------------------
Pager notification
- ---------------------------- -------------------------------------- --------------------------------------
Check Imaging Yes
- ---------------------------- -------------------------------------- --------------------------------------
Bill Payment Yes
- ---------------------------- -------------------------------------- --------------------------------------
Financial Institution Minimum Hardware Requirements: Intel Recommended: Intel Pentium II 266
Pentium 166 Mhz, 128 Mb RAM, 4 Gig Mhz dual processor, 512 Mb RAM, 18
Hard Drive, 24 Gig Tap to Storage Gig Hard Drive, 24 Gig Tap to
and Seagate Backup Exec Storage and Seagate Backup Exec
- ---------------------------- -------------------------------------- --------------------------------------
Software Requirements: Microsoft NT
Server 4.0 w/Internet Information
Server 4.0 and Microsoft SQL Server
6.5
- ---------------------------- -------------------------------------- --------------------------------------
End-User Communication Requirements Internet connection access
- ---------------------------- -------------------------------------- --------------------------------------
Platform Independent Browser depends on level
- ---------------------------- -------------------------------------- --------------------------------------
9
<PAGE>
- ---------------------------- -------------------------------------- --------------------------------------
of encryption required by financial
institution
- ---------------------------- -------------------------------------- --------------------------------------
End-User Functionality Online Applications YourBankOnline, Loans and Credit Card
- ---------------------------- -------------------------------------- --------------------------------------
Discount Brokerage Currently in Beta test
- ---------------------------- -------------------------------------- --------------------------------------
End-User Options Change Password, Change Session
Timeout, Change Account Names,
Change basic color scheme, Change
level of interface from standard to
enhanced, Change Amount of History,
Change Lines per page and Bank
customized user options.
- ---------------------------- -------------------------------------- --------------------------------------
Cash Management ACH origination PPD/PPD+, CCD/CCD+, CTX, Importing
capabilities, NACHA File Processing,
Multiple Company Option, State &
Federal Taxes, Customer controlled
security, Multi-level approvals,
Auto prenotes, On-Us processing,
Warehousing, File limits,
Transaction limits, Bank Controlled
offset and NACHA Import
- ---------------------------- -------------------------------------- --------------------------------------
</TABLE>
The Company will offer a variety of service levels including full hosting and
system support to its customers so that they do not have to hire additional
personnel, purchase additional equipment, train personnel or devote additional
development time to the project. Management believes this program is beneficial
for the financial institution that wants to obtain immediate Internet presence.
As an example, the Company could provide to its customers the following: a
Server, Customer Service, Technical Support, Monthly Reporting, Staff & Customer
Training, Upgrades, Web Page Development and Web Hosting Services.
The Market for YourBankOnline Software
- --------------------------------------
The Internet has rapidly become a marketplace for buying and selling a variety
of goods and services such as travel, securities and consumer products. As
consumers and companies become more familiar and comfortable with transacting
business online, management believes this will translate into a greater interest
for online banking services. Some of the recent developments related to
financial services being provided on the Internet are:
10
<PAGE>
o Fifteen million Internet users have checked mortgage and equity loan rates
online. A marketplace has been created on the Net where consumers apply
once to receive multiple offers on their loan application. These companies
are among the biggest non-credit card advertisers in search engine loan
categories.
o Internet-only banks appear to be flourishing. This includes, Net.B@nk,
TeleBank, and Security First, each a public company with market
capitalization over $1 billion by mid-1999. As of April 1999, Net.B@nk
reported to have 29,000 customers and over $330.0 million in deposits.
o Banking has come to the Internet portals. Yahoo!, AOL, MSN, and Excite have
entered into advertising agreements with major banks offering mortgages,
credit cards, automobile loans, savings instruments, home equity loans and
checking services.
o Bank One Corp. Chief Executive Officer John McCoy has indicated that his
corporation isn't planning any more major acquisitions but will instead
rely on the Internet for the bank's growth. The nation's fourth largest
bank already has arrangements with America Online Inc., Excite Inc., Yahoo!
Inc., and Microsoft to market its credit cards.
Management believes that consumers have a preference for conducting all of their
financial transactions at a single web site. River City is currently running a
demonstration version of this portfolio management feature using YourBankOnline
software.
Traditional banks have been slow to add Internet banking to their services until
they could be confident that demand was sufficient to offset the added expenses.
However, the technology is changing so rapidly and new forms of competition
appearing so broadly, that banks must carefully reconsider their reluctance.
Specific factors affecting a bank's decision to offer online banking are:
o Customer Retention. Near the end of 1998, there were 73 million adults
using the Internet in the U.S., an increase of 30% in just twelve months.
This is 37% of the U.S. adult population. The nations' largest banks are
beginning to offer some level of online banking, and there are large
numbers of new Internet entrants into the financial markets trying to
capture traditional bank business. For banks to retain customers who
respond favorably to online technologies, they will have to provide
competing products and services. River City has achieved higher retention
rates since YourBankOnline was installed.
11
<PAGE>
o Service Improvements. Service levels can be enhanced significantly through
the available technology, which should improve overall customer
satisfaction.
o Cross Sales Generator. The online connection gives the bank opportunities
to cross sell its other products and services much more effectively than
through the mail or in the branch.
o New Fee-Based Revenue and other Revenue Sharing Opportunities. Banks will
have the ability to add new services to their product offerings that can be
sourced from outside providers. Examples are mortgage lending, equipment
leasing, credit cards, investment services, financial planning services,
advertisements, insurance and others to be developed.
o Bill Payment. While bill payment has become a component of many online
banking systems, Internet based bill presentment systems and solution
providers are emerging. These systems should be available for consumer use
in the year 2000. Recent research indicated that consumers would prefer
banks as their preferred provider for bill presentment and payment, as
compared to other options. However, given the huge potential volume of
transactions in this category, aggressive competition will come from large
banks, the web portals, and new companies being started to specialize in
this area. Transpoint, LLC, a joint venture between Microsoft, First Data
Corp. and Citibank, just announced that it would start up its national bill
presentment and payment service later this year.
o Cost Savings. Over time, the highly efficient electronic equipment and
systems used in online banking should allow significant cost savings as
paper-based transactions are eliminated. Management estimates that costs
per transaction are as follows:
o $1.07 in a physical branch
o $0.54 over the phone
o $0.27 at an ATM
o $0.01 over the Internet
12
<PAGE>
The table below sets out the number of FDIC insured banks and savings banks, as
well as the deposits and number of accounts under $100,000.
FDIC INSURED INSTITUTIONS
Assets Number of Client Accts Under $100 Thousand
Institutions Number Percent Cum Percent
Under $25 million 1,509 2,961,743 1% 1%
$25 to 50 million 2,240 9,028,289 2% 3%
$50 to $100 million 2,624 18,854,073 5% 8%
$100 to 300 million 2,813 45,288432 12% 20%
$300 to 500 million 566 18,368,196 4% 24%
$500 to 1 billion 432 23,591,074 6% 30%
$1 to 3 billion 306 35,810,864 9% 39%
$3 to 10 billion 140 56,153,044 14% 54%
$10 billion or more 82 180,125,114 46% 100%
Total Institutions 10,712 390,180,829 100%
Assuming the nation's 100 million households are distributed among banks in
proportion to the distribution of bank accounts, 54 million households use over
10,000 institutions for banking. These 10,000 institutions have over 200 million
deposit accounts under $10,000. Although individual banks vary greatly,
management estimates that a bank represents one household for every four
accounts. The average household has two adults. Thus an institution with 20,000
accounts represents 5,000 households containing 10,000 adults or registered
users. Actual results for River City as shown below indicate one household for
every 2.3 accounts.
FDIC Insured Accounts Under $100 thousand 47,000
Total Assets $450,000,000
Personal Core Deposit Accounts 33,632
Households 19,985
Online Households 2,243
Registered Users 4,956
The Company will initially market the YourBankOnline to financial institutions
with assets of $25 million to $300 million. As the Company grows it will expand
its marketing to financial institutions with assets of $100 million to $5
billion.
13
<PAGE>
The Marketing Strategy for YourBankOnline Software
- --------------------------------------------------
The Company intends to rapidly establish a national market presence by
leveraging a customer base of community banks.
Marketing Strategy:
The Company will utilize its YourBankOnline system to build the user base as
rapidly as possible and leverage its position to permit banks to become
"Financial Portals", defined as central sites where customers can use the
Internet to manage all their financial transactions, information and planning.
YourBankOnline will make it easy and economical for banks to participate in
online banking. It is intended that both the banks and the Company will share in
the fee income generated by the online banking sites.
Sales Strategy:
The range of prices for online banking systems is currently very broad, from a
low of about $30,000 to well over $1 million plus recurring monthly fees of $1
to $3 per user. Management believes the sales strategy for the basic
YourBankOnline system should be to minimize the initial cost to the bank, so
that only the Company's hard system costs and marketing expenses are covered.
This should encourage the banks to initiate online banking and progress toward
becoming a portal that creates revenue opportunities for both the bank and the
Company. The Company anticipates its initial contracts with individual banks for
the use of the YourBankOnline software will be a fixed fee ranging from $10,000
- - $35,000 depending on services offered. The Company will provide, manage, and
facilitate the offerings of a variety of products and services from e-commerce
partners. The Company intends to share the revenue generated from e-commerce
sales with the banks and financial institutions.
Distribution Strategy:
The Company intends to build a network of relationships with established
companies in order to achieve national market coverage in a short period of
time. Management is currently in preliminary talks with several companies that
already sell systems related products and services to target market banks. Their
customer relationships should permit fast access to bank decision makers, and
system specialists from YourBankOnline will provide technical support to close
the sale. In addition, the Company plans on building an internal sales force.
14
<PAGE>
Revenue Plan:
The Company's revenues are projected to come from several sources. Since the
Company's is in the development stages, management has used its best judgment to
identify these sources, recognizing that substantial changes may occur as the
market continues to evolve:
1. Sales of the basic online banking system, including licensing, software,
user fees, and installation support.
2. Sales of system enhancements and newly developed financial service modules.
3. Service bureau fees.
4. Referral revenue and transaction fees from outside product and service
providers, such as mortgage lenders, stock trading, and equipment leasing.
5. Advertising and sponsorship revenues.
The Company believes that by aggregating a group of online financial
institutions and their customer accounts, it will offer a compelling gateway for
a variety of online retailers. This aggregated customer base will be of value to
the vendors. In addition, the aggregated vendors will be a value to bank
customers due to the central location at their bank site and pricing options
that are possible given their combined purchasing power. User acquisition costs
are lower than pure Internet companies, due to the banks' existing client
relationship. Revenues from advertising will be higher due to the desirable
demographics of the user and the frequent account visits. River City reports
that registered users visit the site an average of 2.5 times per week. The
financial portal concept will give customers more reason to regularly visit the
bank's web site. When customers find relevant and useful services in addition to
the basic ones, they are discouraged from searching for and going to competing
sites providing more opportunities for revenue generation for the bank and
relationship building with its customers.
Factors in our sales and revenue plan are:
Target Market
- -------------
The first target market will be all banks and credit unions with a focus on
banks that have higher demographics in the retail customer base. The target
market is the 1,444 institutions with assets of $300 million to $10 billion,
which represent over 60 million users.
15
<PAGE>
Turnkey Approach
- ----------------
The Company will provide a turnkey Internet banking system to create immediate
presence without a bank having to add staff, extensive equipment, and training
or development time. The Company will establish a service bureau in a central
location where server "farms" will be housed. These servers will act as the
Online Financial Warehouses for the banks. YourBankOnline will also provide
technical assistance, customer service, staff training, system upgrades, web
page creative development, and monthly activity reporting. A bank will only need
to provide Internet access, a database transfer file and a staff member at the
bank to work with YourBankOnline representatives. The Company will provide the
systems and support to help the banks become portals.
Portal Development
- ------------------
Management expects each bank's portal to develop in stages. The initial stage
will include basic services such as checking/savings account management, loan
account management and bill payment. In the second stage, banks build their
experience with their customer base, and introduce additional financial services
according to the preferences of its customers. In the mature stage, when the
banks become financial portals, more opportunities emerge. The range of services
will be selected according to the needs and opportunities of each bank's
customer base. A stream of revenue from a diverse range of services, including
bank-based and outsourced services should generate strong profitability for the
banks and the Company. Vast amounts of demographic data and transaction data
collected and analyzed from customer experience with the system will create
opportunities for highly targeted marketing. Management believes customized
services can be marketed to individual customers or categories of customers
identified from the analysis. The potential for one-to-one marketing is
exceptional through the Financial Portal, and superior to opportunities of other
Internet- based businesses.
Competition for YourBankOnline Software
- ---------------------------------------
The market for Internet banking services and financial software applications is
highly competitive, and we expect that competition will intensify in the future.
In addition we could experience competition from our client banks and potential
client banks. From time to time, these potential client banks develop, implement
and maintain their own services and applications. We compete with a variety of
third parties, including Digital Insight, Edify, Netzee, nFront, FundsXpress,
Q-UP, First Data Direct Banking and S1 Technologies, that employ many different
approaches to providing Internet banking services. We expect competition in our
markets to increase significantly as new
16
<PAGE>
companies enter our market and current competitors expand their product lines
and services. These new competitors may include non-bank financial institutions,
such as brokerage firms and on-line service providers such as E*Trade, Intuit,
Charles Schwab, Quicken.com and Yahoo! Finance, all of which could be dominant
competitors given their current position in the online financial services
industry, broad name recognition and substantial online customer bases.
The Company may experience increased competition from Global Payment Systems,
which has a non-exclusive irrevocable right and license to the Company's
software. See "History of Banking Software." If Global were to begin
aggressively marketing YourBankOnline and were to put efforts into adding
features to the software it could have a detrimental impact on the Company's
future to successfully market the software.
In regard to the wider market of specialized financial sites and general-purpose
portals, each of these can be considered as much a potential strategic partner
as a competitor. The Company's strategy of acquiring and leveraging community
banks' customer base is based on the premise that a large group of customers
will ultimately prefer doing business with a local financial institution that
they can readily access in physical form. The Company's competitive advantage is
simply to provide a superior product for far below market cost in order to
leverage a bank's customer base into a set of registered users.
Contractors Directory
Historical Development of Contractors Directory
- -----------------------------------------------
In 1997, the Company developed and, currently operates
contractors-directory.com, a website. This site provides construction
contractors with information useful to their business. Services include listing
of notices for liens filed, notices of building permits, directories of
contractors, notices of upcoming bids, and other similar services of interest to
contractors. Contractors Directory also provides website development for
individual contractors.
The Company, through loans and contributed services from Pakie Plastino and his
related companies, has invested approximately $546,000 in the development of
Contractors Directory. This has resulted in the production of negligible
revenue. The company has significantly reduced the operations and expenditures
associated with the business. Management does not intend to continue to expand
the services and provide updates to Contractors Directory. Current plans are to
sell, "spin-off", abandon or otherwise
17
<PAGE>
dispose of the subsidiary and/or the operations of Contractors Directory, Inc.
During the periods covered by the Form 10-KSB, the Company generated revenues
through host fees of Contractors Directory. This income was offset by payment
made to obtain server space from an unrelated third party, maintenance
associated with the web site and, general and administrative expenditures. It is
unclear whether those companies under the yearly contracts for hosting services
will renew those contracts for the fiscal year ended 2000. Management does not
intend to aggressively seek renewal of those contracts or to pursue new
contracts. Conversely, management does not intend to incur significant expenses
in the maintenance or updating of the web site. Consequently, management expects
the cash flow related to Contractors Directory to be nominal during future
periods.
Description of Contractors Directory
- ------------------------------------
Contractor's Directory provides an Internet site that is available to general
contractors, subcontractors, architects, property managers, insurance companies
and other individuals and entities involved in the construction industry.
Subscribers in various categories are able to provide information about their
companies that interested parties can review in the privacy of their office
using DOS or Windows. Each subcontractor or supplier can provide a color photo
and up to eight pages of text describing their company. Additionally, bid lists,
building permits, and credit and lien information will be updated daily of the
website. General contractors and other interested parties can receive this
service for a fee.
Competition for Contractors Directory
- -------------------------------------
Management is not aware of other companies offering services similar to the
Contractor's Directory. Currently, general contractors, property managers,
engineers, architects and others in the industry normally find sub-contractors
and suppliers through the standard Yellow Pages or by referral.
General
Employees
- ---------
At January 7, 2000 the Company operated with eight employees and consultants.
There is no collective bargaining agreement in place.
18
<PAGE>
Development Costs
- -----------------
The Company is currently a development stage company and no significant revenues
have been earned from the operation of the Company. The majority of the
expenditures and resources of the Company during the last two fiscal years have
been spent on development of Contractors Directory and most recently the
formation YourBankOnline.
ITEM 2. DESCRIPTION OF PROPERTY
- -------------------------------
The Company rents approximately 1,400 square feet of space at 6912 220th Street
SW, Mountlake Terrace, Washington 98043, on a month-to-month basis, for
administrative and sales efforts. As of January 1, 2000, the Company pays $1,850
per month for this facility. The Company considers the facility adequate for
current purposes.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
The Company does not know of any material, active or pending legal proceedings
against them; nor is the Company involved as a plaintiff in any material
proceeding or pending litigation.
The Company knows of no active or pending proceedings against anyone that might
materially adversely affect an interest of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE FOR SECURITY HOLDERS
- -------------------------------------------------------------
None.
19
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- -----------------------------------------------------------------
Through October 21, 1999, the Company's common stock traded on the
Over-the-Counter Electronic Bulletin Board in the United States, having the
trading symbol "CSDD". Subsequent to October 21, 1999, the Company's common
stock was quoted and traded on the "pink sheets". Trading volume and
high/low/closing prices for the past two years are disclosed in the following
table:
NASBD Stock Trading Activity
Quarter High Low Close Volume
Ended
- -------- -------------- -------------- -------------- --------------
12/31/99 $3.50 $.75 $2.25 6,732
09/30/99 $7.50 $2.25 $2.69 7,022
06/30/99 $31.50 $1.87 $4.50 2,171,000
03/31/99 $2.00 $0.12 $1.81 565,000
12/31/98 $0.69 $0.19 $0.25 78,101
09/30/98 No Trading No Trading No Trading No Trading
06/30/98 No Trading No Trading No Trading No Trading
03/31/98 No Trading No Trading No Trading No Trading
12/31/97 No Trading No Trading No Trading No Trading
On January 11, 2000, the shareholders' list for the Company's common shares
showed 40 registered shareholders and 10,864,000 shares issued and outstanding.
The Company has not declared any dividends, on its common or preferred shares,
since incorporation and does not anticipate that it will do so in the
foreseeable future. The present policy of the Company is to retain future
earnings for use in its operations and expansion of its business.
The preferred shares of the Company are not registered and do not trade on an
exchange.
The following is a discussion of is a discussion of securities sold by the
Company during the period covered by this report which were not registered under
the Securities Act:
20
<PAGE>
In March 1997, the Company issued 1,500,000 shares of Common Stock to Pakie
Plastino in exchange for marketing rights in three states for Contractors
Directory. The shares of common stock issued were pursuant to an exemption to
registration provided under Section 4(2), of the Securities Act of 1933. No cash
was received, but Management assumed a non-cash equity value for the stock
issuance of $75,000 (e.g.$0.05 per share). At the same time Mr. Plastino was
subsequently appointed to the Board of Directors and as President of the
Company. At the time of the transaction Mr. Plastino was provided with full and
complete information as to the Company. All stock certificates were issued with
appropriate legend indicating that the securities were acquired for investment
purposes.
On April 17, 1997, the Company issued 1,000,000 shares of Common Stock in
exchange for common stock of Contractor's Directory. The shares of common stock
were issued pursuant to an exemption to registration provided under Section
4(2), of the Securities Act of 1933. No cash was received, but a non-cash equity
value for the stock issuance of $100 (e.g.$0.0001 per share) was utilized. The
acquisition was accounted for as a "pooling of interest" and, consistent with
generally accepted accounting principles, the value of the contributed capital
of the acquired company was carry-forwarded to the books and records of the
surviving company. Contractor's Directory, Inc. had a contributed capital book
value of $100.00 prior to the acquisition and therefore, was the value carried
forward by Contractor's Directory in exchange for the 1,000,000 shares.
Representatives of Contractor's Directory were provided full access to
information about the Company as part of it's due diligence process. All stock
certificates were issued with appropriate legend indicating that the securities
were acquired for investment purposes.
In May 1997 and September 30, 1997, a total of 100,000 shares of Common Stock
were issued for attorney's fees (e.g. Dean Kalivas) and secretarial services
(e.g. Connie Pinter). The shares of common stock issued were pursuant to an
exemption to registration provided under Section 4(2), of the Securities Act of
1933. Mr. Kalivas acted as legal counsel for the Company and performed various
legal services on behalf of the Corporation for the period March 1997 through
June 1997. Mr. Plastino and Mr. Kalivas have been business associates in various
real estate transactions over the past several years. In addition, Mr. Kalivas
purchased a business known as Construction Lien and Credit Services ("CLCSI")
from Mr. Plastino. Mr. Kalivas is not affiliated with Consolidated Data, its
subsidiaries, or Officers or Directors, in any way other than as a shareholder
of the Company. Ms. Pinter acted as executive assistant to Pakie Plastino,
President of the Company, and has been employed by affiliated Companies of Mr.
21
<PAGE>
Plastino since 1984. Ms. Pinter has known Mr. Plastino for approximately 20
years. She has been employed by CLCSI and LGA, Inc, companies controlled, or
previously controlled by Mr. Plastino, in the capacity of Executive Assistant
and Bookkeeper for those companies. Ms. Pinter is not affiliated with
Consolidated Data or its subsidiaries, Officers or Directors, in any way other
than as a shareholder of the company. No cash was received, but Management
assumed a non-cash equity value for the stock issuance of $5,000 (e.g.$0.05 per
share). The Company believes that Ms. Pinter's status as an employee of the
Company provided her access to information concerning the Company. The Company
believes that Mr. Kalivas' position as counsel to the Company provided him
access to information concerning the Company. All stock certificates provided to
Ms. Pinter and Mr. Kalivas were issued with appropriate legend indicating that
the securities were acquired for investment purposes.
Pursuant to an offering in October 1997, the Company sold 80,000 shares of
common stock for an aggregate purchase price of $12,000. The purchaser was
Clayten Vance, a Canadian citizen. He is not affiliated with the Company, its
subsidiaries, Officers or Directors in any way other than as a shareholder of
the Company. The shares of common stock in the foregoing offering, were offered
pursuant to an exemption to registration provided under Section 3(b), Regulation
D, Rule 504 of the Securities Act of 1933, as amended and under the exemption to
registration under Section 11-51-308(1)(p) of the Colorado Securities Act.
In August 1998 and March 1999, a total of 175,000 shares of Common Stock were
issued for consulting services (e.g. Arthur Stevens, 150,000 shares; and Gary
Bylund, 25,000 shares). The shares of common stock issued were pursuant to an
exemption to registration provided under Section 4(2), of the Securities Act of
1933. At the time Mr. Stevens was an employee, and his services related to
computer networking and related support. He continues to provide services to the
Company as a consultant through his own business. The Company believes that Mr.
Stevens status as an employee of the Company provided him access to information
concerning the Company. Mr. Stevens worked for Consolidated Data for
approximately 1 1/2 years. He is not affiliated with Consolidated Data or its
subsidiaries, Officers or Directors, in any way other than as a former employee,
current vendor, and as a shareholder of the company. Neither Mr. Plastino nor
the Company had any association or relationship with Mr. Stevens prior to his
employment with the Company. At the time the services were performed, Mr. Bylund
was a member of the advisory committee to the Company providing advice to the
Company in the area of insurance and financial products. Mr. Bylund is the owner
of an insurance brokerage firm and a registered representative of the NASD. Mr.
Bylund has known Mr. Plastino for
22
<PAGE>
20 years and has provided insurance products to Mr. Plastino in the past. He is
affiliated with Consolidated Data and its subsidiaries as an advisor and as a
shareholder of the company. He is not affiliated in any way with any other
Officers or Directors. No cash was received, but Management assumed a non-cash
equity value for the stock issuance to Mr. Stevens was $7,500 (e.g.$0.05 per
share), and Mr. Bylund was $5,000 (e.g.$0.20 per share). The Company believes
that Mr. Bylund's was sophisticated and had complete access to information
concerning the Company. All stock certificates provided to Messrs. Stevens and
Bylund were issued with appropriate legend indicating that the securities were
acquired for investment purposes.
In March 1999, the Company issued 300,000 shares of Common Stock to InterCorp,
Inc., in compensation for services. The shares of common stock issued were
pursuant to an exemption to registration provided under Section 4(2), of the
Securities Act of 1933. No cash was received, but Management assumed a non-cash
equity value for the stock issuance of $60,000 (e.g.$0.20 per share). InterCorp,
Inc. has made representations to the Company that all of the equity owners of
such company are "accredited investors" as well as recognizing the high degree
of risk of the investment, the ability to bear the risk, that InterCorp, Inc. is
a sophisticated investor, the investment is suitable as an investment, InterCorp
has been given access to full and complete financial and business information
regarding the Company, the securities are restricted securities, and InterCorp
acquired the securities for its own account. All stock certificates were issued
with appropriate legend indicating that the securities were acquired for
investment purposes. Additionally, the President of InterCorp, Beau Jeffries,
has known Mr. Plastino for 6 years. InterCorp has not provided any other
services other than those for which it was compensated 300,000 shares, nor does
InterCorp have any other relationship with Consolidated Data or its
subsidiaries. In prior years, InterCorp has provided services to other companies
controlled by Mr. Plastino. InterCorp is not affiliated with any Directors and
Officers of Consolidated Data other than as a past vendor to companies managed
by Mr. Plastino.
In April 1999, the Company issued 75,000 shares of Common Stock to Wall Street
Marketing Group, Inc., pursuant to an exercise of options previously granted
under the terms of a consulting agreement entered into between the Company and
Wall Street Marketing Group, Inc. on March 1, 1999. The exercise price was
$25,000 for 25,000 shares (e.g. $1.00 per share, $50,000 for 25,000 shares (e.g.
$2.00 per share), and $125,000 for 25,000 (e.g. $5.00 per share). The options
originally granted were for a total of 250,000 shares of common stock at varying
prices and amounts, to be exercised no later than May 1, 2000. Wall Street
Marketing Group still retains the option for: 25,000 shares at
23
<PAGE>
$10.00 per share; 25,000 shares at $15.00 per share; 25,000 shares at $20.00 per
share; 25,000 shares at $25.00 per share; 25,000 shares at $30.00 per share;
25,000 shares at $40.00 per share; and 25,000 shares at $50.00 per share. The
shares of common stock issued were pursuant to an exemption to registration
provided under Section 4(2), of the Securities Act of 1933. Under the terms of
the Consulting Agreement, Wall Street Marketing Group was retained to provide
representation and advice in public relations, public appearances and marketing
of the Company, as well as to disseminate information concerning the Company to
licensed members of the securities industry. Wall Street Marketing Group was
provided with full access to information concerning the Company. All stock
certificates were issued with appropriate legend indicating that the securities
were acquired for investment purposes. The President of Wall Street Marketing
("WSM") has known Mr. Plastino for one year. The Company did not have any
affiliation with WSM prior to services provided by WSM in 1999. WSM has not
provided any other services other than those for which it was compensated in
cash and options. WSM has not had any other relationship with the Company, its
subsidiaries, Officers or Directors.
In May 1999, the Company issued 28,000 shares of Common Stock to Robert Odell,
in compensation for services from January 1998 through June 1999, as a graphics
designer for web site design. The shares of common stock issued were pursuant to
an exemption to registration provided under Section 4(2), of the Securities Act
of 1933. Mr. Odell has been employed by CLCSI and Contractor's Directory, Inc.,
companies controlled by Mr. Plastino, in the capacity of advertising and design
specialist for those companies. Mr. Odell is not affiliated with the Company,
its subsidiaries, Officers or Directors, in any other way, other than as a
shareholder of the company. No cash was received, but Management assumed a
non-cash equity value for the stock issuance of $5,600 (e.g.$0.20 per share).
The Company believes that Mr. Odell's relationship to the Company provided him
access to information concerning the Company. All stock certificates were issued
with appropriate legend indicating that the securities were acquired for
investment purposes.
On September 30, 1998 (1,200,000), and June 1999 (700,000), collectively the
Company issued 1,900,000 shares to Pakie Plastino as compensation for services
as an officer and director. No cash was received, but Management assumed a
non-cash equity value for the stock issuance of $120,000 (e.g.$0.05 per share).
The Company believes that Mr. Plastino's status as an officer and director of
the Company provided him access to information concerning the Company. All stock
certificates were issued with appropriate legend indicating that the securities
were acquired for investment purposes. The shares of common stock issued were
24
<PAGE>
pursuant to an exemption to registration provided under Section 4(2), of the
Securities Act of 1933.
In March 1999 (2,000,000 shares of Common Stock), and April 12, 1999 (1,200,000
shares of Common Stock), the Company collectively issued 3,200,000 shares of its
restricted common stock in full satisfaction of agreements with DTEK
Corporation. The shares of common stock issued to DTEK, were offered pursuant to
an exemption to registration provided under Section 4(2), of the Securities Act
of 1933. No cash was received, but Management assumed a non-cash equity value
for the stock issuance of $640,000 (e.g.$0.20 per share). DTEK was provided with
full and complete access to information about the Company. All stock
certificates were issued with appropriate legend indicating that the securities
were acquired for investment purposes.
In December 1999, the Company sold 80,000 restricted common shares to unrelated
third parties in a private placement. The purchasers of the shares also received
a warrant to purchase an additional 40,000 common shares with an exercise price
of $3.00 per share. The warrant expires September 22, 2000. The shares of common
stock and warrants were offered pursuant to an exemption to registration
provided under Section 4(2), of the Securities Act of 1933. The Company received
cash proceeds of $120,000 from the sale of stock and warrants.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION
- ----------------------------------------------------------------------
The following discussion should be read in conjunction with the financial
statements and related notes included elsewhere in this report. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from the results anticipated in these
forward-looking statements as a result of factors including, but not limited to,
those under "Factors That May Affect Future Results of Operations" below and
elsewhere in this Report.
Overview
- --------
YourBankOnline enables small to medium sized banks to offer their retail and
commercial customers banking and financial services over the Internet. This
product enables banks to offer their customers an array of products, services
and transactions over the Internet in a secure environment. The Company acquired
the YourBankOnline software in March 1999, and from April 1999 to December 1999
our principal activities consisted of recruiting employees, developing our
business strategy, and raising capital for the growth of YourBankOnline. All of
our revenue during the fiscal year ending September 30, 1999, approximately
$27,600, was
25
<PAGE>
generated through licensing fees and other revenues associated with our
Contractors Directory operations. We have not yet generated revenues from
YourBankOnline.
To date, the majority of our resources have been directed to developing our
business plan, forming exclusive strategic marketing alliances, and building our
sales and marketing, management, and technology personnel. We anticipate our
operating expenses will increase substantially in future periods as we increase
our sales force, significantly increase our marketing and branding efforts,
continue to develop new distribution channels, fund greater levels of product
development and expand our support staff and facilities to facilitate our
growth. Accordingly, we may incur additional losses in future periods.
During the periods covered by the Form 10-KSB, the Company generated revenues
through host fees of Contractors Directory. This income was offset by payments
made to obtain server space from an unrelated third party, maintenance
associated with the web site and, general and administrative expenditures. It is
unclear whether those companies under the yearly contracts for hosting services
will renew those contract for the fiscal year ended 2000. Management does not
intend to aggressively seek renewal of those contracts or to pursue new
contracts. Conversely, management does not intend to incur significant expenses
in the maintenance or updating of the web site. Consequently, management expects
the cash flow related to Contractors Directory to be nominal during the fiscal
year ended September 30, 2000. In future periods, management expects to derive
substantially all of its revenues from products and services provided to banks,
the banks' customers and other participants in the financial services industry.
FISCAL YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO FISCAL YEAR
ENDED SEPTEMBER 30, 1998
Revenues
- --------
All revenues during fiscal 1999 and all revenues since inception have been
generated from Contractors Directory. The YourBankOnline banking software
business has not yet generated any revenues.
26
<PAGE>
Service revenue represents fees generated from general contractors,
sub-contractors, and various suppliers. These fees were for Web site listing,
hosting and other Web related services. Service revenue increased $10,043, or
57%, from $17,515 during fiscal 1998 to $27,558 in fiscal 1999. This was
attributable to an increase in the number of general contractors,
sub-contractors, and building supply companies who subscribed to Contractors
Directory services. Service revenue from Contractors Directory is expected to
significantly decrease in future periods as we shift our resources to the
development and marketing of the YourBankOnline banking software product. See
"Contractors Directory" for a discussion of the plans for the Contractors
Directory business.
Expenses
- --------
Total expenses increased $206,196, or 93%, from $221,217 during fiscal 1998 to
$427,413 in fiscal 1999. This increase is primarily attributable to costs
incurred to acquire and begin the initial development of the online banking
business.
Amortization expense increased $66,045, or 283%, from $23,333 during fiscal 1998
to $89,378 in fiscal 1999 as a result of amortization of the Internet banking
software that was acquired in March 1999. The banking software was acquired at a
cost of $640,000 and is being amortized over its expected useful life of five
years.
Advertising, marketing, and travel expense increased $60,934 in fiscal 1999,
which is primarily attributed to costs incurred to purchase the banking
software, recruit future management and employees, and begin to market the
company.
Legal, accounting, and professional fees increased $53,085 which is primarily
attributed to costs associated with preparing the Company's initial filing with
the Securities and Exchange Commission, on Form 10SB.
Facilities, telephone, and related office expense increased $33,194, or 545%,
from $6,093 during fiscal 1998 to $39,287 in fiscal 1999. This increase is
primarily attributed to general and administrative activities associated with
entering into the banking software business as well as general and
administrative costs associated with becoming a public reporting company.
Investor relation expense increased $25,000 and is attributable to consulting
costs incurred to assist the company in public relations, drafting press
releases, public appearances, and the general marketing of the Company.
27
<PAGE>
Directors' fees decreased $27,500, or 41%, from $67,500 during fiscal 1998 to
$40,000 in fiscal 1999. This is due to the reduction in shares granted to P.
Plastino, during fiscal 1999 as compared to fiscal 1998, for services as
Director and Chairman.
Interest Expense
- ----------------
Interest expense increased $9,361, or 22%, from $42,071 during fiscal 1998 to
$51,432 in fiscal 1999. The increase is attributable to a rise in the average
balance of loans payable during fiscal 1999 as compared to fiscal 1998.
Liquidity and Capital Resources
- -------------------------------
Through January 7, 2000 we have raised a total of approximately $343,000 of
capital to fund the operations of the Company. As of September 30, 1999, we had
bank indebtedness of $1,165 in addition to notes payable to companies affiliated
with our Chairman of $546,219.
During fiscal 1999 cash provided by financing activities was $914,683. During
fiscal 1998 cash provided by financing activities was $125,052. The increase is
attributed to additional shares issued for cash and services in fiscal 1999.
Our existing capital resources will not be adequate to fund our operations for
more than two to six months. We have not sustained positive earnings or cash
flow and we are required to incur significant expenses to be competitive.
Consequently, we will require additional funds during the next two to six months
to successfully execute our strategy. Additional financing may not be available
on favorable terms or at all. If we cannot raise adequate funds to satisfy our
capital requirements, we may have to limit our operations significantly. Our
future capital requirements depend upon many factors, including, but not limited
to:
o rate at which we expand our sales and marketing operations;
o extent to which we expand our products and services;
o extent to which we develop and upgrade our technology and data network
infrastructure;
o occurrence, timing, size and success of acquisitions; and
o response of competitors to our service offerings.
We cannot predict the extent to which investor interest in the Company will lead
to future sales of equity securities to fund
28
<PAGE>
our current business plan. It is unlikely that we will raise significant amounts
of capital through borrowing or through the issuance of other debt instruments.
Therefore, in early 2000 we plan on seeking new capital through the issuance of
additional shares the Company, either through a public offering or private
placement, at prices that have yet to be determined. Sales of a substantial
number of shares of our common stock in the public market could adversely affect
the market price of our common stock. We may also seek the advice and assistance
of investment bankers and other financial professionals to assist us in raising
additional capital and we expect to pay fee for these services.
Personnel
- ---------
Our future success depends to a significant extent on the ability to attract and
retain qualified personnel. The market for experienced personnel is competitive,
particularly in the areas of Internet technology and banking related Internet
technology.
Impact of Year 2000 Computer Issues
- -----------------------------------
All computer systems utilized by the Company, including the YourBankOnline
system, were fully Y2K compliant ad did not experience Year 2000 transition
issues. Management does not expect on-going Year 2000 transition issues will
have a material impact on operations as all aspects of the system have been
designed to accurately handle any Y2K issue.
Factors That May Affect Future Results Of Operations
- ----------------------------------------------------
In addition to the other information included in this Report, the following
factors should be considered in evaluating our business and future prospects:
Because we are a Development Stage Company and have a limited operating history,
an investor in our common stock must consider the risks and difficulties
frequently encountered by early stage companies in new and rapidly evolving
markets, including the Internet banking and electronic commerce markets. These
risks include our ability to:
o successfully expand our sales and marketing efforts;
o develop and maintain strategic marketing relationships;
o promote acceptance of our Internet banking services by customers of our
client banks;
o respond effectively to competitive pressures;
29
<PAGE>
o continue to develop and upgrade our technology; and
o attract, retain and motivate qualified personnel.
We cannot guarantee that we will succeed in achieving these goals, and there can
be no assurance we will ever achieve or sustain profitability. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
detailed information on our limited operating history.
We incurred net losses of approximately $451,000 for fiscal the year ending
September 30, 1999 and approximately $1,108,000 from inception through September
30, 1999. At September 30, 1999, we had an accumulated deficit of approximately
$1,108,000. We expect to incur significant operating losses on a quarterly basis
in the future.
We will need to generate significant revenues to achieve and maintain
profitability, and we cannot assure you that we will be able to do so. Even if
we do achieve profitability, we cannot assure you that we can sustain or
increase profitability on a quarterly or an annual basis in the future. If our
revenues grow more slowly than we anticipate or if our operating expenses exceed
our expectations, our financial performance will likely be adversely affected.
See "Liquidity and Capital Resources" for further information on our anticipated
capital funding plans.
GOVERNMENT REGULATION
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted in the future that address issues including user privacy, pricing, and
the characteristics and quality of products and services. Any new laws or
regulations relating to the Internet or the manner in which existing laws are
applied to the Internet could adversely affect our business. Our primary
customers are banks. The banking industry, including electronic banking, is
regulated heavily, and we expect that this regulation will affect the relative
demand for our products and services. In addition, through their ability to
regulate our bank customers' system requirements, bank regulators can
effectively regulate the required security systems, communication technologies
and other features of our products and services. There can be no assurance that
federal, state or foreign governmental authorities will not adopt new
regulations addressing electronic banking or banking operations generally that
could require us to modify our current or future products and services.
30
<PAGE>
FORWARD-LOOKING STATEMENTS
- --------------------------
From time-to-time, the Company or its representatives may have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filings made by the Company with the Securities and Exchange Commission
or other regulatory agencies. Words or phrases "will likely result", "are
expected to", "will continue", " is anticipated", "estimate", "project or
projected", or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). The Reform Act does not apply to initial
registration statements, including this filing by the Company. The Company
wishes to ensure that meaningful cautionary statements accompany such
statements, so as to maximize to the fullest extent possible the protections of
the safe harbor established in the Reform Act. Accordingly, such statements are
qualified in their entirety by reference to and are accompanied by the following
discussion of certain important factors that could cause actual results to
differ materially from such forward-looking statements.
ITEM 7 - FINANCIAL STATEMENTS
- --------------------------------------
Reference is made to the financial statements and related notes and supplemental
data under Item 13 filed with this report.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- ------------------------------------------------------
Not Applicable
31
<PAGE>
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
- -------------------------------------------------------
CONTROL PERSONS, COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
------------------------------------------------------------------
The table below lists, as of January 7, 2000, the names of the Directors and
Executive Officers of the Company. The Directors have served in their respective
capacities since their election and/or appointment and will serve until the next
Annual Shareholders' Meeting or until a successor is duly elected, unless the
office is vacated in accordance with the Articles/By-Laws of the Company. The
Executive Officers serve at the pleasure of the Board of Directors. All
Directors and Executive Officers are residents and citizens of the United
States.
Directors and Executive Officers
Date First
Elected
Name Age or Appointed
- ----------------------------------------------------------------------------
Pakie Plastino, Chairman 50 July 1997
William D. Doehne, COO 46 July 1997
Pakie Plastino. Mr. Plastino is Chairman and a Director of the Company. He
spends 90% of his time on the affairs of the Company. The Company has employed
him since March 1997. His responsibilities include recruiting, coordinating
strategy, planning, and marketing. Mr. Plastino is an officer of Construction
Lien and Credit Services, a Seattle-based company that provides lien filing and
collection services for contractors, and ChekProtekt, a Seattle-based company
that provides check collection services for merchants. Mr. Plastino has been
involved with Construction Lien and Credit Services since 1993.
William D. Doehne. Mr. Doehne is the Chief Operating Officer and a Director of
the Company. He spends 90% of his time on the affairs of the Company. Mr. Doehne
is also the President of Contractors Directory, Inc.. Mr. Doehne has been
associated with Contractors Directory since 1995. From 1991 to 1995 he was
employed ChekProtekt.
The Company has no formal plan for compensating its Directors for their service
in their capacity as Directors. Directors are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at
32
<PAGE>
meetings of the Board of Directors. The Board of Directors may
award special remuneration to any Director undertaking any special services on
behalf of the Company other than services ordinarily required of a Director.
During Fiscal 1997, no Director received and/or accrued any compensation for his
services as a Director, including committee participation and/or special
assignments.
In 1999 an advisory group was formed to advise the Company on a variety of
business and technology issues. This advisory group currently consists of five
individuals, each with over fifteen years of experience in business leadership
and/or technology capacities. These individuals were referred to the Company
through investors and business relationships and were selected by the board of
directors.
Jonathan J. Goody. Mr. Goody is a member of the Advisory Board of the Company.
He is a former Vice President and sales executive for Private Business Inc. of
Brentwood, Tennessee. Private Business is a software company that provides cash
management software to small business through community bank partners. Private
Business became a public company in June 1999. Mr. Goody's primary
responsibility with Private Business included sales to banks located on the West
Coast. Mr. Goody is also a founding partner of Bay Equity Real Estate
Acquisitions, a private real estate holding company. Mr. Goody attended the
University of Southern California where he received a Bachelor of Science Degree
in Business Administration.
Curt Dean Blake. Mr. Blake was formerly the Chief Operating Officer of Starwave
Corporation, a company involved in the collection of content sites on the
Internet. Mr. Blake graduated from the University of Washington in 1980 when he
received his Bachelor of Arts degree in Business Administration. In June 1983 he
received his Juris Doctorate from the University of Washington and in 1984 he
received his MBA from the University of Washington.
Gary L. Bylund. Mr. Bylund currently the President and Chief Executive Officer
of Corporate Planning Systems, L.L.C., a company involved in employee benefit
brokerage and consulting.
Jim David. Mr. David is the President of Trilogy Software, a mainframe software
publisher. From 1996 through 1998 he was employed by Data I/O Corporation first
as Vice President Worldwide Sales & Marketing and then as President. From 1992
through 1995 he was a Vice President of Aldus USA. Mr. David received both his
MBA and B.S (Business Administration/Mathematics) from the University of
Washington.
33
<PAGE>
During Fiscal 1999, the Company awarded 25,000 shares of common stock to each
member of the Advisory Board.
Involvement in Certain Legal Proceedings
- ----------------------------------------
Steven Everett Coryell
On December 20, 1995, a civil injunctive complaint was filed in the
Fourth Judicial District Court in Boise, Idaho (Cause #CV0C95-06373D)
charging that Steven Everett Coryell, the former Chief Executive
Officer of Consolidated Data, and his company, National Investigative
Consultants, Inc. violated the anti-fraud and registrations provisions
of the Idaho Securities Act. The defendants admitted the allegations in
the complaint, which included that they sold securities in the form of
stock, distressed loans packages and limited partnership interests to
13 residents of the state of Idaho. A judgment was entered against the
defendants on March 27, 1996. The court's order found that the
defendants violated the securities laws and permanently enjoined them
from engaging in such practices in the future. The court ordered full
restitution to the investors in the amount of nearly $345,000.
Stipulation for judgment and permanent injunction was entered on May
13, 1996. Mr. Coryell is the sole owner of DTEK Corporation, the owner
of 2,685,000 common shares of the Company.
Pakie Plastino
On or around June 11, 1994, Pakie Plastino was debarred from acting in
any capacity as a contractor in any federally funded construction
project by the U.S. Department of Education. The term of the exclusion
expired on or about August 28, 1995.
Family Relationships
- --------------------
There are no family relationships between any of the officers and/or directors.
34
<PAGE>
ITEM 10 - EXECUTIVE COMPENSATION
- --------------------------------
Between April 1997 and March 1999, Pakie Plastino received 100,000 shares per
month as compensation for his services.
The Company has no material bonus or profit sharing plans pursuant to which cash
or non-cash compensation is or may be paid to the Company's Directors or
Executive Officers. The Company has no stock option or other long-term
compensation program.
During 1998, no funds were set aside or accrued by the Company to provide
pension, retirement or similar benefits for Directors or Executive Officers.
The Company has no plans or arrangements in respect of remuneration received or
that may be received by Executive Officers of the Company in Fiscal 1998 to
compensate such officers in the event of termination of employment (as a result
of resignation, retirement, change of control) or a change of responsibilities
following a change of control, where the value of such compensation exceeds
$60,000 per Executive Officer.
The Company has no written employment agreements.
Other than that disclosed above, no compensation was paid during Fiscal 1998 to
any of the officers or directors of the Company to the extent that they were
compensated in excess of $60,000.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The Registrant is a publicly owned corporation, the shares of which are owned by
United States residents. The Registrant is not controlled directly or indirectly
by another corporation or any foreign government.
35
<PAGE>
The table below lists, as of January 11, 2000, all persons/companies the
Registrant is aware of as being the beneficial owner of more than five percent
(5%) of the common stock of the Registrant.
5% Shareholders
Title Amount and Nature Percent
of of Beneficial of
Class Name of Beneficial Owner Ownership Class #
- ------ ------------------------ ----------------- -------
Common Pakie Plastino (1) 4,875,000 44.9%
Common DTEK (2) 2,685,000 24.7%
TOTAL 7,560,000 69.6% (3)(4)
# Based on 10,864,000 shares outstanding as of January 11, 2000.
1. 4,650,000 of these shares are restricted pursuant to Rule 144. Mr.
Plastino's address is 6912 220th Street S.W., Mountlake Terrace,
Washington 98043.
2. All of these shares are restricted pursuant to Rule 144. Patricia J.
Fishback votes these shares. Ms. Fishback's address is 2309 Mountain view
Drive, #195, Boise, Idaho.
3. Does not reflect share purchase options for 250,000 shares of common stock
issued to Wall Street Marketing Group Inc. for consulting services and
does not include the conversion of preferred stock to common shares.
4. All 100,000 shares of Preferred Stock currently outstanding are owned
beneficially and of record by HEP Trust Company, located at 22
Grapetree/Cocoplum West Bay Road, Grand Cayman Island, British West
Indies.
36
<PAGE>
The table below lists all Directors and Executive Officers who beneficially own
the Registrant's voting securities and the amount of the Registrant's voting
securities owned by the Directors and Executive Officers as a group, as of
January 11, 2000.
Shareholdings of Directors and Executive Officers
Title Amount and Nature Percent
of of Beneficial of
Class Name of Beneficial Owner Ownership Class #
- ----- ---------------------------- ----------------- -------------
Common Pakie Plastino, Chairman & Director 4,875,000[1] 44.9%
Common William D. Doehne 250,000 2.3%
Total 5,125,000 47.2%[2]
# Based on 10,864,000 shares outstanding as of January 7, 2000.
[1] Mr. Plastino acquired 225,000 in March 1997; 1,500,000 shares in March 1997;
750,000 in April 1997; 500,000 on May 1, 1997; 1,200,000 on September 30, 1998;
and 700,000 in June 1999.
[2] Does not reflect share purchase options for 250,000 shares of common stock
issued to Wall Street Marketing Group Inc. for consulting services and does not
include the conversion of preferred stock to common shares.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
There have been no transactions since July 14, 1995 (Date of Inception), or
proposed transactions, which have materially affected or will materially affect
the Company in which any Director, Executive Officer, or beneficial holder of
more that 10% of the outstanding common stock, or any of their respective
relatives, spouses, associates or affiliates has had or will have any direct or
material indirect interest.
On March 3, 1999, the Company engaged InterCorp., Inc. of Seattle, Washington to
procure accounting and legal services necessary to produce current audited
financial statements and to complete and file Form 10-SB with the Securities and
Exchange Commission. InterCorp., Inc. also was to develop a business plan for
the online banking system. InterCorp agreed to provide such services in exchange
for 300,000 shares of restricted common shares. The services were deemed to have
a value of $60,000. The Company issued 300,000 shares of common stock in March
1999 in consideration for services and $100. Through October 1999, the Company
incurred costs associated with services to be provided by InterCorp,
specifically accounting and legal costs associated
37
<PAGE>
with preparation of financial statements and the Form 10-SB. The Company paid
these bills directly and InterCorp has reimbursed the Company $45,000 for these
costs.
Through October 1999, the Company incurred $45,000 in accounting and legal costs
associated with the preparation of financial statements and the Form 10-SB.
These costs related to services that were to be provided by InterCorp. The
Company paid these bills directly and, as of October 1999, InterCorp has
reimbursed the Company in full for these costs.
The Company's independent auditor is unrelated to Inter Corp., Inc.
The Company has awarded 250,000 share purchase options to Wall Street Marketing
Group, Inc., a firm that was hired to assist the Company in investor relations
matter. To date Wall Street Marketing Group Inc. has exercised 75,000 of these
share purchase options.
In December 1999, the Company sold 80,000 restricted common shares to unrelated
third parties in a private placement. The purchasers of the shares also received
a warrant to purchase an additional 40,000 common shares with an exercise price
of $3.00 per share. The warrants expires September 22, 2000. The shares of
common stock and warrants were offered pursuant to an exemption to registration
provided under Section 4(2), of the Securities Act of 1933. The Company received
cash proceeds of $120,000 from the sale of stock and warrants.
Item 13 - EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) The following documents are filed as part of this report:
1. Index to Financial Statements
Independent Auditors' Reports
Consolidated Balance Sheets at September 30, 1999, 1998 and 1997
Consolidated Statement of Loss and Accumulated Deficit for the years ended
September 30, 1999, 1998 and 1997
Consolidated Statement of Cash Flows for the years ended September 30, 1999,
1998 and 1997
Statement of Statement of Changes in Stockholders' Equity for the years ended
September 30, 1999, 1998 and 1997
38
<PAGE>
Notes to Financial Statements
2. Financial statement schedules required to be filed by Item 8 and paragraph
(d) of this Item 13:
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. The exhibits are listed in the index of exhibits
(b) No reports on Form 8-K were required to be filed during the last quarter of
the period covered by this
report.
(c) The index of exhibits
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Consolidated Data, Inc.
a Colorado corporation
Date: January 13, 2000 By: /s/ Pakie Plastino
---------------------
Pakie Plastino, Chairman of the Board and President (Principal Financial and
Accounting Officer)
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 Company and in
the capacities and on the dates indicated.
Date: January 13, 2000 By: /s/ Pakie Plastino
--------------------
Pakie Plastino, Chairman of the Board and President
Date: January 13, 2000 By: /s/ William D. Doehne
-------------------------
William D. Doehne, Director and Chief Operating Officer
<PAGE>
CONSOLIDATED DATA, INC.
AND SUBSIDIARY
(A Development Stage Company)
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
<PAGE>
TABLE OF CONTENTS
Page
Accountant's Report 1
Financial Statements
Consolidated Balance Sheet 2-3
Consolidated Statements of Loss
and Accumulated Deficit 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Changes in
Stockholders' Equity 6-8
Notes to Financial Statements 9-12
<PAGE>
Independent Auditor's Report
To the Board of Directors and Stockholders of
Consolidated Data, Inc.
Mountlake Terrace, Washington
I have audited the accompanying Consolidated Balance Sheet of Consolidated Data,
Inc. and subsidiary for the years ended September 30, 1999, 1998 and 1997 and
the related Consolidated Statements of Loss and Accumulated Deficit,
Consolidated Statement of Cash Flows for the periods then ended, and the
Consolidated Statement of Changes in Shareholders' Equity. My responsibility is
to express an opinion on these restated financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the restated financial statements referred to above present
fairly, in all material respects, the financial position of Consolidated Data,
Inc. and subsidiary for the years ended September 30, 1999, 1998 and 1997, and
the results of its operations and its cash flows for the periods then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Consolidated Data, Inc. will continue as a going concern. As discussed in Note 4
to the financial statements, Consolidated Data, Inc. is engaged in new
operations, and the ability to continue to exist as a going concern relies on
the company's ability to retain adequate financing and to generate sufficient
sales. Management plans in this regard are described in Note 4. The financial
statements do not include any adjustment that might result from the outcome of
the uncertainty of future agreements, financings or sales.
/s/ W.L. Butcher, CPA PS
- ----------------------------
William L. Butcher, CPA P.S.
Everett, Washington
January 7, 2000
<PAGE>
CONSOLIDATED DATA, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999, 1998 and 1997
- -------------------------------------------------------------------------------
ASSETS
------
9/30/99 9/30/98 9/30/97
---------- ---------- ----------
CURRENT ASSETS
Cash $( 1,165) $ 492 $ 598
---------- ---------- ----------
Total Current Assets ( 1,165) 492 598
FIXED ASSETS
Office Equipment 6,891 3,348 -0-
Less: Accumulated Depreciation ( 2,213) ( 670) -0-
Software 25,000 25,000 25,000
Less: Accumulated Amortization ( 24,306) ( 15,972) ( 7,639)
---------- ---------- ----------
Total Fixed Assets 5,372 11,706 17,631
OTHER ASSETS
Directory Marketing Rights 75,000 75,000 75,000
Online Banking Software 640,000 -0- -0-
Less: Accumulated Amortization (104,189) ( 23,145) ( 8,145)
---------- ---------- ----------
Total Other Assets 610,811 51,855 66,855
---------- ---------- ----------
TOTAL ASSETS $ 615,018 $ 64,053 $ 84,814
========== ========== ==========
See accompanying notes and independent auditor's report.
-2-
<PAGE>
CONSOLIDATED DATA, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999, 1998 and 1997
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
9/30/99 9/30/98 9/30/97
---------- ---------- ----------
LIABILITIES
Payroll Taxes Payable $ -0- $ -0- $ 2,111
Loans Payable-Construct. Lien 105,582 121,220 120,145
Loans Payable-CheKproteKt 262,344 277,683 173,206
Loans Payable-HEP Trust 64,000 64,000 64,000
Accounts Payable 36,134 -0- -0-
Advance From Shareholder ( 415) ( 475) ( 475)
Accrued Interest Payable 114,293 62,859 20,788
---------- ---------- ----------
Total Liabilities 581,938 525,287 379,775
STOCKHOLDERS' EQUITY
Common Stock, No Par Value,
50,000,000 shares authorized;
5,026,000 shares issued and
outstanding at September 30,
1997; 6,456,000 shares issued
and outstanding at September
30, 1998; and 10,784,000
shares issued and outstanding
at September 30, 1999 1,131,163 185,563 106,063
Preferred Stock, 5,000,000
shares authorized; 100,000
issued and outstanding at
September 30, 1997, 1998 and
at September 30, 1999 10,050 10,050 10,050
Accumulated Deficit (1,108,133) ( 656,847) ( 411,074)
---------- ---------- ----------
Total Stockholders' Equity 33,080 ( 461,234) ( 294,961)
---------- ---------- ----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 615,018 $ 64,053 $ 84,814
========== ========== ==========
See accompanying notes and independent auditor's report.
-3-
<PAGE>
CONSOLIDATED DATA, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF LOSS AND ACCUMULATED DEFICIT
SEPTEMBER 30, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
Inception to Inception to
Year Ended Year Ended Year Ended Year Ended
9/30/99 9/30/98 9/30/97 9/30/99
----------- ----------- ----------- -----------
Revenues
Service revenue $ 27,558 $ 17,515 $ 29,518 $ 74,591
----------- ----------- ----------- -----------
Gross Profit $ 27,558 $ 17,515 $ 29,518 $ 74,591
Expenses
Advertising 15,776 -0- 36,589 52,365
Accounting 1,200 -0- -0- 1,200
Administration 2,000 -0- -0- 2,000
Amortization 89,378 23,333 15,784 128,495
Audit fees 10,000 -0- -0- 10,000
Bank charges 415 321 423 1,159
Consulting 90,940 2,009 31,247 124,196
Contract labor 15,532 102,201 197,217 314,950
Depreciation 1,544 670 -0- 2,214
Directors fees 40,000 67,500 25,000 132,500
Freight, delivery 62 -0- -0- 62
Insurance expense -0- -0- 105 105
Internet expense 3,724 802 -0- 4,526
Investor relations 25,000 -0- -0- 25,000
Legal, professional 39,746 -0- 17,092 56,838
Licenses 766 1,730 -0- 2,496
Marketing 11,349 -0- 9,260 20,609
Meals, entertainment 691 -0- 189 880
Miscellaneous expense 225 1,226 1,076 2,527
Office expense 17,430 419 16,484 34,333
Printing 4,368 -0- -0- 4,368
Programming 2,520 -0- -0- 2,520
Rent - equipment -0- 12,974 12,443 25,417
Rent - office 2,800 3,600 10,350 16,750
Supplies -0- 110 1,599 1,709
Taxes - payroll -0- 1,649 -0- 1,649
Telephone 12,627 1,964 2,258 16,849
Transfer agent fees 2,139 -0- -0- 2,139
Travel 33,809 -0- 4,400 38,209
Wages and salaries -0- -0- 10,754 10,754
Website fees 3,372 709 27,545 31,626
----------- ----------- ----------- -----------
Total Expenses $ 427,413 $ 221,217 $ 419,815 $ 1,068,445
----------- ----------- ----------- -----------
Loss From Operations $( 399,855) $ ( 203,702) $( 390,297) $( 9938549)
Other Income & Expense
Other income -0- -0- 10 10
Interest income 1 -0- 1 2
Other expense -0- -0- -0- -0-
Interest expense ( 51,432) ( 42,071) ( 20,788) ( 114,291)
----------- ----------- ----------- -----------
Total Other
Income & Expense $( 51,431) $( 42,071) $( 20,777) $( 114,279)
----------- ----------- ----------- -----------
Net Loss ( 451,286) ( 245,773) ( 411,074) (1,108,133)
Accumulated Deficit,
beginning of period ( 656,847) ( 411,074) -0- -0-
Accumulated Deficit,
end of period $(1,108,133) $( 656,847) $( 411,074) $(1,108,133)
=========== =========== =========== ===========
See accompanying notes and independent auditor's report.
-4-
<PAGE>
CONSOLIDATED DATA, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDING
SEPTEMBER 30, 1999, 1998 and 1997
<TABLE>
- --------------------------------------------------------------------------------------------
Inception to Inception to
Year Ended Year Ended Year Ended Year Ended
9/30/99 9/30/98 9/30/97 9/30/99
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash Flows From
Operating Activities:
Net Loss $( 451,286) $( 245,773) $( 411,074) $(1,108,133)
----------- ----------- ----------- -----------
Adjustments to Reconcile
Net Loss to Net Cash
Provided by Operating Activities
Net Cash Provided by
Operating Expenses:
Depreciation & Amortization 90,921 24,003 15,784 130,708
(Increase) Decrease In:
Office Equipment ( 3,543) ( 3,348) -0- ( 6,891)
Software -0- -0- ( 25,000) ( 25,000)
Directory Marketing Rights -0- -0- ( 75,000) ( 75,000)
Online Banking Software ( 640,000) -0- -0- ( 640,000)
Increase (Decrease) In:
Payroll Taxes -0- ( 2,111) 2,111 -0-
Accounts Payable 36,134 -0- -0- 36,134
Accrued Interest Payable 51,434 42,071 20,788 114,293
----------- ----------- ----------- -----------
Total Adjustments ( 465,054) 60,615 ( 61,317) ( 465,756)
Net Cash Provided by
Operating Activities: ( 916,340) ( 185,158) ( 472,391) (1,573,889)
Cash Flows From
Financing Activities:
Loans Payable ( 30,977) 105,552 357,351 431,926
Advances-Shareholder 60 -0- ( 475) ( 415)
Common Stock 945,600 79,500 106,063 1,131,163
Preferred Stock -0- -0- 10,050 10,050
----------- ----------- ----------- -----------
Net Cash Received From
Financing Activities: 914,683 125,052 472,989 1,572,604
Cash Beginning of Periods 492 598 -0- -0-
Cash End of Periods ( 1,165) 492 598 ( 1,165)
=========== =========== =========== ============
</TABLE>
See accompanying notes and independent auditor's report.
-5-
<PAGE>
<TABLE>
CONSOLIDATED DATA, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1999, 1998 and 1997
- -----------------------------------------------------------------------------------------------------
Number of Shares Amount
-------------------- -------------------- Accumulated
Common Preferred Common Preferred Deficit Total
--------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT INCEPTION,
JULY 14, 1995 -0- -0- -0- -0- -0- -0-
May 1996 issuance of
100,000 shares
preferred stock -0- 100,000 -0- 10,050 -0- 10,050
June 1996 issuance of
1,701,000 shares
common stock pursuant
to 504 Reg D at
$0.0005 per share 1,701,000 -0- 851 -0- -0- 851
Net Loss - Year Ended
September 30, 1996 -0- -0- -0- -0- ( 38,561) ( 38,561)
--------- --------- --------- --------- ----------- ---------
BALANCE,
SEPTEMBER 30, 1996 1,701,000 100,000 851 10,050 ( 38,561) ( 27,660)
March 1997 issuance
of shares of common
stock pursuant to
504 Reg D at $0.0005
per share 225,000 -0- 112 -0- -0- 112
March 1997 issuance
of 1,500,000 shares
of common stock for
directory marketing
rights at $0.05 per
share 1,500,000 -0- 75,000 -0- -0- 75,000
April 1997 issuance
of 1,000,000 shares
of common stock for
acquisition of Con-
tractors Directory,
Inc. 1,000,000 -0- 100 -0- -0- 100
Issuance of shares
for directors fees
pursuant to direc-
tors' resolution
dated May 1, 1997
at $0.05 per share 500,000 -0- 25,000 -0- -0- 25,000
Issuance of shares
for attorney and
secretarial services
at $0.05 per share 100,000 -0- 5,000 -0- -0- 5,000
</TABLE>
See accompanying notes and independent auditor's report.
-6-
<PAGE>
CONSOLIDATED DATA, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1999, 1998 and 1997
<TABLE>
- -----------------------------------------------------------------------------------------------------
Number of Shares Amount
-------------------- -------------------- Accumulated
Common Preferred Common Preferred Deficit Total
--------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Loss - Year Ended
September 30, 1997 -0- -0- -0- -0- (372,513) (372,513)
BALANCE,
SEPTEMBER 30, 1997 5,026,000 100,000 106,063 10,050 (411,074) (294,961)
October-December
1997 issuance of
shares pursuant to
504 Reg D private
placement at $0.15
per share 80,000 -0- 12,000 -0- -0- 12,000
August 1998
issuance of shares
for consulting
services at
$0.05 per share 150,000 -0- 7,500 -0- -0- 7,500
September 1998
issuance of shares
for directors fees
pursuant to direc-
tors' resolution
dated May 1, 1997
at $0.05 per share 1,200,000 -0- 60,000 -0- -0- 60,000
Net Loss - Year Ended
September 30, 1998 -0- -0- -0- -0- (245,773) (245,773)
BALANCE,
SEPTEMBER 30, 1998 6,456,000 100,000 185,563 10,050 (656,847) (461,234)
March 1999
issuance of shares
for consulting
services at
$0.20 per share 25,000 -0- 5,000 -0- -0- 5,000
March 1999
issuance of shares
for legal, account-
ing and consulting
services at
$0.20 per share 300,000 -0- 60,000 -0- -0- 60,000
March 1999
issuance of shares
for online banking
software rights at
$0.20 per share 2,000,000 -0- 400,000 -0- -0- 400,000
</TABLE>
See accompanying notes and independent auditor's report.
-7-
<PAGE>
CONSOLIDATED DATA, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1999, 1998 and 1997
<TABLE>
- -----------------------------------------------------------------------------------------------------
Number of Shares Amount
-------------------- -------------------- Accumulated
Common Preferred Common Preferred Deficit Total
--------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
April 1999 issuance
of shares pursuant
to exercise of
private placement
stock option;
25,000 shares at
$1.00; 25,000
shares at $2.00;
and 25,000 shares
at $5.00 75,000 -0- 200,000 -0- -0- 200,000
April 1999 addi-
tional issuance
of shares for
online banking
software at $0.20
per share 1,200,000 -0- 240,000 -0- -0- 240,000
May 1999 issuance
of shares for con-
sulting services
at $0.20 per share 28,000 -0- 5,600 -0- -0- 5,600
June 1999 issuance
of balance of shares
for directors fees at
$0.05 per share pur-
suant to directors
resolution dated
May 1, 1997 700,000 -0- 35,000 -0- -0- 35,000
Net Loss - Year Ended
September 30, 1999 -0- -0- -0- -0- (451,286) ( 451,286)
--------- --------- --------- --------- ----------- ---------
BALANCE,
SEPTEMBER 30, 1999 10,784,000 100,000 1,131,163 10,050 (1,108,133) 33,080
========== ========= ========= ========= =========== =========
</TABLE>
See accompanying notes and independent auditor's report.
-8-
<PAGE>
CONSOLIDATED DATA, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
Note 1. The Company
- --------------------
Consolidated Data, Inc. (formerly Attache' Holdings, Ltd), a Colorado
corporation, (the "Company") initially was capitalized in May 1996 through an
issuance of 100,000 shares of its preferred stock in consideration for $10,050.
Shortly thereafter in June 1996, the Company commenced an offering of up to
20,000,000 shares of its common stock in units of 5,000 shares for $2.50 per
unit pursuant to Rule 504 of Regulation D of the Securities Act of 1933. The
Company sold a total of 1,926,000 common shares in this Regulation D offering.
In early 1997, the company acquired all of the marketing rights to its
electronic directory system for Colorado, California and New Mexico for
1,500,000 common shares of the Company's restricted stock. These electronic
directories, through extensive use of state-of-the-art computer and Internet
telecommunications technology, will provide comprehensive listings of available
sub-contractors and materials suppliers as well as daily up-dated information on
other key items such as building permits, bid lists and credit and lien
information. Each of the companies electronic directories will cover a specific
region of the country which can be readily accessed by anyone involved in real
estate activities. Essentially, they will constitute geographic "Contractor's
Electronic Yellow Pages" which will be much superior to and considerably less
expensive than the traditional telephone directory yellow pages.
The Company soon realized the large potential of this business and effective
April 20, 1997 the Company assumed all worldwide rights and ownership to the
electronic directory system by acquiring 100% of the issued and outstanding
common stock of Contractors Directory, Inc., a Washington corporation, in
exchange for 1,000,000 common shares of the Company's restricted stock.
Funding for development by the Company's electronic directory system was
obtained by the Company's wholly-owned subsidiary through short-term loans
arranged by the Company's management.
As an expansion of the Company's Internet business on March 10, 1999, the
Company acquired from DTEK Corporation all worldwide rights, exclusively and
irrevocably, to DTEK's proprietary online Internet technology and software for
$640,000 payable as follows:
1. $400,000 paid by the issuance of 2,000,000 common shares of the
Company's restricted stock at $0.20 per share.
2. $240,000 paid at the rate of $10,000 per license use or the stock
equivalent at the rate of $0.20 per share of the Company's restricted common
stock or 1,200,000 shares. The cash or the stock must be paid by the Company
twelve months from the date of the contract or by March 10, 2000.
On April 12, 1999 the Company authorized and did issue 1,200,000 shares of its
restricted common stock in full satisfaction of its agreements with DTEK
Corporation above.
As a part of the Company's online banking software acquisition, DTEK Corporation
has assigned to the Company all rights and title to an existing software license
between DTEK and Global Payment Systems, LLC which shall include payments from
River City Bank of Sacramento, subject to DTEK receiving the balance of the
initial licensing revenues as compensation for its consulting and support. All
residual income will go to Consolidated Data, Inc.
-9-
<PAGE>
CONSOLIDATED DATA, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
Note 2. Consulting Agreements
- ------------------------------
On March 3, 1999 in response to newly instituted public company regulatory
requirements, the Company engaged InterCorp, Inc. to procure accounting and
legal services necessary to produce current audited financial statements and to
complete and file form 10SB with the SEC. InterCorp, Inc. also was to develop a
business plan for the online banking system. The Company issued 300,000
restricted common shares as payment for the $60,000 fee charged by InterCorp,
Inc. at $0.20 per share.
On March 1, 1999 the Company engaged Wall Street Marketing Group, Inc. as a
consultant for twelve (12) months to represent, advise, counsel and assist the
Company in public relations, public appearances and the marketing of the
Company. Wall Street Marketing Group, Inc. was also engaged to disseminate
information from the Company to licensed members of the securities industry.
Services to be performed do not relate to NASD activities or financing. In
addition to a consulting fee of $5,000 per month for twelve (12) months, the
Company also granted stock options on the Company's stock to be exercised by May
1, 2000 as follows:
1) 25,000 shares priced at $1.00 per share;
2) 25,000 shares priced at $2.00 per share;
3) 25,000 shares priced at $5.00 per share;
4) 25,000 shares priced at $10.00 per share;
5) 25,000 shares priced at $15.00 per share;
6) 25,000 shares priced at $20.00 per share;
7) 25,000 shares priced at $25.00 per share;
8) 25,000 shares priced at $30.00 per share;
9) 25,000 shares priced at $40.00 per share;
10) 25,000 shares priced at $50.00 per share.
As of June 30, 1999, Wall Street Marketing Group had exercised options to
purchase the Company's common stock as follows: 25,000 shares at $1.00, 25,000
shares at $2.00, and 25,000 shares at $5.00 for a total of 75,000 shares for
$200,000.
Note 3. Summary of Significant Accounting Policies
- ---------------------------------------------------
These Financial Statements include all of the assets, liabilities and results of
operation of the Company. The Company operates on a fiscal year basis beginning
October 1 and ending September 30. Property and equipment are stated at the
lower of cost or fair market value less accumulated depreciation and
amortization. Depreciation is computed for financial statement purposes as well
as for federal income tax purposes using the MACRS (Modified Accelerated Cost
Recovery System) method of depreciation. Equipment is depreciated over five
years. Software is amortized over three years. Electronic directory marketing
rights and online banking license rights are amortized over five years. All
depreciation and amortization methods used are in accordance with GAAP.
Cost of start-up activities including organization costs, were expensed as
incurred for both Consolidated Data, Inc. and Contractors Directory, Inc. in
accordance with SOP 98-5. These consolidated financial statements include the
accounts of Contractors Directory, Inc., a wholly owned subsidiary. Intercompany
transactions have been eliminated.
10
<PAGE>
CONSOLIDATED DATA, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
Note 3. Summary of Significant Accounting Policies - continued
- ---------------------------------------------------
Effective April 20, 1997, Attache Holdings, Inc. acquired 100% of the issued and
outstanding common stock of Contractors Directory, Inc., a Washington
corporation, in a stock for stock acquisition (accounted for as a pooling of
interest) in exchange for 1,000,000 shares of the Company's restricted common
stock. The two shareholders who held 100% of the stock of Contractor's
Directory, Inc. exchanged their stock for the 1,000,000 shares of common stock
of Attache as follows:
Pakie Plastino traded all of his holdings for 750,000 shares
William D. Doehne traded all of his holdings for 250,000 shares
Note 4. Going Concern
- ----------------------
Because of a deficiency in working capital and significant operating losses,
there is doubt about the ability of the Company to continue in existence unless
additional working capital is obtained. The Company currently has plans to raise
sufficient working capital through equity financing and through the acquisition
of companies having sufficient assets and cash flow to enable the Company to be
self-sufficient and profitable.
Note 5. Company Facilities
- ---------------------------
The Company currently rents shared office space on a month-to-month basis from
Construction Lien and Credit Service, Inc., 6912-220th Street SW, Suite 320,
Mountlake Terrace, Washington 98043, for which it is charged $300 per month.
Note 6. Income Tax
- -------------------
Consolidated Data, Inc. and Contractors Directory, Inc. each file separate
federal income tax returns. The net operating loss for Consolidated Data, Inc.
is $(117,502) and will begin expiring in the year 2010. The net operating loss
for Contractors Directory, Inc. is $(524,130) and will begin expiring in the
year 2010.
Note 7. Certain Relationships
- ------------------------------
Pakie V. Plastino, President of the company, has periodically funded the Company
over the past three years through loans from Construction Lien and Credit
Services, Inc. and CheKproteKt, Inc., companies under the ownership and control
of Mr. Plastino. Such loans will be paid back consistent with the Company's
capital requirements.
Note 8. Subsequent Event (Unaudited)
- ------------------------------------
In December 1999, the Company sold 80,000 restricted common shares to unrelated
third parties in a private placement. The purchasers of the shares also received
a warrant to purchase an additional 40,000 common shares with an exercise price
of $3.00 per share. The warrant expires September 22, 2000. The shares of common
stock and warrants were offered pursuant to an exemption to registration
provided under Section 4(2), of the Securities Act of 1933. The Company received
cash proceeds of $120,000 from the sale of stock and warrants.
11
<PAGE>
Exhibit index
3.1 *Articles of Incorporation
3.2 *BYLAWS
4 *Amendment to Form D
21 *Subsidiaries of the Registrant
23 *Consent of Accountants
27 Financial Data Schedule
* These documents have been previously filed with the Securities and Exchange
Commission and are incorporated by reference herein
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-1-1998
<PERIOD-END> SEP-30-1999
<CASH> (1,165)
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> (1,165)
<PP&E> 31,891
<DEPRECIATION> 26,519
<TOTAL-ASSETS> 615,018
<CURRENT-LIABILITIES> 581,938
<BONDS> 0
0
0
<COMMON> 1,131,163
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 615,018
<SALES> 27,558
<TOTAL-REVENUES> 27,558
<CGS> 0
<TOTAL-COSTS> 427,413
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,431
<INCOME-PRETAX> (451,286)
<INCOME-TAX> 0
<INCOME-CONTINUING> (451,286)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (451,286)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
