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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON October 27, 2000
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 6 TO
FORM 10-SB
FILE NO. 0-27631
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
TMANGLOBAL.COM, INC.
(Name of Small Business Issuer in its charter)
FLORIDA 65-0782227
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1000 UNIVERSAL STUDIOS PLAZA, BUILDING 22A, ORLANDO, FL 32819-7610
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (407) 370-4460
Securities to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on which registered
NONE N/A
Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock, par value $.0001 per share
(Title of Class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
TMANglobal.com, Inc. ("TMAN"), a corporation formed under the laws of
the State of Florida, is the result of a merger between FSGI Corporation and The
Martial Arts Network On-Line, Inc. on December 21, 1998 (for accounting purposes
the transaction was effective on January 1, 1999). In the fall of 1998,
management of The Martial Arts Network On-Line, Inc. decided that it wished to
expand its business model from that of being a purely educational and
informative resource to one that would capitalize on e-commerce over the
Internet. Management made inquiry of several companies and individuals about
joint ventures, equity positions, and cash infusions to help with this
expansion. In November, President Ron Tramontano was approached by Joseph Lents,
the father of one of Mr. Tramontano's karate students, who proposed that it
might be worthwhile to speak with his nephew Jason, who was the head of a
publicly-traded company (FSGI Corporation) that was looking for ways to expand
its Internet presence. Since being affiliated with a public company would help
to attract investors and potentially provide for stock to be used as acquisition
consideration, TMAN management decided to explore this opportunity.
TMAN offers goods and services to the martial arts, extreme sports, and
health and fitness markets, through its presence on the World Wide Web. TMAN
also provided credit unions with comprehensive and internal regulatory
compliance audit services, and related internal auditing, accounting and
managerial advisory services, through its wholly-owned subsidiary, Financial
Standards Group, Inc. ("FSG") until FSG's sale on January 27, 2000 to FSG
Holdings LLC ("FSGH"). TMAN is currently traded in the "pink sheets." TMAN was
formerly traded on the Nasdaq OTC Bulletin Board under the symbol "CHOP" (and
later, in November 1999, "CHOPE") until it was delisted on December 1, 1999 for
failure to comply with the Bulletin Board's revised eligibility rules. As soon
as practicable, TMAN will apply to be reinstated for trading on the OTC Bulletin
Board. TMAN's principal executive offices are at 1000 Universal Studios Plaza,
Building 22A, Orlando, Florida 32819-7610. Its telephone number is (407)
370-4460.
FSGI Corporation was formed under the laws of the State of Florida in
1997 as a holding company for the purpose of acquiring Financial Standards
Group, Inc. (FSG). That year FSGI Corporation acquired FSG, a Florida company
organized in October 1989, to assist credit unions in performing financial
services. FSG offered financial services to credit unions as TMAN's wholly-owned
subsidiary until its sale in January 2000. FSGI Corporation began trading on the
Nasdaq OTC Bulletin Board on July 31, 1998 under the symbol "FSGI". TMAN changed
its trading symbol to "CHOP" on January 14, 1999 following its merger with FSGI.
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The Martial Arts Network On-Line, Inc., a company organized under the
laws of the State of Florida, was developed in 1996 by its parent company The
Martial Arts Network, Inc. as an electronic forum dedicated to promoting
education and awareness of martial arts through its web site
www.martial-arts-network.com. The Martial Arts Network On-Line, Inc. web site
was operated for educational purposes only, and not with the objective of
earning a profit. This site continues to be maintained by the parent company,
while TMAN launched www.tmanglobal.com in February 1999 to offer goods and
services to the martial arts, extreme sports, and health and fitness markets.
Through its web site, TMAN attempts to provide portals that are
inviting to, and frequented by, its target market; thereby creating a low cost,
and efficient distribution channel. TMAN believes that the sale of products and
services over the Internet offers attractive benefits to customers, including
greater selection, convenience, ease of use and competitive pricing. As the
Internet becomes an increasingly significant global medium for online activity,
TMAN's objective is to become the preeminent site for martial arts, extreme
sports, and health and fitness products and services.
ACQUISITIONS
On November 13, 1998, FSGI Corporation acquired the right to service
the credit union clients of Bonnie Davis P.C. As consideration, the Company
agreed to issue 40,000 shares of restricted common stock with an agreed upon
market value of $80,000. In addition, the Company agreed that if the total
market value at the twelve month and twenty-four month anniversary dates is less
than $2.00 per share, the Company would issue additional shares valued at the
difference between the market price and the guaranteed amount. If the gross
revenue for the twelve-month period ended November 13, 1999 had not equaled or
exceeded 80% of the purchase price ($64,000), then such share adjustments would
not apply. The gross revenue attributable to the clients of Bonnie Davis P.C.
for the twelve-month period ended November 13, 1999 was approximately $34,000.
The accumulated amortization of the client list at September 30, 1999 was
$14,000. Any shares payable as consideration in this transaction would be issued
to the heirs of Bonnie Davis; however none of such shares of restricted common
stock have been issued to date. The obligation for any share issuances relating
to this transaction were assumed by FSGH as of January 27, 2000.
On December 21, 1998, FSGI Corporation, at the time a publicly traded
company trading on the OTCBB as FSGI, acquired all of the outstanding common
stock of The Martial Arts Network On-Line, Inc., a wholly owned subsidiary of
The Martial Arts Network, Inc. For accounting purposes, the transaction was
effective on January 1, 1999. As consideration, FSGI Corporation issued to The
Martial Arts Network, Inc. an aggregate of 3,000,000 shares of restricted common
stock and an option to purchase up to 1,000,000 additional restricted shares at
a purchase price of $1.00 per share. Upon issuance of the 3,000,000 shares of
FSGI Corporation's common stock to The Martial Arts Network, Inc., FSGI
Corporation had a total of approximately 5,542,833 shares of common stock
outstanding. Therefore, upon completion of the transaction, The Martial Arts
Network, Inc.'s stock holdings represented approximately 54% of FSGI
Corporation's total outstanding shares of common stock. The structure and value
of the transaction were negotiated by the parties at arms length. Management is
not aware whether FSGI Corporation considered any other acquisition alternatives
(whether solicited or unsolicited).
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The Martial Arts Network, Inc. has controlling interest in the new
corporation formed as a consequence of the completion of the acquisition of all
of the outstanding common stock of The Martial Arts Network On-Line, Inc. by
FSGI Corporation. The acquisition was recorded using the purchase method of
accounting. The results of operations of FSGI Corporation, the accounting
acquiree, since the date of acquisition, January 1, 1999 for accounting
purposes, are included in the consolidated statements of operations at September
30, 1999. Goodwill of $2,767,069 was recorded in this transaction and is being
amortized over 15 years using the straight-line method. Goodwill represented
88.1% of the Company's total assets at September 30, 1999. Amortization of this
goodwill will result in a charge against income of $92,236 for each of the 15
years commencing January 1, 1999. That charge will reduce net income (increase
net loss) and will serve to impair the reported operating results, and
presumably the share price performance, of the Company.
FSGI Corporation was introduced to the President of Martial Arts
Network On-Line, Inc., Ron Tramontano, by an individual who was the father of
one of Mr. Tramontano's karate students. Jason Lents, FSGI Corporation's
President, stated that FSGI Corporation had been seeking to acquire one or more
businesses that were involved in Internet commerce, in an effort to increase
shareholder value.
The following summarizes the fair value of the assets acquired and
liabilities assumed of FSGI Corporation on the date of acquisition:
Cash $ (2,437)
Accounts receivable 58,551
Subscriptions receivable 50,000
Prepaid expenses 13,475
Property and equipment 38,767
Client list 78,000
Accounts payable (64,161)
Accrued expenses (35,264)
Notes payable (76,875)
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Net assets $ 60,056
=========
The financial statements as presented, include the operations and
reflect the reverse acquisition of The Martial Arts Network On-Line, Inc., for
the year ended September 30, 1999, and FSG from the date of acquisition, January
1, 1999 to September 30, 1999. The financial statements prior to the reverse
acquisition are those of The Martial Arts Network On-Line, Inc.
On January 27, 2000, the Company sold its wholly-owned subsidiary,
Financial Standards Group, Inc. (FSG), to an unrelated party, FSG Holdings LLC
("FSGH"). Under the terms of the sales agreement, the Company received $88,680
in the form of three promissory notes due in June 2000 and January 2001. In
addition, FSGH assumed all outstanding receivables and payables and the balance
due of $36,571 on a promissory note created by FSG, currently held by Total
World Telecom, Inc. (TWT) - former parent company of FSG (See Note 16). The
Company will also issue a warrant certificate to FSGH for 100,000 shares of TMAN
restricted common stock, with an exercise price of $1.00 per share and a two (2)
year term.
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FSGH was formed in January 2000 by Thomas & Lynn Cvinar of Orlando,
Florida for the sole purpose of acquiring Financial Standards Group, Inc., from
TMANglobal.com. There are no related affiliations between the two companies. The
business reason why FSG was sold was due to the fact that FSG had a ten-year
history of $200,000+/yr losses, which did not look like they were going to
reverse themselves in the foreseeable future - and it was becoming a severe
financial drain on TMANglobal.com, the parent company. It was decided by the
TMANglobal Board of Directors that the shareholders of TMAN would be best served
by ridding itself of this money losing, non-synergistic subsidiary - and at the
same time reducing outstanding liabilities that were being carried on
TMANglobal.com's books on behalf of FSG, such as the TWT matter referenced above
and other loan obligations. (See Note 6.)
PRODUCTS AND SERVICES - INTERNET WEB SITE BUSINESS
TMAN has established three business models to market a selection of
products and services through its online web site. These business models include
an e-commerce operation, a Charter Membership Program, and an entertainment
agency.
E-COMMERCE OPERATIONS. TMAN offers name-brand sporting goods and
apparel at discount prices through a virtual shopping mall accessible on its web
site. Similarly, TMAN offers a variety of books, magazine subscriptions,
videotapes, CDs, DVDs, and cassettes pertaining to martial arts, extreme sports,
health, fitness, and nutrition through a virtual bookstore. TMAN's access to
various titles and labels has expanded tremendously since its affiliation with
Amazon.com beginning in January 1999. As an Amazon.com Associate, TMAN provides
selected books, CDs and videos with accompanying editorials on its web site that
allow customers to make informed choices about their purchases. The purchases
are made through a special link to Amazon.com, which supplies and delivers the
items purchased.
As a complementary business line in its e-commerce operations, TMAN
also intends to develop a billing company that will provide martial arts
schools, gyms and health clubs with marketing and business planning services.
Significant work has not yet commenced on this business line. The Company is
currently investigating the possibility of a joint venture with an existing
company in order to avoid incurring some of the start-up costs attendant to
developing this line of business. In the absence of such a joint venture, the
Company intends to establish a billing company by the end of 2000. However,
there is no assurance that TMAN will be able to develop and provide such
services successfully.
CHARTER MEMBERSHIP PROGRAM. In June 1999, TMAN launched a web-community
Charter Membership Program that offers members a combination of TMAN's products
and services. The Charter Membership Program is designed to allow subscribers
access to restricted areas on TMAN's Internet site through the use of a
membership identification number. For the annual fee, members receive a package
of benefits and the ability to receive discounts off merchandise that is
purchased from the SuperMall, the e-commerce section of TMAN's website. The
program will include access to the following: celebrity chat rooms; a video
jukebox that airs sporting events from around the world; passes to live events;
a global calendar displaying dates of sports, fitness, and health events; a
personal web page; magazine subscriptions; a custom affinity web browser;
t-shirts; vacation packages; discounts on virtual mall purchases; and a monthly
newsletter. To date, no material revenue has been realized from our Charter
Membership Program.
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ENTERTAINMENT AGENCY. TMAN will also provide customers the service of a
virtual talent and casting agency. The agency will provide established and
amateur actors access to information on the latest acting prospects, including
opportunities to act as stunt people and body doubles for major stars. The
online Entertainment Agency is intended to introduce action talent to producers
and directors who will then use the individuals in film and television
productions. The agency will generally charge a 15% agency fee for this service.
To date, no material revenue has been realized from the Entertainment Agency
portion of TMAN's business.
While there can be no assurance, management believes that the martial
arts-related e-commerce business will account for 60% of the Company's net
revenues in Fiscal 2000, with the Charter Membership Program accounting for
approximately 25% of net revenue and the Entertainment Agency accounting for
approximately 15% of net revenue.
SUPPLIERS - INTERNET WEB SITE BUSINESS
The majority of clothing, training equipment, safety gear, and related
products sold to customers through TMAN's virtual shopping mall are manufactured
in Asia. Management believes that, if for any reason it could not rely on, or
retain the services of any of its current suppliers or manufacturers, other
comparable suppliers and manufacturers would be readily available in the
marketplace.
In May 1999, TMAN opened a branch office in Bangkok, Thailand, one of
the centers of the Asian retail market, to serve as TMAN's buying office for its
virtual shopping mall. The Bangkok office allows direct participation in the
Asian market as well as direct access to a range of products produced by a
diversified-base of Asian manufacturers. TMAN's Bangkok presence allows TMAN to
ship and distribute the majority of its merchandise, sold over the Internet via
its virtual shopping mall, directly to customers. The elimination of a
third-party distributor for these products gives TMAN a significant advantage
over many U.S.-based retail companies, and allows TMAN to offer its merchandise
at a more competitive price.
In June 1999, TMAN established arrangements with two Thai
manufacturers, Galar Design and Twins Special Company, to produce its own line
of clothing, training equipment, and safety gear with the private label, TMAN
America. TMAN expects to be able to produce this label in Thailand at relatively
lower costs than domestically. However, there can be no assurance that TMAN will
be successful in producing its private label at a lower cost than those of its
competitors, nor can there be any assurance that the TMAN America label will be
competitive with other more established and well-known brands. To date, no
significant revenue has been generated through the private label sales.
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The majority of the books, music labels, and game titles purchased
through TMAN's virtual bookstore are supplied by three U.S.-based companies,
Amazon.com, Turtle Press and Creative Edge Software. TMAN has relationships with
these and several other suppliers (including Amber Sporting Goods, Black and
Blue Productions, Inc., Century Martial Arts, Magazine City, and Fogdog Sports,
Inc.) to meet its demand for books, magazines, videos, clothing and accessories
for boxing, kickboxing and other martial arts. Such arrangements tend to be in
the form of informal e-mail communications between TMAN and the respective
suppliers which set forth purchase price discounts and payment terms, as well as
provide authority for TMAN to use product illustrations, supplier logos and the
like on its website. Such arrangements generally are for indefinite ongoing
periods, and do not include termination clauses. In the event that any of these
sources became unavailable to TMAN, management is confident that comparable
replacements could easily be obtained in the marketplace.
In January 1999, TMAN's application to participate in the Amazon.com
Associates program was approved. As an Amazon.com Associate, TMAN has agreed to
display the Amazon.com logo on its web site in exchange for access to more than
4.7 million books, music CDs, videos, DVDs, and computer game titles, as well as
Amazon.com's customer service facilities, including payment processing,
ordering, shipping, order status reports, and returns. The Company does not pay
any fee to be an Associate, rather it receives a 15% commission relating to any
Amazon.com purchase initiated from a website owned by the Company. To date, the
Company has not realized significant revenue from this arrangement.
Consequently, management does not currently expect the arrangement to have a
material affect on the Company's financial condition. There can be no assurance
that TMAN will be able to continue its relationship with Amazon.com and the loss
of such a prestigious and important contract could alter TMAN's ability to
obtain and maintain customers.
In April 1999, TMAN and Physical Genius, Inc. came to an arrangement
whereby TMAN agreed to market the Physical Genius Home Trainer on its virtual
shopping mall in exchange for the percentage it earned from the mark-up. The
Physical Genius Home Trainer uses the latest computer hardware and software
technologies to assist athletes, coaches and trainers in designing, executing,
monitoring and analyzing workout routines. The system provides immediate and
comprehensive performance feedback through its patented interactive hand-held
device called a digital training assistant. In the event TMAN's relationship
with Physical Genius, Inc. terminated, TMAN would lose its ability to market the
patented technology of the unique Physical Genius Home Trainer. However, as of
September 1999 sales of the Physical Genius Home Trainer have been immaterial to
TMAN's revenues.
MARKETS AND CUSTOMERS - INTERNET WEB SITE BUSINESS
TMAN markets its products and services worldwide to men and women 18 to
49 years of age with interests in martial arts, extreme sports, health, fitness,
and nutrition. TMAN's objectives are to increase customer traffic to the TMAN
web site, build customer loyalty, encourage repeat purchases and develop
incremental product and service revenue opportunities. TMAN is currently
exploring a variety of media, business developmental and promotional methods to
achieve these goals.
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TMAN is primarily focused on marketing its products and services on the
World Wide Web. In May 1999, TMAN indexed its web site on more than 1,500 search
engines in 37 countries and retained an Internet technology company to increase
the frequency in which TMAN is accessed on keyword searches. Additionally, TMAN
is currently under review for participation as a Yahoo! Premier Shopping
Partner. Such an arrangement would allow TMAN to benefit directly from Yahoo!
traffic by being listed on Yahoo!'s popular and prominent web site as a Premier
Shopping Partner, all at no cost to TMAN. While there can be no assurance,
management believes that TMAN will become a Premier Shopping Partner by the end
of calendar year 2000. TMAN management does not expect that there will be any
material effect on revenues through this arrangement for the calendar year 2000;
however it expects that the additional exposure of its name to Yahoo! users will
be of benefit over the long term.
As an added business strategy to increase access to markets, TMAN seeks
to enter into business combinations and alliances that allow TMAN continued
access to technological innovation and diversified products. Management believes
that developments in the digital information superhighway and other technologies
will give TMAN still greater access to customers.
Management believes that TMAN's sponsorship of sporting events and
participation in high-profile, non-profit fundraisers will increase its
visibility in the market. TMAN intends to sponsor tournaments and sporting
events in the United States to increase its visibility and participation in the
martial arts and sports industries. To date, TMAN has not sponsored any such
events, however the Company intends to begin sponsoring sporting events in the
latter part of calendar year 2000. TMAN currently has concluded an arrangement
with a clothing manufacturer, Always Positive, Inc. of San Diego, California,
that produces positive attitude kidswear. Under the arrangement, TMAN intends to
make a donation of $1.00 for each sale of kidswear to Children's Miracle
Network, a non-profit charitable organization which supports children's
hospitals nationwide. The Company has not yet commenced sales under this
program. Management believes that TMAN's participation in goodwill events and
sponsorship of sporting events will increase the support it receives from the
martial arts community and the public in general.
COMPETITION - INTERNET WEB SITE BUSINESS
The online commerce market is rapidly evolving and intensely
competitive. In addition, the retail clothing, book, music, and sports equipment
industries are intensely competitive. TMAN competes globally with other
retailers and distributors of the products sold on TMAN's web site.
TMAN's strategy for market expansion includes using its growing
presence on the Internet to procure business relationships with potential
competitors whenever a compatible business interest can be identified.
Nonetheless, there can be no assurance that TMAN will be able to come to such
arrangements with competitors, nor that TMAN will be able to compete against
other companies that may be better established, have broader public and industry
recognition, have financial resources substantially greater than those of TMAN,
or have distribution facilities better than those which now or in the
foreseeable future will become available to TMAN.
EMPLOYEES OF THE COMPANY
As of September 25, 2000, TMAN employed 3 full-time employees. None of
TMAN's employees are represented by a labor union, and Management considers its
employee relations to be good.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
CERTAIN STATEMENTS CONTAINED HEREIN ARE NOT BASED ON HISTORICAL FACTS,
BUT ARE FORWARD-LOOKING STATEMENTS THAT ARE BASED UPON NUMEROUS ASSUMPTIONS
ABOUT FUTURE CONDITIONS THAT COULD PROVE NOT TO BE ACCURATE. ACTUAL EVENTS,
TRANSACTIONS AND RESULTS MAY MATERIALLY DIFFER FROM THE ANTICIPATED EVENTS,
TRANSACTIONS OR RESULTS DESCRIBED IN SUCH STATEMENTS. THE COMPANY'S ABILITY TO
CONSUMMATE SUCH TRANSACTIONS AND ACHIEVE SUCH EVENTS OR RESULTS IS SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE
NOT LIMITED TO, THE EXISTENCE OF DEMAND FOR AND ACCEPTANCE OF THE COMPANY'S
PRODUCTS AND SERVICES, REGULATORY APPROVALS AND DEVELOPMENTS, ECONOMIC
CONDITIONS, THE IMPACT OF COMPETITION AND PRICING, RESULTS OF FINANCING EFFORTS
AND OTHER FACTORS AFFECTING THE COMPANY'S BUSINESS THAT ARE BEYOND THE COMPANY'S
CONTROL. THE COMPANY UNDERTAKES NO OBLIGATION AND DOES NOT INTEND TO UPDATE,
REVISE, OR OTHERWISE PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT FUTURE EVENTS OR
CIRCUMSTANCES.
THE FOLLOWING DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND
FINANCIAL CONDITION OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS
REPORT.
The audit report of the Company's independent certified public
accountant relating to the fiscal year ended September 30, 1999 has been
prepared assuming that the Company will continue as a going concern. The Company
experienced a net loss of $3,176,835 during the year ended September 30, 1999,
and a net loss of $134,333 for the nine months ended June 30, 2000, and had
negative cash flows from operations for the year ended September 30, 1999 and
the nine months ended June 30, 2000. Moreover, management expects that the
Company will continue to experience losses during the current fiscal year. The
Company has developed a "viable plan" to continue as a going concern, dependent
on the Company obtaining additional capital. The Company has received
commitments for loans of up to $300,000 from its majority shareholders and
officers to meet its working capital needs; and the Company intends to attempt
to raise additional capital in a private equity placement later in the 2000
calendar year. There can be no assurance that the Company's efforts will be
successful. Additional information about the Company's new "viable plan" can be
found on page 12 under "Financial Condition".
On January 27, 2000, TMAN sold FSG, its accounting and financial
services subsidiary to FSGH, an unaffiliated, independent party that did not
have a material relationship with TMAN, any affiliate of TMAN, any director or
officer of TMAN or any associate of any officer or director of TMAN. Due to the
fact that operations have been discontinued, FSG's statement of assets,
operating results, and financial condition are reflected as discontinued
operations in all periods of TMAN's financial statements.
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RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1999 AND 1998
TMAN did not commence operations until February 1999. From inception
through the end of January 1999, TMAN was a development stage company.
Consequently, it did not realize any revenues, cost of revenues or gross profit
during the fiscal year ended September 30, 1998; and realized revenues of
$12,144, cost of revenues of $8,003, and gross profits of $4,141 for fiscal year
September 30, 1999. Selling, general and administrative expenses for the 1999
fiscal year, in the amount of $373,570, increased $372,543 from $1,027 in fiscal
1998. The $373,570 does not include $567,121 of selling, general, and
administrative expenses relating to FSG, which are included in Loss from
Operations of Discontinued Subsidiary. The net loss for fiscal 1999 increased
$3,175,808 from $1,027 in fiscal 1998, directly reflecting the change in
selling, general and administrative expenses, depreciation and amortization, and
goodwill impairment.
RESULTS OF OPERATIONS - NINE-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
Operating results for the nine-month periods ended June 30, 2000 and
1999 are difficult to compare to each other due to changes in the operations of
TMAN. On January 1, 1999, TMAN acquired FSG as a wholly-owned subsidiary. During
the nine-month period ended June 30, 2000, TMAN, through FSG, was offering
accounting and financial services to credit unions. On January 27, 2000, TMAN
made the decision to discontinue its operations in the accounting and financial
services industry and sold FSG to FSG Holdings, LLC (FSGH). FSGH was an
unaffiliated, independent party that did not have a material relationship with
the Company, any affiliate of the Company, any director or officer of the
Company or any associate of any officer or director of the Company. The selling
price of $88,650 in the form of three promissory notes receivable and the
assumption of outstanding receivables and payables and the balance due of
$36,571 on a promissory note to TWT created by FSG, as well as all other FSG
debt and liabilities, was determined based upon arm's length negotiations
between the parties. Following the sale of FSG on January 27, 2000, the
Company's revenues were solely derived from its e-commerce business, Charter
Membership Program and its Entertainment Agency. Revenues for TMAN increased
from $6,235 in the nine-month period ended June 30, 1999 to $21,748 in the
nine-month period ended June 30, 2000. Costs of revenues increased from $4,454
in the nine months ended June 30, 1999, to $14,496 for the comparable period in
2000.
Selling, general and administrative expenses decreased from $275,398 in
the nine months ended June 30, 1999 to $260,547 in the nine-month period ended
June 30, 2000. The increase of revenues, costs of revenues and other selling
expenses were due primarily to the fact that TMAN was in its initial period of
development in the prior period and incurred many expenses related to the
development of its e-commerce site in the current period. The net loss decreased
from $402,659 in the nine-month period ended June 30, 1999 to $134,333 in the
nine month period ended June 30, 2000 due to the fact that there was a gain in
the sale of FSG, whereby FSGH, the acquirer of FSG, acquired both FSG's payables
and receivables, as well as assuming all debt and liabilities of FSG. (See Note
6.)
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FINANCIAL CONDITION
As of June 30, 2000, the Company's cash balance was $698 and total
assets, including promissory notes from FSGH, was $106,330. Operating activities
during the nine-month period ended June 30, 2000 accounted for the use of
$86,636, as compared to $205,326 used in nine-month period ended June 30, 1999.
The Company expects that its working capital resources and the cash flow that it
expects to receive from operations will not be sufficient to fund its working
capital needs during the twelve months following the date hereof. While
previously the Company was able to use funds available under the Credit
Agreement discussed below, the sale of FSG eliminated the Credit Agreement as a
source of funds after the sale of FSG on January 27, 2000, and there can be no
assurance that the Company's capital resources will now be adequate. During the
nine-month period ended June 30, 2000, the Company realized a net loss of
$134,333. As of that same date, the Company's cash balance was $698. The Company
expects to continue to operate at a loss through the fiscal year ended September
30, 2000. The ability of the Company to fund its working capital needs during
the next twelve months will largely be dependent on its ability to obtain
additional debt and equity financing. The Company has developed a "viable plan"
to continue as a going concern, dependent on the Company obtaining additional
capital. The Company has received commitments for loans of up to $300,000 from
its majority shareholders and officers to meet its working capital needs - which
will be infused into the Company's working capital account within 90 days after
the Company resumes trading on the OTC Bulletin Board. As a result of the sale
of the FSG subsidiary, The Company's losses have decreased dramatically. The
majority of losses in the previous fiscal year could be directly attributed to
the FSG credit union operation. The Company's current burn rate is now less than
$20,000 per month. The Company intends to continue to seek out and evaluate new
opportunities to acquire private firms and to co-venture with strategic partners
whose joint revenues will then contribute to the bottom line of the Company. In
addition, once the promised funds are infused from its majority shareholders and
Officers, the Company intends to ramp up production of its proprietary product
line from Thailand, which has the highest profit margins of any product sold via
the Company's e-commerce SuperMall. The fresh working capital will also be used
for marketing, promoting, and advertising the Company's business to the martial
arts and fitness industries in an effort to drive more customers to its website
and SuperMall. Since the Company's technological infrastructure is now in place,
future losses should continue to decline and the Company expects to be at
breakeven within the next 12-18 months. The Company also intends to attempt to
raise additional capital in a private equity placement later in the 2000
calendar year or in early 2001. There can be no assurance that the Company's
efforts will be successful. If available, such financing would likely result in
substantial dilution to the existing shareholders of the Company.
In May 1998, FSGI Corporation entered into a Credit Agreement with Bank
Atlantic consisting of a $50,000 Loan and a $50,000 Line of Credit
collateralized by the assets of FSG, Inc., for its financial services
operations. The Loan had an interest rate of 11.05% and became due on May 13,
2000. The Loan was assumed by the acquiring corporation, FSGH, upon the sale of
FSG on January 27, 2000. The Line of Credit provided for borrowings of up to
$50,000 at the prime rate plus 2% collateralized by the assets of FSGI
Corporation. The Line of Credit was assumed by the acquiring corporation, FSGH,
upon the sale of FSG on January 27, 2000.
ITEM 3. DESCRIPTION OF PROPERTIES
TMAN leases the following properties for its internet web site
operations: 300 square feet for $700 per month for its executive offices at 1000
Universal Studios Plaza, Building 22A, Orlando, Florida 32819-7610 under a
month-to-month lease; and 150 square feet for $220 per month at 919-459 Silom
Road, Galleria Plaza, Bangkok, Thailand under a lease commencing November 18,
1999 and expiring November 17, 2000. TMAN also subleases 600 square feet for its
customer service and storage facility at 11435A Palmetto Park Road, Boca Raton,
Florida, on a month-to-month basis, for $1,000 per month from West Boca Karate
which is owned by Ron Tramontano, a director and the President of TMAN.
Management believes that the terms and conditions of this lease are comparable
or better than those that would have been obtained on an arms-length basis.
FSG leased four office locations under various lease arrangements in
Kentucky, Michigan, Hawaii, and Georgia. On January 27, 2000 all lease
obligations were assumed by FSGH, the purchaser of FSG.
Except for the sublease at 11435A Palmetto Park Road, Boca Raton,
Florida, each of the lease agreements are with unaffiliated parties. In the
event that TMAN lost its rights under a particular lease, Management believes
that it could locate comparable facilities without difficulty. Management
believes the properties are adequately covered by insurance and that it has
sufficient space for operations for the next twelve months.
10
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of September 25, 2000,
with respect to the beneficial ownership of the outstanding shares of TMAN's
common stock by (1) each person known by TMAN to be the "beneficial owner" of
more than 5% of the common stock; (2) each director of TMAN; (3) each Named
Executive Officer; and (4) all directors and executive officers as a group. On
October 13, 2000 there were 6,214,553 shares of common stock issues and
outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES % OF COMMON STOCK
OF BENEFICIAL OWNER (1) TITLE OF CLASS BENEFICIALLY OWNED BENEFICIALLY OWNED (2)
----------------------------------- ---------------- ------------------------ ------------------------
<S> <C> <C> <C>
The Martial Arts Network, Inc. Common Stock 4,000,000 (3) 37.8%
1000 Universal Studios Plaza
Building 22A
Orlando, Florida 32819-7610
Tony Interdonato Common Stock 5,000,000 (4) 47.3%
c/o TMANglobal.com, Inc.
1000 Universal Studios Plaza
Building 22A
Orlando, Florida 32819-7610
Ron J. Tramontano Common Stock 5,005,000 (5) 47.3%
c/o TMANglobal.com, Inc.
1000 Universal Studios Plaza
Building 22A
Orlando, Florida 32819-7610
All directors and officers as
a group (2 persons) Common Stock 6,005,000 (6) 56.8%
=====
</TABLE>
----------
(1) Unless noted, all of such shares of common stock are owned of September
25, 2000 by each person or entity named as beneficial owner and such
person or entity has sole voting and dispositive power with respect to
the shares of common stock owned by each of them.
(2) As to each person or entity named as beneficial owner, such person's or
entity's percentage of ownership is determined by assuming that any
options held by such person or entity which are exercisable or
convertible within 60 days from the date hereof have been exercised or
converted, as the case may be, making the percentages calculable
on a fully-diluted basis.
(3) Includes 1,000,000 shares of common stock issuable pursuant to options
granted in January 1999 and exercisable through January 2002.
(4) Represents 1,000,000 shares of common stock issuable to Mr. Interdonato
pursuant to options granted in January 1999 and exercisable through
January 2002; the 3,000,000 shares of common stock beneficially owned
by The Martial Arts Network, Inc; and the 1,000,000 shares of common
stock issuable to The Martial Arts Network, Inc. pursuant to options
granted to it in January 1999 and exercisable through January 2002. Mr.
Interdonato is considered a beneficial owner of the interest in TMAN
held by The Martial Arts Network, Inc. given his direct interest in The
Martial Arts Network, Inc. and his position as President and Chief
Operating Officer of The Martial Arts Network, Inc.
(5) Includes, 1,000,000 shares of common stock issuable pursuant to options
granted to Mr. Tramontano in January 1999 and exercisable through
January 2002; 5,000 shares of common stock purchased by Mr. Tramontano
in the open market; the 3,000,000 shares of common stock beneficially
owned through The Martial Arts Network, Inc; and the 1,000,000 shares
of common stock issuable to The Martial Arts Network, Inc. pursuant to
options granted to it in January 1999 and exercisable through January
2002. Mr. Tramontano is considered a beneficial owner of the interest
in TMAN held by The Martial Arts Network, Inc. given his direct
interest in The Martial Arts Network, Inc. and his position as Chairman
and Founder of The Martial Arts Network, Inc.
(6) Represents 2,000,000 shares of common stock issuable to the two
individual directors and officers pursuant to options granted in
January 1999 and exercisable through January 2002; 5,000 shares of
common stock purchased by Mr. Tramontano in the open market; the
3,000,000 shares of common stock beneficially owned through The Martial
Arts Network, Inc; and the 1,000,000 shares of common stock issuable to
The Martial Arts Network, Inc. pursuant to options granted to it in
January 1999 and exercisable through January 2002.
11
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of TMAN are:
NAME AGE TITLE
------------------ --- ------------------------------------
Tony Interdonato 41 Chairman and Chief Executive Officer
Ron J. Tramontano 52 President and Director
TMAN's articles of incorporation provide that the Board of Directors
shall consist of not less than one, nor more than seven directors, each of which
shall be elected annually. Currently the Board of Directors consists of Tony
Interdonato and Ron Tramontano, both of whom were elected in January 1999 and
re-elected January 2000.
TONY INTERDONATO. Mr. Interdonato has been President and Chief
Operating Officer of TMAN's parent, The Martial Arts Network, Inc. since October
1994. Mr. Interdonato became Chairman and Chief Executive Officer of TMAN on
January 1, 1999. From May 1999 to January 2000, Mr. Interdonato was Chief
Executive Officer of FSG. From August 1996 to June 1997, Mr. Interdonato oversaw
the creation and production of an international business television program
(WORLD BUSINESS REVIEW, for which former Secretary of Defense Caspar Weinberger
acts as the on-the-air host) as Senior Vice President and General Manager of
Multi-Media Productions. From June 1994 to May 1996, Mr. Interdonato was the
President of Direct Image, Inc., an multimedia advertising agency. From June
1995 to August 1996, he also served as Vice President of Business
Development/Strategic Planning and Head of Corporate Communications/Public
Relations at Five Star Productions USA. Mr. Interdonato was Senior Producer and
Vice President of Media Relations at WJMK-TV from October 1993 to June 1995.
RON TRAMONTANO. Mr. Tramontano has been Chairman and Founder of The
Martial Arts Network, Inc. since October 1994. Mr. Tramontano became a Director
and President of TMANglobal.com in January 1999. Mr. Tramontano is also Chief
Instructor of the West Boca Karate Center, which he opened in 1986. Prior to
opening West Boca Karate Center, Mr. Tramontano was employed by Teltec
Communications and New York Telephone for more than eighteen years where he
engineered and monitored the first microwave transmission stations to be used at
that time in the Northeast, including the installation of CNN's video
transmitter/receiver at One World Trade Center in New York City. Mr. Tramontano
graduated from Metropolitan Collegiate Institute with a degree in Electronics in
June 1985.
There are no material proceedings to which any director, officer or
affiliate of TMAN, any record or beneficial owner of more than five percent of
TMAN common stock, or any associate of any such director, officer, affiliate of
TMAN or security holder is a party adverse to TMAN or any of its subsidiaries or
has a material interest adverse to TMAN or any of its subsidiaries.
12
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate cash compensation paid for
services rendered to TMAN during the last three years by each person serving as
TMAN's chief executive officer during the last fiscal year. None of TMAN's most
highly compensated executive officers serving as such at the end of the year
ended September 30, 1999 had compensation in excess of $100,000.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------ ----------------------- ----------
SECURITIES
NAME AND OTHER RESTRICTED UNDERLYING
PRINCIPAL ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
POSITION(1) YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($) SARS(#) PAYOUTS($) COMPENSATION($)
------------------- ---- --------- -------- --------------- ----------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tony Interdonato, 1999 60,000 - - 1,000,000 - -
Chief Executive
Officer
Jason L. Lents, 1999 - - 6,250(1) - - - -
President 1998 90,000 - - 286,000 - - -
1997 90,000 - - - - - -
</TABLE>
(1) Jason L. Lents was appointed director of FSGI Corporation and president
of FSG in August 1997. Mr. Lents ran the operations of FSG and FSGI
Corporation, including the duties traditionally assigned to the chief
executive officer from August 1997 to the time it was acquired on
January 1, 1999, at which time Mr. Interdonato was appointed chief
executive officer of FSGI Corporation's successor company TMAN. Mr.
Lents continued as the president of FSG until May 1, 1999 at which time
Mr. Interdonato became Chief Executive Officer of FSG and Michael
Santone became interim President of FSG. Mr. Lents continued to work as
a consultant for FSG from May 1, 1999 until September 30, 1999 for
which he received a total of $6,250. See "Consulting Agreements".
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth the options to purchase shares of common
stock and SARs granted by TMAN to its named executive officers in the fiscal
year ended September 30, 1999.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE OR
NAME AND OPTIONS/SARS EMPLOYEES IN BASE PRICE
PRINCIPAL POSITION GRANTED(#) FISCAL YEAR ($/SH) EXPIRATION DATE
------------------ ---------- ----------- ------ ---------------
<S> <C> <C> <C> <C>
Tony Interdonato,
Chief Executive Officer 1,000,000 33.33% $1.00 1/12/2002
Jason L. Lents,
President - - - -
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
No options to purchase common stock were exercised by any executive
officer during the year ended September 30, 1999.
13
<PAGE>
DIRECTOR AND OFFICER COMPENSATION
TMAN does not generally compensate directors for the activities they
perform in their capacity as director. In January 1999 the Board of Directors
resolved to pay a fixed based salary through January 2000 to TMAN's two
principal officers as follows: $4,000 per month ($48,000 per year) to Tony
Interdonato, Chairman and Chief Executive Officer; and $2,000 per month ($24,000
per year) to Ron Tramontano, President and a Director. As of June 1999, the
Board of Directors resolved to increase the pay of Ron Tramontano to $4,000 per
month ($48,000 per year). In January 1999 Messrs. Interdonato and Tramontano
each also received options to purchase 1,000,000 shares of common stock
exercisable at $1.00 per share until January 2002.
CONSULTING AGREEMENTS
Jason L. Lents, a former director of FSGI Corporation and the former
president of FSG, provided consulting services to FSG between May 1, 1999 and
September 30, 1999 at a rate of $1,250 per month. This consulting agreement
expired on its terms on September 30, 1999.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no transactions between TMAN and any director, executive
officer, or beneficial owner in excess of $60,000 during the year ended
September 30, 1999.
ITEM 8. DESCRIPTION OF SECURITIES
TMAN is currently authorized to issue 20,000,000 shares of common
stock, par value $.0001 per share. As of October 13, 2000, there were 6,214,553
shares of common stock issued and outstanding and 56 holders of record.
Management believes that there are at least 300 beneficial owners. Each share of
common stock entitles the holder to one vote on each matter submitted to the
stockholders. The holders of common stock: (a) have equal ratable rights to
dividends from funds legally available therefor when, as and if declared by the
board of directors; (b) are entitled to share ratably in all of the assets of
TMAN available for distribution to holders of common stock upon liquidation,
dissolution or winding up of the affairs of TMAN; and (c) do not have
preemptive, subscription or conversion rights, or redemption or applicable
sinking fund provisions. Prior to any payment of dividends to the holders of
common stock, all accrued and unpaid dividends on any outstanding shares of
preferred stock must be paid. (As of the date of this Registration Statement,
there are no shares of preferred stock outstanding). TMAN anticipates that, for
the foreseeable future, it will retain earnings, if any, to finance the
operations of its businesses. The payment of dividends in the future will depend
on, among other things, the capital requirements and the operating and financial
conditions of TMAN.
14
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
On January 4, 1999, the Securities and Exchange Commission (the "SEC")
approved amendments to National Association of Securities Dealers, Inc. Rules
6530 and 6540 to limit quotations on the OTC Bulletin Board to the securities of
companies that make current filings pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended. TMAN failed to meet the December 1,
1999 deadline for compliance with the new OTC Bulletin Board eligibility rules,
and, effective since that date, is no longer quoted on the OTC Bulletin Board.
>From January 1999 TMAN traded on the Nasdaq OTC Bulletin Board under the symbol
"CHOP" (and later, from November 1999, "CHOPE"). TMAN traded under the symbol
"FSGI" from July 31, 1998 to January 13, 1999. Currently TMAN trades only in the
"pink sheets." This Registration Statement on Form 10-SB must be reviewed and
cleared by the SEC in order for TMAN to once again meet the requirements of the
new eligibility rule. Once becoming eligible again, TMAN will only be allowed to
re-enter trading on the OTC Bulletin Board after being cleared by the OTC
Compliance Unit. The range of high and low bid information for TMAN's common
stock for each full quarterly period during TMAN's last two fiscal years, is as
follows:
PERIOD HIGH BID LOW BID
------ -------- -------
FISCAL 1999 1st quarter $2.40 $0.44
2nd quarter 3.50 0.75
3rd quarter 2.00 0.625
4th quarter 2.00 0.25
FISCAL 2000 1st quarter 0.75 0.01
2nd quarter 0.75 0.08
3rd quarter 0.75 0.07
4th quarter (1) 0.30 0.05
------------
(1) Through October 13, 2000.
Quotations, through December 1, 1999, were obtained from the Nasdaq OTC
Bulletin Board quarterly quote summaries, and reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions. Quotes subsequent to December 1, 1999 were
obtained from the FinancialWeb.com, Inc. As of December 1, 1999, the last date
the Company's securities traded on the Bulletin Board, the closing bid price for
TMAN's common stock was $0.25. As of the same date, there were approximately 55
holders of record of TMAN's common stock. Management believes that there are
approximately 300 beneficial owners of TMAN common stock. As of the date hereof,
TMAN Common Stock trades in the "pink sheets."
TMAN has not paid any cash dividends and does not anticipate paying any
cash dividends in the foreseeable future. TMAN intends to use any earnings which
it may generate to finance the growth of its business.
15
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
In July 1999, the Trustee in Bankruptcy ("Trustee") for Total World
Telecommunications, Inc. ("Total World') filed a Complaint to Recover Fraudulent
Transfer in the United States Bankruptcy Court for the Southern District of
Florida against Financial Standards Group, Inc. ("FSG"), a wholly-owned
subsidiary of TMANglobal.com, Inc., and the following three individuals who
previously were officers of FSG, Jason L. Lents, Lori Carmichael and James M.
Dorman. IN RE: TOTAL WORLD TELECOMMUNICATIONS, INC. LAWRENCE H. BLUM AS
UNSECURED CREDITORS TRUSTEE V. FINANCIAL STANDARDS GROUP, INC. ET AL., Case No.
97-36030-BKC-SHF, Adv. 99-3153 (U.S.D.C. S.D. Fla. Bkrptcy, 1999). The Trustee
alleged that Total World's transfer of the stock in FSG to the three individuals
who were officers of FSG at the time for a $50,000 note within a year of the
filing of Total World's involuntary bankruptcy was for insufficient
consideration while Total World was insolvent, with the intent to hinder, delay,
and defraud Total World's creditors, and therefore is a voidable fraudulent
transfer under Federal and Florida bankruptcy law. The Trustee sought an Order
declaring the transfer of the FSG stock to the three individuals to have been a
violative fraudulent transfer, and further ordering FSG and the individuals to
turn the FSG stock over to the Trustee, or alternatively awarding unspecified
money damages. Any liability arising from Total World's transfer of the FSG
stock to the three individuals has been assumed by FSGH which purchased FSG from
TMANglobal.com, Inc. on January 27, 2000 pursuant to a Letter Agreement whereby
FSGH purchased all FSG's assets, operations and liabilities. It is management's
understanding that FSGH has reached a settlement with the Trustee in this
matter. In the opinion of management, since these proceedings have been settled
by third parties, they will not have any impact on TMAN's financial position or
results of operations.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
1. In October 1997, FSGI Corporation borrowed $50,000 from Premium
Investment Management, Ltd. In satisfaction of that debt, FSGI Corporation paid
to the lender $3,000 in interest, and in August 1998 at the lender's
instruction, issued to SBZ Investment Subtrust, Ltd. 500,000 shares of
restricted common stock in lieu of repayment of the note; options to purchase
100,000 shares of restricted common stock at $1.00; and options to purchase
100,000 shares of restricted common stock at $.50 per share (all of which
options expire October 31, 2000). In March 1999, TMAN sold 66,667 shares of
restricted common stock to SBZ Investment Subtrust, Ltd. at $.75 per share. For
these transactions, the Company relied on exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act") as
provided under Section 4(2) of the Securities Act.
16
<PAGE>
2. In November 1997, as consideration for consulting services, FSGI
Corporation granted Fly Yellow Investments, Ltd. options to purchase 100,000
shares of restricted common stock at $.75 per share, exercisable between
November 1, 1997 and October 31, 2000. For this transaction, the Company relied
on exemption from registration requirements of the Securities Act as provided
under Section 4(2) of the Securities Act.
3. In June 1998, FSGI Corporation issued 737,000 shares of restricted
common stock on a no cost basis to certain directors including Lori Carmichael,
James Dorman, and Jason Lents, and consultants including Steve Ehlers, Alan
Gioia, Charles Greenberg, Evans Harrell, Hank Klein, David Latraverse, Larry
McCants, Steven Nearman, Douglas Orth, Andy Rivero, Carroll Scarborough, James
M. Schneider, Hubert Sibley, Southeast Capital Partners, Inc., Kevin Spencer,
Kevin Ward, Bryan Yang, John Zurek, predominantly for services rendered for
referrals and business leads in the credit union industry. In this transaction,
the Company relied on exemption from registration requirements as provided under
Rule 701 or Section 4(2) of the Securities Act.
4. In June 1998, FSGI Corporation sold 538,667 shares of common stock
at $.75 per share (an aggregate of $335,000 net of offering expenses) to private
persons including: Adrian Beaulieu, A.W. Boggs, Robert Breske, Thomas J. Campo,
Matthew Cannold, Richard Davimos, Robert Davimos, Lester Dubins, Ross Dubins,
Cary Geensburg, Charles Greenberg, Robert Krantz, Christina Liff, Louise
Nilsdotter, Michael Rossiello, Richard Rubino, Luther Sagebiel, and Robert Zara;
and to corporate entities including Alma Foundation, Inc., Fenway Advisory
Group, and Kelco Foundation, Inc. in a Rule 504 private offering. There were a
total of 21 investors of which 16 were accredited as defined in Rule 501
promulgated under Regulation D of the Exchange Act. 5 investors were deemed
suitable by the Company because they represented in the Subscription Agreements
they executed that they could afford a potential loss of their entire investment
and in the Purchaser Questionnaire that they were experienced, sophisticated,
and had participated in other private placements of securities. In these
transactions, the Company relied on exemption from registration requirements as
provided under Rule 504 or Section 4(2) of the Securities Act.
5. In July 1998, FSGI Corporation granted David Latraverse options to
purchase 50,000 shares of restricted common stock at $1.00 per share between
July 1998 and June 30, 2001 in consideration for investment consulting services.
For this transaction, the Company relied on exemption from registration
requirements of the Securities Act as provided under Rule 701 or Section 4(2) of
the Securities Act.
6. In August 1998, FSGI Corporation issued 33,333 shares of restricted
common stock valued at $.75 per share to M&A West as consideration for financial
advice, investor relations and public relations services. For this transaction,
the Company relied on exemption from registration requirements of the Securities
Act as provided under Section 4(2) of the Securities Act.
17
<PAGE>
7. In August 1998 FSGI Corporation issued 100,000 shares of restricted
common stock at $.75 per share to Five Speed Investments Subtrust, Ltd. in
consideration of consulting services provided. Five Speed Investments Subtrust,
Ltd. was the assignee of Fly Yellow Investments, Ltd. for these options. FSGI
Corporation issued another 100,000 restricted shares at $.75 per share to Five
Speed Investments Subtrust, Ltd. in October 1998 in consideration of consulting
services. In February 1999, Five Speed Investments Subtrust, Ltd. purchased
66,667 shares of TMAN's restricted common stock at $.75 per share. Cash proceeds
to the Company of these transactions totaled $50,000. Five Speed Investments
Subtrust, Ltd. is a venture capital fund. For these transactions, the Company
relied on exemption from registration requirements as provided under Section
4(2) of the Securities Act.
8. In September 1998, FSGI Corporation issued 25,000 shares of
restricted common stock valued at $.75 per share to National Capital Merchant
Group, L.L.C. for strategic planning and financial advice. For this transaction,
the Company relied on exemption from registration requirements of the Securities
Act as provided under Section 4(2) of the Securities Act.
9. In October 1998, FSGI Corporation granted an option to Southeast
Capital Partners, Inc. to purchase 75,000 shares of restricted common stock at
$1.00 per share between October 1, 1998 and September 30, 1999 in consideration
of market and strategic planning services. In June 1998, Southeast Capital
Partners, Inc. was issued 25,000 shares of restricted common stock, valued at
$1.00 per share; in September 1998, Southeast Capital Partners, Inc. was issued
25,000 shares of restricted common stock, valued at $1.00 per share, and in
October 1998 Southeast Capital Partners, Inc. was issued 25,000 shares of
restricted common stock, valued at $1.00 per share, all as additional
consideration payable for additional services provided to the Company. For these
transactions, the Company relied on exemption from registration requirements of
the Securities Act as provided under Section 4(2) of the Securities Act.
10. In October 1998, in addition to $10,000 paid in cash consideration,
FSGI Corporation granted options to purchase restricted common stock to
Managerial Advisory Services, Inc. as partial consideration for management
advisor and investor relation services, as follows: 100,000 shares at $1.00;
100,000 shares at $1.50; and 100,000 shares at $2.00. Such options have a
cashless exercise feature. For these transactions, the Company relied on
exemption from registration requirements of the Securities Act as provided under
Section 4(2) of the Securities Act.
11. In November 1998, FSGI Corporation issued 50,000 shares of
restricted common stock to Stockbroker Relations, Inc. valued at $.82 per share
(30,000 of such shares were retired in April 1999), and 133,333 shares of
restricted common stock valued at $.75 per share, to Scott Sieck for financial
advice, investor relations, and public relations services; of these, 66,667
shares were retired in April 1999. For these transactions, the Company relied on
exemption from registration requirements of the Securities Act as provided under
Rule 701 or Section 4(2) of the Securities Act.
18
<PAGE>
12. In December 1998, FSGI Corporation issued 245,500 shares of
restricted common stock to certain investors including, Barbara Fredricksen,
Bruce Barrows, Steven Busboom, Steve Cave, Joseph Cherico, Alan Gioia, Connie
Himsel, Francis A. Leinenbach, Sonny Lents, Brenda Leverio, Caryn Levin, Kathy
Lockhart, Amy Mollica, Adam Rack, Anthony Rack, Videl Rack, Raskin and Raskin
P.A., Michelle Rocha, Robert Sagebiel, Luther Sagebiel, Debbie Schiavone, Dodi
Strange, Debra Swank, Jerry Tishman, Martha Jane Tucker., as compensation for a
failed prior investment in Total World Telecommunications, Inc. ("Total World").
Total World was formerly the corporate parent of Financial Standards Group, Inc.
These shares were issued to these 25 investors on a no cost basis and there is
no record of any Subscription Agreement, Purchaser Questionnaires, or any other
documents being executed or distributed to determine if these 25 investors were
accredited as defined in Rule 501 promulgated under Regulation D of the Exchange
Act. In these transactions, the Company relied on exemption from registration
requirements as provided under Section 4(2) of the Securities Act. No
consideration of any kind was paid to the Company for any of the shares issued
in the transaction discussed here.
13. On December 21, 1998 (January 1, 1999 for accounting purposes),
FSGI Corporation acquired all of the outstanding common stock of The Martial
Arts Network On-Line, Inc. from The Martial Arts Network, Inc. As consideration,
FSGI Corporation issued an aggregate of 3,000,000 shares of restricted common
stock and an option to purchase up to 1,000,000 additional restricted shares at
a purchase price of $1.00 per share until January 2002. The Martial Arts
Network, Inc. now has controlling interest in the Company, which underwent a
name change on January 14, 2000 from FSGI Corporation to TMANglobal.com, Inc.
For accounting purposes the acquisition has been treated as an acquisition of
FSGI Corporation by The Martial Arts Network On-Line, Inc. and as a
recapitalization of The Martial Arts Network On-Line, Inc., all effective as of
January 1, 1999. In this transaction, the Company relied upon exemption from
registration requirements as provided under Section 4(2) of the Securities Act.
14. In January 1999, TMAN granted options to purchase 1,000,000 shares
of restricted common stock at $1.00 per share, between January 1999 and January
2002, to each of its three officers, Tony Interdonato, Ron Tramontano, and Ron
Valli. For these transactions, the Company relied on exemption from registration
requirements of the Securities Act as provided under Section 4(2) of the
Securities Act.
15. In March 1999, TMAN sold 288,153 shares of common stock to certain
investors including: Bruce and Jo Ann Bateman, Paul Bateman, Theodore and Teresa
Fowler, John and Jennifer Kennedy, Lazzaro and Lorraine Lizzo, Joe and Donna
Mincuzzi, Robert and Gina Monprode, Nicholas Palazzo, Anthony Papariello and
Rose Lohse, Joseph Paradise, Nicholas Restivo, Frank Pero, George and Phyllis
Reilly, Nicholas Restivo, Peter and Ann Restivo, Michael Rossiello, David and
Beth Rubin, Angela and Marie Santorelli, Marie and Carmine Santorelli, Florence
Schreiber, Ben Smith, Robert and Angela Strzalkowski, Nancy Tramontano, and
Jerry Tramontano in a Rule 504 private offering at a price of $.75 per share,
for an aggregate consideration of $216,115. There were a total of 22 investors
of which 13 were accredited as defined in Rule 501 promulgated under Regulation
D of the Exchange Act. Nine investors were deemed suitable by the Company
because they represented in the Subscription Agreements they executed that they
could afford a potential loss of their entire investment and in the Purchaser
Questionnaire that they were experienced, sophisticated, and had participated in
other private placements of securities. In these transactions, the Company
relied on exemption from registration requirements as provided under Rule 504 or
Section 4(2) of the Securities Act.
19
<PAGE>
16. In April 1999, TMAN issued 50,000 restricted shares of common stock
to K.M. Ward, Inc. as consideration valued at $78,750 for consulting services.
Also as of April 1999, TMAN is contractually obligated to issue 100,000 shares
of restricted common stock to Elliott, Lane & Associates as payment for
investment banking services (50,000 of such shares were issued in August 1999).
For these transactions, the Company relied on exemption from registration
requirements of the Securities Act as provided under Rule 701 or Section 4(2) of
the Securities Act.
17. In April and May, 1999, TMAN issued, respectively, 6,800 and 6,700
shares of restricted common stock at $.75 per share to private persons, Tony and
Nancy Anne Vertullo and Michael and Cecilia Held. These investors were deemed
suitable by the Company because they represented in the Subscription Agreements
they executed that they could afford a potential loss of their entire investment
and in the Purchaser Questionnaire that they were experienced, sophisticated,
and had participated in other private placements of securities. The Company
received cash totaling $10,125 for these issuances. For these transactions, the
Company relied on exemption from registration requirements as provided under
Section 4(2) of the Securities Act.
18. In February 2000, TMAN issued 200,000 shares of restricted common
stock upon exercise of options previously issued to SBZ Investment Subtrust,
Ltd. and 100,000 shares of restricted common stock upon exercise of options
previously issued to Fly Yellow Investments, Ltd. at an exercise price of $.10
per share for an aggregate consideration of $30,000.00. Both investors were
accredited as defined in Rule 501 promulgated under Regulation D of the Exchange
Act. In these transactions, the Company relied on exemption from registration
requirements as provided under Section 4(2) of the Securities Act.
None of the foregoing transactions involved any public offering and the
recipients either received adequate information about FSGI Corporation or TMAN,
or had access, through employment or other relationships, to such information.
In each of the foregoing transactions, Management reasonably believed that each
of the recipients was suitable to make such investment because the recipients
represented in their respective Subscription Agreements that they could afford a
potential loss of their entire investment and in their respective Purchaser
Questionnaires that they were experienced, sophisticated, and had participated
in other private placements of securities; or were "accredited" within the
meaning of Rule 501 under the Securities Act because the recipients represented
in their respective Subscription Agreements that they were accredited and
provided information in their respective Purchaser Questionnaires that indicated
they met the income requirements of Rule 501; or both.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0850 of the Florida Business Corporation Act empowers a
corporation to indemnify any person who was or is a party to a proceeding by
reason of the fact that he was or is an officer, director, employee or agent of
the corporation against liability incurred in connection with such proceeding.
Such person must have acted in good faith and in a manner reasonably believed to
be in, or not opposed to, the best interests of the corporation. With respect to
any criminal proceeding, such person must have had no reasonable cause to
believe his conduct was unlawful. Moreover, indemnification of officers,
directors, employees or agents of TMAN is only appropriate when determined to be
proper under the applicable standard of conduct by a majority vote of a quorum
of TMAN's board of directors, excluding any directors seeking indemnification.
20
<PAGE>
Indemnification is not exclusive under the Florida Business Corporation
Act, however, indemnification is not permitted to be made on behalf of any
person if a judgment or final adjudication establishes: (1) a violation of the
criminal law, unless such person had reasonable cause to believe his conduct was
lawful or no reasonable cause to believe his conduct was unlawful; (2) such
person derived an improper personal benefit from the transaction; (3) as to any
director, such proceeding arose from an unlawful distribution under Section
607.0834 of the Florida Business Corporation Act; or (4) willful misconduct or a
conscious disregard for the best interests of TMAN in a proceeding by the
corporation or a stockholder.
TMAN's bylaws provide that TMAN shall indemnify persons acting in good
faith and in the best interest of TMAN. The bylaws provide further, with respect
to criminal activities, that TMAN shall indemnify persons who had no reasonable
cause to think his or her actions unlawful. TMAN is empowered by the bylaws to
purchase and maintain insurance on behalf of any such person.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling TMAN pursuant
to the foregoing provisions, TMAN has been informed that in the opinion of the
SEC, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
PART F/S
See pages F-1 through F-16 hereinbelow.
21
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
See Item 2 below.
ITEM 2. DESCRIPTION OF EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Agreement and Plan of Merger dated December 21, 1998
between FSGI Corporation and The Martial Arts Network
On-Line, Inc. (1)
3.1 Articles of Incorporation and amendment thereto (1)
3.2 Bylaws (1)
4.1 Certificate for shares of common stock (1)
10.1 Consulting Agreement dated March 9, 1999 between K. M.
Ward Inc. and TMAN (1)
10.2 Consulting Agreement dated March 17, 1999 between
VistaQuest, Inc. and TMAN (1)
10.3 General Agreement dated April 29, 1999 between Elliott,
Lane & Associates, Inc. and TMAN (1)
10.4 Purchase Contract dated November 13, 1998 between
Bonnie Davis and FSGI Corporation (1)
11* Statement re: Computation of Per Share Earnings
23* Consent of Independent Certified Public Accountants
27* Financial Data Schedule
--------------
* Filed herewith.
(1) Previously included as an exhibit to the Registrant's Form 10-SB filed
October 13, 1999, and incorporated herein by reference.
22
<PAGE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
<S> <C>
Independent Auditor's Report.................................................................... F-1
Consolidated Financial Statements:
Consolidated Balance Sheets as of September 30, 1999 and 1998 and
unaudited as of June 30, 2000............................................................ F-2
Consolidated Statements of Operations for the years ended September 30, 1999 and 1998
and unaudited for the nine months ended June 30, 2000 and 1999........................... F-3
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the
years ended September 30, 1999 and 1998 and unaudited for the nine months
ended June 30, 2000 and 1999............................................................. F-4
Consolidated Statements of Cash Flows for the years ended September 30, 1999 and 1998
and unaudited for the nine months ended June 30, 2000 and 1999........................... F-5
Notes to Consolidated Financial Statements...................................................... F-6 - F-14
</TABLE>
<PAGE>
DASZKAL BOLTON MANELA DEVLIN & CO.
CERTIFIED PUBLIC ACCOUNTANTS
----------------------------
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
2401 N.W. BOCA RATON BOULEVARD, SUITE 100 BOCA RATON, FLORIDA 33431
TELEPHONE (561) 367-1040 FAX (561) 750-3236
JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN INSTITUTE
MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC ACCOUNTANTS
ROBERT A. MANELA, CPA, P.A.
TIMOTHY R. DEVLIN. CPA, P.A.
MICHAEL S. KRIDEL, CPA, P.A.
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Board of Directors and Stockholders
TMANglobal.com, Inc. and subsidiary
Orlando, Florida
We have audited the accompanying consolidated balance sheets of TMANglobal.com,
Inc. and subsidiary, as of September 30, 1999 and 1998, and the related
consolidated statements of operations, changes in stockholders' equity (deficit)
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TMANglobal.com, Inc.
and subsidiary, as of September 30, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company experienced a loss from operations
in 1999 and 1998 and had negative cash flows from operations for the years ended
September 30, 1999 and 1998. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans regarding
those matters are described in Note 17. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ DASZKAL BOLTON MANELA DEVLIN & CO.
Boca Raton, Florida March 9, 2000, except for Note 16, as to which the date is
September 12, 2000
F-1
<PAGE>
<TABLE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
----------------------------------------------------------------------------------------------------------------
<CAPTION>
ASSETS
------
(UNAUDITED)
SEPTEMBER 30, JUNE 30,
----------------------------------- -----------------
1999 1998 2000
----------------- ----------------- -----------------
<S> <C> <C> <C>
Current assets:
Cash $ 47,470 $ - $ 698
Accounts receivable 87,310 - 694
Due from affiliates 7,447 - 27,647
Current maturity of note receivable - - 55,862
Prepaid and other assets 20,365 - 1,547
----------------- ----------------- -----------------
Total current assets 162,592 - 86,448
----------------- ----------------- -----------------
Property and equipment, net 29,845 - 1,883
----------------- ----------------- -----------------
Other assets:
Goodwill, net 103,000 - -
Client list, net 66,000 - -
Note receivable, net of current portion - - 17,999
----------------- ----------------- -----------------
Total other assets 169,000 - 17,999
----------------- ----------------- -----------------
Total assets $ 361,437 $ - $ 106,330
================= ================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current liabilities:
Accounts payable $ 172,273 $ - $ 95,170
Accrued expenses 11,825 - 58,075
Due to stockholders 7,509 8,097 2,200
Due to parent company - 1,000 -
Checks outstanding in excess of bank balances 8,592 15 -
Current maturities of long-term debt 74,449 - -
Loans payable - other - - 20,000
----------------- ----------------- -----------------
Total current liabilities 274,648 9,112 175,445
----------------- ----------------- -----------------
Long-term debt 36,571 - -
----------------- ----------------- -----------------
Total liabilities 311,219 9,112 175,445
----------------- ----------------- -----------------
Stockholders' equity (deficit):
Common stock, $0.0001 par value;
20,000,000 shares authorized;
5,897,554 and 3,000,000 shares issued
and outstanding at September 30, 1999
and 1998, respectively 590 300 620
Subscriptions receivable - - (15,000)
Additional paid-in capital 3,235,675 (200) 3,265,645
Accumulated deficit (3,186,047) (9,212) (3,320,380)
----------------- ----------------- -----------------
Total stockholders' equity (deficit) 50,218 (9,112) (69,115)
----------------- ----------------- -----------------
Total liabilities and stockholders' equity $ 361,437 $ - $ 106,330
================= ================= =================
See accompanying notes to consolidated financial
statements.
</TABLE>
F-2
<PAGE>
<TABLE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(UNAUDITED)
YEARS ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
----------------------------------- -----------------------------------
1999 1998 2000 1999
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues earned $ 12,144 $ - $ 21,748 $ 6,235
Cost of revenues 8,003 - 14,496 4,454
----------------- ----------------- ----------------- -----------------
Gross profit 4,141 - 7,252 1,781
Operating expense:
General and administrative expense 373,570 1,027 260,547 275,398
Depreciation expense - - - -
Amortization expense - - - -
----------------- ----------------- ----------------- -----------------
Total operating expense 373,570 1,027 260,547 275,398
----------------- ----------------- ----------------- -----------------
Loss from continuing operations (369,429) (1,027) (253,295) (273,617)
----------------- ----------------- ----------------- -----------------
Discontinued operations (See Note 16)
Loss from operations of discontinued subsidiary (2,807,406) - (49,929) (129,042)
Gain from disposal of subsidiary - - 168,891 -
----------------- ----------------- ----------------- -----------------
Net loss $ (3,176,835) $ (1,027) $ (134,333) $ (402,659)
================= ================= ================= =================
Net loss per share (basic & diluted) $ (0.62) $ - $ (0.02) $ (0.08)
================= ================= ================= =================
Weighted average common shares outstanding 5,115,053 3,000,000 6,064,221 4,765,628
================= ================= ================= =================
See accompanying notes to consolidated financial
statements.
</TABLE>
F-3
<PAGE>
<TABLE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
Number Additional
of Common Paid-In Subscription Accumulated
Shares Stock Capital Receivable Deficit Total
------------ -------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 1, 1997 3,000,000 $ 300 $ (200) $ - $ (8,185) $ (8,085)
Net loss - September 30, 1998 - - - - (1,027) (1,027)
------------ -------- ------------ ------------ ------------ ------------
Balance, September 30, 1998 3,000,000 300 (200) - (9,212) (9,112)
Acquisition of assets of FSGI Corp. 2,542,833 254 2,876,871 (50,000) - 2,827,125
Issuance of common stock 440,387 44 330,246 - - 330,290
Issuance of stock for services 100,000 10 122,490 - - 122,500
Retirement of common stock (185,666) (18) (49,982) 50,000 - -
Issuance costs - - (43,750) - - (43,750)
Net loss - September 30, 1999 - - - - (3,176,835) (3,176,835)
------------ -------- ------------ ------------ ------------ ------------
Balance, September 30, 1999 5,897,554 590 3,235,675 - (3,186,047) 50,218
Issuance of common stock 300,000 30 29,970 (15,000) - 15,000
Net loss - June 30, 2000 (Unaudited) - - - - (134,333) (134,333)
------------ -------- ------------ ------------ ------------ ------------
Balance, June 30, 2000 (Unaudited) 6,197,554 $ 620 $ 3,265,645 $ (15,000) $(3,320,380) $ (69,115)
============ ======== ============ ============ ============ ============
See accompanying notes to consolidated financial
statements.
</TABLE>
F-4
<PAGE>
<TABLE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(UNAUDITED)
YEARS ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
--------------------------------- ---------------------------------
1999 1998 2000 1999
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,176,835) $ (1,027) $ (134,333) $ (402,659)
Adjustments to reconcile net loss to cash provided
(used) by operating activities:
Depreciation and amortization 164,122 - 66,823 105,766
Common stock issued for services 122,500 - - 81,500
Goodwill impairment 2,525,715 - - -
Gain of disposal - - (168,891) -
Changes in assets and liabilities, net effects
of acquisitions:
(Increase) decrease in:
Cash acquired - - - (2,437)
Accounts receivable (28,759) - 17,046 15,821
Subscriptions receivable - - - 50,000
Prepaid and other assets (6,890) - (2,711) (14,780)
Increase (decrease) in:
Accounts payable 108,112 - 82,488 (3,779)
Accrued expenses (23,439) - 67,400 (33,723)
Due to affiliates (8,447) - - (1,000)
---------------- ---------------- ---------------- ----------------
Net cash used in operating activities (323,921) (1,027) (72,178) (205,291)
---------------- ---------------- ---------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (12,917) - - -
Cash used in disposal - - (14,458) (1,883)
Cash acquired in acquisition (2,437) - - -
---------------- ---------------- ---------------- ----------------
Net cash used in investing activities (15,354) - (14,458) (1,883)
---------------- ---------------- ---------------- ----------------
Cash flows from financing activities:
Checks outstanding in excess of bank balance 8,577 15 (8,592) 29,125
Proceeds from issuance of common stock, net 286,540 - 15,000 330,290
Proceeds from long term debt 68,000 - 40,000 47,375
Payments on long term debt (25,784) - (15,354) (12,256)
Subscriptions receivable 50,000 - - (1,500)
Payments on notes receivable - - 14,119 -
Due to stockholder (588) - (5,309) (35)
---------------- ---------------- ---------------- ----------------
Net cash provided by financing activities 386,745 15 39,864 392,999
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in cash 47,470 (1,012) (46,772) 185,825
Cash, beginning of year - 1,012 47,470 -
---------------- ---------------- ---------------- ----------------
Cash, end of year $ 47,470 $ - $ 698 $ 185,825
================ ================ ================ ================
See accompanying notes to consolidated financial
statements.
</TABLE>
F-5
<PAGE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
-------------------------------------------------
TMANglobal.com, Inc., ("the Company") was formed on December 21, 1998, resulting
from a merger between The Martial Arts Network On-line, Inc. (a development
stage company, TMANO) and FSGI Corporation (FSGI). TMANglobal.com, Inc., is
located at Universal Studios in Orlando, Florida.
TMANO was incorporated on May 23, 1996, in the State of Florida as the Martial
Arts Network, Inc. The Company then underwent a name change to The Martial Arts
Network Online, Inc. on June 1, 1997. From its inception, TMANO was in the
development stage and engaged primarily in the business of developing its
on-line web site. Consequently, TMANO has had no significant revenue and has
been dependent upon the receipt of capital investment or other financing to fund
its continuing operations.
FSGI was incorporated on May 15, 1997, in the State of Florida. FSGI through its
wholly owned subsidiary Financial Standards Group, Inc. (FSG, Inc.), provides
auditing and accounting services to assist credit unions and their supervisory
committees in performing comprehensive internal and regulatory compliance audits
in satisfaction of their statutory requirements. Financial Standards Group,
Inc., has operations in Georgia, Florida, Kentucky, Michigan, Mississippi,
Louisiana, California, and Hawaii. FSG, Inc. has been sold and is reflected as a
discontinued operation. See Note 16.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
CASH AND CASH EQUIVALENTS
-------------------------
For purposes of the statement of cash flows, the Company considers all cash and
other demand deposits to be cash and cash equivalents. As of September 30, 1999
and 1998, the Company had no cash equivalents.
PROPERTY AND EQUIPMENT
----------------------
Property and equipment are stated at cost and are being depreciated using the
straight-line and accelerated methods over the estimated useful lives of two to
seven years. Leasehold improvements are stated at cost and are being amortized
over the lesser of the term of the lease or the estimated useful life of the
asset. Amortization is included in depreciation expense.
REVENUE RECOGNITION
-------------------
Revenue is recognized when products are shipped to customers.
USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
UNAUDITED INTERIM INFORMATION
-----------------------------
The information presented as of June 30, 2000 and 1999, and for the nine-month
periods ended June 30, 2000 and 1999, has not been audited. In the opinion of
management, the unaudited interim financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
Company's financial position as of June 30, 2000 and 1999, and the results of
its operations and its cash flows for the nine months ended June 30, 2000 and
1999, and the stockholders' deficit for the nine months ended June 30, 2000.
F-6
<PAGE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
--------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated financial statements include the accounts of TMANglobal.com,
Inc. and its wholly-owned subsidiary, Financial Standards Group, Inc., at
September 30, 1999. All intercompany accounts and transactions have been
eliminated in consolidation.
The financial statements as presented, reflect the reverse acquisition of the
Martial Arts Network On-Line, Inc., for the year ended September 30, 1999, and
FSG, Inc., from the date of acquisition, January 1, 1999 to September 30, 1999.
FSG, Inc. was sold on January 27, 2000 and is reflected as a discontinued
operation. (See Note 16.)
BASIC LOSS PER SHARE
--------------------
Basic loss per common share is computed by dividing the net loss by the weighted
average number of shares of common stock outstanding during the year.
DILUTED LOSS PER SHARE
----------------------
Fully diluted loss per common share is computed by dividing the net loss by the
weighted average number of shares of common stock outstanding plus the shares
that would be outstanding if all stock options were exercised.
ADVERTISING
-----------
Advertising costs are expensed when incurred. The advertising cost incurred for
the period ended September 30, 1999 and 1998, was $30,400 and $26,718,
respectively.
AMORTIZATION OF GOODWILL
------------------------
Goodwill represents the amount of which the purchase price of businesses
acquired exceeds the fair market value of the net assets acquired under the
purchase method of accounting.
The excess of the fair value of the net assets of FSGI Corporation acquired by
the reverse acquisition was $2,767,069 and was recorded as goodwill. Goodwill is
being amortized on a straight-line method over 15 years. The accumulated
amortization of the excess fair value of net assets of the Company acquired over
cost is $138,353 at September 30, 1999.
STOCK-BASED COMPENSATION
------------------------
The Company accounts for stock-based compensation issued to employees in
accordance with the provisions of Accounting Principles Board Opinion ("APB")
No. 25, Accounting for Stock Issued to Employees, and complies with the
disclosure provisions of Statement of Financial Accounting Standards ("SFAS")
No. 123, Accounting for Stock-Based Compensation. Under APB No. 25, expense is
based on the difference, if any, on the date of grant, between the fair value of
common stock and the exercise price. Stock issued to non-employees has been
accounted for in accordance with SFAS No. 123 and valued using the Black-Scholes
option pricing model.
F-7
<PAGE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 3 - ACQUISITIONS
---------------------
On December 21, 1998, FSGI Corporation acquired all of the outstanding common
stock of TMAN Online, for accounting purposes the transaction was effective on
January 1, 1999. As consideration, FSGI Corporation issued an aggregate of three
million shares of common stock and an option to purchase up to one million
additional shares at a purchase price of $1.00 per share. The Martial Arts
Network, Inc. (parent of TMANglobal.com, Inc.) now has controlling interest in
the new corporation formed.
The acquisition was recorded using the purchase method of accounting. The
results of operations since the date of acquisition, January 1, 1999, for
accounting purposes, are included in the consolidated statements of operations
at September 30, 1999. Goodwill of $2,767,069 was recorded in this transaction
and is being amortized over 15 years using the straight-line method.
The following summarizes the fair value of the assets acquired and liabilities
assumed of FSGI Corporation:
Cash $ (2,437)
Accounts receivable 58,551
Subscriptions receivable 50,000
Prepaid expenses 13,475
Property and equipment 38,767
Client list 78,000
Accounts payable (64,161)
Accrued expenses (35,264)
Notes payable (76,875)
----------
Net assets $ 60,056
==========
NOTE 4 - GOODWILL IMPAIRMENT
----------------------------
Pursuant to SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of", the Company evaluated the
recoverability of the long-lived assets, primarily goodwill recorded in the
acquisition with FSGI Corporation. Consequently, the Company recorded a non-cash
charge of $2,525,715 or $0.42 per share of common stock, adjusting the carrying
value of the goodwill to its estimated fair value of $103,000. Yearly
amortization for such goodwill was $138,353. This non-cash charge is reflected
as part of the loss from operations of discontinued subsidiary, along with the
revenues, cost of revenues and related general, administrative and other
expenses.
NOTE 5 - PROPERTY AND EQUIPMENT
-------------------------------
The Company acquired computer equipment as part of the reverse acquisition with
FSGI Corporation on January 1, 1999. The Company's property and equipment
consisted of the following at September 30, 1999:
Computer equipment $ 43,614
Less: accumulated depreciation (13,769)
----------
Property and equipment, net $ 29,845
==========
Depreciation expense for the period ended September 30, 1999 and 1998 was
$13,769 and $0, respectively.
F-8
<PAGE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 6 - LONG-TERM DEBT
-----------------------
The Company assumed various notes on January 1, 1999 as part of the acquisition.
The long-term debt consists of the following at September 30, 1999:
Various notes payable for insurance with varying terms and
maturities. Interest rates range from 11% to 17%. $ 6,558
Note payable, interest payable at prime plus 1%, (9.25% at September 30, 1999),
paid semi-annually, with principal due
May 2002, unsecured. 36,571
Note payable, monthly payments of $2,335, including interest at
11.05%, due May 2000, collateralized by Company assets. 17,891
Line of credit, with a bank providing borrowings for up to
$50,000 at prime plus 2% (10.25% at September 30, 1999),
collateralized by Company assets. 50,000
----------
Total $ 111,020
Less: current portion (74,449)
----------
$ 36,571
==========
Maturities of long-term debt at September 30, are as follows:
2000 $ 74,449
2001 -
2002 36,571
----------
Total $ 111,020
==========
NOTE 7 - OPERATING LEASES
-------------------------
The Company leases its facilities in Florida under an operating lease payable in
monthly installments. Other operating leases include automobiles and equipment.
Total lease expense for the period ended September 30, 1999 and 1998 was $97,504
and $70,835 respectively.
Future minimum lease payments for the period ended September 30 are as follows:
2000 $ 17,776
2001 7,916
2002 1,946
2003 1,324
2004 333
---------
Total future minimum lease payments $ 29,295
=========
F-9
<PAGE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 8 - SUPPLEMENTAL CASH FLOW INFORMATION
-------------------------------------------
Supplemental cash flow information for the years ended September 30, 1999 and
1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Additional cash payment information:
Interest paid $ 7,053 $ -
============== ==============
Income taxes $ - $ -
============== ==============
Non cash transactions affecting investing and financing activities:
Common stock issued for acquisition of subsidiary 2,542,833 -
============== ==============
Common stock issued for services 100,000 -
============== ==============
</TABLE>
NOTE 9 - ACQUISITION OF CLIENT LIST
-----------------------------------
On November 13, 1998, FSGI Corporation acquired the right to service the credit
union clients of Bonnie Davis P.C. As consideration, the Company agreed to issue
40,000 shares of restricted common stock with an agreed upon market value of
$80,000. If the total market value at the twelve month and twenty four month
anniversary dates is less than $2.00 per share, the Company will issue
additional shares valued at the difference between the market price and the
guaranteed amount. Further, should the gross revenue for the twelve month period
ended November 13, 1999, not equal or exceed 80% of the purchase price
($64,000), then the share adjustments referred to earlier would not apply.
The accumulated amortization of the client list at September 30, 1999 was
$14,000.
Any shares payable as consideration in this transaction would be issued to the
heirs of Bonnie Davis; however none of such shares of restricted common stock
have been issued to date. The obligation for any share issuances relating to
this transaction were assumed by FSGH as of January 27, 2000 as part of their
acquisition of FSG.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
---------------------------------------
LITIGATION
----------
The Company was a party to legal proceedings with TWT, Inc., former parent of
FSG, Inc., in connection with TWT, Inc.'s bankruptcy. A $50,000 note payable was
recorded in relation to the transfer of TWT's common stock in FSG to three
officers of FSGI Corporation (former name of TMANglobal.com). The balance on the
note as of September 30, 1999, is $36,571 (See Note 6) and was assumed by FSGH
as part of the terms of the sale on January 27, 2000 (See Note 16).
NOTE 11 - STOCKHOLDERS' EQUITY
------------------------------
In January 1999, as a result of the reverse acquisition, the Martial Arts
Network, Inc. (TMAN) was issued three million of the common shares of FSGI
Corporation, which resulted in TMAN obtaining the controlling interest in FSGI
Corporation.
F-10
<PAGE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 11 - STOCKHOLDERS' EQUITY, CONTINUED
-----------------------------------------
COMMON STOCK ISSUED FOR CASH
----------------------------
The Company issued 440,387 shares of common stock during the year ended
September 30, 1999. The net amount obtained from the issuance of these common
shares, after offering costs, was $286,540. The Company also retired 185,666
shares of common stock during the same period.
COMMON STOCK ISSUED FOR SERVICES
--------------------------------
The Company issued 50,000 shares of common stock at $1.57 per share in April
1999 and 50,000 shares of common stock at $0.88 per share in August 1999 for
services relating to mergers, acquisitions and other corporate developments.
NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS
---------------------------------------------
The carrying value of cash, accounts receivable, accounts payable, and loans to
stockholders and affiliates approximates fair value because of their short
maturities. The fair value approximates book value as the interest rates
approximate market rates.
NOTE 13 - RELATED PARTY TRANSACTIONS
------------------------------------
At September 30, 1999, the Company had an outstanding payable to the
stockholders/officers in the amount of $8,097 and a receivable from the parent
company in the amount of $7,447. The transactions involving the
stockholders/officers and parent company are summarized as follows:
Stockholders Parent
------------------- -------------------
Balance at October 1, 1997 $ - $ -
Advances during the year (8,097) -
------------------- -------------------
Balance at September 30, 1997 (8,097) -
Advances during the year - (1,000)
------------------- -------------------
Balance at September 30, 1998 (8,097) (1,000)
Advances during the year 588 8,447
------------------- -------------------
Balance at September 30, 1999 $ (7,509) $ 7,447
=================== ===================
The Company rents office space in Boca Raton, Florida from a stockholder/officer
at $1,000 per month. Rent expense for the period ended September 30, 1999 was
$9,000.
NOTE 14 - INCOME TAXES
----------------------
As of September 30, 1999, TMANglobal.com, Inc. had an unused net operating loss
carry forward of $3,186,047 available for use on its future corporate federal
income tax returns. This amount includes the net operating losses of TMANO, from
the date of inception, and the net operating losses of its subsidiary, FSG,
Inc., since the date of acquisition, January 1, 1999. The Company's evaluation
of the tax benefit of its net operating loss carry forward is presented in the
following table. The tax amounts have been calculated using the 34% federal and
6% state income tax rates.
F-11
<PAGE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 14 - INCOME TAXES, CONTINUED
---------------------------------
1999 1998
------------------ ------------------
Taxes currently payable $ - $ -
Deferred income tax benefit 1,270,733 3,685
Change in beginning valuation allowance (1,270,733) (3,685)
------------------ ------------------
Provision (benefit) for income taxes $ - $ -
================== ==================
The components of deferred tax assets were as follows at September 30, 1999 and
1998:
Deferred tax assets:
Net operating loss carryforward $ 1,274,418 $ 3,685
Net deferred tax asset 1,274,418 3,685
------------ ------------
Valuation allowance:
Beginning of year (3,685) (3,274)
Increase during the year (1,270,733) (411)
------------ ------------
Ending balance (1,274,418) (3,685)
------------ ------------
Net deferred taxes $ - $ -
============ ============
The Company's unused net operating loss carryover as of September 30, 1999, is
summarized below:
Year Loss Originated Year Expiring Amount
---------------------------------------- ------------------- ------------
September 30, 1997 2012 $ 8,185
September 30, 1998 2013 1,027
September 30, 1999 2014 3,176,835
------------
Total available net operating loss $ 3,186,047
============
NOTE 15 - EMPLOYEE STOCK OPTIONS
--------------------------------
As of September 30, 1999, options to purchase 4,350,000 shares of the Company's
common stock at an average price per share of $0.99 have been granted to certain
of the Company's officers and key employees.
At December 31, 1998, outstanding options to purchase 1,350,000 shares of the
Company's stock at an average price per share of $1.86, granted to certain of
the Company's officials and key employees have been acquired during the merger
with FSGI Corporation.
During the fiscal year ending September 30, 1998, the Company had no outstanding
stock options.
The Company has elected to account for the stock options under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and
related interpretations. Accordingly, no compensation expense has been
recognized on the stock options.
F-12
<PAGE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 15 - EMPLOYEE STOCK OPTIONS, CONTINUED
-------------------------------------------
Had compensation expense for the stock option plan been determined based on the
fair value of the options at the grant date consistent with the methodology
prescribed under Statement of Financial Standards No. 123, "Accounting for Stock
Based Compensation", the Company's net loss for the year ended September 30,
1999 would have been increased by $1,535,005 to $4,711,840. The fair value of
each option is estimated on the date of grant using the fair market
option-pricing model with the assumption:
Risk-free interest rate 5%
Expected life (years) 1.5
Expected volatility 2.001
Expected dividends None
The Company's net loss and loss per share would have been reduced to the pro
forma amounts indicated below.
SEPTEMBER 30, 1999
------------------
Net loss
As reported $ (3,176,835)
Pro forma $ (4,711,840)
Loss per share
As reported $ (0.62)
Pro forma $ (0.93)
<TABLE>
A summary of options during the years ended September 30, 1999 and 1998 is shown
below:
<CAPTION>
SEPTEMBER 30, 1999
-----------------------------------
NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
----------------- ----------------
<S> <C> <C>
Outstanding at beginning of year - $ -
Outstanding grants at date of acquisition
Of FSGI Corporation 1,350,000 $ 0.96
Granted to the management of TMAN 3,000,000 1.00
Exercised - -
Forfeited - -
----------------- ----------------
Outstanding at September 30, 1999 4,350,000 $ 0.99
================= ================
Exercisable at September 30, 1999 4,350,000
=================
Available for issuance at September 30, 1999 17,457,167
=================
</TABLE>
NOTE 16 - SUBSEQUENT EVENTS
---------------------------
On January 27, 2000, the Company sold its wholly-owned subsidiary, FSG, Inc. to
an unrelated party, FSG Holdings LLC (FSGH). Under the terms of the sales
agreement, the Company will receive $88,680 in the form of three promissory
notes receivable, due in June 2000 and January 2001. In addition, FSGH assumed
all outstanding receivables and payables and the balance due of $36,571 on a
promissory note created by FSG, Inc., currently held by Total World Telecom,
Inc. (TWT) - former parent company of FSG, Inc. The Company will also issue a
warrant certificate to FSGH for 100,000 shares of restricted common stock, with
an exercisable price of $1.00 per share and a two (2) year term. Revenues for
the subsidiary FSG, Inc., from the date of acquisition (January 1, 1999) to
September 30, 1999 were $1,344,785. Revenues for the period October 1, 1999 to
date of sale (January 27, 2000) were $394,915. These revenues are included in
the loss from operations of discontinued subsidiary in the statement of
operations.
F-13
<PAGE>
TMANGLOBAL.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 17 - MANAGEMENT'S CONSIDERATION OF GOING CONCERN MATTERS
-------------------------------------------------------------
As shown in the accompanying financial statements, the Company incurred a net
loss of $3,176,835 during the year ended September 30, 1999. The Company has
developed a plan to obtain additional capital. The Company has received
commitments for loans of up to $300,000 from its majority shareholders and
officers to meet its working capital needs; and the Company intends to attempt
to raise additional capital in a private equity placement later in the 2000
calendar year. There can be no assurance that the Company's efforts will be
successful. The financial statements do not include any adjustments that might
be necessary if the Company is unable to continue as a going concern.
The Company's e-commerce segment incurred a net loss of $369,429 for the year
ended September 30, 1999. Management plans to raise equity and financing through
acquisitions and mergers.
The Company's accounting services segment, FSG, Inc. incurred a net operating
loss of $2,807,406. During the year, the Company recorded a non-cash charge of
$2,525,715 for the write down of goodwill (See Note 4). In January 2000, the
Company sold FSG, Inc. for $88,680 (See Note 16).
No estimate has been made should management's plan be unsuccessful.
NOTE 18 - INDUSTRY SEGMENT INFORMATION
--------------------------------------
The Company does not have any significant industry segments. All revenues were
derived from its e-commerce activities and there were no significant revenues
from the Charter Membership Program or Entertainment Agency.
F-14
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: October 27, 2000 TMANGLOBAL.COM, INC.
By: /S/ Tony Interdonato
------------------------------------
Tony Interdonato
Chairman and Chief Executive Officer
