SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
KNOWLEDGE NETWORKS, INC.
Nevada 91-2014670
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
24843 Del Prado, Suite 318, Dana Point, CA 92629
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 248-1765
The following Securities are to be registered pursuant to Section 12(g) of the
Act:
10,361,750
Class-A Common Voting Equity Stock
The EXHIBIT INDEX is located at pages 28 of this Registration Statement
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PART I
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UNNUMBERED ITEM: INTRODUCTION
This registration statement is voluntarily filed pursuant to Section 12(g)
of the Securities Exchange Act of 1934, in order to comply with the requirements
of National Association of Securities Dealers for submission for quotation on
the Over-the-Counter Bulletin Board, often called "OTCBB". This Registrant's
common stock is not presently quoted on the OTCBB or elsewhere and has never
traded in brokerage transactions. The requirements of the OTCBB are that the
financial statements and information about the Registrant be reported
periodically to the Commission and be and become information that the public can
access easily. This issuer wishes to report and provide disclosure voluntarily,
and will file periodic reports in the event that its obligation to file such
reports is suspended under the Exchange Act. If and when this 1934 Act
Registration is effective and clear of comments by the staff, this issuer will
be eligible for consideration for the OTCBB upon submission of one or more NASD
members for permission to publish quotes for the purchase and sale of the shares
of the common stock of the issuer.
This Registrant may be the subject of a "Reverse Acquisition". A reverse
acquisition is the acquisition of a private ("Target") company by a public
("Registrant") company, by which the private company's shareholders acquire
control of the public company. While no negotiations are in progress, and no
potential targets have been identified, the business plan of this Registrant is
to find such a target or targets, and attempt to acquire them for stock. While
no such arrangements or plans have been adopted or are presently under
consideration, it would be expected that a reverse acquisition of a target
company or business would be associated with some private placements and/or
limited offerings of common stock of this Registrant for cash. Such placements,
or offerings, if and when made or extended, would be made with disclosure and
reliance on the businesses and assets to be acquired, and not upon the present
condition of this Registrant.
ITEM 1. DESCRIPTION OF BUSINESS
(A) BUSINESS DEVELOPMENT.
(1) FORM AND YEAR OF ORGANIZATION. This Registrant, Knowledge Networks,
Inc., was incorporated in the State of Nevada on December 23, 1998, originally
as a wholly-owned subsidiary of a parent corporation, Knowledge Networks
Acquisition, Inc., also a Nevada Corporation. On or about December 16, 1998, the
shareholders of the parent corporation authorized the creation of this
Registrant-subsidiary, for the purpose of transferring to this Registrant, the
development-stage business of the parent to us, and for the purpose then of
distributing ownership of us to the shareholders of the parent. There were
8,020,000 shares issued on the Record date of November 30, 1998, and the
shareholder list of the former parent as of that date was the shareholders list
of this Issuer as of December 16, 1998, the designated spin-off entitlement
date. For technical reasons, the effectiveness of the Spin-Off was delayed, by
agreement until January 31, 1999. The spin-off shares were issued pursuant to
Section 4(2) of the Securities Act of 1933, and Rule 145, as promulgated by the
Commission, pursuant to its authority under Section 3(b) of the Act. As a result
of these transactions, ownership of this Registrant Corporation passed to the
shareholders of the former Parent company, and those shareholders became our
shareholders on or about January 31, 1999, their entitlement having vested on
December 16, 1998.
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In order to provide complete disclosure, this Registrant will discuss the
organization of its former parent, and share issuance to and including the
effective spin-off, and afterwards.
<TABLE>
<CAPTION>
<S> <C> <C>
Description Our Parent Us
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At or near inception of the former parent, about July 30, 5,000,000
1997, 5,000,000 shares had been issued to founders at
par value.
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During 1997, the former parent had made a limited 3,020,000
offering, pursuant to Regulation D, Rule 504, placing
3,020,000 shares at $0.05.
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Spin-Off January 31, 1999: The issuance was treated as 8,020,000 8,020,000
a new issuance pursuant to Section 4(2) of the Securities
Act of 1933, and were when issued Restricted Securities
as defined in Rule 144(a).
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On December 17, 1998, after the Spin-Off entitlement 980,000
had vested, this Registrant placed 980,000 for cash, at
0.01 per share, on or about December 17 and December
21, 1998, 490,000 shares respectively, to each of two
sophisticated affiliate investors, pursuant to Rule 504 of
Regulation D.
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On March 30, 1999, the Registrant offered and placed 1,035,000
1,035,000 shares of common stock, pursuant to Rule
504, at $0.10 per share to 12 sophisticated investors.
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On that same date, 249,250 shares of common stock 249,250
were issued, at $0.10 per share, pursuant to Regulation
D, Rule 504, as compensation for legal and professional
services, performed and billed at $24,925.00 by Intrepid
International, Ltd. and by its attorneys acting as special
counsel to the Registrant.
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Finally, on that date, the Registrant compensated three 77,500
individuals for services to the Registrant, issuing 77,500
shares of common stock pursuant to Section 4(2) of the
Securities Act of 1933.
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TOTAL ISSUED AND OUTSTANDING 10,361,750
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</TABLE>
Accordingly, the total common stock issued and outstanding is 10,361,750
shares.
We emphasize that all our spin off shares, the 8,020,000 shares, were
issued by us pursuant to Rule 145 as Restricted Securities as if so defined by
Rule 144(a). The fact that our parent had issued some of its securities under
Rule 504 of Regulation D, before the spin-off, is not material to our spin-off
issuance.
As a practical matter, we are required to register our common stock
pursuant to Section 12(g) of the 1934 Act, and to pursue acceptance for
quotation on the OTCBB if it is to have any chance to engage in capital
formation activities, including further bridge financing and private placements.
There are no lock-up or shareholder pooling agreements between or among our
shareholders. All shares are owned and controlled independently by the persons
to whom they are issued. We have no Internet address.
BANKRUPTCY, RECEIVERSHIP OR SIMILAR PROCEEDING. None from inception to
date.
(B) BUSINESS OF THE REGISTRANT. Our business is Microsoft Consulting and
Training, as well as Telecommunications Consulting and Outsourcing. Due to the
computer industry continually changing, the opportunities are abundant; computer
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hardware is becoming less expensive for the average business and software
continues to be more robust and complex and therefore more expensive for the
average business to manage. For all businesses, finding qualified technicians
and teachers has become more and more difficult and expensive.
(1) THE MARKET. The incredible growth in computing and telecommunicating
has created a vast array of new markets for hardware, software and technological
expertise. A new set of software called "middleware" has been developed to
oversee the interaction between disparate computers. When there are many
different types and styles of computers all hooked to the same network the
middleware lets each computer continue operating independently yet, without
reprogramming, cooperate intimately with the others. International Data
Corporation forecasts a middleware market that will grow from $125 million in
1998 to as much as $2.3 billion by the year 2001.
Another specialized market is "groupware" which is actually a catch-all
term encompassing products ranging from fancy E-mail systems to scheduling
programs to electronic bulletin-board software. The most sophisticated groupware
packages have advanced features for automating the flow of work, routing
documents, or allowing far-flung people to collaborate on a single document at
the same time. Workgroup Technologies, Inc., a researcher, predicts that sales
of groupware packages of all types will more than double, to $7.2 billion by
2002, from just over $3.4 billion in 1998.
REPORTING UNDER THE 1934 ACT. Following the effectiveness of this 1934 Act
Registration of the common stock of this Registrant, certain periodic reporting
requirements will be applicable. First and foremost, a 1934 Registrant is
required to file an Annual Report on Form 10-K or 10-KSB, 90 days following the
end of its fiscal year. The key element of such annual filing is Audited
Financial Statement prepared in accordance with standards established by the
Commission. A 1934 Act Registrant also reports on the share ownership of
affiliates and 5% owners, initially, currently and annually. In addition to the
annual reporting, a Registrant is required to file quarterly reports on Form
10-Q or 10-QSB, containing audited or un-audited financial statements, and
reporting other material events. Some events are deemed material enough to
require the filing of a Current Report on Form 8-K. Any events may be reported
currently, but some events, like changes or disagreements with auditors,
resignation of directors, major acquisitions and other changes require
aggressive current reporting. All reports are filed and become public
information. The practical effects of the foregoing requirements on the criteria
for selection of a target company are two-fold: first, the target must have
audited or auditable financial statements, and the target must complete an audit
for filing promptly upon the consummation of any acquisition; and, second, that
the target management must be ready, willing and able to carry forth those
reporting requirements or face de-listing from the OTCBB, if listed, and
delinquency and possible liability for failure to report.
LOAN FINANCING NOT ANTICIPATED. There are no foreseeable circumstances
under which loan financing will be sought or needed from traditional lending
sources during our development stage. It may be necessary for us to obtain
minimal funding by borrowing, possibly with a guaranty from its officers,
directors or principal shareholder, for minimal corporate maintenance, as
described in Item 2, Management's Discussion and Analysis.
DEPENDENCE ON MANAGEMENT. We are required to rely on Management's skill,
experience and judgement, both in regard to operations and in any decision to
expand or change our marketing plan. Please see Item 2 of this Part, Managements
Discussion and Analysis or Plan of Operation, and also Item 7 of this Part,
Certain Relationships and Related Transactions.
Principal Products or Services and their Markets.
(2) PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS..
Microsoft Consulting And Training. The Intel and Microsoft partnership
continues to be the dominating force in the market, and there is no sign that
this will change in the foreseeable future. Software is changing as fast as
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computer hardware although these changes are not as apparent. Every time a new
version of software comes to the market, new business opportunities are created
for the company that has the capability of doing the following:
Identify the Benefits of this new release
Present these benefits to clients
Install and support new software
Train the companies employees on maximizing this new tool.
Recent industry projections indicate that Microsoft BackOffice product
consulting revenues will increase by 100% per year through the year 2001.
Microsoft Exchange consulting alone will produce 1,000,000,000 in annual revenue
by the year 2001. Experienced Microsoft Exchange consultants are being paid on
the average of $150/hr on projects that can last as long as six to nine months.
Our business model is known in the industry as technology transfer
consulting. This means the work is not done by the consultant, but rather the
consultant transfers the knowledge to the client on how to maximize the
hardware/software. This empowers the client and does not make them fearful of
being outsourced by the consulting firm. This also means Knowledge Networks will
have continued revenue from the client when they encounter additional areas of
difficulty.
Training is very expensive for these high end products. In most cases,
people with this level of experience will command top dollar for their services.
Corporations in most cases will not pay to have their employees trained for fear
of losing them to another employer after completing the training. In most cases
they will opt to contract with an outsourcing or consulting firm rather than
increasing their staff.
The same is true for a consulting company. It is very difficult to profit
when the person put into the field requires $125/hr. This business model of
"technology transfer" will be used internally to bring Knowledge Networks
consultants up to speed on new technologies. Young and bright minded people will
be put under an employee or contractor contract for 24 months and be trained
internally on high level Microsoft products. They will be paid $12 - $15 /hr and
then be put into consulting projects where they are billed out at $125/hr. After
two years they have fulfilled their contract and may move up the Knowledge
Networks ranks as a team leader or trainer or work elsewhere if they so choose.
This technology transfer methodology will cut Knowledge Networks training
costs to an absolute minimum. One person gets trained and then trains everyone
else. Microsoft consulting has tremendous reward potential. Most network
specialists inside the Fortune 1000 are too busy maintaining their own networks
to take time out to be trained on something new.
We intend to take maximum advantage of the explosive growth in
telecommunications technology using the backgrounds and strengths of our
management specifically: the filing of patents for new technology, the financing
of new technology, the selling or granting of rights for the utilization of new
technologies and the retention of royalties based on the utilization or
exploitation of the new technologies.
We intend to implement our plan by establishing a telecommunications
consulting business with the goal of finding and identifying areas of
technological need and then creating new technologies to address those needs,
finding, acquiring and marketing its own and other acquired technologies or
rights thereto and the establishment of an outsourcing service to fulfill the
needs of business computer networks while gaining greater access for the Company
to other areas in need of technological innovation.
Management will be seeking opportunities through all means at its disposal
and will be constantly evaluating technology projects looking for new products
requiring further development. We will be offering venture capital for small
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inventors of worthy new technology and will constantly be engaged in finding
money for new inventions. Our consulting division will offer its service as
consultants for technology companies wanting to offer their stock to the public.
TELECOMMUNICATIONS CONSULTING. The methods to be employed by management will
be to develop a complete understanding of the client's telecommunications
environment through interviews, questionnaires, and a detailed technical
analysis of systems and related documentation. Then, armed with this
understanding of the client's existing environment and a vision of the desired
future environment, the barriers that stand between the two can be identified.
The key to our success is concentrating on the technological issues that render
the client the greatest satisfaction and the Company the largest possible
return.
OUTSOURCING. Reacting to the rapid development of hardware and software and
the promise that they can be made to work together in harmony, the business
world has been migrating its business applications from the mainframe to the
desktop. The principal motivation appears to be savings in maintenance costs.
The users of the new systems cite as the main advantage the fact that they are
freed from dependence on the centralized computing department. Despite the
advantages, business has found that network based computing environments are
more complicated than their mainframe counterparts. In the typical network
there are a multitude of computers, operating systems, cabling systems, security
points and applications. Despite its many advantages, gaining control over a
network of computers is just not as simple as mastering a single large computer.
This proliferation of network based desktop computers has created a totally
unanticipated requirement for support and management. An entire industry,
outsourcing, has grown up to bring modern solutions to these needs. The
outsourcing industry takes on the responsibility for the most efficient
integration of hardware, soft ware, networks and people, thereby relieving the
client company of these concerns so that they may concentrate on their principle
business. We intend to utilize outsourcing to address this continually growing
need with technological consulting and project management services.
Market Researcher Dataquest, Inc. estimates that the computer-services
business will grow from $33.3 billion in 1993 to $65.2 billion in 1998, with the
network management portion increasing from 26% to 31%. Gregory M. Jacobson,
executive vice president for outsourcing services at SHL Systemhouse, Inc.
points out that bringing in a third party also makes it easier for the chief
information officer to rein in all those PCs. Jacobsen says; "The modern CIO is
starting to recognize that outsourcing is a way to win back control."
(2) DISTRIBUTION METHODS OF THE PRODUCTS OR SERVICES. The methods and
procedures utilized by management to achieve its client's goals in both the
telecommunications consulting and the outsourcing divisions are:
1. Complete analysis of the client's existing telecommunications and
computing environment and then setting goals, policies and standards for its
future configuration;
2. Standardizing the environment by designing and implementing a
transition from where the client is today to the new environment defined in the
first step;
3. Stabilizing the standardized environment to insure that the Company
and its professionals are achieving the results desired for the client; and
4. Automating the stabilized environment through technological
innovation and/or operational reorganization to drive down costs and increase
the quality of service.
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While implementing the four steps, the principal areas in which the
Company's professionals devote their time will be:
Defining the policies and procedures related to all facets of the
network, its systems and users;
Reporting of utilization, capacities, uptime, performance and
projects;
Training users to effectively use applications, operating systems,
telecommunications equipment and all other network resources;
Keeping current on industry standard and directions that affect the
client's telecommunications and computing environment;
Maximizing productivity by providing an effective user environment and
easy access to network resources;
Tracking resource utilization to provide accounting management and
identification of problems on a trend basis;
Recording accurately the location and configuration of
telecommunicating and computing resources;
Monitoring all systems to detect, isolate, diagnose and resolve system
problems on a real time basis;
Performing system tuning and gathering information that can be used to
maximize its overall performance;
Tightening and testing security to protect the telecommunications
pathways, software and data stored on the systems;
Managing the systems to maintain the integrity, reliability and
availability of telecommunications network resources; and
Providing user support through on-site problem resolution
professionals, telecommunication pathways analysis, on-line documentation,
consumable computer supplies, equipment relocation and other general
network-wide support activities
The Outsourcing division will derive its income from the difference between
the amount per man hour billed to its clients and the amount per hour paid to
its professionals. The industry standard is approximately a fifty percent
mark-up on the amount paid to the outsourcing professional. The
Telecommunications Consulting division will derive its short term income and
profits from consulting fees and its long term profits from the sale and/or
licensing of the technologies which it acquires or which it develops in the
process of solving its client's telecommunications problems.
(3) STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE. None.
(4) COMPETITIVE BUSINESS CONDITIONS AND COMPETITIVE POSITION IN THE
INDUSTRY. Other firms are in the business of offering training and networking
consulting. Management, in evaluating market conditions and competitors, has
developed a niche training method that no other company in the geographic area
can compete with. With increased exposure, word of mouth, and advertising, many
future competitors may arise. Please see Management's Discussion and Analysis,
Item 2 of this part, for an expanded discussion of these and related subjects of
disclosure.
(5) SOURCES OF AND AVAILABILITY OF RAW MATERIALS AND THE NAMES OF
PRINCIPAL SUPPLIERS. Not Applicable.
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(6) DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS. While our business plan
is designed to handle a greater volume of business, we have never had more than
a few accounts at any one time. We are not dependent on any one customer, and no
customer is more important to us than any other. We are however dependent on a
presently small customer base.
(7) PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY
AGREEMENTS OR LABOR CONTRACTS. None.
(8) NEED FOR ANY GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES
AND STATUS. Not Applicable.
(9) EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS ON THE
BUSINESS. Not Applicable. However, we would expect to maintain the corporate
franchise in good standing with the State of its incorporation, and would file
tax returns and reports required to be filed with the Commission. We wish to
report and provide disclosure voluntarily, and will file periodic reports in the
event that its obligation to file such reports is suspended under the Exchange
Act. If and when this 1934 Act Registration is effective and clear of comments
by the staff, we will be eligible for consideration for the OTCBB upon
submission of one or more NASD members for permission to publish quotes for the
purchase and sale of the shares of the common stock of the issuer. In connection
with such submission and any continuation on the OTCBB, we would expect to
comply with NASD regulations, to the extent that any such regulations are
applicable to the conduct of our affairs.
(10) ESTIMATE OF AMOUNT SPENT ON RESEARCH AND DEVELOPMENT IN EACH OF LAST
TWO YEARS. None.
(11) COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS. Not
Applicable.
(12) NUMBER OF TOTAL EMPLOYEES AND FULL-TIME EMPLOYEES. Mr. Jeffrey Harry
is the only full-time salaried employee. All other employees are outside
contractors.
(13) YEAR 2000 COMPLIANCE, EFFECT ON CUSTOMERS AND SUPPLIERS. We were in
the business of ensuring our customers of Year 2000 Compliance, in fact this
concern has boosted the industry s sales in 1999 by 80%. We recommended to our
clients Year 2000 Compliant hardware and software only and the Company s
internal equipment was and remains Year 2000 Compliant. We have encountered no
Year 2000 problems.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(A) (A) PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS.
(1) CASH REQUIREMENTS AND OF NEED FOR ADDITIONAL FUNDS, TWELVE MONTHS. WE
DO NOT HAVE ENOUGH CASH TO FUND OUR OPERATIONS FOR THE NEXT TWELVE MONTHS AT OUR
CURRENT RATIO OF REVENUES TO EXPENSES. WE MUST INCREASE OUR REVENUES BY
INCREASING OUR CUSTOMER BASE AND/OR BORROW FROM OUR CIRCLE OF SHAREHOLDERS OR
SEEK ADDITIONAL INVESTMENT FROM THEM.
.
(2) OTHER REQUIREMENTS, NEXT TWELVE MONTHS.
(I) SUMMARY OF PRODUCT RESEARCH AND DEVELOPMENT. None.
(II) EXPECTED PURCHASE OR SALE OF PLANT AND SIGNIFICANT EQUIPMENT.
None.
(III) EXPECTED SIGNIFICANT CHANGE IN THE NUMBER OF EMPLOYEES. None.
(B) DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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(1) OPERATIONS AND RESULTS FOR THE PAST TWO FISCAL YEARS. At virtually
the beginning of 1999, we acquired the business of our former parent
corporation, as disclosed in Item 1 of Part I. Our present business is the
uninterrupted continuation of the former business of our former parent. We
therefore discuss the two-year operating history of our business and refer to
the Audited Financial Statements of our former parent (immediately before the
spin-off, December 31, 1998) and our current Audited Financial Statements
(beginning with January 1, 1999). Both financial statements are provided as a
part of this report. Note 1(a) to our Audited Financial Statements of 1999
states that we were: "organized on December 16, 1998. The Company was created on
this date through a spin off of the operations and assets to the shareholders of
Knowledge Networks Acquisitions, Inc. The Company specializes in Microsoft
consulting and training as well as telecommunications consulting, training and
outsourcing."
REVENUES. We had revenues of $44,683 in 1999, as compared with $26,302 in
1998. This increase is due to additional clients and retention of existing
clients. While it is encouraging to almost double revenues, it is important to
emphasize that our total revenues remain modest, and the number of our clients,
though increasing, remains limited. While the $26,302 is income of our former
parent, and not ours, for ownership purposes, we include this discussion for
comparative purposes only.
EXPENSES/NET LOSS. We incurred expenses of $117,064 in 1999, consisting of
$101,181 in consulting fees, which include legal and professional expenses, in
connection with our inception and spin-off, and general and administrative
expenses of $15,883. The resulting net loss was $72,381.
In 1998, before our creation and spin-off, our business (then our parent)
showed general and administrative expenses of $81,992, and a resulting net loss
of $55,690. These expenses and loss are those of our former parent and not ours,
and we include this discussion for comparative purposes only.
In our own accounting, we acquired $11,154 in 1998 bad debts and had only
nominal administrative expenses in 1998.
(2) FUTURE PROSPECTS. Our young business is improving, little by little.
The size and scope of our operations is modest. We have not yet demonstrated
profitability. The industry is subject to continuous exponential change,
requiring us to keep up with changing contemporary software in a highly
competitive market. Sudden or unexpected changes in the nature of our client's
needs, due to changing industry standards could present us with unexpected
expenses, and, in the worst case, the loss of clients. For these reasons, we
cannot predict with confidence, when and whether we might achieve profitability
or develop a sufficiently expanded customer base to insure our continued
viability. While we believe we are developing a market niche, there can be no
assurance of our success. Notwithstanding the foregoing cautionary statements,
assuming the continuation of current conditions, we would expect to proceed to
build our customer base and continue with our existing business plan, with
minimal advances and deferrals by our existing shareholders.
(C) REVERSE ACQUISITION CANDIDATE. Our management has no present intention of
becoming a reverse acquisition candidate. A mature and sober analysis of our
two-year operating history requires us to acknowledge the possibility that we
may not succeed in developing a sufficiently expanded customer base in the next
twelve to eighteen months, and that, should our business fail, we might then
become a candidate for some reverse acquisition transaction.
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ITEM 3. DESCRIPTION OF PROPERTY.
The Registrant has no property and enjoys the non-exclusive use of offices
and telephone of its officers and attorneys. We do not pay for incidental
telephone or incidental postage. We do pay for copying and printing, and for
major mailings, if any. These amounts are billed to us and included in our
general and administrative expenses.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. To the best of
Registrant's knowledge and belief the following disclosure presents the total
security ownership of all persons, entities and groups, known to or discoverable
by Registrant, to be the beneficial owner or owners of more than five percent of
any voting class of Registrant's stock. More than one person, entity or group
could be beneficially interested in the same securities, so that the total of
all percentages may accordingly exceed one hundred percent of some or any
classes. Please refer to explanatory notes if any, for clarification or
additional information.
(B) SECURITY OWNERSHIP OF MANAGEMENT. To the best of Registrant's knowledge
and belief the following disclosure presents the total beneficial security
ownership of all Directors and Nominees, naming them, and by all Officers and
Directors as a group, without naming them, of Registrant, known to or
discoverable by Registrant. More than one person, entity or group could be
beneficially interested in the same securities, so that the total of all
percentages may accordingly exceed one hundred percent of some or any classes.
Please refer to explanatory notes if any, for clarification or additional
information.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name and Address of Beneficial Owner Actual % Attributed %
Common Stock Ownership Ownership
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Kirt W. James (1) 1,250,000 12.06 5,000,000 48.25
24843 Del Prado #318 CEO
Dana Point CA 92629 President
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Jeff Harry (1) 1,250,000 12.06 5,000,000 48.25
3 San Bittern COO/CFO
Aliso Viejo CA 92656 Secretary-
Treasurer
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All Officers and Directors as a Group 2,500,000 24.13 5,000,000 48.25
================================================================================
Intrepid International S.A. (1) 2,500,000 24.13 5,000,000 48.25
P.O. Box 8807
Panama 5, Panama
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Polyandrous Trading Group, Inc. (2) 490,000 4.73
3131 Southwest Freeway, #46
Houston TX 77098
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Karl E. Rodriguez (3) 490,000 4.73
23592 Windsong #19E
Aliso Viejo CA 92656
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Total Other 5% Owners 3,480,000 33.59
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TOTAL ALL AFFILIATES 5,980,000 57.71
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Total Shares Issued and Outstanding 10,361,750 100.00
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</TABLE>
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(1) In the foregoing table, the share ownership of each of our officers and
principal shareholder are attributed to each other and to all of them. The
reason for this attribution is that the officers and the principal shareholder
are deemed to be a single shareholder group. Please see Item 7, Relationships
and Transactions for additional disclosure.
(2) Polyandrous Trading Group, Inc. is owned by J. Dan Sifford, an
affiliate of Intrepid. Polyandrous and Mr. Sifford are deemed affiliates by
reason and only by reason of this affiliation.
(3) Karl E. Rodriguez is an attorney who provided services to us in
connection with the spin-off of our corporation by our former parent. He is of
counsel to our principal shareholder. For that reason he was deemed an affiliate
at the time his shares were acquired. He may or may not be deemed an affiliate
in the future depending upon relationships as they may exist at such future
time.
(C) CHANGES IN CONTROL. There are no arrangements known to us, including any
pledge by any persons, of our securities, which may at a subsequent date result
in a change of control of our corporation.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The following persons are the Directors of Registrant, having taken office
from the inception of the issuer, to serve until their successors might be
elected or appointed. The time of the next meeting of shareholders has not been
determined and is not likely to take place before a targeted acquisition or
combination is determined.
<TABLE>
<CAPTION>
<S> <C> <C>
Executive Officers DIRECTOR'S NAME AGE OFFICE/POSITION
- -----------------------------------------------------------------
President
Kirt W. James 42 Chief Executive Officer
- -----------------------------------------------------------------
Secretary/Treasurer
Jeff A. Harry 26 Chief operations officer
Chief Financial Officer
=================================================================
</TABLE>
Mr. James is our Chief Executive Officer responsible for Corporate affairs
and overall management. Mr. Harry is our Chief Operations Officer servicing
customers and dealing with technical matters. Mr. Harry is also our Chief
Financial Officer.
Kirt W. James, the Registrant's President, has a lifelong background in
marketing and sales. From 1972 to 1987, Mr. James was responsible for sales and
business administrative matters for Glade N. James Sales Co., Inc. and from 1987
to 1990 Mr. James built retail markets for American International Medical Supply
Co., a publicly traded company. In 1990 he formed and became President of HJS
Financial Services, Inc., and was responsible for the day to day business
operations of the firm as well as consultation with Clients concerning their
business and Product Development. He remains the President and Sole Shareholder
of HJS, which is presently substantially inactive. During the past five years
Mr. James has been involved in the valuation of private companies for internal
purposes, and as a consultant to private companies engaged in the private sale
and acquisition of other private businesses. He has also assisted private and
11
<PAGE>
public companies in planning for entry into the public market place. Mr. James
is not and has never been a broker-dealer. He has acted primarily as consultant,
and in some cases has served as an interim officer and director of public
companies in their development stage. The following disclosure identifies those
public companies with which he has been involved during the past five years:
Earth Industries, Inc., EditWorks, Ltd., Market Formulation & Research, Inc.,
Mex Trans Seafood Consulting, Inc., BBB-Huntor Associates, Inc., eWorld Travel
Corp., Knowledge Networks, Inc., Last Company Clothing, Inc. and North American
Security & Fire. He is also an Officer and Director of Oasis 4th Movie Project,
an operating non-trading company, and DP Charters, Inc. a public company
currently quoted on the "Pink Sheets".
Jeffrey A. Harry is a Microsoft Certified Systems Engineer (MSCE), with highly
specialized training in windows based networks. His education also includes
training in Novell and MS-Dos software as well as hardware components and
computer network assembly. His training also includes extensive knowledge of
software such as Windows NT, Windows 3.x, Windows 95, MS-Office,
WordPerfect/Corel, Anti-Virus, Netware, Internet, and MS-Mail. Mr. Harry
continues his knowledge of technology changes in hardware and software to remain
competitive in the industry. His background experience consists of over 5 years
of computer hardware and software management. From 1995 to June of 1997 he was
the Manager of Information Systems for a leading New England engineering firm,
Environmental Science Services. He managed the hardware, and software
installations for 150 workstations and supervised an interstate linked network
for the offices in Massachusetts and Rhode Island. From June 1997 to February
1998 he continued to provide consulting services on a free-lance basis while
obtaining his MSCE certification. From February 1998 to present he has been a
small business computer network consultant, specializing in network optimization
and integration of multiple software and hardware platforms.
ITEM 6. EXECUTIVE COMPENSATION.
Since March of 1999, Mr. Harry has received a $4,000 per month salary for
consulting and managing operations for the Company. Mr. James serves without
compensation; however Mr. James is beneficially interested in fees paid to
Intrepid International for its services. Mr. James is not directly compensated
by Intrepid for services to our company, but only indirectly in the
profitability of Intrepid. Except as indicated there is no present executive
compensation or plan of compensation presently adopted or under consideration.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
We have identified Intrepid International as our principal shareholder. We
are billed by Intrepid for services of Intrepid's personnel on a time-fee basis.
Disclosure is now provided as to the Intrepid entities, and its officers and
owners. Intrepid consists of two entities: Intrepid International, S.A., a
Panama Corporation, and Intrepid international, Ltd., a Nevada Corporation, its
wholly-owned United States Agency. Intrepid International is engaged
internationally in providing assistance to business and corporate interests.
(A) INTREPID INTERNATIONAL, S.A. The officers and directors of Intrepid
International, S. A. (Panama) are comprised of three individuals; Laurencio Jaen
O., Teodoro F. Franco L. and Leopoldo Kennion G. All three of these individuals
are Panamanian citizens and each serves as an officer and a director of the
Company.
Laurencio Jaen O., an original incorporator who has served as President and
Director of the Company since its inception in 1984, resides in Panama City,
Republic of Panama. He is, and has been for the past twenty five years, Vice
President of Indiasa Corporation ("Indiasa"), a Panamanian corporation, which,
through one of its subsidiaries, Robmar International, is involved in the
manufacture and distribution of chemical products in Argentina and Brazil and
which, through its former subsidiary Indiasa Aviation Corporation, was, for
12
<PAGE>
eight years ending in 1981, engaged in aviation consulting, the leasing,
purchase and sale of aircraft, and the operation of a cargo airline, primarily
in Latin America. Mr. Jaen was a founder of PAISA, Panama's international
airline, served as president of the Colon Free Zone (the world s largest free
trade zone), and as Director of Panama's Social Security Administration. He has
also served as the President of the Panamanian Chamber of Commerce, and as a
member of the Board of Presidential Advisors of the Republic of Panama.
Teodoro F. Franco L., Secretary and a Director of the Company, has, for
thirty years, been a specialist in maritime and aviation law. Mr. Franco is a
partner in Franco and Franco, one of the most prestigious law firms in Panam
with offices around the world. In addition to his law practice he has served as
Panamanian Consul to Liverpool, England and for the past five years as
Ambassador to Great Britain. The firm practices maritime, aviation and
commercial law and currently is the legal firm for: IBERIA (the Spanish national
airline), KLM (the Dutch national airline), VIASA (the Venezuelan national
airline), Aeroflot (the Russian national airline) and various smaller Latin
American national airlines as well as being the registered agents for thousands
of ocean going ships around the world flying the Panamanian flag. Mr. Franco
brings to the Company a wealth of international legal, commercial and diplomatic
experience.
Leopoldo Kennion G., Treasurer and a Director of the Company, is, and has
for twenty years, been a Certified Public Accountant specializing in
international accounting and is an associate in the law firm of Franco and
Franco. Mr. Kennion practices maritime, aviation and commercial accounting
serving the specialized needs of the transnational clients of Franco and Franco
by providing an interface between them and their auditors.
J. Dan Sifford, Jr., is the United States Managing Director for Intrepid
International, S.A. (Panama). He is fluent in the Spanish Language. His
biographical information is found below.
(B) INTREPID INTERNATIONAL, LTD. The officers and directors of Intrepid
International, Ltd. (Nevada) are comprised of two individuals; Kirt W. James,
and J. Dan Sifford, Jr. Both these individuals are U.S. citizens.
Kirt W. James, is one of our Officers. His biography is found in Item 5 of
this Part I.
J. Dan Sifford, Jr. For the past several years Mr. Sifford has served as
United States Managing Director of Intrepid International, S.A. a Panama
Corporation, providing consulting services to international private companies in
approaching the United States public market place for products, financing and
securities. Mr. Sifford is not and has never been a broker-dealer. He has acted
primarily as consultant, and in some cases has served as an interim officer and
director of public companies in their development stage. The following
disclosure identifies those public companies: Air Epicurean, Inc., All American
Aircraft, Earth Industries, Ecklan Corporation, EditWorks, Ltd., Market., Market
Formulation & Research, Inc., NetAir.com, Inc., NSJ Mortgage Capital
Corporation, Inc., North American Security & Fire, Oasis 4th Movie Project,
Professional Recovery Systems, Inc., Richmond Services, Inc., Telecommunications
Technologies, Ltd., and World Staffing II, Inc. Of these last mentioned
companies, he is currently serving in this Registrant, in Ecklan Corporation, in
Oasis Entertainment's 4th Movie Project, in Richmond Services, Inc, NetAir.com,
Inc. and in Editworks Ltd.
He grew up in Coral Gables, Florida, where he attended Coral Gables High
School and the University of Miami. After leaving the University of Miami, Mr.
Sifford formed a wholesale consumer goods distribution company which operated
throughout the southeastern United States and all of Latin America. In 1965, as
an extension of the operations of the original company, he founded Indiasa
Corporation (Indiasa), a Panamanian company which was involved in supply and
financing arrangements with many of the Latin American Governments, in
particular, their air forces and their national airlines. As customer
13
<PAGE>
requirements dictated, separate subsidiaries were established to handle specific
activities. During each of the past five years he has served as President of
Indiasa, which serves only as a holding company owning: 100% of Indiasa Aviation
Corp. (a company which owns aircraft but has no operations); 100% of Overseas
Aviation Corporation (a company which owns Air Carrier Certificates but has no
operations); 50% of Robmar International, S.A. (a company operates a
manufacturing plant in Argentina and Brazil, but in which Mr. Sifford holds no
office). In addition to his general aviation experience, Mr. Sifford, an Airline
Transport rated pilot, has twenty two years experience in the airline business,
and is currently the President of Airline of the Virgin Islands, Ltd. a commuter
passenger airline operating in the Caribbean, and has been its president
continuously during each of the past five years.
14
<PAGE>
- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------
ITEM 1.
MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY
AND SHAREHOLDER MATTERS EQUITY.
(A) MARKET INFORMATION. The Common Stock of this Registrant is quoted Over the
Counter on the Bulletin Board ("OTCBB") or the NQB Pink Sheets or elsewhere. Our
common stock has never traded in brokerage transactions.
(B) HOLDERS. There are 36 holders of our common stock.
(C) DIVIDENDS. No dividends have been paid by us on our Common Stock and no
such payment is anticipated in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS.
There are no proceedings, legal, enforcement or administrative, pending,
threatened or anticipated involving or affecting this Registrant.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
There have been no disagreements of any sort or kind with Auditors or
Accountants respecting any matter or item reflected in the financial statements
of this Registrant.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
In order to provide complete disclosure, we repeat here the issuances of
our former parent, and share issuance to and including the effective spin-off,
and afterwards.
<TABLE>
<CAPTION>
<S> <C> <C>
Description Our Parent Us
At or near inception of the former parent, about July 30, 5,000,000
1997, 5,000,000 shares had been issued to founders at
par value.
- --------------------------------------------------------------------------------
During 1997, the former parent had made a limited 3,020,000
offering, pursuant to Regulation D, Rule 504, placing
3,020,000 shares at $0.05.
- --------------------------------------------------------------------------------
Spin-Off January 31, 1999: The issuance was treated as a 8,020,000 8,020,000
new issuance pursuant to 4(2) of the Securities Act of
1933, and were when issued Restricted Securities as
defined in Rule 144(a).
- --------------------------------------------------------------------------------
15
<PAGE>
- -----------------------------------------------------------------------------------
On December 17, 1998, after the Spin-Off entitlement 980,000
had vested, this Registrant placed 980,000 for cash, at
0.01 per share, on or about December 17 and December
21, 1998, 490,000 shares respectively, to each of two
sophisticated affiliate investors, pursuant to Rule 504 of
Regulation D.
- -----------------------------------------------------------------------------------
On March 30, 1999, the Registrant offered and placed 1,035,000
1,035,000 shares of common stock, pursuant to Rule 504,
at $0.10 per share to 12 sophisticated investors with pre-
existing relationships with management.
- -----------------------------------------------------------------------------------
On that same date, 249,250 shares of common stock 249,250
were issued, at $0.10 per share, pursuant to Regulation
D, Rule 504, as compensation for legal and professional
services, performed and billed at $24,925.00 by Intrepid
International, Ltd. and by its attorneys acting as special
counsel to the Registrant.
- -----------------------------------------------------------------------------------
Finally, on that date, the Registrant compensated three 77,500
individuals for services to the Registrant, issuing 77,500
shares of common stock pursuant to Section 4(2) of the
Securities Act of 1933.
- -----------------------------------------------------------------------------------
TOTAL ISSUED AND OUTSTANDING 10,361,750
===================================================================================
</TABLE>
We emphasize that all our spin off shares, the 8,020,000 shares, were
issued by us pursuant to Rule 145 as Restricted Securities as is so defined by
Rule 144(a). The fact that our parent had issued some of its securities under
Rule 504 of Regulation D, before the spin-off, is not material to our spin-off
issuance.
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
There is no provision in the Articles of Incorporation, nor the By-Laws of
the Corporation, nor any Resolution of the Board of Directors, providing for
indemnification of Officers or Directors. We are aware of certain provisions of
the Nevada Corporate Law which affects indemnity of Officers or Directors.
NRS 78.7502 provides for mandatory indemnification of officers, directors,
employees and agents, substantially as follows: the corporation shall indemnify
a director, officer, employee or agent of a corporation; to the extent that he
or she has been successful on the merits or otherwise in defense of any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(except an action by or in the right of the corporation) by reason of the fact
that he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise; if he or she acted in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the corporation; and, with respect to any criminal action or
proceeding, in which he or she had no reasonable cause to believe his or her
conduct was unlawful.
16
<PAGE>
- --------------------------------------------------------------------------------
PART F/S
FINANCIAL STATEMENTS PROVIDED WITH THIS FILING:
Audited Financial Statements for the years ended December 31, 1999, 1998
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
F-1
AUDITED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
KNOWLEDGE NETWORKS, INC.
FINANCIAL STATEMENTS
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
19
<PAGE>
C O N T E N T S
Independent Auditors' Report . 21
Balance Sheets 22
Statements of Operations 23
Statements of Stockholders' Equity . 24
Statements of Cash Flows . 25
Notes to the Financial Statements . 26-27
20
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Knowledge Networks, Inc.
We have audited the accompanying balance sheets of Knowledge Networks, Inc. as
of December 31, 1999 and 1998 and the related statements of operations,
stockholders' equity and cash flows for the period from inception on December
16, 1998 through December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Knowledge Networks, Inc. as of
December 31, 1999 and 1998 and the results of its operations and cash flows for
the period from inception on December 16, 1998 through December 31, 1999 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has minimal assets and all revenues are from a
shareholder. These factors raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in the Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
March 2, 2000
21
<PAGE>
KNOWLEDGE NETWORKS, INC.
Balance Sheets
ASSETS
December 31,
1999 1998
- --------------------------------------------------------------------------------
Current assets
Cash $5,585 $3,655
Notes Receivable - Officer (Note 3) 63,993 0
- --------------------------------------------------------------------------------
Total Current Assets 69,578 3,655
- --------------------------------------------------------------------------------
Total Assets $69,578 $3,655
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities 0 0
Stockholders' Equity
Common Stock, authorized
100,000,000 shares of $.001 par value,
issued and outstanding 10,361,750
and 9,000,000 shares respectively 10,362 9,000
Additional Paid in Capital 142,806 15,664
Retained Earnings (Deficit) (83,590) (11,209)
Less: Subscription receivable 0 (9,800)
Total Stockholders' Equity 69,578 3,655
Total Liabilities and Stockholders' Equity $69,578$ $3,655
================================================================================
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
KNOWLEDGE NETWORKS, INC.
Statements of Operations
From inception
December
For the For the 16, 1998
Year Ended Year Ended Through
December 31, December 31, December 31,
1999 1998 1999
- --------------------------------------------------------------------------------
Revenues: $44,683 $0 $44,683
Expenses:
Bad Debt 0 11,154 11,154
Consulting Fees 101,181 0 101,181
General & Administrative 15,883 55 15,938
Total Expenses 117,064 11,209 128,273
- --------------------------------------------------------------------------------
Net (Loss) $(72,381) $(11,209) $(83,590)
- --------------------------------------------------------------------------------
Net Loss Per Share $(.007) $(.001) $(.008)
- --------------------------------------------------------------------------------
Weighted average shares outstanding 10,016,893 9,000,000 9,979,330
================================================================================
The accompanying notes are an integral part of these financial statements
23
<PAGE>
KNOWLEDGE NETWORKS, INC.
Statement of Stockholders' Equity
Additional Deficit
Paid in Accumulated
Capital During the
Common Stock (Discount on Development
Shares Amount Stock) Stage
- --------------------------------------------------------------------------------
Balance at inception -
December 16, 1998 8,020,000 $8,020 $ 0 $0
Shares issued for subscriptions receivable
at $.01 per share 980,000 980 8,820 0
Spin off adjustment (Note1) 0 0 6,844 0
Net loss for the one
month ended December 31, 1998 0 0 0 (11,209)
- --------------------------------------------------------------------------------
Balance, December 31, 1998 b 9,000,000 9,000 15,664 (11,209)
Shares issued for
cash at $.10 per share 1,035,000 1,035 102,465 0
Shares issued for
services at $.10 per share 249,250 249 24,677 0
Shares issued for
services at $.001 per share 77,500 78 0 0
Net loss for the year
ended December 31, 1999 0 0 0 (72,381)
- --------------------------------------------------------------------------------
Balance, December 31, 1999 10,361,750 $10,362 $142,806 $(83,590)
================================================================================
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
KNOWLEDGE NETWORKS, INC.
Statement of Cash Flows
December
16,1998
For the For the (inception)
Year Ended Year Ended to
December 31, December 31, December 31,
1999 1998 1999
- --------------------------------------------------------------------------------
Cash Flows from Operating
Activities:
Net loss $(72,381) $(11,209) $(83,590)
Adjustments to reconcile
net loss to net cash
provided by operations
Bad debt 0 11,154 11,154
Issuance of stock for services 25,004 0 25,004
Net Cash Flows Used in
Operating Activities (47,377) (55) (47,432)
- --------------------------------------------------------------------------------
Cash Flows Used in Investment
Activities:
Cash payments for notes receivable (63,993) 0 (63,993)
Net Cash Used in
Investment Activities (63,993) 0 (63,993)
- --------------------------------------------------------------------------------
Cash Flows from Financing
Activities:
Cash received from
subscriptions receivable 9,800 0 9,800
Cash received from spin-off (Note1) 0 3,710 3,710
Issuance of stock for cash 103,500 0 103,500
Net Cash Flows from
Financing Activities 113,300 3,710 117,010
- --------------------------------------------------------------------------------
Net increase (decrease) in cash 1,930 3,655 5,585
- --------------------------------------------------------------------------------
Cash, beginning of year 3,655 0 0
- --------------------------------------------------------------------------------
Cash, end of year $5,585 $3,655 $5,585
- --------------------------------------------------------------------------------
Supplemental Cash Flow Information
Cash Paid for:
Interest $0 $0 $0
Taxes $0 $0 $0
The accompanying notes are an integral part of these financial statements
25
<PAGE>
KNOWLEDGE NETWORKS, INC.
Notes to The Financial Statements
December 31, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
Knowledge Networks, Inc., ("the Company") is a Nevada corporation organized
on December 16, 1998. The Company was created on this date thru a spin off of
the operations and assets to the shareholders of Knowledge Networks
Acquisitions, IncThe Company specializes in Microsoft consulting and training
as well as telecommunications consulting, training and outsourcing.
b. Accounting Method
The Company recognizes income and expenses on the accrual basis of
accounting.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
e. Provision for Income Taxes
No provision for income taxes has been recorded due to net operating loss
carryforwards totaling approximately $83,590 that will be offset against future
taxable income.
Deferred tax assets and the valuation account is as follows at December
31, 1999 and 1998.
December 31, December 31,
1999 1998
- ----------------------------------------------------------------------
Deferred tax asset:
NOL carrryforward $9,648 $1,681
Valuation allowance (9,648) (1,681)
=====================================================================
Total $ 0 $ 0
NOTE 2 - Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is dependent upon raising
capital to continue operations. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
26
<PAGE>
KNOWLEDGE NETWORKS, INC.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 3 - Related Party Transactions
During 1999, $63,993 was paid to an officer of the Company. The note is due
within the next twelve months with no provision for interest.
During 1999, 326,750 shares of common stock were issued to officers and
shareholders for consulting services of $25,004.
During 1999, $44,683 in sales was to a shareholder.
27
<PAGE>
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
EXHIBIT INDEX
Exhibit
Table Page Number#
Table Category / Description of Exhibit
[2] ARTICLES/CERTIFICATES OF INCORPORATION, AND BY-LAWS
2.1 Articles of Incorporation 29
2.2 By-Laws 32
================================================================================
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to signed on its behalf by the undersigned, thereunto
authorized.
KNOWLEDGE NETWORKS, INC.
by
/s/ /s/
Kirt W. James Jeff Harry
president/director secretary/director
28
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2.1
ARTICLES OF INCORPORATION
- --------------------------------------------------------------------------------
29
<PAGE>
ARTICLES OF INCORPORATION
OF
KNOWLEDGE NETWORKS, INC.
ARTICLE I. The name of the Corporation is KNOWLEDGE NETWORKS, INC.
ARTICLE II. Its principal office in the State of Nevada is 774 Mays Blvd.
#10, Incline Village NV 89452. The initial resident agent for services of
process at that address is N&R Ltd. Group, Inc
ARTICLE III. The purposes for which the corporation is organized are to
engage in any activity or business not in conflict with the laws of the State of
Nevada or of the United States of America. The period of existence of the
corporation shall be perpetual.
ARTICLE IV. The corporation shall have authority to issue an aggregate of
50,000,000 shares of common voting equity stock of par value one mil ($0.001)
per share, and no other class or classes of stock, for a total capitalization of
$50,000. The corporation's capital stock may be sold from time to time for such
consideration as may be fixed by the Board of Directors, provided that no
consideration so fixed shall be less than par value.
ARTICLE V. No shareholder shall be entitled to any preemptive or
preferential rights to subscribe to any unissued stock or any other securities
which the corporation may now or hereafter be authorized to issue, nor shall any
shareholder possess cumulative voting rights at any shareholders meeting, for
the purpose of electing Directors, or otherwise.
ARTICLE VI. The name and address of the Incorporator of the corporation is
William Stocker, Attorney at Law, 34700 Pacific Coast Highway, Suite 303,
Capistrano Beach CA 92624, phone (949) 248-9561, fax (949) 248-1688. The
affairs of the corporation shall be governed by a Board of Directors of not less
than one (1) nor more than (7) persons. The Incorporator shall act as Sole
Initial Director.
ARTICLE VII. The Capital Stock, after the amount of the subscription price
or par value, shall not be subject to assessment to pay the debts of the
corporation, and no stock issued, as paid up, shall ever be assessable or
assessed.
ARTICLE VIII. The initial By-laws of the corporation shall be adopted by
its Board of Directors. The power to alter, amend or repeal the By-laws, or
adopt new By-laws, shall be vested in the Board of Directors, except as
otherwise may be specifically provided in the By-laws.
30
<PAGE>
I THE UNDERSIGNED, being the Incorporator hereinbefore named for the
purpose of forming a corporation pursuant the General Corporation Law of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have set my hand hereunto this Day,
December 16, 1998.
/s/
William Stocker
attorney at law
Incorporator
31
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2.2
By-Laws
- --------------------------------------------------------------------------------
32
<PAGE>
BY-LAWS
OF
KNOWLEDGE NETWORKS, INC.
A NEVADA CORPORATION
ARTICLE I
CORPORATE OFFICES
The principal registered office of the corporation in the State of Nevada
shall be located at 774 Mays Blvd. #10, Incline Village NV 89452. The
corporation may have such other offices, either within or without the State of
incorporation as the board of directors may designate or as the business of the
corporation may from time to time require.
ARTICLE II
SHAREHOLDERS' MEETINGS
SECTION 1. PLACE OF MEETINGS
The directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate any
place, either within or without the State unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or if
a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
SECTION 2. ANNUAL MEETINGS
The annual meeting of the shareholders shall be held on the second Monday
of May in each year, if not a holiday, at Ten o'clock A.M., at which time the
shareholders shall elect a Board of Directors and transact any other proper
business. If this date falls on a holiday, then the meeting shall be held on the
following business day at the same hour.
SECTION 3. SPECIAL MEETINGS
Special meetings of the shareholders may be called by the President, the
Board of Directors, by the holders of at least ten percent of all the shares
entitled to vote at the proposed special meeting, or such other person or
persons as may be authorized in the Articles of Incorporation.
SECTION 4. NOTICES OF MEETINGS
Written or printed notice stating the place, day and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (l0) days nor more than
twenty (20) days before the date of the meeting, either personally or by mail,
by the direction of the president, or secretary, or the officer or persons
calling the meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the stockholder at his address
as it appears on the stock transfer books of the corporation, with postage
thereon prepaid.
33
<PAGE>
SECTION 5. CLOSING OF TRANSFER BOOKS OR FIXING RECORD DATE.
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case twenty (20) days. If the stock transfer books be
closed for the purpose of determining stockholders entitled to notice or to vote
at a meeting of stockholders, such books shall be closed for at least twenty
(20) days immediately preceding such meeting. In lieu of closing the stock
transfer books, the directors may fix in advance a date as the record date for
and such determination of stockholders, such date in any case to be not more
than twenty (20) days and, in case of a meeting of stockholders, not less than
ten (l0) days prior to the date on which the particular action requiring such
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders, or stockholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the directors declaring such dividend is adopted, as the case may
be, shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof.
SECTION 6. VOTING LIST.
The officer or agent having charge of the stock transfer books for the
shares of the corporation shall make, at least ten (l0) days before each meeting
of stockholders, a complete list of stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and number of shares held by each, which list, for a period of ten
(l0) days prior to such meeting, shall be kept on file at the principal office
of the corporation and shall be subject to inspection by any stockholder at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any stockholder during the whole time of the meeting. The original stock
transfer book shall be prima facie evidence as to who are the stockholders
entitled to examine such list or transfer books or to vote at the meeting of
stockholders.
SECTION 7. QUORUM.
At any meeting of stockholders fifty-one (5l) percent of the outstanding
shares of the corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of stockholders. If less than said number
of the outstanding shares are represented at a meeting, a majority of the
outstanding shares so represented may adjourn the meeting from time to time
without further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting originally notified. The stockholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
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SECTION 8. PROXIES.
At all meetings of the stockholders, a stockholder may vote by proxy
executed in writing by the stockholder or by his duly authorized attorney in
fact. Such proxy shall be filed with the secretary of the corporation before or
at the time of the meeting.
SECTION 9. VOTING.
Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these by-laws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such shareholder. Upon the demand of any stockholder, the vote for
directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of Nevada.
SECTION 10. ORDER OF BUSINESS.
The order of business at all meetings of the stockholders, shall be as
follows:
a. Roll Call.
b. Proof of notice of meeting or waiver of notice.
c. Reading of minutes of preceding meeting.
d. Reports of Officers.
e. Reports of Committees.
f. Election of Directors.
g. Unfinished Business.
h. New Business.
SECTION 11. INFORMAL ACTION BY STOCKHOLDERS.
Any action required or permitted to be taken at a meeting of the
stockholders may be taken without meeting if a written consent thereto is signed
by the stockholders holding at least a majority of the voting power, except that
if a different proportion of voting power is required for such an action at a
meeting, then that proportion of written consent is requires; provided however,
that written notice of any action so taken must be promptly given to all
stockholders.
SECTION 12. BOOKS AND RECORDS.
The Books, Accounts, and Records of the corporation, except as may be
otherwise required by the laws of the State of Nevada, may be kept outside of
the State of Nevada, at such place or places as the Board of Directors may from
time to time appoint. The Board of Directors shall determine whether and to what
extent the accounts and the books of the corporation, or any of them, other than
the stock ledgers, shall be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any account or book or document of
this Corporation, except as conferred by law or by resolution of the
stockholders or directors. In the event such right of inspection is granted to
the Stockholder(s) all fees associated with such inspection shall be the sole
expense of the Stockholder(s) demanding the inspection. No book, account, or
record of the Corporation may be inspected without the legal counsel and the
accountants of the Corporation being present. The fees charged by legal counsel
and accountants to attend such inspections shall be paid for by the Stockholder
demanding the inspection.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by its board
of directors. The directors shall in all cases act as a board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of this State.
SECTION 2. NUMBER, TENURE, AND QUALIFICATIONS.
The number of directors of the corporation shall be a minimum of one (l)
and a maximum of nine (9). Each director shall hold office until the next annual
meeting of stockholders and until his successor shall have been elected and
qualified.
SECTION 3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without other notice than
this by-law immediately after, and at the same place as, the annual meeting of
stockholders. The directors may provide, by resolution, the time and place for
holding of additional regular meetings without other notice than such
resolution.
SECTION 4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of the
president or any two directors. The person or persons authorized to call special
meetings of the directors may fix the place for holding any special meeting of
the directors called by them.
SECTION 5. NOTICE.
Notice of any special meeting shall be given at least one day previously
thereto by written notice delivered personally, or by telegram or mailed to each
director at his business address. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 6. QUORUM.
At any meeting of the directors fifty (50) percent shall constitute a
quorum for the transaction of business, but if less than said number is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice.
SECTION 7. MANNER OF ACTING.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the directors.
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SECTION 8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the removal
of directors without cause may be filled by a vote of the majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled by
vote of the stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his predecessor.
SECTION 9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.
SECTION 10. RESIGNATION.
A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the board
or such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
SECTION 11. COMPENSATION.
No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance at
each regular or special meeting of the board may be authorized. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
SECTION 12. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its members an executive
committee and other committees, each consisting of one (l) or more directors.
Each such committee shall serve at the pleasure of the board.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER.
The officers of the corporation shall be the president, a secretary and a
treasurer, each of whom shall be elected by the directors. Such other officers
and assistant officers as may be deemed necessary may be elected or appointed by
the directors.
SECTION 2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.
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SECTION 3. REMOVAL.
Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgement the best interest of the
corporation would be served thereby, but such removal shall be without prejudice
to contract rights, if any, of the person so removed.
SECTION 4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.
SECTION 5. PRESIDENT.
The president shall be the principal executive officer of the corporation
and, subject to the control of the directors, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the directors. He
may sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the directors have authorized to be executed, except in cases where the
directors or by these by-laws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the directors from time to time.
SECTION 6. CHAIRMAN OF THE BOARD.
In the absence of the president or in the event of his death, inability or
refusal to act, the chairman of the board of directors shall perform the duties
of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. The chairman of the board of
directors shall perform such other duties as from time to time may be assigned
to him by the directors.
SECTION 7. SECRETARY.
The secretary shall keep the minutes of the stockholders' and of the
directors' meetings in one or more books provided for that purpose, see that all
notices are duly given in accordance with the provisions of these by-laws or as
required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books of the corporation and in general perform all
the duties incident to the office of secretary and such other duties as from
time to time may be assigned to him by the president or by the directors.
SECTION 8. TREASURER.
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
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banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.
SECTION 9. SALARIES.
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by reason
of fact that he is also a director of the corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS.
The directors may authorize any officer or officers, agent or agents to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
SECTION 2. LOANS.
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the directors. Such authority may be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation, shall be signed
by such officer or officers, agent or agents of the corporation and in such
manner as shall from time to time be determined by resolution of the directors.
SECTION 4. DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies or
other depositories as the directors may select.
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall begin on the lst day of January in
each year, or on such other day as the Board of Directors shall fix.
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ARTICLE VII
DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE VIII
SEAL
The directors may provide a corporate seal which shall have inscribed
thereon the name of the corporation, the state of incorporation, year of
incorporation and the words, "Corporate Seal".
ARTICLE IX
WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these by-laws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE X
AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may be
adopted in the same manner as their adoption, by the Board of Directors if so
adopted; by a vote of the stockholders representing a majority of all the shares
issued and outstanding, if so adopted or adopted by the Board of Directors; or,
in any case, at any annual stockholders' meeting or at any special stockholders'
meeting when the proposed amendment has been set out in the notice of such
meeting.
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CERTIFICATION
THE SECRETARY of the Corporation hereby certifies that the foregoing is a
true and correct copy of the By-Laws of the Corporation named in the title
thereto and that such By-Laws were duly adopted by the Board of Directors of
said Corporation on the date set forth below.
EXECUTED, this day of January 29, 1999.
/s/
JEFF A. HARRY
Secretary
Jeffery A. Harry
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