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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended March 31, 2000 Commission File No. 000-28201
MAXPLANET CORP.
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(Exact name of registrant as specified in its charter)
Delaware 31-1478761
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4400 US Highway Route 9 South
Suite 2800
Freehold, New Jersey 07728
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (732) 625-0770
Securities registered pursuant to Section 12(g) of the Act:
Outstanding at
Title of class November 2, 2000
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Common Stock,
Par Value $0.0001 14,538,421
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _______ No __X____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B under the Securities Exchange Act of 1934 is not contained
herein, and will not be contained, to the best of the Registrant's knowledge, in
definitive proxy or information statements incorporated in Part III of this Form
10-KSB or any amendments to this Form 10-KSB.
The issuer's revenues for its most recent fiscal year were $849,486.
As of November 2, 2000, 14,538,421 shares of Common Stock were outstanding, and
the aggregate market value of shares held by unaffiliated stockholders was
approximately $452,563.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Forward Looking Statement
The following contains forward looking information within the meaning of The
Private Securities Litigation Reform Act of 1995. Such forward looking
statements and paragraphs may be identified by such forward looking terminology
as "may," "will," "believe," "anticipate," or similar words or variations
thereof. Such forward looking statements involve certain risks and uncertainties
including the particular factors described more fully above in this business
discussion and throughout this annual report and in each case actual results may
differ materially from such forward looking statements. Successful marketing of
the online and other products and services offered by MaxPlanet and their future
contribution to MaxPlanet's revenues depends heavily on, among other things, the
successful completion of certain technical projects undertaken by MaxPlanet as
well as the success of MaxPlanet's marketing and sales efforts, none of which
can be assured. Other important factors that MaxPlanet believes may cause actual
results to differ materially from such forward looking statements are discussed
in the "Risk Factors" section set forth herein. In assessing forward looking
statements contained herein, readers are urged to carefully read all such
statements and all of MaxPlanet's filings with the Securities and Exchange
Commission. MaxPlanet does not undertake to publicly update or revise its
forward looking statements even if experience or future changes make it clear
that any projected results or events (expressed or implied) will not be
realized.
BUSINESS HISTORY AND DEVELOPMENT
MaxPlanet Corp., a Delaware corporation, was incorporated in October,
1982 as Robotic Systems & Technology, Inc. ("MaxPlanet"). From approximately
1983 through November 1993, MaxPlanet had no business operations. MaxPlanet's
shares became publicly traded upon the declaration of effectiveness of
MaxPlanet's Registration Statement on Form S-18 filed with the U.S. Securities
and Exchange Commission on April 22, 1983.
From 1994 until December 31, 1997, MaxPlanet made several acquisitions,
each of which were either unsuccessful ventures or were rescinded after
consummation. MaxPlanet filed Certificates of Amendment to its Certificate of
Incorporation with the State of Delaware to change its name to "Concord
International Group, Inc.," on October 14, 1994, to "Maxnet, Inc." on July 8,
1997, and to its current name, "MaxPlanet Corp.," on July 27, 1999.
MaxPlanet is an integrated Internet development company which focuses
on creating and expanding strategic alliances for its comprehensive network of
consumer and business oriented websites on its Internet websites. MaxPlanet
currently occupies offices in New Jersey and Florida. Through its majority owned
subsidiary, Valentino Salotti, Inc., MaxPlanet is a wholesaler and retailer of
contemporary leather furniture and utilizes the Internet to showcase its online
furniture catalog. Trident Recovery Systems, Inc., a wholly owned subsidiary,
offers debt collection services. Maxim Auction, Inc., a wholly owned subsidiary,
plans to offer for sale new and excess merchandise, closeout and refurbished
products to Internet users. Mundo Maximo Corp., a wholly owned subsidiary, was
formed to create a Spanish-language Internet portal to provide users with
information and interactive content centered on Hispanic events in the Spanish
language. See "Description of Business" on Page 6.
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MaxPlanet identifies, acquires, operates and manages Internet
technology and Internet companies which MaxPlanet believes have the potential to
capture specific niche markets. MaxPlanet's revenue is predominately derived
from the sale of furniture through its subsidiary, Valentino Salotti. For the
fiscal years ended March 31, 2000 and 1999, MaxPlanet realized income from
operations from its furniture business of approximately $67,200 and $38,500,
respectively. MaxPlanet has not yet realized a profit from its Internet-based
businesses. For the fiscal years ended March 31, 2000 and 1999, MaxPlanet
realized net losses of $1,148,314 and $906,910, respectively. MaxPlanet cannot
assure that it will not continue to experience net losses in future periods. See
"Risk Factors - MaxPlanet Has A History of Losses and Expects Future Losses" on
page 16.
Subsidiaries
MaxPlanet currently has five wholly-owned subsidiaries and owns
interests in two additional subsidiaries. MaxPlanet owns 100% of the outstanding
securities of MaxPlanet Radio Corp, a Nevada corporation ("MaxPlanet Radio"),
Trident Recovery Systems, Inc., a New York corporation ("Trident"), Maxim
Auction, Inc., a Nevada corporation ("Maxim Auction"), and Mundo Maximo Corp., a
Nevada corporation ("Mundo Maximo"). MaxPlanet also owns 90% of the equity and
voting securities of Valentino Salotti, Inc., a New York corporation ("Valentino
Salotti"), 80% of the equity and voting securities of Ultra Web, Inc., a New
Hampshire corporation ("Ultra Web"), and 30% of the equity and voting securities
of Luxr Ltd., a New York corporation ("Luxr").
Recent Developments
On October 17, 2000, MaxPlanet entered into an agreement with NPS
International Corporation, a New York corporation ("NPS"). The agreement
provides for NPS to lease its corporate office from MaxPlanet and use the
services of MaxPlanet's Internet development and production facility in Miami,
Florida to generate users and customers to purchase products and services
offered by NPS. The agreement is expected to provide MaxPlanet revenues of
$5,000 per month until September 2001, and is automatically renewed for
successive one year terms until either party delivers written notice of
termination to the other party. In connection with the agreement, NPS agreed to
pay MaxPlanet a minimum quarterly fee of 100,000 shares of NPS common stock for
supporting NPS' growth plan. MaxPlanet concurrently sold its
1class.com/oneclass.com and telephonebook.net business plans and related domain
names and certain other domain names to NPS in exchange for 3.5 million shares
of NPS common stock valued at approximately $123,000. Pursuant to the agreement
with NPS, following the execution of the agreement with NPS on October 17, 2000,
Henry Val, the Chief Executive Officer and Chairman of the Board of MaxPlanet,
was appointed interim President, and elected a director, of NPS, and Israel
Goldreich, the Vice President and a director of MaxPlanet, was elected as a
director of NPS.
On August 3, 2000, MaxPlanet entered into a settlement agreement with
Maxnet Holdings, Inc., which, in July 1998, had filed a federal trademark
infringement lawsuit against MaxPlanet relating to MaxPlanet's prior use of the
name "Maxnet, Inc." Pursuant to the settlement agreement, MaxPlanet agreed to
discontinue the use of the Maxnet name and service mark in exchange for Maxnet
Holdings' dismissal of all claims against MaxPlanet. See "Legal Proceedings" on
page 28.
On March 17, 2000, Mundo Maximo Corp. entered into an agreement with
Triumph Global Securities, Ltd. pursuant to which Triumph Global will provide
financial and consulting services to Mundo Maximo and act as its exclusive
advisor and placement agent in connection with Mundo Maximo's efforts to obtain
capital investment from outside sources. Mundo Maximo has paid Triumph Global an
aggregate of $95,000 in cash in connection with the agreement and Triumph Global
will receive the greater of (i) an
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additional $505,000, and (ii) 7% of the first $10 million of the capital raised
by Triumph Global, less $95,000, plus 4% of the capital raised in excess of $10
million.
On November 18, 1999, MaxPlanet issued a press release announcing
management's decision to terminate an agreement to acquire Planet Digital, Corp.
as well to terminate two agreements that MaxPlanet had entered into with Planet
Entertainment, namely a joint venture agreement and an agreement to purchase
non-exclusive rights to 2500 masters from Planet Entertainment. MaxPlanet and
Planet Digital mutually agreed to terminate the agreement by which MaxPlanet was
to acquire Planet Digital after further evaluation of the transaction determined
that consummating the transaction was not in the best business interests of the
respective parties. MaxPlanet terminated the two agreements with Planet
Entertainment due to Planet Entertainment's failure to proceed with the terms of
the agreements. See "Legal Proceedings" on page 28.
Acquisition of Valentino Salotti
On May 8, 1998, MaxPlanet acquired 100% of the outstanding securities
of Valentino Salotti from Isaak Val, the President, and a director, of MaxPlanet
in exchange for (a) 500,000 shares of MaxPlanet common stock and (b) $50,000 in
cash. Mr. Isaak Val was the principal shareholder of Valentino Salotti prior to
the acquisition and currently serves as the President of Valentino Salotti.
Immediately prior to the acquisition by MaxPlanet, Mr. Isaak Val owned, directly
or beneficially, 100% of the equity and voting securities of Valentino Salotti.
Valentino Salotti is a furniture distributor, wholesaler and retailer
that purchases 100% of the merchandise it sells to customers from Tradeway
Upholstery, Inc., a New York corporation, which is wholly-owned by Mr. Isaak
Val, the President and a director of MaxPlanet. MaxPlanet acquired Valentino
Salotti because MaxPlanet believes that it can utilize MaxPlanet's existing
technology and brand name to generate revenue from the sale of Valentino Salotti
furniture via the Internet and because MaxPlanet believes that the Valentino
Salotti name and its quality products will complement MaxPlanet's existing
products and enhance MaxPlanet's name and reputation. See "Description of
Business - Valentino Salotti, CustomLiving.com: Wholesale and Retail Furniture
Sales; Online Furniture Catalog" on page 8.
Sale of 10% of Valentino Salotti
On February 17, 1999, MaxPlanet sold 10% of Valentino Salotti to A & J
Capital, Inc., a New York corporation ("A & J Capital") that was not an
affiliate of MaxPlanet at the time of such sale, for $200,000. MaxPlanet
received $50,000 and a promissory note in the principal amount of $150,000,
payable on demand at any time after 12 months from the date of issuance, at a
rate of interest of 10% per annum, from A & J Capital in connection with the
sale. MaxPlanet sold its 10% interest in Valentino Salotti to generate capital
for operations. See "Recent Sales of Unregistered Securities," beginning on page
31.
Acquisition of WebPhoneBook.com
On June 4, 1998, MaxPlanet acquired research information and business
plans for its WebPhoneBook/Portal Community Internet project, the domain name
WebPhoneBook.com and 17 other domain names from Intrasoft, Ltd., an unaffiliated
New York corporation, for $70,000. MaxPlanet intends WebPhoneBook.com to be a
source of industry specific business guides that will be basic, fast, and easy
to use and that will provide consumer contact and product information for local
businesses.
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MaxPlanet acquired WebPhoneBook.com because MaxPlanet believes that
WebPhoneBook.com will enhance the services provided by MaxPlanet and will
benefit MaxPlanet's users by providing them with a personalized search engine
that will focus on the interests specified by each user. MaxPlanet believes that
its WebPhoneBook can serve as the Internet's Multimedia Rolodex, providing users
with valuable information about commercial business to business services on the
web without all the extraneous, irrelevant and redundant information generated
by traditional search engines. MaxPlanet intends to utilize the assets acquired
from Intrasoft to generate revenue, directly and indirectly, by:
o selling advertising space on the WebPhoneBook.com and related
websites;
o selling directory space on WebPhoneBook.com to businesses; and
o utilizing the acquired websites to increase traffic to
MaxPlanet's Portal Community and to further build and enhance
MaxPlanet's name and reputation.
See "Description of Business - Directory Products and Services on the Internet:
www.WebPhone Book.com." on page 8.
Acquisition of OneClass.com and 1Class.com
On June 16, 1998, MaxPlanet acquired the domain names, business plan
and content of OneClass.com and 1Class.com (collectively, "OneClass"), online
shopping networks which link users to products and services offered by third
party vendors and enable users to make online purchases of such products and
services, from Reich Brothers, Inc. ("Reich Brothers"), a Delaware corporation,
of which Israel Goldreich, the Vice President and a director of MaxPlanet, is
the principal shareholder.
MaxPlanet acquired OneClass as part of its overall plan to acquire
domains, products and services that MaxPlanet believes enhance and complement
the products and services provided by MaxPlanet and that MaxPlanet believes will
ultimately increase shareholder value. By obtaining OneClass, MaxPlanet acquired
the OneClass operation and business plan, which MaxPlanet has integrated into
its online Portal Community. At the time of this acquisition, Mr. Goldreich
owned, directly or beneficially, 100% of the outstanding securities of Reich
Brothers. Reich Brothers received an aggregate of $6000 cash, 25,000 shares of
MaxPlanet common stock and an option to purchase 100,000 additional shares of
MaxPlanet common stock at $1.00 per share. On October 17, 2000, MaxPlanet sold
all rights to OneClass to NPS International Corporation. See "Recent
Developments" on page 2.
Acquisition of Luxr
On November 12, 1998, MaxPlanet acquired 5% of the outstanding
securities of Luxr, an unaffiliated designer, importer and distributor of fine
jewelry, including watches and estate jewelry, as consideration for a loan made
by MaxPlanet to Luxr in the principal amount of $140,000 and in connection with
a marketing agreement entered into by MaxPlanet with Luxr by which MaxPlanet
agreed to market Luxr products online. In connection with MaxPlanet's
acquisition of 5% of the outstanding securities of Luxr, Luxr executed and
delivered to MaxPlanet a promissory note, dated November 12, 1998, in the
principal amount of $140,000, with interest in the amount of $2800, payable in
full upon demand by MaxPlanet 30 days after the date of issuance.
MaxPlanet made the loan to, and acquired the 5% interest in, Luxr in an
effort to facilitate MaxPlanet's entry into the online jewelry market and with
the intention of featuring Luxr and its products as a `Premier Vendor' on
MaxPlanet's auction website. On April 29, 1999, MaxPlanet agreed to convert the
balance due to MaxPlanet pursuant to the promissory note into shares of Luxr
common stock, and, as a result,
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acquired an additional 25% interest in Luxr through such conversion, which
increased MaxPlanet's total equity interest in Luxr to 30%. See "Description of
Business - Jewelry Online: Luxr, www.LUXR.com" on page 12.
Acquisition of Virtual Financial
Pursuant to an agreement dated December 15, 1998, MaxPlanet acquired
100% of the equity securities of Virtual Financial Network.com, Inc. ("Virtual
Financial"), an unaffiliated Florida technology and marketing corporation, and
its related Internet website, for $50,000 in cash, an aggregate of 500,000
shares of MaxPlanet common stock issued to the shareholders of Virtual Financial
at and after closing and an additional 500,000 shares of MaxPlanet common stock
that was to be issued to such shareholders subsequent to the closing of the
transaction (the "Additional Shares"). The Additional Shares were issued by
MaxPlanet and are being held in escrow, subject to the outcome of litigation
between the parties. See "Legal Proceedings" on page 28.
MaxPlanet issued 100,000 shares of common stock to Reich Brothers,
Inc., of which Israel Goldreich, the Chief Operating Officer, Vice-President and
a director of MaxPlanet, is the President, for identifying Virtual Financial as
an acquisition target and for facilitating the transaction. This transaction was
consummated prior to Mr. Goldreich's service as an officer and director of
MaxPlanet. See "Recent Sales of Unregistered Securities," beginning on page 31.
On June 18, 1999, Articles of Dissolution were filed with the State of
Florida dissolving Virtual Financial. MaxPlanet has since terminated the
operations of the Internet website. MaxPlanet utilized the assets, including
Virtual Financial's technology and personnel MaxPlanet obtained in its
acquisition of Virtual Financial to establish an Internet development division
that focuses on developing MaxPlanet's Java Component Technology, WebPhoneBook,
E-Commerce, online multimedia solutions, CustomLiving and the MundoMaximo
website. MaxPlanet intends that its Internet development division will also
provide development services to customers who seek to develop personal or
business-related Internet websites, and MaxPlanet expects to generate revenue
from fees charged to customers for such services. See "Description of Business -
Internet Developers: Virtual Financial" on page 9.
Acquisition of Trident Recovery Systems
On February 11, 1999, MaxPlanet acquired 100% of the outstanding
securities of Trident in exchange for 500,000 shares of MaxPlanet common stock.
Trident's core business is asset recovery in both consumer and commercial areas.
MaxPlanet acquired Trident with the intention of utilizing Trident's experience
and expertise in the asset recovery business to enhance MaxPlanet's existing
debt collection-related domain. MaxPlanet intends to utilize Trident to offer
asset recovery services nationwide via the Internet. See "Description of
Business - Trident Recovery Systems, Inc." on page 10.
Formation of Maxim Auction
On February 18, 1999, MaxPlanet's formed its wholly-owned subsidiary,
Maxim Auction, which MaxPlanet intends will serve as an online auction.
MaxPlanet formed Maxim Auction to operate MaximAuction.com, through which
MaxPlanet intends to sell new merchandise, excess merchandise, closeout and
refurbished products to Internet users, consumers and small to medium-sized
businesses. MaxPlanet anticipates that MaximAuction.com will feature a rotating
selection of brand name products, merchandise, computers and consumer
electronics, which typically sell at significant discounts as compared to prices
offered by traditional retailers. MaxPlanet will seek to utilize
MaximAuction.com to run auctions
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seven days a week, offering many items in each of its daily auctions, providing
a distribution channel ranging from new products to products generally available
at garage sales and flea markets and odd lot quantities of closeout and
refurbished goods. See "Description of Business - Auction Online: Maxim Auction
and Maximauction.com" on page 12.
Acquisition of Ultra Web
On February 24, 1999, MaxPlanet purchased 80% of the outstanding equity
and voting securities of Ultra Web, Ultra Web's Telphonebook.net domain, which
functions as an Internet yellow-pages directory, and certain equipment, domain
names, databases and other Internet related assets from a non-affiliate of
MaxPlanet in exchange for 100,000 shares of MaxPlanet common stock.
MaxPlanet intends to utilize the InfoQuest technology licensed by Ultra
Web, which allows users to search a national directory with over 108 million
listings in less than one-tenth of a second, to enhance MaxPlanet's existing
services and information resources. MaxPlanet intends to integrate the InfoQuest
technology and databases into MaxPlanet's WebPhoneBook.com, which MaxPlanet
believes will enable MaxPlanet to generate advertising and directory sales
revenue. MaxPlanet intends to integrate these components into its
WebPhoneBook.com and make WebPhoneBook.com function as a desktop Internet
multimedia rolodex. MaxPlanet intends to continue to utilize the InfoQuest
technology. See "Description of Business - Directory Products and Services on
the Internet: www.WebPhoneBook.com" on page 8. MaxPlanet sold all rights to the
Internet website www.Telephonebook.net to NPS International Corporation on
October 17, 2000. See "Recent Developments" on page 2.
Formation of MaxPlanet Radio Corp.
On March 22, 1999, MaxPlanet formed MaxPlanet Radio Corp. to operate
its MaxPlanet Radio Network, which was launched by MaxPlanet on December 29,
1998. MaxPlanet Radio is an audio and video content provider that is intended to
enable users to listen to music and view videos through MaxPlanet's website. See
"Description of Business - Maximmusic.com and MaxPlanet Radio Network: Music -
Audio/Video Online" on page 10.
DESCRIPTION OF BUSINESS.
MaxPlanet is an integrated Internet development company which focuses
on creating and expanding strategic alliances for its comprehensive network of
consumer and business oriented websites on its Internet websites. MaxPlanet
currently occupies offices in New Jersey and Florida. Through its majority owned
subsidiary, Valentino Salotti, Inc., MaxPlanet is a wholesaler and retailer
sales of contemporary leather furniture and utilizes the Internet to showcase
its online furniture catalog. Trident Recovery Systems, Inc., a wholly owned
subsidiary, offers debt collection services. Maxim Auction, Inc., a wholly owned
subsidiary, plans to offer for sale new and excess merchandise, closeout and
refurbished products to Internet users. Mundo Maximo Corp., a wholly owned
subsidiary, was formed to create a Spanish-language Internet portal to provide
users with information and interactive content centered on Hispanic events in
the Spanish language.
MaxPlanet opened its corporate website www.MXNT.com in July, 1998,
developed and created the portal community website www.MaxPlanet.com in August,
1998, and launched www.MaxPlanet.com on December 2, 1998. MaxPlanet operates the
Internet auction website www.MaximAuction.com, which it created on December 23,
1998, over which MaxPlanet plans to offer new merchandise, excess merchandise,
closeout and refurbished products for sale to Internet users, consumers and
small to medium-sized businesses.
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MaxPlanet operates the domain www.MundoMaximo.com, MaxPlanet's official
Spanish Portal Internet site through its subsidiary, Mundo Maximo, which was
incorporated on September 10, 1999. MaxPlanet seeks to utilize this website to
capitalize on the growing global Hispanic online market. MaxPlanet intends that
MundoMaximo.com will serve as its Spanish-language Internet portal, enabling
MaxPlanet to provide users with information and interactive content centered on
global Hispanic events in both Spanish and English.
MaxPlanet operates MaxPlanet Radio, which offers originally programmed
audio and video content over the Internet, through www.MaxPlanet.com. MaxPlanet
intends to integrate into, and operate through, MaxPlanet Radio an audio/video
digital encoding content provider on the Internet which will enable users to
listen to music, view videos and movies, utilize interactive CD ROMs, computer
software, PDAs (personal digital assistants) and WAP (wireless application
protocol), which will deliver content over digital wireless networks. MaxPlanet
intends to continue to develop, or acquire, the content and services required to
appeal to the Internet savvy shopper, sophisticated shopper, bargain hunter,
spontaneous purchaser and active bidder.
MaxPlanet offers customers, advertisers and users multiple outlets for
entertainment, shopping and information online. MaxPlanet intends to provide
users of its Internet websites with the option of shopping online or bidding for
products, which MaxPlanet believes will position it to capture a share of online
purchases and advertising revenues. MaxPlanet is attempting to create multiple
interactive Portals with E-commerce and Auctions, integrate video, music and an
Internet radio station and establish a desktop information business to business
and user to user web telephone book and Internet website address book. While
MaxPlanet expects to generate revenue through E-Commerce, including sales of
Internet development services, furniture and products over the Internet,
MaxPlanet anticipates that its principal source of revenue will be derived from
fees paid by third parties for advertising their products and services on
MaxPlanet's main and satellite websites.
Relative Importance of Operations
MaxPlanet's management considers its Internet websites
www.MaxPlanet.com and www.MundoMaximo.com to be its most important operations,
since these sites are expected to comprise an international portal community
that will tie together MaxPlanet's featured products and services and be
utilized to launch and access MaxPlanet's featured product lines, resources and
services. Management considers Valentino Salotti and its www.CustomLiving.com
website to be its next most important operation at this time, since during the
fiscal year ended March 31, 2000, approximately 88% of MaxPlanet's revenue was
generated by Valentino Salotti. See "Description of Business" on page 6 and
"Description of Business - Valentino Salotti, CustomLiving.com: Wholesale and
Retail Furniture Sales; Online Furniture Catalog" on page 8.
Management believes the Internet development and web-hosting business
to be its next most important business operation, followed by the directory
service and other resources that MaxPlanet provides through its
www.WebPhoneBook.com Internet website. Management considers MaximAuction to be
its next most important operation, followed by Trident, MaxPlanet Radio and
Luxr, in descending order of relative importance. See "Description of Business -
Internet Developers: Virtual Financial" on page 9 and "Description of Business -
Directory Products and Services on the Internet: www.WebPhoneBook.com" on page
8.
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Valentino Salotti, CustomLiving.com: Wholesale and Retail Furniture Sales;
Online Furniture Catalog.
Valentino Salotti, is a furniture wholesaler and retailer that designs
and distributes contemporary leather furniture and household products. Valentino
Salotti currently occupies approximately 15,000 square feet of warehouse and
showroom space at 248 Flushing Ave, Brooklyn, New York 11205. MaxPlanet
currently utilizes the Internet as an online catalog for Valentino Salotti
merchandise and intends to offer Valentino Salotti designs and custom
manufactured products directly to customers via the Internet and through a
proposed interactive kiosk program that is being explored by MaxPlanet. To date,
Valentino Salotti has derived no revenue from sales made to customers directly
via the Internet.
For the fiscal years ending March 31, 2000 and 1999, the total revenue
derived by MaxPlanet from Valentino Salotti was $748,592 and $516,763,
representing approximately 88% and 99%, respectively, of MaxPlanet's total
revenue during such periods.
On July 16, 1998, MaxPlanet launched www.CustomLiving.com, a website
that enables MaxPlanet to offer Valentino Salotti designs and custom
manufactured products to customers through its online catalog. Customers can
access the Valentino Salotti catalog of merchandise through this website and can
order the merchandise by telephone for delivery or by visiting the Valentino
Salotti showroom in Brooklyn, New York.
MaxPlanet intends to sell Valentino Salotti furniture directly to
customers over the Internet and to offer access to its CustomLiving website
through interactive kiosks in selected malls and shopping centers. At present,
this Internet website is functioning as an online furniture catalog; however,
the website is not fully functional because MaxPlanet is in the process of
raising additional funds to finance the completion of this project, which will
include the hiring of qualified technical personnel to complete its development.
MaxPlanet intends to begin marketing and sales for this website in the fiscal
year ending March 31, 2001. MaxPlanet is also considering opening a CustomLiving
flagship store in New Jersey. MaxPlanet intends to offer select franchise
opportunities for individuals interested in opening CustomLiving stores
throughout the United States. MaxPlanet intends for CustomLiving stores and
kiosks to enable customers to design virtual rooms, similar to the actual rooms
that they wish to furnish, with furniture of their choice, utilizing interactive
kiosk monitors.
Directory Products and Services on the Internet: www.WebPhoneBook.com.
MaxPlanet anticipates that its www.WebPhoneBook.com Internet search
engine will place entire industries in simple, easy-to-use interactive
categories and directories. At present, this website is not fully functional,
and MaxPlanet has derived no revenue from the operations of this business, as
MaxPlanet is in the process of raising funds to finance the completion of this
project, which will include the hiring of qualified technical, marketing and
sales personnel to complete the development of this website and market its
services. MaxPlanet intends to complete development and begin marketing and
sales of this website in the fiscal year ending March 31, 2001.
MaxPlanet intends for WebPhoneBook.com to be a source for various
industry specific business guides. These guides are intended to be basic, fast,
and easy-to-use, and are intended to provide consumer contact and product
information for local businesses nationwide in the short term future and
worldwide in the long term future. Users will be provided with a personalized
search engine that will carry the interests specified by each user. MaxPlanet
expects WebPhoneBook to serve as a Multimedia Rolodex for the Internet.
MaxPlanet intends for WebPhoneBook.com to provide customers with valuable
information about commercial business to business services on the Internet
without all the extraneous, irrelevant and redundant information generated by
traditional search engines. MaxPlanet expects that its Webphonebook.com, in
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conjunction with MaxPlanet.com and MaxPlanet's satellite websites, will provide
users with the information that they seek from sources located in their area or
within reasonable proximity to them and that it will also provide names of
persons or entities in such localities who can assist them in finding the
information that they seek.
MaxPlanet expects to derive revenue from WebPhoneBook.com through the
sale of advertising space on the websites and from the sale of directory
listings, generating revenue in a manner similar to the manner in which revenue
is generated by traditional yellow pages directory book providers.
Internet Developers: Virtual Financial.
On November 19, 1998, MaxPlanet established its Internet development
division, which focuses on developing MaxPlanet's Java Component Technology,
WebPhoneBook, E-Commerce, online multimedia solutions, CustomLiving and the
MundoMaximo website. While MaxPlanet's Internet development division has done no
significant work for companies other than MaxPlanet and its affiliates,
MaxPlanet expects that this business will provide development services to
customers who seek to develop personal or business-related Internet websites.
At present, MaxPlanet's Internet development division is not fully
functional, as MaxPlanet is in the process of raising funds to finance the
completion of this project, which will include the hiring of qualified
technical, marketing and sales personnel to complete the development of this
business and market its services. MaxPlanet intends to begin marketing and sales
for this division by the end of the fiscal year ending March 31, 2001. In the
year ended March 31, 2000, MaxPlanet derived no significant revenue as a direct
result of the operations of its Internet development division. While MaxPlanet
owns the rights to the Internet website www.vfn.com., Virtual Financial was
dissolved on June 18, 1999 and the operations of the website were terminated at
that time. See "Acquisition of Virtual Financial" on page 5.
Mundomaximo.com, MaxPlanet - Africa, MaxPlanet - U.S. States and Cities.
MaxPlanet created the domain www.MundoMaximo.com (MaxPlanet's official
Spanish Portal Internet site) and launched the website on January 8, 1999, in an
attempt to capitalize on the growing global Hispanic online market. MaxPlanet
intends for MundoMaximo.com to serve as a Spanish-language Internet portal,
through which MaxPlanet will provide users with information and interactive
content centered on global Hispanic events in the Spanish language. Since the
language preference of many acculturated American Hispanics is English,
MaxPlanet also offers users the ability to access information and services in
English on www.MaxPlanet.com.
At present, the MundoMaximo.com Internet website is operational, but is
not fully functional, as MaxPlanet is in the process of raising funds to finance
the completion of this project, which will include the hiring of qualified
technical, marketing and sales personnel to complete the development of this
website and market its services. MaxPlanet intends for its MundoMaximo.com
website, from which MaxPlanet derived no revenue during fiscal year ended March
31, 2000, to be fully operational by the end of the fiscal year ending March 31,
2001, and MaxPlanet intends to begin marketing and sales for MundoMaximo.com by
the end of the fiscal year ending March 31, 2001.
MundoMaximo.com attempts to attract viewers by providing a one-stop
destination for identifying, selecting and accessing resources, services,
content and information, and by providing users with a search engine, free
e-mail, Spanish-language news feeds, chat rooms and message boards. MaxPlanet
anticipates that the principal source of revenue from MundoMaximo.com will be
generated through fees charged to third
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parties for advertising their products and services on MundoMaximo.com. In the
fiscal year ended March 31, 2000, the MundoMaximo.com website generated no
revenues, and MaxPlanet does not expect to derive any significant revenue from
its MundoMaximo.com website.
MaxPlanet intends to utilize MundoMaximo.com to target and reach the
Hispanic market and its distribution channels. According to a July 1999 study
conducted by the United States Department of Commerce, approximately 5 million
of the approximately 31 million Latin Americans residing in the United States
regularly utilize the Internet. MaxPlanet believes that this market will be able
to support healthy competition for Internet purchases by Latin Americans
residing in the United States. MaxPlanet believes the this market warrants
portal space dedicated to Hispanic community news, products and lifestyle and
that MaxPlanet has the ability to provide such service to this community.
MaxPlanet launched its MaxPlanet-Africa website on June 25, 1999. This
website is intended to provide MaxPlanet users with easy access to information
related to the continent of Africa, its people and its diverse culture. At
present, this website is not fully functional. MaxPlanet does not expect to
derive any revenue directly from this website, but instead intends for it to
enhance the overall value of the MaxPlanet brand name by serving as an
information resource for users of MaxPlanet's portal community.
MaxPlanet plans to launch portal sites for each state in the United
States and expects that each site will offer users regional auctions, shopping,
entertainment and various other items of local interest.
Trident Recovery Systems, Inc.
Trident is a full service asset recovery company that is capable of
handling accounts from initial collection efforts through the legal process
until the debt is resolved. MaxPlanet intends to penetrate the U.S. market
through increased advertising, Internet integration, marketing and a focused
sales effort. For the fiscal year ended March 31, 2000, and for the period
beginning February, 1999, the date of MaxPlanet's acquisition of Trident,
through March 31, 1999, total revenue derived by MaxPlanet from Trident was
approximately $44,000 and $23,300, respectively, representing approximately 5.0%
and 4.0% of MaxPlanet's total revenue during such periods.
MaxPlanet expects to continue to operate Trident as a stand-alone
collection agency in the short term, but intends to fully integrate Trident into
MaxPlanet's CollectionAgencies.com domain in the long term. MaxPlanet intends to
create a nationwide sales force with regional sales and service offices in every
major market through contracts with, and acquisitions of, other regional
collection and recovery corporations.
Maximmusic.com and MaxPlanet Radio Network: Music - Audio/Video Online.
In November, 1998, MaxPlanet created its maximmusic website to
specialize in the production, downloading and distribution for independent music
recording artists. MaxPlanet created this domain in conjunction with its
decision to enter the online music - audio/video market and the creation of
MaxPlanet's Entertainment Division, MaxPlanet Media-Entertainment, and its
online recording label Maximmusic.com.
On December 29, 1998, MaxPlanet launched the MaxPlanet Radio Network,
which enables users to listen to, or view, as the case may be, audio and video
content delivered to them via the Internet and utilize interactive CD ROMs and
computer software through MaxPlanet's websites. Though the MaxPlanet Radio
website is currently operational, it is not yet fully functional. However,
MaxPlanet anticipates that MaxPlanet Radio will be fully functional, and that it
will derive revenue from MaxPlanet Radio, in the fiscal year ending March 31,
2001.
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MaxPlanet intends to premier new independent recording artists under
MaxPlanet's Maximmusic.com label. MaxPlanet intends to utilize Maximmusic to
provide independent artists with the facilities to record music, a forum for
their music to be heard, promotional services and a mechanism for the
distribution of the music. MaxPlanet intends to offer independent artists the
use of MaxPlanet's production facilities in Florida and the opportunity to
promote the music on MaxPlanet's websites. MaxPlanet expects to generate revenue
from the sale of these music products and from fees charged to artists for the
use of MaxPlanet's facilities and resources.
MaxPlanet intends to enter into joint ventures that will enable
MaxPlanet to offer proprietary music catalogs of other companies, digital
downloading directly from such catalogs, and a platform to showcase new artists.
MaxPlanet intends to enable customers to create their own CDs, listen to music
24 hours a day and to order from MaxPlanet the music that they listen to over
the radio. MaxPlanet intends utilize MaxPlanet Radio to develop an online
jukebox that will enable users to:
o load a play list of their favorites music to play;
o record a greatest hits CD; and
o download directly to their PCs for their personal use.
MaxPlanet intends to enable distributors to sell product directly to
market, offering users the ability to order products directly from MaxPlanet.
MaxPlanet intends for MaxPlanet Radio to become an aggregator of streaming audio
and video programming, to obtain non-exclusive digital rights to feature length
movies and to offer a library of digital feature films to its users. MaxPlanet
also expects MaxPlanet Radio to:
o author DVD products and convert audio and video products into
digital format;
o provide content modules for Video on Demand (VOD) servers; and
o provide Wireless Application Protocol (WAP) for PDAs and the
digital wireless network.
MaxPlanet believes that these additional levels of content will enable
MaxPlanet to attract more users to its websites, which will lead to increased
advertising revenue, sales of products, sponsorships, affiliate programs and
brand awareness.
While MaxPlanet's Internet music website is operational, MaxPlanet is
in the process of raising funds to finance the completion of this project, which
will include the hiring of qualified technical, marketing and sales personnel to
complete the development of this website and market its services. For the year
ending March 31, 2000, MaxPlanet derived no revenue from music related products
and operations. MaxPlanet expects that approximately 20% to 30% of MaxPlanet's
future revenues will be derived from the wholesale distribution of pre-recorded
music, digitally downloaded music, advertising and music product sales through
MaxPlanet Radio and MaximMusic.com.
Auction Online: Maxim Auction and MaximAuction.com
On December 23, 1998, MaxPlanet created the domain www.MaximAuction.com
to serve as an Internet auction website. On February 18, 1999, MaxPlanet formed
Maxim Auction as a wholly owned subsidiary with the intention of operating
MaximAuction.com through Maxim Auction.
At present, MaximAuction.com offers a limited selection of items that
are available for bidding, which primarily include Valentino Salotti furniture
and LUXR jewelry. This is attributable to the fact that while the
MaximAuction.com website is fully operational, MaxPlanet has not yet initiated
MaximAuction's marketing and sales campaign, which MaxPlanet believes will
attract users interested in listing items for sale on the website. MaxPlanet
intends to raise additional funds to enable it to launch this marketing and
sales
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campaign, which MaxPlanet anticipates will be initiated by the end of the fiscal
year ending March 31, 2001. For the year ended March 31, 2000, MaxPlanet derived
no revenue from the operations of MaximAuction.
MaxPlanet intends to utilize MaximAuction.com to sell new merchandise,
excess merchandise, closeout and refurbished products to Internet users,
consumers and small to medium-sized businesses. MaxPlanet believes that its
online auction will represent an exciting sales format for users and that it
will take advantage of the interactive nature of the Internet.
MaxPlanet intends that MaximAuction.com will feature a rotating
selection of brand name products, merchandise, computers and consumer
electronics that will typically sell at significant discounts as compared to
merchandise sold at traditional retailers. MaxPlanet expects that
MaximAuction.com will operate auctions seven days a week and offer a variety of
items in each of its daily auctions.
MaximAuction.com's online auctions are intended to provide a
distribution channel ranging from new products to products from garage sales,
flea markets and odd lot quantities of closeout and refurbished goods. MaxPlanet
believes that the frequency of Maxim Auction's auctions and its ability to
continuously add new items will allow vendors to dispose of inventory quickly,
thus minimizing their risk of price erosion.
MaxPlanet believes that it will attract vendors to sell products
through MaximAuction.com, since online sales allow vendors to liquidate excess
merchandise directly to a nationwide audience without cannibalizing their
primary distribution channels. Thus, MaximAuction.com will provide an additional
channel of distribution for manufacturers which will enable such manufacturers
to expose their products to users of MaxPlanet's community of websites.
MaximAuction.com is intended to present users with the opportunity to
establish their own prices on popular brand name products, the convenience of
shopping 24 hours a day, seven days a week, and a unique audio/video experience
combined with an ever-changing merchandise mix, which MaxPlanet believes will
entice users/customers to participate in the auctions. MaxPlanet intends to
provide users with an entertaining, easy to use and fast auction process, with
tight control of the order process and customer support, which MaxPlanet
believes will encourage users to repeatedly visit the site and utilize the
services offered by MaxPlanet. MaximAuction.com has established multiple
channels for communicating with customers before and after each sale, including
telephone, e-mail and online support. MaxPlanet also intends to incorporate
other features into MaximAuction.com, such as a personalized page with a user's
bidding history, to encourage repeat visits.
MaxPlanet plans to obtain merchandise directly and indirectly from
computer and consumer electronics manufacturers and through other vendors, such
as retailers, distributors and other various companies. MaxPlanet intends to
offer businesses an exclusive `Premier Vendor' presence on MaximAuction.com, in
which MaxPlanet expects to charge vendors fees for the rights to be exclusive
advertising vendors for specific business subdivisions of MaximAuction.com.
Jewelry Online: Luxr, www.LUXR.com
MaxPlanet, which has a 30% equity interest in LUXR, entered into an
exclusive marketing agreement with LUXR, a designer, importer and distributor of
fine jewelry, watches and estate-jewelry, and created www.LUXR.com to serve as a
sales outlet for LUXR merchandise. MaxPlanet intends to feature LUXR and its
products as a `Premier Vendor' on MaximAuction.com's Jewelry Channel.
To date, MaxPlanet has realized no significant revenue as a direct
result of sales from its LUXR.com Internet website, as MaxPlanet is in the
process of raising funds to finance the completion of this project,
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which will include the hiring of qualified technical, marketing and sales
personnel to complete the development of this website and market its services.
Preparation for the Year 2000
MaxPlanet has experienced no material disruptions to its computer
systems or operations as a result of the Year 2000 computer problem. MaxPlanet
anticipates that it will not experience a material adverse impact to its
operations, liquidity or financial condition related to systems under its
control as a result of the Year 2000. MaxPlanet's total cost to achieve Year
2000 compliance was approximately $250,000. More than one-half of this amount
was expended in the first and second fiscal quarters of 1999.
Employees
MaxPlanet currently employs a total work force of five full-time
employees, including two technicians. MaxPlanet also utilizes independent
contractors on a project by project basis. None of MaxPlanet's employees are
covered by collective bargaining agreements. MaxPlanet has never experienced any
labor disruptions or work stoppages and considers its employee relations to be
good.
Competition
MaxPlanet primarily competes in the following markets, among others:
o the furniture market, including sales of furniture utilizing
the Internet;
o the Spanish language Internet portal community market;
o the web-hosting provider market;
o the jewelry market, including sales of jewelry utilizing the
Internet;
o the online telephone directory market;
o the online audio and video market;
o the e-commerce market; o the asset recovery market; and
o the online auction market.
In the online audio and video market, MaxPlanet competes with, among
others, Navarre Corporation, a major distributor of music, software, interactive
CD-ROM products and DVD videos, which sells to major music and software
retailers, wholesalers and rackjobbers. Through its majority owned NetRadio
Corporation, Navarre owns and operates NetRadio Network, an audio content
broadcaster on the Internet, which is in direct competition with MaxPlanet's
MaxRadio Corp.
In the online furniture market, MaxPlanet primarily competes with,
among others, the following companies: BeHome.com, EthanAllen.com, EZshop.com,
Furniture.com, FurnitureFind.com, FurnitureOnline.com, GoodHome.com, Living.com,
and Homeportfolio.com.
In the Spanish Internet Portal Community Provider market, MaxPlanet
primarily competes with, among others, the following companies: Yahoo!, Latin
America Online, StarMedia.com, Lycos / Terra Networks, Quepasa.com, Yupi.com and
Ole.com.
In the web hosting providers and online community markets, MaxPlanet
primarily competes with, among others, Globix, Global Crossing, Exodus, GTE,
UUNET, Frontier, Excite.com, Yahoo!/GeoCities, and America Online.
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In the online jewelry retail business, MaxPlanet primarily competes
with, among others, Adornis.com, Ashford.com, Miadora.com, NiemanMarcus.com,
Zale.com and Tiffany.com.
The online E-commerce market is new, rapidly evolving and intensely
competitive, and MaxPlanet expects that competition will further intensify in
the future. Barriers to entry are minimal, and current and new competitors can
launch new web sites at a relatively low cost. MaxPlanet competes and intends to
compete with a variety of companies, including:
o online vendors of furniture, auctions,
information/directories, food, vitamins & supplements, music,
music videos and other entertainment related products;
o online vendors of CDs, DVDs, video movies, books and other
related products;
o online service providers which offer MP3 music products
directly to or in cooperation with other retailers;
o other retailers that offer music products, including mass
merchandisers, superstores and consumer electronic stores; and
o non-store retailers such as music clubs. Many of these
traditional retailers also support dedicated websites, which
would compete directly with MaxPlanet.
Sales and Marketing
MaxPlanet's sales and marketing efforts are focused on increasing
traffic on MaxPlanet's websites, sales of furniture and jewelry and increasing
the customer base of MaxPlanet's Internet development business. MaxPlanet
currently markets the merchandise that it retails and the services that it
provides through its network of Internet websites and intends to develop a sales
and marketing force or, in the alternative, to outsource marketing efforts to
direct marketers.
MaxPlanet supplements its direct sales efforts with a variety of
marketing initiatives, which include, among other things, public relations
activities, telemarketing, online advertising, print advertisements in industry
periodicals and trade shows.
Insurance
MaxPlanet maintains Worker's Compensation Insurance, Commercial
Property Insurance and Commercial General Liability Insurance, and is in the
process of securing Directors and Officers Insurance. MaxPlanet has obtained a
$500,000 "key man" life insurance policy on the life of Israel Goldreich and
intends to obtain a $500,000 "key man" life insurance policy on the life of
Henry Val.
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Intellectual Property
MaxPlanet has applied for copyright/trademark/patent protection, as the
case may be, in the United States for MaxPlanet, WebPhoneBook, CustomLiving,
MAX!, and "The First Internet Ambassador," and has applied for
copyright/trademark protection of "MaxPlanet" in Japan. Although MaxPlanet holds
or has the exclusive and non-exclusive use of various trademarks and copyrights
associated with its MaxPlanet brand, CustomLiving, MundoMaximo and other
properties, such protection does not provide assurance that unauthorized use
will not occur. MaxPlanet does not intend to apply for copyright protection for
its music recordings because MaxPlanet believes that such copyright would not
offer significant protection.
Revenues in the music industry are often adversely affected by the
unauthorized reproduction of recordings for commercial sale, commonly referred
to as "piracy," and by home taping and downloading for personal use. In the
event that another party infringes on a copyright or trademark covering
MaxPlanet's products, the enforcement of such rights is at the option of
MaxPlanet. Parties may be issued copyrights or trademarks that may prevent the
sale of MaxPlanet's products or require MaxPlanet to acquire licenses or pay
royalties to such parties.
MaxPlanet intends to begin reserving and placing into escrow 5% of all
sales that it derives from master recordings after purchasing such master
recordings to offset claims that may be made against MaxPlanet relating to the
master recordings. MaxPlanet intends to review whether such 5% reserve is
sufficient on a periodic basis and may, based upon such periodic reviews,
increase or decrease such amount based upon the dollar amount of claims it
derives from its master recordings.
For the year ended March 31, 2000, MaxPlanet generated no net sales
from sales of master recordings, and therefore no funds were reserved and
escrowed relating to sales of master recordings. MaxPlanet cannot provide
assurance that such 5% reserve will be sufficient to offset claims made against
MaxPlanet related to the master recordings. Should MaxPlanet not prevail in any
dispute concerning the right to publish and distribute any master recording that
may be subject to dispute, MaxPlanet, its business and its business prospects
may be adversely and materially affected, and in certain cases, MaxPlanet may
not be able to license, nor be able to afford to license, these master
recordings.
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RISK FACTORS
The following risk factors, as well as the other information contained
in this Form 10-KSB, should be carefully considered. An investment in
MaxPlanet's common stock involves a high degree of risk and may not be
appropriate for investors who cannot afford to lose their entire investment.
MAXPLANET HAS A HISTORY OF LOSSES AND EXPECTS FUTURE LOSSES.
MaxPlanet has a history of net losses. MaxPlanet and its operating
subsidiaries, Valentino Salotti, Mundo Maximo, Maxim Auction, Trident, MaxPlanet
Radio, Ultra Web and Luxr, from which MaxPlanet receives substantially all of
its revenues and net income, have incurred net losses since inception. MaxPlanet
incurred net losses of $1,148,314 and $906,910, respectively, for the fiscal
years ended March 31, 2000 and 1999. Given that MaxPlanet expects to continue to
incur significant sales, operating and marketing expenses, MaxPlanet will need
to generate significant revenues to achieve profitability. Even if MaxPlanet
achieves profitability, MaxPlanet may not maintain or increase profitability on
a quarterly or annual basis in the future. If revenues grow slower than
anticipated, or if operating expenses exceed expectations or cannot be adjusted
accordingly, MaxPlanet's business, results of operations and financial condition
will be adversely affected. MaxPlanet cannot provide assurance that it will be
able to generate sufficient revenues from its operations or its websites to
achieve or sustain profitability in the future. See "Management Discussion and
Analysis or Plan of Operation" beginning on page 33.
MAXPLANET'S INABILITY TO REPLACE OR OFFSET LOST SALES AND ACQUIRE
BUSINESSES WOULD ADVERSELY AFFECT MAXPLANET'S RESULTS OF OPERATIONS.
MaxPlanet intends to increase its sales by:
o soliciting prospective acquisitions,
o soliciting new business customers,
o generating increased sales from existing customers (including
increases in the number of Internet sites serviced),
o promoting MaxPlanet's Internet customer service capabilities
to third party companies, and
o acquiring businesses.
If MaxPlanet is unable to replace or offset lost sales or to increase
sales and acquire businesses, MaxPlanet's results of operations will be
materially adversely affected. No assurances can be given that MaxPlanet will be
able to replace sales losses from its sites or acquire businesses with
sufficient revenues to sustain MaxPlanet's growth. See "Management Discussion
and Analysis or Plan of Operation" on page 33.
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ANY ACQUISITIONS THAT MAXPLANET UNDERTAKES COULD BE DIFFICULT TO
INTEGRATE, DISRUPT MAXPLANET'S BUSINESS, DILUTE SHAREHOLDER VALUE AND
ADVERSELY AFFECT MAXPLANET'S BUSINESS.
MaxPlanet may acquire or make investments in complementary businesses,
technology, services or products if appropriate opportunities arise. These
acquisitions and investments could disrupt MaxPlanet's ongoing business,
distract management and employees and increase expenses. From time to time,
MaxPlanet has had discussions with companies regarding acquiring, or investing
in, their businesses, products, services or technologies. MaxPlanet may not be
able to identify suitable acquisition or investment candidates and, even if
MaxPlanet does identify suitable candidates, MaxPlanet may not be able to make
such acquisitions or investments on commercially acceptable terms. If MaxPlanet
acquires a company, MaxPlanet could have difficulty in assimilating that
company's personnel, operations, technology and software and the key personnel
of the acquired company may decide not to work for MaxPlanet. If MaxPlanet makes
other types of acquisitions, MaxPlanet could have difficulty integrating the
acquired products, services or technologies into MaxPlanet's operations. These
difficulties could disrupt ongoing business, distract management and employees,
increase expenses and adversely affect results of operations. MaxPlanet may also
incur indebtedness or issue equity securities to pay for any future
acquisitions. The issuance of equity securities could be dilutive to existing
shareholders.
MAXPLANET'S LIMITED OPERATING HISTORY MAKES FUTURE RESULTS DIFFICULT TO
PREDICT.
MaxPlanet began conducting business on the Internet with its launch of
its MaxPlanet.com website in December 1998 and its Mundomaximo.com website in
January 1999. Accordingly, there is limited operating history upon which to base
an evaluation of MaxPlanet's business prospects and detailed period-to-period
comparisons of its financial results cannot be relied upon for accurate
projections of future performance. MaxPlanet's business prospects must therefore
considered in light of the risks, expenses and difficulties frequently
encountered by newly emerging companies, particularly companies in new and
rapidly evolving markets such as the electronic commerce market. These risks
include:
o an evolving and unpredictable business model;
o the ability to manage growth;
o the ability to continue to develop and extend the "MaxPlanet"
brand;
o the ability to anticipate and adapt to a developing market;
o acceptance by customers of MaxPlanet's Internet products,
services, music genres, auctions and excess merchandise sold
at such auctions;
o the ability to effectively integrate the technology and
operations or any other acquired businesses or technologies
with MaxPlanet's operations;
o dependence upon the level of website traffic activity;
o development of equal or superior Internet products and
services by competitors;
o dependence on vendors for merchandise;
o the ability to successfully enhance and distribute products;
o the ability to successfully implement its marketing
strategies;
o dependence for certain services; and
o the ability to identify, attract, retain and motivate
qualified personnel.
To address these risks, MaxPlanet must, among other things, continue to
expand its vendor channels and buyer resources, increase traffic to its
websites, maintain its customer base and attract significant numbers of new
customers, respond to competitive developments, implement and execute
successfully its business strategy and continue to develop and upgrade its
technologies and customer services. There can be no
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assurance that MaxPlanet will be successful in addressing these risks. See
"Description of Business," beginning on page 6.
MAXPLANET'S BUSINESS WILL BE ADVERSELY AFFECTED IF MAXPLANET IS UNABLE
TO SAFEGUARD THE SECURITY AND PRIVACY OF CUSTOMERS' FINANCIAL DATA.
A significant barrier to e-commerce and online communications has been
the need for secure transmission of confidential information over the Internet.
Internet usage could decline if any well-publicized compromise of security
occurred, whether or not such compromise of security is related to MaxPlanet.
MaxPlanet may incur significant costs to protect against the threat of security
breaches or to alleviate problems caused by such breaches. MaxPlanet also
retains on its premises personal financial documents that MaxPlanet receives
from customers and prospective customers. These documents are highly sensitive
and if a third party were to misappropriate MaxPlanet's users' personal
information, users could possibly bring legal claims against MaxPlanet.
MaxPlanet cannot assure that its privacy policy will be deemed sufficient by
MaxPlanet's prospective customers or any laws or regulations governing privacy
which may be adopted in the future.
MAXPLANET HAS LIMITED EXPERIENCE AS A WHOLESALE AND RETAIL DISTRIBUTOR OF
MUSIC PRODUCTS.
Prior to the creation of the domain MaximMusic.com in November 1998,
MaxPlanet's current management had no experience in the sale and distribution of
recorded music. MaxPlanet gained substantial knowledge and experience in the
sale and distribution of pre-recorded music as a result of the formation and
operation of MaxPlanet Radio. MaxPlanet cannot provide assurance that the
inexperience of its management in this line of business will not have a material
adverse effect on its operations.
MAXPLANET IS DEPENDENT UPON ITS AFFILIATES AND DISTRIBUTORS FOR SALES OF
MAXPLANET'S PRODUCTS.
Though MaxPlanet anticipates that it will generate sales through
advertising, MaxPlanet expects that a material portion of its sales will
continue to be made through affiliated and unaffiliated distributors. If
MaxPlanet is not successful in signing distribution agreements with affiliates
and distributors, MaxPlanet's ability to sell its products may be materially
adversely affected. Affiliates and distributors generally offer products of
several different companies, including products that may compete with
MaxPlanet's products. Typically, agreements with affiliates and distributors are
terminable at will. The termination by any affiliate or distributor of their
relationship with MaxPlanet may have a material adverse effect on MaxPlanet's
future results of operations.
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MAXPLANET PURCHASES SUBSTANTIALLY ALL OF THE PRODUCTS THAT IT SELLS
FROM AFFILIATES.
MaxPlanet purchases substantially all of the products it sells from
affiliated parties, including its purchases of Valentino Salotti furniture from
Tradeway Upholstery, Inc. While MaxPlanet has identified several furniture
manufacturers located in the Far East, the United States and Canada that
MaxPlanet believes to be capable of reproducing Valentino Salotti's products at
a reasonable cost, MaxPlanet has not entered into negotiations or production
contracts with any of these companies. Since Valentino Salotti purchases all of
the furniture products that it sells from Tradeway, of which Isaak Val, the
President and a director of MaxPlanet, is the President and a holder of 100% of
the outstanding equity securities, Valentino Salotti's agreement with Tradeway
is not necessarily on the same or equivalent terms as such an agreement would
have been if it had been negotiated with an unrelated party. Any future
modifications to its agreement with Tradeway would be negotiated on a similar
basis. MaxPlanet cannot assure that there will be no future modifications to its
existing agreement with Tradeway.
MAXPLANET IS DEPENDENT ON SALES OF FURNITURE THROUGH VALENTINO SALOTTI.
For the fiscal year ended March 31, 2000, substantially all of
MaxPlanet's revenues were derived from its 90% owned subsidiary, Valentino
Salotti. In the year ended March 31, 2000, MaxPlanet recognized revenue of
approximately $748,592 as a result of the acquisition of Valentino Salotti. If
Valentino Salotti experiences a significant reduction in sales, such a reduction
would adversely affect MaxPlanet's Results of Operations. See "Description of
Business - Valentino Salotti, CustomLiving.com: Wholesale and Retail Furniture
Sales; Online Furniture Catalog." on page 8.
MAXPLANET'S SALES ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.
Most products offered by MaxPlanet are related to entertainment,
information and E-commerce. The sales of entertainment-related products are
subject to various factors including, without limitation:
o the popularity of the brands;
o the types of sites and links;
o genres of music and recording artists;
o information resources; and
o advertising budget constraints.
Popularity of brands, styles, genres of music and recording artists may
fluctuate greatly and irregularly and adversely affect the sales of products and
advertising revenues of certain brands, artists, types of music and furniture.
To address these risks, MaxPlanet believes that it must, among other things:
o expand its customer base;
o successfully implement its business, advertising and marketing
strategies;
o continue to develop its websites and transaction-processing
systems;
o provide superior customer service;
o respond to competitive developments and changing or emerging
trends in the entertainment, information and music industries;
and
o attract and retain qualified personnel.
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MaxPlanet cannot provide assurance that (a) prevailing popular
preferences for certain brands, styles, artists and types of entertainment will
remain relatively constant or not fluctuate significantly, (b) MaxPlanet can
identify and respond to and capitalize on changing or emerging Internet industry
trends, or (c) sales of MaxPlanet's products will not be adversely affected by
such trends and MaxPlanet's failure to adequately respond to such trends. See
"Description of Business," beginning on page 6.
MAXPLANET'S RESERVES FOR RETURNS OF PRODUCTS MAY PROVE INADEQUATE AND
THUS MAY ADVERSELY AFFECT MAXPLANET'S RESULTS OF OPERATIONS.
In accordance with industry practice, MaxPlanet's music products are to
be sold on a return basis, estimated to be approximately 25% of sales, and
MaxPlanet intends to establish reserves for returns of finished products in
accordance with such industry standards. An unanticipated increase in returns
could result in MaxPlanet's reserves proving inadequate, which could adversely
affect MaxPlanet's results of operations and profits. MaxPlanet cannot provide
assurance that it will be able to generate sufficient revenues from successful
products and music releases to cover the costs of unsuccessful products and
music releases.
MAXPLANET WILL REQUIRE ACCESS TO LIBRARIES OF MUSIC RECORDING MASTERS,
BUT MAXPLANET IS NOT PRESENTLY INSURED FOR CASUALTIES IT MAY CAUSE TO
SUCH MUSIC RECORDING MASTERS.
MaxPlanet plans to be engaged in the audio and video digitizing,
downloading and recording industry and will be highly dependent upon access to
libraries of music recording masters. MaxPlanet does not presently have an
insurance policy covering casualties to libraries of music recording masters,
though MaxPlanet does not own or access any libraries of music recording masters
at this time. MaxPlanet intends to obtain such insurance as soon as practicable.
MaxPlanet cannot provide assurance that such insurance will be obtained, that
MaxPlanet can obtain such insurance, that MaxPlanet can maintain such insurance
at a cost that is acceptable to MaxPlanet, or that such insurance will cover all
casualties that the libraries of music recording masters may incur. MaxPlanet
expects to obtain such insurance prior to offering its users direct access to
such recording masters through MaxPlanet's servers.
MAXPLANET'S EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL
TO MAXPLANET'S BUSINESS, AND THE LOSS OF ANY OF THESE OFFICERS OR KEY
PERSONNEL WOULD LIKELY HAVE AN ADVERSE AFFECT ON MAXPLANET'S BUSINESS.
MaxPlanet's future success depends to a significant extent on the
continued services of its senior management and other key personnel,
particularly the personal efforts and abilities of three executive officers,
Henry Val, the Chief Executive Officer, Isaak Val, the President, and Israel
Goldreich, the Vice-President and Chief Operating Officer of MaxPlanet. The loss
of the services of Henry Val, Isaak Val or Israel Goldreich could have a
materially adverse effect on MaxPlanet's business and operations. Henry Val and
Israel Goldreich have each separately entered into employment agreements with
MaxPlanet that expire on December 31, 2010. MaxPlanet has obtained a $500,000
"key man" term life insurance policy on the life of Israel Goldreich and intends
to obtain a $500,000 "key man" life insurance policy on the life of Henry Val.
See "Executive Compensation - Employment Agreements, Termination of Employment
and Change in Control Arrangements" beginning on page 43 for detailed
information on MaxPlanet's key personnel.
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MaxPlanet's ability to provide web development services is dependent
upon MaxPlanet's ability to employ qualified personnel. The loss of any one or
more of MaxPlanet's Internet developers could have a materially adverse impact
on MaxPlanet's ability to deliver saleable products to its customers via the
Internet.
MAXPLANET MAY NOT BE ABLE TO RECRUIT AND RETAIN THE PERSONNEL IT NEEDS TO
SUCCEED.
MaxPlanet's future success depends on its ability to continue to
attract, retain and motivate highly skilled employees, particularly with respect
to MaxPlanet's technical functions. Competition for personnel throughout the
industry is intense. MaxPlanet may be unable to retain its key employees or
attract, assimilate or retain other highly qualified employees in the future.
MaxPlanet has from time to time in the past experienced, and expects to continue
to experience in the future, difficulty in hiring and retaining employees with
appropriate qualifications. If MaxPlanet does not succeed in attracting new
personnel or retaining and motivating its current personnel, MaxPlanet's
business will be adversely affected.
MAXPLANET IS SUBJECT TO SIGNIFICANT CONTRACTUAL OBLIGATIONS TO CERTAIN
MEMBERS OF ITS MANAGEMENT.
MaxPlanet has entered into agreements with two principal executive
officers, Henry Val and Israel Goldreich, which provide that each officer will
receive a percentage of any capital raised by MaxPlanet, the value of any
acquisition by MaxPlanet, and MaxPlanet's pre-tax profits. MaxPlanet has also
entered into employment agreements with Henry Val and Israel Goldreich which
provide, among other things, for the grant of certain options to each of Henry
Val and Israel Goldreich. MaxPlanet has also entered into definitive option
agreements with Henry Val, Isaak Val and Israel Goldreich. See "Executive
Compensation - Employment Agreements, Termination of Employment and Change in
Control Arrangements," on page 43.
THE SUCCESS OF MAXPLANET'S BUSINESS MAY DEPEND UPON ITS ABILITY TO
OBTAIN AND MAINTAIN COPYRIGHT OR TRADEMARK PROTECTION FOR ITS BRAND,
PRODUCTS AND MUSIC COMPOSITIONS.
MaxPlanet's success may depend in substantial part on its ability to
obtain and maintain copyright or trademark protection for its brand, products
and music compositions in order to preserve the value of its recordings library
and to generate revenues from operations without infringing on the proprietary
rights of third parties. To the best of MaxPlanet's knowledge, MaxPlanet is not
currently the subject of any action regarding the ownership or the right to
market, reproduce and distribute any of its recordings. In certain instances,
MaxPlanet's rights to its recordings are not exclusive, and MaxPlanet is engaged
in licensing activities involving both the acquisition of rights to certain
master recordings and of compositions for its own projects, and the granting of
sub-licenses or rights to third parties to use of MaxPlanet's master recordings.
The availability on acceptable terms of such cross-licensing arrangements is
generally made possible by existing industry practices based on reciprocity.
Should such industry practices change, MaxPlanet cannot provide assurance that
it will be able to obtain licenses from third parties on terms satisfactory to
MaxPlanet or at all, and MaxPlanet's business, particularly with respect to
compilation products, could be materially adversely affected. See "Description
of Business - Intellectual Property" on page 15.
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MAXPLANET MAY BE SUBJECT TO CLAIMS BY THIRD PARTIES OF OWNERSHIP
INTERESTS IN CERTAIN MASTER MUSIC RECORDINGS PUBLISHED OR PURCHASED AND
SOLD BY MAXPLANET.
MaxPlanet may receive notices from third parties claiming a ownership
interests in certain master music recordings published or purchased by MaxPlanet
and sold through its affiliates or distributors, demanding, among other things,
that MaxPlanet immediately cease distributing these master recordings or, in the
alternative, demanding that MaxPlanet pay them royalties. MaxPlanet is prepared
to respond by providing these entities with information regarding the chain of
title to these recordings, and MaxPlanet may suspend the future release of
recordings until the matters are resolved. MaxPlanet cannot provide assurance
that these type of matters will be resolved to MaxPlanet's satisfaction, that
additional claims will not be brought against MaxPlanet in the future by other
parties or that any such claims will not be successful. If such a claim is
successful, MaxPlanet's business could be materially adversely affected. In
addition to any potential monetary liability for damages, MaxPlanet could be
required to obtain a license in order to continue to market the music
compositions in question or could be enjoined from enhancing or selling such
compositions if such a license were not made available to MaxPlanet on
acceptable terms. In the event that MaxPlanet should become involved in
litigation, such litigation could require significant financial and management
resources of MaxPlanet. MaxPlanet cannot provide assurance that its right to use
any master recordings will not be subject to a dispute, which may result in the
delay or MaxPlanet's inability to use or exploit particular master recordings or
which may require MaxPlanet to pay royalties that MaxPlanet may not be able to
afford. See "Description of Business - Intellectual Property," on page 15.
MAXPLANET IS SUBJECT TO GOVERNMENT REGULATIONS AND LEGAL UNCERTAINTIES
WHICH MAY ADVERSELY AFFECT OR OTHERWISE INHIBIT MAXPLANET'S ABILITY TO
OPERATE ITS BUSINESS.
MaxPlanet is subject, both directly and indirectly, to various laws and
regulations relating to its business. Due to the increasing popularity and use
of the Internet, it is possible that new laws and regulations may be adopted
with respect to the Internet which may restrict or otherwise inhibit MaxPlanet's
ability to do business via the Internet. Such laws and regulations may cover
issues such as user privacy, pricing, content, copyrights, distribution and
characteristics and quality of products and services. The growth and development
of the market for online commerce may prompt more stringent consumer protection
laws, which may impose additional burdens on companies conducting business
online. The enactment of any additional laws or regulations may impede the
growth of the Internet, which could, in turn, decrease the demand for
MaxPlanet's products and services and increase MaxPlanet's cost of doing
business, or which will otherwise have an adverse effect on MaxPlanet. The
applicability to the Internet of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes, libel and
personal privacy is uncertain and could expose MaxPlanet to substantial
liability. The laws of certain foreign countries provide the owner of
copyrighted products with the exclusive right to expose, through sound and video
samples, copyrighted items for sale to the public and the right to distribute
such products. Any such new legislation or regulation, or any application of
existing laws and regulations to the Internet, could have a material adverse
effect on MaxPlanet.
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MAXPLANET'S COMMON STOCK IS LISTED ON THE OTC BULLETIN BOARD, WHICH
PROVIDES A LIMITED MARKET AND SUBJECTS THE COMMON STOCK TO THE RISKS
ASSOCIATED WITH THE APPLICATION OF PENNY STOCK RULES.
MaxPlanet's common stock is quoted on the OTC Bulletin Board, an
NASD-sponsored and operated inter-dealer automated quotation system for equity
securities. As long as the common stock is traded on the OTC Bulletin Board, the
common stock is subject to certain penny stock rules adopted by the Securities
and Exchange Commission. The penny stock rules require a broker-dealer, prior to
a transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the SEC which provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction and monthly account statements showing
the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that, prior to a transaction in a penny
stock not otherwise exempt from the rules, the broker-dealer must make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. As long as MaxPlanet's common stock remains subject to the
penny stock rules, investors may find it more difficult to sell their shares of
common stock.
THE MARKET PRICE OF MAXPLANET'S COMMON STOCK MAY BE SIGNIFICANTLY
VOLATILE DUE TO DEVIATIONS IN RESULTS OF OPERATIONS FROM ANALYSTS'
ESTIMATES OR CHANGES IN THE MARKET OR THE ECONOMY.
There may be significant volatility in the market price of MaxPlanet's
common stock. Quarterly operating results of MaxPlanet, deviations in results of
operations from estimates of securities analysts, changes in general conditions
in the economy or the Internet services industry or other developments affecting
MaxPlanet, or its competitors, could cause the market price of MaxPlanet's
common stock to fluctuate substantially. The equity markets have, on occasion,
experienced significant price and volume fluctuations that have affected the
market prices for the securities of many companies. These fluctuations are often
unrelated to the operating performance of such companies and may adversely
affect the market price of MaxPlanet's common stock. The market price of
MaxPlanet's common stock could also be adversely affected by (a) critical or
negative statements or reports by brokerage firms, industry or financial
analysts or industry periodicals concerning MaxPlanet or its products, (b) the
advertising or marketing efforts of competitors or (c) other factors that could
affect consumer perception.
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MAXPLANET INTENDS TO UTILIZE THE INTERNET TO MARKET AND DISTRIBUTE ITS
PRODUCTS BUT MAXPLANET CANNOT GUARANTEE WHEN NECESSARY ENHANCEMENTS TO
MAXPLANET'S WEBSITES WILL BE COMPLETED AND SUCH WEBSITES WILL BE FULLY
FUNCTIONAL.
MaxPlanet has expended, and will continue to expend, capital resources
to upgrade MaxPlanet's Internet websites to market and distribute its products
over the Internet and to make its furniture, music and auction items available
for sale to customers. MaxPlanet has completed the first stage of the
development of its Internet websites, and anticipates completing the design and
development of its websites and having its websites available for full
commercial use prior to the end of the fiscal year ending March 31, 2001.
MaxPlanet cannot provide assurance that it will complete the enhancement of its
websites or that such sites will be fully functional by such time. The failure
of MaxPlanet's websites to be fully functional and permit the marketing,
ordering and sale of MaxPlanet's products on a wholesale and retail basis over
the Internet may substantially and adversely affect MaxPlanet's future business
prospects and its ability to expand and compete with other, larger corporations,
which currently sell, market and distribute similar products to consumers over
the Internet, several of which have significantly greater resources than
MaxPlanet. See "Description of Business - Competition," on page 13.
THE MARKET FOR MAXPLANET'S PRODUCTS AND SERVICES IS RAPIDLY CHANGING
AND MAXPLANET MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP NEW PRODUCTS OR
ENHANCE EXISTING PRODUCTS TO RESPOND TO THE DEMANDS OF THE MARKET.
The market for MaxPlanet's products and services is characterized by
rapidly changing technology, changing customer needs, frequent new product
introductions and evolving industry standards that may render existing products
and services obsolete. The life cycles of MaxPlanet's products are difficult to
estimate. MaxPlanet's growth and future financial performance will depend upon
its ability to enhance its existing products and to introduce new products that
meet dynamic customer requirements on a timely and cost-effective basis.
MaxPlanet cannot provide assurance that it will be successful in developing new
products or enhancing its existing products or that such new or enhanced
products will receive market acceptance or be delivered timely to the market.
MaxPlanet has experienced product development delays in the past and may
experience delays in the future.
MAXPLANET IS SUBJECT TO COMPETITIVE BUSINESS CONDITIONS.
MaxPlanet faces intense competition ranging from small regional
businesses to large international companies. MaxPlanet's ability to succeed will
depend on its ability to attract new brands, acquire new Internet sites and
content, talented artists or persons or companies who control existing libraries
of master recordings as well as the appeal of compositions in MaxPlanet's
existing library. MaxPlanet cannot provide assurance that it will be able to
compete successfully against current and future competitors. New technologies
and the expansion of existing technologies may also increase the competitive
pressures on MaxPlanet. Although MaxPlanet believes that its brand MaxPlanet is
new and unique, MaxPlanet cannot provide assurance that competitors possessing
greater financial resources and established distribution facilities will not be
able to develop products which directly compete with MaxPlanet's products and
offer them at substantially lower prices than MaxPlanet is able to offer. See
"Description of Business - Competition," on page 13.
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MAXPLANET'S BUSINESS IS SUBJECT TO SEASONAL VARIATIONS AND DELAYS IN
BRINGING PRODUCTS TO MARKET MAY ADVERSELY AFFECT MAXPLANET'S RESULTS OF
OPERATIONS.
MaxPlanet's results of operations and those of its Valentino Salotti
subsidiary are subject to seasonal variations and by the timing of holidays. In
accordance with industry practice, MaxPlanet records revenues for sales of music
products, except those related to telemarketing C.O.D. transactions, when such
products are shipped to retailers. Companies in the music industry usually
experience a decline in revenues and net income in January and February, due in
significant part to increased purchases of products by retailers prior to
December in anticipation of holiday sales. If planned releases of music masters
products are delayed beyond the peak holiday season, MaxPlanet's operating
results could be materially adversely affected. Consequently, MaxPlanet's
results of operations may not meet the expectations of securities analysts and
investors, in which case the price of MaxPlanet's common stock would likely be
materially adversely affected.
MAXPLANET'S BUSINESS SUCCESS IS DEPENDENT UPON THE CONTINUED GROWTH IN
USE OF THE INTERNET.
MaxPlanet's future success is substantially dependent upon continued
growth in the use of the Internet and the Web in order to support the sale of
advertising and products on MaxPlanet's online media properties. Rapid growth in
the use of and interest in the Internet and the Web is a recent phenomenon.
MaxPlanet cannot provide assurance that communication or commerce over the
Internet will become more widespread or that extensive content will continue to
be provided over the Internet. The Internet may not prove to be a viable
commercial marketplace for a number of reasons, including lack of acceptable
security technologies, potentially inadequate development of the necessary
infrastructure, such as a reliable network backbone, or timely development and
commercialization of performance improvements, including high speed modems. To
the extent that the Internet continues to experience significant growth in the
number of users and level of use, there can be no assurance that the Internet
infrastructure will continue to be able to support the demands placed upon it by
such potential growth or that the performance or reliability of the Web will not
be adversely affected by this continued growth. The Internet could lose its
viability due to delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet activity, or due to
increased governmental regulation. Changes in or insufficient availability of
telecommunications services to support the Internet also could result in slower
response times and adversely affect usage of the Web and MaxPlanet's online
media properties. If use of the Internet does not continue to grow, or if the
Internet infrastructure does not effectively support growth that may occur,
MaxPlanet's business, operating results and financial condition would be
materially and adversely affected.
MAXPLANET IS SUBJECT TO RISKS ASSOCIATED WITH BRAND DEVELOPMENT.
MaxPlanet believes that establishing and maintaining the "MaxPlanet"
brand is a critical aspect of its efforts to attract and expand its Internet
audience and that the importance of brand recognition will increase due to the
growing number of Internet sites and the relatively low barriers to entry.
Promotion and enhancement of the "MaxPlanet" brand will depend largely on
MaxPlanet's success in providing high quality products and services, which
cannot be assured. If consumers do not perceive MaxPlanet's existing products
and services to be of high quality, or if MaxPlanet introduces new products and
services or enters into new business ventures that are not favorably received by
consumers, MaxPlanet will be unsuccessful in promoting and maintaining its
brand, and will risk diluting its brand and decreasing the attractiveness of its
audiences to advertisers. In order to attract and retain Internet users and to
promote and maintain the "MaxPlanet" brand in response to competitive pressures,
MaxPlanet may find it necessary to increase substantially its financial
commitment to creating and maintaining a distinct brand loyalty among consumers.
If MaxPlanet is unable to
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provide high quality products and services or otherwise fails to promote and
maintain its brand, or if MaxPlanet incurs excessive expenses in an attempt to
improve its products and services or promote and maintain its brand, MaxPlanet's
business, operating results and financial condition will be materially and
adversely affected.
MAXPLANET MUST RELY ON ADVERTISING REVENUES AND IS UNCERTAIN AS TO THE
SUCCESS OF THE ADOPTION OF THE INTERNET AS AN ADVERTISING MEDIUM.
MaxPlanet derives substantially all of its revenues from the sale of
advertisements on its Web pages under short-term contracts. Most of MaxPlanet's
advertising customers have only limited experience with the Web as an
advertising medium, have not devoted a significant portion of their advertising
expenditures to Web-based advertising and may not find such advertising to be
effective for promoting their products and services relative to traditional
print and broadcast media. MaxPlanet's ability to generate significant
advertising revenues will depend upon, among other things:
o acceptance of the Web by advertisers as an effective and
sustainable advertising medium;
o the development of a large base of users of MaxPlanet's
services possessing demographic characteristics attractive to
advertisers; and
o the ability of MaxPlanet to develop and update effective
advertising delivery and measurement systems.
No standards have yet been widely accepted for the measurement of the
effectiveness of Web-based advertising, and there can be no assurance that such
standards will develop sufficiently to support Web-based advertising as a
significant advertising medium. There can be no assurance that the advertisers
will determine that banner advertising, which MaxPlanet expect to comprise a
substantial portion of its revenues that it anticipates receiving from its
Internet websites, is an effective or attractive advertising medium, and there
can be no assurance that MaxPlanet will effectively transition to any other
forms of Web-based advertising should they develop.
IF MAXPLANET IS UNABLE TO ENHANCE ITS WEBSITES AND DEVELOP NEW MEDIA
PROPERTIES IT MAY NOT BE ABLE TO REMAIN COMPETITIVE.
To remain competitive, MaxPlanet must continue to enhance and improve
the responsiveness, functionality, features and content of MaxPlanet's main
website, as well as MaxPlanet's other branded media properties. MaxPlanet cannot
provide assurance that it will be able to successfully maintain competitive user
response times or implement new features and functions, such as greater levels
of user personalization, localized content filter and information delivery
through "push" methods, which will involve the development of increasingly
complex technologies.
MaxPlanet's future success also depends in part upon the timely
processing of website listings submitted by users and Web content providers,
which have increased substantially in recent periods. MaxPlanet has from time to
time experienced significant delays in the processing of submissions, and
further delays could have a material adverse effect on MaxPlanet's goodwill
among Web users and content providers, and on MaxPlanet's business. A key
element of MaxPlanet's business strategy is the development and introduction of
new MaxPlanet branded products targeted for specific interest areas, user groups
with particular demographic characteristics and geographic areas. MaxPlanet
cannot provide assurance that it will be successful in developing, introducing
and marketing such products or media properties or that such
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products and media properties will achieve market acceptance, enhance
MaxPlanet's brand name recognition or increase traffic on MaxPlanet's online
properties.
MaxPlanet depends substantially on third party efforts in the
development and operation of new media properties. The introduction of new media
properties also may be subject to delays that may negatively affect advertising
revenues and MaxPlanet's competitive position. Enhancements of or improvements
to MaxPlanet or new media properties may contain undetected errors that require
significant design modifications, resulting in a loss of customer confidence and
user support and a decrease in the value of MaxPlanet's brand name recognition.
Any failure of MaxPlanet to effectively develop and introduce these properties,
or failure of such properties to achieve market acceptance, could adversely
affect MaxPlanet's business, results of operations and financial condition.
THE MARKET FOR MAXPLANET'S PRODUCTS AND MEDIA PROPERTIES ARE DEVELOPING
AND MAXPLANET IS UNCERTAIN WHETHER MAXPLANET'S PRODUCTS AND MEDIA
PROPERTIES WILL BE ACCEPTED BY THE MARKET.
The markets for MaxPlanet's products and media properties have only
recently begun to develop, are rapidly evolving and are characterized by an
increasing number of market entrants who have introduced or developed
information navigation products and services for use on the Internet and the
Web. As is typical in the case of a new and rapidly evolving industry, demand
and market acceptance for recently introduced products and services are subject
to a high level of uncertainty and risk. Because the market for MaxPlanet's
products and media properties is new and evolving, it is difficult to predict
the future growth rate, if any, and size of this market. There can be no
assurance either that the market for MaxPlanet's products and media properties
will develop or that demand for MaxPlanet's products or media properties will
emerge or become sustainable. MaxPlanet's ability to successfully develop
additional targeted media properties depends substantially on use of
MaxPlanet.com to promote such properties. If use of MaxPlanet.com fails to
continue to grow, MaxPlanet's ability to establish other targeted properties
would be materially and adversely affected. If the market fails to develop,
develops more slowly than expected or becomes saturated with competitors, or if
MaxPlanet's products and media properties do not achieve or sustain market
acceptance, MaxPlanet's business, operating results and financial condition will
be materially and adversely affected.
MAXPLANET IS SUBJECT TO AN ONGOING INVESTIGATION BY THE SECURITIES AND
EXCHANGE COMMISSION AND MAY BE REQUIRED TO PAY MONETARY PENALTIES IN
THE EVENT OF A DETERMINATION THAT IS ADVERSE TO MAXPLANET.
MaxPlanet complied with an order from the Securities and Exchange
Commission in October 1998, which directed a private investigation into
questions relating to all offers and sales of securities and trading in
securities that may involve possible violations of Sections 17(a) and (b) of the
Securities and Exchange Act of 1933 and section 10(b) of the Securities and
Exchange Act of 1934. To the best of MaxPlanet's knowledge, MaxPlanet continues
to be a subject of this ongoing investigation by the Commission. An unfavorable
resolution of this action could have a significant adverse effect on MaxPlanet's
financial condition. See "Legal Proceedings" on page 28.
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ITEM 2. DESCRIPTION OF PROPERTY.
MaxPlanet's principal office is located at 4400 US Highway Route 9
South, Suite 2800, Freehold, New Jersey 07728. MaxPlanet leases this office from
Freehold Craig Road Partnership, a non-affiliate of MaxPlanet, pursuant to a
lease, dated July 28, 1998, which provides for MaxPlanet to pay monthly rent of
$3,510.94 for a term of 62 months beginning on August 3, 1998 and terminating on
September 30, 2003. MaxPlanet occupies approximately 2,800 square feet of office
space at this location.
Valentino Salotti currently occupies approximately 15,000 sq. ft. of
warehouse/showroom space at 248 Flushing Avenue, Brooklyn, New York 11223, which
it subleases from Tradeway Upholstery, Inc., an affiliate of MaxPlanet for a
term of five years beginning on May 8, 1999 and is renewed annually until such
time as either party notifies the other party in writing of its intention to
terminate the occupancy. Valentino Salotti does not pay rent or other charges to
Tradeway for the use and occupancy of the Brooklyn property.
MaxPlanet owns and utilizes a stand alone structure with approximately
6500 sq. ft. of office space and an adjacent parking lot at 14422 NW 7th Avenue,
Miami, Florida 33168, where MaxPlanet operates a data center and MaxPlanet's
development and sales departments. MaxPlanet purchased its Florida facilities
from A & J Capital, a principal shareholder of MaxPlanet, on October 19, 1999.
MaxPlanet owns the facility, and, at present, there are no liens on, or
mortgages associated with, the property. At present, there is no proposed
program to renovate, improve or develop the property. MaxPlanet, which is the
sole occupant of the facility, fully occupies the facility. Management believes
that the property is adequately insured. The annual realty tax on the property
is approximately $3,950. MaxPlanet has taken no depreciation on this property.
See "Certain Relationships and Related Transactions" on page 47.
MaxPlanet cannot provide assurance that the owners of the properties
from which MaxPlanet rents space will not demand increased rent from MaxPlanet
in the future in consideration for the use of these properties or that MaxPlanet
will not relocate its operations at substantial cost to MaxPlanet, if necessary,
which may adversely affect MaxPlanet's financial condition and results of
operations.
ITEM 3. LEGAL PROCEEDINGS
On August 3, 2000, MaxPlanet entered into a settlement agreement with
Maxnet Holdings, Inc., which, in July 1998, had filed a federal trademark
infringement lawsuit against MaxPlanet relating to MaxPlanet's prior use of the
name "Maxnet, Inc." Pursuant to the settlement agreement, MaxPlanet agreed to
discontinue the use of the Maxnet name and service mark in exchange for Maxnet
Holdings' dismissal of all claims against MaxPlanet. See "Recent Developments"
on page 2.
On March 16, 2000, MaxPlanet commenced an action by filing a claim in
the Superior Court of New Jersey, Monmouth County, against Michael Marsowicz
("Marsowicz"), the former President of Virtual Financial Network The principal
parties are MaxPlanet and Marsowicz. Marsowicz, as president of Virtual
Financial Network, entered into an Agreement with MaxPlanet to develop web
phonebook software. MaxPlanet paid Marsowicz and Marsowicz did not perform his
obligations under the agreement. Thereafter, MaxPlanet negotiated a contract to
buy common stock of Virtual Financial Network. MaxPlanet alleges that Marsowicz
breached this agreement as well. Marsowicz counter-claimed against MaxPlanet
alleging damages. Damages sought are not specified in the pleadings of either
party. MaxPlanet has entered a default against Marsowicz for failure to timely
file an answer. It is anticipated that Marsowicz will vacate the default, at
which time MaxPlanet expects that it will proceed with discovery.
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On January 28, 2000, Planet Entertainment Corp. ("Planet
Entertainment") commenced an action against MaxPlanet by filing a claim in the
Superior Court of New Jersey, Monmouth County. The principal parties are Planet
Entertainment, MaxPlanet and the principals of MaxPlanet. The parties entered
into an agreement whereby Planet Entertainment was to raise capital and invest
money in, and merge with, MaxPlanet. Planet Entertainment was also to sell
MaxPlanet song titles and provide MaxPlanet with the digital recording equipment
to put the titles on the Internet. Planet Entertainment is alleging that
MaxPlanet failed to buy the song titles as agreed. MaxPlanet alleges that Planet
Entertainment never delivered the equipment to put the song titles on the
Internet and only delivered a fraction of the song titles contracted for, which
were not even delivered timely. MaxPlanet also alleges that Planet Entertainment
did not provide the capital contribution agreed upon by the parties. Each of the
parties alleges damages incurred due to the other party's failure to perform.
The parties have filed initial pleadings, are presently exchanging answers to
interrogatories and documents, and expect to take depositions of parties and
witnesses after responding to interrogatories. Damages are not specified by
either party in the pleadings filed.
In October, 1998, MaxPlanet complied with an order from the Securities
and Exchange Commission that directed a private investigation into questions
relating to all offers and sales of securities and trading in securities that
may involve possible violations of Sections 17(a) and (b) of the Securities Act
of 1933, as amended, and Section 10(b) of the Securities and Exchange Act of
1934, as amended. To the best of MaxPlanet's knowledge, MaxPlanet continues to
be a subject of this ongoing investigation by the Commission. An unfavorable
resolution of this action could have a significant adverse effect on MaxPlanet's
financial condition. See "Risk Factors - MaxPlanet is Subject to an Ongoing
Investigation By the Securities and Exchange Commission and May Be Required to
Pay Monetary Penalties in the Event of a Determination that is Adverse to
MaxPlanet" on page 27.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the security holders during the
fourth quarter of the fiscal year ended March 31, 2000.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market For Shares
MaxPlanet's shares of common stock are traded on the Nasdaq OTC
Bulletin Board (the "OTC Bulletin Board") under the symbol "MXNT." Prior to
February 9, 2000, MaxPlanet was a non-reporting publicly traded company.
MaxPlanet was required to become a reporting company by the Securities and
Exchange Commission by the close of business on February 9, 2000 in accordance
with changes to Nasdaq Stock Market rules requiring all companies trading
securities on the OTC Bulletin Board to comply with the reporting company
requirements. Prior to such time, MaxPlanet was a non-reporting publicly traded
company. MaxPlanet's shares have had a limited market in the OTC Bulletin Board,
and OTC Bulletin Board quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions, and may not represent actual transactions.
The following is a summary of the high and low bid for each quarter for the last
two fiscal years:
Quarter Ending High Bid Low Bid
----------------------------- ------------- --------------
$ 3.687 $ 0.250
June 30, 1998
September 30, 1998 4.500 0.500
December 31, 1998 1.750 0.406
March 31, 1999 3.500 0.875
June 30, 1999 8.375 1.687
September 30, 1999 2.875 1.187
December 31, 1999 1.281 0.562
March 31, 2000 2.250 0.500
June 30, 2000 1.500 0.150
September 30, 2000 0.230 0.120
------------- --------------
30
<PAGE>
Holders of Record
As of October 27, 2000, there were approximately 1219 holders of record
of MaxPlanet's common stock.
Dividends and Dividend Policy
MaxPlanet has not declared or paid any dividends over the past two
fiscal years or in any subsequent period for which financial information may be
required.
MaxPlanet does not expect to declare or pay any dividends in the
foreseeable future, but instead intends to retain all earnings, if any, to
expand MaxPlanet's operations. The payment of dividends, if any, in the future
is within the discretion of the Board of Directors and will depend upon
MaxPlanet's earnings, if any, its capital requirements and financial condition,
and other relevant factors.
Description of Securities
MaxPlanet is authorized to issue 50 million shares of its common stock,
par value $.0001 per share, and 10 million shares of preferred stock, par value
$.0001 per share. As of October 27, 2000, there were 14,538,421 shares of
MaxPlanet common stock outstanding and no preferred stock outstanding. Holders
of common stock are entitled to dividends as and when declared by the Board of
Directors from funds legally available therefore and, upon liquidation,
dissolution or winding up of MaxPlanet, to share ratably in all assets remaining
after payment of all liabilities. Holders of common stock do not have preemptive
rights, and are entitled to one vote for each share of common stock held of
record by them. MaxPlanet's common stock is not redeemable and does not have any
conversion rights. All of the outstanding shares of MaxPlanet's common stock are
fully paid and non-assessable.
Recent Sales of Unregistered Securities
On February 24, 1999, MaxPlanet issued 100,000 shares of common stock
to the sole shareholder of Ultra Web, Inc., in connection with MaxPlanet's
acquisition of 80% of the equity securities of Ultra Web. MaxPlanet's issuance
of common stock to the sole shareholder of Ultra Web, Inc. Val was exempt from
registration requirements pursuant to Section 4(2) of the Securities Act and
Rule 506 of Regulation D of the Securities Act. See "Description of Business -
Acquisition of Ultra Web" on page 6.
On February 17, 1999, MaxPlanet sold 10% of the equity securities of
Valentino Salotti to A & J Capital for $200,000. As consideration for the
purchase of the securities, A & J Capital paid MaxPlanet $50,000 in cash at
closing and issued MaxPlanet a promissory note in the principal amount of
$150,000, payable on demand at any time following 12 months after the date of
issuance, at a rate of interest of 10% per annum. MaxPlanet's sale of equity
securities of Valentino Salotti to A & J Capital was exempt from registration
requirements pursuant to Section 4(2) of the Securities Act and Rule 504 of
Regulation D of the Securities Act, since MaxPlanet sold the shares to one
accredited, sophisticated investor who had conducted business with MaxPlanet on
prior occasions. See "Description of Business - Sale of 10% of Valentino
Salotti" on page 3.
On February 17, 1999, MaxPlanet issued 500,000 shares of common stock
to the sole shareholder of Trident Recovery Systems, Inc., in connection with
MaxPlanet's purchase of 100% of the equity securities of Trident. MaxPlanet's
issuance of common stock to Mr. Feinberg was exempt from registration
requirements
31
<PAGE>
pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D of
the Securities Act, since MaxPlanet issued shares to an accredited,
sophisticated investor who was familiar with MaxPlanet and transacted business
with MaxPlanet on prior occasions. See "Description of Business - Acquisition of
Trident Recovery Systems" on page 5.
On December 15, 1998, MaxPlanet issued an aggregate of one million
shares of MaxPlanet common stock to the shareholders of Virtual Financial
Network.com, Inc., in exchange for 100% of the outstanding equity securities of
Virtual Financial. MaxPlanet's issuance of common stock in connection with this
acquisition was exempt from registration requirements pursuant to Section 4(2)
of the Securities Act and Regulation D of the Securities Act, since MaxPlanet
issued shares to accredited, sophisticated investors who were familiar with
MaxPlanet and transacted business with MaxPlanet on prior occasions. See
"Description of Business - Acquisition of Virtual Financial" on page 5.
On December 15, 1998, in connection with MaxPlanet's acquisition of
Virtual Financial, MaxPlanet issued 100,000 shares of common stock to Reich
Brothers, Inc., of which Israel Goldreich, the Chief Operating Officer, Vice
President and a director of MaxPlanet, is the President, as payment to Reich
Brothers' for its service as a consultant. The transaction was consummated, and
the shares were issued to Mr. Goldreich, prior to Mr. Goldreich's service as a
director and officer of MaxPlanet. MaxPlanet's issuance of common stock to Reich
Brothers was exempt from registration requirements pursuant to Section 4(2) of
the Securities Act and Regulation D of the Securities Act. See "Description of
Business - Internet Developers: Virtual Financial" on page 9.
On October 28, 1998 and January 8, 1999, MaxPlanet issued and sold an
aggregate of 1,852,500 shares of common stock at $0.40 per share, for an
aggregate offering price of $741,000, to a group of four accredited investors,
including A & J Capital. MaxPlanet's issuance of common stock to the group was
exempt from registration requirements pursuant to Section 4(2) of the Securities
Act and Rule 504 of Regulation D of the Securities Act, since MaxPlanet issued
shares to accredited, sophisticated investors who were familiar with MaxPlanet
and transacted business with MaxPlanet on prior occasions.
On June 16, 1998, MaxPlanet issued 25,000 shares of MaxPlanet common
stock to Reich Brothers, Inc., a corporation wholly-owned by Israel Goldreich, a
director of MaxPlanet, in connection with MaxPlanet's acquisition of the domain
names, business plan and content of OneClass.com and 1Class.com online shopping
networks, which were subsequently sold to NPS International Corporation on
October 17, 2000. MaxPlanet's issuance of common stock to Reich Brothers was
exempt from registration requirements pursuant to Section 4(2) of the Securities
Act and Rule 506 of Regulation D of the Securities Act, since MaxPlanet issued
shares to an accredited, sophisticated investor who was familiar with MaxPlanet
and transacted business with MaxPlanet on prior occasions. See "Description of
Business - Acquisition of OneClass.com and 1Class.com" on page 4.
On May 8, 1998, MaxPlanet issued 500,000 shares of common stock to
Isaak Val, the President of MaxPlanet and of Valentino Salotti and the father of
Henry Val, who is the Chairman and Chief Executive Officer of MaxPlanet, in
connection with MaxPlanet's acquisition of 100% of the outstanding securities of
Valentino Salotti from Mr. Isaak Val. MaxPlanet's issuance of common stock to
Mr. Isaak Val was exempt from registration requirements pursuant to Section 4(2)
of the Securities Act and Rule 506 of Regulation D of the Securities Act, since
MaxPlanet issued shares to an accredited, sophisticated investor who was
familiar with MaxPlanet and transacted business with MaxPlanet on prior
occasions. See "Description of Business - Acquisition of Valentino Salotti" on
page 3.
On May 5, 6 and 12, 1998, MaxPlanet issued and sold 3,050,000 shares of
common stock at $0.06 per share, for an aggregate offering price of $183,000, to
a group of accredited investors. MaxPlanet's issuance of common stock to the
group was exempt from registration requirements pursuant to Section 4(2) of the
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Securities Act and Rule 504 of Regulation D of the Securities Act, since
MaxPlanet issued shares to accredited, sophisticated investors who were familiar
with MaxPlanet and had transacted business with MaxPlanet on prior occasions.
On September 15, 1997, MaxPlanet issued and sold 670,000 shares of
common stock at $0.50 per share to a group of accredited investors for
approximately $335,000 in cash. The issuance of common stock was exempt from
registration requirements pursuant to Section 4(2) of the Securities Act and
Rule 504 of Regulation D of the Securities Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion contains certain forward-looking statements
that are subject to business and economic risks and uncertainties, and our
actual results could differ materially from those forward-looking statements.
The following discussion of the financial condition and results of operations of
MaxPlanet should be read in conjunction with the consolidated financial
statements and notes thereto.
Results of Operations
MaxPlanet's historical operating results do not reflect present
business strategy and consequently are not indicative of the probability of
MaxPlanet's future success or failures.
Liquidity and Capital Resources
MaxPlanet's capital requirements have historically exceeded its cash
flow from operations as MaxPlanet has been building its business. As a result,
MaxPlanet has depended upon sales of its common stock and borrowings from third
parties to finance its working capital requirements.
At present, MaxPlanet has limited capital resources, pending completion
of the investment agreement between Mundo Maximo, Corp. and Triumph Global
Securities. MaxPlanet has implemented cost control measures that have enabled it
to continue to remain operational absent such immediate funding. See "Recent
Developments" on page 2.
In May 1998, MaxPlanet purchased all of the outstanding stock of
Valentino Salotti, Inc. for 500,000 shares of common stock and $50,000 in cash.
See "Description of Business - Acquisition of Valentino Salotti" on page 3.
In June 1998, MaxPlanet acquired research information and
business-plans for the Webphonebook/Portal - Community Internet project along
with WebPhoneBook.com and 17 other Domain Names from Intrasoft, Ltd. for $70,000
in cash. See "Description of Business - Acquisition of WebPhoneBook.com" on page
3.
In June 1998, MaxPlanet acquired the domain names, business plan, and
the content of OneClass.com and 1Class.com, which MaxPlanet subsequently sold to
NPS International Corporation on October 17, 2000, from Reich Brothers, Inc. The
shareholders of Reich Brothers, Inc. received $6000, 25,000 shares of MaxPlanet
common stock and an option to purchase 100,000 shares of MaxPlanet common stock
priced at $1.00 per share. See "Description of Business - Acquisition of
OneClass.com and 1Class.com" on page 4.
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<PAGE>
In December 1998, MaxPlanet purchased all of the outstanding stock of
Virtual Financial Network.com, Inc. in exchange for $50,000 in cash, an
aggregate of 500,000 shares of MaxPlanet common stock delivered at and after
closing and an additional 500,000 shares of MaxPlanet common stock to be issued
thereafter (the "Additional Shares"). The Additional Shares were issued by
MaxPlanet and are being held in escrow, subject to the outcome of litigation
between the parties. See "Legal Proceedings" on page 28.
On January 7, 1999, MaxPlanet formed Mundo Maximo, Corp. and its
Internet website www.MundoMaximo.com (MaxPlanet's official Spanish Portal
Internet site) in an attempt to capitalize on the growing global Hispanic online
market. MundoMaximo.com is intended to provide Hispanic Community news, products
and lifestyle.
In February 1999, MaxPlanet acquired 100% of the outstanding stock of
Trident Recovery Systems, Inc. for 500,000 shares of common stock. See
"Description of Business - Acquisition of Trident Recovery Systems, Inc." on
page 5.
In February 1999, MaxPlanet acquired 80% of the outstanding stock of
Ultra Web, Inc. for in exchange for 100,000 shares of MaxPlanet common stock.
MaxPlanet acquired Telephonebook.net, which was subsequently sold to NPS
International Corporation, as part of the acquisition of Ultra Web. See
"Description of Business - Acquisition Ultra Web" on page 6.
On October 19, 1999, MaxPlanet purchased property in Miami, Florida
with approximately 6500 sq. ft. of office space which MaxPlanet out of which
MaxPlanet operates its Internet development and technology department. See
Certain Relationships and Related Transactions on page 47.
MaxPlanet has commitments under leases covering its facility in New
Jersey. The minimum amounts of the total of lease payments are approximately
$42,000 per year for each of the next three years. MaxPlanet has also leased a
number of computer workstations for a period of three years.
On March 17, 2000, Mundo Maximo Corp. entered into an agreement with
Triumph Global Securities, Ltd. pursuant to which Triumph Global will provide
financial and consulting services to Mundo Maximo and act as its exclusive
advisor and placement agent in connection with Mundo Maximo's efforts to obtain
capital investment from outside sources. Mundo Maximo has paid Triumph Global an
aggregate of $95,000 in cash in connection with the agreement and Triumph Global
will receive the greater of (i) an additional $505,000, and (ii) 7% of the first
$10 million of the capital raised by Triumph Global, less $95,000, plus 4% of
the capital raised in excess of $10 million. MaxPlanet believes that its
agreement with Triumph Global will enable MaxPlanet to raise additional capital
to meet its projected financial needs. See "Recent Developments" on page 2.
In September 2000, MaxPlanet entered into an agreement to sell certain
domain names and Internet related assets to NPS International Corporation in
exchange for 3,500,000 shares of NPS common stock that is valued at
approximately $123,000. See "Recent Developments" on page 2.
On October 17, 2000, MaxPlanet consummated an agreement with NPS
International Corporation ("NPS") whereby the NPS is to lease its corporate
office from MaxPlanet and use the services of MaxPlanet's Internet development
and technology facility in Miami, Florida to generate users and customers to
purchase the products and services offered by NPS. The agreement is to provide
MaxPlanet revenues of $5,000 per month until September 2000 and is automatically
renewed for successive one year terms until one party delivers written notice of
termination to the other party of such party's intention to terminate the
agreement. NPS agreed to pay MaxPlanet a minimum quarterly fee of 100,000 shares
of NPS common stock for supporting NPS' growth plan. See "Recent Developments"
on page 2.
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<PAGE>
MaxPlanet has entered into employment agreements with its Chief
Executive Officer and Vice President through December 31, 2010. The agreements
provide for minimum compensation and bonuses as determined by the Board of
Directors. See "Executive Compensation - Employment Agreements, Termination of
Employment and Change in Control Arrangements" beginning on page 43.
MaxPlanet plans to continue to develop, contract or acquire the content
and services needed to appeal to the Internet User. Through contractual
agreement, acquisitions and Internet properties MaxPlanet plans to continue to
offer businesses, customers, advertisers and Users entertainment, shopping and
information online. By providing options for the Internet User MaxPlanet may be
positioned to capture a share of online purchases and advertising revenues.
MaxPlanet anticipates that in addition to sales of Internet development
services, furniture and products through E-Commerce MaxPlanet's source of
revenue will be fees paid by third parties for advertising their products and
services on www.MaxPlanet.com and its other Internet properties.
Year Ended March 31, 2000 Compared to Year Ended March 31, 1999
Operating Revenues. Operating revenues for the year ended March 31, 2000 were
$849,486 compared to $521,513 for the year ended March 31, 1999, a 62.9%
increase. The additional revenues resulted primarily from an increased amount of
sales of furniture sold by Valentino Salotti, Inc. of $231,829 and Internet
advertising and web hosting of $96,330.
Cost of Revenues. Cost of revenues for the year ended March 31, 2000 were
$1,427,257 compared to $841,739 for the year ended March 31, 1999, a 69.6%
increase. The additional costs resulted from an increase in cost of goods sold
associated with furniture sales of $196,772, and increases in consulting fees of
$140,602, payroll of $195,075 and Internet development costs of $42,509.
Sales and Marketing Expenses. Sales and marketing expenses were $251,960 for the
year ended March 31, 2000 compared to $63,054 in the year ended March 31, 1999,
a 298% increase. Increases in advertising, commissions, and public relations
costs totaling $125,709 primarily accounted for the difference.
General and Administrative Expenses. General and administrative expenses were
$377,794 for the year ended March 31, 2000 as compared to $105,280 for the year
ended March 31, 1999, an increase of $272,514 or 359%. Increases in insurance,
rent, utilities and other office expenses totaling $64,702 accounted primarily
for the increases.
Other Income (Expenses). Gains on sales of assets were $49,617 for the year
ended March 31, 2000 as compared to $193,598 in the year ended March 31, 1999.
The decrease was primarily from a result of a sale of 10% of the equity
securities of Valentino Salotti, Inc. resulting in a $188,500 gain in 1999.
Additional gains from the sales of marketable securities, totaling $44,519 were
achieved in 2000. In 1999, MaxPlanet recorded impairment losses of $627,300
primarily due to the valuation of a minority interest in an unrelated company of
$152,800 and valuation of the wholly-owned subsidiary interest of Virtual
Financial of $456,000. Interest and dividend income for the year ended March 31,
2000 was $30,748 compared to $19,596 in the year ended March 31, 1999.
35
<PAGE>
Liquidity and Capital Resources. Cash for the year ended March 31, 2000
decreased by $948,250. MaxPlanet's operating activities used cash of $919,015 in
the year ended March 31, 2000 primarily due to a net loss of $1,148,314. An
increase in accounts payable of $170,867 provided additional funds.
Cash for the year ended March 31, 1999 increased by $870,834. MaxPlanet's
operating activities used cash of $519,812. A significant non-cash offset to net
loss resulted from impairment losses totaling $627,300, whereas gains on sales
of assets of $193,598 are added to the net loss. Increases in accounts payable
and accrued expenses were offset by an increase in inventory by $156,607.
Cash provided by investing activities was $164,620 for the year ended March 31,
2000 and cash used in investing activities was $263,402 in the year ended March
31, 1999. In both years, cash was used to purchase marketable securities. Also
in both years, MaxPlanet purchased office furniture, equipment, and software
relating to Internet development.
Net cash used in financing activities was $193,855 for the year ended March 31,
2000. Proceeds from the issuance of common stock were $60,151 whereas loans to
related parties were $254,006.
Net cash provided by financing activities was $1,654,048 for the year ended
March 31, 1999 primarily from issuance of common stock of $1,074,862 and
proceeds from a note payable in the amount of $800,000. Loans to unrelated
parties totaled $221,300.
Balance sheet accounts. Cash at March 31, 1999 was $950,524 as compared to
$2,274 at March 31, 2000, a decrease of $948,250, due primarily from cash used
in operations of $919,015, amounts paid for property and equipment of $51,178
and loans to related parties of $254,006, less amounts received from sales of
marketable securities totaling $230,298.
Property and equipment increased by $272,597 primarily from the purchase of the
Company's building in Florida. Additional loans to related parties were paid
$254,338 during the year ended March 31, 2000. Deferred revenue increased during
the year ended March 31, 2000 by $209,536 relating to sales of marketable
security calls, which expire subsequent to March 31, 2000.
Note payable, other, of $800,000 at March 31, 1999 decreased to zero at March
31, 2000 due this note being converted into common stock. Additional
paid-in-capital increased by $1,337,490 to $3,330,454 at March 31, 2000 due to
the Company's purchases of assets using its common stock and the aforementioned
note conversion.
Year Ended March 31, 1999 Compared to Year Ended March 31, 1998
MaxPlanet and its subsidiaries did not have substantial business in the year
ended March 31, 1998. Therefore, the 1999 activity itself would approximate the
change between the years.
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ITEM 7. FINANCIAL STATEMENTS
See the financial statements listed in the accompanying index to the
Financial Statements on Page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Robert Rescigno, CPA ("Rescigno") resigned as the principal accountant
to audit the financial statements of MaxPlanet, effective April 3, 2000.
Rescigno, a solo practitioner, informed MaxPlanet that he was unable to continue
to work for MaxPlanet due to reasons unrelated to MaxPlanet.
The reports of Rescigno on MaxPlanet's financial statements for the
past two fiscal years did not contain an adverse opinion or a disclaimer of
opinion, nor were such reports qualified or modified as to uncertainty, audit
scope or accounting principles.
The decision to accept the resignation submitted by Rescigno was
approved by MaxPlanet's Board of Directors.
During the two most recent fiscal years and the subsequent interim
period preceding April 3, 2000, there were no disagreements with Rescigno on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to Rescigno's satisfaction,
would have caused Rescigno to make reference to the subject matter of the
disagreement in connection with its report.
During the two most recent fiscal years and the subsequent interim
period preceding April 3, 2000, Rescigno did not advise MaxPlanet of any matters
set forth in Item 304(a)(1)(v) of Regulation S-K.
On April 3, 2000, MaxPlanet appointed Ehrenkrantz, Sterling & Co. LLC
("Ehrenkrantz, Sterling") as the principal accountant to audit MaxPlanet's
financial statements.
During MaxPlanet's two most recent fiscal years and the subsequent
interim period preceding April 3, 2000, neither MaxPlanet (nor anyone acting on
MaxPlanet's behalf) consulted with Ehrenkrantz, Sterling regarding the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
MaxPlanet's financial statements, and neither a written report nor oral advice
was provided to MaxPlanet by Ehrenkrantz, Sterling on matters which would
require disclosure pursuant to Items 304(a)(1)(iv) and 304(a)(1)(v) of
Regulation S-K.
MaxPlanet filed a Current Report on Form 8-K with the Securities and
Exchange Commission on April 10, 2000, regarding the resignation of Rescigno and
the appointment of Ehrenkrantz, Sterling as the principal accountant to audit
the MaxPlanet's financial statements.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The current directors and executive officers of MaxPlanet are as follows:
--------------------------------------------------------------------------------
Name Age Position
--------------------------------------------------------------------------------
Henry Val1 40 Chief Executive Officer and
Chairman of the Board
Isaak Val1 64 President, Director and President of
Valentino Salotti
Israel Goldreich 35 Vice President, Acting Chief Operating
Officer, Secretary and Director
--------------------------------------------------------------------------------
(1) Henry Val is the son of Isaak Val.
A summary of the business experience and background of MaxPlanet's
current directors and executive officers is set forth below.
HENRY VAL has been the Chief Executive Officer and Chairman of the Board of
MaxPlanet since January 1998. Mr. Val has been with MaxPlanet on a full-time
basis since January 1998. Mr. Val has been associated with MaxPlanet since 1993,
serving primarily as a consultant from 1993 through 1998. Since 1990, Mr. Val
has been the Chief Executive Officer of the consulting company Alphamedia, Inc.
Mr. Val was appointed as interim President, and was elected a director, of NPS
International Corporation following the execution of MaxPlanet's agreement with
NPS International Corporation on October 17, 2000. See "Recent Developments" on
page 2.
ISAAK VAL has been with MaxPlanet, on nearly a full-time basis, since February
16, 1999. Mr. Val was elected President of MaxPlanet by the Board on April 8,
1999, and as a director of MaxPlanet on May 8, 1998. Mr. Val has been in the
custom furniture design, production and sales industry for 49 years. Mr. Val
founded Tradeway Upholstery, Inc. in 1991, has served as President of Tradeway
Upholstery since such time. Mr. Val is involved with Tradeway on a part-time
basis, with the preponderance of his time spent with the business of MaxPlanet
and its subsidiary, Valentino Salotti. Mr. Val founded Valentino Salotti in
1996, and has served as the President of Valentino Salotti since such time.
ISRAEL GOLDREICH has served as Vice-President, Acting Chief Operating Officer
and Secretary of MaxPlanet, and has been with MaxPlanet on a full-time basis,
since January 1, 1999. Mr. Goldreich was elected as a director of MaxPlanet on
March 25, 1998. Prior to joining MaxPlanet, Mr. Goldreich worked full time with
the consulting company Reich Brothers, and has served as the President of Reich
Brothers from November 1997 to present. Mr. Goldreich received his juris
doctorate degree from the Massachusetts School of Law in Andover, Massachusetts
in 1995. Mr. Goldreich has served as a director of NPS International Corporation
since October, 2000.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the any
person who, at any time during the last fiscal year, was an executive officer,
director or beneficial owner of more than 10% of any class of equity securities
of MaxPlanet registered pursuant to Section 12 (each a "reporting person") to
file reports regarding ownership of MaxPlanet's common stock with the SEC and to
furnish MaxPlanet with copies of all such filings. Based on a review of these
filings, MaxPlanet is aware that not all filings have been timely made.
MaxPlanet is aware that Isaak Val, Henry Val, Israel Goldreich and A & J
Capital, each of whom filed reports required by Section 16(a) with the SEC on
October 11, 2000, not all of which were untimely made, did not file all of their
reports in a timely manner.
Directors
All directors of MaxPlanet hold office until the next annual meeting of
shareholders or until their successors are elected and qualified. At present,
MaxPlanet's Bylaws provide for no fewer than one, nor more than five, directors.
There are currently three directors of MaxPlanet. The Bylaws permit the Board of
Directors to fill any vacancy, and directors who are elected by the Board to
fill vacancies may serve until the next annual meeting of shareholders or until
such director's successor is elected and qualified. Officers of MaxPlanet serve
at the discretion of the Board of Directors.
Directors' Compensation
Directors were not paid a fee for service as a director or committee
member during the fiscal year ended March 31, 2000.
Board Of Directors' Meetings And Committees
The Board of Directors met an aggregate of 115 times during the fiscal
year ended March 31, 2000. While MaxPlanet currently has no standing committees
of the Board, MaxPlanet expects to establish audit and compensation committees
in the fiscal year ending March 31, 2001.
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ITEM 10. EXECUTIVE COMPENSATION.
Summary Compensation Table. The Summary Compensation Table set forth
below shows certain compensation information for all individuals serving as
MaxPlanet's Chief Executive Officer or acting in a similar capacity during the
1999 fiscal year, the four most highly compensated executive officers, other
than the Chief Executive Officer, serving as executive officers at the end of
the 1999 fiscal year, and two highly compensated individuals not serving as
executive officers at the end of the 1999 fiscal year (collectively, the "Named
Executive Officers") for services rendered in all capacities during the fiscal
years ended March 31, 2000, March 31, 1999 and March 31, 1998. This information
includes base salaries, bonus awards and long-term incentive plan payouts, the
number of stock options and stock appreciation rights ("SARs") granted, and
certain other compensation, if any, whether paid or deferred.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
Awards
------
Securities
Underlying
Options/ All Other
Name and Principal Position Period Salary Bonus SARs (1) Compensation
--------------------------- ------ ------ ----- -------- ------------
<S> <C> <C> <C> <C> <C>
Henry Val Fiscal Year Ended 3/31/00 $ 30,000 ---- 150,000 ----
Chief Executive Officer & Chairman, Fiscal Year Ended 3/31/99 11,000 ---- 650,000 ----
2/98 to present Fiscal Year Ended 3/31/98 ---- ---- ---- ----
Isaak Val Fiscal Year Ended 3/31/00 7,200 ---- ---- $ 1,500
President, 4/99 to present Fiscal Year Ended 3/31/99 3,000 ---- ---- 1,500
Director, 2/99 to 3/99 Fiscal Year Ended 3/31/98 ---- ---- ---- ----
Israel Goldreich Fiscal Year Ended 3/31/00 52,000 ---- 150,000 89,000
Vice President, Acting Chief Fiscal Year Ended 3/31/99 9,000 ---- 650,000 14,700
Operating Officer, and
Secretary, 1/99 to present Fiscal Year Ended 3/31/98 ---- ---- ---- ----
</TABLE>
(1) Securities represent shares of MaxPlanet common stock underlying options.
40
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Option/SAR Grants in Last Fiscal Year. The following table shows
information regarding grants of stock options made to the Named Executive
Officers during the fiscal year ended March 31, 2000. The amounts shown as
potential realizable values are based on assumed annualized rates of stock price
appreciation of five percent and ten percent over the term of the options. These
potential realizable values are based solely on arbitrarily assumed rates of
appreciation required by applicable SEC regulations. Actual gains, if any, on
option exercises and common stock holdings are dependent on the future
performance of MaxPlanet's common stock and overall stock market conditions.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable
Value at Assumed
Annual Rates of
Number of Stock Price
Securities % of Total Appreciation for
Underlying Options/SARs Option Term
Options/SARs Granted to Exercise or Base Expiration ------------
Name Granted (1) Employees Price ($/Sh) Date 5% 10%
---- ----------- --------- ------------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C
Henry Val 150,000 50% $ 2.00 2010 0 0
Isaak Val ---- ---- ---- ---- ---- ----
Israel Goldreich 150,000 50% 2.00 2010 0 0
-----------------------
</TABLE>
(1) Securities represent shares of MaxPlanet common stock underlying options.
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Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values. The following table summarizes for each of the Named
Executive Officers the number of stock options, if any, exercised during the
fiscal year ended March 31, 2000, the aggregate dollar value realized upon
exercise, the total number of securities underlying unexercised options, if any,
held at March 31, 2000, and the aggregate dollar value of in-the-money,
unexercised options, if any, held at March 31, 2000. Value realized upon
exercise is the difference between the fair market value of the underlying stock
on the exercise date and the exercise or base price of the option. Value of
unexercised, in-the-money options at fiscal year-end is the difference between
the exercise or base price and the fair market value of the underlying stock on
March 31, 2000. The last sale price of MaxPlanet common stock on November 2,
2000 was $0.065. The values in the column "Value of Unexercised In-The-Money
Options/SARs at FY-End" have not been, and may never be, realized. The
underlying options have not been, and may not be, exercised, and actual gains,
if any, on exercise will depend upon the value of the underlying stock on the
date of exercise.
No options were exercised by the Named Executive Officers during the
2000 fiscal year. The following table sets forth information regarding the value
of unexercised options held by the named Executive Officers of MaxPlanet.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In the Money
Options/SARs at Options/SARs at
FY-End (1) FY-End (1)
---------- ----------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Henry Val 800,000 ---- ---- ----
Isaak Val ---- ---- ---- ----
Israel Goldreich 800,000 ---- ---- ----
</TABLE>
(1) Securities represent shares of MaxPlanet common stock underlying options.
42
<PAGE>
Employment Agreements, Termination of Employment and Change in Control
Arrangements
Isaak Val does not receive compensation for his service as President of
MaxPlanet and Valentino Salotti.
As compensation for services rendered to MaxPlanet by Henry Val,
MaxPlanet paid Henry Val a salary of $25,000 for the five months of employment
ended May 31, 1999. On January 1, 1999, MaxPlanet entered into an employment
agreement with Henry Val, which is to expire on December 31, 2010, unless
earlier terminated as provided in the agreement, which provides that Henry Val
will receive:
o an annual salary of $125,000 commencing June 1, 1999, with
annual increases during the following nine years of no less
than 10% per annum;
o 2.5% of all pre-tax profits recorded by MaxPlanet in
accordance with Generally Accepted Accounting Principles
("GAAP");
o the greater of:
o 2% of the value of any acquisition by MaxPlanet (as
computed by the purchase price plus the value of any
additional consideration paid in connection with such
acquisition); or
o 2% of the revenue reported by the acquired party in
its preceding fiscal year;
and
o 2.5% of any capital raised by MaxPlanet.
In the event that any portion of the consideration to be paid to Henry
Val in accordance with the above shall consist of publicly held securities, the
market price of these securities shall be used to determine its value, and the
value related to any option, warrant or right to purchase these securities shall
be determined by the Black-Scholes Model. At the sole option of Henry Val, any
compensation due under the agreement described above may be converted into
shares of MaxPlanet's common stock at a conversion price equal to the average
closing bid price for the common stock 30 days prior to any such acquisition or
capital funding. In the event of a change of control, Henry Val may resign as an
officer and employee of MaxPlanet, and all amounts due and owing for the term of
the agreement shall become due and payable. Henry Val waived 50% of his 1999
salary in exchange for options to purchase 150,000 shares of MaxPlanet common
stock at $2.00 per share, exercisable for a period of three years ending on
December 31, 2001.
Henry Val will also receive bonuses in amounts that the Board of
Directors may determine, at its sole discretion, from time to time, and, from
April 1, 1999 through the remainder of the term of Henry Val's employment
agreement, Henry Val will receive options to purchase up to 100,000 shares of
MaxPlanet common stock each year at the closing price per share of MaxPlanet's
common stock as of March 31 of each year.
At such time as MaxPlanet achieves a profitable year, as determined by
its independent accountants, Henry Val will receive
o options to purchase an additional 200,000 shares of
MaxPlanet's common stock each year at the closing price per
share of MaxPlanet's common stock as of March 31 of each year,
and
o an additional 5% of MaxPlanet's pre-tax profit for each year.
43
<PAGE>
In the event of a profitable year, Henry Val will have the option to
accept the additional 5% profit compensation
o as cash,
o in the form of shares of MaxPlanet's common stock, or
o in the form of options to purchase shares of MaxPlanet's
common stock, in an amount that is equal to double the amount
of cash compensation that Henry Val would otherwise be
entitled to receive in such an event, at a price per share
equal to the closing price per share of the common stock on
the last business day of such profitable fiscal year.
MaxPlanet has agreed to properly and timely register all of the shares
underlying the Employee Stock Plan and other such compensation plans.
The Board of Directors may, at its sole discretion, grant additional
compensation to Henry Val, and the Board will review Henry Val's salary
annually, and may, at its sole discretion, increase his salary and grant
additional bonuses to Henry Val. The Board may not reduce Henry Val's
compensation without his consent.
From January 1, 1999 through March 31, 2000, MaxPlanet paid Henry Val
approximately $41,000 pursuant to his employment agreement.
As compensation for services rendered to MaxPlanet by Israel Goldreich
during the five months of employment ended May 31, 1999, MaxPlanet paid Mr.
Goldreich a salary of $25,000 for such time. On January 1, 1999, MaxPlanet has
entered into an employment agreement with Israel Goldreich which is to expire on
December 31, 2010, unless earlier terminated as provided in the agreement, which
provides that Mr. Goldreich will receive:
o an annual salary of $100,000 commencing on June 1, 1999, with
annual increases during the following nine years of no less
than 10% per annum;
o 2.5% of all pre-tax profits recorded by MaxPlanet, in
accordance with Generally Accepted Accounting Principles
("GAAP");
o the greater of:
o 2% of the value of any acquisition by MaxPlanet (as
computed by the purchase price plus the value of any
additional consideration paid in connection with such
acquisition); or
o 2% of the revenue reported by the acquired party in
its preceding fiscal year;
and
o 2.5% of any capital raised for MaxPlanet.
In the event that any portion of such consideration shall consist of
publicly held securities, the market price of these securities shall be used to
determine value, and the value related to any option, warrant or right to
purchase these securities shall be determined by the Black-Scholes Model. At Mr.
Goldreich's option,
44
<PAGE>
such compensation may be converted into shares of
MaxPlanet's common stock at a conversion price equal to the average closing bid
price for the common stock 30 days prior to any such acquisition or capital
funding.
In the event of a change of control, Mr. Goldreich may resign as an
officer and employee of MaxPlanet, and all amounts due to Mr. Goldreich for the
term of the agreement will become immediately due and payable to Mr. Goldreich.
Mr. Goldreich waived 50% of his 1999 annual salary in exchange for options to
purchase 150,000 shares of MaxPlanet's common stock at $2.00 per share,
exercisable for a three year period ending on December 31, 2001.
Mr. Goldreich may also receive bonuses in such amounts as the Board of
Directors may determine, at its sole discretion, from time to time.
Mr. Goldreich will receive options to purchase up to 100,000 shares of
MaxPlanet's common stock each year exercisable at the closing price as of March
31 of each year. At such time as MaxPlanet achieves a profitable year, as
determined by its independent accountants, Mr. Goldreich will receive:
o options to purchase an additional 200,000 shares of
MaxPlanet's common stock each year at the closing price per
share of MaxPlanet's common stock as of March 31 of each year:
and
o an additional 5% of MaxPlanet's pre-tax profit for each year.
In the event of a profitable year, Mr. Goldreich will have the option
to accept the additional 5% profit compensation
o as cash,
o in the form of shares of MaxPlanet's common stock, or
o in the form of options to purchase shares of MaxPlanet's
common stock, with an aggregate value that is equal to double
the amount of cash compensation that Mr. Goldreich would
otherwise be entitled to receive in such an event, at a price
per share equal to the closing price per share of the common
stock on the last business day of such profitable fiscal year.
The Board of Directors may, at its sole discretion, grant additional
compensation to Mr. Goldreich, and the Board will review Mr. Goldreich's salary
annually, and may, at its sole discretion, increase his salary and grant
additional bonuses to Mr. Goldreich. The Board may not reduce Mr. Goldreich's
compensation without his consent.
From January 1, 1999 through March 31, 2000, MaxPlanet paid Mr.
Goldreich approximately $61,000 pursuant to his employment agreement.
MaxPlanet entered into option agreements with Messrs. Goldreich and
Isaak Val, pursuant to which each may purchase up to 500,000 shares of
MaxPlanet's common stock at an exercise price of $1.50 per share. All options
granted pursuant to these agreements are freely assignable. The agreements
provide that upon the filing of a registration statement by MaxPlanet, each of
Mr. Goldreich and Mr. Isaak Val are entitled to demand registration rights for
the shares issuable upon the exercise of such options. In the event that demand
registration or piggyback registration, as the case may be, is not accomplished
within three business days of the filing of a Registration Statement by
MaxPlanet, MaxPlanet shall be responsible for any loss in value and for any
legal fees incurred by Messrs. Goldreich and Isaak Val. MaxPlanet's results of
operations could be adversely affected, and its available cash could be
diminished, by MaxPlanet's obligation to register the shares issuable upon the
exercise of options by Messrs. Goldreich and Isaak Val.
45
<PAGE>
MaxPlanet generally grants stock options to employees and consultants
with an exercise price not less than the fair market value at the date of grant.
MaxPlanet accounts for stock option grants to employees in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and, accordingly, recognizes no compensation expense related to
option grants. In cases where MaxPlanet grants options below the fair market
value of the stock at the date of grant, the difference between the exercise
price and the fair market value is treated as compensation expense and amortized
over the vesting period of the option, if any. Stock options granted to
consultants and others instead of cash compensation are recorded based upon
management's estimate of fair value of the options or the related services
provided and expensed over the vesting period, if any.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of the date hereof, information
regarding ownership of MaxPlanet's Common Stock, by each person known by
MaxPlanet to be the beneficial owner of more than 5% of MaxPlanet's outstanding
Common Stock, by each director, by certain related shareholders, and by all
executive officers and directors of MaxPlanet as a group. All persons named
below have sole voting and investment power over their shares except as
otherwise noted.
<TABLE>
<CAPTION>
Number of Shares
Title of Class Name of Beneficial Owner Beneficially Owned Percent of Class (1)
--------------------- ------------------------------- ----------------------- ----------------------------------------
<S> <C> <C> <C>
Common Stock Henry Val (2) 5,245,708 36.08 %
Common Stock A & J Capital (3) 1,555,000 10.70
Common Stock Isaak Val (2) 501,000 3.44
Common Stock Israel Goldreich 274,205 1.89
Common Stock Directors - Total 6,020,913 41.41 %
--------------------- ------------------------------- ----------------------- ----------------------------------------
</TABLE>
(1) As of October 27, 2000, there were 14,538,421 shares of MaxPlanet's
common stock issued and outstanding.
(2) Henry Val, the Chief Executive Officer and Chairman of the Board of
MaxPlanet, is the son of Isaak Val, the President of MaxPlanet.
(3) A & J Capital is controlled by Eric Goudis.
46
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Valentino Salotti sells furniture that is produced exclusively by
Tradeway Upholstery, Inc. Valentino Salotti markets, and is a distributor of,
furniture produced by Tradeway. Valentino Salotti operates on a 20% gross margin
on sales of products that it purchases from Tradeway. Mr. Isaak Val, the
President and a director of MaxPlanet, owns, directly or beneficially, 100% of
the outstanding securities of Tradeway.
On October 17, 2000, MaxPlanet entered into an agreement with NPS
International Corporation, a New York corporation ("NPS"). The agreement
provides for NPS to lease its corporate office from MaxPlanet and use the
services of MaxPlanet's Internet development and production facility in Miami,
Florida to generate users and customers to purchase products and services
offered by NPS. MaxPlanet concurrently entered into an agreement with NPS to
sell MaxPlanet's 1class.com/oneclass.com and telephonebook.net business plans
and related domain names and certain other domain names to NPS in exchange for
3,500,000 shares of NPS common stock valued at approximately $123,000. Pursuant
to the agreement with NPS, following the execution of the agreement with NPS on
October 17, 2000, Henry Val, the Chief Executive Officer and Chairman of the
Board of MaxPlanet, was appointed interim President, and elected a director, of
NPS, and Israel Goldreich, the Vice President and a director of MaxPlanet, was
elected as a director of NPS. See "Recent Developments" on page 2.
On October 19, 1999, MaxPlanet purchased approximately 6500 square feet
of office space, located at 14422 NW 7th Avenue, Miami, Florida 33168, from A &
J Capital, a principal shareholder of MaxPlanet, which owns directly or
beneficially approximately 10.7% of the outstanding securities of MaxPlanet, in
exchange for 500,000 shares of MaxPlanet's common stock. MaxPlanet operates its
development and technology departments at this location. See "Market for Common
Equity and Related Stockholder Matters - Recent Sales of Unregistered
Securities," beginning on page 31.
On February 17, 1999, MaxPlanet sold 10% of the equity securities of
Valentino Salotti to A & J Capital for $200,000, in a sale that was accounted
for as a pooling-of-interests. As consideration for the purchase of the
securities, A & J Capital paid MaxPlanet $50,000 in cash at closing and issued
MaxPlanet a promissory note in the principal amount of $150,000, payable on
demand at any time following 12 months after the date of issuance, at a rate of
interest of 10% per annum. See "Market for Common Equity and Related Stockholder
Matters - Recent Sales of Unregistered Securities," beginning on page 31.
On October 28, 1998 and January 8, 1999, MaxPlanet issued and sold an
aggregate of 1,852,500 shares of common stock at $0.40 per share, for an
aggregate offering price of $741,000, to a group of four accredited investors,
including A & J Capital. MaxPlanet's issuance of common stock to the group was
exempt from registration requirements pursuant to Section 4(2) of the Securities
Act and Rule 504 of Regulation D of the Securities Act, since MaxPlanet issued
shares to accredited, sophisticated investors who were familiar with MaxPlanet
and transacted business with MaxPlanet on prior occasions. See "Market for
Common Equity and Related Stockholder Matters - Recent Sales of Unregistered
Securities," beginning on page 31.
On June 16, 1998, MaxPlanet issued 25,000 shares of MaxPlanet common
stock to Reich Brothers, Inc., a corporation wholly-owned by Israel Goldreich,
the Vice-President and a director of MaxPlanet, in connection with MaxPlanet's
acquisition of the domain names, business plan and content of OneClass.com and
1Class.com online shopping networks, which MaxPlanet subsequently sold to NPS
International Corporation on October 17, 2000. Mr. Goldreich was a director of
MaxPlanet at the time of the acquisition. See "Description of Business -
Acquisition of OneClass.com and 1Class.com" on page 4.
47
<PAGE>
On May 8, 1998, MaxPlanet issued 500,000 shares of common stock to
Isaak Val, the father of Henry Val, the President and Chief Executive Officer of
MaxPlanet, in connection with MaxPlanet's acquisition of 100% of the outstanding
securities of Valentino Salotti from Mr. Isaak Val. Mr. Isaak Val was the
principal shareholder of Valentino Salotti prior to the acquisition and
currently serves as the President of Valentino Salotti. Immediately prior to the
acquisition by MaxPlanet, Mr. Isaak Val owned, directly or beneficially, 100% of
the equity and voting securities of Valentino Salotti. See "Description of
Business - Acquisition of Valentino Salotti" on page 3.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
(a) Financial Statements: The Financial Statements furnished by MaxPlanet
pursuant to Item 7 are included in this Annual Report at pages F-1
through F-18.
(b) Exhibits: See the Exhibit Index beginning on page 50 of this Annual
Report.
(c) Reports on Form 8-K: The Registrant filed a Current Report on Form 8-K
on April 10, 2000, regarding the resignation of the Registrant's
principal accountant to audit the Registrant's financial statements and
the appointment of the Registrant's new principal accountant to audit
the Registrant's financial statements.
48
<PAGE>
Index to Financial Statements
Page
----
Independent Auditors' Report-Ehrenkrantz Sterling & Co. LLC. . . . . . . . .F-2
Consolidated Balance Sheet-March 31, 2000 . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations and Comprehensive Income
(Loss)-Years Ended March 31, 2000 and 1999 . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Changes in Stockholders' Equity-Two
Years Ended March 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows-Years Ended March 31, 2000
and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
MAXPLANET CORP.
Freehold, New Jersey
We have audited the accompanying consolidated balance sheet of MAXPLANET CORP.
and subsidiary companies as of March 31, 2000 and the related consolidated
statements of operations and comprehensive income (loss), changes in
stockholders' equity, and cash flows for the years ended March 31, 2000 and
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 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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at March 31, 2000 and
the results of its operations and its cash flows for the years ended March 31,
2000 and 1999 in conformity with generally accepted accounting principles.
EHRENKRANTZ STERLING & CO., LLC
______________________________________
Ehrenkrantz Sterling & Co., LLC
September 22, 2000, except
as to Note 15 as to which the date is
October 17, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS, CONTINUED
MAXPLANET, CORP. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
March 31, 2000
--------------
<S> <C>
ASSETS
Current assets
Cash $ 2,274
Accounts receivable 8,093
Marketable securities 603,790
Inventories 171,053
Prepaid expenses and other current assets 8,401
---------------
Total current assets 793,611
Property and equipment, net 333,214
Note receivable 166,250
Intangibles, net 254,350
Due from related parties 254,338
Other assets 11,530
---------------
Total Assets $ 1,813,293
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 297,635
Other current liabilities 50,995
Due related parties 77,705
Deferred revenue 214,000
---------------
Total current liabilities 640,335
---------------
Minority interest 10,571
---------------
Commitments and contingencies -
Stockholders' equity
Preferred Stock, $.0001 par value 10,000,000 authorized,
0 issued and outstanding, $.0001 par value -
Common stock, $.0001 par value, 50,000,000 authorized,
14,538,421 shares issued and outstanding 1,454
Additional paid-in-capital 3,330,454
Accumulated deficit (2,352,586)
Accumulated other comprehensive income 183,065
---------------
Total Stockholders' Equity 1,162,387
Total Liabilities and Stockholders' Equity ---------------
$ 1,813,293
===============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
MAXPLANET CORP. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Years ended March 31,
2000 1999
---- ----
<S> <C> <C>
Revenues
Products $ 750,456 $ 518,813
Advertising 74,030 -
Web hosting 25,000 2,700
----------- ------------
849,486 521,513
----------- ------------
Operating costs and expenses
Cost of revenues 1,427,257 841,739
Sales and marketing 251,960 63,054
General and administrative 377,794 105,280
----------- ------------
2,057,011 1,010,073
----------- ------------
Loss from operations (1,207,525) (488,560)
----------- ------------
Other income (expense)
Loss on impairment of assets - (627,300)
Gain on sale of marketable securities 49,617 193,598
Interest and dividend income 30,748 19,596
Interest expense (14,431) (396)
----------- ------------
65,934 (414,502)
----------- ------------
Loss before minority interest (1,141,591) (903,062)
Minority interest (6,723) (3,848)
----------- ------------
Net loss (1,148,314) (906,910)
----------- ------------
Other comprehensive income (loss), net of tax
Unrealized holding gains (losses) arising during the year 183,065 (33,832)
Reclassification adjustment 33,832 -
----------- ------------
216,897 (33,832)
----------- ------------
Comprehensive income (loss) $ (931,417) $ (940,742)
============ =============
Net loss per share-basic and diluted $ (0.08) $ (0.09)
============ =============
Weighted average shares outstanding basic and diluted 14,242,147 10,325,311
============ =============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
MAXPLANET, CORP. AND SUBSIDIARY COMPANIES
CONSOLIDATED SCHEDULE OF STOCKHOLDERS' EQUITY
TWO YEARS ENDED MARCH 31, 2000
Net
Unrealized
Additional gain (loss)
Common Stock Paid-in Accumulated on Marketable
shares amount Capital Deficit Securities Total
------ ------ ------- ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1998 5,960,921 $ 596 $ 297,362 $ (297,362) $ - $ 596
Issuance of common stock 7,027,500 703 1,695,602 - - 1,696,305
Net unrealized loss on marketable securities - - - - (33,832) (33,832)
Net loss - - - (906,910) - (906,910)
---------- ------- ---------- ------------ -------- ------------
Balance at March 31, 1999 12,988,421 1,299 1,992,964 (1,204,272) (33,832) 756,159
Issuance of common stock 1,550,000 155 1,337,490 - - 1,337,645
Net unrealized gain on marketable securities - - - - 216,897 216,897
Net loss - - - (1,148,314) - (1,148,314)
---------- ------- ---------- ------------ -------- ------------
Balance at March 31, 2000 14,538,421 $ 1,454 $3,330,454 $(2,352,586) $183,065 $ 1,162,387
========== ======= ========== ============ ======== ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
MAXPLANET CORP. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,148,314) $ (906,910)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 32,542 13,895
Amortization 33,201 15,344
Gain on sale of marketable securities (49,617) (193,598)
Minority interest 6,723 3,848
Allowances on impairment losses (1,500) 627,300
Changes in operating assets and liabilities:
Accounts receivable 3,209 (8,202)
Inventory 19,859 (156,607)
Prepaid expenses and other current assets 19,978 (28,379)
Accounts payable and accrued expenses 170,867 113,497
Other current liabilities (5,963) -
------------ -----------
Net cash used in operating activities (919,015) (519,812)
------------ -----------
Cash flows from investing activities:
Purchases of property and equipment (51,178) (62,512)
Note receivable (15,000) 48,750
Acquisition of subsidiary - (50,000)
Deferred income 209,536 -
Purchases of marketable securities (842,112) (183,271)
Additions to intangible assets - (76,007)
Proceeds from sales of marketable securities 862,874 68,668
Other assets 500 (9,030)
------------ -----------
Net cash provided by (used in) investing activities 164,620 (263,402)
------------ -----------
Cash flows from financing activities:
Net proceeds from issuance of stock 60,151 1,074,962
Loans to unrelated parties - (221,300)
Proceeds from note payable, other - 800,000
Proceeds from (payments to) related parties (254,006) 486
------------ -----------
Net cash provided by (used in) financing activities (193,855) 1,654,148
------------ -----------
Net increase (decrease) in cash (948,250) 870,834
Cash, beginning of year 950,524 79,690
------------ -----------
Cash, end of year $ 2,274 $ 950,524
============= ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
MAXPLANET CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
MAXPLANET CORP. is an integrated Internet development company which
focuses on creating and expanding strategic alliances for its
comprehensive network of consumer and business oriented websites on
its Internet sites. The Company has offices in New Jersey and
Florida. MAXPLANET is a wholesaler and retailer of contemporary
leather furniture and utilizes the Internet to showcase its online
furniture catalog through its majority owned subsidiary, Valentino
Salotti, Inc. A wholly owned subsidiary, Trident Recovery Systems,
Inc. offers debt collection services. Maxim Auction, Inc., a wholly
owned subsidiary, plans to offer for sale, new and excess
merchandise, closeout and refurbished products, to Internet users.
Mundo Maximo Corp., a wholly owned subsidiary, was formed to create a
Spanish-language Internet portal to provide users with information
and interactive content centered on Hispanic events. Maxplanet Radio
Corp., a wholly owned subsidiary, is an audio and video content
provider that is intended to enable users to listen to music and view
videos through MAXPLANET'S website. Ultra Web, Inc., a majority-owned
subsidiary, functions as an Internet yellow-pages directory.
FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned and majority-owned
subsidiaries. All material intercompany accounts and transactions
have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
REVENUE RECOGNITION AND FINANCIAL STATEMENTS
Net sales are recognized at the time merchandise is shipped to
customers.
Advertising sales on banner contracts and interfaces and links to
other websites are recognized ratably over the period in which the
advertisement and/or link is displayed, provided that no significant
obligations remain at the end of the period and collection of the
resulting receivable is probable.
In December 1999, the Securities and Exchange Commissions ("SEC")
issued SEC Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition in Financial Statements." SAB 101 summarized certain of
the SEC's views in applying generally accepted accounting principles
to revenue recognition in financial statements. SAB 101 will be
effective for the Company in the first quarter of fiscal year 2001.
The Company is reviewing the requirements of SAB 101 and currently
believes that its revenue recognition policy is consistent with the
guidance of SAB 101.
F-7
<PAGE>
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash
equivalents.
The Company has classified marketable securities as
available-for-sale. Securities classified as available-for-sale are
carried at fair value with material unrealized gains and losses
reported in stockholders' equity. Realized gains and losses and
declines in value judged to be other-than-temporary are recorded in
other income or expense. The cost of securities sold is based on the
specific identification method.
ADVERTISING COSTS
The Company expenses all advertising costs as incurred. The Company
incurred approximately $32,300 and $1,000 in advertising costs for
the years ended March 31, 2000 and 1999, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company considers the recorded costs of its financial assets and
liabilities, which consist primarily of cash and cash equivalents,
accounts receivable, investments, accounts payable and related party
payables, to approximate the fair value of the respective assets and
liabilities.
INVENTORIES
Inventories consist of finished goods and are carried at the lower of
cost or market. Cost is determined on a first-in, first-out basis.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, less accumulated
depreciation and amortization computed on a straight-line basis over
the lesser of the estimated useful lives of the assets (generally
three to ten years for equipment, furniture, and leasehold
improvements; and thirty-nine years for buildings) or the lease term.
GOODWILL AND INTANGIBLE ASSETS
Domain names are amortized over their estimated useful lives which
range from three to five years. The accumulated amortization at March
31, 2000 was $28,389. Intangible assets are reviewed for impairment
whenever events or circumstances indicate impairment might exist, or
at least annually. Goodwill represents the excess of cost over the
fair value of the net assets acquired in acquisitions by the Company,
and is being amortized using the straight-line method over fifteen
years. The Company assesses the recoverability of its assets, by
comparing projected undiscounted net cash flows associated with those
assets against their respective carrying amounts. Impairment, if any,
is based on the excess of the carrying amount over the fair value of
those assets.
WARRANTY EXPENSE
The Company generally warrants its products against defects for a
period of one to five years. No provision for warranty expense is
provided because the amounts are not significant.
F-8
<PAGE>
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
DERIVATIVES
In June 1998, the Financial Accounting Standards Board issued
statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments and
hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and
measure those instruments at fair value. Management does not expect
SFAS No. 133 to have a material effect on the Company's financial
position or results of operations. Implementation of this standard
has recently been delayed by the FASB for a 12 month period. The
Company is required to adopt SFAS 133 in fiscal year 2002. (See Note
7).
LONG-LIVED ASSETS
In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
long-lived assets to be held and used by the Company are reviewed to
determine whether an event or change in circumstances indicates that
the carrying amount of the asset may not be recoverable. For
long-lived assets to be held and used, the Company bases its
evaluation on such impairment indicators as the nature of the assets,
the future economic benefit of the assets, any historical or future
profitability measurements, as well as other external market
conditions or factors that may be present. If such impairment
indicators are present or other factors exist that indicate that the
carrying amount of the asset may not be recoverable, the Company
determines whether an impairment has occurred through the use of an
undiscounted cash flows analysis of assets at the lowest level for
which identifiable cash flows exist. If impairment has occurred, the
Company recognizes a loss for the difference between the carrying
amount and the estimated value of the asset. The fair value of the
asset is measured using discounted cash flow analysis or other
valuation techniques. During the year ended March 31, 1999, the
Company recorded a write-down of long lived assets associated with a
30% equity interest in Luxr, Inc. of $152,800, 100% equity interest
in Virtual Financial Network.Com, Inc., of approximately $456,000 and
a loan receivable from an unrelated individual of $18,500 totaling
$627,300. No impairment expense was recognized in the year ended
March 31, 2000.
CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION
In March 2000, FASB issued FASB Interpretation No. 44 (FIN 44),
"Accounting for Certain Transactions Involving Stock Compensation--an
Interpretation of APB Opinion No. 25." FIN 44 clarifies the
following: the definition of an employee for purposes of applying APB
opinion No. 25; the criteria for determining whether a plan qualifies
as a noncompensatory plan; the accounting consequence of various
modifications to the terms of the previously fixed stock options or
awards; and the accounting for an exchange of stock compensation
awards in a business combination. FIN 44 is effective July 1, 2000,
but certain conclusions in FIN 44 covers specific events that
occurred after either December 15, 1998 or January 12, 2000.
Management does not expect the application of FIN 44 to have a
material impact on the Company's financial position or results of
operations.
F-9
<PAGE>
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Financial Standards No. 109, "Accounting for
Income Taxes" (SFAS 109). Under the asset and liability method of
SFAS 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statements carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect of a change in tax
rates on deferred tax assets and liabilities is recognized in income
in the period that includes the enactment date.
BUSINESS SEGMENTS
The Company has adopted FASB Statement No. 131, "Disclosure About
Segments of an Enterprise and Related Information," which establishes
standards for disclosures about products, geographic and major
customers. The Company's implementation of this standard does not
have any effect on its financial statements.
EARNINGS PER COMMON SHARE
The Company adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share" (SFAS 128). Under SFAS 128 earnings per
common share is computed by dividing net income (loss) available to
common shareholders by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share do not
reflect the potential dilution that could occur if securities or
other contracts to issue common shares were exercised or converted
into common shares or resulted in the issuance of common shares as
the impact of such would be antidilutive given the net losses
incurred.
CONCENTRATION OF CREDIT RISK
The Company maintains its cash with various financial institutions.
The Company performs periodic evaluations of the relative credit
standing of these institutions.
COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS 130), which
establishes standards for the reporting and disclosure of
comprehensive income and its components. SFAS 130 requires unrealized
gains or losses on the Company's available-for-sale securities, which
prior to adoption were reported separately in stockholder's equity,
to be included in other comprehensive income.
Investments in marketable securities classified as "available for
sale" are recorded at fair value and unrealized gains and losses, if
any, net of tax, are reported as accumulated other comprehensive
income within stockholders' equity. The cost of securities sold is
based on the specific identification method.
Note 2: ACQUISITIONS
On May 8, 1998, MAXPLANET acquired Valentino Salotti, Inc.
(Valentino), which was accounted for as a purchase whereby Valentino
became a wholly-owned subsidiary of MAXPLANET. Valentino sells a line
of contemporary leather furniture. In connection with the accounting,
MAXPLANET issued 500,000 shares of common stock valued at $.13 per
share.
F-10
<PAGE>
Note 2: ACQUISITIONS (continued)
The operations and financial position of Valentino were accounted for
in the consolidated financial statements of the Company beginning
April 1, 1998. During the period April 1, 1998 through May 7, 1998,
Valentino's operations were immaterial. The excess purchase price
over the fair market value of the assets was $97,823 and is being
amortized using the straight-line method over 15 years.
On December 15, 1998, MAXPLANET acquired Virtual Financial
Network.Com, Inc. (Virtual Financial) which was accounted for as a
purchase whereby Virtual Financial became a wholly-owned subsidiary.
Virtual Financial was subsequently dissolved. Virtual Financial was a
Florida technology and marketing corporation. In connection with the
accounting, MAXPLANET issued 1,000,000 shares of common stock valued
at $0.406 per share, plus $50,000 in cash. See note 10.
On February 11, 1999, MAXPLANET acquired Trident Recovery Systems,
Inc. (Trident) which was accounted for as a purchase whereby Trident
became a wholly-owned subsidiary of MAXPLANET. Trident offers debt
collection services. In connection with the accounting, MAXPLANET
issued 500,000 shares of common stock valued at $.20 per share.
The operations and financial position of Trident were accounted for
in the consolidated financial statements of the Company beginning
April 1, 1998. Prior to this period, Trident had no operations. The
excess purchase price over the fair market value of the assets was
$99,900 and is being amortized using the straight-line method over 15
years.
On February 24, 1999, MAXPLANET acquired Ultra Web, Inc. (Ultra),
which was accounted for as a purchase whereby Ultra became a
majority-owned subsidiary of MAXPLANET. Ultra functions as an
Internet yellow-pages directory. In connection with the accounting,
MAXPLANET issued 100,000 shares of common stock valued at $.20 per
share for 80% of the equity securities of Ultra Web, Inc.
There are no reported operations or financial position of Ultra
accounted for in the consolidated financial statements of the
Company. The excess purchase price over the fair market value of the
assets was $3,833 and is being amortized using the straight-line
method over 15 years.
Note 3: INVESTMENTS IN MARKETABLE SECURITIES
At March 31, 2000, investments in marketable securities consist of
the following classifications:
Market
Cost Value
---- -----
Classified as Available for
Sale Equity Securities $ 420,725 $ 603,790
=========== ===========
Proceeds and realized gains of securities classified as available for
sale totaled $862,874 and $49,617, respectively, for the year ended
March 31, 2000.
F-11
<PAGE>
Note 4: NOTE RECEIVABLE
Unsecured demand note receivable of $150,000 plus accrued interest of
$16,250 results from the sale of 10% of the equity securities of
Valentino Salotti, Inc. in February 1999 to an unrelated party. The
purchaser is required to pay interest only at the rate of 10% per
annum. The note is not expected to be repaid before April 1, 2001.
Note 5: PROPERTY AND EQUIPMENT
At March 31, 2000, property and equipment consists of the following:
Computer equipment and software $ 104,337
Building 253,961
Furniture and equipment 21,353
--------------
379,651
Less accumulated depreciation 46,437
--------------
$ 333,214
==============
Note 6: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
At March 31, 2000, accrued expenses consist of the following:
Accounts payable $ 64,829
Accrued consulting fees 60,000
Accrued professional fees 157,200
Other accruals, including payroll taxes withheld 15,606
------------
$ 297,635
============
Note 7: DEFERRED REVENUE
The Company sold certain marketable security calls expiring
subsequent to March 31, 2000. The transaction of approximately
$214,000 has been deferred until the calls have expired.
Note 8: INCOME TAXES
At March 31, 2000, the Company has net Federal and State operating
loss carryforwards of approximately $2,400,000. The timing and manner
in which the operating loss carryforwards may be utilized in any year
will be limited to the Company's ability to generate future earnings.
Current net operating loss carryforwards will expire principally
between the years 2002 and 2020. As the Company has not generated
earnings and no assurance can be made of future earnings, a valuation
allowance in the amount of the deferred tax assets has been recorded.
The change in the valuation allowance was $409,000. There was no
current or deferred provision for income taxes for the year ended
March 31, 2000.
F-12
<PAGE>
Note 9: TRANSACTIONS WITH RELATED PARTIES
Amounts due from the stockholders of the Company or affiliated
entities are carried interest-free and are not expected to be
collected within the next year.
The president of Valentino Salotti, Inc. (See note 1) is also
president and a director of MAXPLANET.
Note 10: COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company and various subsidiaries lease an office facility in
Freehold, New Jersey under a lease expiring in September 2003, with a
renewal option for the facility of one five year period. The lease
provides for the Company to pay certain operating expenditures of the
facility. In addition, a subsidiary leases from its related party a
warehouse and showroom facility in Brooklyn, New York on a yearly
basis. Certain operating expenditures of this facility are the
responsibility of the subsidiary. Through March 31, 2000, the
subsidiary is not paying rent or other facility operations expenses.
Rent expense totaled $56,702 and $32,088 in 2000 and 1999,
respectively.
Minimum future commitments under all operating lease arrangements are
as follows:
Years Ending March 31 Amount
---------------------
2001 $ 42,132
2002 42,132
2003 42,132
2004 21,066
-----------
$ 147,462
===========
LITIGATION
On March 16, 2000, MAXPLANET commenced an action by filing a claim in
the Superior Court of New Jersey Monmouth County, against Michael
Marsowicz ("Marsowicz"), the former President of Virtual Financial
Network. The principal parties are MAXPLANET and Marsowicz.
Marsowicz, as president of Virtual Financial Network, entered into an
Agreement with MAXPLANET to develop web phone book software.
MAXPLANET paid Marsowicz and Marsowicz did not perform his
obligations under the agreement. Thereafter, MAXPLANET negotiated a
contract to buy 100% of the common stock of Virtual Financial Network
which was to include a fully functional site and web phonebook
technology. MAXPLANET alleges that Marsowicz breached this agreement
as well. Marsowicz counter-claimed against MAXPLANET alleging
damages. MAXPLANET has entered a default against Marsowicz for
failure to timely file an answer. Management anticipates that
Marsowicz will vacate the default, at which time MAXPLANET expects
that it will proceed with discovery.
F-13
<PAGE>
Note 10: COMMITMENTS AND CONTINGENCIES (continued)
In October 1998, MAXPLANET complied with an order from the Securities
and Exchanges Commission, which directed a private investigation into
questions relating to all offers and sales of securities and trading
in securities that may involve possible violation of section 17(a)
and (b) of the Securities and Exchange Act of 1933 and section 10(b)
of the Securities and Exchange Act of 1934. To the best of
MAXPLANET's knowledge, MAXPLANET continues to be a subject of this
ongoing investigation by the Commission. An unfavorable resolution of
this action could have a significant adverse effect on MAXPLANET's
financial condition, and the Company may be required to pay monetary
penalties.
On January 28, 2000, New Jersey-based Planet Entertainment Corp.
commenced an action against MAXPLANET in the Superior Court of New
Jersey to enforce an agreement dated July 2, 1999, whereby MAXPLANET
was to purchase music masters for use of MAXPLANET Radio. MAXPLANET
terminated the agreement as a result of Planet Entertainment's
failure to perform and provide a certain capital contribution.
MAXPLANET believes that it will prevail in this cause of action.
The Company is also subject to legal proceedings and claims which
arise in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability with respect to these
actions will not materially affect the financial position of the
Company.
EMPLOYMENT CONTRACTS
Employment contracts between the Company and two executive officers
through 2008 provide for minimum annual salaries of $125,000 and
$100,000, respectively, adjusted for incentives based on the
Company's attainment of specified levels of revenues, pretax profits,
capital raised and the value of acquisitions. In addition, each of
the executive officers received employee stock options of 300,000
shares of common stock based upon the waiver of 50% of their
compensation for 2000 and 1999.
Two executive officers have options to purchase 500,000 shares of
MAXPLANET common shares at $1.50 per share.
COMMITMENTS
On March 17, 2000, Mundo Maximo Corp. entered into an agreement with
Triumph Global Securities, Ltd. for $95,000, which has been reflected
in the financial statements, pursuant to which Triumph Global
Securities will provide financial consulting services and act as the
Company's exclusive advisor in connection with the Company's efforts
to obtain outside investment in the Company from third-party sources.
In connection with the agreement Mundo Maximo will pay Triumph a
minimum of $505,000. If the gross proceeds from offerings to outside
investors exceed certain levels, additional funds are due.
MAXPLANET, which owns a 30% equity interest in Luxr, Inc., entered
into an exclusive marketing agreement. Luxr, Inc., operates as a
designer, importer and distributor of fine jewelry, watches and
estate-jewelry, and serves as an online sales outlet for merchandise.
MAXPLANET is to receive 50% of net revenues from the agreement.
MAXPLANET has realized no significant revenue as a result of the
agreement for the years ended March 31, 2000 and 1999.
See note 15 for subsequent events.
F-14
<PAGE>
Note 11: SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental cash flow information for the years ended March 31, 2000
and 1999 is as follows:
Years Ended March 31
2000 1999
---- ----
Interest $ 14,431 $ 396
Income taxes 930 --
Non cash transactions of the Company for the years ended March 31,
2000 and 1999 were as follows:
During the year ended March 31, 2000, MAXPLANET recognized
advertising revenue of approximately $70,000 in exchange for 125,000
shares, valued at $0.06 per share, of an unrelated company's stock.
On February 17, 1999, MAXPLANET sold 10% of the equity securities of
Valentino Salotti Inc. for $200,000. As consideration for the sale of
securities, $50,000 was paid to MAXPLANET at closing plus a
promissory note, due on demand, for $150,000.
See note 12 for non-cash capital stock transactions.
The Company purchased, through broker margin accounts, marketable
securities totaling $21,995 and $58,168 during the years 2000 and
1999 respectively.
In 1999, Henry Val, Chief Executive Officer and Chairman of the
Board of MAXPLANET, contributed inventory to the Company totaling
$25,055.
Note 12: CAPITAL STOCK TRANSACTIONS
On October 19, 1999, MAXPLANET issued 500,000 shares of common stock
valued at $.50 per share to AJ Capital Ltd., Inc. in exchange for a
building located in Miami, Florida.
During June 1999, MAXPLANET rescinded 60,000 shares of common stock
at par value ($.0001) to a former employee.
On April 30, 1999, MAXPLANET issued 10,000 shares of common stock
valued at $6.00 per share to an accredited investor.
On April 13, 1999, MAXPLANET issued 1,000,000 shares of common stock
valued at $.80 per share in exchange for a $800,000 note payable due
AJ Capital Ltd., Inc.
On April 12, 1999, MAXPLANET issued 100,000 shares of common stock
valued at $.875 per share to Reich Brothers, Inc., a corporation
wholly-owned by Israel Goldreich, Vice President and a director of
MAXPLANET, in connection with the Company's acquisition of a company.
On February 24, 1999, MAXPLANET issued 100,000 shares of common stock
valued at $.20 per share to the sole shareholder of Ultra Web, Inc.
in connection with the Company's acquisition of 80% of the equity
securities of Ultra Web, Inc.
F-15
<PAGE>
Note 12: CAPITAL STOCK TRANSACTIONS (continued)
On February 11, 1999, MAXPLANET issued 500,000 shares of common stock
valued at $.20 per share to the sole shareholder of Trident Recovery
Systems, Inc., in connection with MAXPLANET's purchase of 100% of the
equity securities of Trident.
On January 8, 1999 and October 28, 1998, MAXPLANET issued and sold an
aggregate of 1,852,500 shares of common stock valued at $.40 per
share for $741,000 to a group of four accredited investors.
On December 15, 1998, MaxPlanet issued 1,000,000 shares of common
stock valued at $0.406 per share to shareholders of Virtual Financial
Network.Com, Inc., in connection with MaxPlanet's purchase of 100% of
the equity securities of Virtual Financial.
On June 16,1998, MAXPLANET issued 25,000 shares of MAXPLANET common
stock valued at $.25 per share to Reich Brothers, Inc., a corporation
wholly-owned by Israel Goldreich, vice president and a director of
MAXPLANET, in connection with the Company's acquisition of the domain
names, business plan and content of OneClass.com and 1Class.com
online shopping networks.
On May 8, 1998, MAXPLANET issued 500,000 shares of common stock
valued at $.13 per share to Isaak Val, the father of Henry Val, the
president and a director of MAXPLANET, in connection with MAXPLANET's
acquisition of 100% of the outstanding securities of Valentino
Salotti, Inc.
On May 5, 6 and 12th, 1998, MAXPLANET issued a total of 3,050,000
shares of common stock valued at $.06 per share for $183,000 to a
group of accredited investors.
Note 13: STOCK PLAN
The Company has a Nonqualified Stock Option Plan that provides for
the granting of options to purchase shares of common stock to certain
officers of the Company. Exercise and vesting terms for options
granted under this plan are determined at each grant date. All
options when granted will be granted at not less than fair market
value at dates of grant. At the end of 2000, 800,000 options were
available for grant under the plan. As of March 31, 2000 the
following options were granted under this plan.
SFAS No. 123 "Accounting for Stock-Based Compensation" (SFAS No.
123") encourages (but does not require) compensation expense to be
measured based on fair value of the equity instrument awarded. In
accordance with APB No. 25 "Accounting for Stock Issued to Employees"
no compensation cost has been recognized in the Consolidated
Statements of operations for the Company's stock option plan. If
compensation cost for the Company's stock option plan had been
determined in accordance with the fair value method prescribed by
SFAS No. 123, the Company's net loss would have been $1,148,314 and
$906,910 for 2000 and 1999 respectively. Loss per share would have
been $0.08 and $0.09 for 2000 and 1999, respectively.
F-16
<PAGE>
Note 13: STOCK PLAN (continued)
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
------ --------------
<S> <C> <C>
Outstanding, beginning of year 1,300,000 $ 1.62
Granted 300,000 $ 2.00
Outstanding, end of year 1,600,000 $ 1.69
Options exercisable at year-end 1,600,000 $ 1.69
Weighted-average fair value of
options granted during the year $ 2.00
</TABLE>
The Black-Scholes option pricing model, in the opinion of
management, the existing models do not necessarily provide a
reliable single measure of the fair value of the options, since
the options price is in excess of the fair market value of the
stock.
Note 14: SEGMENT INFORMATION
The Company adopted Statement Financial Accounting Standard No. 131,
"Disclosures about Segments of an Enterprise and Related Information
(SFAS 131)," in 1999.
The accounting policies and a detail of operations of the operating
segments are the same as those described in the summary of
significant accounting policies. There are no material inter-segment
sales or transfers. All revenues are generated within the United
States and all revenue producing assets are located therein.
Management evaluates a segment's performance based upon profit or
loss from operations before income taxes.
F-17
<PAGE>
Note 14: SEGMENT INFORMATION (Continued)
<TABLE>
<CAPTION>
Years ended March 31,
2000 1999
---- ----
<S> <C> <C>
Sales
Internet website hosting and advertising $ 100,894 $ 4,750
Furniture products 748,592 516,763
------------ ----------
Total sales $ 849,486 $ 521,513
============ ==========
Operating loss
Internet website hosting and advertising $ (1,274,759) $ (527,042)
Furniture products 67,234 38,482
------------ ----------
(1,207,525) (488,560)
Corporate other income (expenses) 59,211 (418,350)
------------ ----------
Loss before income taxes $ (1,148,314) $ (906,910)
============ ==========
Assets
Internet website hosting and advertising $ 1,630,410 $1,657,949
Furniture products 182,883 178,036
------------ ----------
Total assets $ 1,813,293 $1,835,985
============ ==========
Capital expenditures
Internet website hosting and advertising $ 51,178 $ 62,512
Furniture products -- --
------------ ----------
Total capital expenditures $ 51,178 $ 62,512
============ ==========
Depreciation and amortization expense
Internet website hosting and advertising $ 65,743 $ 29,239
Furniture products -- --
------------ ----------
Total depreciation and amortization expense $ 65,743 $ 29,239
============ ==========
</TABLE>
Note 15: SUBSEQUENT EVENTS
In September 2000, the MAXPLANET entered into an agreement to sell
certain domain names to NPS International Corporation ("NPS") an
entity where MAXPLANET'S Chief Executive Officer and Chairman of the
Board is the President of NPS and of which Israel Goldreich, the Vice
President and a director of the MAXPLANET is a director of NPS, for
3,500,000 shares of common stock to be valued at approximately
$123,000.
On October 17, 2000, the MAXPLANET entered into an agreement with NPS
International Corporation whereby NPS will lease its corporate office
from MAXPLANET and use the services of MAXPLANET's Internet
development and production facility in Miami, Florida to generate
users and customers to products and services offered by NPS. The
agreement will provide the MAXPLANET revenues of $5,000 per month
until September 2001, renewing automatically for successive one year
terms until written notice of termination is received. In addition,
among other items in the Agreement, NPS agreed to evaluate and pay
MAXPLANET a minimum quarterly fee of 100,000 shares of NPS common
stock for supporting NPS's growth plan.
F-18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, this 17th day of
November, 2000.
MAXPLANET CORP.
HENRY VAL ISRAEL GOLDREICH
By:__________________________ By:______________________________
Henry Val Israel Goldreich
Chief Executive Officer Chief Financial Officer and
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the date indicated.
Title Date
----- ----
Directors November 17, 2000
Henry Val
Isaak Val
Israel Goldreich
HENRY VAL
By:
-----------------------------------
Henry Val, as attorney-in-fact
49
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Number Exhibit
-------------- -------
<S> <C> <C>
2.1 Agreement of Merger, dated June 18, 1997, by and
between the Registrant and Maxnet, Inc., merging
Maxnet, Inc. with and into the Registrant and
changing the name of the Registrant to Maxnet, Inc.,
effective as of July 8, 1997.
3.(I) 1 Certificate of Incorporation of Registrant filed
with the State of Delaware on October 26, 1982.
2 Certificate of Amendment of Certificate of
Incorporation of Registrant filed with the State of
Delaware on October 14, 1994.
3 Certificate For Renewal and Revival of Charter filed
with the State of Delaware on May 20, 1994.
4 Certificate For Renewal and Revival of Charter of
Registrant filed with the State of Delaware on April
23, 1996.
5 Certificate of Amendment of Certificate of
Incorporation of Registrant filed with the State of
Delaware on June 19, 1997.
6 Certificate For Renewal and Revival of Charter of
Registrant filed with the State of Delaware on May
18, 1999.
7 Certificate of Amendment of Certificate of
Incorporation of Registrant filed with the State of
Delaware on July 27, 1999.
3.(II) 1 Amended Bylaws of the Registrant.
10.1 Purchase Agreement by and between the Registrant and
Valentino Salotti dated May 8, 1998.
10.2 Promissory Note, dated November 12, 1998, in the
principal amount of $140,000 issued to the
Registrant by Luxr, Inc.
10.3 Purchase Agreement by and between the Registrant and
Intrasoft, Ltd., dated June 4, 1998.
10.4 Purchase Agreement by and between the Registrant and
VFN.Com, Inc., dated December 15, 1998.
10.5 Employment Agreement by and between the Registrant
and Henry Val, dated as of January 1, 1999.
10.6 Employment Agreement by and between the Registrant
and Israel Goldreich, dated as of January 1, 1999.
50
<PAGE>
10.7 Purchase Agreement by and between the Registrant and
Trident Recovery Systems, Inc., dated February 9,
1999.
10.8 Agreement by and between Valentino Salotti, Inc. and
A & J Capital, Inc., dated February 16, 1999.
10.9 Purchase Agreement by and between the Registrant and
Michele Erard-Coupe, dated as of February 24, 1999.
10.10 Agreement by and between the Registrant and Luxr,
Inc. to Convert Promissory Note to Stock Purchase
and for Internet Content Service, dated April 27,
1999.
10.11 Asset Purchase Agreement by and among MaxPlanet
Corp. and NPS International Corporation, dated as of
October 17, 2000.
10.12 Agreement by and between Triumph Global Securities,
Ltd. and Mundo Maximo Corp., dated March 17, 2000.
16.1 * Letter from Robert Rescigno, CPA to the Securities
and Exchange Commission, dated April 7, 2000
(Incorporated by reference from Exhibit 16.1 to the
Current Report on Form 8-K filed by the Registrant
with the Securities and Exchange Commission on April
10, 2000 (SEC File No. 000-28201)).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
24.1 Power of Attorney.
27 Financial Data Schedule for the fiscal year ended
March 31, 2000, submitted to the Securities and
Exchange Commission in electronic format.
</TABLE>
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* Incorporated by reference.
51
