<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended JULY 31, 2000
Commission file number 0-29671
GOLDONLINE INTERNATIONAL, INC.
(Name of small business issuer in its charter)
DELAWARE 13-3986493
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
111 RHODES, CONROE, TEXAS 77301
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (409) 756-6888
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.0001 PAR VALUE
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No .
Check if delinquent filers in response to Item 405 of Regulation S-B is not
contained in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year $1,634,962.
As of September 30, 2000, the registrant had outstanding 94,984,408 shares of
its Common Stock, par value $.0001, its only class of voting securities. The
aggregate market value of the shares of Common Stock of the registrant held by
non-affiliates on September 30, 2000, was approximately $19,569,000 based on its
closing price on the OTC: Bulletin Board on that date. (See Item 5).
DOCUMENTS INCORPORATED BY REFERENCE
No documents are incorporated by reference into this Report except those
Exhibits so incorporated as set forth in the Exhibit index.
Transitional Small Business Disclosure Format (Check one): Yes [ ]; No [ X ].
<PAGE> 2
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
On April 20, 2000, pursuant to an agreement and plan of reorganization dated
April 11, 2000, Goldonline International, Inc. ("GDOL" or the "Company")
acquired 100% of the issued and outstanding common stock of Benton Ventures,
Inc. ("Benton"), a Delaware corporation, in exchange for 1,200,000 newly issued
common shares of GDOL. On April 25, 2000, the Board of Directors of GDOL elected
to merge Benton into GDOL pursuant to Section 253 of Delaware's General
Corporate Laws. As a result of the merger, GDOL will be the surviving company
and assumes the reporting responsibilities under successor issuer status as more
fully detailed in Section 12(g)(3) of The Securities Exchange Act of 1934.
GDOL, formerly Transun International Airways, Inc., was incorporated May 22,
1996 in Delaware and until June 1999 was a development stage company with plans
to establish itself as an air transport company providing non-scheduled air
service (charter flights) for tour operators, charter brokers, cruise line
casinos, theme parks and theme attractions.
On June 10, 1999, GDOL acquired all of the issued and outstanding common stock
of Con-Tex Silver Imports, Inc. ("Silver"), incorporated September 12, 1994 in
Texas and Gold Online.com, Inc. ("Go.com"), incorporated February 3, 1999 in
Delaware. For accounting purposes, the acquisitions have been treated as the
acquisition of Silver and Go.com by GDOL with Silver as the acquirer (reverse
acquisition). The historical financial statements prior to June 10, 1999 are
those of Silver.
ACQUISITION OF HMS JEWELRY CO., LTD AND HMS OPERATING COMPANY
On October 26, 2000, the Company completed the acquisition of the business and
assets of HMS Jewelry Co., Ltd., a Texas limited partnership, and HMS Operating
Company, a Texas corporation, (collectively "HMS") for $7 million, $4.5 million
in cash and $2.5 million in convertible secured promissory notes. The notes bear
interest at eight percent (8%) per annum and require monthly payment of
interest. The notes are convertible into the Company's common stock at $1.25 per
share, as adjusted for any stock splits or combinations. One note in the amount
of $1.25 million is due October 15, 2001, and the other note in the amount of
$1.25 million is due October 15, 2002.
HMS is a wholesale jewelry distributor with headquarters in Dallas, Texas. HMS
primarily sells gold products to a network of over 30,000 retail jewelers,
through a catalog and telephone ordering system. For the year ended July 31,
2000, unaudited pro forma combined sales would have been $16,200,000, net
earnings would have been $492,000 and net earnings per share would have been
$0.006.
Prior to closing the HMS transaction, the Company sold 1.1 million shares of its
common stock for net proceeds of $1,567,500 and utilized these funds plus
existing cash reserves to make the initial cash payment.
2
<PAGE> 3
BUSINESS OF ISSUER
GDOL is now a holding company principally engaged in acquiring and developing
jewelry related businesses. Silver is involved in both the wholesale and retail
jewelry business, principally silver, with retail locations in the Houston area.
The wholesale operation of Silver consists of both sales directly from its
headquarters in Conroe, Texas and from jewelry shows at locations throughout the
south central United States. Go.com is establishing an Internet jewelry business
and commencing in the late fall of 1999; Go.com began selling through e-commerce
sites, located at http://www.GoldOnline.com and http://yahoo.com/goldonline on
Yahoo! and offers a wide selection of discounted gold and silver jewelry as well
as diamonds and watches.
Silver and Go.com offer a variety of luxury and premium products, including gold
and silver jewelry, neckchains, bracelets, fancy necklaces, earrings, diamond
jewelry, pre-owned high-end watches and mass-market watches. The Company
currently carries over 10,000 styles of jewelry, which may be purchased through
its e-commerce site. The Company's online store is designed to provide consumers
with a convenient and enjoyable shopping experience in an Internet-based retail
environment through easy-to-navigate Web pages. Customers have the convenience
and flexibility of shopping 24 hours a day, seven days a week, from any location
with Internet access.
The Company's current product offerings are well suited for online commerce,
having high average selling prices and relatively low average distribution and
shipping costs. The Company generally utilizes the services of United Parcel
Service for shipping its products.
COMPETITION
All direct marketing and retail businesses are highly competitive. With the
Internet, the Company competes for consumer expenditures with all other forms of
retail businesses, including department, discount, warehouse and specialty
stores, mail order, catalog and television home shopping companies as well as
other direct sellers and infomercials. The Internet home shopping industry is
highly competitive. The Company believes that the Internet shopping industry is
still very attractive to consumers, manufacturers and retailers. The industry
offers consumers convenience, entertainment and the opportunity to test market
new products, create brand awareness and access additional channels. The Company
is at a competitive disadvantage in attracting viewers due to the fact that the
Company's Internet site is limited to its future advertising budget. The Company
expects increasing competition for viewers from major Internet providers and
retailers that may seek to enter Internet shopping. The Company believes that
the number of new entrants into the Internet shopping industry will also
continue to increase. The Company believes it is positioned to compete; however,
no assurance can be given that the Company will be able to acquire consistent
advertising at prices favorable to the Company. The Company's competitors are
larger and more diversified than the Company, have greater financial, marketing,
merchandising and distribution resources; therefore, the Company cannot predict
the degree of success, if any, with which it will meet competition in the
future.
3
<PAGE> 4
TECHNOLOGICAL CHANGE
The Internet is characterized by technological change. The Company's success
with Go.com will depend, in part, on its ability to enhance its existing
services, develop new services that address the needs of its prospective
customers and respond to technological advances and practices on a timely basis.
The development of a Web entails significant technical, financial and business
risks. There can be no assurance that the Company will successfully implement
new technologies or adapt its Web site and transaction-processing systems to
customer requirements or emerging industry standards. If the Company is unable,
for technical, legal, financial or other reasons, to adapt in a timely manner in
response to changing market conditions, such inability could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
SOURCE AND AVAILABILITY OF RAW MATERIALS
The Company acquires its inventory from a large number of sources, the loss of
any one of which would not have a material impact on the operations of the
Company.
MAJOR CUSTOMERS
The Company has a large number of wholesale customers, with jewelry stores
located primarily in the south central United States. Retail sales and Internet
sales also serve a large number of customers. The loss of any individual
wholesale or retail customer would not have a material impact on the operations
of the Company.
EMPLOYEES
At July 31, 2000, the Company had 27 employees, 5 of whom are part-time.
ITEM 2. DESCRIPTION OF PROPERTY
At July 31, 2000, the Company maintained its corporate headquarters and its
wholesale jewelry inventory and operations at 111 Rhodes, Conroe, Texas 77301.
The office and warehouse is 7,500 square feet and is leased from the President
and principal owner of the Company for $2,200 per month. At July 31, 2000, the
Company also operated two retail jewelry stores in the Conroe area with
aggregate monthly rent of approximately $7,000 and one wholesale outlet in
Dallas with monthly rent of approximately $2,000.
4
<PAGE> 5
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
GDOL has been a non-reporting publicly traded company with certain of its
securities exempt from registration under the Securities Act of 1933 pursuant to
Rule 504 of Regulation D and Rule 701 of the General Rules and Regulations of
the Securities and Exchange Commission. GDOL's common stock is traded on the OTC
Bulletin Board operated by Nasdaq under the symbol GDOL. GDOL has not filed a
registration statement with the Securities and Exchange Commission and has not
been a reporting company under the Securities Exchange Act of 1934 prior to
April 3, 2000. The Nasdaq Stock Market has implemented a change in its rules
requiring all companies trading securities on the OTC Bulletin Board to become
reporting companies under the Securities Exchange Act of 1934.
The Company was required to become a reporting company by the close of business
on April 3, 2000, or no longer be listed on the OTC Bulletin Board. GDOL has
effected the merger with Benton and has become a successor issuer thereto in
order to comply with the reporting company requirements implemented by the
Nasdaq Stock Market.
The following chart shows the quarterly high and low bid prices for the
Company's Common Stock since June 1999, when it first began trading, as reported
on the OTC:Bulletin Board. The prices represent quotations by dealers without
adjustments for retail mark-ups, mark-downs or commissions and may not represent
actual transactions.
<TABLE>
<CAPTION>
Opening High Low Closing
Bid Bid Bid Bid
<S> <C> <C> <C> <C>
Quarter ended July 31, 1999 -- $ .75 $ .25 $ .50
Quarter ended October 31, 1999 $ .50 $1.13 $ .28 $ .63
Quarter ended January 31, 2000 $ .63 $1.50 $ .56 $1.00
Quarter ended April 30, 2000 $1.00 $2.72 $ .81 $2.50
Quarter ended July 31, 2000 $2.50 $3.25 $1.63 $1.88
</TABLE>
5
<PAGE> 6
HOLDERS
As of July 31, 2000, there were approximately 198 holders of record of the
Company's common stock, an undetermined number of which represent more than one
individual participant in securities positions with the Company.
DIVIDENDS
The Company has not previously paid cash dividends on its common stock, and
intends to utilize current resources to expand; thus, it is not anticipated that
cash dividends will be paid on the Company's common stock in the foreseeable
future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
From time to time, the Company may publish forward-looking statements relative
to such matters as anticipated financial performance, business prospects,
technological developments and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. All statements other than statements of historical fact included in
this section or elsewhere in this report are, or may be deemed to be,
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Exchange Act of 1934. Important factors that
could cause actual results to differ materially from those discussed in such
forward-looking statements include: 1. General economic factors including, but
not limited to, changes in interest rates, trends in disposable income;
2.Information and technological advances; 3. Cost of products sold; 4.
Competition; and 5. Success of marketing, advertising and promotional campaigns.
The operations of the Company consist of the retail and wholesale sales of
Silver and the Internet sales of Go.com. Silver has been in operation since
1994. Go.com's initial Internet sales operations commenced during the current
fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The Company increased its working capital to $6,657,979 from $145,215. The
working capital increase of $6,512,764 consists primarily of increases in cash
in the amount of $5,934,775 and inventory of $512,130. The Company raised
$6,779,205 in cash during the year from the exercise of options and warrants and
from the sale of common stock, the principal source of the working capital
increase.
On October 23, 2000, the Company completed the acquisition of the business and
assets of HMS Jewelry Co., Ltd., a Texas limited partnership, and HMS Operating
Company, a Texas corporation, (collectively "HMS") for $7 million, $4.5 million
in cash and $2.5 million in
6
<PAGE> 7
convertible secured promissory notes. The notes bear interest at eight percent
(8%) per annum and require monthly payment of interest. The notes are
convertible into the Company's common stock at $1.25 per share, as adjusted for
any stock splits or combinations. One note in the amount of $1.25 million is due
October 15, 2001 and the other note in the amount of $1.25 million is due
October 15, 2002.
HMS is a wholesale jewelry distributor with headquarters in Dallas, Texas. HMS
primarily sells gold products to a network of over 30,000 retail jewelers,
through a catalog and telephone ordering system. For the year ended July 31,
2000, unaudited pro forma combined sales would have been $16,200,000, net
earnings would have been $492,000 and net earnings per share would have been
$0.006.
Prior to closing the HMS transaction, the Company sold 1.1 million shares of its
common stock for net proceeds of $1,567,500 and utilized these funds plus
existing cash reserves to make the initial cash payment.
SALES AND COST OF SALES
Sales increased $125,934 (8%) to $1,634,962 during the year ended July 31, 2000
from the year ended March 31, 1999 amount of $1,509,028. Sales during the year
ended July 31, 2000 included 32.5% retail sales, 60.4% wholesale sales and 7.1%
Internet sales. Sales during the year ended March 31, 2000 consisted of 32.8%
retail sales and 67.2% wholesale sales.
Cost of sales amounted to $1,023,215 during the year ended July 31, 2000 as
compared to $814,835 during the year ended March 31, 1999, an increase of
$208.380 (26%). During the year ended July 31, 2000, material costs amounted to
$798,258 or 78% of total cost of sales and labor costs amounted to $174,219 or
17% of total cost of sales. During the year ended March 31, 1999, material costs
amounted to $769,244 or 94% of total cost of sales. The increased costs during
the year ended July 31, 2000 are primarily a result of the addition of a new
product line, beaded necklaces, bracelets and earrings, during the year, which
requires labor to assemble.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $883,613 during the
year ended July 31, 2000 as compared to $659,063 during the year ended March 31,
1999, an increase of $224,550 (34%). The increase consists of $72,454 (including
$6,672 in amortization expense) in costs associated with being a public company,
principally professional services, $34,170 (including $3,129 in depreciation
expense) of costs associated with the initial start-up of Internet sales and
$117,926 in costs associated with Silver's operations. Silver's major cost
increases include bad debt expense of $41,038, depreciation expense of $14,853,
show expense of $34,672 and salary expense of $15,268.
7
<PAGE> 8
The Company is currently implementing a new inventory and sales tracking system
which is expected to provide a substantially improved method of monitoring
inventory levels and sales trends. The implementation process has contributed to
the increased selling, general and administrative costs.
OTHER INCOME AND EXPENSE
During the year ended July 31, 2000, the Company earned $61,268 in interest
income from cash investments, principally from the cash it received during May
2000 from the sale of 5,000,000 shares of its common stock.
Interest expense was $30,515 during the year ended July 31, 2000 as compared to
$17,542 during the year ended March 31, 1999. The increase is due to the higher
average level of notes payable and long-term debt during the year ended July 31,
2000.
INCOME TAXES
Income tax benefit amounted to $26,456 during the year ended July 31, 2000 as
compared to $68 during the year ended March 31, 1999. The income tax benefit
during the year ended July 31, 2000 would have been $80,456, due primarily to
the net operating loss for the period; however, the Company elected to establish
a valuation allowance of $54,000 and reduced the deferred tax asset and income
tax benefit by this amount.
ITEM 7. FINANCIAL STATEMENTS
The Consolidated Financial Statements of Goldonline International, Inc. and
Subsidiaries, together with the report thereon of Stephen P. Higgins, C.P.A.
dated September 20, 2000 for the year ended July 31, 2000, the four months ended
July 31, 1999 and the year ended March 31, 1999 is set forth on pages F-1
through F-14 hereof.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
8
<PAGE> 9
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following table sets forth the names, ages and current positions with the
Company held by the Directors, Executive Officers and Significant Employees,
together with the year such positions were assumed. There is no immediate family
relationship between or among any of the Directors, Executive Officers or
Significant Employees, and the Company is not aware of any arrangement or
understanding between any Director or Executive Officer and any other person
pursuant to which he was elected to his current position.
<TABLE>
<CAPTION>
POSITION OR OFFICE DATE FIRST
NAME AGE WITH THE COMPANY ELECTED/
APPOINTED
<S> <C> <C> <C>
James G. Gordon 33 President, Director 1999
Dr. Terry Washburn 47 Director 2000
</TABLE>
James G. Gordon is the President and a Director of GDOL since 1999. Prior to
starting the Company, Mr. Gordon was founder and President of Con-Tex Silver
Imports, Inc., a wholesale and retail jewelry operation from 1994 to the
present. Mr. Gordon received a Bachelor of Science Degree from the University of
Arkansas in 1990 and has been involved in the jewelry wholesale business since
1990. Mr. Gordon has also been a Certified Gemologist since 1990.
Dr. Terry Washburn became a Director during the current year and is the
President of Eurovest, Inc., ("Eurovest") a private venture capital firm.
Eurovest specializes in private placement of capital as well as providing
consulting services in strategic planning, business development and
organizational management. As the President of Eurovest, he is responsible for
screening and analyzing prospective investment candidates for final
recommendations to investors and/or Boards of Directors. Dr. Washburn served
eight years as a Board member of a private pension fund during which he served
on the investment advisory subcommittee that successfully directed the firm's
asset base, that reached 3 billion dollars. Dr. Washburn earned a Bachelor of
Business Administration from the University of Oklahoma, a Master of Divinity
from the Southwestern Baptist Theological Seminary in Ft. Worth, Texas and a
Doctor of Ministry from the Fuller Theological Seminary in Pasadena, California.
He has extensive background in accounting, marketing, strategic planning and
leadership development.
9
<PAGE> 10
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
During the fiscal year ended July 31, 2000, Mr. Gordon and International
Internet, Inc. failed to file Form 3 when they became subject to the filing
requirement on April 25, 2000. Mr. Gordon and International Internet, Inc. have
filed Form 5 to report all necessary transactions and activity.
ITEM 10. EXECUTIVE COMPENSATION
The following table shows the cash compensation of the Company's chief executive
officer and each officer whose total cash compensation exceeded $100,000, for
the fiscal year ended July 31, 2000 and the two months ended July 31, 1999. The
Company has no long-term compensation plans.
<TABLE>
<CAPTION>
NAME AND FISCAL OTHER ALL
PRINCIPAL YEAR ANNUAL OTHER
POSITION ENDED SALARY BONUS COMPENSATION COMPENSATION
<S> <C> <C> <C> <C> <C>
James G. Gordon 07/31/00 $72,000 - - -
(CEO) 07/31/99 $12,000 - - -
</TABLE>
The Company makes available certain non-monetary benefits to its executive
officers with a view to acquiring and retaining qualified personnel and
facilitating job performance. The Company considers such benefits to be ordinary
and incidental business costs and expenses. The value of such benefits did not
exceed, in the case of any named individual, 10% of the cash compensation of the
individual.
On September 1, 1999, the Company established a stock option plan, which
reserved 10,000,000 shares of the Company's common stock for issue to certain
employees, directors and consultants. The Plan provides that options may by
granted for no less than fair market value at the date of the option grant.
During the year ended July 31, 2000, options to acquire 108,000 common shares
were granted and exercised.
The chief executive officer did not receive an option during the year ended July
31, 2000 and does not have any options outstanding at July 31, 2000.
The directors did not receive any additonal compensation for their service as a
director.
10
<PAGE> 11
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates all persons who, as of September 30, 2000, the
most recent practicable date, are known by the Company to own beneficially more
than 5% of any class of the Company's voting securities and all Directors of the
Company and all Officers who are not Directors of the Company, as a group. As of
September 30, 2000, there were 94,984,408 shares of the Company's common stock
outstanding.
<TABLE>
<CAPTION>
TITLE NAME AND ADDRESS AMOUNT AND NATURE
OF OF BENEFICIAL OF BENEFICIAL % OF
CLASS OWNER OWNER CLASS
<S> <C> <C> <C>
Common James G. Gordon 67,500,000 71.06%
President, Director
111 Rhodes
Conroe, TX 77301
Common International Internet, Inc. 10,200,000 10.74%
6413 Congress Ave, Ste 240
Boca Raton, FL 33487
Common Dr. Terry Washburn -- -- %
1701 West N.W. Highway
Grapevine, TX 76051
Common All directors and executive 67,500,000 71.06%
officers as a group (two persons)
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases, on a month-to-month basis, its corporate headquarters and
its wholesale jewelry operations location from the President and chief executive
officer of the Company for a monthly rental of $2,200 ($26,400 for the fiscal
year ended July 31, 2000).
11
<PAGE> 12
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS - See Exhibit Index at Page 13
(B) REPORTS ON FORM 8-K - the Company filed one report on Form 8-K
during the fourth quarter. The report dated April 26, 2000 announced
the merger of the Company with Benton Ventures, Inc. and the
assumption, by the Company, of the Security and Exchange Commission
reporting obligations of Benton Ventures, Inc.
Financial statements included:
a) Audited financial statements of GDOL and subsidiaries as of
July 31, 1999 and March 31, 1999 and 1998 and for the periods
then ended;
b) Unaudited financial statements of GDOL and subsidiaries as of
January 31, 2000 and 1999 and for the three and six months
then ended;
c) Pro forma statements - Balance Sheet as of January 31, 2000
and Statements of Operations for the six months ended January
31, 2000, the four months ended July 31, 1999 and the year
ended March 31, 1999.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GOLDONLINE INTERNATIONAL, INC.
Date: November 8, 2000 By: /s/ James G. Gordon
------------------------------
James G. Gordon
President and Principal
Financial and Accounting Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Date: November 8, 2000 By: /s/ James G. Gordon
------------------------------
James G. Gordon
Director
Date: November 8, 2000 By: /s/ Dr. Terry Washburn
------------------------------
Dr. Terry Washburn
Director
12
<PAGE> 13
OBTAINED FROM GOLDONLINE INTERNATIONAL, INC. (THE "COMPANY") UPON REQUEST AND
PAYMENT OF THE COMPANY'S COSTS IN FURNISHING SUCH COPIES. COPIES MAY ALSO BE
OBTAINED FROM THE SECURITIES AND EXCHANGE COMMISSION FOR A SLIGHT CHARGE.
(The foregoing is not applicable to the original(s) hereof.)
EXHIBIT INDEX
<TABLE>
<CAPTION>
Securities and
Exchange
Commission Page
Exhibit No. Type of Exhibit Number
<S> <C> <C>
2 Plan of acquisition, reorganization, arrangement, N/A
liquidation, or succession
3(i) Articles of incorporation N/A
3(ii) By-laws N/A
4 Instruments defining the rights of holders, incl. Indentures N/A
7 Opinion re: liquidation N/A
9 Voting trust agreement N/A
10 Material contracts N/A
11 Statement re: computation of per share earnings N/A
14 Material foreign patents N/A
16 Letter on change in certifying accountant N/A
21 Subsidiaries of the Registrant Item 1
24 Power of Attorney N/A
27 Financial Data Schedule 28
28 Information from reports furnished to state insurance N/A
regulatory authorities
99 Additional exhibits N/A
</TABLE>
13
<PAGE> 14
STEPHEN P. HIGGINS, C.P.A.
95 SEAVIEW BLVD.
PORT WASHINGTON, NEW YORK 11050
GOLDONLINE INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2000 AND 1999 AND MARCH 31, 1999
<PAGE> 15
GOLDONLINE INTERNATIONAL, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
No.
<S> <C>
Index 2
Auditors Report 3
Consolidated Balance Sheet 4
Consolidated Statements of Operations 5
Consolidated Statement of Stockholders' Equity 6
Consolidated Statements of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-14
</TABLE>
F-2
<PAGE> 16
STEPHEN P. HIGGINS, C.P.A.
95 SEAVIEW BLVD.
PORT WASHINGTON, NEW YORK 11050
Board of Directors
Goldonline International, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Goldonline
International, Inc. and subsidiaries as of July 31, 2000 and the consolidated
statements of operations, stockholders' equity and cash flows for the year ended
July 31, 2000, the four months ended July 31, 1999 and the year ended March 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Goldonline
International, Inc. and subsidiaries as of July 31, 2000 and the results of
their operations and their cash flows for the year ended July 31, 2000, the four
months ended July 31, 1999 and the year ended March 31, 1999, in conformity with
generally accepted accounting principles.
September 20, 2000
(October 26, 2000 as to Note 9)
Port Washington, New York
F-3
<PAGE> 17
GOLDONLINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JULY 31, 2000
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,969,201
Accounts receivable, net of allowance of $11,595 86,568
Inventory 925,338
Prepaid expenses and other assets 89,450
Deferred income taxes 2,000
-----------
Total current assets 7,072,557
-----------
Property and equipment, net 157,024
Deposits 6,441
Deferred income tax 46,100
Goodwill, less accumulated amortization of $7,784 92,336
-----------
$ 7,374,458
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current installments of long-term debt and notes payable $ 211,913
Accounts payable 186,006
Accrued expenses 14,202
Due to shareholder 2,457
-----------
Total current liabilities 414,578
-----------
Long-term debt less current installments 58,930
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value. Authorized 200,000,000 shares; issued and
outstanding 94,984,408 shares 9,498
Paid-in capital 7,013,946
Deficit (122,494)
-----------
Total stockholders' equity 6,900,950
-----------
$ 7,374,458
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 18
GOLDONLINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED JULY 31, 2000, FOUR MONTHS ENDED JULY 31, 1999 AND YEAR ENDED MARCH
31, 1999
<TABLE>
<CAPTION>
YEAR FOUR MONTHS YEAR
ENDED ENDED ENDED
JULY 31, 2000 JULY 31, 1999 MARCH 31, 1999
<S> <C> <C> <C>
SALES AND REVENUES $ 1,634,962 $ 462,915 $ 1,509,028
COST OF SALES 1,023,215 229,340 814,835
------------ ------------ ------------
GROSS PROFIT 611,747 233,575 694,193
Selling, general and administrative expense 883,613 257,656 659,063
------------ ------------ ------------
EARNINGS (LOSS) FROM OPERATIONS (271,866) (24,081) 35,130
OTHER INCOME (EXPENSE)
Interest expense (30,515) (7,426) (17,542)
Interest and other income 61,268 25 165
------------ ------------ ------------
30,753 (7,401) (17,377)
------------ ------------ ------------
EARNINGS (LOSS) BEFORE INCOME TAXES (241,113) (31,482) 17,753
INCOME TAX EXPENSE (BENEFIT) (26,456) (10,501) (68)
------------ ------------ ------------
NET EARNINGS (LOSS) $ (214,657) $ (20,981) $ 17,821
============ ============ ============
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ (0.002) $ (0.000) $ 0.000
============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 89,381,618 80,014,892 75,000,000
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 19
GOLDONLINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED JULY 31, 2000, FOUR MONTHS ENDED JULY 31, 1999 AND YEAR ENDED MARCH
31, 1999
<TABLE>
<CAPTION>
Common Stock Paid-in Retained
Shares Par Value Capital Earnings (Deficit) Total
---------- ------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, April 1, 1998 500 $ 1,000 $ -- $ 95,323 $ 96,323
Net earnings -- -- -- 17,821 17,821
---------- ------- ----------- --------- -----------
Balance March 31, 1999 500 1,000 -- 113,144 114,144
Recapitalization 74,999,500 6,500 (6,500) -- --
---------- ------- ----------- --------- -----------
75,000,000 7,500 (6,500) 113,144 114,144
Acquire Goldonline International, Inc. 1,196,408 120 120
Acquire Gold Online.com, Inc. 10,000,000 1,000 24,000 25,000
Common stock sold for cash 800,000 80 199,920 200,000
Net loss -- -- -- (20,981) (20,981)
---------- ------- ----------- --------- -----------
BALANCE, July 31, 1999 86,996,408 $ 8,700 $ 217,420 $ 92,163 $ 318,283
Options exercised for cash 50,000 5 1,695 -- 1,700
Options exercised for services 58,000 5 18,119 -- 18,124
Common shares sold for cash 5,080,000 508 5,976,992 -- 5,977,500
Warrants exercised for cash 1,600,000 160 799,840 -- 800,000
Merger with Benton Ventures 1,200,000 120 (120) -- --
Net loss -- -- $ (214,657) (214,657)
---------- ------- ----------- --------- -----------
BALANCE, July 31, 2000 94,984,408 $ 9,498 $ 7,013,946 $(122,494) $ 6,900,950
========== ======= =========== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 20
GOLDONLINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED JULY 31, 2000, FOUR MONTHS ENDED JULY 31, 1999 AND YEAR ENDED MARCH
31, 1999
<TABLE>
<CAPTION>
YEAR FOUR MONTHS YEAR
ENDED ENDED ENDED
JULY 31, 2000 JULY 31, 1999 MARCH 31, 1999
<S> <C> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Net earnings (loss) $ (214,657) (20,981) 17,821
Adjustments to reconcile net earnings (loss) to net
cash used in operating activities:
Depreciation and amortization 47,335 11,523 22,681
Deferred income taxes (26,456) (10,501) (5,452)
Common stock issued for services 18,125 -- --
Provision for bad debts 11,595 -- --
Accounts receivable (67,164) (12,091) (4,422)
Inventory (512,130) (125,401) (11,898)
Other assets (85,250) -- (3,691)
Accounts payable 46,550 43,482 (17,472)
Accrued expenses (1,750) 5,944 (10,525)
----------- --------- --------
Net cash used in operating activities (783,802) (108,025) (12,958)
----------- --------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditures (23,628) (6,035) (15,595)
----------- --------- --------
Net cash used in investing activities (23,628) (6,035) (15,595)
----------- --------- --------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Proceeds from sale of common stock 6,779,200 200,000 --
Loan proceeds 50,000 50,000 98,000
Repayment of long-term debt and notes payable (77,440) (106,721) (60,350)
Repayment of amounts due shareholder (9,555) (4,279) (6,776)
----------- --------- --------
Net cash provided by financing activities 6,742,205 139,000 30,874
----------- --------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,934,775 24,940 2,321
CASH AND CASH EQUIVALENTS, beginning of period 34,426 9,486 7,165
----------- --------- --------
CASH AND CASH EQUIVALENTS, end of period $ 5,969,201 $ 34,426 $ 9,486
=========== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 21
GOLDONLINE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED JULY 31, 2000, FOUR MONTHS ENDED JULY 31, 1999 AND YEAR ENDED MARCH
31, 1999 (CONTINUED)
<TABLE>
<CAPTION>
YEAR FOUR MONTHS YEAR
ENDED ENDED ENDED
JULY 31, 2000 JULY 31, 1999 MARCH 31, 1999
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes are as follows:
Interest $26,427 $ 7,426 $17,542
Income taxes $ 5,384 $ -- $13,640
Noncash investing and financing activities are as follows:
Acquisition of equipment in exchange for long-term debt $19,462 $ 19,983 $42,145
Common stock issued to acquire Gold Online.com, Inc. $ 25,000
Common stock issued to acquire Goldonline International, Inc. $ 120
Note payable assumed to acquire Goldonline International, Inc. $100,000
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 22
GOLDONLINE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Goldonline International, Inc. (formerly Transun International
Airways, Inc.) ("GDOL") and its wholly owned subsidiaries Con-Tex
Silver Imports, Inc. ("Silver") and Gold Online.com, Inc. ("GO.com")
(collectively referred to as the "Company"). All material
intercompany accounts and transactions have been eliminated.
(b) ORGANIZATION
GDOL was incorporated May 22, 1996 in Delaware and until June 1999
was a development stage company with plans to establish itself as an
air transport company providing non-scheduled air service (charter
flights) for tour operators, charter brokers, cruise line casinos,
theme parks and theme attractions.
Silver was incorporated September 12, 1994 in Texas. GO.com was
incorporated on February 3, 1999 in Delaware.
On June 10, 1999, GDOL acquired all of the issued and outstanding
common stock of Silver and GO.com. For accounting purposes, the
acquisitions have been treated as the acquisition of Silver and
GO.com by GDOL with Silver as the acquiror (reverse acquisition).
The historical financial statements prior to June 10, 1999 are those
of Silver.
(c) MERGER
On April 20, 2000, pursuant to an agreement and plan of
reorganization dated April 11, 2000, Goldonline International, Inc.
("GDOL" or the "Company") acquired 100% of the issued and
outstanding common stock of Benton Ventures, Inc. ("Benton"), a
Delaware corporation, in exchange for 1,200,000 newly issued common
shares of GDOL. On April 25, 2000, the Board of Directors of GDOL
elected to merge Benton into GDOL pursuant to Section 253 of
Delaware's General Corporate Laws. As a result of the merger, GDOL
will be the surviving company and assumes the reporting
responsibilities under successor issuer status as more fully
detailed in Section 12(g)(3) of The Securities Exchange Act of 1934.
Benton was a dormant company and its assets and liabilities were
insignificant; accordingly, no pro forma information is presented.
(d) BASIS OF PRESENTATION
Upon the acquisition of GO.com and Silver by GDOL, GO.com and Silver
changed their year-end to July 31, from December 31 and March 31,
respectively, to conform to the year-end of GDOL, effective with the
period ended July 31, 1999. Accordingly, the financial statements
include the year ended July 31, 2000, the four months ended July 31,
1999 and the year ended March 31, 1999.
(e) NATURE OF BUSINESS
GDOL is a holding company principally engaged in acquiring and
developing businesses. Silver is a company involved in both the
wholesale and retail jewelry business. GO.com is establishing an
Internet jewelry business.
F-9
<PAGE> 23
(f) RISKS AND UNCERTAINTIES
The Company is subject to all the risks inherent in an early stage
company in the Internet industry. These risks include, but are not
limited to, a limited operating history, limited management
resources, dependence upon consumer acceptance of the Internet,
Internet related security risks and the changing nature of the
electronic commerce industry. The Company's operating results may be
materially affected by the foregoing factors.
(g) CASH EQUIVALENTS
The Company considers all liquid investments with original
maturities of three months or less to be cash equivalents. At July
31, 2000, cash equivalents consist of money fund investments, money
market accounts and business checking accounts.
(h) INVENTORIES
Inventories consist primarily of silver jewelry and are carried at
the lower of average cost or market.
(i) MACHINERY AND EQUIPMENT
Owned machinery and equipment are stated at cost and depreciated
using the straight-line method over the estimated useful lives of
the respective assets.
(j) GOODWILL
Costs in excess of the fair value of net assets acquired are
amortized over a fifteen-year period on a straight-line basis. The
carrying value of goodwill is reviewed if the facts and
circumstances suggest that it may be impaired. If this review
indicates that goodwill will not be recoverable, the Company's
carrying value of the goodwill would be reduced.
(k) INCOME TAXES
Deferred income taxes are recognized for income and expense items
that are reported for financial purposes in different years than for
income tax purposes.
(l) REVENUE AND COST RECOGNITION
Sales revenues are recognized when the product is shipped. Cost of
sales, which is recognized simultaneously with the recognition of
sales, is comprised of the cost of materials and indirect costs
incurred during the manufacturing process.
(m) NET EARNINGS (LOSS) PER SHARE
Net earnings (loss) per share amounts are computed using the
weighted average number of shares outstanding during the period.
Fully diluted earnings (loss) per share is presented if the assumed
conversion of common stock equivalents results in material dilution.
(n) USE OF ESTIMATES
The process of preparing consolidated financial statements in
conformity with generally accepted accounting principles requires
the use of estimates and assumptions regarding certain types of
assets, liabilities, revenues and expenses. Such estimates primarily
relate to unsettled transactions and events as of the date of the
consolidated financial statements. Accordingly, upon settlement,
actual results may differ from estimated amounts.
(o) FAIR VALUE DETERMINATION
Financial instruments consist of cash, cash investments, accounts
receivable, accounts payable, accrued liabilities, notes payable and
long-term debt. The carrying amount of these financial instruments
approximates fair value due to their short-term nature or the
current rates which the Company could borrow funds with similar
remaining maturities.
F-10
<PAGE> 24
2. ACQUISITION
On June 10, 1999, GDOL issued 75,000,000 of its common shares to acquire
all of the common shares of Silver. Silver is both a wholesale and retail
marketer of jewelry, primarily silver. For accounting purposes, the
acquisition has been treated as the acquisition of Silver by GDOL with
Silver as the acquiror (reverse acquisition). Simultaneously, GDOL issued
10,000,000 of its common shares to acquire all of the common shares of
GO.com. GO.com is a new Internet Company and it has the domain name Gold
Online.com. A value of $25,000 was recorded for this acquisition. Pro
forma information has not been presented as GDOL had no prior continuing
operations and GO.com had only recently commenced operations.
3. RELATED PARTY TRANSACTIONS
Silver leases its corporate headquarters from the principal shareholder of
the Company at the rate of $2,200 per month. This amounted to $26,400
during the year ended July 31, 2000, $8,800 during the four month period
ended July 31, 1999 and amounted to $26,400 during the year ended March
31, 1999.
The Company had received loans from its principal shareholder. The balance
owed was $2,457 at July 31, 2000.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at July 31, 2000:
<TABLE>
<S> <C>
Equipment and store furnishings $ 55,725
Transportation equipment 156,125
Web site 37,225
Leasehold improvements 1,035
---------
250,110
Less accumulated depreciation (93,086)
---------
$ 157,024
=========
</TABLE>
5. LONG-TERM DEBT AND NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<S> <C>
Note payable to bank with interest at 10% $126,400
payable on demand or January 1, 2001 if no
demand is made; accrued interest payable
monthly; collateralized by all assets of
Silver and guaranteed by the principal
shareholder of the Company
Note payable to the brother of the principal 50,000
shareholder of the Company due on demand after
July 23, 2000 with interest at 8%, unsecured,
convertible into common stock of the Company
at $.01 per share
</TABLE>
F-11
<PAGE> 25
<TABLE>
<S> <C>
Notes payable to companies in monthly
installments aggregating $2,534, including
interest ranging from 9.8% to 11.98% through
January 2005; collateralized by
transportation equipment 94,443
--------
270,843
Current installments of long-term debt
and notes payable 211,913
--------
Long-term debt less current installments $ 58,930
========
</TABLE>
The aggregate maturities of long-term debt for the periods ending July 31,
2005 are as follows: 2001 - $211,913, 2002 $38,005, 2003 - $8,479, 2004 -
$9,534 and 2005 - $2,912.
6. INCOME TAXES
Income tax expense (benefit) for the year ended July 31, 2000, the four
months ended July 31, 1999 and the year ended March 31, 1999 consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
<S> <C> <C> <C>
July 31, 2000 - Federal $ -- ($26,456) ($26,456)
======== ======== ========
July 31, 1999 - Federal $ -- ($10,501) ($10,501)
======== ======== ========
March 31, 1999 - Federal $ 5,384 (5,452) (68)
======== ======== ========
</TABLE>
Actual income tax expense (benefit) applicable to earnings (loss) before
income taxes is reconciled with the "normally expected" federal income tax
expense (benefit) as follows:
<TABLE>
<CAPTION>
JULY 31, JULY 31, MARCH 31,
2000 1999 1999
<S> <C> <C> <C>
"Normally expected" income tax
expense (benefit) ($81,978) ($10,704) $ 6,036
Deferred tax asset valuation
Allowance 54,000 -- --
Surtax exemption -- -- (6,816)
Non-deductible entertainment and other 1,522 203 712
-------- -------- -------
($26,456) ($10,501) ($ 68)
======== ======== =======
</TABLE>
F-12
<PAGE> 26
The deferred income tax assets and liabilities at July 31, 2000 are
comprised of the following:
<TABLE>
<CAPTION>
CURRENT NONCURRENT
<S> <C> <C>
Allowance for bad debts $ 4,000 --
Net operating loss carryforwards -- 103,900
--------- ---------
4,000 103,900
Less valuation allowance (2,000) (52,000)
--------- ---------
Deferred income tax asset 2,000 51,900
Deferred income tax liability - asset basis -- (5,800)
--------- ---------
Net deferred income tax assets (liabilities) $ 2,000 $ 46,100
========= =========
</TABLE>
7. CAPITAL STOCK
The Company sold 200,000 units (The "Units") at $1.00 per Unit. Each Unit
consisted of 4 shares of common stock, par value $.001, and 1 warrant.
Each warrant entitled the holder to purchase eight shares of the common
stock of the Company at a purchase price of $.50 per share.
Under the terms of the initial offering, the warrants were scheduled to
expire on September 30, 1999. The exercise period for the warrants was
extended until February 29, 2000.
At July 31, 1999, warrants for the purchase of 1,600,000 shares of the
Company's common stock at $.50 per share had been issued and all were
outstanding. During the year ended July 31, 2000, all warrants were
exercised.
On September 1, 1999, the Company established a stock option plan, which
reserved 10,000,000 shares of the Company's common stock for issue to
certain employees, directors and consultants. The Plan provides that
options may be granted for no less than fair market value at the date of
the option grant. During the year ended July 31, 2000, options to acquire
108,000 common shares were granted and exercised.
8. COMMITMENTS
The Company operates two retail jewelry stores in addition to its
corporate headquarters, which also houses its wholesale jewelry operations
and leases show space on a month-to-month basis. Rental expense was
$124,062 during the year ended July 31, 2000, $58,554 during the
four-month period ended July 31, 1999 and $215,531 during the year ended
March 31, 1999. Minimum rental commitments under all non-cancelable leases
with an initial term in excess of one year are payable as follows: 2001 -
$12,819, 2002 - $13,201, 2003 - $8,561. The majority of the Company's
leases are month-to-month.
9. SUBSEQUENT EVENT
On October 26, 2000, the Company completed the acquisition of the business
and assets of HMS Jewelry Co., Ltd., a Texas limited partnership, and HMS
Operating Company, a Texas corporation, (collectively "HMS") for $7
million, $4.5 million in cash and $2.5 million in convertible secured
promissory notes. The notes bear interest at eight percent (8%) per annum
and require monthly payment of interest. The notes are convertible into
the Company's common stock at $1.25 per share, as adjusted for any stock
splits or combinations. One note in the amount
F-13
<PAGE> 27
of $1.25 million is due October 15, 2001, and the other note in the amount
of $1.25 million is due October 15, 2002.
HMS is a wholesale jewelry distributor with headquarters in Dallas, Texas.
HMS primarily sells gold products to a network of over 30,000 retail
jewelers, through a catalog and telephone ordering system. For the year
ended July 31, 2000, unaudited pro forma combined sales would have been
$16,200,000, net earnings would have been $492,000 and earnings per share
would have been $0.006.
The Company has sold 1.1 million shares of common stock for net proceeds
of $1,567,500 and is utilizing these funds plus existing cash reserves to
make the initial cash payment.
F-14
