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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 2000
SEC FILE NO.: 0-31137
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B)
OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
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KEO INTERNATIONAL, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-4129717
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
630 THIRD AVENUE, 5TH FLOOR
NEW YORK, NEW YORK 10017 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(212) 983-6900
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS TO BE SO REGISTERED: EACH CLASS IS TO BE REGISTERED:
<S> <C>
Not Applicable Not Applicable
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
FORWARD LOOKING STATEMENTS
The statements contained in this registration statement on Form 10-SB that
are not historical facts are "forward-looking" statements. Such forward-looking
statements may be identified by, among other things, the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy of future operations that involve
risks and uncertainties. These "forward-looking" statements include:
o statements regarding anticipated growth in revenue, gross margins and
earnings;
o statements regarding our current business strategy;
o our projected sources and uses of cash; and
o our plans for future development and operations.
These statements are forward-looking in nature and involve a number of
risks and uncertainties. Actual results may differ materially. Among the factors
that could cause results to differ materially are:
o the availability of sufficient capital to finance our business strategy
on terms satisfactory to us;
o competitive factors;
o changes in labor, equipment and capital costs;
o changes in regulations affecting our business;
o future acquisitions or strategic partnerships;
o general business and economic conditions; and
o other factors described from time to time in our reports filed with the
Securities and Exchange Commission.
We caution readers not to place undue reliance on any such forward-looking
statements and, as such, speak only as of the date made.
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
We are a marketer and distributor of specialty medical equipment. Our
primary customer target groups are physicians, hospitals, clinics, and medical
schools throughout the world. We currently market and distribute medical imaging
systems.
In May 2000, we acquired our first distribution contract from Com S.A., a
French-based company, which Com S.A. will continue to manage under a management
agreement between us and Com S.A. Com S.A. has been in business since June 1990
marketing medical imaging systems to physician offices and hospitals throughout
the world.
INDUSTRY
According to a 1999 United States Department of Commerce report, total
market demand in France for medical equipment in 1998 was US$3.80 billion and is
anticipated to reach US$3.94 billion in 1999 with a 4% annual growth rate from
1999 to 2001. This represented about 5% of the world market. The report also
stated that United States consumption of medical equipment was 45% of the world
consumption, representing approximately US$34 billion. The report stated that
the best sales prospects for medical equipment include non-invasive surgery,
orthopedic and
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disposable medical equipment. Furthermore, the strain on public budgets has
re-emphasized the importance of the price-quality factor as well as a need for
more cost-effective equipment.
Revenues of the medical products distribution industry are estimated to be
growing as a result of a growing and aging population, increased health care
awareness, proliferation of medical technology and testing, and expanding
third-party insurance coverage. In addition, the physician market is benefitting
from the shift of procedures and diagnostic testing from hospitals to alternate
sites, particularly physician offices, despite a migration of significantly
lower hospital medical product pricing into the physician office market.
Economic and political forces continue to drive health care cost
containment. Successful strategies to control expenses will include minimally
invasive procedures which minimize patient trauma, enhance recovery and
ultimately reduce medical intervention and lengthy hospital stays. Procedures
are needed that help detect diseases at their earliest and most treatable
stages. Procedures that have traditionally taken place in an operating room need
to be safely and effectively performed in outpatient settings, thereby reducing
costs and increasing patient convenience. All these procedures require the
ability to see inside the body without using a scalpel. Imaging systems bring
into view abnormalities that are only millimeters in size. Specialized equipment
allows physicians to evaluate life-threatening cardiac arrhythmias without open
heart surgery. Emergency room radiographic units minimize patient trauma.
These three factors--the growth of the medical equipment market, increasing
diagnostic testing and procedures being performed out side the traditional
hospital environment, and medical cost containment programs, support what we
believe to be a positive economic market for cost-effective medical imaging
systems. These systems provide high quality medical care without the costly
invasive surgical techniques previously necessary to make routine diagnoses.
OUR STRATEGY
Our goals are to be a leading distributor and marketer of specialty medical
equipment to physicians, hospitals, clinics, and medical schools throughout the
world and to enhance operating performance. Our strategy is intended to:
o increase revenue and market share by capitalizing on our competitive
strengths to increase sales to both existing and new customers through
our operating strategy; and
o to expand our core business through our growth strategy.
The key elements of our strategies are as follows:
Operating Strategy
o Offer a broad product line emphasizing exclusive products. We seek to
establish exclusive distribution and marketing arrangements for selected
medical equipment. In addition to products relating to medical imaging
systems, we anticipate expanding our product line to include hypodermic
needle disposal equipment. We believe that our selling efforts, sales
force, and customer base provide manufacturers with a unique sales
channel through which to distribute new and existing products and
technology that require consultative selling.
o Enhance selling capabilities. We believe that our sales force is our
most valuable corporate asset. We intend to focus not only on the
recruitment of sales personnel with superior sales aptitude, but also on
the initial and continued development of our sales force. We believe
investment in personnel and training will enable us to provide
high-quality service to our customers, offer sophisticated product lines,
and attract manufacturers that desire a means of rapidly bringing new
products and technology to market.
o Provide differentiated, high quality service. We believe our success
will rely on our ability to provide superior customer service--providing
our customers timely and accurate information and prompt service.
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Growth Strategy
o Form strategic relationships. We believe that we can increase awareness
of our products through relationships with other providers of medical
products, such as pharmaceuticals.
o Implement our e-commerce strategy. We intend to develop a business to
business presence by delivering sales and information to our customers by
the Internet.
o Expand through acquiring complementary businesses. We intend to
aggressively pursue local, regional, and other distributors in markets
where we can leverage our sales expertise, expand our geographic
coverage, add service and sales competence, and gain market share.
PRODUCTS/SUPPLIERS
Mecaserto Distribution Agreement
We have the exclusive right to market and sell certain products
manufactured by Macaserto, a France-based manufacturer of medical imaging
systems. These products are:
o SIMICS II
o PHEBUS SIMULATOR
o PHEBUS SCANVIEW NT
The SIMICS II and the Phebus Simulator are medical imaging systems for use
in radiation treatment for cancer patients. These systems are designed to
efficiently and accurately produce high quality images of the tumor in
preparation of radiation treatment. The Phebus Scanview NT is medical imaging
system software. The physician determines the location on the patient to be
scanned and the software automatically manages the motion of the patient and
equipment to produce the images.
Our exclusive territory extends throughout most of Europe, North and South
America and Asia. However, we can not market and distribute competitive products
in our exclusive territory. Mecaserto has the exclusive right to distribute its
products in France.
In addition, we have agreed to assist Mecaserto in selling its products in
France and to the French government. These services include:
o assisting with market studies;
o assisting in seeking new customers and target markets;
o assisting in preparing cost estimates; and
o assisting in preparing government contract bids.
In return for our assistance, Mecaserto has agreed to pay us 2.5% of sales
for Mecaserto's products and 5% of sales for spare parts in France and to the
French government.
Our exclusive arrangement, however, is not exclusive of rights that Siemens
A.G., one of the world's largest providers of health-care equipment. Siemens
A.G. has an agreement with Mecaserto to market and sell Mecaserto's products
that utilizes Siemens' technology.
Our agreement with Mecaserto terminates on June 29, 2002. The agreement
renews annually unless either party elects to terminate the agreement at least
six months before the termination date. The agreement also provides for
Mecaserto to set periodic sales objectives based on the prior periods' Mecaserto
sales.
Through June 30, 2000, the dollar volume of goods sold to date under the
distribution agreement by Com S.A. was approximately FF11 million, or
approximately $1.6 million based on the exchange rate of one United States
dollar for 6.87 French Francs as of July 5, 2000, which met the sales
objectives. We have already exceeded our sales objective of FF14 million, which
translates to $2.04 million based on the exchange rate, for the six months
ending December 31, 2000.
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Management Agreement
We have hired Com S.A. to manage the Mecaserto distribution agreement.
Under the management agreement, we will pay Com S.A. 20% of the difference
between the revenue from derived from the distribution agreement less the costs
and expenses with respect to the distribution agreement. In the event we breach
the management agreement, Com S.A. may repurchase the Mecaserto distribution
agreement by returning to us the 2,831,020 shares of our common stock originally
issued to Com S.A. Because the management agreement does not reduce Com S.A.'s
compensation for our administrative and other expenses not related to the
distribution agreement, we may have to pay Com S.A. even though we are operating
at a loss.
CUSTOMERS
Our target customers are physicians, hospitals, clinics, and medical
schools. Most of the customers will use the products in their healthcare
practice, as opposed to buying the products for resale.
MARKETING AND DISTRIBUTION
We market to customers through our sales team through a variety of media
including medical trade shows, medical conferences and in-session meetings. We
consider our sales team to be our most significant asset.
Orders are processed by obtaining a written order from a customer. We send
the order to the manufacturer who ships directly to the customer. The customer
pays Mecaserto. Mecaserto pays Com S.A. the commission owed under the
distribution agreement. Finally, Com S.A. keeps its 20% of the commission and
pays the balance to us.
RECRUITMENT AND DEVELOPMENT
We believe that a talented sales force is important to our success.
Accordingly, we intend to invest in recruiting, training and developing these
employees. We intend to recruit new sales personnel as we obtain additional
distribution contracts and relationships. Our proposed recruitment program
includes the following:
o Recruitment. We intend to develop and implement a recruitment program to
help provide us with a source of mobile and committed sales
representatives.
o Technical Service Specialists. We believe that superior customer service
is critical to our success. We intend to implement an intensive service
training program in which our sales representatives will be
participating.
o Continued Development. We believe that continued development of our
sales representatives is important to our success. We encourage our sales
representatives to participate in industry-accredited self-study
programs. Every sales representative will attend local sales meetings,
annual sales and marketing meetings, and key vendor product conferences.
COMPETITION
We operate in a highly competitive environment. Our principal competitors
are the few multi-market medical distributors that are full-line, full-service
medical supply companies, most of which are international in scope. These
companies have sales representatives competing directly with us, are
substantially larger in size, and have substantially greater financial resources
than us.
There are also numerous local dealers that distribute medical equipment
within the same market as us. Most local dealers are privately owned and operate
with limited product lines. We also compete with manufacturers that sell their
products both to distributors or directly to users, including office-based
physicians and hospitals.
Our largest competitor is Siemens, A.G., one of the world's largest
providers of health-care equipment, focusing on imaging systems, electromedicine
and audiological devices.
Customers place high value on reliability, ease of doing business and
speed. As more healthcare practices consolidate into larger, more geographically
spread organizations, we expect that there will be a growing number of large
customers that will require their distributor of choice to be able to reliably
service many locations.
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We currently have negligible market share in the medical products
distribution industry. Our ability to achieve market penetration is dependent
upon our ability to acquire distribution rights for other products, which, as
yet, have not been identified.
REGULATORY MATTERS
General
Governments extensively regulate the provision of medical devices.
Applicable laws and regulations in jurisdictions where we distribute our
products require us to meet various standards relating, among other things, to
licensure, personnel, maintenance of proper records, equipment and quality
assurance programs.
We believe that we substantially comply with applicable laws where we
distribute our products. However, if a government finds that we have not
complied with these laws, then we could be required to change our way of
operating jurisdiction, and this could have a negative impact on our business.
We believe that the health care services industry will continue to be subject to
extensive government regulation. We cannot predict the scope and effect of
future regulation on our business.
United States Law
For example, the U.S. Federal Food, Drug, and Cosmetic Act generally
regulates the manufacture of drug and medical devices shipped in interstate
commerce, including such matters as labeling, packaging, storage and handling of
such products.
Under Medicare, Medicaid, and other government-funded health care programs,
federal and state governments enforce a federal law called the Anti-Kickback
Statute. The Anti-Kickback Statute prohibits any person from offering or paying
any type of benefit to another person in exchange for the referral of items or
services covered by Medicare, Medicaid or other federally-subsidized program.
Remuneration prohibited by the Anti-Kickback Statute includes the payment or
transfer of anything of value. Many states also have similar anti-kickback
statutes.
In an effort to combat health care fraud, the Health Insurance Portability
and Accountability Act of 1996, also called HIPAA, was enacted to, among other
things, broaden the scope of certain fraud and abuse laws, extended criminal
penalties for Medicare and Medicaid fraud to other federal health care programs,
and expanded the authority of the Office of Inspector General to exclude persons
and entities from participating in the Medicare and Medicaid programs. HIPAA
also extended the Medicare and Medicaid civil monetary penalty provisions to
other federal health care programs, increased the amounts of civil monetary
penalties, and established a criminal health care fraud statute.
French Law
Under the French healthcare system, virtually the entire population of
France is covered by the National Health Program in which both public and
private hospitals are subject to government approval for their location, their
development and their major medical expenditures. In addition, the French
government, like other governments of developed countries, has imposed controls
on health expenditures.
Other Laws
We are also subject to regulation in the other countries where we market
our products. Many of the laws and regulations applicable in such countries are
similar to those described above. The national health or social security
organizations of certain countries require the products distributed by us to be
qualified before they can be marketed in those countries. Our products are
approved for distribution in the countries where we currently distribute our
products. The Mecaserto imaging systems are pending approval in Brazil. We can
not determine whether Brazil will approve any or all of these products.
Despite our efforts to meet comply with the laws and regulations of the
countries where we market and sell our products and services, a government
agency may require us to change our practices. If an agency were to take such a
position, it could adversely affect our business.
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Health Care Legislation
Laws and regulations regarding the sale and distribution of medical
equipment and devices in the countries where we market and sell our products are
subject to change. We cannot predict what impact, if any, such changes might
have on our business. Any new legislation or regulations, or new interpretations
of existing statutes and regulations, governing the manner in which we provide
our products and services could have a material impact on our business. In
addition, our physician and other health care customers are subject to
significant regulation. Any changes to the laws and regulations that impact
their practices may have a material adverse impact on our business.
EMPLOYEES
As of June 30, 2000, we had five part-time employees. All of our operations
are non-union.
RISK FACTORS
We have no operating history or revenues. We are a development-stage
enterprise that has no operating history or revenues upon which an evaluation of
our business and prospects can be based. We must, therefore, be considered to be
subject to all of the risks inherent in the establishment of a new business
enterprise, including the weight of prospective development and marketing costs,
along with the uncertainties of being able to effectively market our products
and services. Our prospects must be considered in light of the risks and delays
frequently encountered by new businesses in highly competitive industries. The
auditor's report to the financial statements accompanying this Form 10-SB
contains a qualification that we may not continue as a going concern. We can not
assure you that we will meet our expectations or objectives, that we will
generate significant revenues at all, or, if we are able to generate revenues,
that we will ever become profitable.
We may be unable to meet our future capital requirements, which we are
likely to be highly dependent upon. Based on our current operating plan, we
anticipate that cash generated through revenues will allow us to meet our
current cash requirements. Because we believe that it is necessary to build
market share rapidly in order to effectively compete in our market, we intend to
spend a significant percentage of our working capital on increasing our sales
team and expanding our product line. Any inability or delay in closing any
required financing is likely to leave us with insufficient cash to meet the
requirements of our aggressive budget and impede our ability to pursue our
business plan. It may turn out, further, that we require additional funding
sooner than anticipated. In addition, development opportunities and other
contingencies may arise, which could require additional capital. Any inability
to obtain required future financing would likely have a materially adverse
effect on our business and could require that we significantly reduce or suspend
our operations.
We may not be able to successfully manage our business or achieve
profitability. We expect that our sales and marketing, operations and
administrative expenses will increase in the future. As a result, we will need
to generate significant revenues to achieve and maintain profitability. We can
not assure you that this will occur, or, if it does occur, that any such
revenues will be sufficient to pay our expenses, or that any such revenues will
continue to grow, or that we will achieve profitability. To do so, we believe
that we will need to do the following:
o Expand our product lines
o Increase the size of our sales force; and
o Extend our presence in local markets.
If revenues grow slower than we anticipate, or operating expenses exceed
our expectations or cannot be adjusted accordingly, it is likely to have a
materially adverse effect on our business.
We depend on our exclusive distributorship agreement with Mecaserto. We
currently have one distribution agreement--the distribution agreement with
Mecaserto. Until we establish distribution agreements with other manufacturers,
sales of Mecaserto's products will account for all of our revenues. Furthermore,
if we are unable to meet our obligations to Com S.A. under the Management
Agreement, Com S.A. has the right to purchase the Mecaserto contract from us by
returning to us 2,831,020 shares of our common stock.
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We are dependent on Com S.A. to manage the Mecaserto contract and generate
revenues and cash flow in the short term. Until such time that we are able to
develop and maintain a sales force, we are dependent on Com S.A. to manage and
perform the Mecaserto contract. In addition, all of the revenues and cash flow
from operations is dependent on Com S.A. marketing and distributing Mecaserto's
products until such time that we have obtained additional distribution contracts
with other suppliers. We can not assure that we will be successful in either
developing and maintaining a sales force or obtaining additional distribution
contracts.
One of our key officers is employed by Com S.A. and may have a conflict
with us. Claude Delranc, our Executive Vice President and a director, is an
employee of Com S.A. Mr. Delranc's affiliation with Com S.A. may conflict with
our goals, principally because:
o Com S.A. will likely continue to do business distributing products for
manufacturers other than Mecaserto and the time devoted by Mr. Delranc to
our business may be limited by the time spent on the business of Com
S.A.; and
o Com S.A. may have the right to retain the Mecaserto distribution
agreement if we should fail to meet our obligations under the Management
Agreement with Com S.A.
We are dependent on our key personnel. Other than Ralph Brown, our
President and Chief Executive Officer, to whom we have agreed to pay Cdn $3,000
per year, none of our officers or directors will be compensated by us at this
time. Each of our officers and directors has other full time employment and will
be available to participate in management decisions only on a part time or as
needed basis. The time which our officers devote to our business affairs and the
skill with which they discharge their responsibilities, could have an impact on
our success.
We do not have written employment contracts with any of our officers or
employees. Our business may suffer if we are unable to retain key personnel.
The loss of the services of any of our executive officers, including Ralph
Brown, our President and Chief Executive Officer, could adversely affect our
business and prospects for the future.
The voting agreement gives Johanna Bonnier voting power over approximately
51% of our voting shares. The voting agreement between Com S.A. and Johanna
Bonnier gives Ms. Bonnier control over the outcome of matters submitted to the
stockholders for approval, including the election of our directors. As a result,
Ms. Bonnier will have control over our board of directors and significant
influence over our affairs and management.
Our rate of revenue growth will be adversely affected if we are unable to
make future acquisitions. If we are unable to make acquisitions, we may not
meet our revenue growth expectations and our business, financial condition, and
results of operations could be materially and adversely affected. While we are
not currently a party to any agreements or understandings for any material
acquisitions, we expect to acquire both domestic and foreign companies as part
of our growth strategy. However, we may be unable to continue to identify
suitable acquisition candidates. We compete with other companies to acquire
businesses that distribute medical equipment and supplies. We expect this
competition to continue to increase, making it more difficult to acquire
suitable companies on favorable terms.
Acquisitions may decrease our shareholders' percentage ownership in our
company and require us to incur debt. We may issue equity securities in future
acquisitions that could be dilutive to our shareholders. We also may incur
additional debt and amortization expense related to goodwill and other
intangible assets in future acquisitions. This additional debt and amortization
expense may reduce significantly our profitability and materially and adversely
affect our business, financial condition, and results of operations.
We may be exposed to product liability claims. Although we do not
manufacture products, the manufacture and distribution of medical equipment
entails inherent risks of product liability, including claims of defective
construction of the medical equipment, defective design of the medical equipment
and incorrect instructions in the operation of the equipment. We currently do
not maintain product liability insurance and we presently do not intend to
purchase such insurance. If we were found to be responsible for a products
liability claim, our business and operations could be materially adversely
effected.
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We need to hire and retain qualified sales representatives to generate
sales growth. Our ability to retain existing customers and attract new
customers is dependent upon:
o hiring and developing new sales representatives;
o adding, through acquisitions, established sales representatives whose
existing customers become our customers; and
o retaining those sales representative.
An inability to adequately hire or retain sales representatives could limit
our ability to expand our business and grow sales.
Upon the departure of a sales representative, we face the risk of losing
the representative's customers. This is particularly a risk where the
representative goes to work as a sales representative for a competitor. We have
not required our sales representatives to execute a noncompetition agreement as
a condition of employment.
We may become exposed to risks of managing and expanding operations in
foreign countries. We intend to expand our operations to serve our target
customers globally. As we expand internationally, we will need to hire, train
and retain qualified personnel in countries where language, cultural or
regulatory impediments may exist. We cannot assure you that vendors, physicians
or other involved parties in foreign markets will accept our services and
business practices. The cost of medical care in many countries is funded by the
government, which may significantly impact spending budgets in certain markets.
Doing business internationally is subject to inherent risks, including:
o political and economic instability;
o difficulties in staffing and managing foreign operations;
o difficulties in accounts receivable collection;
o fluctuating currency exchange rates;
o costs associated with localizing service offerings in foreign countries;
o unexpected changes in regulatory requirements;
o difficulties in the repatriation of earnings; and
o burdens of complying with a wide variety of foreign laws and labor
practices.
We may not be able to compete successfully with other medical equipment
companies. The medical equipment distribution market is very competitive. Our
principal competitors are the few full- line and full-service multi-market
medical distributors, most of which are international in scope. Many of these
companies:
o have sales representatives competing directly with us;
o are substantially larger in size; and
o have substantially greater financial resources than we do.
We also compete with:
o local dealers; and
o certain manufacturers that sell their products both to distributors and
directly to users such as office-based physicians.
Most local dealers are privately owned and operate within limited product
lines.
We face pricing and customer credit quality pressures due to reduced
spending budgets by health care providers. The cost of a significant portion of
medical care is funded by government and private insurance programs. In recent
years, government-imposed limits on reimbursement of hospitals and other health
care providers have significantly impacted spending budgets in certain markets
within the medical-products industry. In addition, private third-party
reimbursement plans are also developing increasingly sophisticated methods of
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controlling health care costs. Therefore, we cannot assure you that the purchase
of our medical products will not be limited or reduced or that we will be able
to collect our receivables in a timely manner, if at all. This may adversely
affect our future sales and income.
Our common stock may, and likely will be, subject to the penny stock
rules. Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by certain rules adopted by the Securities and Exchange
Commission. Penny stocks generally are equity securities with a price of less
than $5.00 other than securities registered on certain national securities
exchanges or quoted on Nasdaq provided that current price and volume information
with respect to transactions in such securities is provided by the exchange or
system. The rules require that, prior to a transaction in a penny stock not
otherwise exempt from the rules, the broker-dealer must:
o deliver a standardized risk disclosure document that provides information
about penny stocks and the risks in the penny stock market;
o provide the customer with current bid and offer quotations for the penny
stock;
o disclose the compensation of the broker-dealer and its salesperson in
connection with the transaction;
o provide the customer monthly account statements showing the market value
of each penny stock held in the customer's account; and
o make a special written determination that the penny stock is a suitable
investment for the customer and receive the customer's written agreement
to the transaction.
These disclosure requirements may have the effect of reducing the liquidity
of penny stocks. If our securities are subject to the penny stock rules, you may
find it more difficult to sell your shares of our common stock.
Our ability to pay dividends is limited. We currently intend to retain any
future earnings and, therefore, do not plan to pay dividends in the foreseeable
future. Our future dividend policy will depend on our earnings, capital
requirements, financial condition and other factors that our board of directors
deems relevant. We can give no assurance that dividends will ever be paid.
Unless a public market develops for our common stock, you may not be able
to sell your shares. To date, there has been no public market for our common
stock. We cannot assure you that an active trading market will ever develop or,
if developed, that it will be maintained. Failure to develop or maintain an
active trading market could negatively affect the price of our securities.
Shares eligible for future sales by our current stockholders may adversely
affect the development of a public market in our stock and the price of our
stock, if a public market is developed. The market price of our common stock
could decline as a result of sales of shares of common stock by our existing
stockholders. These sales might make it more difficult for us to sell equity
securities in the future at a time and at a price that we deem appropriate.
The Mecaserto distribution agreement is governed by French law. In the
event of a dispute there may be a different outcome than if the agreement was
under United States law. Furthermore, any dispute relating to the agreement must
be submitted for adjudication in France.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements involving
risks and uncertainties based on our current expectations and the development of
our business. All statements in this registration statement related to our
intended business plans, prospective financial operations and expected future
growth or profitability constitute forward-looking statements. Forward-looking
statements are subject to a number of risks and uncertainties. Our actual
results may differ significantly from those anticipated or expressed in these
statements. You should read the following discussion and analysis in conjunction
with the audited financial statements (and notes thereto) and other financial
information of our company appearing elsewhere in this registration statement
for the period from inception to June 30, 2000.
Our company was formed on April 5, 1999, under the laws of the State of
Delaware. We have purchased, through Comsa Acquisition Corporation, a Delaware
Corporation and our wholly-owned subsidiary, an Exclusive Sales and Distribution
Agreement from Com S.A., a France-based company, to market specialty medical
equipment to groups of physicians, hospitals, clinics and medical schools
throughout the world. The following is our plan of operation for the next twelve
months. Although we were formed in April 5, 1999, we were unable to complete the
agreements to begin operations until June 30, 2000. We also entered into a
Management Agreement granting Com S.A. the exclusive right to negotiate and
execute contracts in our name for the sales, marketing and distribution under
the Mecaserto distribution agreement. In consideration for this arrangement, Com
S.A. will be paid a management fee of 20% of the cash flow derived under the
Mecaserto distribution agreement.
We are in the developmental stage and, as of June 30, 2000, have not earned
any revenues.
We have also received money from a limited offering of 2,350,000 shares of
our common stock in April 1999, which raised an aggregate of $117,500 less
offering expenses of $48,329. The proceeds from the limited offering have been
and are being used to pay for our legal and accounting fees in connection with
the preparation and filing of our registration statement on Form 10-SB, the
preparation and filing of our quarterly reports, the preparation of our annual
audit for the year ended December 31, 1999, and to provide start-up capital to
begin operations.
We do not expect to hire any employees or engage the services of any
additional independent contractors in the next twelve months unless the number
of customers increases to an extent that additional personnel are needed. We
anticipate that any additional consultants would be paid a percentage of our
sales.
Although we would like to generate profits, at this stage, it is unlikely
we will be able to do so, unless we attract additional distribution arrangements
and generate significant revenues.
Our business for the next twelve months does not include any product
research and development other than purchasing and reselling products
manufactured by Mecaserto.
We do not expect to purchase any plant or significant equipment in the next
twelve months and we do not own any plant or significant equipment to sell.
We anticipate that we will continue to operate at a loss for the
foreseeable future. Our expenses consist of general and administrative expenses,
legal fees and accounting fees.
Since April, 1999, our management had devoted the majority of its efforts
to completing the contracts with Com S.A., obtaining new customers for our
products, pursuing and finding a management team to continue the process of
completing our marketing goals, and obtaining sufficient working capital through
the sale of shares of common stock through a private placement offering. These
activities were funded by our management and investments from stockholders.
We intend to acquire distribution rights for other products, by one or more
of
o acquisitions of rights to distribute manufacturers' products;
o acquisitions of other companies with related or complementary businesses,
and
o licensing or joint venture relationships with companies with related or
complementary businesses.
We currently have not identified any such potential acquisitions.
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RESULTS OF OPERATIONS
Results of Operations for the period from inception, April 5, 1999, to
June 30, 2000.
For the period from inception, April 5, 1999, to June 30, 2000, we had not
yet begun operations and had generated no revenues.
Our general and administrative costs aggregated approximately $37,840 for
the period from inception, April 5, 1999, to June 30, 2000 which includes a
payment of $26,000 to our Chief Financial Officer, Johanna Bonnier, and an
accrual of $3,600 for rent due Kaplan Gottbetter & Levenson, LLP for rental of
office space and $8,240 in office expense.
LIQUIDITY AND CAPITAL RESOURCES
We increased our liquidity through the sale of 2,350,000 shares of common
stock offered at $0.05 per share aggregating gross proceeds of $126,000.
We expended an aggregate of $23,385 in negative cash flows from operations
for the period from inception, April 5, 1999, to June 30, 2000. We also
purchased computer equipment aggregating $3,464.
We anticipate that cash flows from operations will be sufficient to meet
our working capital requirements. However, if we are unable to generate revenues
to meet our current operating expenses, or if expenses should increase, we would
need to seek additional capital, probably through issuing equity.
Euro Currency Conversion
The sale of our products will likely be in French Francs. On January 1,
1999, eleven of the fifteen member countries of the European Union established
fixed conversion rates between their existing currencies or legal currencies,
and one common currency--the euro. The euro now trades on currency exchanges and
may be used in business transactions. Beginning in January 2002, new
euro-denominated bills and coins will be issued, and legal currencies will be
withdrawn from circulation.
Certain issues arise in the conversion to the euro. These issues include,
among others:
o competitive implications of increased price transparency within European
Union countries,
o changes in currency exchange costs and rate exposures, and
o continuity of contracts that require payment in a legal currency, and tax
implications of the conversion.
We do not anticipate any significant negative consequences of these issues
and do not anticipate that the euro conversion will have a material adverse
impact on our financial condition or results of operations.
Foreign Tax Matters
We may become subject to income tax laws in each of the countries in which
we do business through wholly-owned subsidiaries and through affiliates. We
intend to make a comprehensive review of the income tax requirements of our
operations, file appropriate returns and make appropriate income tax planning
analyses directed toward the minimization of our income tax obligations in these
countries.
Hedging Activities and Foreign Currency Exchange Risks
We have not in the past, and presently have no plans to hedge our foreign
currency risks. We may, however, in the future do so when it is practical and
cost effective to do so.
Inflation
Inflation has not had a significant impact on our financial condition or
results of operations.
Exchange Controls
Under current French exchange control regulations, there are no limitations
on the amount of cash payments that may be remitted to us from our operations in
France. Laws and regulations concerning foreign exchange controls do require,
however, that all payments or transfers of funds made by a French resident to a
non-resident be handled by an authorized intermediary bank. We do not anticipate
any significant negative consequences of these issues or that such exchange
controls, as currently in effect, will have a material adverse impact on our
financial condition or results of operations.
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<PAGE>
INCOME TAX
As of December 31, 1999, we had a tax loss carry-forward of $45,385. Our
ability to utilize our tax credit carry-forwards in future years will be subject
to an annual limitation pursuant to the "Change in Ownership Rules" under
Section 382 of the Internal Revenue Code of 1986, as amended. However, any
annual limitations are not expected to have a material adverse effect on our
ability to utilize our tax credit carry-forwards.
We expect our capital requirements to increase over the next several years
as we continue to develop our business, increase sales and administration
infrastructure and embark on developing in-house business capabilities and
facilities. Our future liquidity and capital funding requirements will depend on
numerous factors, including the extent to which our present management can fund
the continued capital requirements, the costs and timing of expansion of sales,
marketing activities, facilities expansion needs, and competition in the
business entered into.
The report of our independent accountants on our December 31, 1999
financial statements contains an explanatory paragraph regarding our ability to
continue as an on-going business.
Because we are in the early stage in our business operations, our revenues
are subject to wide variation from quarter to quarter. In addition, we may
pursue a strategy of growing through acquisitions. The size and timing of
acquisitions will be affected by a number of factors which are hard to predict
and many of which are beyond our control. Because of these factors, our results
of operations discussed below are unlikely to be an accurate indication of
future performance and should be viewed with considerable caution.
ENVIRONMENTAL MATTERS
We believe we are operating in compliance with all applicable environmental
laws and regulations. We do not believe that capital and operating expenditures
in order to comply with these laws and regulations are expected to materially
affect our business or results of operations.
YEAR 2000 COMPLIANCE
We did not experience any material interruptions of business as a result of
the Year 2000 computer problem.
ITEM 3. DESCRIPTION OF PROPERTY
We currently maintain our executive and administrative offices at 630 Third
Avenue, New York, New York at a monthly rent of $250.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BENEFICIAL OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of our common stock as of October 5, 2000. The information in this
table provides the ownership information for:
o each person known by us to be the beneficial owner of more than 5% of our
common stock;
o each of our directors;
o each of our executive officers; and
o our executive officers, directors and director nominees as a group.
Beneficial ownership has been determined in accordance with the rules and
regulations of the SEC and includes voting or investment power with respect to
the shares. Unless otherwise indicated, the persons named in the table below
have sole voting and investment power with respect to the number of shares
indicated as
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beneficially owned by them. We are unaware of any plans of such persons to sell
their shares in the open market. There are currently no outstanding options or
warrants to purchase any common stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE OWNED
--------------------------------------------------------------------------- ------------------ ----------------
<S> <C> <C>
Johanna Bonnier(1)(2) ..................................................... 3,031,020 55%
8 Rue Curie
Rueil Malmaison, France 92500
Com S.A.(1) ............................................................... 2,831,020 51%
60 Rue de Londres
Paris, France 75 008
Viking Investment Group II, Inc.(3) ....................................... 420,000 8%
3533 W. Fairview St.
Miami, Florida 33133
Ralph Brown ............................................................... 0 0%
181 University Avenue
Suite 2200
Toronto, Ontario, Canada M5H 3M7
Claude Delranc ............................................................ 0 0%
60 Rue de Londres
Paris, France 75 008
All Executive Officers and 3,031,020 3%
Directors as a Group (3 persons).........................................
</TABLE>
------------------
(1) Com S.A., a wholly-owned subsidiary of Valurex, S.A., is the record and
beneficial owner of 2,831,020 shares of our common stock, but has a voting
agreement with Johanna Bonnier. The voting agreement provides that Com S.A.
shall vote its shares as Ms. Bonnier instructs. See "Security Ownership of
Certain Beneficial Owners and Management--Change of Control".
(2) Ms. Bonnier is the record and beneficial owner of 200,000 shares of common
stock. Ms. Bonnier also has the right to vote the 2,831,020 shares of our
common stock owned by Com S.A. See "Security Ownership of Certain Beneficial
Owners and Management--Change of Control".
(3) Ian Markofsky is the sole shareholder of Viking Investment Group II, Inc.
and may be deemed to be a beneficial owner of these shares.
CHANGE IN CONTROL
Com S.A. has entered into a voting agreement, simultaneous with the closing
of the acquisition of Com S.A., with Olivier Halimi, one of our shareholders, to
vote all of the shares of our common stock owned by Com S.A. as Mr. Halimi
directs. Mr. Halimi assigned the rights under the voting agreement to Johanna
Bonnier, our Chief Financial Officer and a director. The voting agreement
terminates on the earlier of the May 31, 2010 or when Com S.A. is the beneficial
and record owner of less than 25% of our outstanding common stock.
This voting agreement gives Ms. Bonnier voting power over approximately 51%
of our voting shares which would give her control over the outcome of matters
submitted to the stockholders for approval, including the election of our
directors, and, as a result, Ms. Bonnier would have control over our board of
directors and significant influence over our affairs and management.
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<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND OFFICERS
The members of our board of directors and our executive officers, together
with their respective ages and certain biographical information are as set forth
below. Our directors are elected at our annual stockholders meeting and serve
for one year terms. Our officers are elected by, and serve at the designation
and appointment of, the board of directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Ralph Brown.......................................... 67 Chairman, President and Chief Executive Officer
Claude Delranc....................................... 57 Director and Exec. Vice President
Johanna Bonnier...................................... 27 Director and Chief Financial Officer
</TABLE>
BIOGRAPHIES
Ralph Brown was appointed our Chairman, President and Chief Executive
Officer in July 2000. Since 1959 Mr. Brown has been practicing law in Toronto,
Canada.
Claude Delranc was appointed as our Executive Vice President and a Director
in May 2000. He is currently a sales representative of Com S.A. Prior to joining
Com S.A., Mr. Delranc was with IBM where he most recently served as sales
engineer. Mr. Delranc has a degree in Computer Science and Corporate Management
from Ecole Nationale de Commerce de Paris (Business School in Paris).
Johanna Bonnier has been our Chief Financial Officer and a director since
April 1999. From April 1999 through May 2000, she was also our President and
Chief Financial Officer. From September 1997 through March 1999, she has been an
assistant accountant for DMI, a wholesale jeweler. From June 1996 through
September 1997, she has been a sales representative for COMSECO, a manufacturer
of cosmetic mannequins for cosmetic companies. In 1992, Ms. Bonnier earned her
degree in Medical Reps from CAP SANTE (Medical School in Paris).
There are no other officers or significant employees. No family
relationships exist among the directors and the officers. No legal proceedings
have been instituted in the previous five years against any of our directors or
officers. We have no knowledge of any legal proceedings against any predecessor
director, officer, or promoter.
ITEM 6. EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS' COMPENSATION
We have not commenced paying any of our officers or directors any salary or
fees. Ralph Brown, our President and Chief Executive Officer, will receive Cdn
$3,000 per year and will be reimbursed for expenses.
2000 STOCK OPTION PLAN
We adopted our 2000 Stock Option Plan in May 2000. The plan provides for
the grant of options intended to qualify as "incentive stock options", options
that are not intended to so qualify or "nonstatutory stock options" and stock
appreciation rights. The total number of shares of common stock reserved for
issuance under the plan is 1,000,000, subject to adjustment in the event of a
stock split, stock dividend, recapitalization or similar capital change, plus an
indeterminate number of shares of common stock issuable upon the exercise of
"reload options" described below. We have not yet granted any options or stock
appreciation rights under the plan.
The plan is presently administered by our board of directors, which selects
the eligible persons to whom options shall be granted, determines the number of
shares of common stock subject to each option, the exercise price therefor and
the periods during which options are exercisable, interprets the provisions of
the plan and, subject to certain limitations, may amend the plan. Each option
granted under the plan shall be evidenced by a written agreement between us and
the optionee.
Options may be granted to all employees (including officers) and directors
of, and certain consultants and advisors to, us or any subsidiary.
The exercise price for incentive stock options granted under the plan may
not be less than the fair market value of our common stock on the date the
option is granted, except for options granted to 10% stockholders which must
have an exercise price of not less than 110% of the fair market value of our
common stock on the date the option is granted. The exercise price for
nonstatutory stock options is determined by the board of
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<PAGE>
directors. Incentive stock options granted under the plan have a maximum term of
ten years, except for 10% stockholders who are subject to a maximum term of five
years. The term of nonstatutory stock options is determined by the board of
directors. Options granted under the plan are not transferable, except by will
and the laws of descent and distribution.
The board of directors may grant options with a reload feature. Optionees
granted a reload feature shall receive, contemporaneously with the payment of
the option price in common stock, a right to purchase that number of shares of
common stock equal to the sum of (i) the number of shares of common stock used
to exercise the option, and (ii) with respect to nonstatutory stock options, the
number of shares of common stock used to satisfy any tax withholding requirement
incident to the exercise of such nonstatutory stock option.
Also, the plan allows the board of directors to award to an optionee for
each common share covered by an option, a related alternate stock appreciation
right, permitting the optionee to be paid the appreciation on the option in lieu
of exercising the option. The amount of payment to which an optionee shall be
entitled upon the exercise of each stock appreciation right shall be the amount,
if any, by which the fair market value of a share of common stock on the
exercise date exceeds the exercise price per share of the option.
LIMITATION ON LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our certificate of incorporation eliminates the personal liability of
directors to our company and our stockholders for monetary damages for breach of
fiduciary duty as a director to the fullest extent permitted by Section 102 of
the Delaware General Corporation Law, provided that this provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to our company or our stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) arising under Section 174 of the Delaware General
Corporation Law (with respect to unlawful dividend payments and unlawful stock
purchases or redemptions), or (iv) for any transaction from which the director
derived an improper personal benefit.
Additionally, we have included in our certificate of incorporation and our
bylaws provisions to indemnify our directors, officers, employees and agents and
to purchase insurance with respect to liability arising out of the performance
of their duties as directors, officers, employees and agents as permitted by
Section 145 of the Delaware General Corporation Law. The Delaware General
Corporation Law provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors,
officers, employees and agents may be entitled under our bylaws, any agreement,
vote of stockholders or otherwise.
The effect of the foregoing is to require our company, to the extent
permitted by law, to indemnify the officers, directors, employees and agents of
our company for any claim arising against such persons in their official
capacities if such person acted in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interests of our company, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
OPTION/SAR GRANTS
We have not granted any options or stock appreciation rights during the
last fiscal year.
AGGREGATE OPTION/SAR EXERCISES
No stock options or stock appreciation rights have been exercised in the
last fiscal year.
LONG TERM INCENTIVE PLAN AWARDS
No long term incentive plans have been awarded.
COMPENSATION OF DIRECTORS
No salary or regular compensation is paid to our directors. Our directors
are entitled to reimbursement of out of pocket expenses incurred in connection
with their duties as directors. To date, no such expenses have been requested or
paid.
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<PAGE>
EMPLOYMENT CONTRACTS
We do not have written employment contracts with any of our officers or
employees. We have agreed to pay Ralph Brown, our President and Chief Executive
Officer Cdn $3,000 per year.
REPORT ON REPRICING OF OPTIONS/SARS
No options or stock appreciation rights have been granted.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACQUISITION OF MECASERTO CONTRACT
On May 31, 2000, we acquired, through Comsa Acquisition Corporation, a
Delaware corporation and our wholly-owned subsidiary, the Mecaserto distribution
agreement from Com S.A., a French Societe Anonyme, for 2,831,020 shares of
common stock resulting in Com S.A. owning 51% of our outstanding common stock.
We have also hired Com S.A. to manage the Mecaserto contract. Under the
management agreement, we will pay Com S.A. 20% of the difference between the
revenue from derived from the Mecaserto contract less the costs and expenses
with respect to the Mecaserto contract. In the event we breach the management
agreement, Com S.A. may repurchase the Mecaserto contract by returning to us the
2,831,020 shares of our common stock originally issued to Com S.A.
Claude Delranc, our Executive Vice President and a director, is also an
employee of Com S.A.
Com S.A. has entered into a voting agreement, simultaneous with the closing
of the acquisition of Com S.A., with Olivier Halimi, one of our shareholders, to
vote all of the shares of our common stock owned by Com S.A. as Mr. Halimi
directs. Mr Halimi assigned the rights under the voting agreement to Johanna
Bonnier, our Chief Financial Officer and a director. The voting agreement
terminates on the earlier of the May 31, 2010 or when Com S.A. is the beneficial
and record owner of less than 25% of our outstanding common stock.
This voting agreement gives Ms. Bonnier voting power over approximately 51%
of our voting shares which would give her control over the outcome of matters
submitted to the stockholders for approval, including the election of our
directors, and, as a result, have control over our board of directors and
significant influence over our affairs and management.
INITIAL FINANCING
In April 1999, we raised approximately $126,000 in a private placement by
issuing an aggregate of 2,520,000 of shares of common stock to various
investors, including certain members of our board of directors.
We believe that the terms of the above transactions are commercially
reasonable and no less favorable to our company than we could have obtained from
an unaffiliated third party on an arm's length basis. To the extent our company
may enter into any agreements with related parties in the future, our board of
directors has determined that such agreements must be on similar terms.
ITEM 8. DESCRIPTION OF SECURITIES
Our authorized capital stock currently consists of 25,000,000 shares of
common stock, par value $0.001 per share, and 5,000,000 shares of preferred
stock, par value $0.001 per share, the rights and preferences of which may be
established from time to time by our Board of directors. There are 5,551,020
shares of our common stock issued and outstanding, no shares of preferred stock
outstanding, and no other securities, including without limitation any
convertible securities, options, warrants, promissory notes or debentures
outstanding.
The description of our securities contained herein is a summary only and
may be exclusive of certain information that may be important to you. For more
complete information, you should read our Certificate of Incorporation and its
restatements, together with our corporate bylaws.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of our common
stock entitled to vote in any election of directors may elect all of the
directors standing for election. Subject to preferences that may be applicable
to any shares of preferred stock outstanding at the time, holders of
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<PAGE>
our common stock are entitled to receive dividends ratably, if any, as may be
declared from time to time by our board of directors out of funds legally
available therefor.
Upon the liquidation, dissolution or winding up of our company, the holders
of our common stock are entitled to receive ratably, our net assets available
after the payment of
o all secured liabilities, including any then outstanding secured debt
securities which we may have issued as of such time;
o all unsecured liabilities, including any then unsecured outstanding
secured debt securities which we may have issued as of such time; and
o all liquidation preferences on any then outstanding preferred stock.
Holders of our common stock have no preemptive, subscription, redemption or
conversion rights, and there are no redemption or sinking fund provisions
applicable to the common stock. The outstanding shares of our common stock are
duly authorized, validly issued, fully paid and nonassessable. The rights,
preferences and privileges of holders of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
preferred stock which we may designate and issue in the future.
PREFERRED STOCK
Our board of directors is authorized, without further stockholder approval,
to issue up to 5,000,000 shares of preferred stock in one or more series and to
fix the rights, preferences, privileges and restrictions of these shares,
including dividend rights, conversion rights, voting rights, terms of redemption
and liquidation preferences, and to fix the number of shares constituting any
series and the designations of these series. These shares may have rights senior
to our common stock. The issuance of preferred stock may have the effect of
delaying or preventing a change in control of us. The issuance of preferred
stock could decrease the amount of earnings and assets available for
distribution to the holders of common stock or could adversely affect the rights
and powers, including voting rights, of the holders of our common stock.
At present, we have no plans to issue any shares of our preferred stock.
DELAWARE ANTI-TAKEOVER LAW
If we become listed on a national stock exchange or the Nasdaq Stock Market
or have a class of voting stock held by more than 2000 record holders, we will
be governed by the provisions of Section 203 of the General Corporation Law of
Delaware. In general, such law prohibits a Delaware public corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless it is approved in a prescribed manner.
As a result of Section 203 of the General Corporation Law of Delaware, any
potential acquirers may be discouraged from attempting to acquire us, thereby
possibly depriving holders of our securities of certain opportunities to sell or
otherwise dispose of such securities at above-market prices pursuant to such
transactions.
COM S.A. VOTING AGREEMENT
Com S.A., the record and beneficial owner of 2,831,020 shares of common
stock, has entered into a voting agreement with Olivier Halimi, one of our
shareholders, to vote all of the shares of our common stock owned by Com S.A. as
Mr. Halimi directs. Mr. Halimi assigned the rights under the voting agreement to
Johanna Bonnier, our Chief Financial Officer and a director. This effectively
gives Ms. Bonnier voting power over 50% of our voting shares which gives her
control over the outcome of matters submitted to the stockholders for approval,
including the election of our directors, and, as a result, have control over our
affairs and management. The voting agreement terminates on the earlier of the
May 31, 2010 or when Com S.A. is the beneficial and record owner of less than
25% of our outstanding common stock.
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<PAGE>
PART II
ITEM 1. MARKET PRICE OF DIVIDENDS ON OUR COMMON EQUITY AND OTHER SHAREHOLDER
MATTERS
MARKET INFORMATION
There is no public trading market on which our common stock is traded. We
will file a Form 211 with the National Association of Securities Dealers in
order to allow the quotation of our common stock on the Bulletin Board. Of the
5,551,020 issued and outstanding shares of common stock, 200,000 are owned by
our directors and executive officers, which are not freely tradeable unless
registered under the Securities Act or until three months after such executive
officer or director resigns his or her position and all other requirements of
Rule 144 are met. The 2,831,020 shares of common stock held by Com S.A. are not
freely tradeable unless registered under the Securities Act or until after
May 31, 2001 and three months after Com S.A. no longer owns a controlling
interest in our company and all other requirements imposed by Rule 144 are met.
2,000,000 of shares of common stock may trade on the Bulletin Board under the
symbol "KEOI", if available. 520,000 shares of common stock held by certain
investors issued under Rule 506 can be sold immediately pursuant to Rule 144
after satisfying all other requirements imposed by Rule 144. We currently have
no outstanding options, warrants or convertible securities. We have granted none
of our stockholders any registration rights. We currently have no plans to
register the resale of any of our outstanding common stock.
HOLDERS
There are approximately 39 record holders of our common stock.
DIVIDENDS
As of the date hereof, no cash dividends have been declared on our common
stock. Subject to the prior rights of any series of preferred stock which may
from time to time be outstanding, if any, holders of common stock are entitled
to receive ratably, dividends when, as, and if declared by our Board of
Directors out of funds legally available therefor. Under Delaware law, we may
only pay dividends out of capital and surplus, or out of retained earnings for
the year the dividends were declared. The payment of dividends on our common
stock is, therefore, subject to the availability of capital and surplus or
retained earnings as provided under Delaware law.
ITEM 2. LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding, nor is our property the
subject of any pending legal proceeding, that is not routine litigation that is
incidental to its business. It may be noted that many aspects of our business
will involve substantial risks of liability, including exposure to substantial
liability under various products liability laws in connection with possible
defects in the products we market and distribute. We currently do not maintain
products liability insurance to protect against such risks.
ITEM 3. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In April 1999, we issued 200,000 shares of our common stock, to Johanna
Bonnier for agreeing to serve as an officer and director of our company. The
issuance was exempt pursuant to Rule 506 of Regulation D promulgated under the
Act.
On April 6, 1999, we closed an offer and sale of 2,000,000 shares of our
common stock, at a price of $0.05 per share, aggregating $100,000, pursuant to
Rule 504 of Regulation D promulgated under the Act.
On April 8, 1999, we closed an offer and sale of 520,000 shares of our
common stock, at a price of $0.05 per share, aggregating $26,000, pursuant to
Rule 504 of Regulation D promulgated under the Act.
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<PAGE>
On May 31, 2000, we entered into an acquisition agreement with Com, S.A. to
purchase the Mecaserto contract from Com, S.A., in exchange for 2,831,020 shares
of our common stock. The shares of common stock issued to Com S.A. were issued
pursuant to an exemption from the registration requirements of the Securities
Act pursuant to Section 4(2).
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our certificate of incorporation and bylaws contain provisions eliminating
the personal liability of each of our directors to our company and our
stockholders for certain breaches of his or her fiduciary duty of care as a
director. This provision does not, however, eliminate or limit the personal
liability of a director:
o for any breach of such director's duty of loyalty to us or our
stockholders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o under Delaware statutory provisions making directors personally liable,
under a negligence standard, for unlawful dividends or unlawful stock
repurchases or redemptions; or
o for any transaction from which the director derived an improper personal
benefit.
This provision offers persons who serve on the Board of Directors of our
company protection against awards of monetary damages resulting from breaches of
their duty of care (except as indicated above), including grossly negligent
business decisions made in connection with takeover proposals for our company.
As a result of this provision, our ability or one of our stockholders to
successfully prosecute an action against a director for a breach of his duty of
care has been limited. However, the provision does not affect the availability
of equitable remedies such as an injunction or rescission based upon a
director's breach of his duty of care. The Securities and Exchange Commission
has taken the position that the provision will have no effect on claims arising
under the federal securities laws.
In addition, the certificate and bylaws provide mandatory indemnification
rights, subject to limited exceptions, to any person who was or is party or is
threatened to be made a party to any threatened, pending or contemplated action,
suit or proceeding by reason of the fact that such person is or was a director
or officer of our company, or is or was serving at the request of our company as
a director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise. Such indemnification rights include
reimbursement for expenses incurred by such person in advance of the final
disposition of such proceeding in accordance with the applicable provisions of
the Delaware General Corporation Law.
We have also entered into indemnification agreements with each of our
directors and executive officers to give such directors and officers additional
contractual assurances regarding the scope of the indemnification in our
certificate of incorporation and to provide additional procedural protections.
The only material benefit the agreements provides is the advancement of expenses
to the indemnified party. At present, there is no pending litigation or
proceeding involving any of our directors, officers or employees regarding which
indemnification is sought, nor are we aware of any threatened litigation that
may result in claims for indemnification.
We currently do not have liability insurance for its officers and
directors, but we may obtain such insurance in the future.
19
<PAGE>
PART F/S
Our consolidated financial statements as of December 31, 1999 and for the
period from April 5, 1999 (inception) to December 31, 1999, and the independent
auditor's report of Thomas P. Monahan, independent certified public accountant,
with respect thereto, and our consolidated unaudited financial statements and
related footnotes for the six months ending June 30, 2000 appear on pages F-1 to
F-9 of this Form 10-SB.
20
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
---------- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3.1* -- Certificate of Incorporation of Registrant
3.2* -- Bylaws
10.1* -- Asset Purchase Agreement dated May 31, 2000 between Keo International, Inc. Valurex
S.A., Comsa Acquisition Corp., and Com S.A.
10.2* -- Management Agreement dated May 31, 2000 between Keo International, Inc., Comsa
Acquisition Corp., and Com S.A.
10.3* -- Exclusive Distribution and Marketing Agreement between Mecaserto and Com S.A., as
amended
10.3.1** -- Annex to Exhibit 10.3.
10.4* -- Stock Option Plan
10.5* -- Indemnification Agreement--Ralph Brown
10.6* -- Indemnification Agreement--Joanna Bonnier
10.7* -- Indemnification Agreement--Claude Delranc
10.8* -- Voting and Shareholders Agreement dated as of May 31, 2000 by and between Mr. Olivier
Halimi and Com S.A.
21* -- List of Subsidiaries
27** -- Financial Data Schedule
</TABLE>
------------------
* Previously filed with the Registrant's Form 10-SB filed July 25, 2000.
** Filed herewith.
21
<PAGE>
SIGNATURES
IN ACCORDANCE WITH SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, HEREUNTO DULY AUTHORIZED.
KEO INTERNATIONAL, INC.
Date: October 4, 2000 By: _____________/s/ RALPH BROWN_____________
Ralph Brown
President
22
<PAGE>
THOMAS P. MONAHAN
CERTIFIED PUBLIC ACCOUNTANT
208 LEXINGTON AVENUE
PATERSON, NEW JERSEY 07502
(973) 790-8775
FAX (973) 790-8845
To The Board of Directors and Shareholders
of Keo International, Inc. (a development stage company)
I have audited the accompanying consolidated balance sheet of Keo
International, Inc. (a development stage company) as of December 31, 1999 and
the related consolidated statements of operations, cash flows and shareholders'
equity for the period from inception, April 5, 1999, to December 31, 1999. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Keo International, Inc. (a development stage company) as of December 31, 1999
and the consolidated results of its operations, shareholders equity and cash
flows for the period from inception, April 5, 1999 to December 31, 1999 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that Keo International, Inc. (a development stage company) will
continue as a going concern. As more fully described in Note 2, the Company has
incurred operating losses since the date of reorganization and requires
additional capital to continue operations. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans as to these matters are described in Note 2. The financial statements do
not include any adjustments to reflect the possible effects on the
recoverability and classification of assets or the amounts and classifications
of liabilities that may result from the possible inability of Keo International,
Inc. (a development stage company) to continue as a going concern.
Thomas P. Monahan, CPA
June 10, 2000
Paterson, New Jersey
F-1
<PAGE>
KEO INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 2000
1999 (UNAUDITED)
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................................ $ 66,801 $ 42,322
-------- ---------
Total current assets................................................................ 66,801 42,322
Fixed assets.......................................................................... 3,464
-------- ---------
Total assets.......................................................................... $ 66,801 $ 45,786
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses.................................................................... $ 18,064 $ 3,500
-------- ---------
Total current liabilities........................................................... 18,064 3,500
Stockholders' equity
Common Stock authorized 25,000,000 shares, $0.001 par value each. At December 31,
1999 and June 30, 2000, there are 2,720,000 and 5,551,020 respectively shares
outstanding...................................................................... 2,720 5,551
Additional paid in capital............................................................ 84,951 223,671
Reserve for license agreement......................................................... (141,551)
Deficit accumulated during the development stage...................................... (38,934) (45,385)
-------- ---------
Total stockholders' equity............................................................ 48,737 42,286
-------- ---------
Total liabilities and stockholders' equity............................................ $ 66,801 $ 45,786
======== =========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
KEO INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE PERIOD FOR THE SIX FROM INCEPTION,
FROM INCEPTION, MONTHS ENDED APRIL 5, 1999
APRIL 5, 1999 TO JUNE 30, 2000 TO JUNE 30, 2000
DECEMBER 31, 1999 (UNAUDITED) (UNAUDITED)
-------------------- ---------------- --------------------
<S> <C> <C> <C>
Revenue................................................. $ 0 $ 0 $ 0
Costs of goods sold..................................... 0 0 0
---------- ---------- --------
Gross profit............................................ 0 0 0
Operations:
General and administrative............................ 30,867 7,115 37,982
Non cash expenses-consulting fees..................... 10,000 0 10,000
Depreciation and amortization......................... 0 0 0
---------- ---------- --------
Total expense...................................... 40,867 7,115 47,982
Loss from operations.................................... (40,867) (7,115) (47,982)
Other income:
Interest income....................................... 1,933 664 2,597
---------- ---------- --------
Total other income................................. 1,933 664 2,597
Net income (loss)....................................... $ (38,934) $ (6,451) $(45,385)
========== ========== ========
Net income (loss) per share--basic...................... $ (0.02) $ (0.00)
Number of shares outstanding--basic..................... 2,040,000 2,837,959
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
KEO INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR PERIOD FROM FROM INCEPTION,
INCEPTION, FOR SIX MONTHS APRIL 5, 1999 TO
APRIL 5, 1999, TO ENDED JUNE 30, JUNE 30, 2000
DECEMBER 31, 1999 2000 (UNAUDITED) (UNAUDITED)
----------------- ----------------- ------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)...................................... $ (38,934) $ (6,451) $(45,385)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation:
Non cash expenses--consulting fees..................... 10,000 10,000
Non cash payment of debt............................... 8,500 8,500
Accrued expenses....................................... 18,064 (14,565) 3,500
--------- --------- --------
Total Cash Flows From Operations......................... (2,370) (21,015) (23,385)
Cash Flows From Financing Activities:
Sale of common stock net of offering expenses.......... 69,171 69,171
--------- --------- --------
Total Cash Flows From Financing Activities............... 69,171 69,171
Cash Flows From Investing Activities:
Purchase of fixed assets............................... (3,464) (3,464)
--------- --------- --------
Total Cash Flows From Investing Activities............... (3,464) (3,464)
Net Increase (Decrease) in Cash.......................... 66,801 (24,479) 42,322
Cash Balance Beginning of Period......................... 0 66,801 0
--------- --------- --------
Cash Balance End of Period............................... $ 66,801 $ 42,322 $ 42,322
========= ========= ========
Supplemental Disclosure of Cash Flow Information:
Cash Paid For Interest................................. $ 0
Cash Paid For Income Taxes............................. $ 0
Non cash activities:
Acquisition of license rights.......................... $ 141,551 $141,551
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
KEO INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
DEFICIT
RESERVE ACCUMULATED
ADDITIONAL FOR DURING
PREFERRED PREFERRED COMMON COMMON PAID IN LICENSE DEVELOPMENT
DATE STOCK STOCK STOCK STOCK CAPITAL AGREEMENT STAGE TOTAL
--------------------------------- --------- --------- ---------- ------ ---------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sale of shares of stock
through private placement...... 2,350,000 $2,350 $ 115,150 $117,500
Offering expenses................ $ (48,329) (48,329)
Issuance of shares for legal
fees........................... 170,000 170 8,330 8,500
Issuance of shares of stock for
payment consulting fees........ 200,000 200 9,800 10,000
Net loss......................... (38,934) (38,934)
--- --- ---------- ------ ---------- --------- --------
Balance.......................... 0 $ 0 2,720,000 2,720 84,951 (38,934) 48,737
December 31, 1999
Unaudited
Issuance of shares for license
agreement...................... 2,831,020 2,831 138,720 (141,551)
Net loss......................... (6,451) (6,451)
--- --- ---------- ------ ---------- --------- --------
Balance June 30, 2000............ 0 $ 0 5,551,020 $5,551 $ 223,671 $ (141,551) (45,385) $ 42,286
=== === ========== ====== ========== ========== ========= ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
KEO INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1--ORGANIZATION OF COMPANY AND ISSUANCE OF COMMON STOCK
a. Creation of the Company
Keo International, Inc. (the "Company") was formed on April 5, 1999 under
the laws of the State of Delaware. The Company is authorized to issue an
aggregate of 25,000,000 shares of common stock, $.001 par value each share and
5,000,000 shares of preferred stock, $.001 par value each share.
b. Description of the Company
The Company has purchased an Exclusive Sales & Distribution Agreement (the
"Distribution Agreement") from Valurex S.A., a Societe Anonyme organized under
the laws of Luxembourg ("Valurex") and sole shareholder of Com S.A. ("Comsa")
through the Company's subsidiary Comsa Acquisition Corp., a Delaware
corporation, ("Acquisition") to market specialty medical equipment to groups of
physicians, hospitals, clinics and medical schools throughout the world.
c. Issuance of shares
In April, 1999, the Company sold an aggregate of 2,350,000 shares of common
stock for an aggregate consideration of $117,500 or $0.05 per share less
offering expenses of $48,329.
In April 1999, the Company issued 170,000 shares of common stock to Kaplan
Gottbetter & Levenson, LLP in consideration for the payment of legal services
valued at $8,500 or $0.05 per share.
In April 1999, the Company issued 200,000 shares of common stock to Johanna
Bonnier in consideration of consulting services valued at $10,000 or $0.05 per
share.
In May, 2000, the Company issued 2,831,020 shares of common stock to Com
S.A. ("Comsa"), a wholly-owned subsidiary of Valurex S.A., a Societe Anonyme
organized under the laws of Luxembourg ("Valurex") for an Exclusive Sales &
Distribution Agreement ("Distribution Agreement") as amended March 22, 1999. The
Distribution Agreement was valued at $141,551 or $0.05 per share.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Financial Statement Presentation
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
incurred net losses of $45,385 from inception to June 30, 2000. These factors
indicate that the Company's continuation as a going concern is dependent upon
its ability to obtain adequate financing. The Company has completed a private
placement with net proceeds of $66,171 and will require additional financing and
upon the resources of management to provide the necessary working capital for
the Company to begin marketing products pursuant to the Company's license
agreement. The Company will require substantial additional funds to finance its
business activities on an ongoing basis and will have a continuing long-term
need to obtain additional financing.
The consolidated financial statements presented at December 31, 1999
consist of the balance sheet of the Company and its subsidiary as at December
31, 1999 and the consolidated statements of operations, cash flows and members
equity for the period from inception, April 5, 1999 to December 31, 1999 for the
Company and its subsidiary.
F-6
<PAGE>
KEO INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1999
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The unaudited consolidated financial statements presented at June 30, 2000
consist of the balance sheet of the Company and its subsidiary as at June 30,
2000 and the consolidated statements of operations, cash flows and stockholders
equity of the Company and its subsidiary for the six months ended June 30, 2000
and for the period from inception, April 5, 1999, to June 30, 2000.
b. Cash and cash equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
c. Significant Concentration of Credit Risk
At December 31, 1999 and June 30, 2000, the Company has concentrated its
credit risk by maintaining deposits in several banks. The maximum loss that
could have resulted from this risk totaled $-0- and $-0-respectively which
represents the excess of the deposit liabilities reported by the banks over the
amounts that would have been covered by the federal insurance.
d. Earnings per share
Basic earnings per share are calculated on the basis of the weighted
average number of common shares outstanding for each period.
e. Revenue recognition
Revenue is recognized when products are shipped or services are rendered.
f. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
g. License Agreement
The license agreement is for a 2 year period beginning May, 2000 and will
be amortized over the related period.
h. Unaudited financial information
In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring items) necessary to present fairly the consolidated financial position
of the Company and its subsidiary as of June 30, 2000 and the consolidated
results of its operations and its cash flows for the six months ended June 30,
2000. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. The results of operations for the
periods presented are not necessarily indicative of the results to be expected
for the full year.
F-7
<PAGE>
KEO INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1999
NOTE 3--ACQUISITION OF LICENSE RIGHTS
In May, 2000 the Company issued 2,831,020 shares of common stock valued at
$141,551 to Valurex for the assignment of a License originally issued to Com
S.A. to the Company to market specialty medical equipment manufactured by
Mecaserto throughout the world through the Company's subsidiary, Comsa
Acquisition Corp. The Company also has the right to entitle sub distributors or
commercial agents for the sales of the products in the territory. The contract
is for a term of 2 years beinning May, 2000 with a 12 month trial period during
which each party may put an end to the present contract with a 3 months notice.
The License will be renewed by tacit agreement every year on the anniversary of
the License, unless a notice is given at least 6 months before any of the
contractual dates. Over the whole territory, the products will be marked under
the MECASERTO Trademark. Marketing and distribution objectives will be defined
by the parties for one year and will be revised every 6 months. In the case that
80% of these objectives have not been achieved, the Company will pay an
indemnity of 5% on the unachieved part of the objectives. The Company has agreed
to not manufacture, distribute and/or sell directly any product that could be
competitive to the products of this License agreement.
NOTE 4--RELATED PARTY TRANSACTIONS
a. Issuance of Shares of Common Stock
In May, 2000, the Company issued 2,831,020 shares of common stock to
Valurex, the sole shareholder of Comsa, for a License agreement to market
specialty medical equipment to groups of physicians, hospitals, clinics and
medical schools throughout the world. The License agreement was valued at
$141,551.
The Company has issued 200,000 shares of common stock to Johanna Bonnier,
President of the Company and Vice President of Acquisition, in consideration for
services valued at $10,000 or $0.05 per share.
Mr. Philippe Halimi, President of Comsa, has purchased 150,000 shares of
common stock through the Company's private placement at $0.05 per share for an
aggregate consideration of $7,500.
b. Management Agreement
The Company also entered into a Management Agreement to engage Comsa as
manager and operator that contracts and grants Comsa an exclusive authority to
manage, control and operate the business of the Company at Comsa's sole cost and
expense, including, without limitation, negotiation and execution of contracts
in the name of the Company and Acquisition for the sales, marketing and
distribution of products under the Contracts. In consideration for this
arrangement, Comsa will be paid a management fee of 20% of the Cash Flow of
Acquisition. Cash Flow means, for any period, all revenues and income of any
kind, directly or indirectly derived from the Contracts less all costs and
expenses with respect to the Contracts beginning July 1, 2000. The term of this
agreement is until the earlier of (a) the termination of the Contracts or (b) a
period of five years, unless earlier terminated.
As of December 31, 1999 and June 30, 2000, the amount of money paid to
Comsa pursuant to this agreement is $-0- and $-0- respectively.
b. Lease Commitment
The Company occupies office space on a month-to-month basis for $250 per
month from Kaplan Gottbetter & Levenson, LLP, 630 Third Avenue, New York, New
York. For the period from inception, April 5, 1999 to December 31, 1999 and for
the period from inception, April 5, 1999 to June 30, 2000, the Company has
accrued $2,250 and 1,250 respectively.
F-8
<PAGE>
KEO INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1999
NOTE 5--PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of preferred stock,
$.001 par value per share. The board of directors of the Company is granted the
power to determine by resolution from time to time the power, preferences,
rights, qualifications, restrictions or limitations of the preferred stock.
At December 31, 1999 and June 30, 2000, the number of preferred shares
outstanding was -0-.
NOTE 6--INCOME TAXES
The Company provides for the tax effects of transactions reported in the
financial statements. The provision, if any, consists of taxes currently due
plus deferred taxes related primarily to differences between the basis of assets
and liabilities for financial and income tax reporting. The deferred tax assets
and liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of June 30, 2000, the Company had no
material current tax liability, deferred tax assets, or liabilities to impact on
the Company's financial position because the deferred tax asset related to the
Company's net operating loss carry forward was fully offset by a valuation
allowance.
At June 30, 2000, the Company has net operating loss carry forwards for
income tax purposes of $45,385. These carry forward losses are available to
offset future taxable income, if any, and expire in the year 2010. The Company's
utilization of this carry forward against future taxable income may become
subject to an annual limitation due to a cumulative change in ownership of the
Company of more than 50 percent.
The components of the net deferred tax asset as of June 30, 2000 are as
follows:
<TABLE>
<S> <C>
Deferred tax asset:
Net operating loss carry forward............................... $ 15,431
Valuation allowance............................................ $(15,431)
--------
Net deferred tax asset......................................... $ 0
</TABLE>
The Company recognized no income tax benefit for the loss generated from
inception, April 5, 1999 to June 30, 2000.
SFAS No. 109 requires that a valuation allowance be provided if it is more
likely than not that some portion or all of a deferred tax asset will not be
realized. The Company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income. Because the Company has
yet to recognize significant revenue from the sale of its products, the Company
believes that a full valuation allowance should be provided.
NOTE 7--COMMITMENTS AND CONTINGENCIES
2000 Stock Option Plan
The Company has adopted an employee stock option plan to induce individuals
and eligible entities to advance the interests of the Company. The Company has
reserved 1,000,000 shares of common stock.
NOTE 8--DEVELOPMENT STAGE COMPANY
The Company is considered to be a development stage company with little
operating history. The Company is dependent upon the resources of the Company's
management and its ability to raise or borrow additional funds to continue to
exist. The Company has purchased the rights to market specialty medical
equipment to groups of physicians, hospitals, clinics and medical schools
throughout the world and will require additional funds to complete the process
of implementing the Company's marketing program.
F-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
---------- --------------------------------------------------------------------------------------------
<S> <C> <C>
3.1* -- Certificate of Incorporation of Registrant
3.2* -- Bylaws
10.1* -- Asset Purchase Agreement dated May 31, 2000 between Keo International, Inc. Valurex
S.A., Comsa Acquisition Corp., and Com S.A.
10.2* -- Management Agreement dated May 31, 2000 between Keo International, Inc., Comsa
Acquisition Corp., and Com S.A.
10.3* -- Exclusive Distribution and Marketing Agreement between Mecaserto and Com S.A., as
amended
10.3.1** -- Annex to Exhibit 10.3.
10.4* -- Stock Option Plan
10.5* -- Indemnification Agreement--Ralph Brown
10.6* -- Indemnification Agreement--Joanna Bonnier
10.7* -- Indemnification Agreement--Claude Delranc
10.8* -- Voting and Shareholders Agreement dated as of May 31, 2000 by and between Mr. Olivier
Halimi and Com S.A.
21* -- List of Subsidiaries
27** -- Financial Data Schedule
</TABLE>
------------------
* Previously filed with the Registrant's Form 10-SB filed July 25, 2000.
** Filed herewith.
