UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) of the Securities Exchange Act of 1934
Axxexs Capital Inc.
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(Name of Small Business Issuer in its charter)
New Jersey 22-3380447
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(State or other jurisdiction of (I.R.S. Employee Identification No.)
incorporation organization)
150 River Road, Ste. B-3 Montville, NJ 07045
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (973) 331 - 0344
----------------
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Common Stock NASDAQ OTC Bulletin Board
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---------------------------------------- ------------------------------------
Securities to be registered under Section 12(g) of the Act:
--------------------------------------------------------------------------------
(Title of class)
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(Title of class)
<PAGE>
PART I
Item 1. Description of Business.
The Company was incorporated May 4, 1995. The Company is engaged in a line of
business that comprises several classes of service, including securities
broker/dealer, consulting for private companies and Internet website
development. This business is conducted by the Company through its subsidiaries,
First Summit Securities, Inc., Charter Small Business Network, Inc., and Capital
Relay Systems, Inc. First Summit Securities, Inc. is a broker/dealer registered
with the Securities and Exchange Commission (SEC) and is a member of the
National Association of Securities Dealers (NASD) and with the securities
agencies of several states. The Company is headquartered in Montville, New
Jersey. On June 10, 1995, the Company acquired all of the assets of Charter
Financial Network, Inc., a company that had conducted a similar business.
Consideration for this asset acquisition was 2,535,987 shares of the Common
Stock of the Company and $40,000. Included among the assets acquired was a
trademark for SMALL$TOCK, a systematic approach to marketing securities for
small companies. under Regulation D, Rule 504. Charter Small Business Network,
Inc., the Company's consulting organization provides consulting services to
private companies seeking financing. Capital Relay Systems, Inc. is engaged in
the development of Internet software to facilitate exempt securities offerings.
First Summit Securities, Inc., ("FSS"), is a New Jersey corporation,
incorporated on January 18, 1994. FSS became a registered broker/dealer with the
National Association of Securities Dealers, Inc. (NASD), on December 5, 1995.
FSS presently acts as a placement agent for Issuers who are offering exempt
securities through direct public offerings under Regulation D promulgated under
the Securities Act of 1933, as amended. Many of the offerings FSS participates
in are those that have been structured through CSBN's SMALL$TOCK(R) program. FSS
may also act as the Placement Agent for other offerings introduced by outside
professionals.
Charter Small Business Network, Inc., ("CSBN"), is a Delaware corporation
incorporated on May 3, 1995. CSBN provides consulting and investment banking
services for small businesses seeking to raise investment capital. CSBN has
developed and trademarked a financial program called SMALL$TOCK(R) pursuant to
which CSBN acts as a consultant for an Issuer, providing financial consulting
services in connection with an exempt offering by said Issuer. The SMALL$TOCK(R)
program is a financial strategy that takes advantage of changes to Regulation D
of the Securities Act of 1933, as amended. governing small business offerings
introduced in 1992 and 1998. These changes, called the Small Business
Initiatives, make it easier for small businesses to obtain public financing
under certain exempt regulations. The Company provides an Issuer with the
opportunity to have its business plan reviewed by CSBN to determine whether the
Issuer qualifies for funding through Regulation D. CSBN is then retained as the
financial consultant to develop financing strategies, offering documentation,
marketing materials and provide other consulting services. CSBN uses the
services of securities attorneys associated with the SMALL$TOCK(R) program to
develop all the disclosure documentation for each client Issuer.
Capital Relay Systems, Inc., ("CRS"), was incorporated in New Jersey on May 4,
1996. CRS is intended to be a computer networking company and website developer.
To date CRS has concentrated on the development of SBOnet, a site owned by FSS,
an affiliate. The site has not been activated and requires an additional 100
hours of programming. CRS also plans to provide (i) database management to other
companies, (ii) World Wide Web site design, (iii) design and programming of
website concepts unrelated to the financial industry; and (iv) website
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programming for e-commerce businesses to sell services or products through the
Internet. CRS's present operations have been suspended pending budget
consideration.
COMPETITION
First Summit Securities, Inc. - FSS competes directly with larger, more
established broker/dealers. FSS presently provides only limited services
directed to exempt issuers. This is an area that is not traditionally handled by
larger broker/dealers who target larger IPO's.
Charter Small Business Network, Inc. - CSBN competes directly with traditional
investment bankers, financial consultants, attorneys, broker/dealers and venture
capital firms for the business of developing capital structures, business plans,
marketing strategies and disclosure documents.
Capital Relay Systems - The Company competes directly with other services
disseminating information on investments, particularly private placements. In
addition, Internet competition for programming web design is intense and CRS
will face significant competition from other companies in this area.
Item 2. Management's Discussion and Analysis or Plan of Operation.
In the fiscal year ending June 30, 2000, the Company reported lower revenues and
assets for the period. Revenues declined to $352,276, a 44% decline over 1999's
record levels as a result of (i) downsizing at First Summit and (ii) a five (5)
month examination by the NASD. In addition to our lower revenues, our Company
reported a decline in our assets. This was due mainly to the market pricing of
our stock position in AirTrax Corporation, from $4.125 per share to $2.125 per
share. The Company also amortized $57,008 of the start-up cost of SBOnet which
had previously been capitalized on the Company's balance sheet. Finally,
equipment depreciation of $17,769 also added to our lower assets.
Item 3. Description of Property.
The Company currently leases office space at 150 River Road, Ste. B-3,
Montville, NJ 07045 and at 501 Sarah Street, Stroudsburg, PA, 18360. The rental
of each office is currently $1,000 per month.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of June 30, 2000,
regarding the voting control ownership of the Common Stock and Voting Preferred
Stock by (i) each person known to the Company to be the beneficial owner of more
than 5% of the outstanding shares of Common or Voting Preferred Stock; (ii) each
of the Company officers and directors; and (iii) all of the Company's executive
officers and directors as a group.
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<TABLE>
<CAPTION>
Common Stock % of Common
Beneficially Preferred Voting Stock Benef. % of Preferred Stock
Name(1) Owned(2) Stock Rights(3) Owned Total(2) Beneficially Owned(3)
------------------------------ ------------ ---------------- -------------- ---------------------
<S> <C> <C> <C> <C>
Pennsylvania Capital 648,071 1,500,000 18.2% 100%
Robert Weeks 403,000 11.4%
Louis Anthony Perosi 296,534 8.4%
Louis Perosi, Jr. 124,202 3.5%
Joseph P. Przyhocki 25,000 0.7%
Louis Elwell 11,000 0.3%
Jeffrey Augen 5,000 0.1%
Maurice Leonardo 77,742 2.2%
Albert Walla 326,352 9.2%
All Officers, Directors and
10% holders as a group. 1,916,901 1,500,000 54.0% 100%
</TABLE>
(1) The address of each beneficial owner is the address of the Company.
(2) Based on 3,544,565 shares of Common Stock outstanding as of June 30, 2000.
(3) Based upon 150,000 shares outstanding of Preferred stock after giving
effect to the 10 for 1 voting rights.
Item 5. Directors and Executive Officers, Promoters and Control Persons.
The directors and executive officers of the Company, their ages, and the
positions they hold are set forth below. All directors hold office until the
next annual meeting of stockholders and the election and qualification of their
successors. Officers are elected annually by the Board of Directors and, subject
to existing employment and consulting agreements, serve at the discretion of the
Board.
Officers and Directors
Name Age Position
---- --- --------
Mr. Louis Perosi, Jr. 53 President/CEO/Chairman
Mr. Joseph Przyhocki, III 26 Treasurer
Mr. Louis Anthony Perosi 30 Secretary/Director
Mr. Louis Elwell 38 Director
Mr. Maurice Leonardo 46 Director
Mr. Jeffrey Augen 55 Director
Mr. Louis Perosi, Jr., President/CEO/Chairman - Mr. Perosi has been the CEO and
President of the Company since 1993. He developed the firm's SMALL$TOCK(R)
program. He has an extensive background in securities and corporate finance.
From 1988 to 1993, Mr. Perosi was President and CEO of a public company called
Imagine America, Inc. Concurrent to this, Mr. Perosi was also employed as
Corporate Finance Officer for First Monmouth Securities, an NASD registered
broker/dealer specializing in corporate and municipal bonds. Prior to that he
was Executive Vice President, director and partner in the OTC firm of Friedman
Manger & Company, Inc., from 1979 to 1986. From 1971 to 1979, Mr. Perosi worked
as a retail stockbroker at various
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NASD firm's such as Morton Kominsky & Co., Inc., Investors Associates, Inc. and
Christian Paine & Co., Inc. Mr. Perosi attended William Paterson College,
majoring in Business Administration and Economics. He is listed in Paragon's
Who's Who in America, 1996. He holds a General Securities Principals License
(Series 24), a Registered Representation License (Series 7) and a State
Securities License, (Blue Sky) (Series 63).
Mr. Joseph P. Przyhocki III, Treasurer - Mr. Przyhocki has been the Corporate
Accountant for the Company since July 1995. Prior to being employed by the
Company, Mr. Przyhocki was employed by M. Epstein's, Morristown, New Jersey from
September 1989 to June, 1994. Mr. Przyhocki holds a BS in accounting from
Fairfield University. In August 1996 he was appointed Treasurer for AXXEXS
Capital. He completed the Uniform Certified Public Accountants exam in May 1997.
Mr. Louis Anthony Perosi, Director/Corporate Secretary - Mr. L. A. Perosi has
developed an extensive computer department for the Company which includes
network, server and database operations. His expertise allows AXXEXS and its
subsidiaries to operate in-house imaging, document development and marketing
departments. His experience includes computer consulting work for small
businesses where he served as a Program Analysis Engineer on specific projects.
He has also worked independently as a Wide Area Network Designer. Mr. L. A.
Perosi is the President of an independent computer company called PSI Prime,
Inc. He also is licensed as a registered representative (Series 62 and 63) with
the NASD. Mr. L. A. Perosi received a BS in Computer Engineering from New Jersey
Institute of Technology. Mr. L. A. Perosi is the son of Louis Perosi, Jr.
Mr. Louis Elwell, Director - Mr. Elwell is presently an independent and
managerial consultant. Prior to that he was the Executive Vice President of
Prism Marketing Group, Inc., a telecommunication services company. From 1986
through 1991 he was President and co-founder of a public company called Powerex
Corporation involved in the financing of energy management systems. Mr. Elwell
received a B.S. in Economics, Finance and Entrepreneurial Management, the
Wharton School, University of Pennsylvania.
Mr. Maurice Leonardo, Director-elect - Mr. Leonardo was employed by Multi-State
Advisory Services, Inc. from 1972 to 1980 as a sales manager and commodities
trading advisor. From 1980 to 1982, he was employed by Liggett, Fairchild & Co.,
Inc., an NASD broker/dealer, as Vice President and Chief Trader. From 1982 to
present, he was self-employed as a financial consultant with the firm P & L
Financial Resources , Inc. Concurrent to his position at P & L Financial
Resources, Mr. Leonardo was employed by Prudential Insurance as a Sales Manager
from 1989 to 1985. He graduated from Bloomfield College with a BA in History and
has been a shareholder in Axxexs since its inception.
Mr. Jeffrey Augen, Director - Mr. Augen has served in various capacities as an
officer or administrator for privately held companies during the past seven
years. His basic expertise is in legal, regulatory and financial matters and
coordination of a company's activities with its professional representatives.
Mr. Augen holds a law degree from St. John's University School of Law and a
Masters of Law Degree in Taxation from the University of Miami Graduate School
of Law.
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Item 6. Executive Compensation.
Annual Compensation Long Term
------------------- Compensation
------------
Name and Principal Position Year Salary Bonus Other Stock Options
Louis Perosi, Jr.
Chairman and President 1999 $32,840 $1,788 None
Item 7. Certain Relationships and Related Transactions.
Shareholders owning a substantial portion of the outstanding stock of the
Company received finder fees and commissions in connection with private
placements made by the Company and the sale of Company Common Stock. These
totaled $1,788.
Item 8. Description of Securities.
There are three (3) separate issues of Preferred Stock, each with its own rights
and entitlements, as detailed below.
Number of Shares
----------------
Issued &
Authorized Outstanding
---------- -----------
Preferred Class A 150,000 150,000
Preferred Class B 100,000 26,850
Preferred 250,000
------- -------
500,000 176,850
======= =======
The Preferred Class A has no par value and is non-convertible. It is entitled to
a ten (10) to one (1) vote in all matters coming before the shareholders and is
entitled to a 5% cumulative dividend based on a $10 per share stated value.
Dividends totaling $100,000 accrued through June 30, 2000 on this issue of
Preferred Stock. Of this amount, $100,000 was paid April 30, 1998 by the
issuance of 100,000 shares of Common Stock.
The Preferred Class B has no par value; it is non-voting and non-convertible,
but is entitled to participate along with common shareholders in any dividends
and is redeemable on June 1, 20002 at a stated value of $10 per share.
The Preferred class has not yet been characterized. The Board of Directors has
reserved authority to assign characteristics to this class of Preferred Stock.
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PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
The Company's Common Stock has traded on the National Quotation Bureau's pink
sheets since September 1999. Prior to this, the Company's Common Stock traded on
the NASDAQ, Bulletin Board under the symbol "AXXE". The table below sets forth
the high and low bid prices of the Common Stock of the Company. The quotations
reflected inter-dealer prices without retail markup, markdown, or commissions
and may not necessarily represent actual transactions. There is an absence of an
established trading market for the Company's Common Stock, as the market is
limited, sporadic and highly volatile. The absence of an active market may have
an effect upon the high and low price as reported.
2000 Low Bid High Bid
---- ------- --------
1st quarter .01 .25
2nd quarter .01 .25
As of June 30, 2000, there are 519 shareholders of record of the Company's
Common Stock. Although there are no restrictions on the Company's ability to
declare or pay dividends, the Company has not declared or paid any dividends on
its Common Stock since its inception and does not anticipate paying dividends in
the future.
Item 2. Legal Proceedings.
The National Association of Securities Dealers Regulations, Inc., ("NASD"), in
connection with its periodic examination of First Summit Securities, Inc.,
("FSS") initiated an inquiry in 1999 into some of the business practices of FSS
and Charter Small Business Network, Inc. This matter is in a preliminary stage,
and the NASD has not indicated any intention to assess penalties or initiate
litigation. Management does not feel it has violated any rules. In the event
penalties are assessed or charges made, the Company and its attorneys are
prepared to provide a vigorous defense.
Item 3. Changes in and Disagreements with Accountants.
There were no changes in or disagreements with the accountants since inception.
Item 4. Recent Sales of Unregistered Securities.
During the fiscal year 1999, 32,500 shares of Participating Redeemable Preferred
were sold. Total money received, after deduction of commissions, was $29,500.
During the fiscal year 1998, 51,834 shares of Common Stock were sold. A total
amount of $69,975 was received by the Company after deducting commissions.
During the same fiscal year, 11,100 shares of Participating Redeemable Preferred
Stock were sold for $63,900 after deducting commissions. During the fiscal year
1997, 6,500 shares of Participating Redeemable Preferred Stock were issued for
$58,500 after deducting commissions.
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Item 5. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation and By-Laws provide that a director's
liability to the Company for monetary damages will be limited. In addition, the
Company is obligated under the Certificate of Incorporation and By-Laws to
indemnify its directors and officers against certain liabilities incurred with
respect to their service in such capacities. The Company will execute
indemnification agreements that will indemnify each director and officer against
certain liabilities that may incur. Each of these measures could reduce the
legal remedies available to the Company and the shareholders against such
individuals.
PART F/S
AXXEXS.COM INCORPORATED
AND CONSOLIDATED SUBSIDIARIES
Financial Statements
June 30, 2000
CONTENTS
Page
----
Accountant's Audit Report 9
Balance Sheet 10
Statements of Income and Comprehensive Income 11
Statements of Changes In Stockholders' Equity 12
Statements of Cash Flows 13
Notes to Financial Statements 14
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ROBERT G. JEFFREY
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of Axxexs.com Incorporated
I have audited the accompanying balance sheet of Axxexs.com Incorporated and
consolidated subsidiaries as of June 30, 2000 and the related statements of
income and comprehensive income, changes in stockholders' equity, and cash flows
for the two year period ended June 30, 2000. These financial statements are the
responsibility of the Company management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted the 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 used 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 financial statements referred to above present fairly, in all
material respects, the financial position of Axxexs.com Incorporated and
consolidated subsidiaries as of June 30, 2000, and the results of its operations
and its cash flows for the years ended June 30, 2000 and 1999 in conformity with
generally accepted accounting principles.
Wayne, New Jersey
October 25, 2000
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AXXEXS.COM INCORPORATED
AND CONSOLIDATED SUBSIDIARIES
Balance Sheet
June 30, 2000
ASSETS
Current Asset:
Cash and cash equivalents $ 42,023
Officer loans 7,931
Prepaid expenses 2,482
---------
Total current assets 52,436
Fixed Assets:
Office furniture and equipment 82,951
Automobile 24,586
Software development cost 171,023
---------
Total fixed assets 278,560
Less, accumulated depreciation 141,222
---------
Net fixed assets 137,338
Other Assets:
Investments 191,076
Cost of NASD membership 6,500
---------
Total other assets 197,576
---------
Total Assets $ 387,350
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable $ 51,739
Accounts payable and accrued liabilities 59,790
Payroll tax withholdings and accruals 7,457
---------
Total current liabilities 118,986
Note Payable 50,000
---------
Total Liabilities 168,986
Stockholders' Equity:
Common stock - authorized 7,000,000 shares without par value;
3,554,565 shares issued and outstanding 733,870
Preferred stock - authorized 500,000 shares without par value;
176,850 shares issued and outstanding 152,650
Retained deficit (835,850)
Accumulated other comprehensive income 167,694
---------
Total stockholders' equity 218,364
---------
Total Liabilities and Stockholders' Equity $ 387,350
=========
The accompanying notes are an integral part of these financial statements.
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AXXEXS.COM INCORPORATED AND CONSOLIDATED SUBSIDIARIES
Statements of Income and Comprehensive Income
For the Years Ended June 30, 2000 and 1999
2000 1999
--------- ---------
Revenue:
Fee income $ 133,040 $ 443,020
Investment income 218,074 191,262
Interest and other income 1,162 2,993
--------- ---------
Total Revenue 352,276 637,275
Expenses:
Salaries and wages 180,961 380,626
Payroll taxes and benefits 37,699 44,178
Printing and postage 31,894 47,378
Office supplies and expenses 59,646 63,509
Legal and accounting 79,547 18,890
Telephone 16,635 21,643
Internet service 1,136 2,077
Rent 27,100 20,266
Bad debts 1,558 39,287
Depreciation and amortization 74,777 16,393
Travel and entertainment 1,115 7,957
NASD and other regulatory fees 16,722 24,887
Advertising 1,324 13,084
Insurance 5,864 4,816
Interest 4,688 7,813
--------- ---------
Total expenses 540,666 712,804
--------- ---------
Net Loss (188,390) (75,529)
Other Comprehensive Income, (net of tax):
Unrealized losses on securities: -- 596,300
Reclassification adjustment for gains
included in net loss (218,074) --
Unrealized holding losses arising
during period (210,532) --
Comprehensive Income (Loss) $(616,996) $ 520,771
========= =========
Net Loss Per Common Share $ (.07) $ (.04)
========= =========
The accompanying notes are an integral part of these financial statements.
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AXXEXS.COM INCORPORATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
COMMON PREFERRED ACCUMULATED
STOCK STOCK OTHER
----------------------- -------------------- COMPREHENSIVE RETAINED
Shares Amount Shares Amount INCOME DEFICIT TOTAL
--------- ---------- ------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1998 3,469,565 $ 733,870 173,600 $ 123,400 $ -- $ (571,931) $ 285,339
Shares issued for services 75,000 --
Net loss for the year (75,529) (75,529)
Unrealized holding gains arising
during the period (net of
income tax) 596,300 596,300
--------- ---------- ------- ---------- ---------- ---------- ----------
Balance, June 30, 1999 3,544,565 $ 733,870 173,600 $ 123,400 $ 596,300 $ (647,460) $ 806,110
Shares issued for services 10,000 --
Sales of stock under Rule 504,
Regulation D, offerings 3,250 29,250 29,250
Net loss for the year (188,390) (188,390)
Changes in unrealized holding
gains (428,606) (428,606)
--------- ---------- ------- ---------- ---------- ---------- ----------
Balance, June 30, 2000 3,554,565 $ 733,870 176,850 $ 152,650 $ 167,694 $ (835,850) $ 218,364
========= ========== ======= ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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AXXEXS.COM INCORPORATED AND CONSOLIDATED SUBSIDIARIES
Statements of Cash Flows
For the Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(188,390) $ (75,529)
Adjustments to reconcile net loss to net cash
consumed by operating activities:
Depreciation and amortization 74,777 16,393
Changes in assets and liabilities:
Decrease in accounts receivable 7,876 21,520
Decrease in employee loans -- 21,030
Decrease in NASD deposit -- 1,692
Decrease (increase) in accounts payable
and accrued liabilities 37,324 (19,992)
Decrease in unearned income -- (12,000)
Increase (decrease) in payroll tax liabilities 2,873 (7,945)
Decrease (increase) in prepaid expenses 2,445 (846)
--------- ---------
Net cash consumed by operating activities (63,095) (55,677)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in investments (17,259) --
Acquisition of fixed assets -- (45,162)
Reduction of other assets -- (1,562)
--------- ---------
Net cash consumed by investing activities (17,259) (46,724)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under notes payable 5,000 46,739
Proceeds of issuances of preferred stock 29,250 --
--------- ---------
Net cash provided by financing activities 34,250 46,739
--------- ---------
Net Decrease In Cash and Cash Equivalents (46,104) (55,662)
Cash and Cash Equivalents, beginning of period 88,127 143,789
--------- ---------
Cash and Cash Equivalents, end of period $ 42,023 $ 88,127
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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AXXEXS.COM INCORPORATED AND CONSOLIDATED SUBSIDIARIES
Notes To Financial Statements
June 30, 2000
I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature Of Operations
The Company was incorporated May 4, 1995 for the purpose of managing private
security placements and exempt security offerings for small businesses. This
business is conducted by the Company and through its subsidiaries, First Summit
Securities, Inc., Charter Small Business Network, Inc., and Capital Relay
Systems, Inc. Capital Relay Systems, Inc. is engaged in the development of
Internet software to facilitate exempt securities offerings.
On June 10, 1995, the Company acquired all of the assets of Charter Financial
Network, Inc., a publicly owned company which had conducted a similar business.
Consideration for this asset acquisition was 2,535,987 shares of the common
stock of the Company and $40,000. Included among the assets acquired was a
trademark for $MALLSTOCK, a systematic approach to marketing securities for
small companies.
The Company is engaged in a single line of business which comprises several
classes of service, including securities broker/dealer, consulting for private
security placements, and principal transactions.
First Summit Securities, Inc. is a broker/dealer registered with the Securities
and Exchange Commission (SEC) and is a member of the National Association of
Securities Dealers (NASD) and with the securities agencies of several states.
The Company is headquartered in Montville, New Jersey, but conducts its business
throughout the United States.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and
all of its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash And Cash Equivalents
For purposes of the statement of cash flows, the Company considers all short
term debt securities purchased with a maturity of three months or less to be
cash equivalents.
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Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, which include cash
equivalents, accounts receivable, accounts payable, accrued liabilities and
notes payable approximate their fair values at June 30, 2000.
The company classifies its investments in equity securities as available for
sale. Securities classified as available for sale are carried in the financial
statements at fair value if they are publicly traded. Non-publicly traded
securities are carried at cost as it is not practicable to estimate their value.
Realized gains and losses, determined using the first-in, first-out method, are
included in earnings; unrealized holding gains and losses are reported in other
comprehensive income.
Property And Equipment
Property and equipment is carried at cost. Depreciation is provided under the
Modified Accelerated Cost Recovery System, as permitted by Internal Revenue
Service Regulations, using lives of five years for automotive equipment and
computers and seven years for furniture and equipment. This method has produced
results which do not vary significantly from those that would result from use of
a method which comports with generally accepted accounting principles.
Advertising Costs
The Company expenses advertising costs when the advertisement occurs. Total
advertising expense amounted to $1,324 and $13,084 for the years ended June 30,
2000 and 1999, respectively.
Software Development
Software development is carried at cost and is being amortized by the straight
line method beginning with the date the software was placed in service. A life
of three years is being used.
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, Accounting Income Taxes. Thus, income taxes are
provided for the tax effects of transactions reported in the financial
statements. Deferred income tax assets and liabilities, if appropriate, would be
measured using statutory rates expected to apply when temporary differences are
expected to be recovered or settled. The benefits of net operating losses will
be recognized when there is clear evidence that the benefits will be realized.
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Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Stock For Services
The Company accounts for capital stock issued for services in accordance with
Statement of Financial Accounting Standards No. 123, accruing cost measured by
the fair value method. During the year ended June 30, 1999, shares of common
stock were issued to employees and non-employees for services. These amounted to
75,000 shares. No cost was recorded for these shares as their value was not
considered material.
Segment Reporting
Management treats the operations of the Company and its subsidiaries to be one
segment.
Comprehensive Income
The Company employs procedures for the reporting of Comprehensive Income.
Comprehensive Income includes all changes in equity of a business enterprise
during a period except those resulting from investments by and distributions to
owners.
Earnings Per Share
Basic and diluted net loss per common share is computed by dividing the net
income available to common shareholders for the period by the weighted average
number of shares of common stock outstanding during the period. The number of
weighted average shares outstanding as well as the amount of net loss per share
are the same for basic and diluted per share calculations for all periods
reflected in the accompanying financial statements.
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<PAGE>
II. INVESTMENTS
As part of its compensation for managing security placements and offerings, the
Company receives options to acquire at discounted prices shares of the stock of
its client companies. At June 30, 2000 the Company owned shares in seven such
client companies, as detailed below. AirTrax, Inc. was publicly traded at June
30, 2000 and its shares are carried at fair market value. Since the other
securities are not publicly traded, it is not practicable to establish fair
market values for them.
<TABLE>
<CAPTION>
Private Placements (A)
Number Cost ----------------------
Of Per Total Shares
Shares Share Cost Price Issued
------ ----- ---- ----- ------
<S> <C> <C> <C> <C> <C>
ADA
Enterprises, Inc. 103,227 $ .01 $ 1,107 $ 1.00 150,000
Netweave Corp. 56,371 .01 604 5.00 150,000
S.T. Monforte
Technologies, Inc. 116,609(C) .01 1,350 2.50 138,000
Golden Pear Cafe, Inc. 64,148(C) .01 788 2.50 311,353
U.S. Myriad
Technologies, Inc. 49,809(C) .01 634 1.00 277,467
TvPath.com, Inc. 46,644(C) .01 600 1.00 650,000
AirTrax, Inc. 71,071 2.375(B) 168,794
--------
Total Investments $173,877
========
</TABLE>
(A) Sold in private placements managed by the Company.
(B) Fair market value at June 30, 2000.
(C) A major shareholder has the right to acquire from the Company 50% of the
shares the Company is entitled to acquire in any twelve transactions of this
type engaged in after July 19,1995. To date, one such acquisition right has been
exercised. Of the investments now owned by the Company, four are subject to this
right.
For a five year period which will end June 30, 2002, the Company is obligated to
transfer 6.7% of all stock acquired as compensation for managing security
placements and offerings to a fund established for the benefit of its Class B
preferred shareholders. Each of the security holdings noted above has been
reduced by such a transfer.
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<PAGE>
III. LONG-TERM DEBT
Long-Term debt consists of a promissory note due June 17, 2003, which bears
interest as 12.5%.
IV. PREFERRED STOCK
There are three separate issues of preferred stock, each with its own rights and
entitlements, as detailed below.
Number of Shares
--------------------------
Issued and
Authorized Outstanding
---------- -----------
Preferred Class A 150,000 150,000
Preferred Class B 100,000 26,850
Preferred 250,000 --
------- -------
500,000 176,850
======= =======
The Preferred Class A has no par value and is non convertible. It is entitled to
a ten to one vote in all matters coming before the shareholders and is entitled
to a 5% cumulative dividend based on a $10 per share stated value. Dividends
totaling $262,500 accrued through June 30, 2000 on this issue of preferred
stock. Of this amount, $100,000 was paid April 30, 1998 by the issuance of
100,000 shares of common stock.
The Preferred Class B has no par value; it is non-voting and non-convertible but
is entitled to participate along with common shareholders in any dividends and
is redeemable on June 1, 2002 at a stated value of $10 per share. See also Note
II for a description of a fund of investments which has been set aside for this
class of preferred stockholders.
The Preferred Class has not yet been characterized. The Board of Directors has
reserved authority to assign characteristics to this class of preferred stock.
V. RELATED PARTY TRANSACTIONS
During the year ended June 30, 2000 10,000 shares of common stock of the Company
were issued as compensation to a shareholder for extending the due date of a
$50,000 note obligation.
Shareholders owning a substantial portion of the outstanding stock of the
Company received finder fees and commissions during the year ended June 30, 2000
in connection with private placements made by the Company and the sale of
Company preferred stock. These totaled $1,788.
VI.
18
<PAGE>
OPERATING LEASES
Office equipment is leased under operating leases that expire during the year
2000 and 2002. The Company rents its office premises on a month to month basis,
paying $1,600 per month. The following is a schedule of future minimum rental
payments required under the operating leases.
Year Ending
June 30, Amount
----------- ------
2001 $ 9,099
2002 8,660
2003 2,165
Rent expense in the years ended June 30, 2000 and 1999 amounted to $40,352 and
$32,692, respectively.
VII. INCOME TAXES
The Company has experienced losses each year since its inception. As a result,
it has incurred no Federal income tax. The Internal Revenue Code allows net
operating losses (NOL'S) to be carried forward and applied against future
profits for a period of twenty years. A New Jersey corporation business tax
liability of $200 accrued during each of the years ended June 30, 2000 and 1999,
that being the minimum annual tax imposed on all New Jersey Corporations. New
Jersey tax law allows the carry forward of NOL'S for seven years. The Company
had NOL carry forwards of $830,000 as of June 30, 2000. The potential tax
benefit of these NOL's has not been recorded on the books of the Company.
VIII.
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<PAGE>
LOSS PER SHARE
YEAR 2000
Income Average Shares Per Share
(Loss) Outstanding Amount
-------- -------------- ---------
Net loss $(188,390)
Adjustment for preferred stock
dividends (75,000)
---------
Income (loss) attributable to
common shareholders $(263,390) 3,544,982 $(.07)
========= ========= =====
YEAR 1999
Income Average Shares Per Share
(Loss) Outstanding Amount
-------- -------------- ---------
Net loss $ (75,529)
Adjustment for preferred stock
dividends (75,000)
---------
Income (loss) attributable to
common shareholders $(150,529) 3,547,123 $(.04)
========= ========= =====
Of the outstanding preferred stock, 26,850 shares are entitled to participate
with common shareholders in dividends. These shares were not included in the
computation of earnings per share because such inclusion would have an
antidilutive effect.
20
<PAGE>
IX. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for interest and income taxes during the years ended June 30, 2000 and
1999, is presented below:
2000 1999
---- ----
Interest $ 3,125 9,375
Income taxes 200 200
There were no noncash investing activities during either of the years ended June
30, 2000 or 1999. The following noncash financing activities occurred:
Shares of common stock were issued for services during 2000 and 1999,
totaling 10,000 and 75,000, respectively.
X. NET CAPITAL REQUIREMENTS
First Summit Securities, Inc. is a broker/dealer subject to the Securities and
Exchange Commission Uniform Net Capital Rule (Rule 15c3-1), which requires the
maintenance of minimum net capital and requires that the ratio of aggregate
indebtedness to net capital, both as defined, not exceed 15 to 1. At June 30,
2000, First Summit Securities, Inc. had net capital which was adequate to
satisfy both requirements.
XI. CONTINGENCIES
The National Association of Securities Dealers Regulations, Inc. ("NASD") in
connection with its periodic examination of First Summit Securities, Inc.
("First Summit") initiated an inquiry in 1999 into some of the business
practices of First Summit and Charter Small Business Network, Inc. This matter
is in a preliminary stage, and the NASD has not indicated any intention to
assess penalties or initiate litigation. Management does not feel it has
violated any rules. In the event penalties are assessed or charges made, the
Company and its attorneys are prepared to provide a vigorous defense.
PART III
Item 1. Index to Exhibits.
3 (i) a. Certificate of Incorporation of Princeton Capital, Inc. dated May 4,
1995.
3 (i) b. Amended and Restated Certificate of Incorporation dated January 6,
1999.
3 (i) c. Business Entity Amendment Filing dated October 29, 1999.
3 (i) d. Business Entity Amendment Filing dated August 9, 2000.
3 (ii) By-Laws of the Company.
10 (i) Employment Agreement dated April 18, 2000 with Mr. Louis Perosi, Jr.
21 (i) Subsidiaries of the Registrant
99 (i) Stock and Cash Exchange Agreement by and between Imagine America, Inc.
and Princeton Capital, Inc. dated June 10, 1995.
Item 2. Description of Exhibits.
3 (i) a. Certificate of Incorporation of Princeton Capital, Inc. dated May 4,
1995.
3 (i) b. Amended and Restated Certificate of Incorporation dated January 6,
1999.
3 (i) c. Business Entity Amendment Filing dated October 29, 1999.
3 (i) d. Business Entity Amendment Filing dated August 9, 2000.
3 (ii) By-Laws of the Company.
10 (i) Employment Agreement dated April 18, 2000 with Mr. Louis Perosi, Jr.
21 (i) Subsidiaries of the Registrant
99 (i) Stock and Cash Exchange Agreement by and between Imagine America, Inc.
and Princeton Capital, Inc. dated June 10, 1995.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Axxexs Capital, Inc.
(Registrant)
Date November 14, 2000 By /s/ Louis Perosi, Jr.
Louis Perosi, Jr.
President
*Print the name and title of each signing officer under his or her signature
22
