UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED (THE "ACT") For the fiscal year ended May 31, 2000.
[ ] TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D) OF THE ACT
For the transition period from to
.
E-PAWN.COM, INC.
(Exact Name of Registrant as Specified in Its Charter, Referred to herein as
"Company")
NEVADA 33-2533-LA 87-0435741
(State or Other Commission File I.R.S. Employer
Jurisdiction of Number Identification No.
Incorporation)
Merrill Lynch Tower
2855 University Drive, Suite 200
Coral Springs, Florida 33065
Tel. 954-575-7296
(Address of Principal Executive Offices and Telephone)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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Indicate by check mark whether the registrant: (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of May 31, 2000 there were 153,048,820 shares of the Registrant's
Common Stock, $0.001 par value, outstanding, which is the only class of common
stock of the registrant issued as of that date that has a bid and ask price
quoted in a public market. The aggregate market value of the common stock held
by non-affiliates computed by reference to the closing bid price for the Common
Stock as quoted by the NASD OTC-Bulletin Board market as of May 31, 2000 was
approximately $34,163,620.
The Private Securities Reform Act of 1995 provides a "safe harbor" for
forward- looking statements. Certain information included in this Form 10-K (as
well as information included in the Exhibits) contains statements that are
forward looking, such as those relating to consummation of the transaction,
anticipated future revenue of the companies and success of current product
offerings. Such forward looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future
and, accordingly, such results may differ materially from those expressed in any
forward looking statements.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibits 2.01, 3(i), 10.6 and 10.8 filed with Form 8-K filings have
been incorporated by reference.
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PART I
ITEM 1. BUSINESS.
OVERVIEW
E-Pawn.Com, Inc. was incorporated in 1985 in the state of Nevada as Java,
Inc. The Company changed its name to Wasatch International Corporation in 1995.
It acquired E- Pawn, Inc. in February 2000, and the Company changed its name to
E-Pawn.Com, Inc. Its wholly-owned subsidiary E-Pawn, Inc., began operations in
1999 to operate an Internet auction site and to acquire and operate
complimentary electronic commerce (e-commerce) businesses under its
UBUYNETWORK.COM umbrella.
E-Pawn.Com, Inc. is a publicly traded company (Trading Symbol: "EPWN").
Its corporate offices are located in Coral Springs, Florida. On June 14, 2000,
the Securities and Exchange Commission suspended trading of the Company's common
stock for 10 trading days. The Commission stated that it took this action
because it had questions about the disclosure of the persons in control and
about certain market activity. The Commission also issued subpoenas to the
Company and to affiliates of the Company in connection with its investigation.
The Company has provided the Commission with information in response to its
inquiry. The action of the Commission did result in loss of listing on the NASD
OTC Bulletin Board, and through September 15, the Company's stock has prices
quoted only in the National Market Quotation "pink sheets." The Company has made
application to the NASD for relisting on the OTC Bulletin Board.
The Company's business model is based on expanding through acquisition
of companies that can be efficiently integrated into the Company and that can
use the Company's e-commerce system and network to add value. The Company
intends to expand globally with acquisitions in major economic markets. The
target companies will likely be complementary to the Company's domestic
operating companies. The Company will add the power of the Internet to the
businesses it acquires, and then it will take the knowledge and expertise that
it develops in one market and share that knowledge and expertise with its
subsidiary and affiliated companies in other markets.
The Company's success in executing its business strategy rests on
identifying companies that can benefit from the technology and network which the
Company offers. Because of the adverse market conditions for the Company's stock
arising from the Commission trading suspension and the indictment of the
Company's president for alleged securities law violations, the Company has had
certain of its transactions terminated by parties. The uncertainty surrounding
the Commission action has limited the Company's sources for new capital. The
Company believes that the restoration of the listing on the OTC Bulletin Board,
and the launch of new ventures with the Ubuynetwork.com brands, such as
Ubuyhomes.com and Ubuymortgages.com, will confirm the validity of the Company's
business model and will allow for continued expansion.
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INTERNET AND E-COMMERCE INDUSTRY AND MARKETS
The way in which business organizations interact with their employees,
suppliers, contractors and customers is undergoing significant change. To a
great extent, these changes have been evolving for a decade in response to
intensified competitive dynamics in many industries. Many of these changes are
the result, in part, of technological advancements and, in part, of
globalization.
In recent years, the rate of change has accelerated because of the
widespread use of the Internet. The word "e-commerce" is being generically used
to describe the environment in which organizations are interacting with their
trading partners and customers. Increasingly, the Internet is used as the
backbone for a growing number of back office functions, from internal
communications to commercial transactions with suppliers and customers. As the
Internet matures, companies are discovering more ways to leverage Internet-based
technology within the enterprise and the extended trading communities - the
world - in which they participate. As a low-cost method of distribution and
marketing, the Internet, in sheer size and power, transcends all other mediums
and methods. Moreover, it levels the playing field in terms of pricing by making
available to consumers everywhere, products and services from almost anywhere -
and at virtually the same prices as in the local market.
The rush to build and operate Web-based systems is placing enormous
stress on today's networking and communications infrastructure. By 2002,
International Data CORPORATION (IDC1) projects that Internet users should number
more than 300 million, up from 10 million in 1998. In addition, B2B e-commerce,
currently the fastest growing sector of e-commerce, is expected to exceed $179
billion by 2001. To facilitate this growth, companies are rapidly extending and
upgrading their Internet and networking infrastructures. This growth will, in
turn, spawn the development of new industries and products, and will unite
consumers the worldwide. E-Pawn.Com is well positioned to benefit from this
explosion.
E-BUSINESS, a name trademarked and sponsored by IBM Global Services,
has also come into using generically, and it signals the emergence of
innovations in product and services offerings. Capital spending on Internet and
e-commerce services represents the highest growth of any industry since the
Internet because a commercial factor in the marketing horizons of the corporate
world. IDC estimates that the worldwide demand for Internet services, which
amounted to roughly $7.4 billion in 1998, will grow to more than $43.6 billion
by the year 2002. These figures represent a 5-year compounded annual growth rate
(GAGR) of 57% for the 5-year period 1997 to 2002. Much of this growth is related
to the increased sophistication of Internet-based projects, which are driving
organizations to seek outside technology assistance from companies such as
E-Pawn.Com. Meanwhile, the product and service providers have been expanding
their markets and marketing opportunities through strategies developed by
Internet savvy companies like E-Pawn.Com.
Analysts have grouped the Internet exchange revenue sources into three
general categories: recurring subscription and maintenance fees (known as "real
estate" participation); commissions on each transaction ("revenue sharing"); and
equity stakes in the Internet exchange companies and the companies capitalizing
on the Internet exchange (revenue/equity bundle). All forecasts predict a huge
payoff. The gartner group2, the consulting firm, has forecast that total
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business-to-business (B2B) transactions (i.e., the value of good and services)
alone will rise from $145 billion in 1999 to $7.3 trillion in 2004; taking a
nominal estimation of only 0.25 percent (one quarter of a point) of that figure
in transaction fees would yield nearly $20 billion in annual revenue, with more
growth to come. The big payoff will be in the equity of the companies that are
active participants. An analyst for WARBURG DILLON READ3 has suggested that
there is at least a trillion dollars in market capitalization to be created in
Internet and e-commerce services and exchange providers in the next few years.
E-Pawn.Com will be one of the players, and it intends to command a high premium
because of its service and position.
1 IDC IS A LEADING PROVIDER OF INFORMATION TECHNOLOGY DATA, INDUSTRY
ANALYSIS AND STRATEGIC AND TACTICAL GUIDANCE TO BUILDERS, PROVIDERS AND
USER OF INFORMATION TECHNOLOGY. IDC IS BASED IN FRAMINGHAM,
MASSACHUSETTS AND MAINTAINS OFFICES IN MORE THAN 40 COUNTRIES AROUND
THE WORLD.
2 GARTNER IS A WORLD LEADER IN PROVIDING BUSINESS TECHNOLOGY RESEARCH,
CONSUMER AND MARKET INTELLIGENCE, CONSULTING, CONFERENCES AND DECISION-
MAKING TOOLS, WITH MORE THAN 80 LOCATIONS AROUND THE WORLD
3 WARBURG DILLON READ IS THE INVESTMENT-BANKING ARM OF UBS AG,
SWITZERLAND'S LEADING BANK. IN ADDITION TO ITS CORE BUSINESSES -- DEBT
AND EQUITY FINANCE, ADVISORY SERVICES, RISK MANAGEMENT, SECURITIES AND
FOREIGN EXCHANGE, AND RISK MANAGEMENT -- WARBURG DILLON READ PROVIDES
PRODUCTS, EXECUTION, AND TRANSACTION PROCESSING FOR OTHER DIVISIONS
WITHIN UBS
STRATEGIC ALLIANCES
Through strategic acquisitions, mergers and partnering, E-Pawn.Com is
expanding by offering the use of its e-commerce applications and marketing
strategies as the contribution to the enterprise. The almost universal
acceptance of the internet as a de facto standard of communications has spawned
new market opportunities everywhere. E- Pawn.Com can assist in increasing
revenues and profits by improving the visibility of businesses in the
marketplace, and by reducing commercial operating costs by using the Internet as
a system of distribution.
GROWTH STRATEGY
The primary business objectives of the Company are to:
o Identify and pursue market opportunities and acquisitions that
facilitate corporate growth at an overall rate of 300% or
better over the next five years.
o Deliver products and services that are competitively priced.
o Produce above average returns on sales and assets through
effective cost management, functional integration,
consolidation, and economies of scale.
o Establish joint ventures, strategic business relationships,
and develop specialized marketing opportunities that leverage
the Company's capabilities.
o Provide a solid professional environment that will create
growth opportunities for management and employees.
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To achieve the critical mass necessary to compete successfully in the
domestic and global market, E-Pawn.Com plans to grow by acquiring, consolidating
and integrating businesses with complimentary products, skills, services, and
management. The Company focuses on acquiring the operating companies with
revenues and assets, not Internet service providers. The Company's goal is to
combine its Internet expertise and assets with the conventional business. The
Company describes this model as a merger of "Clicks with Bricks." As a rule,
acquisition candidates will have a focus in one or more of the business segments
the Company is pursuing, an operating history of at least three years,
demonstrated potential for growth, and an experienced management team.
THE E-PAWN.COM BUSINESS MODEL
The E-Pawn.Com model is designed to provide businesses with an
enterprise-class Internet e-commerce application software that is functionally
comprehensive. E-Pawn.Com has developed the business model to allow for the
expansion that will result after the acquired companies start to benefit from an
e-pawn.com management infrastructure and from E-Pawn.Com's e-commerce sales
chain process, distribution channels and network. To expand its global
enterprise opportunities, new acquisitions in major economic markets must be
complementary with current operating companies. E-Pawn.Com's value is to expand
product and services availability through its Internet-based distribution
channels. By adding the power of the Internet to the businesses it acquires, it
will also take the knowledge and experience that it develops in one market and
transfer that knowledge and experience to its subsidiaries and affiliated
companies in other markets.
Although business initially focused on facilitating and conducting
transactions between businesses over the Internet, a number of companies more
recently have focused on facilitating a wide variety of business-to-consumer
transactions. These companies typically use the Internet to offer standard
products and services that can be easily described with graphics and text and do
not necessarily require physical presence for purchase. Items that qualify
include books, compact discs, videocassettes, automobiles, home loans, airline
tickets and online stock trading. The Internet gives these companies the
opportunity to develop relationships with customers from a central location
without having to make the significant investments normally required in
traditional retail such as building local retail stores, managing a worldwide
distribution infrastructure or developing the printing and mailing
infrastructure associated with traditional direct marketing activities. Follow
up service comes from online catalogs and instruction manuals.
E-Pawn.Com's business model intends to profit greatly by building a
large database that will be mined for other business opportunities. The Company
will adhere to industry standards for privacy and the use of confidential
customer information. The Company has adopted a Privacy Policy, and this is
posted on the Company websites.
E-Pawn.Com intends to acquire companies in industries which respond to
Internet marketing strategies, and it will engage in a selective process of
spinning off certain of these companies to the shareholders of E-Pawn.Com, and
its publicly-held subsidiaries and affiliates. E-Pawn.com has adopted a strict
formula for selecting target companies for acquisition and joint ventures. Among
the criteria and standards applied by E-Pawn.Com are:
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o an operating history of at least three years
o potential for rapid growth ; and
o an experienced management team that will remain with the
acquired company after acquisition.
The E-Pawn.Com business model combines the two potent business
elements: (i) Internet-based auction sites for consumer and B2B sales, and (ii)
online marketplaces and exchanges through its ubuynetwork.com umbrella.
E-Pawn.Com , Inc. Website Overview
E-Pawn.Com UBuy Network Big Ticket World Bazoo2000
Pawn Shop ubuyhomes.com Spotlight of the E-Designz
Auctionline Month
E-Pawn Store ubuysportsline.com BTW Auctions E-Commerz
Stockholders ubuycomics.com BTW For Sale E-Projectz
Forum
Swap Page ubuydigital.com BTW Clubs E-Portalz
EZ-Lovers + 271 additional Wanted Board
UBuy Domains
Fantastic Vacations Message Board
Help-u-Build Guest Book
King Brothers
Sports Picks
Chatroom Directory
105 Domains
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THE AUCTION SITES
E-Pawn.Com offers multiple auction sites, which are patterned on the
eBay model. E-Pawn.com auction sites are designed to provide an efficient,
online trading community for the exchange of goods and services between
businesses (B2B) and, where appropriate between businesses and consumers (B2C).
Access to the trading floor will be free, but E- Pawn.Com expects to earn
substantial fees from every aspect of its trading activities.
Individuals and businesses will use E-Pawn.Com auction sites to buy and
sell items in more than 2,000 categories: from automobiles and collectibles to
antiques, sports memorabilia, computers, books, and jewelry. As a leading
person-to-person trading site, buyers will want to trade on E-Pawn.Com because
of the large number of items available. Sellers will be attracted to E-Pawn.Com
to conduct business where there are large numbers of buyers. As a leading
business-to-business trading site, businesses find E-Pawn.Com an ideal place for
the interchange and exchange of goods and services.
E-Pawn.Com different auction sites execute the transaction by the
temporal matching of buyers and sellers, and by matching prices to levels of
supply and demand. Auction formats may be divided into three main types:
O REGULAR AUCTIONS. E-Pawn.Com began its website as a regular auction
site, and it is in the process of expanding its interactive auction or
exchange format as its management and fulfillment support components
become more integrated. Sellers have the opportunity to post an offer,
and buyers can bid on it.
O BULLETIN BOARDS. A central online meeting place for fragmented buyers
and sellers. Sellers post offers and buyers bid on these offers through
basic e-mail or traditional fax and phone. The bidding period is not
defined, and bidders are not aware of competing bids.
O REVERSE AUCTIONS. Buyers post requests to purchase in a structured
format, and sellers bid for the supply of goods or services. This
format is especially attractive for the Small, Medium Enterprise (SME)
market because it allows multiple buyers to form groups to negotiate
greater discounts from a growing number of suppliers.
The auction format works best in industries that either are trading
redundant, time sensitive products or are involved in selling specialized goods
and services, e.g., second hand equipment, not saleable returned goods, media
space, return loads, or construction equipment. Auction models often work across
multiple products or industries and typically in closed or pre-qualified
marketplaces. All buyers benefit from a broader supply base, lower search and
transaction costs, and more dynamic pricing. All sellers benefit from broader
customer access, lower transaction costs and a better understanding or market
pricing.
E-Pawn.Com auction sites have been designed to address the dynamics of
the above mechanisms and market demands. E-Pawn.Com sites are based upon the
traditional wide spectrum bulletin board auction model, and the
Bigticketworld.com and Ubuynetwork.com sites use a more advanced "branded"
auction model. All web sites successfully attract their respective clients
because they are user friendly, dynamic and attractive sites with the latest in
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sound, video and display features. The visitor to an E-Pawn.Com site will
want to stay and browse. The sites also provide unlimited opportunity for
linking visitors to other associated sites; as the site network expands, the
Internet Content Provider becomes an Internet portal.
THE BIGTICKETWORLD.COM SITE.
Items more than $100,000 in value or asking price are placed on the
Bigticketworld.com site. This site features items ranging from specialty cars,
boats, castles, estate items to jewelry and B2B commerce, and offers private
auction facilities to members. The site receives special promotion as a
specialty area, and it has numerous regular features such as monthly interviews
with personalities from the world of business, art and sports. It also offers
member discounts to events and functions around the globe. As of today,
Bigticketworld.com has listed millions of dollars worth of items. The curious
and the wealthy are attracted to this site, which then leads them to the other
sites in the network.
UBUYNETWORK.COM
E-Pawn.Com's principal source of revenues and profits is the network of
operating companies that operate under its ubuynetwork.com umbrella and brand
names.
E-Pawn.Com has already registered more than 400 domain names for
websites of which almost two thirds are "ubuy" names, such as: publishing
(ubuypublishing.com), real estate (ubuyhomes.com), automobiles (ubuycars.com),
jewelry (ubuyjewelry.com). As of May 31, 2000, the Company is the registered
owner of the following domain names:
HELPUBUILDSERVICES.COM PLATINUMRESORTSUK.COM
EZLOVER.NET GREATTUNES.COM
PAWNSHOPAUCTIONLINE.NET WORLDWIDEWEBDESIGNERS.COM
PAWNSHOPAUCTION.NET VCGLTD.COM
PAWNSHOPAUCTIONLINE.COM ABCCHATROOM.COM
FREECOUPONDISCOUNTS.COM ABCNEWSCHATROOM.COM
E-PAWN.NET ACCOUNTANTSCHATROOM.COM
E-PAWNINC.COM AIRFORCECHATROOM.COM
EPAWNINC.COM ALGORECHATROOM.COM
E-PAWNMALL.COM ALIENCHATROOM.COM
E-PAWN.COM AMERICANLEGIONCHATROOM.COM
SWAPPAGE.COM ARMYCHATROOM.COM
SWAPPAGE.NET ARTCHATROOM.COM
BREAKABOOKIE.COM ATTORNEYSCHATROOM.COM
SPACEPORT2000.COM BABYLON5CHATROOM.COM
BIGTICKETWORLD.COM BASEBALLCHATROOM.COM
SCHOOLSPOTLIGHT.COM BASKETBALLCHATROOM.COM
SCHOOLSPOTLIGHT.NET BATTLESTARCHATROOM.COM
SCHOOLSPOTLIGHT.ORG BEARSCHATROOM.COM
KINGBROTHERSSPORTSLINE.COM BEATLESCHATROOM.COM
KIDZS.COM BETTINGCHATROOM.COM
GIRLZS.COM BIBLECHATROOM.COM
BOYZS.COM BRITISHOPENCHATROOM.COM
TOYZS.COM CBSCHATROOM.COM
BAZOO2000.COM CBSNEWSCHATROOM.COM
WEBCARTZ.COM CBSSPORTSLINECHATROOM.COM
EPWN.NET CNBCCHATROOM.COM
CLUBPLATINUMUK.COM
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CNNCHATROOM.COM SPORTSBOOKCHATROOM.COM
CNNNEWSCHATROOM.COM STANLEYCUPCHATROOM.COM
CAMPAIGN2000CHATROOM.COM STARTREKCHATROOM.COM
CAMPINGCHATROOM.COM STARWARSCHATROOM.COM
CHERCHATROOM.COM STUDENTSCHATROOM.COM
CHURCHCHATROOM.COM SUPERBOWLCHATROOM.COM
COMPUTERCHATROOM.COM SWAPPAGECHATROOM.COM
DANMARINOCHATROOM.COM TEACHERSCHATROOM.COM
DEMOCRATCHATROOM.COM USOPENCHATROOM.COM
DENNISRODMANCHATROOM.COM VFWCHATROOM.COM
DERRICKJETERCHATROOM.COM VWCHATROOM.COM
DIVINGCHATROOM.COM VETERANSCHATROOM.COM
DOCTORSCHATROOM.COM WALLSTREETCHATROOM.COM
DODGERSCHATROOM.COM WEBCHATROOM.COM
ELVISCHATROOM.COM WIMBLEDONCHATROOM.COM
FISHINGCHATROOM.COM WORLDSERIESCHATROOM.COM
FOOTBALLCHATROOM.COM WWFWRESTLINGCHATROOM.COM
FORDCHATROOM.COM XFILESCHATROOM.COM
GEORGEWBUSHCHATROOM.COM YANKEECHATROOM.COM
GOLFCHATROOM.COM UBUYACCOUNTING.COM
GOTTICHATROOM.COM UBUYADVERTISING.COM
HOWARDSTERNCHATROOM.COM UBUYAIRCHARTER
HUNTINGCHATROOM.COM UBUYAIRCRAFT.COM
HUSTLERCHATROOM.COM UBUYANTIQUES.COM
INDY500CHATROOM.COM UBUYANYTHING.COM
INTERIORDESIGNCHATROOM.COM UBUYAPPLIANCES.COM
INVENTORSCHATROOM.COM UBUYART.NET
INVESTORCHATROOM.COM UBUYARTSUPPLIES.COM
JESSEVENTURACHATROOM.COM UBUYAUCTIONS.NET
JESUSCHATROOM.COM UBUYAUCTIONLINE.COM
JOBSEARCHCHATROOM.COM UBUYAUTOINSURANCE.COM
JOKECHATROOM.COM UBUYAUTOPARTS.COM
LOVERSCHATROOM.COM UBUYAUTOS.COM
MSNBCCHATROOM.COM UBUYAUTOS.NET
MADONNACHATROOM.COM UBUYBALLOONS.COM
MERCEDESCHATROOM.COM UBUYBANDS.COM
MICROSOFTCHATROOM.COM UBUYBANKING.COM
MUSICIANCHATROOM.COM UBUYBARBECUES.COM
NBCNEWSCHATROOM.COM UBUYBEARS.COM
NFLCHATROOM.COM UBUYBEAUTYSUPPLIES.COM
NHLCHATROOM.COM UBUYBEDDING.COM
NASCARCHATROOM.COM UBUYBEDS.COM
NAVYCHATROOM.COM UBUYBEER.COM
PAMELAANDERSONCHATROOM.COM UBUYBOATS.COM
PENTHOUSECHATROOM.COM UBUYBONDS.COM
PILOTSCHATROOM.COM UBUYBOOKS.COM
PLAYBOYCHATROOM.COM UBUYBOOKS.NET
POKEMONCHATROOM.COM UBUYBOWLING.COM
PRINCESSDIANACHATROOM.COM UBUYBRANDS.COM
PROFESSORSCHATROOM.COM UBUYBRANDS.NET
REALTORSCHATROOM.COM UBUYBRANDS.NET
REPUBLICANCHATROOM.COM UBUYBRITISHFOOD.COM
RICKYMARTINCHATROOM.COM UBUYBUILDER.COM
ROLLLINGSTONECHATROOM.COM UBUYBURGERS.COM
ROLLSROYCECHATROOM.COM UBUYCANDLES.COM
SAILINGCHATROOM.COM UBUYCANDY.COM
SECRETARIESCHATROOM.COM UBUYCANDY.NET
SINATRACHATROOM.COM UBUYCARD.COM
SKYDIVINGCHATROOM.COM UBUYCARD.NET
SOAPOPERACHATROOM.COM UBUYCARDS.COM
SOFTWARECHATROOM.COM UBUYCARDS.NET
SPACECHATROOM.COM UBUYCARDSERVICES.COM
SPACEPORTCHATROOM.COM UBUYCARDSERVICES.NET
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UBUYCARINSURANCE.COM
UBUYCARPET.COM
UBUYCARS.COM
UBUYCARS.NET
UBUYCASKETS.COM
UBUYCASUALTYINSURANCE.COM
UBUYCDPLAYERS.COM
UBUYCDS.COM
UBUYCEDARHOMES.COM
UBUYCELLPHONES.COM
UBUYCHAINS.COM
UBUYCHARMS.COM
UBUYCHEESE.NET
UBUYCHEESECAKE.COM
UBUYCHICKEN.COM
UBUYCHINESEFOOD.COM
UBUYCHOCOLATE.COM
UBUYCIGARS.COM
UBUYCLASSICCARS.COM
UBUYCLEANING.COM
UBUYCLEANINGSERVICES.COM
UBUYCLEANINGSUPPLIES.COM
UBUYCLOCKS.COM
UBUYCLOSEOUTS.COM
UBUYCOFFEE.COM
UBUYCOFFEE.NET
UBUYCOINS.COM
UBUYCOINS.NET
UBUYCOLLECTIBLES.COM
UBUYCOMICS.COM
UBUYCOMPUTERS.COM
UBUYCONDONS.COM
UBUYCOOKIES.COM
UBUYCOOKWARE.COM
UBUYCOPIERS.COM
UBUYCOSMETICS.COM
UBUYCREDITCARD.COM
UBUYCROCODILES.COM
UBUYCRUISES.COM
UBUYCYCLES.COM
UBUYDECOR.COM
UBUYDENTISTS.COM
UBUYDIAMONDS.COM
UBUYDISCOUNTBROKER.COM
UBUYDISCOUNTBROKERS.COM
UBUYDOCTORS.COM
UBUYDOLLS.COM
UBUYDRUGS.NET
UBUYEARRINGS.COM
UBUYEDUCATION.COM
UBUYELECTRONICS.NET
UBUYEMPLOYMENT.COM
UBUYENTERTAINMENT.COM
UBUYEQUIPMENTLEASING.COM
UBUYEVERYTHING.COM
UBUYFABRIC.COM
UBUYFACTORING.COM
UBUYFANS.COM
UBUYFASHIONS.COM
UBUYFILM.COM
UBUYFIRSTCLASSBEARS.COM
UBUYFISHING.COM
UBUYFLOORCOVERING.COM
UBUYFLOWERS.COM
UBUYFLOWERS.NET
UBUYFORECLOSURES.COM
UBUYFRANCHISES.COM
UBUYFREIGHT.COM
UBUYFRUIT.NET
UBUYFURNITURE.NET
UBUYGARDENSUPPLIES.COM
UBUYGEMS.COM
UBUYGENERICDRUGS.COM
UBUYGERMANFOOD.COM
UBUYGIFTS.COM
UBUYGIFTS.NET
UBUYGOLD.COM
UBUYGOLF.NET
UBUYGOLFCLUBS.COM
UBUYGOLFEQUIPMENT.COM
UBUYGOURMETCOFFEE.COM
UBUYGOURMETCOFFEE.NET
UBUYGREEKFOOD.COM
UBUYGROUP.COM
UBUYGUITARS.COM
UBUYGUNS,COM
UBUYHANDBAGS.COM
UBUYHARDONS.COM
UBUYHEADHUNTERS.COM
UBUYHEALTHCARD.COM
UBUYHEALTHFOOD.COM
UBUYHEAVYEQUIPMENT.COM
UBUYHOLDINGS.COM
UBUYHOMEBUILDER.COM
UBUYHOMEIMPROVEMENTS.COM
UBUYHOMEINSPECTIONS.COM
UBUYHOMES.COM
UBUYHORSES.COM
UBUYINDIANFOOD.COM
UBUYINSURANCE.NET
UBUYINTERNETSERVICES.COM
UBUYINVESTMENTS.COM
UBUYITALIANFOOD.COM
UBUYJANITORIAL.COM
UBUYJAPANESEFOOD.COM
UBUYJETBOATS.COM
UBUYJETS.COM
UBUYJEWELRY.COM
UBUYJOBS.COM
UBUYJUNKYARD.COM
UBUYKANGAROOS.COM
UBUYKOALABEARS.COM
UBUYKOALAS.COM
UBUYKOREANFOOD.COM
UBUYKOSHERFOOD.COM
UBUYLAWNMOWERS.COM
UBUYLEASING.COM
UBUYLEGAL.COM
UBUYLEGALSERVICES.COM
UBUYLIFEINSURANCE.COM
UBUYLINEN.COM
UBUYLINENS.COM
UBUYLISTS.COM
UBUYLOANS.COM
UBUYLOANS.NET
UBUYLOGHOMES.COM
UBUYLOYALTYCARD.COM
UBUYLOYALTYCARD.NET
UBUYLUGGAGE.COM
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UBUYMAILINGLISTS.COM
UBUYMATTRESSES.COM
UBUYMEDIA.NET
UBUYMEDICALCARD.COM
UBUYMEDICALSUPPLIES.COM
UBUYMEDICINE.COM
UBUYMEMORABILIA.COM
UBUYMOBILEPHONES.COM
UBUYMODELHOMEFURNITURE.COM
UBUYMORTGAGES.COM
UBUYMOTORHOMES.COM
UBUYMP3.COM
UBUYMUFFLERS.COM
UBUYMUTUALFUNDS.COM
UBUYNECKLACES.COM
UBUYNETWORK.COM
UBUYNETWORK.NET
UBUYOFFICESUPPLIES.COM
UBUYONCREDIT.COM
UBUYORGANS.COM
UBUYPAGERS.COM
UBUYPANDABEARS.COM
UBUYPANDAS.COM
UBUYPARTYSUPPLIES.COM
UBUYPAWN.COM
UBUYPENDANTS.COM
UBUYPERFUME.COM
UBUYPETS.NET
UBUYPETSUPPLIES.COM
UBUYPHARMACEUTICALS.COM
UBUYPIANOS.COM
UBUYPIZZA.COM
UBUYPORN.COM
UBUYPOWERTOOLS.COM
UBUYPRETZELS.COM
UBUYPRINTING.COM
UBUYPRODUCTIONS.COM
UBUYPRODUCTIONS.NET
UBUYPROMOTIONS.COM
UBUYPROMOTIONS.NET
UBUYREALESTATE.NET
UBUYRELIGIOUSJEWELRY.COM
UBUYRINGS.COM
UBUYROLLERBLADES.COM
UBUYROSES.COM
UBUYRUGS.COM
UBUYRX.COM
UBUYSECURITIES.COM
UBUYSEEDS.COM
UBUYSEEDS.NET
UBUYSHOES.COM
UBUYSILVER.COM
UBUYSNOWMOBILES.COM
UBUYSOCCER.COM
UBUYSOFTWARE.NET
UBUYSPORTSLINE.COM
UBUYSPORTINGGOODS.COM
UBUYSTAMPS.COM
UBUYSTOCK.COM
UBUYSTOCK.NE
UBUYSTOCKS.COM
UBUYSUNGLASSES.COM
UBUYSURPLUS.COM
UBUYSWEETS.COM
UBUYTEDDYBEARS.COM
UBUYTENNIS.COM
UBUYTENNISBRACELETS.COM
UBUYTEXTILES.COM
UBUYTHAIFOOD.COM
UBUYTSHIRTS.COM
UBUYTICKETS.COM
UBUYTICKETS.NET
UBUYTIMESHARE.COM
UBUYTIRES.COM
UBUYTITLEINSURANCE.COM
UBUYTOURS.COM
UBUYTOYS.COM
UBUYTOYS.NET
UBUYTRAVEL.COM
UBUYTRAVEL.NET
UBUYTROPHIES.COM
UBUYTRUCKS.COM
UBUYTRUCKPARTS.COM
UBUYTVS.COM
UBUYVACATIONS.COM
UBUYVIDEOS.COM
UBUYVITAMINS.COM
UBUYWALLABIES.COM
UBUYWATCHES.NET
UBUYWHATEVER.COM
UBUYWIDGETS.COM
UBUYWINE.NET
UBUYYACHTS.COM
UBUYYARN.COM
The Company's primary business objective is to acquire and operate
existing private and public companies in certain of these Internet and market
areas, and to further enhance the value in each company through a combination of
internal growth and acquisitions. Areas that grow significantly in revenues and
profits may eventually be spun off to operate as separate companies in which all
E-Pawn.Com shareholders may receive a stake through stock dividends. Because the
Internet is a 24 hours-a-day, 7 days-a-week operation that projects into the
domestic and international arena, E-Pawn.Com is aiming to acquire and develop
businesses on all the continents and significant economic regions of the world.
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E-Pawn.Com plans to launch new company ventures using its e-commerce
services and Ubuy branding in the following areas:
o Residential and commercial real estate
o Jewelry design and manufacturing
o Commercial Printing and design services
o Infomercial productions
o Digital recording and production technologies
E-Pawn.Com seeks strategic partners that are small to medium size
businesses that do not have the financial capability to develop Internet
infrastructure and to compete with the larger Internet leaders such as Amazon,
CDNow, Egghead and others. E-Pawn.Com intends to promote entrepreneurship within
its ranks - keeping each operating company or group nimble and aggressive,
seeking out changing market needs and responding efficiently TO CUSTOMER
DEMANDS. IN SHORT: AS CLIENT'S NEEDS CHANGE, SO WILL E-PAWN.COM. By
consolidating the responsibility for human resource planning, compensation,
benefits, finance, accounting, and certain other administrative tasks at the
corporate level, the operating entities will be free to pursue their core
competencies and the delivery of excellent customer support. The objective is
greater efficiency at all levels.
The E-Pawn.Com business strategy is to build its core business around
niche products and services that lend themselves readily to Internet-based
marketing and distribution, and e-commerce methods. E-Pawn.Com will focus on
incorporating the following market SEGMENTS AND INDUSTRIES INTO ITS BUSINESS
MODEL THROUGH ITS UBUY branding:
o Automobiles o Accessories
o Collectibles o Sports memorabilia
o Digital products o Books, tapes and CDs
o Music
EXPANSION BY ACQUISITIONS
During the fourth quarter of fiscal 2000 ending May 31, 2000, the
Company engaged in an active program of seeking candidates for acquisition and
investment for its Ubuy network and for launching new business lines supported
by its Internet marketing. The Company signed letters of intent and engaged in
many due diligence reviews of companies in businesses and industries such as
jewelry manufacturing, printing, publications, specialty product marketing,
music and entertainment, freight forwarding, novelties, sports memorabilia,
consumer smart cards, employment and staffing services, and prepaid legal
insurance. The Company authorized the issuance of almost 100 million shares to
effect the transactions. However, most of the transactions were not completed
because of numerous factors, including the lack of capital, issues discovered
during due diligence review, incompatibility of business approaches, changes in
the market value of either the Company's stock or the stock of the target
company, and the trading suspension issued by the SEC among other things. In all
instances, except the Shopper's Online, the Company and the target amicably
terminated the negotiations and contractual arrangements, and the Company
recovered and cancelled the shares.
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The Company reached an agreement with David McKenna of Dublin, Ireland
to purchase the shares of Marlborough International, Plc., a publicly traded
company, in the employment and staffing services industry. The shares
represented approximately 45% of the outstanding shares. The Company and
Marlborough and Mr. McKenna reached an agreement to cancel the agreements, and
Mr. McKenna arranged to purchase 500,000 restricted shares of the Company's
common stock for $100,000. This transaction was completed in July 2000.
UBUYHOMES.COM, INC.
In April 2000, the Company entered into an agreement with the
shareholders of Home Realty & Investment Corp., Inc. ("Home Realty") to acquire
80% of the outstanding stock of the Home Realty. Home Realty is a full service
real estate brokerage and marketing company focusing on the residential market
in the South Florida Atlantic Coast region. The company was organized in 1994.
It has two offices, and it plans to open offices in every major market in the
region. The Company closed the transaction in July 2000, and Home Realty will be
consolidated in next year's operations.
The Company intends to have Home Realty develop a real estate marketing
strategy using the Ubuyhomes.com brand and Internet banner. The website will be
a tool in the marketing program, and the Ubuyhomes.com website will be linked to
all other sites in the uBuy network and E-Pawn.Com universe of domain names. The
sites for this portal will be engaged in active cross selling. Visitors to one
site can browse the other sites, and these contacts will likely lead to buyer
interest. In addition, the website will offer Home Realty the chance to present
other promotions to attract visitors which will be more economic than the
typical marketing inducements which have low return on marketing expenditures.
CELEXX CORPORATION
The Company made a substantial investment in CeleXx Corporation of Boca
Raton, Florida (herein referred to as "CeleXx") during April 2000. The Company
arranged for the contribution of 1,000,000 shares of the Company's free trading
stock to CeleXx, for 1,000,000 shares of CeleXx common stock to be given to the
Company. The agreement provided for additional investment in the form of
exchanges of common stock of each company. The Company intended for CeleXx to
provide technical support, and management and administrative services. Prior to
obtaining a budget and a mutually acceptable management services agreement,
CeleXx announced that it was terminating all association with the Company in
July 2000. CeleXx also demanded the immediate return of $500,000 that was
advanced to the Company in April 2000. The Company filed a lawsuit against
CeleXx and its chairman, Douglas H. Forde, who was also a former chairman and
director of E-Pawn.Com, Inc. The Company is seeking specific performance and
other relief. See Item 3 - Legal Proceedings and Note 3 of the Notes to
Consolidated Financial Statements.
The unavailability of CeleXx to perform these services will cause the
Company to rely on other contract providers and professional advisors for the
support.
SOFTWARE PRODUCTS
E-Pawn.Com uses software from conventional vendors under license, and
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it has developed its own proprietary software for special applications. The
Company will take the conventional products and adapt or customize the programs
to serve the applications for the Company. The Company and its website
management company, Worldwide Web Designers, Inc., employ a group of consultants
and programers who adapt and write the software for specific applications. The
designs employ all of the tools required for presentation of appealing and
useful commercial sites, including color, animation, video, and audio features.
The Company intends to update and enhance the features and functionality of its
programs in order to provide top of the line service and products to its
customers and visitors. The programs are compatible with all of the primary
Internet browsers and fully functional with WebTV, which is an important viewing
medium outside the United States.
The Company has developed proprietary software programs for certain key
e- commerce applications. The following programs are offered for license:
STOREFRONT MANAGER
The Storefront Manager is a basic package of tools necessary for the
presentation and operation of an e-commerce website. The package is directed to
the SME business and commercial user. A website employing this package can
handle thousands of products or units with text and graphics or pictures. The
program is easy to use and install, and the commercial operator can control and
change the site without any knowledge of programing languages and techniques.
The operator can customize the site for its special purposes. The package
includes automated listing of items, search tools, banner ads, buying and
selling tools, pricing and discounting, administration and calculations of
subsidiary costs such as taxes and shipping, e-mail verification and other
online transaction verification modules. The program can be integrated and
merged into an existing website or used as a stand-alone site. The software is
currently written for use in six languages. The Company has a standard
storefront package using this software which can be supplied to a customer ready
to use by simply selecting the color, font and logos. The Company will license
the software to third parties and to its subsidiaries and affiliates in the
domestic and international markets.
ONLINE AUCTION PROGRAMS
E-Pawn.Com has developed proprietary packages of online auction
software programs which allow for private, reserve, reverse, sealed-bid and
regular auction formats. The Company has obtained under license software that
includes programs which permit Flash and Dutch auctions. The programs are
customized for use with other Company programs. The programs allow sellers to
choose auction parameters including duration, minimum bid, bid INCREMENT, AND
PAYMENT METHODS AND TERMS. THE COMPANY'S PAWNSHOPAUCTIONLINE offers free image
hosting to sellers on Company servers. The seller has the opportunity to display
before putting the item on the block. The Company's auction programs provide an
easy-to- use interface with an intuitive site architecture. The programs have
many search function tools which allow for searches by categories, products,
name brand, price, and others. The software is compatible with most of the
Internet browsers in use today.
ONLINE PROJECT MANAGEMENT
The Company has secured the exclusive license for a Web-based project
management program. This program will provide the user with instant access to
the status of projects.
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The users can enter new projects, add tasks to projects, enter assignments to
individuals within tasks, update assignments, and provide instructions and notes
to assignments, tasks and projects. The principal advantage of the Company's
program over conventional project administration programs is that it is
Web-based, and not confined to a closed network or platform. Users will be free
to view the status of the project online through the Internet from anywhere, by
hand-held medium, telephone, or laptops. All information is updated through the
Internet. An important advantage of the Company's program is that it is based on
"Thin- Client Technology" which eliminates the need to install anything on the
client side in order to access and run the program. Therefore, the administrator
is not concerned about adding new users and dealing with incompatible systems or
hardware. Users and administrators can track current and completed projects.
Projects can be subdivided and team members can track the progress on different
components of a projects and the work of individual members. Communication is
enhanced by integration of e-mail which has multiple distribution and security
characteristics.
These applications can be viewed at www.bazoo2000.com.
GLOBAL EXPANSION PROGRAM
E-Pawn.Com intends to develop the E-Pawn.Com concept around the world
through the Global Partner Program. The first of these programs was finalized
with an affiliated Swiss company Asset Investment Management (1984), S.A. in May
2000. Asset Investment Management, a 16-year old asset management company based
in Switzerland, has agreed to establish and operate the E-Pawn.Com business
model in Austria, Switzerland, Norway, Denmark and Sweden. The Company has
organized two subsidiaries in the United Kingdom, namely, e-Pawn.co.uk Plc and
Ubuynetwork.co.uk Plc. Neither subsidiary had any operations through May 31,
2000. However, the Company intends to install operations using the E-Pawn.Com
business model in these subsidiaries. The companies have been organized to have
the ordinary shares traded in public markets.
As networking, Internet access, and advanced communications systems
become cheaper and more commonplace, E-Pawn.Com's target market will shift to
encompass virtually every country in the world that has access to the Internet
and a base of users.
Today, the fastest growing markets for the Internet are in Latin
America, the Caribbean, and Western Europe (source: IDC). The rate of growth in
these emerging markets is projected to increase exponentially over the first
quarter of the 21st century. To position itself to benefit, E-Pawn.Com is
establishing ties and aligning itself with established partners and service
providers across the United States, Europe, the Caribbean and Latin America. By
expanding its geographical base, E-Pawn.Com will be better able to serve its
clientele across the United States and around the world, and will stand to
benefit from new and expanding technologies without regard for their origin or
source.
MARKETING PLAN
The Company is aware that marketing is likely to be the biggest
determinant to the Company's success. Until the Internet-using-public is aware
of its presence, E-Pawn.Com will be utilizing the following strategies to bring
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viewers and customers to its sites:
o Targeted advertising on various Internet networks such as Yahoo and
Excite.
o Radio commercials
o Direct mail advertising
o Infomercials
After there is a public awareness and recognition, the Company believes
the attraction of viewers to its portal will be self-sustaining.
COMPETITION
Competition among providers of online personal trading and auctions,
storefronts and other e-commerce platforms is a new, rapidly evolving and
intense. The Company expects competition to intensify in the future as the
barriers to entry are relatively low, and current and new competitors can launch
new sites at a nominal cost using commercially available software. The Company's
strategy of acquiring companies that function as commercial enterprises in
specific markets means that the competition is not always another online auction
provider or e-commerce site. The competition will be with companies offering
similar goods and services to that of the acquired company. Depending on the
industry or application, E- Pawn.com currently or potentially competes with a
number of companies serving particular categories of goods and services.
Broad-based competitors include the traditional stores and distributors as well
as emerging online retailers. These include Wal- Mart, Sears, Costco, Buy.com,
AOL.com, Yahoo!shopping, and MSN.
Additionally, the Company faces competition from various online auction
sites including: Amazon.com, the Fairmarket Auction Network (a auction network
including Microsoft's MSN, Excite@Home, Dell Computer, ZD Net, Lycos and more
than 100 others), First Auction, Surplus Auction, uBid, Yahoo! Auctions and a
large number of other companies using an auction format for consumer-to-consumer
or business-to-consumer sales.
Some current and potential competitors have longer company operating
histories, larger customer bases and greater brand recognition in other business
and Internet markets than E-Pawn.Com does. Some of these competitors also have
significantly greater financial, marketing, technical and other resources. Other
online trading services may be acquired by, receive investments from or enter
into other commercial relationships with larger, well established and
well-financed companies. As a result, some of the Company's competitors with
other revenue sources may be able to devote more resources to marketing and
promotional campaigns, adopt more aggressive pricing policies and devote
substantially more resources to website and systems development than the Company
is able to do. Increased competition may result in reduced operating margins,
loss of market share and diminished value of the E-Pawn and Ubuy brands. Some of
the Company's competitors have offered services for free and others may do this
as well. The Company may be unable to compete successfully against current and
future competitors.
Although the Company may have substantial competition, the flexibility
which it has through its size and chain of command with management, means the
Company can react quickly and seize opportunities which present themselves
without long and tedious bureaucratic processes. In addition, the Company has
the ability to raise capital because of its access to public capital markets.
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ITEM 2. PROPERTIES.
The Company has leased approximately 1500 square feet of executive
offices for its corporate headquarters in an office tower in Coral Springs,
Florida. The Company has prepaid the rent for two years. The Company owns or
leases all the computer equipment and servers required for the operation of its
business. The Company has no debt associated with the equipment and furnishings,
except for desks and chairs which are leased.
ITEM 3. LEGAL PROCEEDINGS.
On June 14, 2000, the Securities and Exchange Commission suspended
trading of the Company's common stock citing questions about the adequacy of
disclosures about controlling shareholders. The trading suspension lifted after
10 business days, and no further public administrative action has occurred
involving the Company. In another action on June 14, 2000, the United States
Department of Justice indicted Eli Leibowitz, the Company's President and
Director, and Leslie Greyling, the husband of Anne Greyling, who controls Swiss
Arctic Traders Ltd. and LaSalle Holdings Ltd. which are each controlling
shareholders of the Company. These relationships had been disclosed. The United
States charged the defendants with wire fraud, securities fraud and conspiracy
to commit wire and securities fraud and commercial bribery.
The commission issued subpoenas in connection with the investigation
styled in the matter of certain microcap securities to the Company and
affiliates of the Company. These included certain of its directors, and the
Company has provided the information requested. The investigation is ongoing and
the Company will cooperate with the inquiry. Although the Company was not
charged in the Department of Justice action, and the Company had no association
whatsoever with the persons involved in the criminal conduct highlighted by the
federal authorities in its news conference announcing the action, the inclusion
of the trading suspension in the same release and the general references made by
the authorities to manipulation of Internet stocks by those charged, caused
almost all of the media from around the world to associate the Company with
organized crime, which the Company denies. Only a few news sources accurately
reported that the trading suspension had nothing to do with the story concerning
Microcap Fraud involving organized crime. As a result of the confusion
associated with the government agencies' news releases and the misleading
headlines, the Company and its management have been subjected to numerous
inaccurate and erroneous rumors and stories in the financial press, news press,
by financial commentators and on the Internet message boards. These stories and
the other events have caused certain transactions which the Company was pursuing
to be terminated and certain transactions to be withdrawn. Management of the
Company believes that the Company and its shareholders have been damaged by the
persons who caused the false and misleading reports to be made which led to the
adverse consequences, including a substantial decline in the market value of the
Company's stock. The Company will evaluate the legal rights and remedies which
it may have against those that caused this damage. The ultimate outcome of the
aforementioned investigation cannot presently be determined.
On August 1, 2000, the Company filed a lawsuit in the Circuit Court of the
15th Judicial Circuit, Palm Beach Count, State of Florida. The case is styled
E-Pawn.com, Inc. v. Celexx Corporation and Douglas H. Forde, Case No.
CL007436AN. The lawsuit alleges causes of action for breach of contract, fraud
and breach of fiduciary duty.
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The Company is seeking damages, specific performance, and an injunction. A
material claim in the lawsuit is the failure of CeleXx to complete the
transaction which was called for in the Investment Agreement between the Company
and CeleXx made on March 10, 2000, as amended on April 3, 2000. The Company
received 1,000,000 shares of common stock of CeleXx in exchange for 1,000,000
shares of free trading common stock of the Company, and CeleXx advanced $500,000
to the Company in connection with the transactions associated with the
Investment Agreement. CeleXx has made demand for the return of the $500,000, and
it has demanded rescission of all of the agreements between the Company and
CeleXx and return of the stock that was exchanged.
On June 14, 2000, the Company received a notice that Shopper's
Online, Inc. and Freebees, Inc. intended to cancel the agreements between the
Company and each of these respective companies. The Company had entered into an
agreement with the owner of these companies to acquire 19% of the outstanding
shares of each respective company in exchange for two million shares of the
Company's common stock and a payment of $100,000. In addition, the two companies
entered into a management agreement with the Company to perform management
services for a fee of $10,000 per month. The stipulated value of the stock
exchange was $3.1 million. The Company delivered the shares and the funds and
performed all terms and conditions required of it under the agreement. The
Company's counsel made demand for full restitution and charged the companies and
their principal, William C. Martucci, with violation of the Florida Civil Theft
law, which may allow the Company to recover treble damages plus attorneys' fees.
No response to the demand has been received within the required abatement
period, which expired on August 25, 2000. The Company has authorized counsel to
file the lawsuit against all persons who participated in the transaction.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matter to a vote of security holders
during the fourth quarter of the year ending May 31, 2000. On July 7, 2000, the
shareholders holding more than 90 percent of the voting shares of the Company
consented in writing to certain action in lieu of a meeting. The action taken by
the shareholders was the election of Edward O. Ries, Alison Madej and Jennifer
Martin as directors of the Company. In addition, the shareholders consented to
the appointment of Steve Bazsuly as the proxy to vote the Company's shares of
CeleXx Corporation at a special meeting of that company. On July 10, 2000,
shareholders holding over 90 percent of the voting shares consented in writing
to the Rescission Agreement between the Company and Loyalty Holdings Limited.
The Company has set a special meeting of shareholders for October 30,
2000. Notice of the meeting and a proxy will be filed on September 22, 2000 and
mailed to shareholders of record. The agenda for the meeting will include the
election of directors, the appointment of the Company's independent auditor for
fiscal 2001, and the approval of the 2000 Stock Plan.
The solicitation of the consent of the controlling shareholder, Fortuna
Holdings Limited, whose vote on any issue will cause the approval of that issue,
will be made through the proxy that will be filed with the Commission pursuant
to Regulation 14A.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock has traded over-the-counter and quoted on
the OTC NASDAQ Electronic Bulletin Board (OTCBB) under the symbol "EPWN" since
February 29, 2000 through May 31, 2000. The Company previously traded under its
former symbol "WITD." The Company traded under this symbol since 1995. The
following table represents the range of the high and low bid prices of the
Company's stock as reported by the NASDAQ Trading and Market Services for the
fiscal quarter for the fiscal year ending May 31, 2000. Such quotations
represent prices between dealers and may not include retail markups, markdowns,
or commissions or actual transactions.
QUARTER ENDED HIGH LOW
August 31, 1999 $ .04 $ .02
November 30, 1999 $ .03 $ .02
February 29, 2000 $2.75 $ .02
May 31, 2000 $9.13 $ .81
As of May 31, 2000, the Company had approximately 5000 stockholders of
record of the Company's common stock although the Company believes that the
number of stockholders is significantly larger because many firms hold shares on
behalf of many beneficial owners.
DIVIDENDS
The Company has never paid cash dividends on its stock, and it
anticipates that it will continue to retain any future earnings to finance the
growth and expansion of its business. The Company may elect to issue stock
dividends from its subsidiaries and investments.
QUOTATIONS
Through May 31, 2000, the Company's common stock was quoted on the OTC
Bulletin Board. Under the rules, a company must be current with its filings in
order to maintain the listing on the OTC Bulletin Board. If the company sustains
a period of delinquency or if the NASD believes that information required by
Rule 15c2-11 promulgated under the Securities Exchange Act of 1934, as amended,
is not adequate, its listing may be removed from the OTC Bulletin Board, in
which case the company will move the listing to the National Quotations Bureau's
Pink Sheets. This move, if made, may adversely affect the market in the
Company's stock. The Company has provided disclosures required by Rule 15c2-11.
See Item 3 - Legal Proceedings and Note 2 of the Notes to Consolidated Financial
Statements.
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ITEM 6. SELECTED FINANCIAL DATA.
The Company has not presented a comparative columnar table of selected
financial data because the present Company has had only one year of operations,
pursuant to the reverse acquisition with E-Pawn, Inc. in February 2000.
The Company divested its former assets and operations in February 2000 when it
spun off its Caribbean International Corporation subsidiary to its shareholders.
See Note 1 of the Notes to Consolidated Financial Statements. The Company
acquired E- Pawn, Inc. in February 2000 in a reverse acquisition. The
consolidated financial statements that have been presented are those of E-Pawn,
Inc., which was incorporated on May 26, 1999, and it had no predecessors. The
Company, therefore, has had only one year of operations in its present form, and
historical financial statements for prior years are not appropriate for
comparative purposes. The Consolidated Statement of Operations at page F-5 and
Consolidated Statement of Cash Flows at page F-7 with the accompanying Notes to
Consolidated Financial Statements present fairly and accurately the Company's
financial condition. See also Item 7 and Item 7A following in this Annual Report
for discussion of the results of operations and factors affecting the Company
and its financial position.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
OVERVIEW
E-Pawn.Com, Inc. is an applications service provider and holding
company for shares of companies that it serves and services. The Company has
developed sophisticated software for networking and providing e-commerce
platforms for selling products and services through the Internet. The Company
uses its technological assets in conjunction with its marketing programs to add
value to companies. E-Pawn.Com, Inc. and its other affiliates customarily make
an investment in the companies to which it provides services in certain markets.
The Company shed all of its previous operations when it spun off the
shares of Caribbean Holdings International Corporation in February 2000 to the
shareholders of the Company. The Company had generated net losses and a
substantial deficit from its previous operations. The operations following the
conversion to its present business in February 2000 have continued to generate
net losses. Following its acquisition of E- Pawn, Inc., the Company has used its
available cash resources to reinstate the Company as a public company and to
build and maintain the infrastructure to be a substantial participant in the
Internet industry. The Company has used some of its cash to facilitate
acquisitions of shares of target companies, which should assist the Company in
developing revenue and profits. Management believes that the Company will
require continuing cash infusions from private and public sources using its debt
and equity capital resources, although the Company will avoid incurring debt
which it cannot service from operations. The sale or use of additional shares of
the Company's capital stock will result in dilution of its stockholders. There
is no assurance that the Company will be able to secure the additional financing
on acceptable terms from any source. The present controlling shareholders have
contributed the working capital necessary to sustain operations when funds were
not available from other sources. The continued operation of the Company and its
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ability to reach the goals of expansion and growth will be at risk until its
capital resources from internal and external sources are more definite and
diverse.
RESULTS OF OPERATIONS
FISCAL YEAR 2000
During the period, E-Pawn.Com, Inc. was a development stage enterprise
and accordingly, engaged in limited operations. The company generated revenue of
$7,400 for the fiscal year ended May 31, 2000.
Operating expenses during this period were $1,290,000, which consisted
primarily of internet expense paid of $250,000, legal and accounting fees of
$100,000, consulting services of $460,000, and a legal settlement of $190,000.
Depreciation and amortization of $9,800 was expensed for fiscal year
ended May 31, 2000. The Company intends to depreciate its furniture and
equipment and its intangible assets on a straight-line basis over a period of 5
years, which is the estimated period that the assets will likely benefit the
Company. Management will review the Company's carrying value periodically. If
the value is less than originally determined and the value must be lowered, the
Company may suffer a charge against earnings and a shortening of the asset life.
Through May 31, 2000, the Company and its subsidiaries have sustained
substantial operating losses that may be offset against future taxable income
through the year 2018. A substantial amount of the carryforwards are subject to
annual limitations pursuant to the Internal Revenue Code which become effective
when an "ownership change" such as a change in control occurs.
FACTORS AFFECTING OPERATING RESULTS
The focus of the Company's operations during fiscal 2000 has been
acquisitions and capital formation. The Company must continue to maintain the
website infrastructure which is the primary asset which attracts acquisition
candidates. The acquisition program has placed, and will continue to place, a
significant drain on management's time and operational resources. When the
Company acquires a company or asset, the Company must continue to infuse time
and funds to integrate the acquired company and to install the systems necessary
to manage the business and finances for the acquired company. There is no
guarantee that the acquired company will make a successful transition, and if
the acquired company should fail, the Company may be required to write off the
amount of the investment.
LIQUIDITY AND CAPITAL RESOURCES
The Company has generated most of its cash requirements from private
placements and advances by major shareholders. At May 31, 2000, the Company had
$ 7,000 cash on hand. During the three months following the acquisition of
E-Pawn, Inc., the Company received cash of $700,000, of which $500,000 was
advanced by CeleXx Corporation and $200,000 was from the proceeds from issuance
of common stock. The cash was used for operations and investments.
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The consolidated financial statements have been prepared assuming the
Company will continue as a going concern. The Company has incurred a loss of
approximately $1,280,000 has a working capital and a total stockholder's
deficiency of $1,950,000 and $258,000 respectively, which creates a substantial
doubt about the Company's ability to continue as a going concern. The recovery
of assets and continuation of future operations are dependent upon the Company's
ability to obtain additional debt or equity financing and its ability to
generate revenues sufficient to continue pursuing its business purposes. The
principal shareholder has indicated a willingness to continue to fund the
operating expenses for the foreseeable future although there is no assurance
that such shareholder will continue to do so. The Company is actively pursuing
equity and debt financing to fund future operations and acquisitions.
After May 31, 2000, the Company agreed to acquire all of the Class A
Preferred Stock held by Swiss Arctic Traders Ltd for a promissory note in a
principal amount of $1 million. The note will bear simple interest at 10% per
annum and payments will be interest only payable monthly and principal and
unpaid accrued interest will be due in five years. Fortuna Holdings Limited
entered into an agreement to acquire substantially all of the common stock of
the Company held by Swiss Arctic Traders. The Company may try to sell the
Preferred Stock in return for assumption of the note and other consideration
flowing to the Company.
INFLATION
Management is of the opinion that inflation in the economy has had no
adverse impact on the Company's operation.
YEAR 2000 COMPLIANCE
Management believes that it has taken appropriate steps to protect the
Company's programs and systems from Y2K failures and disruptions. The Company
has had no significant problem with its systems because of the failure to
recognize 2000. The funds expended by the Company to manage this problem have
not been material.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
An investor should carefully consider the risks described below before
making an investment decision. The risks and uncertainties described below are
not the only ones facing the Company. Additional risks and uncertainties not
presently known to management or that it currently deems immaterial also may
impair business operations of the Company. If any of the following risks
actually occur, the business could be harmed. In such case, the trading price of
the Company's common stock could decline, and holders of the shares may lose all
or part of their investment.
LIMITED OPERATING HISTORY
The Company in its present form as an Internet applications service
provider has been doing business in this market segment since 1999. There is
only a limited operating history on which an investor can base an evaluation of
its business and prospects.
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With a substantial portion its business classified as an online e-commerce
enterprise in the early stage of development, the Company faces increased risks,
uncertainties, expenses and difficulties. Although the Company intends to
acquire existing companies with operating histories not directly tied to the
Internet, an investor should consider an investment in the company in light of
the following risks, uncertainties, expenses and difficulties. To address these
risks and uncertainties, management must do the following:
o maintain and increase our number of registered users;
o maintain and expand the website and customer support operations at
reasonable cost;
o continue to make trading through the websites safer for users;
o maintain and enhance the Company's brands;
o successfully execute the business model and marketing strategy;
o continue to develop and upgrade the proprietary technology and
information processing systems;
o continue to refine our service to meet the needs of a changing market
and competitive environment;
o attract, integrate, retain and motivate qualified personnel.
The Company's failure to accomplish one or more of these goals may
cause the Company to have adverse financial results.
SOURCES OF WORKING CAPITAL LIMITED
The amount and availability of capital for the Company are matters
which are not always under the control of the Company. If capital requirements
materially exceed the ability of the Company to meet them, then the Company must
scale back its commitments and its expansion plans.
VOLATILITY OF STOCK PRICE AND LIMITED MARKET
The Company's common stock has experienced fluctuations in price and
volume during the past fiscal year. There has been a limited public market for
the common stock on the electronic bulletin board and in the pink sheets. The
Company has no assurance that a strong public market for the common stock will
develop or continue in the future. The Company is treated as a high tech or
Internet stock, and the stocks of these companies have experienced wide
fluctuations in price and volume. The market price changes may not be tied to
the financial performance of the company and its prospects for growth. Such
factors as variations in interim financial results, comments by securities
analysts, rumors on message boards, technological innovations and products
employed by the Company and its competitors, and changing demands for Internet
access all can affect the market price and its volatility.
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ADVERSE CONSEQUENCES OF ACQUISITION PROGRAM
If appropriate opportunities present themselves, the Company intends to
acquire businesses, technologies, services or products that management believes
are strategic. The process of integrating any acquisition may create unforeseen
operating difficulties and expenditures and is itself risky. The areas where the
Company may face difficulties include:
o diversion of management time (at the Company and at the acquired
company) during the period of negotiation through closing and further
diversion of such time after closing from a focus on operating the
businesses to issues of integration and future products;
o decline in employee morale and retention issues resulting from changes
in compensation, reporting relationships, future prospects, or the
direction of the business;
o the need to integrate each company's accounting, management
information, human resource and other administrative systems to permit
effective management and the lack of control if such integration is
delayed or not implemented; and
o the need to implement controls, procedures and policies appropriate for
a larger public company at companies that prior to acquisition had been
smaller, private companies.
Management has limited experience in managing this integration process.
Most of the Company's acquisitions to date have involved either privately run
companies or very early stage companies, which may exacerbate these integration
issues. Moreover, the anticipated benefits of any or all of these acquisitions
may not be realized. Future acquisitions could result in dilution of equity
securities, the incurrence of debt, contingent liabilities or amortization
expenses related to goodwill and other intangible assets, any of which could
harm the business. Future acquisitions may require us to obtain additional
equity or debt financing, which may not be available on favorable terms or at
all. Even if available, this financing may cause dilution.
SYSTEM FAILURES AND ABUSES CAN HARM BUSINESS
In the event of system failures from break down of equipment, line
interruptions, overloads, power loss, weather and natural disaster, break-ins,
sabotage, and general vandalism and hacker attacks can all affect the systems on
which the business of the Company depends. Most of the Company's systems are run
in locations away from the Company headquarters, and the equipment is under the
management of third party contractors. The Company has engaged two distinct
service providers in order to provide a measure of backup in the event of
failure at one provider. However, the Company does not provide for complete
backup and redundancy to its systems in the event of a failure from any of the
above causes or those yet unforseen. In the event of a failure of service, the
Company may be forced to expended unbudgeted funds to remedy the problem, and
the Company may lose customers and visitors as well as damage its reputation.
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The Company is also subject to damage and loss of revenue if the Company's
websites are used for illegal conduct, such as selling stolen or pirated goods
and the perpetration of fraudulent activities and scams. The illegal conduct
conducted through the Company's websites could expose the Company to government
fines and penalties, as well as civil litigation. In addition, the Company may
be subjected to slander and libel attacks by unknown persons through message and
bulletin boards against which the Company has little defense. In all of these
instances, the reputation of the Company will be threatened, and the Company may
suffer financial loss either directly or indirectly.
The ultimate risk to the business is the failure of the Web and
Internet infrastructure. Although the original concepts developed by the
Department of Defense focused on survivability because of the weblike network
which allows for transmission around momentary bottlenecks and breaches, the
original designers did not predict the level of use which it has experienced.
The network backbone must be reliable, and it requires the necessary speed, data
capacity and security to make it an accepted and reliable means of
communications and commerce. If the infrastructure is not able to keep up with
the usage demands, it make break down or slow down thereby losing users. This
result will harm the Company.
REGULATORY ACTION MAY CREATE RISKS TO BUSINESS
As a publicly traded company, the Company is subject to federal, state
and self- regulatory scrutiny and regulation of its securities and the
transactions in securities. In addition, the Company and its subsidiaries may be
involved in businesses which have independent licensing and regulation, such as
selling wine, automobiles and real estate. In addition, the auction function is
subject of regulation on the procedures in many states. The Company must comply
with a vast assortment of laws and regulations, and the management's failure to
comply may cause the Company loss in the form of fines and loss of the right to
do certain business. The Internet business is new, and one may anticipate that
it will become the subject of more regulation from state, municipal and federal
authorities in the future. The increase in regulation will have a concomitant
increase in costs for doing business.
Trading in the Company's common stock was suspended by the Securities
and Exchange Commission on June 14, 2000, without prior notice to the Company or
an opportunity by the Company to make any explanation on matters that concern
the Commission. Such action is within the regulatory purview of the Commission.
This action and the announcements made in association with the action, no matter
what the merit or findings, can cause damage to the Company and lower the price
of the stock. Such risks are inherent in submitting the Company to the
regulatory authorities enforcing the corporate and securities laws.
The Company does not collect taxes on the transfer of goods and
services and other transactions which are effected on our online facilities.
These transactions may become subject to taxation on sales and use or other
excise taxes. The Company has adopted a policy of collecting sales and use taxes
from customers who are a resident in the state where the goods or services
originate and are shipped. The United States government has issued a moratorium
on the collection of sales and use taxes for e- commerce transactions, but this
moratorium is for a limited period. Many taxing bodies wish to impose taxes on
the transactions. In the event that a taxation scheme is implemented and
enforced, the Company may be subject to adding this burden to the business, and
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the Company must either absorb it with loss to the Company or find a way to pass
through the expense to customers. The Company would be harmed by imposition of
taxes on e-commerce transactions.
RISKS ASSOCIATED WITH INTERNATIONAL TRANSACTIONS
The Company has a plan to expand into markets throughout the world. It
has formed subsidiary companies in the United Kingdom. The Company has little
experience in marketing and localizing its online services in markets outside
the United States, although the management team has international market
experience in other industries. Management must obtain assistance to permit a
successful entry into the myriad of markets worldwide. Each market will have its
local consumer protection laws, local cultures, standards and policies. In
addition, the Company will face local competition from persons who may
understand the local market better. In order to overcome these risks to
business, management must provide a superior product and superior marketing
ideas, and it must engage local partners to take primary responsibility for the
market.
CONTINUED GROWTH OF ONLINE COMMERCE AND INTERNET USAGE NECESSARY
Usage of the Internet as a vehicle for person to person and business to
business/consumer/government transactions is a recent phenomenon. Although it
has grown exponentially over the past five years, this level of acceptance and
use may not continue. Users may be turned off by fraud, loss or privacy, and
costs, which will cause users to revert to more conventional marketing and
commerce. Also the Company may also find that its business will be subject to
seasonal and cyclical variations which will affect the ability of the Company to
maintain high level of service. For example, B2B activities may be greater in
the fall-spring buying seasons, and consumer trade may be greater in the
summer/preschool and Christmas buying seasons. In order for the Company to meet
these demands, it may have an overcapacity with servers in off periods and not
enough capacity during the peak demand periods. Both over and under capacity
infrastructures can have detrimental impact of the financial success of the
Company.
ONLINE AND INTERNET COMMERCE SERVICE PROVIDER MARKET IS INTENSELY COMPETITIVE
The market in which the Company competes is rapidly evolving and very
competitive; and it is expected that the competition will only intensify.
Barriers to entry are low, and both low budget operations and high budget major
international enterprises are entering the market daily. The number of
competitors in the United States may exceed 1000 when considering the breath of
service markets: B2B, B2C, and B2G. Companies with strong brand identification
and with enormous marketing budgets are becoming competitors. Some of our
competitors have engaged in diverse and aggressive "give away" promotional
campaigns, have adopted aggressive pricing at below cost, even free, services,
and devote more resources to system development and improvement than the Company
is able to do. Management must be innovative and creative to increase operating
margins, market share, and brand identification. The Company must keep pace with
rapid technological changes by evolving with the changes. In addition, the
Company must develop new services, features and functions. Some of the
innovations may not be accepted by the customers. To answer some of the
challenges, the Company may pursue strategic relationships with other service
providers. The use of third parties places these services outside the direct
control of the Company, which may cause harm to the Company if the third party
provides low quality service.
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CONTROL OF COMPANY WITH LIMITED SHAREHOLDERS, OFFICERS AND DIRECTORS
One shareholder, Fortuna Holdings Limited, has control over 50% of the
voting of the Common and Preferred Stock. This shareholder has the ability to
control the Company and direct its business and affairs, including the election
of directors. The concentration of ownership and control may limit the ability
of others to have influence on the affairs of the Company and may make it almost
impossible, without the consent of the controlling shareholder, to change
policies and direction of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
For the Annual Financial Statements see Part IV, Item 14 of this Annual
Report on Form 10-K at pages F-2 through F-19.
Selected Supplementary Data has not been presented except in Part II,
Item 7 and in the Quarterly Reports filed by the Company on Form 10-QSB. The
last quarter of the year ending May 31, 2000 was the only time any substantial
operations for the Company occurred, and comparative data with other quarters
would not provide meaningful financial information on the Company. The Company
did not complete any significant business acquisitions during the last quarter
of its fiscal year which either audited financials or pro forma financial
information is required.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On March 14, 2000, Jones, Jensen & Company, LLC advised the Registrant
that it could no longer serve the Company as its independent auditor and
certifying accountant. The former accountant voluntarily resigned and advised
the Company that the reason for the resignation was its association with McGrady
& Pullen Network. The former accountant and the Company had no disagreement or
dispute about accounting policy and reports on the financial statements of
Company. The former accountant returned to the Company the balance on deposit as
a retainer for accounting services, and no outstanding fees are due by Company
to the former accountant. The withdrawal was amicable and the former accountant
advised that it would cooperate with the successor accountant.
The Company's accountants' reports, and consolidated financial
statements for the year ending May 31, 2000, are filed with this Form 10-K, and
the two years ending May 31, 1999 and 1998 were filed on Form 10-KSB, on April
24, 2000. Such reports, which have been issued by the Company's current
accountants, are modified as to uncertainty with regards to the Company's
ability to continue as a going concern. The accountants' report for the year
ended May 31, 2000 also contains explanatory paragraphs with regards to certain
lawsuits and an SEC investigation of the Company.
The Company does not have a separate audit committee. The Board
responded to the voluntary withdrawal of the former accountant by engaging the
firm Feldman Sherb & Co.,P.C. of New York, New York, as its principal certifying
accountant and independent auditor.
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At no time during the three most recent fiscal years through May 31,
2000, has the Company received any notice of disagreement or "reportable events"
with the former accountant as described in Regulation S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table presents the directors and executive offices who
are serving and have served during the period covered by this Annual Report, and
persons nominated for positions during the coming year. The table includes the
name, age, position and time of service. The term of office is open until the
date of resignation or removal. Below the table is a description of the business
experience, family relationship and involvement in legal proceedings associated
with the persons listed.
Resignation/
Name Age Position Elected Removal
---- --- -------- ------- -------
Eli Leibowitz 55 Director, President and October 1996 June 2000
Chief Financial Officer
Anne M.E. 45 Director June 1997 January 2000
Greyling
Vaughan Dabbs 47 Director June 1997 January 2000
David Lerger 38 Director June 1997 January 2000
Clinton Greyling 25 Director and
Vice President January 1998 June 2000
Mary Duncan 45 Secretary July 1996 May 2000
Ray Winter 57 Director April 2000 July 2000
Doug H. Forde 57 Director and CEO April 2000 July 2000
Jennifer Martin 52 Director and Secretary May 2000
Alison Madej 30 Director and Vice President July 2000
Edward O. Ries 62 Director and CEO July 2000
Albert Reynolds 68 Advisory Director February 2000
T.A. Forde 58 Advisory Director May 2000
Eli Leibowitz is a licensed Certified Public Accountant with practice
experience in all areas of finance, administration, management and taxation. He
is self-employed as a financial consultant providing financial consulting and
temporary Chief Financial Officer services to client companies. Mr. Leibowitz
served as Corporate Controller for LMT Steel Products, Inc., of Hoboken, New
Jersey, and from 1985 to 1988 he was a Division Controller for Masco Industries,
Inc., a New York Stock Exchange company. He was a Senior Accountant for the
international accounting firm, Grant Thornton.
Anne M.E. Greyling is a business executive and the controlling
shareholder of LaSalle Group, Ltd., a Cayman Island company which is the
controlling shareholder of the Company directly and through its ownership of
Swiss Arctic Traders Ltd. She has been an officer and director of numerous
companies engaged in real estate development involving hotels, timeshares,
apartments, commercial projects and condominiums throughout the Caribbean and
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Europe. She is the mother of Clinton Greyling, a director, and she is married to
Leslie Greyling, who has given consulting services to the Company in the past.
Vaughan Dabbs, D.C. is the Director of Operations at the Spine and
Rehabilitation Center. From 1988 to 1998 he served as President of Oswego Spine
and Rehabilitation Center.
Clinton Greyling is a director and President of Caribbean International
Holdings Corporation, a subsidiary of the Company. Mr. Greyling has been engaged
in the real estate marketing and development business in the United States and
the Caribbean Basin. He is the son of Anne M.E. Greyling, a director.
Mary Duncan has served as Corporate Secretary since 1996, and she has
served in the same capacity for several public companies.
Ray E. Winter is an executive with broad experience with companies
engaged in the telecommunications and computer graphics industry. During the
1980s, he led a team that managed a 13-country electronic information service in
the ITT Group. He has owned several companies involved in the computer graphics
industry. In recent years he has been engaged in establishing companies that
provide services for telecommunications networks. His work in this field led him
to develop the Internet based smart card program that the Company acquired in
conjunction with Loyalty Card Holdings.
Douglas H. Forde is the Chairman of CeleXx Corporation as well as the
Chairman of E-Pawn.Com, Inc. He was a tax specialist and management consultant
for KPMG Peat Marwick. He as served as a corporate controller at McGraw-Hill
Corporation, and he was a manager and director of divisions involved in
Financial Policy and Capital Planning at Xerox Corporation.
DIRECTORS ELECTED AFTER MAY 31, 2000
Mr. Ries has broad experience managing companies involved in
manufacturing, marketing, finance and services. He has served as an officer and
director of public and private companies. Following the completion of the sale
of assets of a private Ohio company in which he was a principal and an
executive, Mr. Ries plans to move to Florida where he will become directly
involved in the operations and administration of the Company.
Ms. Madej has been serving as the manager of public and investor
relations since May 1, 2000. Previously, she was involved in the administration
of an employee owned medical and health services company in the Tampa Bay
region, and she served as a director of the Florida ESOP Association. She is a
licensed real estate salesperson in Florida and a registered physical therapist
assistant. She is the daughter of Steven Bazsuly, a controlling person of the
Company.
Ms. Martin was a founder of E-Pawn, Inc. which the Company acquired in
January 2000. She is the President of Worldwide Web Designers, Inc., which has a
Consulting Agreement with the Company to manage the Company's Internet websites.
Ms. Martin has extensive experience with companies involved in finance,
marketing and merchandising with emphasis on directing international business
programs for her associated companies. Her work during the last three years has
been focused on development of Internet marketing programs.
ADVISORY DIRECTORS
The position of Advisory Director was created to attract experienced
business persons who will give advice without taking on the commitment of
regularly working on the business of the Company. The present Advisory Directors
are residents of Ireland. The Directors have provided the Company with counsel
and advice on expansion in Europe and other international markets.
Mr. Albert Reynolds is a former Prime Minister of the Republic of
Ireland. He is the Chairman of a privately held family business in the pet food
business, C&D Pet Foods, Co. During his public service, he has served as the
Minister of Post and Telegraphs and as the Minister of Transport for Ireland. In
his service as Minister of Post and Telegraph he guided the redevelopment of the
telecommunications infrastructure for Ireland. In addition to his national
service, Mr. Reynolds served on numerous European Commission committees and
boards.
Mr. T.A. Forde is a trading consultant with a base of operation in
Dublin, Ireland. His work has been primarily directed to assisting companies in
developing international trade. He has work extensively in Africa and the Middle
East. The companies that he has advised have been involved in the construction,
heavy machinery, vessel and aircraft, hospital equipment and telecommunications
industries. In the past five years he has worked on investments and capital
formation for client companies.
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ITEM 11. EXECUTIVE COMPENSATION.
During the period of this Annual Report, the Company provided no
compensation to directors for serving in that position.
Effective on January 1, 1997, the Company entered into an employment
agreement with Mr. Eli Leibowitz to serve as Chief Financial Officer for a
period of five years. The agreement provides for annual compensation of $150,000
with annual increases of $10,000 as well as an option to purchase, each year,
250,000 shares of common stock at par value ($.001) plus other benefits and
bonuses. Mr. Leibowitz agreed to postpone payment of his salary until the
Company has obtained sufficient operational funding. Upon resignation of Mr.
Joseph Logan in October 1997, Mr. Leibowitz became the President of the Company,
and he continued as the CFO. During January 2000, Mr. Leibowitz agreed to accept
500,000 shares of common stock in lieu of all compensation owed to him through
January 31, 2000. Also, on that day, Mr. Leibowitz, pursuant to his consulting
agreement, exercised his option to purchase common stock at par value. Mr.
Leibowitz purchased one million shares, representing compensation for 1997
through and including fiscal 2000. The Company did not provide any monetary
compensation to Mr. Leibowitz during the period of this Annual Report.
The Company agreed to issue and deliver to Mr. Albert Reynolds 500,000
shares of its restricted common stock as compensation for his agreeing to join
the company as a consultant. The agreement was made in early February 2000.
The Company agreed to issue to Steve Bazsuly and other consultants
working with Worldwide Web Designers, Inc. the 1,844,000 shares of common stock
of the Company which had been registered under an S-8 Registration Statement
filed by the Company. The shares were authorized, but the Company has not as of
this date issued the shares, although the contractual commitment to issue the
shares arose at the time of the initial transaction between the Company and the
selling shareholders of E-Pawn, Inc.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table provides the number of shares held by management
and the directors and those persons who own more than five percent of the
Company's common stock as of May 31, 2000.
NAMES AND ADDRESSES SHARES BENEFICIALLY OWNED PERCENTAGE OF CLASS
------------------- ------------------------- -------------------
(Common Stock unless
otherwise indicated)
Swiss Arctic Traders Ltd 43,125,000 Common 26.4%
c/o Anne M.E. Greyling * 50,000,000 Preferred 50.0%
153 St. Johns Road
Tunbridge Wells
Kent, UK
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Fortuna Holding Limited 50,000,000 Common 30.6%
c/o John E.J. King ** 50,000,000 Preferred 50.0%
Charlotte House, Suite M-2
Nassau, Bahamas
Eli Leibowitz 20,000 <1.0%
Eli Leibowitz, Trustee for 1,500,000
Yonah Trust
289 Starling Road
Englewood, New Jersey
Anne M.E. Greyling* 12,995,100 7.9%
153 St. Johns Road
Tunbridge Wells
Kent, UK
Vaughan Dabbs *** 421,000 <1.0%
4269 Buckskin Lake Dr.
Ellicott, Maryland
David Lerger 25,000 <1.0%
263 N. Merchants Dr.
Oswego, Il 60543
Mary Duncan 45,000 <1.0%
1510 Shaker Circle
West Palm Beach, Florida
Jennifer Martin 1,000,000 <1.0%
2855 University Suite 200
Coral Springs, Florida
Steven Bazsuly ** 5,000,000 3.0%
1744 Colonial
Coral Springs, Florida
La Salle Group, Ltd. 3,545,100 2.0%
c/o Anne Greyling *
153 St. Johns Road
Tunbridge Wells
Kent, UK
* Anne M.E. Greyling is the ultimate controlling shareholder of Swiss
Arctic Traders Ltd which holds directly approximately 27% of the common
stock and has majority voting control through the Preferred Stock. Mrs.
Greyling also controls LaSalle Group Ltd. She holds directly in her
name 1,050,000 shares. Of the total shares listed as owned by her,
8,400,000 shares are deemed to be owned by her beneficially through her
children and relatives. She disclaims beneficial ownership because each
is an adult living independently.
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** Fortuna Holdings Limited owns approximately 29% of the outstanding
common shares and it controls half of the Preferred Stock which
controls the election of the Board. Fortuna Holdings Limited is owned
by the Bazsuly Family LP, for which Steven Bazsuly is the general
partner. In addition, Steven Bazsuly and his wife Susan Bazsuly
collectively own 5 million shares of common stock. Steven Bazsuly also
controls Worldwide Web Designers, Inc. which holds 20% of Fortuna
Holdings Limited. The number of shares does not include the stock plan
shares which were to be issued and delivered to Mr. Bazsuly, but the
Company has not executed this transaction. See Note 9 of Notes to
Consolidated Financial Statements.
*** Dr. Dabbs holds shares directly and beneficially through his
professional company and through his joint tenancy with Lis Dabbs.
On July 19, 2000, the Company was advised by Swiss Arctic Traders Ltd.
that Swiss Arctic Traders, Ltd, a shareholder with more than 10% of the
outstanding common shares, had agreed to sell 25 million shares of Common Stock
registered in its name to Fortuna Holdings Limited, another controlling
shareholder of the Company. In addition, Swiss Arctic Traders, Ltd granted
Fortuna Holdings Limited an option to acquire another 15 million shares of the
Company's common stock, which is currently pledged to a third party, and Swiss
Arctic Traders Ltd. granted to Fortuna Holdings Limited a proxy to vote the 15
million shares of common stock. Swiss Arctic Traders Ltd. has declared that it
intends to divest its interest, direct and indirect, in the Company until it
holds 4.9% or less of the outstanding shares of voting stock of the Company.
As part of the purchase agreement and the option to purchase the
Company's shares granted by Swiss Arctic Traders Ltd. to Fortuna Holdings
Limited, Swiss Arctic Traders, Ltd. granted to Fortuna Holdings Limited a proxy
to vote 10 million shares of common stock which it owns directly and which is
part of the optioned block. In addition, Swiss Arctic Traders, Ltd. has arranged
for the granting of a proxy to Fortuna Holdings Limited for 13,650,000 shares of
common stock which is registered in the name of third parties, but which is
beneficially owned or controlled by Swiss Arctic Traders, Ltd. With the common
stock owned directly by Fortuna Holdings Limited of 50 million shares and the
common stock purchased from Swiss Arctic Traders, Ltd of 25 million shares and
the proxy for 23,650,000 shares of common stock, Fortuna Holdings Limited
controls in excess of 55% of the voting common stock and its controls 100% of
the outstanding Class A Preferred Stock which has voting control. Prior to this
announcement, the Company had entered into an agreement to buy back the Class A
Preferred Stock held by Swiss Arctic Traders, Ltd. for a note with principal of
$1,000,000 bearing interest of 10% per annum and payable, interest only over
five years when the principal will be due.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Fortuna Holdings Limited is a Bahamian company in which the principal
shareholder is Bazsuly Family L.P. a Florida registered limited partnership.
Steve Bazsuly is the general partner. Steve Bazsuly was the founder of E-Pawn,
Inc. He is also a founder and principal shareholder of Worldwide Web Designers,
Inc. (WWW Designers), a Florida corporation, which consults on website design
and management. Worldwide Web Designers, Inc. has a management services
agreement with E-Pawn, Inc. which provides for a monthly service fee of $50,000
for WWW Designers to manage the
-33-
<PAGE>
Company's websites. This contract was assumed by the Company at the time of the
acquisition by the Company. Ms. Jennifer Martin, Secretary and Director of the
Company, is President of WWW Designers.
Vanguard Communications, Inc. ("Vanguard") is a Florida corporation
owned by Steve Bazsuly. Vanguard has provided business development services to
the Company for several years. It has received compensation in 1997 in the form
of stock options. Vanguard has provided offices and personnel to the Company for
the public relations work. As of May 31, 2000, the Company had accrued $25,000
in fees and expenses due to Vanguard.
In April 2000, the Company arranged for Shaun Greyling, a resident of
Tallahassee, Florida and the son of Anne Greyling, the controlling person of
Swiss Arctic Traders, Ltd. which at the time of the transaction was a
controlling person of the Company, to transfer to CeleXx Corporation 1,000,000
shares of free trading common stock of the Company. The transfer was accepted by
CeleXx, and it immediately ordered the shares issued in its name. CeleXx also
signed an agreement which acknowledged that the delivery of the 1,000,000
shares, and it affirmed the agreement to exchange 10 million shares of
restricted E-Pawn.Com, Inc. common stock for 12 million shares of CeleXx common
stock. CeleXx also advanced $500,000 to the Company in connection with the share
exchange. The Company agreed to transfer to Mr. Greyling two million shares of
CeleXx common stock which it was to receive as part of the transaction. The
Company is awaiting the delivery of the shares by CeleXx.
Mr. Douglas H. Forde, the President and CEO, of CeleXx agreed to serve
as a director of the Company in April 2000. Later in May 2000, Mr. Forde agreed
to be named chairman of the Company's Board. The Company was given notice around
August 1, 2000 that he resigned from the Board effective on June 30, 2000.
During the period between June 30 and August 1, Mr. Forde participated in
director meetings and consented to action as a member of the Board. Mr. Forde
signed the agreements between the Company and CeleXx on behalf of CeleXx. Mr.
Forde solicited a proxy from the Company, and the Company granted him a proxy to
vote its shares of CeleXx to increase the capital of CeleXx. The Company filed
suit against CeleXx and Mr. Forde, for fraud, breach of fiduciary duty and
specific performance among other things. See Item 3 - Legal Proceedings.
-34-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Upon written request, the Company will provide, without charge, a copy
of this Report on Form 10-K, including the consolidated financial statements,
financial statement schedules and any exhibits for the Company's most recent
fiscal year. All requests should be sent to:
E-Pawn.Com, Inc.
Investor Relations
2855 University Drive, Suite 200
Coral Springs, Florida 33065
In addition, the Securities and Exchange Commission maintains a website
that provides access to all filings made electronically by the Company at
www.sec.gov. The Company's website is located at www.E-Pawn.Com. Information
contained on the Company's website is not a part of this Annual Report on
Form10-K.
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements:
E-PAWN.COM, INC. AND SUBSIDIARIES
(A Development Stage Company)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report ................................ F-2 - F3
Consolidated Balance Sheet . ............................... F-4
Consolidated Statement of Operations ........................ F-5
Consolidated Statements of Stockholders' Deficit............. F-6
Consolidated Statement of Cash Flows ........................ F-7
Notes to Consolidated Financial Statements .................. F-8 - F-19
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of E-Pawn.Com, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of E-Pawn.Com, Inc.
and Subsidiaries (A Development Stage Company) (formerly Wasatch International
Corporation) as of May 31, 2000 and the related consolidated statements of
operations, stockholders' deficit and cash flows for the year ended May 31,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of E-Pawn.Com, Inc. and
Subsidiaries as of May 31, 2000 and the results of their operations and their
cash flows for the year ended May 31, 2000, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
consolidated financial statements, the Company incurred operating losses of
approximately $1,300,000 for the year ended May 31, 2000. Additionally, the
Company had a working capital deficiency and a stockholders' deficiency of
approximately $1,953,000 and $258,000, respectively, at May 31, 2000. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans with respect to these matters are described in
Note 4 to the consolidated financial statements. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
As discussed in note 3 to the consolidated financial statements, the Company has
filed lawsuits with respect to certain investment transactions to acquire equity
interests in other companies. The Company has recorded a valuation allowance for
such investments as a component of stockholders' deficit in the accompanying
financial statements.
F-2
<PAGE>
In addition, as per note 2 to the consolidated financial statements, the Company
is the subject of an ongoing Securities and Exchange Commission investigation
which resulted in the temporary suspension of trading of its securities and the
subsequent removal of the Company's shares from trading on the NASDAQ OTC
Bulletin Board. Concurrent with such suspension and investigation, the United
States Department of Justice obtained indictments against the Company's
President and the spouse of an affiliate of the Company alleging the commission
of wire and securities fraud and the conspiracy to commit wire and securities
fraud and commercial bribery. The ultimate outcome of the aforementioned
investigation cannot presently be determined and no provision for any liability
that may result from the investigation has been made in the accompanying
financial statements.
/s/ Feldman Sherb & Co., P.C.
Feldman Sherb & Co., P.C.
Certified Public Accountants
New York, New York
September 8, 2000
F-3
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
MAY 31, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 7,271
Prepaid expenses 94,475
---------------
TOTAL CURRENT ASSETS 101,746
---------------
FURNITURE AND EQUIPMENT (net of accumulated depreciation of $5,827) 23,470
---------------
INTANGIBLE ASSETS (net of accumulated amortization of $4,000) 16,965
---------------
OTHER ASSETS
Investment in CeleXx Corp. 975,000
Advance on purchase of subsidiary 677,343
Investment in Shoppers Online / Freebees 2,000
Investment in Edwards / Wasatch LLC 1
---------------
TOTAL OTHER ASSETS 1,654,344
---------------
$ 1,796,525
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 304,688
Due to shareholder 1,250,000
Loan payable 500,000
---------------
TOTAL LIABILITIES 2,054,688
---------------
STOCKHOLDERS' DEFICIT:
Preferred stock, $10 par value; 10,000,000 shares authorized;
no shares issued and outstanding -
Preferred stock, Class A, $.10 par value; 100,000,000 shares authorized;
100,000,000 issued and outstanding 10,000,000
Common stock, $.001 par value; 500,000,000 shares authorized;
153,048,820 shares issued and outstanding 153,049
Additional paid-in capital 5,111,185
Unrealized loss on marketable securities (3,078,000)
Deficit accumulated during development stage (12,051,064)
Deferred compensation related to stock issued for services (393,333)
---------------
TOTAL STOCKHOLDERS' DEFICIT (258,163)
---------------
$ 1,796,525
===============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 2000
Management fee revenue $ 7,400
General, and administrative expenses 1,289,888
-------------------
Net loss $ (1,282,488)
====================
Net loss per common share-basic and diluted $ (0.01)
====================
Weighted average common shares outstanding 112,936,340
====================
Net loss $ (1,282,488)
Other comprehensive loss -
Unrealized loss on marketable securities (3,078,000)
-------------------
Comprehensive loss $ (4,360,488)
====================
See notes to consolidated financial statements.
F-5
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
--------------- --------------------- Paid-in
Shares Amount Shares Amount Capital
----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - MAY 26, 1999 (Inception) 100,000,00 $10,000,000 100,000,000 $100,000 $ -
Net loss - - - - -
----------- ---------- ----------- ------- ---------
BALANCE - MAY 31, 1999 100,000,000 10,000,000 100,000,000 100,000 -
Issuance of common stock for exchange - - 48,433,820 48,434 -
Common stock issued as payment to the president of Wasatch for services
rendered from January 1, 1997 through January 31, 2000 - - 500,000 500 493,500
Common stock purchased by president of the company per consulting agreement
at par value - - 1,000,000 1,000 -
Common stock issued for consulting services issued at $2.12 per Share - - 125,000 125 264,875
Common stock issued pursuant to settlement agreement
issued at $2.12 per share - - 90,000 90 190,710
Common stock issued pursuant to purchase agreement with Home Realty
Investment Corp., Inc. issued at $2.70 per share - - 200,000 200 539,800
Common stock issued for commission due in connection with acquisition
agreement of Home Realty Investment Corp., Inc. issued at $2.-0 per share - - 50,000 50 134,950
Common stock issued for consulting services issued at $1.18 per -hare - - 500,000 500 589,500
Common stock issued pursuant to purchase agreement with Shoppers Online,
Inc. issued at $1.50 per share - - 1,000,000 1,000 1,349,000
Common stock issued pursuant to purchase agreement with Freebees Inc.
issued at $1.50 per share - - 1,000,000 1,000 1,349,000
Common stock issued for cash - - 150,000 150 199,850
Unrealized loss on writedown of marketable securitites - - - - -
Net loss - - - - -
---------- --------- ----------- --------- -----------
BALANCE - MAY 31, 2000 100,000,000 $10,000,000 153,048,820 $153,049 $ 5,111,185
========== ========== =========== ======== =========
</TABLE>
F-6
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (Con't)
<TABLE>
<CAPTION>
Deficit
Accumulated
Unrealized Loss During
on Marketable Development Deferred
Securities Stage Compensation Total
-------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
BALANCE - MAY 26, 1999 (Inception) $ - $(10,100,000) $ - $ -
Net loss - - - -
-------------- ----------- ------------- ----------
BALANCE - MAY 31, 1999 - (10,100,000) - -
Issuance of common stock for exchange - (668,576) - (620,142)
Common stock issued as payment to the president of Wasatch for services
rendered from January 1, 1997 through January 31, 2000 - - - 494,000
Common stock purchased by president of the company per consulting agreement
at par value - - - 1,000
Common stock issued for consulting services issued at $2.12 per -hare - - - 265,000
Common stock issued pursuant to settlement agreement
issued at $2.12 per share - - - 190,800
Common stock issued pursuant to purchase agreement with Home Realty
Investment Corp., Inc. issued at $2.70 per share - - - 540,000
Common stock issued for commission due in connection with acquisition
agreement of Home Realty Investment Corp., Inc. issued at $2.-0 per share - - - 135,000
Common stock issued for consulting services issued at $1.18 per -hare - - (393,333) 196,667
Common stock issued pursuant to purchase agreement with Shoppers Online,
Inc. issued at $1.50 per share - - - 1,350,000
Common stock issued pursuant to purchase agreement with Freebees Inc.
issued at $1.50 per share - - - 1,350,000
Common stock issued for cash - - - 200,000
Unrealized loss on writedown of marketable securitites (3,078,000) - - (3,078,000)
Net loss - (1,282,488) - (1,282,488)
------------ ------------ ----------- ----------
BALANCE - MAY 31, 2000 $ (3,078,000) $(12,051,064) (393,333) $(258,163)
============ ============ ============ ==========
</TABLE>
See notes to consolidated financial statements.
F-6 (Con't)
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MAY 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,282,488)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 9,827
Common stock issued for services 461,667
Common stock issued in legal settlement 190,800
Change in assets and liabilities:
Prepaid expenses (94,475)
Accounts payable and accrued expenses 179,545
----------------------
NET CASH USED IN OPERATING ACTIVITIES (535,124)
----------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Advance on purchase of subsidiary (2,343)
Investment in CeleXx Corp. (5,000)
Investment in Shoppers Online Inc. & Freebees Inc. (100,000)
Purchase of fixed assets (29,297)
Purchase of intangible assets (20,965)
----------------------
CASH USED IN INVESTING ACTIVITIES (157,605)
----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans payable 500,000
Proceeds from issuance of common stock 200,000
----------------------
CASH PROVIDED BY FINANCING ACTIVITIES 700,000
----------------------
NET INCREASE IN CASH 7,271
CASH - Beginning of year -
----------------------
CASH - end of year $ 7,271
======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ -
======================
Income taxes $ -
======================
Non-cash financing and investing activities:
Common stock issued in advance of purchase
of subsidiary $ 675,000
======================
Common stock issued for investments $ 2,700,000
======================
Issuance of note payable for investment
in marketable securities $ 1,250,000
======================
See notes to consolidated financial statements.
F-7
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MAY 31, 2000
NOTE 1 - ORGANIZATION
E-Pawn.Com, Inc. (the "Company") was incorporated in the State of Nevada on
November 4, 1985 as Java, Inc. The Company changed its name to Wasatch
International Corporation ("Wasatch") on September 27, 1995, and on February 28,
2000, the Company changed its name to E-Pawn.Com, Inc., pursuant to a reverse
acquisition agreement with E-Pawn, Inc. The Company's principal business
activity is to seek potential business ventures and assets, which may warrant
investment or purchase. The Company has been a development stage company from
inception.
On November 7, 1986, the Company issued shares of its common stock to
acquire Quazon Communications, Inc. ("Quazon"). In 1989, the Company ceased
operations. On November 12, 1995, the Company acquired all of the issued and
outstanding common stock of Graffiti Removal Systems, Inc. ("Graffiti").
Graffiti was incorporated on November 8, 1995 in the State of Utah. Graffiti's
principal business was graffiti removal and consulting. In February 1997, the
Company sold Graffiti to its former President in exchange for the recovery of
expenses.
Effective September 25, 1996, the Company acquired all of the issued and
outstanding common stock of Caribbean Holdings International Corporation
("Caribbean") in exchange for 25 million shares of the Company's common stock.
Caribbean was incorporated in the State of Florida on December 27, 1995.
Caribbean is a partner in a joint venture engaged in the development and sale of
recreational property in the Bahamas. On January 20, 2000, the Company's Board
of Directors approved the distribution of one share of Caribbean common stock
for each share owned of the Company's common stock. This action, which was
effected on February 28, 2000, resulted in the transfer of substantially all of
the then existing assets of the Company to the shareholders, and the Company had
limited remaining liabilities.
On January 18, 2000, the Company amended the Articles of Incorporation
to provide that the authorized share capital shall be increased to a total
authorized of 500 million shares of common stock, $0.001 par value, and 100
million shares of newly created Class A Preferred Stock, par value $0.10 per
share. The Class A Preferred Stock has no right to dividends, but each share of
Class A Preferred shall have 100 votes per share.
On January 20, 2000, the board of directors approved the acquisition of
E-Pawn, Inc.("E- Pawn"), a Florida corporation which was incorporated on May 26,
1999, from two companies, Swiss Arctic Traders Ltd. ("Swiss Arctic"), a Turks
and Caicos Islands company and affiliate of the Company's then majority
stockholder, LaSalle Group, Ltd. ("LaSalle"), and Fortuna Holdings Limited
("Fortuna"), a Bahamian company and affiliate of the former owner of E-Pawn.
F-8
<PAGE>
E-Pawn is a multi-faceted Internet portal, website designer, and software
developer which operates the "e- pawn.com" and "ubuynetwork" websites. Under the
terms of the agreement, dated January 27, 2000, in exchange for all of the
outstanding capital stock of E-Pawn, the Company issued a total of 100 million
shares of restricted common stock and 100 million shares of Class A Preferred
Stock of the Company, both divided equally between Swiss Arctic and Fortuna. On
completion of the acquisition, a change of control occurred because the two
acquiring companies, Swiss Arctic and Fortuna, acquired, respectively, 50
million shares of restricted Class A Preferred Stock which grants the holders
the power to elect a majority of the directors to the board as well as 50
million shares of the Company's restricted common stock to each of the companies
in exchange for all of the E-Pawn stock.
The acquisition of E-Pawn has been accounted for as a reverse
acquisition, because the former shareholders of E-Pawn own hold a majority of
the outstanding common stock of the Company after the acquisition. Accordingly,
the combination of the Company and E-Pawn is recorded as a recapitalization of
E-Pawn pursuant to which E-Pawn is treated as the continuing entity for
accounting purposes and the historical financial statements presented are those
of E-Pawn.
The closing of the E-Pawn stock purchase transaction was subject to
receipt of an independent appraisal of the value of E-Pawn and its business and
assets compared to similar companies, and acceptable to the Board of Directors.
The Company engaged an appraiser to prepare a report, but the report was not
completed prior to the end of the fiscal year. The Company was to fund a total
of $2,015,000 in working capital to E-Pawn within 180 days of the effective date
of the transaction, February 28, 2000, failure of which could void the
transaction by either Swiss Arctic or Fortuna. The funding was not made.
However, the selling shareholders, Fortuna and Swiss Arctic, and the Company
waived all contingencies and conditions in the Acquisition Agreement which would
allow for rescission of the agreement for the purchase of E-Pawn by any party.
In April 2000, the Company formed three domestic subsidiaries,
Ubuynetwork.com, Inc., Ubuyhomes.com, Inc. and Ubuycard.com, Inc., and two
foreign subsidiaries in the United Kingdom, E-Pawn.co.uk, Plc. and
Ubuynetwork.co.uk, Plc. Such subsidiaries have yet to commence operations.
NOTE 2 - SECURITIES AND EXCHANGE COMMISSION INVESTIGATION AND
REGULATORY ACTION
On June 14, 2000, the United States Securities and Exchange Commission
("Commission") announced (Release No. 42938) the temporary suspension of trading
of the securities of the Company. The Commission temporarily suspended trading
for 10 trading days because of questions which it had about the accuracy and
adequacy of publicly disseminated information concerning, among other things,
the identity of the persons in control of the Company and recent trading
activity in the Company's shares and whether is was related to manipulative
conduct. The Commission also issued a subpoena to the Company and to affiliates
of the Company as well as market makers and brokers involved in the trading of
the shares pursuant to its ongoing market investigation in the matter of certain
Microcap Securities (NY-6667). The Commission requested information concerning
the transaction whereby the Company acquired E-Pawn, Inc. and additional
F-9
<PAGE>
information on its management, shareholders, and its public announcements.
Subsequent to the trading suspension, the NASD removed the Company's shares from
trading on the NASDAQ OTC Bulletin Board. The Commission admonished brokers to
not trade in the shares without due diligence and reference to the disclosure
requirements of Rule 15c2-11 under the Securities Exchange Act which provides
for the information which must be available to brokers and dealers in order to
resume quotations. The ultimate outcome of the SEC investigation on the future
operations of the Company cannot be determined at this time.
The announcement of the trading suspension and the Commission inquiry
and the other events have resulted in the suspension or termination of certain
transactions which the Company was pursuing. Certain parties with whom the
Company has agreements have attempted to use the Commission's action as a basis
for terminating certain contracts. Counsel for the Company has advised the
Company's management that the Commission's action does not cancel any legal
contractual relationship between the Company and third parties without express
language in the contract that allows one party to take such action upon the
occurrence of such an event.
At the same time as the Commission was taking the action to suspend the
trading in the Company's common stock, on June 14, 2000, the United States
Department of Justice obtained indictments against Eli Leibowitz, the Company's
President and Chief Financial Officer, and Leslie Greyling, the husband of Anne
Greyling. Ms. Greyling is an affiliate of the Company through the ownership of
Swiss Arctic and LaSalle, entities that have held controlling interests in the
Company. The indictment alleges that the accused committed wire fraud,
securities fraud and conspiracy to commit wire fraud, securities fraud and
commercial bribery. The Company terminated the consulting agreement with Mr.
Leibowitz and removed him from all positions with the Company and its
subsidiaries. Counsel for the Company subsequently engaged Mr. Leibowitz to
assist in the compiling of certain financial information and documentation for
these financial statements for which he received compensation.
NOTE 3 - LITIGATION SUBSEQUENT TO YEAR END
A. CELEXX CORPORATION
On March 14, 2000, the Company announced that it had formed a strategic
alliance with CeleXx Corporation (OTCBB: CLXX) ("CeleXx") under the terms of
which CeleXx will provide management services, IT engineering and support
service, website design and website hosting services on a fee basis under a
mutually acceptable agreement. In addition, the agreement provided that the
Company could purchase one million shares of CeleXx common stock at $5 per share
and have an option for a period of up to one year, to acquire additional shares
aggregating a market value of $50 million. The Company and CeleXx amended the
agreement, and on April 5, 2000, the Company and CeleXx arranged for the
delivery of one million shares of the Company's free trading common stock owned
by Shaun Greyling (see note 5) for one million shares of CeleXx common stock,
and that this exchange, by agreement, satisfied the condition for the purchase
of the CeleXx stock at $5 per share. The agreement, as amended, also provided
F-10
<PAGE>
for, at the Company's option, an exchange of 10 million shares of the Company's
common stock for 12 million shares of CeleXx's common stock. Upon completion of
this exchange, the Company had the option for one year to repeat the transaction
by exchanging one million shares of the Company's free trading common stock for
one million shares of CeleXx' common stock and the Company could then exchange
$50 million worth of the Company's common stock for $50 million worth of
CeleXx's common stock with the number of shares based on the market value on the
date of exercise of such option.
The Company valued the investment of the one million shares at $1.25
(CeleXx' closing price on the date the shares were issued of $1.38 less a ten
percent discount). However, as of May 31, 2000, the closing price of the stock
was $1.08 and after giving effect to a ten percent discount the net was $.97 per
share. The Company recorded a valuation allowance of $280,000 on such investment
at May 31, 2000, leaving a value of $970,000. As of the date of this report, the
quoted market price of CeleXx's stock was $.56 per common share.
The Company exercised its option and issued the 10 million shares for
the exchange on April 17, 2000, pursuant to the agreement. However, CeleXx
failed to deliver the 12 million shares of its common stock and to fulfill other
commitments under the agreement, and, as a result, the certificate registered in
the name of CeleXx for the 10 million shares is being held by the Company
pending delivery of the 12 million CeleXx shares.
The Company made demand for specific performance, and on August 1,
2000, the Company filed a lawsuit in the Circuit Court of the 15th Judicial
Circuit, Palm Beach Count, State of Florida. THE CASE IS STYLED E-PAWN.COM, INC.
V. CELEXX CORPORATION AND DOUGLAS H. FORDE, Case No. CL007436AN. The lawsuit
alleges causes of action for breach of contract, fraud and breach of fiduciary
duty. The Company is seeking, among other things, specific performance to have
CeleXx complete the transaction which was called for in the Investment Agreement
between the Company and CeleXx made on March 10, 2000, as amended in April 2000.
The defendants have filed a response seeking to have the case dismissed.
Following the delivery of the 1,000,000 shares of the Company's common stock
from Shaun Greyling, as discussed in note 5, the Company received 1,000,000
shares of common stock of CeleXx, and CeleXx advanced $500,000 to the Company in
connection with the transactions associated with the Investment Agreement.
CeleXx has made demand for the return of the $500,000, and it has demanded
rescission of all of the agreements between the Company and CeleXx and return of
the stock that was exchanged.
B. SHOPPER'S ONLINE, INC. AND FREEBEES, INC.
On May 9, 2000, the Company agreed to purchase 19% of the outstanding
stock in Shopper's Online, Inc. ("Shoppers"), a New Jersey based e-commerce
Internet portal site, and Freebees, Inc. ("Freebees"), a New Jersey Internet
marketing company, in exchange for two million shares of restricted common stock
of the Company and $100,000. The Company issued one million shares of its common
stock to Shoppers and one million shares of its common stock to Freebees. In
addition, the Company paid $100,000 as part of the consideration for the
acquisition of the shares. The Company's stock was valued at $1.35 per share,
F-11
<PAGE>
(the Company's closing price on the date of the agreement of $1.50 less a ten
percent discount). Also, each of the acquired companies engaged the Company to
manage certain of its Internet and applications functions for a monthly fee of
$10,000 per month in the aggregate.
On June 14, 2000, the Company received a notice that Shoppers and
Freebees intended to cancel the agreements between the Company and each of these
respective companies. The Company had delivered the shares and the funds and
performed all terms and conditions required of it under the agreement. Shoppers
and Freebees never delivered the shares representing 19% of each company. The
Company's counsel made demand for full restitution and charged the companies and
their principal, William C. Martucci, with violation of the Florida Civil Theft
law, and will seek to recover treble damages plus attorney's fees. No response
to the demand has been received within the required abatement period, which
expired on August 25, 2000. The Company has filed the lawsuit against all
persons who participated in the transaction. The Company recorded a valuation
allowance as of May 31, 2000 of $2,798,000 on the investment.
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION - As of May 31, 2000, the activities of the Company
and its subsidiaries have had limited revenues. In addition, the
accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. The Company has incurred a
loss of approximately $1,282,000, has a working capital and a total
stockholders' deficiency of approximately $1,953,000 and $ 258,000
respectively, which creates a substantial doubt about the Company's ability
to continue as a going concern. The recovery of assets and continuation of
future operations are dependent upon the Company's ability to obtain
additional debt or equity financing and its ability to generate revenues
sufficient to continue pursuing its business purposes. The principal
shareholder has indicated a willingness to continue to fund the operating
expenses for the foreseeable future although there is no assurance that
such shareholder will continue to do so. The Company is actively pursuing
equity and debt financing to fund future operations and acquisitions.
B. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the subsidiaries, Ubuynetwork.com, Inc., Ubuycard.com, Inc., and
Ubuyhomes.com, Inc. The Company distributed the shares of Ubuynetwork.com,
Inc. and Ubuyhomes.com, Inc. to the Company's shareholders during April and
May 2000. The Company retained the distributed shares allocated to Fortuna
and Swiss Arctic, the controlling shareholders. The shares retained give
the Company approximately 66% of the outstanding shares of Ubuyhomes.com,
Inc. and Ubuynetwork.com, Inc. The Company held 80% of the shares of
Ubuycard.com, Inc. as of May 31, 2000, and the remaining 20% was held by
Loyalty Holdings Limited ("Loyalty"). Ubuycard.com, Inc. was formed to
develop and market a consumer benefits smart card using technology acquired
by the Company from an affiliate of Loyalty. The Company recovered the 20%
share held by Loyalty pursuant to the Recission Agreement dated July 10,
2000.
C. ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
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management to make estimates and assumptions that affect 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.
D. CASH AND CASH EQUIVALENTS - For the purposes of the statement of cash
flows, the Company considers highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
E. FURNITURE AND EQUIPMENT - Furniture and equipment are carried at cost.
Depreciation is computed using the straight-line method over the useful
lives of the various assets, ranging from three to five years.
F. NET INCOME (LOSS) PER COMMON SHARE - Basic net income (loss) per share is
computed by dividing net income (loss) by the weighted average number of
common shares outstanding for the period. Diluted net income (loss) per
share is computed by dividing net income (loss) by the weighted average
number of common shares outstanding for the period. For all periods
presented, diluted net loss per share was the same as basic net loss per
share.
G. FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments
consist primarily of cash, accounts receivable, accounts payable and
accrued expenses and approximate fair value because of their short term
maturities.
H. INCOME TAXES - Pursuant to Statement of Financial Accounting Standards No.
109 ("SFAS 109") "Accounting for Income Taxes, the Company accounts for
income taxes under the liability method. Under the liability method, a
deferred tax asset or liability is determined based upon the tax effect of
the differences between the financial statement and tax basis of assets and
liabilities as measured by the enacted rates which will be in effect when
these differences reverse.
Through May 31, 2000, the Company and its subsidiaries have sustained
substantial operating losses that may be offset against future taxable
income through the year 2018. No tax benefit has been reported in the
consolidated financial statements since their realization cannot be
assured. A substantial amount of the carry forwards are subject to annual
limitations pursuant to the Internal Revenue Code which become effective
when an "ownership change," such as a change of control occurs.
I. IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and circumstances
indicate that the cost of an asset may be impaired, an evaluation of
recoverability would be performed. If an evaluation is required, the
estimated future undiscounted cash flows associated with the asset would be
compared to the asset's carrying amount to determine if a write-down to
market value is required. At May 31, 2000, the Company does not believe
that any impairment has occurred.
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J. STOCK BASED COMPENSATION - The Company accounts for stock transactions in
accordance with APB No. 25, "Accounting for Stock Issued to Employees." In
accordance with Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock- Based Compensation," the Company adopted the
pro forma disclosure requirements of SFAS 123.
K. INTANGIBLE ASSETS - Intangible assets consist of domain names and are
stated at cost, less accumulated amortization. Amortization is computed
using the straight-line method over an estimated life of five years based
upon management's expectations relating to the life of the technology and
current competitive market conditions. The estimated life is reevaluated
each year based upon changes in these factors.
L. COMPREHENSIVE INCOME - The Company has adopted Statement of Financial
Accounting Standards No. 130 ("SFAS 130") "Reporting Comprehensive Income."
Comprehensive income is comprised of net loss and all changes to the
statements of stockholders equity, except those due to investments by
stockholders, changes in paid-in-capital and distributions to stockholders
NOTE 5 - DUE TO SHAREHOLDER
In April 2000, the Company arranged for Shaun Greyling, son of Anne
Greyling, to transfer to CeleXx 1,000,000 shares of free trading common stock of
the Company. The transfer was accepted by CeleXx , and it immediately ordered
the shares issued in its name. CeleXx also signed an agreement which
acknowledged that the delivery of the 1,000,000 shares, and it affirmed the
agreement to exchange 10 million shares of restricted E-Pawn.Com, Inc. common
stock for 12 million shares of CeleXx common stock. The Company agreed to
transfer to Mr. Greyling two million shares of CeleXx common stock which it was
to receive as part of the transaction. The Company is awaiting the delivery of
the shares by CeleXx (see note 3A).
NOTE 6 - INVESTMENT IN KIWI AND EDWARDS WASATCH ENTERPRISES LLC
The Company advanced funds in the form of Debtor In Possession ("DIP")
financing to Kiwi International Airlines of Newark, N.J. ("Kiwi"), an air
carrier that had filed for reorganization pursuant to Chapter 11 of the
Bankruptcy Code. The Company, in October 1996, agreed to provide a total of
$1,000,000 in DIP financing to Kiwi. In November 1996, the Company along with an
individual, hereinafter referred to as "Edwards", agreed to form a limited
liability company, Edwards- Wasatch Enterprises LLC (hereinafter "EWE"), to
which the Company assigned its right to provide Kiwi the DIP financing. Pursuant
to the agreement (the "EWE Agreement"), Edwards agreed to loan up to $1,000,000
as required to fund Kiwi operations, and the Company agreed to provide up to an
additional $1,000,000. (As of the date of the EWE Agreement, the Company had
provided Kiwi with $100,000 of the DIP financing.)
From November 1996 the Company held 41% of EWE, and Edwards held the
balance. The Company had an option to acquire all of Edwards' interest in EWE in
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exchange for shares of stock of the Company. The Company had advanced
approximately $1,450,000 in cash. All of the funds contributed to EWE were used
to finance Kiwi.
In February 1997, the Company delivered 4,000,000 shares of common
stock to Edwards as partial consideration for his agreement to merge EWE into
the Company. Edwards elected not to conclude the merger and wholly failed to
perform. The Company demanded the return of all shares, and the Company issued a
stop transfer order to the transfer agent. In addition, the Company issued
500,000 shares to Edwards under a consulting contract under which he was to
perform certain services. No work was ever performed, and the Company may seek
recovery of the shares or damages. The Company is carrying the EWE investment at
the nominal amount of $1.
On January 18, 2000, LaSalle acquired 10 million common shares from the
Company in exchange for the forgiveness of debt plus interest which LaSalle had
provided to finance the Kiwi Airlines transaction. In addition, LaSalle covered
the ongoing expenses of the Company through January 2000. LaSalle accepted the
shares, and released all debts and claims against the Company, direct and
indirect. This issuance of stock resulted in LaSalle controlling approximately
52% of the total issued and outstanding common stock, prior to the acquisition
of E-Pawn.
NOTE 7 - CARIBBEAN JOINT VENTURE
On July 10, 1996, the Company's then wholly owned subsidiary,
Caribbean, entered into a joint venture agreement with two individuals
previously unaffiliated with the Company or any of its subsidiaries to develop,
lease and sell real estate located in the Bahamas beneficially owned by those
individuals. These individuals were the heirs to an estate, which was in the
process of being probated. The agreement provided for net profits to be shared
by Caribbean and the two individuals. The agreement also stipulated that advance
payments were to be made to the two individuals toward their share of future net
profits derived from lease and sale of the real estate. Pursuant to the
agreement, the two individuals were paid $100,000 initially and $5,000 each per
month, until the estate was completely probated. Through August 1999 a total of
$493,029 was advanced pursuant to the agreement. In September 1999, the Company
became aware that the Joint Venture Partners had entered into agreements with
third parties and accepted advances from such parties in violation of the
agreement. The Company, therefore, suspended payment of advances, and the Joint
Venture partners claimed default by Caribbean of the agreement. On January 20,
2000, the Company's Board of Directors approved the spin-off of Caribbean via a
stock dividend to the Company's shareholders as of February 28, 2000.
NOTE 8 - RELATED PARTY TRANSACTIONS
In January 2000, the E-Pawn entered into a consulting agreement with
World Wide Web Designers, Inc. ("WWW") to provide computer programming and
website design and maintenance. WWW is owned by four individuals, one of whom is
the general partner of the controlling shareholder of Fortuna, which is the
controlling shareholder of the Company as of June 29, 2000, as discussed in note
13. Another WWW shareholder is an officer and director of the Company. This
agreement runs through December 31, 2005, and provides for a fee to WWW of
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$50,000 per month. WWW acquired 20 % of Fortuna and 20 % of Swiss Arctic in
connection with the sale of E-Pawn to Fortuna and Swiss Arctic.
During the year ended May 31, 2000, the Company engaged the services of
Vanguard Communications Group Ltd. ("Vanguard") to assist in business
development and general public relations. Vanguard is owned by Steven Bazsuly,
an affiliate of the Company, who is the general partner of the controlling
shareholder of Fortuna, which, as of June 29, 2000, is the controlling
shareholder of the Company (see note 13). As of May 31, 2000, total expense for
services rendered by Vanguard to the Company totaled $25,000.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Effective January 1, 1997, the Company entered into an employment
agreement with Mr. Eli Leibowitz to serve as Chief Financial Officer for a
period of five years. The agreement provided for annual compensation of $150,000
with annual increases of $10,000 as well as an option to purchase, each year,
250,000 shares of common stock at par value ($.001) plus other benefits and
bonuses. Mr. Leibowitz agreed to postpone payment of his salary until the
Company obtained sufficient operational funding. In October 1997, Mr. Leibowitz
became President of the Company. During January 2000, Mr. Leibowitz agreed to
accept 500,000 shares of common stock in lieu of all compensation owed to him
through January 31, 2000. Also, Mr. Leibowitz, pursuant to his consulting
agreement, exercised his option to purchase common stock at par value. The
agreement allows for vesting of 250,000 options for shares per year which may be
exercised at par value. Mr. Leibowitz purchased one million shares, representing
compensation for 1997 through and including fiscal 2000.
In October 1996, in connection with the Wasatch International
Corporation Stock Plan and the filing of the related registration statement, the
Company entered into various consulting agreements with officers, directors and
consultants wherein those individuals are to provide services to the Company for
a period of one year with the shares of common stock issued as sole
compensation. In connection with the purchase of E-Pawn, the Company agreed to
issue 1,844,000 shares, the balance of the unissued shares under the Stock Plan,
to the principals of WWW, an affiliate of the Company's controlling shareholder,
who were acting as consultants to the Company in connection with the transition
to an Internet enterprise and conversion of online assets. These shares,
although not distributed by May 31, 2000, have been valued at $.02 per share,
the Company's stock price on the date of the acquisition agreement.
The Company is a defendant in a lawsuit brought by an individual in the
Orlando District Court seeking $70,000 for the purchase price and approximately
$200,000 in damages in connection with the proposed purchase of a start up
Internet advertising company made in November 1996. The Company has filed an
answer and is defending the action. Counsel for the Company believes it has
defenses to the causes of action which will be asserted. The case has been
dormant and no trial date has been set.
In February 2000, the Company settled a claim from an investor who
purchased restricted common stock of the Company from a third party. The
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settlement agreement provided for the Company to deliver to the claimant, Solar
Lane Productions Inc., 90,000 shares of restricted common stock of the Company.
These shares have been valued at $2.12 per share, the stock's closing price on
the settlement date. On March 8, 2000, a motion to dismiss was filed in this
action.
In February, 2000, the Company entered into a consulting agreement with
an individual to provide financial advisory services for a period of two years.
The agreement provides for compensation in the form of restricted common stock
of 500,000 shares per year. In April 2000, the consultant received his first
year's shares in full. The shares have been valued at $1.18 per share, (The
Company's closing price on May 31, 2000 of $1.31 less a ten percent discount).
Due to the stock being issued prior to performance of the services, the prepaid
portion has been accounted for as deferred compensation. This individual also
agreed to take a position as an advisory director for the Company.
In March 2000, the Company entered into an agreement to lease office
space for two years for $2,276 per month. As part of the agreement, the Company
was required to prepay the entire amount. Thus, as of May 31, 2000, the Company
had prepaid rent of approximately $48,000.
The Company , along with LaSalle and the husband of an affiliate of the
Company, were the subjects of civil litigation arising from a loan advanced to
the Company in April 1997 by two individuals. This claim was settled in March
2000 by LaSalle for cash and shares of the Company's common stock.
In April 2000, the Company made an agreement with Asset Investment
Management (1984) S.A. ("AIM"), to form two subsidiaries, "E-Pawn.Com
(Switzerland) AG" and "Ubuynetwork.Com (Switzerland) AG". Under the terms of the
agreement, the Company will own 75% of all outstanding stock and AIM will own
25% of the stock of the subsidiaries. From the 75% share, the Company will
reserve 24% of the shares that will be offered to investors for future funding
of the subsidiaries through a private placement and an initial public offering
(IPO). The private placement will raise $1,000,000 for 4% of the outstanding
stock. The IPO will issue up to the remaining 20% of the stock held in reserve.
The net proceeds after recovery of the Company's and AIM's expenses of these
offerings will be used to fund operations of the subsidiaries. As of May 31,
2000, these subsidiaries were formed, however, the Company has not received any
stock certificates, there have not been any operations for either subsidiary nor
has the private placement or IPO taken place.
NOTE 10 - OTHER ISSUANCES OF STOCK
On February 29, 2000, the Company's Board of Directors approved the
issuance of 125,000 shares of the Company's common stock to various consultants.
These shares have been valued at $2.12 per share, which was the closing price of
the stock on such date.
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On May 17, 2000, the Company issued 150,000 shares of its restricted
common stock for $200,000 cash in a private placement to one investor.
NOTE 11 - DISTRIBUTIONS AND DIVIDENDS TO SHAREHOLDERS
On March 5, 2000, the Company announced that it would distribute common
stock of its subsidiary, Ubuynetwork.com, Inc., as a special dividend to
shareholders of record as of April 18, 2000, on a two shares of Ubuynetwork.com
Inc. for each share of the Company held on the record date. On March 15, 2000,
the Company announced that it will distribute shares of its subsidiary,
Ubuyhomes.com, Inc., as a special dividend to the Company's shareholders of
record as of May 1, 2000. The shareholders of the Company on the record date
will receive two shares of Ubuyhomes.com, Inc. for each of the Company's common
shares held. The two controlling shareholders, Fortuna and Swiss Arctic, have
agreed to waive the right to receive the dividends for Ubuynetwork.com, Inc. and
Ubuyhomes.com, Inc., and the Company will retain the shares that were to be
distributed to such shareholders. The Company, therefore, retains approximately
66% of the outstanding shares of the companies.
NOTE 12 - INVESTMENT IN HOME REALTY AND OTHER INVESTMENTS
On March 9, 2000, the Company announced that it had entered into an
agreement to acquire Home Realty & Investment Corp., Inc. ("Home"), a Florida
full service real estate company, established in 1994. The Purchase and Sale
Agreement was signed on April 17, 2000. Under the terms of the agreement, the
Company would issue 250,000 shares of its common stock and $105,000 in exchange
for 80% of Home's capital stock. Also, on the first anniversary of the closing
date, the Company will issue an additional 250,000 shares of its common stock
and an additional $50,000. The initial 250,000 shares were issued in April 2000,
however, the cash payment was not made until July 2000. Therefore, the
acquisition was not considered closed until the cash payment was made in July
2000. The issuance of the stock has been accounted for as an advance on the
purchase of a subsidiary at a price of $2.70 per share, which represents the
average closing price for the three days prior to and three days subsequent to
the signing of the agreement ($3.00) less a ten percent discount.
On June 1, 2000, contingent on the closing of the acquisition
agreement, the Company entered into two employment agreements with the former
owners of Home. The agreements call for annual base salaries for each employee
of $100,000 per annum plus other bonuses and benefits.
During the quarter ending May 31, 2000, the Company made several
agreements and signed letters of intent with companies which provided for the
acquisition of a substantial percentage of the companies' capital stock and
other investment opportunities. The agreements provided for the issuance of
shares of common stock of the Company and, in certain cases, a cash payment. The
Company approved the issuance of 97,400,000 shares in connection with these
transactions. Due to various circumstances, including the trading suspension and
the indictment of the Company's former President, Eli Leibowitz on June 14,
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2000, certain of the transactions were either rescinded or canceled. The stock
certificates, which were being held in escrow pending the closing of the
transactions, have been returned to the transfer agent and canceled.
NOTE 13 - SUBSEQUENT EVENTS
On June 12, 2000, the Company adopted the 2000 Nonstatutory Stock Plan
(the "Plan"), which allows for a maximum grant of 10 million options. The Plan
will be effective for a term of ten years. As of the date of this report, no
options have been granted.
On June 29, 2000, the Company entered into an agreement to acquire the
50 million shares of Class A Preferred Stock held by Swiss Arctic. The Company
agreed to redeem the stock in consideration for a promissory note in the
principal amount of $1,000,000 and bearing interest at 10% per annum interest
only payable monthly and the principal and any accrued and unpaid interest due
in five years. The Class A Preferred Stock will secure the payment of the
promissory note and the certificates will be held in escrow, but the voting
rights tied to the Class A Preferred Stock will be held by a proxy given to the
Board of Directors of the Company. The other holder of the Preferred Stock is
Fortuna, a company that is controlled by the Bazsuly Family L.P.
On July 16, 2000, the Company entered into a stock subscription
agreement with Mr. David McKenna whereby Mr. McKenna agreed to purchase, either
on his own or through his nominee, 500,000 shares of the Company's common stock
at $.20 per share, or $100,000. On July 17, 2000, Aurum Nominees purchased the
stock, and $100,000 was wired into the Company's account.
On July 19, 2000, Swiss Arctic, a controlling shareholder, advised the
Company that it had agreed to sell 25 million shares of Common Stock registered
in its name to Fortuna, another controlling shareholder of the Company. In
addition, Swiss Arctic granted Fortuna an option to acquire another 15 million
shares of the Company's common stock, which is currently pledged to a third
party, and Swiss Arctic granted to Fortuna a proxy to vote the 15 million shares
of common stock. Swiss Arctic has declared that it intends to divest its
interest, direct and indirect, in the Company until it holds 4.9% or less of the
outstanding shares of voting stock of the Company. As part of the purchase
agreement and the option to purchase the Company's shares granted by Swiss
Arctic to Fortuna, Swiss Arctic granted to Fortuna a proxy to vote 10 million
shares of common stock which it owns directly and which is part of the optioned
block. In addition, Swiss Arctic has arranged for the granting of a proxy to
Fortuna for 13,650,000 shares of common stock which is registered in the name of
third parties, but which is beneficially owned or controlled by Swiss Arctic.
With the common stock owned directly by Fortuna of 50 million shares and the
common stock purchased from Swiss Arctic of 25 million shares and the proxy for
23,650,000 shares of common stock, Fortuna controls in excess of 55% of the
voting common stock and its controls 100% of the outstanding Class A Preferred
Stock which has voting control.
The Company has been informed that a lawsuit has been filed against a
former shareholder. The Company has not been served and believes it is not a
party to the complaint.
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2. Financial Statement Schedules.
All schedules have been omitted because the information required to be
set forth therein is not applicable, or is shown in the financial statements or
notes thereto, or the information is otherwise included.
3. Exhibits.
The Exhibits listed in the Exhibit Index immediately preceding such
Exhibits are filed as part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K.
On April 18, 2000, the Company filed a Current Report on Form 8-K dated
March 31, 2000 to report:
under Item 1 (Changes in Control) that LaSalle Group Ltd. had acquired
10 million shares in exchange for debt of the Company; the Company would acquire
E-Pawn, Inc., a Florida corporation, from Swiss Arctic Traders, Ltd. and Fortuna
Holdings Limited for stock; and
under Item 2 (Acquisition and Disposition of Assets) that the Company
had authorized the issuance of 100 million shares of common stock and 100
million shares of Series A Preferred Stock for the purchase of E-Pawn, Inc.;
that the Company would dispose of its assets by distributing a dividend to all
shareholders of the stock of Caribbean Holdings International Corp.; and
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under Item 4 (Changes in Registrant's Certifying Accountant) that
Jones, Jenson & Company had resigned and Feldman Sherb Horowitz & Co had been
engaged; and
under Item 5 (Other Events) that the Company had amended its Articles
of Incorporation to change the name and increase the authorized capital; and
approved issuance of 1.5 million shares to Eli Leibowitz the President; and
approved letters of intent for transactions with Colonel's International, Inc.,
Homes Realty & Investment Corp., CeleXx Corporation, O'Con Enterprises, Inc.,
and Silverhawk Development Company; and that the Company would grant dividends
of stock of its subsidiaries, Ubuynetwork.com, Inc. and Ubuyhomes.com, Inc.; and
that Albert Reynolds had accepted a position as an advisory director; and the
Company had a marketing agreement with Exchequer Investments Ltd. for the
Company's software; and that the Company announced settlement for litigation and
claims with Hans Kooring and the disposition or existence of other claimants;
and
under Item 6 (Resignations of Directors) that Anne Greyling, Vaughan
Dabbs, and David Leger had resigned.
No financial statements were required to be filed with such report.
On May 31, 2000, the Company filed a Current Report on Form 8-K dated
May 31, 2000 to report
under Item 2 (Acquisition or Disposition of Assets) that the Company
would make the stock dividend distribution of its subsidiaries Ubuynetwork.com,
Inc. and Ubuyhomes.com, Inc.; and the majority shareholders would return their
dividend shares to the Company; and that the Company had purchased 19% of
Shoppers Online, Inc. and Freebees, Inc. for cash and stock; and the Company had
authorized the issuance of 42,650,000 shares to complete transactions with
several companies and that the shares would be held in escrow pending the
closings; and the Company would enter into an agreement with Loyalty Holdings
Limited on the development and marketing of a smart card; and that the Company
had a marketing agreement with Marlborough International Plc.; and that the
Company had a joint venture with Asset Investment Management (1984) S.A. for
development of business in seven European countries; and
under Item 6 (Change in Directors and Officers) that Raymond Winter was
named a director; Douglas H. Forde was named a director and chairman; and Mary
Duncan resigned as Secretary and Jennifer Martin was named Secretary; and
No financial statements were required to be filed with such report.
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INDEX OF EXHIBITS FILED WITH ANNUAL REPORT
Exhibit
Number EXHIBIT DESCRIPTION
2.01* Agreement for Acquisition of E-Pawn, Inc. between Registrant and
Fortuna Holdings Limited and Swiss Arctic Traders Ltd. dated
January 20, 2000
3(i)** Certificate of Amendment of Articles of Incorporation filed
February 23, 2000.
3(ii) Registrant's Amended and Restated Bylaws
4 Form of Certificate for Common Stock
10.1 Consulting Agreement between E-Pawn, Inc. and Worldwide Web
Designers, Inc.
10.2 Lease between Registrant as Lessee and The Towers of Coral
Springs LTD. as Lessor for office at Merrill Lynch Tower, Suite
200.
10.3 Registrant's 2000 Nonstatutory Stock Plan
10.4 Purchase and Sale Agreement for stock of Home Realty and
Investment Corp., Inc. between Registrant and Paul Rubeo and
Peter Leon dated April 17, 2000
10.5 Employment Agreements and Addenda between Home Realty and
Investment Corp., Inc. and Paul Rubeo and Peter Leon
10.6*** Investment Agreement and Amendment and Extension of Agreement
between Registrant and CeleXx Corporation*
10.7 Rescission Agreement between Registrant and Loyalty Holdings
Limited and Raymond Winter dated July 10, 2000.
10.8**** Agreement between Registrant and Swiss Arctic Traders Ltd
providing for the purchase of the Class A Preferred Shares held
by Swiss Arctic Traders, Ltd. dated June 29, 2000.
21 Subsidiaries of the Registrant
27 Financial Data Schedule
*Filed as Exhibit A to Form 8-K filed on April 18, 2000 and incorporated
herein by reference.
** Filed as Exhibit C to Form 8-K filed on April 18, 2000 and
incorporated herein by reference.
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*** Filed as Exhibit C to Form 8-K filed on July 5, 2000 and
incorporated herein by reference.
**** Filed as Exhibit A to Form 8-K filed on July 5, 2000 and
incorporated herein by reference.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed by the undersigned, thereunto duly
authorized.
E-PAWN.COM, INC.
(formerly Wasatch International Corporation)
BY /S/ EDWARD O. RIES
------------------
Edward O. Ries, President, CEO, and Director
Date: September 20, 2000
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
BY /S/ JENNIFER MARTIN
-------------------
Jennifer Martin, Secretary and Director
Date: September 20, 2000
BY /S/ ALISON MADEJ
----------------
Alison Madej, Vice President and Director
Date: September 20, 2000
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