UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ________________
Commission File Number 000-14614
NET LNNX, INC.
(name of small business issuer in its charter)
Pennsylvania 23-1726390
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
7700 N. W. 37TH AVENUE
MIAMI, FLORIDA 33147
(Address of principal executive offices)(Zip Code)
(305) 691-2800
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b)
of the Exchange Act:
NONE
Securities registered pursuant to Section 12(g)
of the Exchange Act:
COMMON STOCK, NO PAR VALUE
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
as required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [XX]
No [ ]
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained herein, and
no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or
any amendment to this Form 10-K. [ ]
Issuer's revenues for the fiscal year ended December 31,
1998:..$00.00.
As of March 31, 1999, the aggregate market value of the voting
stock held by non-affiliates was approximately $4,264,053
(2,436,602 shares at $1.75, which is an average of the bid and
ask price of such stock).
The number of shares outstanding of each of the issuer's classes
of common stock, as of March 31, 1999: 19,134,102 (one class).
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
TABLE OF CONTENTS
ITEMS
PAGE
PART I
ITEM 1. DESCRIPTION OF BUSINESS 1
ITEM 2. PROPERTIES 5
ITEM 3. LEGAL PROCEEDINGS 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 5
PART II 5
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION 6
ITEM 7. FINANCIAL STATEMENTS 8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 9
PART III 9
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT 9
ITEM 10. EXECUTIVE COMPENSATION 11
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 13
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 14
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development.
We were organized as Chester County Security Fund, Inc. under
the laws of Pennsylvania on April 15, 1968. Corporate Investment
Company purchased our outstanding shares and we became a
subsidiary of Corporate Investment Company. In 1986 Corporate
Investment Company distributed our outstanding stock to its
shareholders. Prior to 1996, we were a holding company conducting
virtually no business operation other than seeking merger
partners.
In January 1996, we changed our name to Net Lnnx, Inc. and
acquired a majority interest in Communications/USA, Inc. by
exchanging our stock for their stock. In February 1996, we formed
a wholly owned subsidiary, TrueNet Corporation. These
transactions proved to have only limited benefit to us. As a
result, we disposed of our interest in Communications/USA, Inc.
and TrueNet Corporation in January of 1997. Other than
maintaining our good standing status in the State of Pennsylvania,
and seeking prospective businesses or assets to acquire, from the
time of disposing of our interest in Communications/USA, Inc. and
TrueNet Corporation, we have had no business operations.
As mentioned above, in January 1996, we entered into an
agreement to exchange approximately 83.5% of our no par value
common stock for approximately 60% of the common stock of
Communications/USA, Inc. Communications/USA, Inc., through its
wholly owned subsidiary CommTel/USA, Inc., owned and operated
Voice-Tel franchises which did business on the West Coast of
Florida from Tampa Bay to Naples, and the East Coast of Florida
from Cocoa to Stuart. Voice-Tel is in the interactive voice
messaging industry and sells its products to both local customers
and national accounts. Voice-Tel is the largest interactive voice
messaging company in the United States, operating a digital
telecommunications network through independently owned franchises.
In January 31, 1997, our board of directors approved our sale
to Palm Capital, Inc. of all of our shares of Communications/USA,
Inc. In exchange for our Communications/USA, Inc. stock, we
received:
. $25,000 in cash;
. a 7% promissory note in the amount of $475,000,
. all of the shares of our stock owned by Palm Capital; and
. by the assumption by Palm Capital of all of the
liabilities of Communications/USA.
We sold all of our rights to our common stock of
Communications/USA stock to both Raul E. Balsera and Robert
Feiman. Both Balsera and Feiman were officers and shareholders of
Palm Capital, Inc. They also were affiliate shareholders of the
Company prior to the sale. Balsera also served as chief financial
officer of Communications/USA. Palm also agreed to assume the
liabilities of Communications/USA. On May 23, 1997 our
shareholders approved the purchase agreement at the annual meeting
of shareholders.
<PAGE> 1
Also, in January 1997, we agreed with The Banana Corporation,
Inc. to transfer to The Banana Corporation all of the stock of our
wholly owned subsidiary, TrueNet Corporation. TrueNet Corporation
had begun operating as an Internet service provider in West Palm
Beach, Florida.
In exchange for the TrueNet Corporation stock, The Banana
Corporation transferred to us Ten Percent of its common stock. In
April 1997, pursuant to a separate agreement, we
. purchased Ten Percent of The Banana Corporation's newly
formed operating subsidiary, Banana Online, Inc. for
$14,500 and an additional 100,000 shares of Banana Online;
and
. exchanged our Banana Corporation shares to Banana
Corporation.
On June 5, 1997, we agreed to assign the Promissory Note from
Palm Capital in exchange to Harbor Town Holding Group I, Inc. The
transfer to us by Harbor Town I of Two Million Fifty Eight
Thousand Two Hundred and Nine shares of Harbor Town I's capital
stock. The Harbor Town I stock was subsequently distributed to
our shareholders as a stock dividend.
On May 19, 1997, we agreed to assign our 200,000 shares of
Banana Online to Harbor Town Holding Group II, Inc. to us by
Harbor Town II of Two Million Fifty Eight Thousand Two Hundred and
Nine shares of Harbor Town II's capital stock.
On June 6, 1997, we agreed with Harbor Town I that Harbor
Town I would not enforce the assignment of the Palm Capital Note
to Harbor Town I until we could maximize the value for the Palm
Capital Note.
On June 27, 1997, we filed suit against Palm, Comm/USA,
Feiman, Balsera and Gibbs and Runyan, P.A , a Florida professional
corporation ("Gibbs"), in the Circuit Court of the Fifteenth
Judicial Circuit, Palm Beach County, Florida in connection with
the entire transaction in which we acquired the Palm Capital Note.
On December 18, 1997 the lawsuit was settled and we accepted
$100,000 in exchange for a release from liability of all
defendants to the lawsuit. The final order was signed by the
Court on January 5, 1998.
Although we originally had agreed to pay anything we received
on the Palm Capital Note to Harbor Town I, on November 6, 1997,
Harbor Town I canceled our assignment of the Palm Capital Note to
it and we cancelled a $12,600 promissory note dated June 2, 1997
from Harbor Town I to us.
Other than maintaining our good standing status in the State
of Pennsylvania, and seeking prospective businesses or assets to
acquire. From December, 1997 to February, 1999, we have had no
business operations.
On February 18, 1999, we entered into an Agreement and Plan
of Merger with NetSub, Inc., a Florida corporation and our wholly-
owned subsidiary, and PrintOnTheNet.Com, Inc., a Delaware
corporation ("POTN"). The Agreement and Plan of Merger provided
that Net Sub, Inc. would be merged with and into POTN in
consideration for each share of POTN common stock being converted
into 16,500 shares of our common stock and 1,000 shares of our
preferred stock. Each share of our preferred stock is convertible
into 7.207 shares of our common stock.
<PAGE> 2
On March 11, 1999, we acquired all of the common stock of
POTN (the "Acquisition"). The Acquisition was accomplished by
merging POTN with and into NetSub, Inc. POTN then became our
wholly-owned subsidiary. Shareholders of POTN received 16,500,000
shares of our common stock and 1,000,000 shares of our preferred
stock convertible into an additional 7,207,000 shares of our
common stock in exchange of their POTN stock. As a result, POTN
shareholders now own approximately 90% of our common stock,
assuming the shares of preferred stock are converted into shares
of our common stock. This change in control was previously
reported in the Company's Form 8-K filed on March 26, 1999.
We are authorized to issues 20,000,000 shares of common
stock, almost all of which were issued in the Acquisition. There
are not enough shares of common stock currently available to allow
all the preferred stock issued in the Acquisition to be converted
into common stock. We intend to increase the number of shares of
common stock we are authorized to issue to the cover the
conversion of preferred stock into shares of common stock.
POTN operates an Internet business that provides a fully
interactive venue through which companies of all sizes will be
able to design and order their printing materials via the World
Wide Web.
(b) Business of Issuer.
We are presently a holding company conducting virtually no
business operations other than through POTN, our sole wholly-owned
subsidiary corporation. As discussed above, POTN is a printing
company marketing printing via the Internet. POTN will provide a
fully interactive venue through which individual customers and
companies of all sizes will be able to design and order their
printed materials via the World Wide Web. The site allows the
user to see an image of what they will be receiving before
submitting an order. The system allows a wide choice of options
including font, layout, paper, color and graphics. The choices
extend to any type of printing including letterhead, forms,
business cards, envelopes and invitations.
Exclusive Production and Sales Agreement
On February 17, 1999, POTN entered into an Exclusive
Production and Sales Agreement (the "Agreement") with National
Lithographers and Publishers, Inc. and PrintAmerica Management
Co., Inc. which provides that POTN shall, for a period of at least
two (2) years, have the exclusive right to purchase at a preferred
price from the PrintAmerica Companies all printed goods and items
required in the course of POTN's business operations. Benjamin
Rogatinsky and Samuel Rogatinsky, each shareholders of Net Lnnx,
own the PrintAmerica Companies.
<PAGE> 3
Marketing
POTN will use the PrintAmerica Companies' large printing
sales force to negotiate web based secure accounts directly with
existing and new large corporate clients. Clients will be able to
set up accounts for free and pay only when orders are made.
Business cards, forms and other documents will be laid-out in
standard templates, and users can view and make real time changes
to names, addresses and other adjustable items. This interactive
web site will be one of the first in the printing industry to
employ the "what you see is what you get" technology. Through its
arrangement with the PrintAmerica Companies, POTN has an existing
and active customer base to which it will market its services,
while other printers on the web rely entirely on individuals and
firms to locate them through search engines or advertising.
Current customers of PrintAmerica include Alamo Rent-a-Car, Tasco
Corporation, Radisson Hotel Corporation, The Wackenhut
Corporation, Sunglass Hut Corporation, and Sunbelt Distributors,
Inc., among others.
Distribution
POTN believes it has the ability to control scheduling of
work and delivery as a result of its Agreement with the
PrintAmerica Companies, and intends to ship all work product
within 48 to 72 hours of an order being placed.
Services
POTN will provide an added service to its larger, corporate
clients, by building and maintaining a searchable asset library of
their digital files. Once published, a client's library would be
available to authorized viewers for quick browsing and searching
via thumbnail previews over any common web browser. After
locating the image needed, the client can download a low or high-
resolution version of the file. The centralized storage of files
benefits clients by eliminating errors and standardizing
publishing in organizations with multiple markets. It also
represents a significant savings of time and money over the
conventional methods of transporting images.
Competition
While there are large number of printing companies
advertising on the web, POTN has identified only one other company
of note that has established a web based printing service similar
to theirs. Unlike its main competitor, which is a computer
company marketing printing via the web, POTN is a printing company
marketing printing via the Internet. As mentioned above, POTN
expects to derive business through its relationship with the
PrintAmerica Companies, rather than by way of search engines or
advertising, the methods employed by its competitors. Because of
the Agreement with PrintAmerica, POTN anticipates having an
additional advantage over competitors by having the ability to
completely oversee and control production and consistently
maintain quality control.
<PAGE> 4
ITEM 2. PROPERTIES.
Our executive and business offices are located at 7700 N.W.
37th Avenue, Miami, Florida 33147.
ITEM 3. LEGAL PROCEEDINGS.ITEM 3.LEGAL PROCEEDINGS
No material legal proceedings are pending of which we are a
party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of our securities holders
during the fourth quarter of the fiscal year covered by this
report.
PART II
ITEM 5.MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS.ITEM 5.MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
(a) Market Information.
Our common stock has been traded on the over-the-counter
market since May 1989. The following table sets forth the range
of high and low closing sale prices for each quarterly period in
the fiscal year ended December 31, 1998, and 1997 as reported by
over-the-counter market quotations. The quotations reflect inter-
dealer prices, without retail mark-up, mark down or commission and
may not represent actual transactions.
<TABLE>
<CAPTION>
1997 High Low
<S> <C> <C>
1st Quarter $1.875 $0.547
2nd Quarter $1.00 $0.422
3rd Quarter $1.00 $0.375
4th Quarter $1.125 $0.25
1998 High Low
1st Quarter $0.75 $0.25
2nd Quarter $0.813 $0.25
3rd Quarter $1.938 $0.375
4th Quarter $0.656 $0.25
</TABLE>
(b) Holders.
As of March 31, 1999, there were approximately 19,134,102
holders of record of the Company's common stock.
(c) Dividends.
We did not declare or pay any cash dividends on our common
stock for the last two fiscal years. No restrictions limit our
ability to pay dividends on our common stock.
<PAGE> 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.
This Annual Report on Form 10-KSB contains forward-looking
statements. For this purpose, any statements contained in it that
are not statements of historical fact should be regarded forward-
looking statements. For example, the words "believes,"
"anticipates," "plans," and "expects" are intended to identify
forward-looking statements. There are a number of important
factors that could cause the Company's actual results to differ
materially from those indicated by such forward-looking
statements. These factors include, those shown at the end of this
section under the caption "Certain Factors That May Affect Future
Results."
(a) Plan of Operation.
We are presently a holding company conducting virtually no
business operations other than through POTN, our recently acquired
wholly-owned subsidiary corporation.
Building and Maintaining the Web Site
We are currently building our web site. The POTN site will
offer two features which it believes will distinguish it from
other interactive sites on the web selling printing services.
First, it will employ graphic on-the-fly technology, allowing
purchasers to see an image of what they will be receiving before
they submit the order. This interactive web site will be one of
the first in the printing industry to employ the "what you see is
what you get" technology. Secondly, POTN will use the
PrintAmerica Companies' large printing sales force to negotiate
and establish web based secure accounts directly with existing and
new large corporate clients. Clients will be able to set up
accounts for free and pay only when orders are made. Business
cards, forms and other documents will be laid-out in standard
templates, and users can view and make real time changes to names,
addresses and other adjustable items. Each secure site will have
a unique look and nomenclature. The secure sites will be
developed to meet the particular nuances of each client's needs.
While POTN will be purchasing its own dedicated servers, it will
contract with an off-site location to house and maintain the
server for a fee. The site will have a T1 connection, 24-hour
support, and redundant backup systems. Programmers and graphic
artists familiar with web site design will be hired in-house to
establish and update the open and secure platforms as required.
Marketing
We intend to utilize the sales force of the PrintAmerica
Companies to market to large corporate clients and will also rely
on search engines to attract business. POTN will use direct
advertising to market the web site to individuals and small
businesses.
Production
We will be contracting all the printing work related to our
business to the PrintAmerica Companies, through our exclusive
Agreement with the PrintAmerica Companies. This arrangement
offers us the following advantages.
. We will be able to leverage the PrintAmerica Companies'
sales staff and customer base.
. The PrintAmerica Companies have already made the capital
investment for machinery and equipment and has the system
in-place to produce our work product within 48 hours in
most cases.
<PAGE> 6
. The PrintAmerica Companies currently operate three plants
and currently have excess capacity. We will be provided
a high priority given the volume of work anticipated. The
PrintAmerica Companies can immediately accommodate our
projected work flow and have the ability to add machinery
and equipment as warranted.
. Under the Exclusive Production and Sales Agreement and
given the ownership structure of PrintAmerica Companies,
control and quality of production will be assured to a
greater degree than is the case with most third party
arrangements.
. We will be able to focus all of our attention on building
and maintaining the interactive web site.
. We will not carry inventory, a major impediment to
realizing profit for many web based retailers today.
Distribution
All shipping will be handled by the PrintAmerica Companies.
Shipping will be completed from the PrintAmerica Companies'
production facilities directly to consumers via U.S. Mail, and for
additional charges via UPS and FedEx. International shipping will
be done case-by-case.
Certain Factors That May Affect Future Results
. The printing industry is highly competitive. Competition is
largely based on price, quality, range of services offered,
distribution capabilities, customer service, availability of
printing time on appropriate equipment and state-of-the-art
technology. Primarily due to excess capacity in the industry,
we could potentially experience downward pricing pressure and
increased competition which would drive down revenues by either
forcing a cut in sales or in prices. There is always the risk
of general market down turn which could impact revenues and
growth.
. The price of paper, the primary raw material used in the
industry, is volatile over time and may cause significant
swings in net sales and cost of sales. The price of paper last
spiked in early 1995. Since then price increases have been
modest. By the end of 1999, with the combined paper needs of
POTN and the PrintAmerica Companies, we intend to purchase
directly from paper mills either in the U.S., Europe, or Asia.
Given the volume of the paper purchases, we feel we will be
able to obtain quality paper at competitive prices.
. All senior positions have yet to be filled. As we grow, a
broad range of skilled employees will be required. Our success
depends upon our senior management, particularly Ben
Rogatinsky, Chairman and Chief Executive Officer, Samuel
Rogatinsky, President and Chief Operating Officer, and Paul
Lambert, Chief Financial Officer. The loss of anyone of their
services could have a material affect on POTN.
. POTN is a start-up company and has no significant operating
history. We have no significant operating history and have not
generated any revenue to date. Since our inception we have
been engaged in developing our web site. There can be no
assurance that we will be successful in completing and
maintaining our web site and implementing our marketing
strategy. Because we anticipate incurring significant costs in
connection with the development and operation of our web site,
there can be no assurance that we will achieve sufficient
revenues to offset anticipated operating costs. Our viability,
profitability and growth depend exclusively upon successful
completion and marketing of our web site. There can be no
assurance that we will be able to generate revenues or ever
achieve profitable operations.
<PAGE> 7
. We have no significant capital. We have required significant
capital to develop our business and to date our majority
shareholders have funded all of our setup costs out-of-pocket.
We will continue to require significant funds as we grow. We
are currently not generating revenue from our operations. We
have no current arrangements in place with respect to sources
of additional financing. If we have to arrange for financing
to further the development of our web site, there can be no
assurances that such financing will be available on acceptable
terms or at all. The inability to obtain additional financing,
when needed, would have a material adverse effect on us,
including possibly requiring us to curtail or cease our
operations.
. Computer-based systems that utilize two digits rather than four
digits to define the applicable year may fail to properly
recognize date sensitive information when the year changes to
2000. We are in the process of completing a comprehensive
review of our computer-based systems to determine if they will
be affected by resulting Year 2000 related compliance issues,
that is whether those systems have Year 2000 related "computer
bugs." So far this review has revealed no material Year 2000
related compliance issues. Because most of our systems are
relatively new, we do not expect to incur Year 2000 compliance
related costs that would be material to us. We are asking for
confirmation from outside vendors, financial institutions and
others that they are Year 2000 compliant or that they are
developing and implementing plans to become Year 2000
compliant. However, there is no assurance that these outside
vendors, financial institutions and others will timely resolve
their own Year 2000 compliance issues or that any such failure
would not have an adverse effect on us. We believe we are
devoting the necessary resources to timely address all Year
2000 compliance issues over which we have control.
. Demand and market acceptance for recently introduced services
and products over the Internet are subject to a high level of
uncertainty. We are one of the first web based printing
companies marketing printing material via the Internet. It is
difficult to predict the size of this market or its future
growth, if any. The success of our business will depend upon
the adoption of the Internet as a medium for commerce by a
broad base of consumers and businesses. There can be no
assurance that widespread acceptance of Internet commerce in
general, or of our Internet printing services in particular,
will occur. We will rely on consumers and businesses who have
historically used traditional means of commerce to order and
purchase printed materials. In order for us to be successful,
these consumers and business must accept and utilize this novel
way of conducting business and exchanging information. Issues
concerning the commercial use of the Internet, such as ease of
access, security, reliability, cost and quality of service may
affect the growth of Internet use or the attractiveness of
conducting commerce online. There can be no assurance that
there will be broad acceptance of the Internet as an effective
medium for commerce by consumers and businesses or that the
market for our Internet printing business will develop
successfully or achieve widespread acceptance. If our Internet
printing services do not achieve market acceptance, our
business, results of operations and financial condition could
be materially adversely affected.
ITEM 7. FINANCIAL STATEMENTS.
Information with respect to this item is set forth in the
"Index" to Financial Statements on Pages F-1 through F-11.
<PAGE> 8
NET LNNX, INC.
INDEX TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
TABLE OF CONTENTS
Page
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-1
FINANCIAL STATEMENTS
Balance Sheets F-2
Statements of Operations F-3
Statements of Shareholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
<PAGE> F-0
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Net Lnnx, Inc.
West Palm Beach, Florida
We have audited the accompanying balance sheets of Net Lnnx, Inc.
(the "Company") as of December 31, 1998 and 1997, and the related
statements of operations, shareholders' equity, and cash flows
for the years ended December 31, 1998 and 1997. 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 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 financial statements referred to above
present fairly, in all material respects, the financial position
of Net Lnnx, Inc. as of December 31, 1998 and 1997 and the
results of its operations and cash flows for the years ended
December 31, 1998 and 1997 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 3 to the financial statements, the Company has suffered
losses from operations that raise substantial doubt about its
ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 3. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
March 6, 1999
Ft Lauderdale, Florida
<PAGE> F-1
NET LNNX, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,446 $ 33,171
Loans receivable - related parties 5,000 10,500
Loan receivable - Palm Capital - 50,000
Prepaid expenses 1,550 1,550
--------- ---------
Total current assets 7,996 95,221
Property and equipment - net 4,972 7,405
--------- ---------
$ 12,968 $ 102,626
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,000 $ 24,731
Accrued expenses 100 -
--------- ---------
Total current liabilities 8,100 24,731
--------- ---------
Stockholders' equity:
Preferred stock - no par value,
5,000,000 shares authorized,
no shares issued or outstanding - -
Common stock - no par value,
20,000,000 authorized,
2,634,102 and 2,200,000 issued
and outstanding at December 31, 1998
and 1997, respectively 1,000 1,000
Additional paid-in capital 1,830,324 1,687,936
--------- ---------
Retained deficit (1,826,456) (1,611,041)
4,868 77,895
----------- -----------
$ 12,968 $ 102,626
=========== ===========
</TABLE>
<PAGE> F-2
NET LNNX, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Operating revenues $ - $ -
----------- -----------
Operating expenses 216,219 735,077
----------- -----------
(216,219) (735,077)
=========== ===========
Other income:
Installment sale income - 8,388
Interest income 804 27,985
----------- -----------
804 36,373
=========== ===========
Operating loss from continuing operations (215,415) (698,704)
----------- -----------
Discontinued operations:
Loss from operations of discontinued
operations - (665)
Loss from disposal of discontinued
operations - (457,559)
----------- -----------
- (458,224)
----------- -----------
Net loss $ (215,415) $(1,156,928)
=========== ===========
Loss per common share:
Loss from continuing operations $ (0.09) $ (0.33)
=========== ===========
Loss from operations discontinued
operations $ - $ -
=========== ===========
Loss from disposal of discontinued
operations $ - $ (0.22)
=========== ===========
Net loss per share $ (0.09) $ (0.55)
Number of shares used in earnings
per common share computation 2,410,826 2,108,945
</TABLE>
<PAGE> F-3
NET LNNX, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997
<TABLE>
<CAPTION>
Additional
Common Stock paid-in Retained
Shares Amount capital deficit Total
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1997 1,472,626 $ 1,000 $ 896,285 $ (454,113) $ 443,172
Common stock issued for cash 500,000 - 200,000 - 200,000
Common stock exchanged for
professional fees 227,374 - 591,651 - 591,651
--------- --------- ---------- ---------- ----------
Net loss - - - (1,156,928) (1,156,928)
Balances at December 31, 1997 2,200,000 1,000 1,687,936 (1,611,041) 77,895
Common stock issued
for cash 243,893 - 80,000 - 80,000
Common stock exchanged for
professional fees 190,209 - 62,388 - 62,388
Net loss - - - (215,415) (215,415)
----------- --------- ----------- ----------- ----------
Balances at December 31, 1998 $ 2,634,102 $ 1,000 $ 1,830,324 $(1,826,456) $ 4,868
=========== ========= =========== =========== ==========
</TABLE>
<PAGE> F-4
NET LNNX, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (215,415) $(1,156,928)
Adjustments to reconcile net loss
to net cash provided by (used for)
operating activities:
Depreciation 2,433 3,376
Professional fees exchanged for
common stock 62,388 591,651
Net assets of discontinued operations - 450,400
Change in operating assets and liabilities:
Loan receivables - related parties 5,500 (10,500)
Loan receivable 50,000 (50,000)
Prepaid expenses - (1,550)
Accounts payable (16,731 (18,866)
Accrued expenses 100 2,187
--------- ---------
Net cash used by operating activities (111,725) (190,230)
--------- ---------
Cash flows from investing activities:
Acquisition of equipment - (1,643)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock 80,000 200,000
--------- ---------
Net increase (decrease) in cash (31,725) 8,127
Cash and cash equivalents at
beginning of year 33,171 25,044
--------- ---------
Cash and cash equivalents at
end of year $ 1,446 $ 33,171
========= =========
Supplemental cash flow information: $ 1,446 $ 33,171
========= =========
None
</TABLE>
<PAGE> F-5
NET LNNX, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and purpose - Net Lnnx, Inc. (the "Company") was
organized as Chester County Security Fund, Inc. ("Chester")
December 31, 1988 under the laws of Pennsylvania as a wholly
owned subsidiary of Corporate Investment Company ("CIC"). On
May 5, 1989, CIC distributed the outstanding stock of Chester to
its shareholders as a stock for stock dividend. Chester was a
holding company conducting virtually no operations other than
its efforts to seek merger partners.
In January, 1996, the Company in a stock for stock exchange,
acquired a majority interest in Communications/USA, Inc. The
Company also formed a wholly owned subsidiary, TrueNet, Inc.
After the Company acquired and formed its subsidiaries, it
changed its name to Net Lnnx, Inc. and had a 1 for 20 reverse
stock split.
Cash and cash equivalents - Cash and cash equivalents represent
actual balances in banks or invested in liquid short-term
investments with maturities of three months or less when
purchased. All of the balances are owned by the Company and are
not encumbered in any manner.
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts. Management believes that the
estimates utilized in preparing its financial statements are
reasonable. Actual results could differ from those estimates.
Property and equipment - Property and equipment are recorded at
cost. The equipment is depreciated over its estimated useful
life using the straight-line method. Repairs and maintenance
are expensed.
Fair value of financial instruments - The fair value of the
Company's financial instruments such as loans receivable and
accounts payable approximate their carrying value.
Compensated absences - Compensated absences have not been
accrued, as they are considered immaterial.
Stock-based compensation - The Company accounts for stock-based
awards using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"). Accordingly, no
compensation cost has been recognized for its stock options.
The Company provides additional pro forma disclosures as
required under Statement of Financial Accounting Standard, No.
123, "Accounting for Stock-Based Compensation" (FASB 123").
<PAGE> F-6
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income taxes - The Company accounts for income taxes on an
asset and liability approach to financial accounting. Deferred
income tax assets and liabilities are computed annually for
temporary differences between the financial statement and tax
bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
Loss per share - Financial Accounting Standards No. 128,
"Earnings Per Share" ("FAS 128"), requires presentation of
earnings or loss per share on basic and diluted earnings per
share. The Company has potentially dilutive shares; however,
because the Company has a loss, the shares are deemed anti-
dilutive and only basic loss per share is presented. Loss per
share is computed by dividing net income by the weighted average
number of shares outstanding during the period.
2. SUBSEQUENT EVENT - CHANGE IN CONTROL
On February 19, 1999, the Company entered into a definitive
agreement to acquire all of the stock of PrintOnTheNet.com, Inc.
("Print"). The acquisition agreement provides for Print
shareholders to receive 16,500,000 shares of the common stock of
the Company and preferred stock convertible into an additional
7,207,000 shares of common stock. On a fully diluted basis, the
new shareholders will directly control approximately 90% of the
common stock. The transaction is subject to customary
conditions, and, assuming they are all satisfied, is expected to
close in March, 1999.
3. UNCERTAINTY - GOING CONCERN
As shown in the accompanying financial statements, the Company
incurred a net loss of $215,415 in 1998 and $1,156,928 in 1997.
As of December 31, 1998, the Company's current liabilities
exceeded its current assets by $104. The Company has no
operations but continues to incur expenses. These factors
create an uncertainty about the Company's ability to continue as
a going concern. The ability of the Company to continue as a
going concern is dependent upon completion of a proposed
acquisition and the Company's ability to raise capital and to
generate positive cash flows. The financial statements do not
include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
<PAGE> F-7
4. PROPERTY AND EQUIPMENT
At December 31, property and equipment consisted of the
following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Computer equipment $ 7,441 $ 7,441
Furniture 5,000 5,000
--------- ---------
12,441 12,441
Less accumulated
depreciation 7,469 5,036
--------- ---------
$ 4,972 $ 7,405
========= =========
</TABLE>
Depreciation expense for the 1998 and 1997 was $2,433 and
$3,376, respectively.
5. CHANGES IN STOCKHOLDERS' EQUITY
In 1998 and 1997, the Company exchanged stock for various
professional fees and services. The value of the securities was
set by the value that its common stock was trading at the time
of the exchange.
6. STOCK OPTION PLAN
On January 20, 1997, the Company adopted a restricted stock
plan, known as the 1997 Restricted Stock Plan (the "Plan").
Officers and directors and related corporations of the Company
may be granted nonqualified options to purchase up to 500,000
shares of the common stock of the Company. The Plan terminates
January 20, 2006 unless extended by the Company. The exercise
price of the nonqualified options granted under the Plan shall
in no event be less than the lesser of (1) the book value per
share of common stock as of the end of the fiscal year of the
Company immediately preceding the date of such grant, or (2) 50
percent of the fair market value per share of common stock on
the date of such grant.
In accordance with APB 25 and related interpretations, no
compensation expense has been recognized for its stock based
compensation. Possible compensation cost for the Company's
stock options have been determined based upon the fair value at
the grant date consistent with the Black-Scholes methodology
prescribed under FASB 123. The Company did not recognize
<PAGE> F-8
compensation expense because the market price of the shares had
decreased to the point the shares did not generate expense under
the Black-Scholes formula.
The fair value of these options was estimated at the date of
grant with a Black-Scholes option pricing model using a dividend
yield of 0%, estimated volatility of 0%, a risk-free interest
rate of 6.42%, and an expected life of ten (10) years.
<PAGE> F-9
6. CONTINUING OPERATIONS (continued)
In January of 1998, the Company redeemed 175,000 stock options,
which had been granted but not exercised. The redeemed price
was $ .20 for a total of $35,000 which was recorded as
compensation in 1998.
Stock option activity for the Plan since inception was as
follows:
<TABLE>
<CAPTION>
Number of Option Price
Shares Per Share Range Total
<S> <C> <C> <C> <C>
Outstanding options on
January 1, 1997 - $ - $ - $ -
Granted 400,000 .6875 .875 331.250
Outstanding options on
December 31, 1997 400,000 .6875 .875 331,250
Expired/redeemed 325,000 .2000 .875 314,062
Outstanding options on
December 31, 1998 75,000 $ .6875 $ .6875 $ 17,188
</TABLE>
7. DISPOSITION OF OPERATIONS
Communications/USA, Inc. - On January 31, 1997, the
shareholders of the Company approved a purchase agreement dated
January 17, 1997 with Palm Capital, Inc. ("Palm") to sell to
Palm all of the Company's investment in Communications/USA, Inc.
("CUSA") (the "Transaction").
As consideration for the CUSA sale, Palm agreed to deliver to
the Company all of the Company's stock, options, and other
rights to the Company's common stock held by Palm and its
shareholders, plus the sum of $500,000, secured by 1,250,000
shares of CUSA's common stock. The $500,000 was payable in cash
of $25,000 and a promissory note of $475,000 with interest at
7%. Palm also agreed to the assumption of CUSA's liabilities.
A disagreement over the subsequent sale of CUSA's stock, which
was security for the Transaction, developed and litigation
followed. On January 26, 1998, the litigation was settled with
the Company being paid $190,000 on the note of which $50,000 was
received in 1998. The Company determined that further
litigation would be too costly to pursue. In 1997, the Company
charged to loss from disposal of discontinued operations
$408,959.
<PAGE> F-10
8. DISPOSITION OF OPERATIONS
TrueNet, Inc. - On January 31, 1997, the Company entered into
a sale and purchase agreement with Banana Corporation, Inc.
("BCI") to transfer to BCI 100% of the common stock and assets
of the Company's wholly owned subsidiary, TrueNet. As
consideration, BCI transferred to the Company 10% (100,000
shares) of BCI's common stock. In May 1997, BCI declared
bankruptcy. In 1997, the Company charged to loss from disposal
of discontinued operations $48,600.
Potential tax benefits from the loss on disposition have not
been recognized since the ultimate realization of the tax
benefits is dependent upon the Company generating future capital
gains.
9. INCOME TAXES
The Company has had no taxable income for the years ended
December 31, 1998 and 1997, and as a result, has recorded no tax
expense. The Company recorded deferred tax assets resulting
from net operating losses of $822,158 and $606,743 less a
valuation allowance of $822,158 and $606,743 for 1998 and 1997,
respectively. The losses generated before 1997 in the amount of
$899,761 can be carried forward in varying amounts for 15 years
to the year 2012. The loss for 1998, $215,415, can be carried
forward 20 years to the year 2018
10. YEAR 2000 COMPUTER CONSIDERATIONS (UNAUDITED)
The Company has completed an inventory of computer systems and
other electronic equipment that may be affected by the year 2000
issue and that are necessary to conduct Company operations. The
Company believes it is compliant with the year 2000.
Because of the unprecedented nature of the year 2000 issue, its
effects and the success of related remediation efforts will not
be fully determinable until the year 2000 and thereafter.
Management cannot assure that the Company is or will be year
2000 ready, that the Company's remediation efforts will be
successful in whole or in part, or that parties with whom the
Company does business will be year 2000 compliant.
<PAGE> F-11
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Sweeney Gates & Company were dismissed as the Company's
independent certified public accountants effective March 25,
1999. There were no disagreements between the Company and
Sweeney Gates & Company on any matter of accounting principals
or practices, financial statement disclosure, or auditing scope
of procedure in connection with the audits of the fiscal years
ended December 31, 1996 and 1997, and all subsequent interim
periods. Berkowitz Dick Pollack & Brant, LLP was engaged on
March 25, 1999 as the Company's independent certified public
accountants. This change in accountants was previously reported
in the Company's Form 8-K filed with the Securities and Exchange
Commission (the "Commission") on March 26, 1999.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT.
(a) Identity of directors and executive officers.
<TABLE>
<CAPTION>
Name Age Position Director Since
<S> <C> <C> <C>
Benjamin Rogatinsky 31 Chief Executive Officer/ March 1999
Chairman of the Board of
Directors
Samuel Rogatinsky 29 President/Chief Operating March 1999
Officer/Director
Paul Lambert 31 Chief Financial Officer/ March 1999
Director
William R. Colucci 59 Director September 1997
</TABLE>
(b) Business experience of directors and executive officers.
Benjamin Rogatinsky has served as the Chief Executive Officer
and Chairman of the Board of Directors of the Company since March
1999 and is currently the Chief Executive Officer and Chairman of
POTN. From 1996 to date, Mr. Rogatinsky has served as the
President of National Lithographers and Publishers, Inc., a
commercial printing company. From 1997 to date, Mr. Rogatinsky
has also been employed as the President of PrintAmerica Management
Company, Inc. Benjamin Rogatinsky is the brother of Samuel
Rogatinsky, described below. Mr. Rogatinsky practiced certified
public accounting from 1993 to 1996.
Samuel Rogatinsky has served as the President, Chief
Operating Officer and a Director of the Company since March 1999
and is currently the President and Chief Operating Officer of
POTN. From 1996 to date, Mr. Rogatinsky has served as the Vice
President of National Lithographers and Publishers, Inc., a
commercial printing company. Form 1997 to date, Mr. Rogatinsky
has also been employed as the Vice President of PrintAmerica
Management Company, Inc. Samuel Rogatinsky is the brother of
Benjamin Rogatinsky, described above. Mr. Rogatinsky was an
attorney at law in private practice from 1994 to 1996.
Mr. Lambert has served as the Chief Financial Officer and a
Director of the Company since March 1999 and is currently the
Chief Financial Officer of POTN. For the past five years, Mr.
Lambert has also served as the President of Lambert Advisors, a
management consulting company.
<PAGE> 9
Mr. Colucci has served as a Director of the Company since
September, 1997. Mr. Colucci is also presently a consultant with
a privately held management firm known as Harbor Town Management
Group, Inc., a Florida corporation, which provides investment
banking and business consulting services. From June 1996 to May
1997, Mr. Colucci served as Chief Operating Officer and SEC
Compliance officer for Physicians Laser Services, Inc., a publicly
traded Delaware corporation. From April 1991 to May 1996, Mr.
Colucci served as a senior partner of Decision Dynamics, Inc., a
private business and real estate consulting firm.
Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors, officers and persons who own more than
10% of the Common Stock of the Company ("Reporting Persons") to
file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Reporting Persons are
required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) reports they
file. Based solely upon a review of (i) copies of section 16(a)
filings received by the Company during or with respect to the 1998
fiscal year and (ii) certain written representations of its
officers and directors with respect to the filing of annual
reports of changes in beneficial ownership, the Company believes
that each filing required to be made pursuant to Section 16(a) of
the Exchange Act during the 1998 fiscal year has been filed in a
timely manner, except as follows:
Ronald W. Hayes, Jr., an officer, director and beneficial
owner of more than 10% of the Company's common stock, failed to
timely file a required Form 4 for July 1998 with respect to one
transaction; and William R. Colucci, an officer and director,
failed to timely file a required Form 4 for July 1998 with respect
to one transaction. To the best knowledge of the Company, Robert
& Cyndee Hackney, JTWROS, beneficial owners of more than 10% of
the Company's common stock during 1998, were delinquent with their
Exchange Act Section 16(a) reporting requirements during the most
recent fiscal year.
<PAGE> 10
ITEM 10. EXECUTIVE COMPENSATIONITEM 10.EXECUTIVE COMPENSATION .
Other than set forth below, no compensation has been paid
or accrued for the benefit of any executive officer or directors
of the Compnay during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h)
Other Securities All
Annual Restricted Underlying Other
Name & Compen- Stock Options/ LTIP Compen-
Position Year Salary ($) Bonus($) sation Award(s) SARs(#) Payouts($) sation($)
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald W. Hayes, Jr. 1998 10,200(1) -0- -0- -0- -0- -0- 20,000(2)
Director, Chairman
of the Board and
President
William R. Colucci 1998 $33,391(3) -0- -0- -0- -0- -0- 5,000(4)
Director
</TABLE>
<TABLE>
Notes to table:
(1) In July 1998, Ronald W. Hayes, Jr. was granted 30,000 shares
of common stock of the Company as compensation for serving as
the Company's chairman of the board of directors and
president. The per share closing market price of the
Company's common stock on July 14, 1998, the date of the
grant, was $.034.
(2) As part of his compensation for serving as a director of the
Company during 1997, Ronald W. Hayes, Jr. was awarded options
to purchase 100,000 shares of the Company's common stock at
a price of $0.875 per share exercisable, in whole or in part,
at any time on or before January 31, 1999. On January 1,
1998, in connection with the terms of a contemplated merger
which never occurred, the Company redeemed all such 100,000
options at a per option price of $0.20 or $20,000 in the
aggregate, and such options were canceled. The per share
closing market price of the Company's common stock on
December 31, 1997 was $0.25.
(3) In July 1998, William R. Colucci was granted 98,209 shares of
common stock of the Company (an aggregate value of $33,391)
as compensation for serving as a director and officer of the
Company. The per share closing market price of the Company's
common stock on July 14, 1998, the date of the grant, was
$0.34.
(4) As part of his compensation for serving as a director of the
Company during 1997, William R. Colucci was awarded options
to purchase 100,000 shares of the Company's common stock at
a price of $0.687 per share. On January 1, 1998, in
connection with the terms of a contemplated merger which
never occurred, the Company redeemed 25,000 options at a per
option price of $0.20 or $5,000 in the aggregate, and such
redeemed options were canceled. The per share closing market
price of the Company's common stock on December 31, 1997 was
$0.25.
<PAGE> 11
The Company has no bonus or incentive plans in effect, nor
are there any understandings in place concerning additional
compensation to the Company's officers and directors.
Each person who serves as a director of the Company is
compensated up to $500 for travel expenses in the event a director
is traveling outside South Florida and is required to return to
South Florida to attend an emergency director's meeting.
<PAGE> 12
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
The following tables set forth the number of shares, based on
information obtained from the persons named below, of the Common
Stock and the Preferred Stock of the Company beneficially owned as
of March 11, 1999 by (i) owners of more than 5% of the Company's
Common Stock and (ii) all officers and directors of the Company
individually and as a Group.
Security Ownership of Certain Beneficial Owners and Management
Name and Address of Amount and Nature Percent of Amount and Nature Percent of Class
Beneficial Owner(1) of Beneficial Owner (2) Class(3) of Beneficial Assuming Conversion
Ownership Assuming of Preferred Stock
Conversion of into Common Stock
Preferred Stock into
Common Stock (4)
<S> <C> <C> <C> <C>
Benjamin Rogatinsky 7,837,500 40.96% 11,260,825 42.75%
Samuel Rogatinsky 7,837,500 40.96% 11,260,825 42.75%
Paul Lambert 825,000 4.31% 1,185,350 4.50%
William R. Colucci(5) 197,500 1.20% 197,500 *%
All officers
and directors
as a group (4
persons)(5) 16,697,500 87.27% 23,902,000 90.75%
</TABLE>
* Less than 1%
(1) The address of each of the persons listed above is care of
the Company.
(2) Unless otherwise noted, the Company believes that all persons
named in the table have sole voting and investment power with
respect to all shares of stock beneficially owned by them.
(3) Based upon 19,134,102 shares of Common Stock outstanding as
of the consummation of the Acquisition of POTN.
(4) The 1,000,000 shares of Preferred Stock issued in the
Acquisition are convertible into 7,207,000 shares of Common
Stock. However, there are only 20,000,000 shares of the
Company's Common Stock currently authorized. Almost all of
the shares of Common Stock have been issued in the
Acquisition. There are not enough shares of Common Stock
authorized to allow all the Preferred Stock to be converted
into common stock. The Company intends to increase the
number of shares of Common Stock it is authorized to issue to
the cover the conversion of Preferred Stock into shares of
Common Stock.
(5) Includes the right to purchase up to 75,000 shares of the
Company's Common Stock at any date prior to November 25,
1999.
<PAGE> 13
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except for the issuance of the Company's shares of Common and
Preferred Stock in the Acquisition of POTN, since 1997, no
director or executive officer of the Company, any nominee to
election as a director, or any person known to the Company to own
of record or beneficially more than 5% of the Company's Common
Stock or any member of the immediate family of any of the
foregoing persons had, or will have, any direct or material
interest in any transaction or series of similar transactions to
which the Company or any of its subsidiaries, was or is to be a
party, in which the amount involved exceeds $60,000.
Pursuant to the provisions of the Agreement and Plan of
Merger, Net Sub was merged with and into POTN, whereby each
outstanding share of POTN common stock was converted into 16,500
shares of the Company's common stock and 1,000 shares of the
Company's preferred stock, each one of which is convertible into
7.207 shares of the Company's Common Stock, and each outstanding
share of Net Sub common stock was converted into 1 share of POTN
Common Stock. POTN survived the merger and become a wholly-owned
subsidiary of the Company, and Net Sub "disappeared" with and into
POTN and no longer exist.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
Exhibit Description
2.1(a)* Form of Agreement and Plan of Merger by and among
Net Lnnx, Inc., Net Sub, Inc. and
PrintOnTheNet.Com, Inc. (See Exhibit 10.1 to Form
8-K filed with the Commission on March 26, 1999).
2.1(b)* Form of Plan of Merger between PrintOnTheNet.Com,
Inc. and Net Sub, Inc. (See Exhibit 10.2 to Form
8-K filed with the Commission on March 26, 1999).
3.1(a)* Articles of Incorporation (See Exhibit (3)(A) to
Form 10-K previously filed with the Commission
for fiscal year ended December 31, 1983).
3.1(b) Amendment No. 1 to Articles of Incorporation.
3.1(c) Amendment No. 2 to Articles of Incorporation.
3.1(d)* Amendment No. 3 to Articles of Incorporation (See
Exhibit (3)(i)(2) to Form 10-KSB filed with the
Commission on April 3, 1998).
3.1(e)* Amendment No. 4 to Articles of Incorporation (See
Exhibit (3)(i)(3) to Form 10-KSB filed with the
Commission on April 3, 1998).
3.2(a)* Bylaws (See Exhibit (3)(B) to Form 10-K
previously filed with the Commission for fiscal
year ended December 31, 1983)
3.2(b)* Amendment No. 1 to Bylaws (See Exhibit (3)(ii)(2)
to Form 10-KSB filed with the Commission on April
3, 1998).
3.2(c)* Amendment No. 2 to Bylaws (See Exhibit (3)(ii)(3)
to Form 10-KSB filed with the Commission on April
3, 1998).
9.1* Voting Trust Agreement between Robert C. Hackney
and R.H. Financial Services, Inc. dated December
31, 1996 (See Exhibit (9) to Form 10-KSB filed
with the Commission on April 15, 1997).
10.1* Stock Purchase Agreement between the Company and
R.H. Financial Services, Inc. dated December 31,
1996 (See Exhibit 1 to Form 8-K filed with the
Commission on January 10, 1997).
<PAGE> 14
10.2* Sale and Purchase Agreement Between the Company
and The Banana Corporation, Inc. dated January
31, 1997 (See Exhibit 1 to Form 8-K filed with
the Commission on February 14, 1997).
10.3* Purchase Agreement Between the Company and Palm
Capital, Inc. dated January 17, 1997 (See Exhibit
2 to Form 8-K filed with the Commission on
February 14, 1997).
10.4* Addendum To Stock Purchase Agreement between the
Company and R.H. Financial Services, Inc. dated
March 10, 1997 (See Exhibit 1 to Form 8-K/A filed
with the Commission on March 24, 1997).
10.5* Cancellation of Instrument (See Exhibit 2 to Form
8-K/A filed with the Commission on March 24,
1997).
10.6* 1997 Restricted Stock Plan (See Exhibit
(10)(ii)(1)to Form 10-KSB filed with the
Commission on April 3, 1998).
10.7* William R. Colucci Stock Option Agreement dated
November 25, 1997 (See Exhibit (10)(ii)(2) to
Form 10-KSB filed with the Commission on April 4,
1998).
10.8* Frederick A. Hall Stock Option Agreement dated
January 31, 1997 (See Exhibit (10)(iii)(3) Form
10-KSB filed with the Commission on April 4,
1998).
10.9* Ronald W. Hayes, Jr. Stock Option Agreement dated
January 31, 1997 (See Exhibit (10)(iv)(4) to Form
10-KSB filed with the Commission on April 4,
1998).
10.10* Ronald P. Perella Stock Option Agreement dated
January 31, 1997 (See Exhibit (10)(v)(5) to Form
10-KSB filed with the Commission on April 4,
1998).
10.11* Exclusive Production and Sales Agreement by and
among PrintOnTheNet.Com, Inc., National
Lithographers and Publishers, Inc. and
PrintAmerica Management Company, Inc. dated
February 17, 1999 (See Exhibit 10.3 to Form 8-K
filed with the Commission on March 26, 1999).
11.1 Statement re: Computation of Per Share Earnings.
16.1* Letter on change in Certifying Accountant (See
Exhibit 16.1 to Form 8-K filed with the
Commission on March 26, 1999).
21.1 List of Subsidiaries.
23.1 Consent of Sweeney Gates & Company.
27.1 Financial Data Schedule.
* The Exhibits thus designated are incorporated herein by
reference as exhibits hereto. Following the description of such
exhibits is a reference to the copy of the exhibit heretofore
filed with the Commission, to which there have been no amendments
or changes.
(b) Reports on Form 8-K.
Form 8-K filed on March 26, 1999 reported the following items:
(1) the Change in Control of the Registrant; (2) the
Acquisition of POTN; and (3) the change of the Company's
Certifying Accountant.
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Exchange Act, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
NET LNNX, INC. (Registrant)
By:/s/ Benjamin Rogatinsky
Benjamin Rogatinsky,
Chairman and Chief
Executive Officer
Date: April 14, 1999
Pursuant to the requirements of the Exchange Act, this
report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ William R. Colucci Director April 14, 1999
William R. Colucci
/s/ Benjamin Rogatinsky Chief Executive Officer April 14, 1999
Benjamin Rogatinsky Chairman of the Board of
Directors
/s/ Samuel Rogatinsky Chief Operating Officer, April 14, 1999
Samuel Rogatinsky President, Director
/s/ Paul Lambert Chief Financial Officer, April 14, 1999
Paul Lambert Director
EX - 3.1(b)
Amendment No. 1 to Articles of Incorporation
Microfilm Number Filed with the Department of State on
May 15, 1991
Entity Number 64409
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB: 15-1915 (Rev. 89)
In compliance with the requirements of 15 Pa.C.S. Sec. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to
amend its Articles, hereby states that:
1. The name of the corporation is: Chester County Security Fund, Inc.
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) commercial registered office provider and the county
of venue is (the Department is hereby authorized to correct the
following address to conform to the records of the Department):
(a) 26 East Market Street West Chester, PA 19382 Chester County
Number and Street City State Zip County
(b)
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3. The statute by or under which it was incorporated is:
Pennsylvania Business Corporation Law of May 5, 1933
P.I. 364, as amended.
4. The original date of its incorporation is: April 15, 1968
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
<PAGE>
The amendment shall be effective on:
6. (Check one of the following):
The amendment was adopted by the shareholders pursuant to 15 Pa.C.S.
Sec. 1914(a) and (b).
X The amendment was adopted by the board of directors pursuant to
15 Pa.C.S. Sec. 1914 (c).
7. (Check, and if appropriate complete, one of the following):
X The amendment adopted by the corporation, set forth in full, is as
follows:
RESOLVED, that the Articles of Incorporation be amended, in part, to read
as follows:
1. "The location and post office address of its initial registered
office in this Commonwealth is:
310 Building 2, 100 Matsonford Road, Radnor, Delaware County,
PA 19087" and
2. "The aggregate number of shares which the Corporation shall have
authority to issue is:
25,000,000 shares of $1.00 Par Value Common Stock"
8. (Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original Articles
and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this 13th day
of May, 1991.
Chester County Security Fund, Inc.
(Name of Corporation)
By:
(Signature)
TITLE: Vice President
<PAGE>
EX - 3.1(c)
Amendment No. 2 to Articles of Incorporation
Microfilm Number Filed with the Department of State on
March 22, 1993
Entity Number 64409
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB: 15-1915 (Rev. 89)
In compliance with the requirements of 15 Pa.C.S. Sec. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to
amend its Articles, hereby states that:
1. The name of the corporation is: Chester County Security Fund, Inc.
2. The (a) address of this corporation's current registered office in
this Commonwealth or (b) commercial registered office provider and
the county of venue is (the Department is hereby authorized to
correct the following address to conform to the records of the
Department):
(a) 310 Building 2, 100 Matsonford Rd., Radnor, PA 19087 Delaware County
Number and Street City State Zip County
(b)
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was incorporated is:
Pennsylvania Business Corporation Law of May 5, 1933
P.I. 364, as amended.
4. The original date of its incorporation is: April 15, 1968
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of Amendment
in the Department of State.
<PAGE>
The amendment shall be effective on:
6. (Check one of the following):
The amendment was adopted by the shareholders pursuant to 15 Pa.C.S.
Sec. 1914(a) and (b).
X The amendment was adopted by the board of directors pursuant to
15 Pa.C.S. Sec. 1914 (c).
7. (Check, and if appropriate complete, one of the following):
X The amendment adopted by the corporation, set forth in full, is as
follows:
RESOLVED, that the Articles of Incorporation be amended, in part, to read
as follows:
1. "The aggregate number of shares which the Corporation shall have
authority to issue is:
20,000,000 shares of no par value Common Stock"
8. (Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original Articles
and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
17th day of March, 1993.
Chester County Security Fund, Inc.
(Name of Corporation)
By:
(Signature)
TITLE:
EX - 11.1
Computation of Net Loss Per Common Share
NET LNNX INC.
STATEMENT RE: COMPUTATION OF NET LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
<S> <C> <C>
Net Loss $ 215,415 $ 698,704
Loss applicable to common stockholders $ 215,415 $ 698,704
Total weighted average number of
common shares and equivalents 2,410,826 2,108,945
Net loss per common share $ (0.09) $ (0.55)
</TABLE>
EXHIBIT 21.1
List of Subsidiaries
LIST OF SUBSIDIARIES
1. Net Lnnx, Inc.
1.1 PrintOnTheNet.com, Inc.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
We consent to the inclusion of our report dated March 6,
1999 with respect to the audited financial statements of Net
Lnnx, Inc. for the year ended December 31, 1998 in the Annual
Report on Form 10-KSB for Net Lnnx, Inc. for the year ended
December 31, 1998.
/s/Sweeney, Gates & Co.
Sweeney, Gates & Co.
Member American Institute of Certified Public Accountants SEC Practice Section
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-KSB FOR THE YEAR ENDING
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,446,000
<SECURITIES> 0
<RECEIVABLES> 6,550,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,996,000
<PP&E> 12,441,000
<DEPRECIATION> 7,469,000
<TOTAL-ASSETS> 12,968,000
<CURRENT-LIABILITIES> 8,100,000
<BONDS> 0
0
0
<COMMON> 1,000,000
<OTHER-SE> 3,868,000
<TOTAL-LIABILITY-AND-EQUITY> 12,968,000
<SALES> 0
<TOTAL-REVENUES> 804,000
<CGS> 0
<TOTAL-COSTS> 216,219,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (215,415,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (215,415,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (215,415,000)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
