<PAGE>2
FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] 15,ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: 1/31/00
OR
[ ]15,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 - 0-25792
Bionet Technologies, Inc.
(Formerly Pratt, Wylce & Lords, Ltd.
Exact name of Registrant as specified in its charter)
NEVADA 541990 84-1247085
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdictions Classification Code Number) Identification number)
of incorporation
or organization
1070 East Indian Town Road, Suite 208-210
Jupiter, Florida 33477
(Address of principal executive offices) (Zip Code)
Telephone: (561) 745-1949
(Registrant's telephone number, including area code)
Securities registered pursuant to
Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Act: Common Stock, $.001 par value
Check whether the Company (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days. Yes __x__ No _____
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of Company's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [x]
The Company's revenues for its most recent fiscal year were $0.00. As
of January 31, 2000, the market value of the Company's voting $.00l par
value common stock held by non-affiliates of the Company was $1,827,957.
The number of shares outstanding of Company's class of common
stock, as of January 31, 2000 was 11,711,606 shares of its $.001 par
value common stock.
Check whether the Issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes ____ No _____
No documents are incorporated into the text by reference.
Transitional Small Business Disclosure Format (check one)
Yes No x
-------- --------
<PAGE>3
PART I
ITEM 1. BUSINESS - General
Organizational History. Bionet was incorporated in the State of
Florida on May 22, 1986 using the name Global Wrestling Alliance, Inc.
Bionet was authorized to issue 75,000,000 common shares at $.0001 par
value. Bionet had limited operations from 1988 through 1990 and
ceased operations at that time. Bionet experienced a change in
control and pursuant to Articles of Amendment on May 31, 1993, the name
of the corporation was changed to Pratt, Wylce & Lords, Ltd. and a One
for One Hundred reverse stock split was effectuated. Bionet was
reincorporated in the State of Nevada on August 18, 1993. Pursuant to
the Articles of Merger filed to change the our domicile, Bionet is
authorized to issue 75,000,000 common shares at $.001 par value and as
of December 31, 1998 there were 3,204,270 common shares outstanding. In
1998, the name of Bionet was changed to Bionet Technologies, Inc. to
more accurately reflect the nature of its proposed business.
The previous business objective of Bionet was to provide consulting
services which assist the client-company in becoming a publicly traded
company. Since its cessation of financial consulting activities,
Bionet has carried out administrative functions and has begun
liquidating its investment portfolio. Bionet is currently seeking new
business activities unrelated to the provision of financial services.
Due to the ratio of the securities received as partial compensation
from its client companies to assets, Bionet registered as a Business
Development Company. Upon termination of its consulting activities
and cessation of receipt of any securities for services and due to its
current and proposed activities, Bionet ceased to be a Business
Development Company on November 6, 1998 upon filing Form N-54C under
the Act.
Bionet provides the management control and oversight, maintains
operating systems and provides the capital necessary to operate each
division and subsidiary. Bionet also coordinates the
interrelationship between the various divisions and subsidiaries.
Bionet provides management oversight, establishes controls and
maintains operating systems.
During the years ended January 31, 1997 and 1998, Bionet made working
capital advances to Immune Technologies, Inc. (Immune), a former client
company, amounting to $79,800. The business of Immune consists of
research and development and marketing of products based on new
technology for the prevention and related therapy of infectious
diseases in animals.
In June 1998 Bionet entered into a purchase and sale agreement with
Immune whereby Bionet would purchase assets of Immune consisting
primarily of accounts receivable, furniture, equipment and intangible
assets. The purchase price paid consisted of 2,000,000 shares of
Bionet's common stock and the cash advances made. The 2,000,000
common shares were distributed to Bionet shareholders.
The business of Immune consists of research and development and
marketing of products based on new technology for the prevention and
related therapy of infectious diseases in animals. To date, no
revenues have been received from Immune's operations.
During August 1998, Bionet agreed to issue 1,900,000 shares of its
restricted common stock to the shareholders of Greengold Corporation
(Greengold) in exchange for 100% of the outstanding common stock of
Greengold. Greengold, to date, has been engaged in research and
development of technology that it hopes to utilize in the recycling and
disposal of animal waste with the first application being hog waste.
Additional applications of its technology are in the treatment of
industrial and municipal water and waste treatment facilities. The
assets and liabilities of Greengold consist of patent costs of $7,500
and accounts payable of $28,649 at the acquisition date. The fair
value of the stock issued in the transaction amounted to $475,000. The
excess of the fair value of the purchase price over the assets acquired
has been treated as the purchase of research and development costs by
Bionet and has been charged to expense during the current quarter.
GreenGold International is a subsidiary of Bionet. Greengold, to
date, has been engaged in research and development of technology that
will be utilized in the recycling and disposal of animal waste with the
first application being hog waste. Additional applications of its
<PAGE>4
technology are in the treatment of industrial and municipal water and
waste treatment facilities. To date, no revenues have been received
from GreenGold's operations.
Greengold has not yet begun any revenue generating operations. Bionet
is currently evaluating and attempting to resolve a dispute with an
officer of Greengold regarding its proprietary rights and may pursue
actions that include but are not limited to litigation to resolve its
rights regarding Greengold.
Immune Technologies and GreenGold each have their own executive
structure but the management of all divisions and subsidiaries is
responsible to Mr. Schafler, the president of Bionet.
Competition. Any proposed business of Bionet could be very
competitive. Bionet will encounter competition in its chosen business
who are already offering, or will in the future offer, the same or
similar products services as those which may be offered by Bionet.
Entities with greater established financial resources and contacts than
Bionet may be competitors in Bionet's chosen business industries.
They may develop marketing strategies that are competitive with or
superior to Bionet's products and/or services or which can be marketed
more effectively.
Federal and/or State Regulation. Bionet is not subject to any federal
or state regulations regarding its services or proposed activities.
However, Bionet files required reports under Section 12g of the
Securities Act of 1934.
Employees. Bionet has currently has only one full time employee and
no part time employees. Mr. Schafler is the key employee and handles
almost all of the administrative functions. Bionet shall employ
additional individuals as required.
Seasonal Nature of Business Activities. Bionet's business activities
are not seasonal. The business activities of Bionet's subsidiary may
be seasonal in the future.
Seasonal Nature of Business Activities. The Company's business
activities are not seasonal. The business activities of the Company's
subsidiary may be seasonal in the future.
ITEM 2. PROPERTIES.
The Company leases office space at 1070 East Indian Town Road, Suite
208-210, Jupiter, Florida 33477. The Company has entered into an
operating lease for its office and research facility that calls for
annual rental payments aggregating $29,200. The lease term extends
through the year 2006. Minimum annual rental payments under the lease
are as follows for the years ended January 31, 2001 through 2006: 2001
- $29,200; 2002 - $30,200: 2003 - $19,000; 2004 - $11,000; 2005 -
$11,000: 2006 - $1,000.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not involved in any legal proceedings at this date.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the fiscal year ended January 31, 2000, no
matters were submitted to a vote of the Company's security holders,
through the solicitation of proxies.
<PAGE>5
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information. The Company's Common Stock is traded on the OTC
Bulletin Board under the symbol "BNTK". The following table sets
forth the bid quotations for the Company's Common Stock for each
quarter of the last two fiscal years, as reported by the OTC Bulletin
Board. The Company's market makers are Herzog Securities, Olsen
Payne Company, Sharpe Capital, Inc., Hill Thompson Securities, Knight
Securities, M.H. Myerson, Wien Securities Corp., FLTT, and North
American Institutional Brokers. The quotations represent inter-dealer
prices without retail markup, markdown or commission, and may not
necessarily represent actual transactions.
Quarter Ended Bid Price
High Low
1/31/00 .360 .200
10/31/99 .312 .312
7/31/99 .625 .625
4/30/99 .562 .562
1/31/99 1.125 .937
10/31/98 .25 .25
7/31/98 .437 .375
4/30/98 .375 .375
The Company's common stock commenced trading on the over-the-counter
market in October 1996. Prior to that time, there was no market for the
securities of the Company.
Holders. The approximate number of holders of record of the
Company's $.001 par value Common Stock, as of January 31, 2000, was
916.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Trends and Uncertainties. Due to its change in business, Bionet
no longer operate on revenues from its consulting fee income.
During June, 1998, Bionet issued 2,000,000 restricted Common
Shares to Immune Technologies, Inc. (Immune) in exchange for certain
assets of Immune. Immune had been a client of Bionet and the
Company had advanced an aggregate of $79,800 to Immune during 1997 and
1998 to assist in meeting that company's working capital requirements.
Immune, to date, had been engaged in research and development of
technology that it hopes to utilize in the diagnosis and treatment of
animal diseases. The assets acquired from Immune consist of cash,
inventory and fixed assets aggregating $100,972 at the purchase date.
During August 1998, Bionet issued 1,900,000 of its restricted
common stock to the certain shareholders of Greengold Corporation
(Greengold) in exchange for 80% of the outstanding common stock of
Greengold. Greengold, to date, has been engaged in research and
development of technology that it hopes to utilize in the recycling and
disposal of animal waste with the first application being hog waste.
Additionally applications of its technology are in the treatment of
industrial and municipal water and waste treatment facilities. The
assets and liabilities of Greengold consist of patent costs of $7,500
and accounts payable of $28,649 at the acquisition date.
The Company will have to seek equity or debt financing to continue
operations regarding its new acquisitions.
Capital Resources and Source of Liquidity. The Company currently
has no material commitments for capital expenditures. The Company
can meet its short term cash flow needs from the proceeds from the
sale of common stock ($1,355,336 for the year ended January 31,
2000).
In the long term, the Company shall utilize the continued sale of its
securities to meet its cash flow needs until the Company can implement
its new business plan.
Going Concern. The Company is not currently delinquent on any of
its obligations even though the Company has not received any revenues
from its division or subsidiary.
<PAGE>6
For the year ended January 31, 2000, the Company purchased fixed
assets of $8,095. This resulted in net cash used in investing
activities of $8,095 for the year ended January 31, 2000.
For the year ended January 31, 1999, the Company received proceeds
from the sale of investments of $131,694 and purchased fixed assets of
$32,049. This resulted in net cash provided by investing activities
of $99,645 for the year ended January 31, 1999.
For the year ended January 31, 2000, the Company received proceeds
from the sale of common stock of $1,355,336. This resulted in
net cash provided by financing activities of $1,355,336 for year ended
January 31, 2000.
For the year ended January 31, 1999, the Company received from the
sale of common stock of $197,683, proceeds from stock subscriptions of
$150,329 and advances from stockholders of $108,119. This resulted
in net cash provided by financing activities of $456,131 for year
ended January 31, 1999.
Results of Operations. For the year ended January 31, 2000, the
Company did not receive any revenue due to lack of operations of its
division, Immune and subsidiary, Greengold. The Company had general
and administrative expenses of $1,727,948 for the year ended January
31, 2000 which consisted primarily of salaries and wages of $901,734,
professional fees of $61,302, travel of $83,249, advertising of
$12,458, telephone of $10,959, maintenance of $17,064, insurance of
$69,283, consulting of $383,240, moving expense of $882, rent of
$28,873 and other expenses of $95,391. The Company also had
depreciation and amortization of $19,157 and research and development
costs of $44,356 for the year ended January 31, 2000.
Salaries increased substantially due to the issuance of stock as
partial compensation but actual cash compensation was not materially
different.
Travel increase substantially due to the efforts of the Company to
raise additional capital to fund ongoing operations.
Consulting expenses increased due to the issuance of stock for outside
services involved in the Company's financing efforts.
For the year ended January 31, 1999, the Company did not receive any
revenue due to the cessation of previous operations and the subsequent
acquisitions of Immune and Greengold. The Company had general and
administrative expenses of $833,850 for the year ended January 31,
1999 which consisted primarily of salaries and wages of $226,163,
legal of $30,037, accounting of $11,975, travel of $22,270,
advertising of $890, telephone of $6,208, printing of $1,341,
insurance of $45,931, consulting of $129,706, moving expense of
$19,233, rent of $14,558 and other expenses (including consolidation
adjustments) of $325,538. The Company also had a charge off of
acquired research and development costs of $1,475,000 for the year
ended January 31, 1999.
Plan of Operation.
The Company intends to receive revenues through its division. Bionet
has already begun to generate revenues through advertising and
participation in retail sales on its website. Bionet expects to begin
generating revenues from its divisions IMOD product line.
Bionet expects neither expenses nor income from any Greengold
operations until the conflict regarding the Greengold proprietary
technology is resolved.
The Company currently intends to acquire businesses and assets as may
provide gain for the shareholders. The Company has acquired certain
assets of Immune Technologies, Inc. and intends to continue to pursue
Immune's business plan. The Company may also choose to form
corporations for the purpose of pursuing such business ventures as are
deemed potentially profitable by the Board of Directors.
<PAGE>7
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
The response to this item is being submitted as a separate section of
this report beginning on page 10.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have not been any changes in or disagreements with accountants on
accounting and financial disclosure.
<PAGE>8
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Identification of Directors and Executive Officers of the Company.
The names, addresses and positions of the present directors and
officers of the Company are set forth below:
<TABLE>
<CAPTION>
Name and Address Age Position
<S> <C> <C>
L. Alan Schafler, age 63 President/Secretary June 1997
Treasurer/Director to present
Erich Schmid, age 52 Director November, 1997
to present
James Yanai, age 59 Director November, 1997
to present
Resumes.
L. Alan Schafler. Mr. Schafler has been President, Treasurer and a
Director of the Company since June 1997. Mr. Schafler has been the
president of L. Alan Schafler & Associates for the last five years.
From 1974 to present, Mr. Schafler has been a management consultant
providing strategic planning and problem solving resource in a wide
range of corporate disciplines. Mr. Schafler's specialty is the review
and appropriate realignment of integrated corporate functions to
maximize the growth and profitability of the business enterprise.
Mr. Schafler obtained a B.B.A. degree in accounting from Hofstra
University in 1957 and an MBA in Finance/Management from New York
University Graduate School of Business in 1959. Mr. Schafler has
attended continuing financial/management post MBA studies and seminars
at New York University Graduate School of Business. Mr. Schafler has
been an instructor and advisor for Management Decision Laboratory at
the NYU Graduate School of Business and attended and instructed
programming and systems courses at the Systems Research Institute.
James Yanai. Mr. Yanai is currently a Director of the Company. He
has worked as a buyer for Delta Floral Distributors for the last five
years.
Erich K. Schmid. From 1994 to present, Mr. Schmid has been President
of Business Intermediary Services, Ltd., a business brokerage firm he
co-founded specializing in middle-market transactions. Mr. Schmid has
also been a Director of Redneck Foods, Inc., a restaurant company from
January 31, 1997. From 1985 to 1994, Mr. Schmid was a Vice President
with New South Business Ventures, Inc. and its predecessor T.C.
Wilkinson, Jr. & Associates, Inc., general business brokerage firms.
He is a member of the International Business Brokers Association, Inc.
and is a Certified Business Intermediary. Mr. Schmid earned a
Bachelor of Science in industrial management and a Master of Science in
management from the University of Akron in 1971 and 1996, respectively.
All directors will serve on the Board of Directors until the next
annual meeting of the shareholders of Company, or until their
successors have been duly elected and qualified. Officers serve at the
discretion of the Board of Directors.
Directorships. No director or nominee for director holds a
directorship in any other company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934 or
subject to the requirements of Section 15(d) of such Act or any company
registered as an investment company under the Investment Company Act of
1940.
<PAGE>9
ITEM 10. EXECUTIVE COMPENSATION
</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted(1) LTIP Other
and Compen- Stock Options/ Pay- Compen-
Principal Salary Bonus sation Awards SARs Outs sation
Position Year ($) ($) ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alan Schafler 2000 $190,500 (2) $47,500
President, 1999 $119,623 (2) $47,500
Treasurer
Chief Financial
Officer
</TABLE>
(1) Mr. Schafler received stock for services valued at $47,500 in
1999 and $47,500 in 2000.
(2)Mr. Schafler had an $80,000 loan against stock that was forgiven in
2000. Mr. Schafler received 5,000 preferred shares and preferred
stock conversion rights vesting during 1999 valued at $273,438 and
valued at $125,000 vesting during 1998.
No other officer has received compensation in the last year.
The Company has entered into an employment agreement with Mr.
Schafler, its president dated December 28, 1998, which provides for
annual compensation and benefits aggregating $168,000 through 2003.
In connection with the employment agreement, Mr Schafler was granted
options to purchase 750,000 shares of the Company's common stock at an
exercise price of $.19 per share, the fair value of the common stock
(based on the closing bid price for the Company's common stock) at the
date specified for the option grant (March 26, 1998) as previously
approved by the Company's Board of Directors. The option is
exercisable for a five-year period.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following tables list the Company's stockholders who, to the best
of the Company's knowledge, own of record or, to the Company's
knowledge, beneficially, more than 5% of the Company's outstanding
Common Stock; the total number of shares of the Company's Common Stock
beneficially owned by each Director; and the total number of shares of
the Company's Common Stock beneficially owned by the Directors and
elected officers of the Company, as a group.
Shareholdings
<TABLE>
<CAPTION>
Percentage of
Number & Class Outstanding
Name and Address of Shares Common Shares
<S> <C> <C>
L. Alan Schafler
2035 Staysail Lane
Jupiter, Florida 33477 500,000 4.59%
Erich K. Schmid
40 Spring Hollow Lane
Fairview, NC 28730 0 0%
James Yanai
17600 Van Ness
Torrence, CA 90504 0 0%
Timothy Miles
#9 Niblick
Hilton Head Island, SC 29938 1,918,604 17.61%
Paul Skillicorn
Rt. 1, Box 440
Snow Hill, NC 28580 760,608 6.98%
<PAGE>10
William Spira
14221 Park Avenue South
Burnsville, MN 55337 760,608 6.98%
All Directors & Officers
as a group (3 persons) 500,000 4.59%
</TABLE>
The above assumes exercise of outstanding options.
In December 1998, Bionet issued Erich Schmidt and James Yanai,
directors, each an option to purchase 10,000 common shares at $.25 per
common shares. The option period is for three years from December,
1998.
Options. Bionet has issued Dexter Thompson, a non-affiliate an option
to purchase 9,000 common shares at $.437 per common share. The option
vests in three equal installments annually beginning April 5, 2000.
Bionet has issued Anthony Bertrami, a non-affiliate, an option to
purchase 20,000 common shares at $.25 per common shares. The option
period is for three years from December, 1998.
Bionet has issued Clint Clark, a non-affiliate an option to purchase
10,000 common shares at $.25 per common shares. The option period is
for two years from May 30, 1997.
These option were issued pursuant to Section 4(2) of the Act. These
option holders are sophisticated investors who have an ongoing
relationship with Bionet.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the years ended January 31, 1999 and 1998, the Company's former
president, Timothy Miles, who is currently a major shareholder of the
Company made working capital advances to the Company of $108,119 and
$86,819, respectively. Mr. Miles has agreed to convert the balance
due to him at January 31, 1999 into shares of the Company's restricted
common at a conversion rate of $.19 per share. The stock price
represents the trading bid price of the Company's common stock as of
the date the conversion was approved by the Company's Board of
Directors. The shares were issued to the former officer during March
2000.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements and schedules are filed as part of
this report:
Report of Independent Public Auditors...............................10
Consolidated Balance Sheet..........................................11
Consolidated Statement of Operations................................12
Consolidated Statement of Stockholder's Equity......................13
Consolidated Statement of Cash Flows................................14
Notes to Financial Statements.......................................16
Schedules Omitted: All schedules other than those shown have been
omitted because they are not applicable, not required, or the required
information is shown in the financial statements or notes thereto.
<PAGE>11
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
BioNet Technologies, Inc.
We have audited the consolidated balance sheet of BioNet Technologies,
Inc. as of January 31, 2000, and the related consolidated statements
of operations, changes in stockholders' equity, and cash flows for
each of the two years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above, present fairly, in all material respects, the financial
position BioNet Technologies, Inc. as of January 31, 2000, and the
results of its operations, changes in stockholders' equity and cash
flows for each of the two years then ended, in conformity with
generally accepted accounting principles.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Denver, Colorado
May 15, 2000
<PAGE>12
BioNet Technologies, Inc.
Consolidated Balance Sheet
January 31, 2000
ASSETS
Current assets:
Cash and cash equivalents $ 52,461
Trading securities 132,000
Prepaid expenses 6,713
---------
Total current assets 191,174
Property and equipment, at cost, net of
accumulated depreciation of $32,580 96,779
Available for sale securities 72,750
Other assets 11,714
--------
$ 372,417
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,959
Accrued expenses 40,233
--------
Total current liabilities 66,192
Stockholders' equity:
Preferred stock, $.001 par value,
50,000 shares authorized,
5,000 shares issued and outstanding 5
Common stock, no par value,
75,000,000 shares authorized,
11,711,606 shares issued and outstanding 11,712
Additional paid in capital 3,789,966
Subscriptions to common stock 788,456
Accumulated deficit (4,283,914)
----------
306,225
----------
$ 372,417
See accompanying notes to consolidated financial statements.
<PAGE>13
BioNet Technologies, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended
January 31,
2000 1999
<S> <C> <C>
Costs and expenses
General and administrative $ 1,727,948 $ 832,901
Charge off of acquired research and development cost - 1,475,949
--------- ---------
(Loss) from operations (1,727,948) (2,308,850)
Other income and (expense):
Gain (loss) realized from sale of investments (14,059) 34,194
Unrealized gain (loss) on investments 33,000 69,756
Interest income 2,834 -
Interest espense (1,145) (1,087)
--------- ---------
20,630 102,863
--------- ---------
(Loss) before income taxes (1,707,318) (2,205,987)
Provision for income taxes - -
--------- ---------
Net income (loss) $(1,707,318) $(2,205,987)
Basic earnings (loss) per share:
Net income (loss) $ (0.17) $ (0.39)
Weighted average shares outstanding 9,852,722 5,715,465
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>14
BioNet Technologies, Inc.
Consolidated Statement of Stockholders' Equity
Years Ended January 31, 2000 and 1999
<TABLE>
<CAPTION>
Additional Paid
Preferred Stock Common Stock Paid In Stock Unearned Accumulated
Shares Amount Shares Amount Capital Subscriptions Services Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 31, 1998 - $ - 3,255,270 $ 3,255 $ 555,041 $ - $ - $ (370,609) $ 187,687
Sale of common stock
for cash - - 760,294 761 196,923 - - - 197,683
Common stock issued
for services - - 1,125,000 1,125 212,625 - (95,000) - 118,750
Preferred stock issued
for services 5,000 5 - - 4,995 - - - 5,000
Fair value of preferred
stock conversion rights
vested during year - - - - 125,000 - - - 125,000
Stock subscriptions
received in cash - - - - - 150,329 - - 150,329
Stock subscriptions received
for debt conversion - - - - - 194,938 - - 194,938
Common shares issued
for merger - - 1,900,000 1,900 473,100 - - - 475,000
Common shares issued
for asset purchase - - 2,000,000 2,000 998,000 - - - 1,000,000
Net loss for the year - - - - - - - (2,205,987)(2,205,987)
------- ------ ---------- ------ --------- -------- -------- ----------- ----------
Balance, January 31, 1999 5,000 5 9,040,564 9,041 2,565,683 345,267 (95,000) (2,576,596) 248,400
Stock subscriptions
received in cash - - - - - 1,355,336 - - 1,355,336
Fair value of preferred
stock conversion rights
vested during year - - - - 273,438 - - - 273,438
Compensation value of
options granted - - - - 21,800 - - - 21,800
Common stock issued
for services - - 57,052 57 19,512 - - - 19,569
Issuance of subscribed
shares - - 2,613,990 2,614 909,533 (912,147) - - -
Amortization of
unearned services - - - - - - 95.000 - 95,000
Net loss for the year - - - - - - - (1,707,318)(1,707,318)
------- ------ ---------- ------ --------- -------- -------- ----------- ---------
Balance, January 31,
2000 5,000 $ 5 11,711,606 $ 11,712 $3,789,966 $ 788,456 $ - $(4,283,914) $ 306,225
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>15
BioNet Technologies, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION
Year Ended January 31,
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,707,318) $ (2,205,987)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 19,531
Amortization of unearned services 95,000
Write off of purchased research costs - 1,453,828
Common stock issued for services 19,569 123,750
Compensation value of options and conversion rights 295,238 125,000
Changes in assets and liabilities:
(Increase) decrease in:
Prepaid expenses 5,177 (11,890)
Trading securities 29,500 44,988
Other assets (2,611) -
(Decrease) increase in:
Accounts payable (65,659) 13,173
Accrued expenses (949) 39,433
-------- ---------
Total adjustments 394,796 1,798,119
--------- ---------
Net cash provided by (used in)
operating activities (1,312,522) (407,868)
Cash flows from investing activities:
Purchase of fixed assets (8,095) (32,049)
-------- ---------
Net cash provided by (used in) investing activities (8,095) (32,049)
Cash flows from financing activities:
Proceeds from sale of common stock 1,355,336 348,012
Advances from stockholders - 108,119
-------- ---------
Net cash provided by (used in) financing activities 1,355,336 456,131
Increase (decrease) in cash 34,719 16,214
Cash and cash equivalents,
beginning of period 17,742 1,528
-------- ---------
Cash and cash equivalents,
end of period $ 52,461 $ 17,472
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>16
BioNet Technologies, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended January 31,
2000 1999
<S> <S> <S>
Supplemental cash flow information:
Cash paid for interest $ 1,145 $ 1,087
Cash paid for income taxes - -
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>17
BioNet Technologies, Inc.
Notes to Consolidated Financial Statements
Note 1. Summary of significant accounting policies.
Organization
The Company was incorporated in the State of Florida on May 22, 1986
as Global Wrestling Alliance, Inc. The Company had limited operations
from 1988 through 1990 and ceased operations at that time. The
Company experienced a change in control and began operations of its
present business as of May 31, 1993. The Company was reincorporated
in the State of Nevada on August 18, 1993 and during the year ended
January 31, 1999 changed its name to BioNet Technologies, Inc.
The Company was in the business of providing financial consulting
services for corporate clients. As compensation for these services,
the Company received both cash and common stock of the companies to
which it provided its services. The Company had elected to be treated
as a Business Development Company pursuant to Section 54 of the
Investment Company Act of 1940.
During January 1997, the Company determined that it was unable to
complete certain of its consulting projects and would be unable to
accept new consulting clients in the future. The Company negotiated
contract termination agreements with all of its active clients that
provided for the immediate discontinuance of consulting services.
Since its cessation of financial consulting activities during January
1997 the Company has carried out administrative functions and has
begun liquidating its investment portfolio. The Company is currently
seeking new business activities unrelated to the provision of
financial services and during the year ended January 31, 1999
completed a merger with GreenGold Corporation, Inc. (Greengold) and an
asset acquisition agreement with Immune Technologies, Inc. (Immune)
Immune to date has been engaged in research and development of
technology it hopes to utilize in the diagnosis and treatment of
animal diseases.
Greengold to date has been engaged in research and development of
technology it hopes to utilize in the recycling and disposal of hog
farm waste.
During the year ended January 31, 2000, the Company established a
newly formed wholly owned subsidiary named Animal911.COM. (Animal911).
This company plans to offer online assistance to pet owners and
through the operation of an internet site known as animalstores.com.,
plans to market pet related products.
Principles of Consolidation
The consolidated financial statements include the accounts of BioNet
Technologies, Inc. and its wholly-owned subsidiaries, Greengold and
Animal911. All significant inter-company balances and transactions
have been eliminated. The Company operates the business acquired from
Immune Technologies, Inc. (see Note 2.) as a division.
Securities Valuation
Investments in unrestricted securities that are traded in the over-
the-counter market are generally valued at the closing bid price on
the last day of the year. These securities are considered to be
"trading securities" as it is management's intent to liquidate them in
the near term as market conditions warrant. Restricted securities and
securities for which no public market exist are valued at fair value
as determined by the Board of Directors. These securities are
initially valued at the price per share provided for in the client
company's private sale of its securities.
Periodic adjustments to the initial fair value are made when deemed
appropriate by the directors based upon intervening events or
circumstances that would have a material effect on the Company's
ability liquidate the securities. Such intervening events and
circumstances would include among others material changes in the
client's financial position and results of operations, doubts about
the client's ability to continue as a going concern, a petition in
bankruptcy, the discovery of a material legal or environmental claim,
more recent sales of non-trading securities or the abandonment of
plans to complete a registration of the securities for public sale.
These securities are considered to be "available for sale securities"
<PAGE>18
as the Company's ability to liquidate them in the near term is not
assured and is dependent upon the establishment of a public market for
the securities at an undetermined future date.
Inventory
Inventory is valued at the lower of cost or market. Inventories are
reviewed periodically and items considered to be slow-moving or
obsolete are reduced to estimated net realizable value through an
appropriate reserve.
Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents. The Company had no cash
equivalents during the periods presented.
Furniture and equipment
Furniture and equipment are stated at cost. Depreciation is provided
for by the straight-line method over estimated useful lives as
follows:
Equipment 5 years
Revenue
Revenue from the sale of investments is recorded on settlement dates
as determined by independent brokers and dealers in securities. The
use of trade dates for determination of such revenue would not have a
material effect on reported amounts.
Advertising costs:
Advertising costs are charged to operations when the advertising first
takes place. Advertising costs charged to operations were $12,458 for
the year ended January 31, 2000.
Income taxes
Deferred taxes are provided to reflect the income tax effects of
amounts included for financial statement purposes in different periods
than for tax purposes, principally unrealized appreciation of
investments and the valuation of securities received as revenue, the
constructive receipt of which for income tax purposes precedes the
establishment of fair value under generally accepted accounting
principles. Valuation of the securities for income tax purposes is
based on fair value at the date the shares are issued to the Company,
which is generally one to three months prior to the private sale of
stock by the client company.
Per share amounts
In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings Per Share." SFAS No. 128 supersedes and
simplifies the existing computational guidelines under Accounting
Principles Board ("APB") Opinion No. 15, "Earnings Per Share."
The statement is effective for financial statements issued for periods
ending after December 15, 1997. Among other changes, SFAS No. 128
eliminates the presentation of primary earnings per share and replaces
it with basic earnings per share for which common stock equivalents
are not considered in the computation. It also revises the
computation of diluted earnings per share. The Company has adopted
SFAS No. 128 and there is no material impact to the Company's earnings
per share, financial condition, or results of operations. The
Company's earnings per share have been restated for all periods
presented to be consistent with SFAS No. 128.
The basic loss per share is computed by dividing the net loss for the
period by the weighted average number of common shares outstanding for
the period. Loss per share is unchanged on a diluted basis since the
assumed exercise of common stock equivalents would have an anti-
dilutive effect.
Concentration of credit risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist principally of cash and
investments in client company common stocks. During the year the
Company maintained cash deposits at financial institutions in excess
of the $100,000 limit covered by the Federal Deposit Insurance
Corporation. Client company common stocks are generally thinly traded
new issues traded in the over-the-counter market or securities for
<PAGE>19
which no market exists. Attempts by the Company or others to sell
substantial positions in these securities could have material negative
effects on quoted market prices and the resulting fair value of the
securities.
Estimates
The preparation of the Company's financial statements requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from these estimates. Management estimates the
fair value of its investments in securities for which no public market
exists based on the factors mentioned above. It is reasonably
possible that changes may occur in the near future with respect to
client company activities that would require adjustment of the fair
value of these securities.
Stock-based Compensation
The Company adopted Statement of Financial Accounting Standard No. 123
(FAS 123), Accounting for Stock-Based Compensation beginning with the
Company's first quarter of 1996. Upon adoption of FAS 123, the
Company continued to measure compensation expense for its stock-based
employee compensation plans using the intrinsic value method
prescribed by APB No. 25, Accounting for Stock Issued to Employees.
The Company paid stock based compensation to certain officers and
shareholders as described in Notes 4 and 8.
New Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines
for all items that are to be recognized under accounting standards as
components of comprehensive income to be reported in the financial
statements. The statement is effective for all periods beginning
after December 15, 1997 and reclassification financial statements for
earlier periods will be required for comparative purposes. To date,
the Company has not engaged in transactions that would result in any
significant difference between its reported net loss and comprehensive
net loss as defined in the statement and therefore comprehensive
income is equivalent to net income. .
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use ("SOP 98-1").
SOP 98-1 provides authoritative guidance on when internal-use software
costs should be capitalized and when these costs should be expensed as
incurred.
Effective in 1998, the Company adopted SOP 98-1, however the Company
has not incurred costs to date that would require evaluation in
accordance with the SOP.
Effective December 31, 1998, the Company adopted SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"). SFAS 131 superseded SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards for
the way that public business enterprises report information about
operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments
in interim financial reports. SFAS 131 also establishes standards for
related disclosures about products and services, geographic areas, and
major customers.
The adoption of SFAS 131 did not affect results of operations or
financial position. To date, the Company has not operated in any
business activity.
Effective December 31, 1998, the Company adopted the provisions of
SFAS No. 132, Employers' Disclosures about Pensions and Other Post-
retirement Benefits ("SFAS 132"). SFAS 132 supersedes the disclosure
requirements in SFAS No. 87, Employers' Accounting for Pensions, and
SFAS No. 106, Employers' Accounting for Post-retirement Benefits Other
Than Pensions. The overall objective of SFAS 132 is to improve and
standardize disclosures about pensions and other post-retirement
benefits and to make the required information more understandable. The
adoption of SFAS 132 did not affect results of operations or financial
position.
The Company has not initiated benefit plans to date that would require
disclosure under the statement.
<PAGE>20
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities
("SFAS 133"), which is required to be adopted in years beginning after
June 15, 1999. SFAS 133 will require the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are
not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes
in the fair value of derivatives will either be offset against the
change in fair value of hedged assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive
income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company has not yet determined
what the effect of SFAS 133 will be on earnings and the financial
position of the Company, however it believes that it has not to date
engaged in significant transactions encompassed by the statement.
During 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 - Reporting on the Costs of Start-Up
Activities. The statement is effective for fiscal years beginning
after December 15, 1998 and requires that the cost of start-up
activities, including organization costs be expensed as incurred. The
Company adopted the statement upon in 1999 and has charged $975 of
organization costs to expense during the period ended January 31, 2000
that had been incurred in connection with the formation of
Animalll911.
Note 2. Business acquisitions
On May 29, 1998, the Company completed a merger agreement whereby
2,000,000 shares of its restricted common stock became issuable to the
shareholders of Immune Technologies, Inc. (ITI) in exchange for
certain assets of ITI. ITI had been a client of the Company and the
Company had advanced an aggregate of $79,800 to Immune during 1997 and
1998 to assist in meeting that company's working capital requirements.
Immune to date has been engaged in research and development of
technology it hopes to
utilize in the diagnosis and treatment of animal diseases.
The assets acquired from ITI consist of cash, inventory and fixed
assets aggregating $100,972 at the purchase date based on original
cost. No adjustments were made to the carryover values of these
assets. The fair value of the stock issued in the transaction
amounted to $1,000,000 based upon the closing price of the Company's
common stock at the merger date of $.50 per share. The excess of the
fair value of the purchase price over the assets acquired has been
treated as the purchase of research and development costs by the
Company and has been charged to expense during the current year. The
Company believes that this charge-off is appropriate as the acquired
business has not begun commercial operation and the Company has no
indication that its products or processes for the treatment of animal
diseases will be commercially successful if operations commence. The
controlling shareholders of Immune retained a significant ownership
interest in the acquired business as a result of number of shares
issued to complete the asset purchase.
On August 18, 1998, completed an agreement of sale/exchange whereby
the Company agreed to issued 1,900,000 shares of its restricted common
stock to the certain shareholders of Greengold Corporation (Greengold)
in exchange for 80% of the outstanding common stock of Greengold.
Greengold to date has been engaged in research and development of
technology it hopes to utilize in the recycling and disposal of hog
farm waste.
The assets and liabilities of Greengold consist of patent costs of
$7,500 and accounts payable of $28,649 at the acquisition date. The
fair value of the assets and liabilities acquired are based on cost in
the case of assets and stated value for the liabilities assumed. The
fair value of the stock issued in the transaction amounted to $475,000
based upon the closing price of the Company's common stock at the
merger date of $.25 per share. The excess of the fair value of the
purchase price over the assets acquired has been treated as the
purchase of research and development costs by the Company and has been
charged to expense during the current year. The Company believes that
this charge-off is appropriate as the acquired business has not begun
commercial operation and the Company has no indication that its
process to dispose of hog farm waste will be commercially successful
if operations commence. The former controlling shareholders of
<PAGE>21
Greengold retained a significant ownership interest in the acquired
business as a result of number of shares issued to complete the
merger.
Had the above described acquisitions occurred at the beginning of the
fiscal year ended January 31, 1999, the Company's results of
operations would be as follows:
Revenues $ -
Net loss $(2,099,874)
Basic loss per share $ (.29)
Note 3. Investments
Common stock of client companies was issued to the Company as payment
for its services and was recorded as revenue ratably over the term of
the consulting contract. As indicated in Note 1, the Company has
completed termination agreements with all of its consulting clients.
Trading Securities:
At January 31, 2000 the Company had investments in listed common
equity securities as follows:
Historical Fair
Shares Cost Value
Free trading shares:
National Sorbents, Inc. 88,000 $264,000 $132,000
First Nordic 55,000 5,000 -
-------- --------
$269,250 $132,000
Fair value of securities as of January 31, 2000 was determined by
reference to prices quoted on the NASDAQ OTC Bulletin Board.
The shares of National Sorbents, Inc. were issued to the Company
during November 1995. At January 31, 1997, the Board of Directors
determined that intervening events and circumstances had arisen that
would require adjustment of the fair value of these securities as of
January 31, 1997 to zero value. Specifically, the company has
suffered significant deterioration of financial position and results
of operations and has halted its efforts to register its securities
for public sale. During the year ended January 31, 1998, this client
company was able to establish limited trading of its securities in the
over the counter market.
Available For Sale Securities:
At January 31, 1998 the Company had investments in common equity
securities for which no public market exists as follows:
Historical Fair
Shares Cost Value
Immune Technologies, Inc. 10,000 15,000 -
Casinovations Incorporated 29,100 43,650 72,750
---------- ----------
$ 58,650 $ 72,750
The securities of Casinovations Incorporated were valued at their fair
value, which amounted to $2.50 per share. This company has continued
private offerings of its securities at $2.50 per share during the year
ended January 31, 2000. No intervening events or circumstances
occurred subsequent to the valuation of these securities that would
require an adjustment to their valuation as of January 31, 2000. The
shares of Immune Technologies, Inc. have been reduced to a zero value
as that company became an inactive shell company as a result of the
business acquisition described in Note 2.
The Company has had no activity in the number of shares owned for any
investment classified as trading securities during the years ended
January 31, 2000. During the year ended January 31, 1999, the Company
completed the following transactions with respect to its portfolio of
trading securities:
Sales for cash
Shares Proceeds Gain
Players Network, Inc. 25,000 $ 43,282 $ 5,782
Coronado Industries, Inc. 100,000 $ 88,412 $ 28,412
<PAGE>22
During the year ended January 31, 2000, the Company completed the
following transactions with respect to its portfolio of available for
sale securities:
Sales for cash
Shares Proceeds Gain (Loss)
Rubicon Sports, Inc. 25,000 $ 23,441 $(14,059)
The Company has had no activity in the number of shares owned for any
investment classified as available for sale securities the year ended
January 31, 1999.
Note 4. Furniture and equipment
Furniture and equipment consists of the following at January 31, 2000:
Office equipment $ 29,317
Lab equipment 98,542
Leasehold improvements 1,500
--------
129,359
Less accumulated depreciation (32,580)
--------
$ 96,779
Depreciation expense charged to operations was $19,531 and $9,838
during the years ended January 31, 2000 and 1999 respectively.
Note 5. Capital share transactions
During the year ended January 31, 1999 the Company issued 760,294
shares of its common stock to a limited investor group for cash
aggregating $197,683 and collected an additional $150,329 in cash and
converted $197,938 of shareholder debt in exchange for subscriptions
to its restricted common stock. The subscribed stock will be issued
at $.19 per share based in the trading value of the Company's common
stock at September 30, 1998, the date of the subscription.
Additionally during 1999, the Company issued an aggregate of 3,900,000
shares of its common stock for the acquisitions of ITI and GGC (see
Note 2).
In connection with an employment contract with its president, the
Company issued 5,000 shares of its $.001 par value preferred stock at
a nominal value of $1.00 per share for services provided by the
officer. The Company charged an amount of $5,000 to compensation
expense in connection with the issuance of preferred stock. The
shares are convertible into common stock at the rate of 1,000 shares
of common stock for each share of preferred stock to be converted.
Conversion rights vest to the officer based upon performance goals for
the Company as included in the employment contract.
During the year ended January 31, 1999, the first performance goal was
attained whereby the Company became obligated to convert 250 shares of
the preferred stock into its restricted common stock. The fair value
of the common stock at the vesting date (May 29, 1998) amounted to
$.50 per share based upon the bid value of the stock.
During the year ended January 31, 2000, the next two performance goals
were attained whereby the Company became obligated to convert 500
shares of the preferred stock into its restricted common stock. The
fair value of the common stock at the vesting date (February 8, 1999)
amounted to $.875 per share based upon the bid value of the stock.
The Company has recorded $273,438 and $125,000 of compensation expense
in connection with the vesting of the conversion rights during the
years ended January 31, 2000 and 1999, respectively. Additional
vesting of the conversion rights will be based upon the maintenance of
minimum bid prices of the Company's common stock for a thirty day
period at the following levels: 250 shares at $1.50, balance of the
shares (4,000) 250 shares are convertible for each $.50 increase in
the minimum bid price for the thirty day period or upon the Company
achieving an annual net profits and annual increases thereof of $.05
per share for each subsequent 250 share preferred stock series
<PAGE>23
During the year ended January 31, 1999, the Company issued an
aggregate of 1,125,000 shares of its common stock as compensation to
an officer and others for services performed and to be performed for
the Company. The shares were valued at fair value based on the bid
price of the Company's common stock ($.19 per share) at September 30,
1998, the date that the compensation shares were approved by the
Company and the recipients. The value of the compensation shares
issued for future services amounted to $95,000 and has been shown in
the accompanying financial statements as unearned services, a
reduction of stockholders' equity. This amount was be recorded as
expense during the year ended January 31, 2000.
During the year ended January 31, 2000, the Company received
$1,355,336 in cash for the sale of subscriptions to its common stock
and issued an aggregate of 2,613,900 shares of common stock related to
certain of the subscriptions received. The subscription purchasers
paid an average of $.35 for each share of common stock received.
Also during the year ended January 31, 2000, the Company issued 57,052
shares of its common stock for services valued at $19,569. The fair
value of the services was determined based on the quoted bid price for
the stock at the date the issuance was approved by the Company's Board
of Directors.
Note 6. Commitments
The Company has entered into an operating lease for its office and
research facility that calls for annual rental payments aggregating
$29,200. The lease term extends through the year 2006. Minimum
annual rental payments under the lease are as follows for the years
ended January 31, 2001 through 2006: 2001 - $29,200; 2002 - $30,200:
2003 - $19,000; 2004 - $11,000; 2005 - $11,000: 2006 - $1,000.
Rent expense amounted to $28,873 and $14,558 for the years ended
January 31, 2000 and 1999, respectively.
The Company has entered into an employment agreement with its
president Dated December 28, 1998, which provides for annual
compensation and benefits aggregating $168,000 through 2003.
Note 7. Income taxes
Deferred income taxes may arise from temporary differences resulting
from income and expense items reported for financial accounting and
tax purposes in different periods. Deferred taxes are classified as
current or non-current, depending on the classification of assets and
liabilities to which they relate. Deferred taxes arising from
temporary differences that are not related to an asset or liability
are classified as current or non-current depending on the periods in
which the temporary differences are expected to reverse.
The Company currently has net tax operating loss carryforwards
aggregating approximately $4,507,300 which expire beginning in 2008 as
follows:
2008 $ 10,700
2010 14,000
2012 128,000
2013 440,700
2014 2,206,000
2015 1,107,300
----------
$ 4,507,300
The principal difference between the Company's book operating losses
and income tax operating losses results from recognition of unrealized
gains or losses on securities owned for financial statement purposes.
The deferred tax asset resulting from the operating loss carryforward
described above (approximately $1,532,000) has been fully reserved as
it is more likely than not that sufficient taxable income will not be
generated in future years that would allow the Company to utilize the
asset. The increase in the reserve during the year ended January 31,
2000 amounted to approximately $580,000.
Note 8. Stock option plan
During 1995, the Company adopted the 1995 Non-Statutory Stock Option
Plan that provides for granting to the Company's officers, directors,
employees and certain other individuals who consult with or advise the
<PAGE>24
Company, options to acquire up to 750,000 shares of the Company's
common stock. The shares issuable under the 1995 plan are at a price
not less than 85% of the fair market value of the stock on the date of
grant. The exercise periods of the options are not to exceed ten
years. Activity in the plan during the years ended January 31, 2000
and 1999 is as follows:
Weighted Weighted
Average Average
Number Exercise Number Exercise
of Shares Price of Shares Price
Outstanding, beginning of year 50,000 $.23 - -
Granted 150,000 $.29 50,000 $.23
Exercised - - - -
Cancelled - - - -
-------- ----- -------- -----
Outstanding, end of year 200,000 $.28 50,000 $.23
At January 31, 2000 there were 550,000 options available for grant.
Certain of the options granted during the year ended January 31, 2000
were issued with an exercise price less than the quoted price for the
Company's stock at the grant date. The Company has recorded $21,800
of compensation expense in connection with these options.
In connection with the employment agreement disclosed in Note 6, the
Company's president was granted options to purchase 750,000 shares of
the Company's common stock at an exercise price of $.19 per share, the
fair value of the common stock (based on the closing bid price for the
Company's common stock) at the date specified for the option grant
(March 26, 1998) as previously approved by the Company's Board of
Directors. The option is exercisable for a five-year period. The
Company has not recorded compensation expense in connection with the
option grant. The fair value of the options at the date of grant was
estimated using the Black-Scholes model with assumptions as follows:
2000 1999
Market value $.375 - $.47 $ .19
Expected life in years 5 5
Interest rate 7.0% 6.5%
Volatility 7.8% 10%
Dividend yield 0.0% 0.00%
The average fair value of the options granted during 2000 and 1999
amounted to $.23 and $.05 per option. Stock based compensation costs
would have increased pretax losses by $12,750 ($.00 per share) and
$39,150 ($.00 per share) in 2000 and 1999, respectively if the fair
value of the options granted during the years had been recognized as
compensation expense.
Note 9. Related Party Transactions.
During the years ended January 31, 1999 and 1998, the Company's former
president who is currently a major shareholder of the Company made
working capital advances to the Company of $108,119 and $86,819,
respectively. The shareholder has agreed to convert the balance due
to him at January 31, 1999 into shares of the Company's restricted
common at a conversion rate of $.19 per share. The stock price
represents the trading bid price of the Company's common stock as of
the date the conversion was approved by the Company's Board of
Directors. The shares were issued to the former officer during March
2000.
Note 10. Supplemental Statement of Operations Information.
During the years ended January 31, 2000 and 1999, the Company incurred
$1,727,948 and $832,901 of general and administrative expenses
respectively, the components of which are as follows:
2000 1999
Employee compensation $901,734 $474,913
Consulting expense 383,240 129,706
Travel expense 83,249 22,270
Professional fees 61,302 42,012
Insurance 69,283 45,931
Rent 28,873 14,558
<PAGE>25
Depreciation & amortization 19,157 10,917
Research & development 44,356 23,930
Advertising 12,458 -
Moving expense 882 19,233
Maintenance 17,064 7,723
Telephone expense 10,959 6,208
Other expenses 95,391 35,500
-------- --------
$1,727,948 $ 832,901
<PAGE>26
(b) List of Exhibits
The following exhibits are filed with this report:
(2) Articles of Incorporation incorporated by reference to Form 10SB
File Number 0-25792
(2.1) Articles of Merger incorporated by reference to Form 10SB, File
Number 0-25792
(2.2) Bylaws incorporated by reference to Form 10SB, File Number 0-
25792
(3) Common Stock Certificate incorporated by reference to Form 10SB,
File Number 0-25792
(6) Consulting Agreement with Applied Cellular Technology (formerly
Axcom Information Technology, Inc.) incorporated by reference to
Form 10SB, File Number 0-25792
(6.1) Consulting Agreement with Level Best Golf, Inc. incorporated by
reference to Form 10SB, File Number 0-25792
(6.2) Consulting Agreement with Sports Legends, Inc. incorporated by
reference to Form 10SB, File Number 0-25792
(6.3) Consulting Agreement with Gaming Venture Corp. USA incorporated
by reference to Amendment 1 to Form 10SB, File Number 0-25792
(6.4) Consulting Agreement with Grand Slam Licensing, Inc. incorporated
by reference to Form 10SB, File Number 0-25792
(6.5) Consulting Agreement with Trinity Works, Inc. incorporated by
reference to Amendment 1 to Form 10SB, File Number 0-25792
(6.6) Consulting Agreement with Players Network incorporated by
reference to Amendment 2 to Form 10SB, File Number 0-25792
(6.7) Consulting Agreement with National Sorbents, Inc. incorporated by
reference to Amendment 2 to Form 10SB, File Number 0-25792
(6.8) Consulting Agreement with Federated Financial Services, Inc.
incorporated by reference to Amendment 2 to Form 10SB, File
Number 0-25792
(12) 1995 Non-Statutory Stock Option Plan incorporated by reference to
Amendment 3 to Form 10SB, File Number 0-25792
(B) REPORTS ON FORM 8-K
None
<PAGE>27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this
Report to be signed on its behalf by the undersigned duly authorized
person.
Date: May 29, 2000 Bionet Technologies, Inc.
/s/ L. Alan Schafler
------------------------------------
By: L. Alan Schafler, President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates indicated.
/s/ L. Alan Schafler 5/29/00
------------------------
L. Alan Schafler
President and Director
(Principal Executive, Financial and Accounting)
/s/ Erich Schmid 5/29/00
------------------------
Erich Schmid
Director
/s/ James Yanai 5/29/00
------------------------
James Yanai
Director
