<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended December 31, 1998 Commission File No. 0-17772
NET COMMAND TECH, INC.
(f/k/a CORSAIRE, INC.)
State of Delaware 55-0672633
- ---------------------------------------- -----------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
62 INDIAN TRACE, SUITE 286, WESTON, FLORIDA 33326
- ------------------------------------------------------ --------------
(Address of principal executive offices) (Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- --------------------- ---------------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share*
----------------------------------------------------------------
(Title of Stock)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for other such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes No X*
--- ---
(2) Yes No X*
--- ---
The Registrant's revenues for its most recent fiscal year were $0. As
of December 31, 1998, 5,784,889 shares of the Registrant's common stock were
issued and outstanding.
Total No. of Pages: 17
See Item 1
<PAGE> 2
NET COMMAND TECH, INC.
(FORMERLY CORSAIRE, INC)
TABLE OF CONTENTS
FORM 10-KSB
<TABLE>
<CAPTION>
PAGE
<S> <C>
Part I
Item 1. Description of Business..............................................1
Item 2. Description of Property..............................................3
Item 3. Legal Proceedings....................................................3
Item 4. Submission of Matters to a Vote of Security Holders..................3
Part II
Item 5. Market for Common Equity and Related
Stockholder Matters..................................................3
Item 6. Management's Discussion and Analysis or Plan of Operation............3
Item 7. Financial Statements.................................................4
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................4
Part III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act..................................................4
Item 10. Executive Compensation...............................................5
Item 11. Security Ownership of Certain Beneficial Owners
and Management.......................................................5
Item 12. Certain Relationships and Related Transactions.......................6
Item 13. Exhibits and Reports on Form 8-K.....................................6
</TABLE>
i
<PAGE> 3
PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Registrant is an inactive company. Management has been seeking
opportunities to acquire operating entities, which in its opinion will provide
profitable operations to the Registrant. The Company was incorporated in the
State of Delaware in 1994.
A. CORPORATE HISTORY
In March 1995 Rene Hamouth, now a principal stockholder of the
Company, became its president, in connection with a possible business
transaction involving the Company. At that time it was represented to Mr.
Hamouth by Paul Parshall, then the Company's president and sole director, that
the Company (then known as Acunet Corporation) (i) had been incorporated under
the laws of the State of Delaware in 1987, (ii) had completed a registered
public offering of its common stock in 1988, (iii) had filed reports with the
United States Securities and Exchange Commission (the "SEC") under SEC File No.
0-17772 and Internal Revenue Service (the "IRS") FEIN No. 55-0672633, (iv) had
become dormant in 1990, and (v) had been rehabilitated in 1994.
According to the Form 10-QSBs for the quarters ended March 31, June 30
and September 30, 1994, filed by Mr. Parshall, the Company (i) had its class of
common stock registered under Section 12(g) of the Securities and Exchange Act
of 1934, as amended (the "Exchange Act"), (ii) was dormant, (iii) had no
revenues, no assets and no liabilities and there were "no corporate records or
minutes available to document the activities of the corporation." The Company's
10-KSB for the year ended December 31, 1994, filed by Mr. Parshall and which
contained audited financial statements, disclosed that there were 50,000,000
shares outstanding, 28,986,734 of which had been issued to Worthington Company,
Mr. Parshall's affiliate, "in exchange for payment of filing fees."
Beginning in March 1995, at Mr. Hamouth's direction, the Company's
activities involved the identification and evaluation of potential
merger/acquisition candidates. In March 1995, the Company effected a reverse one
for one hundred stock split which resulted in a reduction of the outstanding
number of shares to 500,000 and also issued an additional 2,689,900 shares
through August 1995 to Mr. Hamouth and others for services rendered. As of
December 31, 1995, the Company remained inactive and had 3,189,900 shares
outstanding held by 567 stockholders; there was "only a limited market for the
Company's common stock" (as disclosed in the Company's Form 10-KSB for the year
ended December 31, 1995). The Company continued to seek merger or acquisition
candidates. In August 1995, Mr. Parshall resigned as a director.
The Company continued to file Quarterly Reports on Form 10-QSB for the
quarters ended March 31, June 30 and September 30, 1996 under SEC File No.
0-17772. For the periods covered by these reports, the Company disclosed that it
had been unsuccessful in consummating a merger, acquisition or business
transaction with an operating company; it therefore remained as a shell company.
No other periodic reports had been filed with the SEC. The Company's shares
traded in the over-the-counter market.
<PAGE> 4
From September 1996 through 1998, the Company continued its search for
an acquisition candidate, although no periodic reports were filed with the SEC.
In late 1998, Roger Dunavant became president and sole director, Mr. Hamouth
having resigned.
In February 1999, the Company, through a wholly-owned subsidiary,
purchased certain tangible and intangible assets involving software for internet
and intranet use, set top box technology and remote surveillance security
systems from a third party. In addition, the Company purchased a 51% interest in
a British corporation. In connection with these transactions, the Company issued
an aggregate of 3,108,750 shares of its common stock, par value $0.001. In April
1999, the Company entered into a transaction to acquire a privately held
corporation involved in providing advanced internet broadcast video and security
software in exchange for approximately 2,350,000 shares of common stock.
During the course of preparing the delinquent Forms 10-QSB and Forms
10-KSB for the period from December 31, 1996 through December 31, 1998, and for
the quarter ended March 31, 1999, present management uncovered the following:
(1) that the State of Delaware requires that the revival and
renewal of a Certificate of Incorporation of an administratively dissolved
corporation be effectuated through the execution and filing of a certificate on
the authority of those who were the directors of the corporation at the time of
its expiration;
(2) that Mr. Parshall apparently did not file such a
certificate, but instead filed an original Certificate of Incorporation under
the same name as the dormant corporation which was to have been revived (i.e.
Acunet) and then continued to file reports with the SEC under the SEC file
number of the non-revived company;
(3) that Mr. Parshall had, on other occasions, incorporated
new companies with the same name as dissolved (or dormant companies) that had
common stock registered under Section 12(g) of the Exchange Act, continued to
file reports under the non-revived companies' file number, and in the process,
issued a significant amount of shares in these companies to himself; and
(4) that in September 1996, Mr. Parshall had been enjoined by
the United States District Court of Utah (SEC v. Axiom Securities Solutions,
Inc. and Paul L. Parshall, Civil Action No. 2-96CV-08245J) from violating the
anti-fraud provisions of the federal securities laws and was barred from serving
as an officer or director of a company filing reports with the SEC. In addition,
in September 1996, he was the subject of administrative proceedings before the
SEC barring him from participating in penny stock offerings and association with
a broker/dealer, investment company, investment advisor, transfer agent or
municipal securities dealer.
The Company, validly existing as a corporation under Delaware law,
while continuing to report under SEC File No. 0-17772, has determined to file a
Form 10-SB covering its common
2
<PAGE> 5
stock in order to properly register its common stock under the Exchange Act and
correct the existing deficiency.
ITEM 2. DESCRIPTION OF PROPERTY
None.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is currently only a limited market for the Company's Common
Stock. The Company's Common Stock trades on the OTC Bulletin Board under the
symbol "NCDR". The following quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions.
Common Stock
------------
Quarter Ended High Low
- ------------- ---- ---
March 31, 1997 $7.0000 $2.6562
June 30, 1997 4.7500 2.6250
September 30, 1997 3.5469 1.0000
December 31, 1997 1.3750 0.4531
March 31, 1998 2.5469 0.6250
June 30, 1998 1.3281 0.3750
September 30, 1998 1.0625 0.5000
December 31, 1998 1.7188 0.2812
As of December 31, 1998, there were 569 shareholders of
record, holding 5,784,889 shares of the Company's Common Stock.
The Company did not declare dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
The Company is inactive and has had limited operations. The Company had
no revenues in 1998, but incurred expenses, primarily legal fees, in connection
with various corporate matters. The Company had no revenues in 1997,
but incurred various expenses, consisting primarily of officers' compensation.
Similarly, the Company had no revenue in 1996, but incurred various expenses,
consisting primarily of consulting and legal fees. Substantially all expenses
in 1996, 1997 and 1998 were satisfied through the issuance
of common stock.
3
<PAGE> 6
ITEM 7. FINANCIAL STATEMENTS
See index to Financial Statements attached hereto.
ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company engaged Strabala Ramirez & Associates, Certified Public
Accountants ("Strabala"), 19762 MacArthur Blvd., Suite 100, Irvine, CA 92612, to
audit its financial statements for 1996, 1997 and 1998. Strabala served as the
Company auditors with respect to its 1995 financial statements.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
(a) Identification of Directors and Executive Officers.
<TABLE>
<CAPTION>
Name Age Position Period of Service
- ---- --- -------- -----------------
<S> <C> <C>
Rene M. Hamouth 48 President/Director March 1995 to November 1998
William R. Dunavant 46 President/Director November 20, 1998
</TABLE>
Information concerning Directors and Executive Officers including their
business experience for at least the past five (5) years, is as follows:
RENE M. HAMOUTH
Mr. Hamouth was appointed a director and president on March 7, 1995.
Prior to being appointed to the Company's Board of Directors and beginning in
1983 to the present, Mr. Hamouth has acted as a financial consultant to various
private and public companies in both Canada and the United States, and provided
assistance in raising capital for these companies. From 1972 to 1982, he was an
Account Executive for firms which recruited executives for large corporations.
WILLIAM R. DUNAVANT
Mr. Dunavant was the president of Summus Technologies, Inc. from the
end of 1997 to August 1998. Previously he was the president of Straight Arrow
Products, Inc. from 1989 to 1995 and founder and chief executive officer of
Topline, Inc. from 1984 to 1996. Straight Arrow marketed shampoo and related
products. Topline was involved in aircraft maintenance and deicing operations.
4
<PAGE> 7
(b) Compliance with 16(a) of the Securities Exchange Act of 1934
The Exchange Act requires all executive officers and directors to
report any changes in the ownership of common stock of the Company to the SEC
and the Company. All reports that were required to be filed in 1998 were so
filed.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table.
The following table sets forth information for the year ended December
31, 1998, concerning compensation paid to the Company's president/director for
services rendered to the Company during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Securities Restricted
Fiscal Underlying Stock All Other
Executive Officer Year Salary Bonus Options Awards Compensation
- ------------------------------ --------- ---------- ----------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Rene M. Hamouth 1998 $0 $0 -- -- --
President/Director
William R. Dunavant 1998 $0 $0 -- -- --
President/Director
</TABLE>
On November 20, 1998, the Company entered into an agreement with Mr.
Dunavant to serve as president and director. The agreement is for a three year
period at an initial salary of $200,000, plus bonuses. In addition, Mr. Dunavant
is to receive 1,000,000 shares of common stock plus an additional 1,000,000
shares at such time that the Company achieves annual earnings of $.50 per share;
achieves annual sales revenue of $10,000,000 or achieves annual before tax
earnings of $5,000,000.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on December 31, 1998, the Company had
5,784,889 shares outstanding. The table below contains information concerning
each person who is known by the Company to be the beneficial owner of more than
five percent of the Company's common stock. To the best of the Company's
knowledge no other persons are beneficial owners of five percent or more of the
Company's shares.
5
<PAGE> 8
<TABLE>
<CAPTION>
Name and address Amount and Nature of
Of Beneficial Owner Beneficial Ownership Percentage
- --------------------------------------- ----------------------------- ------------------
<S> <C> <C>
Rene M. Hamouth 3,776,030* 66.37%
53 Thedford Place
West Vancouver, B.C.
V7S 1R9
Carmine J. Bua 2,393,030** 41.4%
3838 Camino Del Rio North
Suite 333
San Diego, CA 92108
</TABLE>
- ---------------------------------------
* Includes 2,393,030 shares owned by Carmine J. Bua subject to an option
to purchase held by Mr. Hamouth.
** Shares subject to option to purchase held by Mr. Hamouth.
The following table sets forth the total number of shares of the
Company's common stock beneficially owned by its executive officer as of
December 31, 1998.
<TABLE>
<CAPTION>
Name and address Amount and Nature of
Of Beneficial Owner Beneficial Ownership Percentage
- --------------------------------------- ----------------------------- ------------------
<S> <C> <C>
William R. Dunavant 0* 0
All directors and officers as a group 0 0
(one named)
</TABLE>
* As of December 31, 1998, the Company had not issued the 1,000,000
shares to Mr. Dunavant.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
6
<PAGE> 9
INDEPENDENT AUDITORS' REPORT
TO: The Board of Directors
Net Command Tech, Inc.
(formerly known as Corsaire, Inc. and Corsaire Snowboard, Inc.)
Weston, Florida
We have audited the accompanying balance sheets of Net Command Tech,
Inc. (formerly known as Corsaire, Inc. and Corsaire Snowboard, Inc.), as of
December 31, 1998, 1997 and 1996, and the related statements of operations,
changes in stockholders' equity and cash flows for the years ended December 31,
1998, 1997 and 1996. 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 audits provide 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 Command Tech,
Inc. (formerly known as Corsaire, Inc. and Corsaire Snowboard, Inc.) as of
December 31, 1998, 1997 and 1996 and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
As discussed in Note 6 to the financial statements, the Company did not
follow proper procedures for revival and renewal of a dissolved corporation as
required under the laws of the State of Delaware. The Company continued to file
reports and issue stock under the assumed entities' file number.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has suffered substantial operating losses and
has accumulated a deficit of $3,515,965 as at December 31, 1998, which raises
substantial doubt about its ability to continue as a going concern. Management
plans regarding these matters also are described in Note 7. The financial
statements do not include any adjustments that might result from outcome of this
uncertainty.
/s/ Strabala, Ramirez & Associates, Inc.
STRABALA, RAMIREZ & ASSOCIATES, INC.
May 6, 1999
7
<PAGE> 10
NET COMMAND TECH, INC.
(FORMERLY KNOWN AS CORSAIRE, INC. AND CORSAIRE SNOWBOARD, INC.)
BALANCE SHEETS
AS OF DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ -- $ 20 $ 35
----------- ----------- -----------
Total current assets -- 20 35
----------- ----------- -----------
Total Assets $ -- $ 20 $ 35
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Total Liabilities $ -- $ -- $ --
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, authorized 25,000,000
shares: 5,784,889, 3,041,859 and 3,041,859
outstanding in 1998, 1997 and 1996, respectively 5,785 3,042 3,042
Paid-in capital 3,510,180 3,076,748 3,076,748
Prepaid stock-based officer compensation -- -- (51,309)
Accumulated deficit (3,515,965) (3,079,770) (3,028,446)
----------- ----------- -----------
Total Stockholders' Equity -- 20 35
----------- ----------- -----------
Total Liabilities and Stockholders' Equity $ -- $ 20 $ 35
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 11
NET COMMAND TECH, INC.
(FORMERLY KNOWN AS CORSAIRE, INC. AND CORSAIRE SNOWBOARD, INC.)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
----------- ----------- -----------
Expenses
Officers' compensation -- 51,309 79,941
Consulting services -- -- 522,500
Legal fees and expenses 436,175 -- 149,822
Other general and administrative expenses 20 15 5,000
----------- ----------- -----------
Total expenses 436,195 51,324 757,263
----------- ----------- -----------
Loss before provision for income taxes (436,195) (51,324) (757,263)
Provision for income taxes -- -- --
----------- ----------- -----------
Net loss $ (436,195) $ (51,324) $ (757,263)
=========== =========== ===========
Net loss per share $ (0.09) $ (0.02) $ (0.25)
=========== =========== ===========
Weighted average shares outstanding 4,711,426 3,041,859 3,029,999
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE> 12
NET COMMAND TECH, INC.
(FORMERLY KNOWN AS CORSAIRE, INC. AND CORSAIRE SNOWBOARD, INC.)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------
ADDITIONAL PREPAID STOCK TOTAL
NUMBER OF PAR PAID-IN ACCUMULATED BASED OFFICER STOCKHOLDERS'
SHARES VALUE CAPITAL DEFICIT COMPENSATION EQUITY
--------- ----- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 3,189,900 $ 3,190 $ 2,267,359 $ (2,271,183) $ (131,250) $ (131,884)
1/96 Cancellation of shares (250,000) (250) 250 --
3/96 Contribution from shareholder 11,741 11,741
4/96 Stock issued for professional
services 145,000 145 797,355 797,500
5/96 Cancellation of shares (43,041) (43) 43 --
12/96 Accrued officer compensation 79,941 79,941
Net loss for year (757,263) (757,263)
---------- ------- ----------- ------------ ---------- ----------
BALANCE, December 31, 1996 3,041,859 3,042 3,076,748 (3,028,446) (51,309) 35
12/97 Accrued officer compensation 51,309 51,309
Net loss for year (51,324) (51,324)
---------- ------- ----------- ------------ ---------- ----------
BALANCE, December 31, 1997 3,041,859 3,042 3,076,748 (3,079,770) -- 20
1/98 Stock issued for professional
services 350,000 350 196,525 196,875
6/98 Stock issued for professional
services 2,393,030 2,393 236,907 239,300
Net loss for year (436,195) (436,195)
---------- ------- ----------- ------------ ---------- ----------
BALANCE, December 31, 1998 5,784,889 $ 5,785 $ 3,510,180 $ (3,515,965) $ -- $ --
========== ======= =========== ============ ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE> 13
NET COMMAND TECH, INC.
(FORMERLY KNOWN AS CORSAIRE, INC. AND CORSAIRE SNOWBOARD, INC.)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (436,195) $ (51,324) $ (757,263)
Adjustments to reconcile net loss to net
cash used in operating activities
Issuance of common stock for consulting and legal services
and satisfaction of amounts due officer 436,175 51,309 877,441
Changes in assets and liabilities:
Decrease in accounts payable -- -- (137,062)
Decrease in refundable deposit -- -- 5,000
---------- --------- ----------
Net cash used in operations (20) (15) (11,884)
---------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution from shareholder -- -- 11,741
---------- --------- ----------
Net cash provided by financing -- -- 11,741
---------- --------- ----------
Net decrease in cash and cash equivalents (20) (15) (143)
Cash and cash equivalents beginning of period 20 35 178
---------- --------- ----------
Cash and cash equivalents end of period $ 0 $ 20 $ 35
========== ========= ==========
Interest and income taxes paid $ -- $ -- $ --
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 14
NET COMMAND TECH, INC.
(FORMERLY KNOWN AS CORSAIRE, INC. AND CORSAIRE SNOWBOARD, INC.)
NOTES TO FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Principles.
Net Command Tech, Inc. (formerly known as Corsaire, Inc.) (the
"Company") was incorporated in Delaware in 1994 under the name Acunet
Corporation.
In March 1995, the Company changed its name from Acunet Corporation to
Corsaire Snowboard, Inc. The Company became inactive March 1, 1997 and remained
so until July 15, 1997 when it was revived in Delaware under the name Corsaire,
Inc. The Company changed its name to Net Command Tech, Inc. in May 1999.
The Company's principal business purpose has been the identification
and evaluation of prospective merger and acquisition opportunities.
The Company's shares are traded in the over-the-counter market.
(a) CASH AND CASH EQUIVALENTS.
Cash equivalents consist of short-term, highly liquid
investments that are readily convertible into cash and were purchased with
maturities of less than three months.
(b) CURRENCY TRANSLATION.
The accompanying financial statements are expressed in U.S.
dollars. The Company maintains an office in Fort Lauderdale, Florida and no
longer has operations in Canada. Any expenditures and obligations in Canadian
currency were translated at the exchange rate prevailing when they were
incurred. Assets and liabilities at December 31, 1998, 1997 and 1996, where
applicable, have been translated at the year-end exchange rates. There were no
significant exchange or translation gains or losses during these years.
(c) VALUATION OF SHARES ISSUED FOR SERVICES.
The Company accounts for stock-based compensation at fair
market value, in accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). SFAS 123 establishes a fair value based method of
accounting for stock-based compensation.
(d) BASIC AND DILUTED LOSS PER SHARE.
Net loss per share is determined by dividing net loss by the
weighted average number of common shares outstanding during the year.
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<PAGE> 15
(e) 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 of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and that affect revenues and expenses during the period reported.
Estimates are adjusted to reflect actual experience when necessary. Significant
estimates are used to account for fair market value of the Company's common
stock exchanged for services of consultants and professionals.
(f) NEW ACCOUNTING STANDARDS.
Effective January 1, 1998, Corsaire adopted Statement of Financial
Accounting Standard No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 131 establishes standards for defining
operating segments and for reporting information about operating segments in
financial statements. It also establishes standards for related disclosures
about products, geographic areas, and major customers. The Company's reportable
operating segments did not change as a result of adopting SFAS 131.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). This statement, which is effective January
1, 2000, requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position, measure those instruments at
fair value and recognize changes in the fair value of derivatives in earnings in
the period of change unless the derivative qualifies as an effective hedge that
offsets certain exposures. This statement is not expected to have a significant
effect on the Company's financial statements.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 "Reporting on the Costs of Start-up
Activities." This statement is effective for 1999, but is not expected to have a
significant effect on the Company's financial statements.
(2) Related Party Information.
(a) In January 1994, a company affiliated with the president of the
Company at that time received 289,867 shares of common stock in exchange for
payments of filing fees for the Company.
(b) In March 1995, the Company entered into a two-year agreement with
the president of the Company at that time. The agreement provided that he would
assist the Company in the identification and evaluation of prospective merger
and acquisition opportunities, and arrange for the financing of such
acquisitions and/or mergers. No such merger or acquisition occurred, nor were
any financing arrangements made during that time. In accordance with the
agreement, the Company issued 2,250,000 shares of common stock to the then
president. These 2,250,000 shares were recorded as compensation for the period
through May 30, 1997, and have been prorated and charged to expense accordingly.
These shares have been valued at $.10 per share, the fair market value at the
contract date. The Company did not issue the appropriate Forms 1099 or W-2 at
the time of the transaction.
13
<PAGE> 16
(c) The Company, from time to time, issued 2,743,430 shares in exchange
for services. These shares were valued at $.06 per share (350,000) and $.10 per
share (2,393,030).
(3) Consulting and Legal Services.
In 1996 and 1998, the Company issued common stock to various
individuals, including consultants and the Company's general counsel for legal
services. These shares have been valued at the bid price at the dates of
issuance. Of the 495,000 shares issued, the fair market value of shares of
$522,500 was for consulting services and $471,875 was for legal fees and
expenses.
See 2(c) above.
(4) Provision for Income Taxes.
The Company has had net operating losses during the years ending
December 31, 1996, 1997 and 1998. These losses were predominantly non-cash
exchanges of stock for services which were not reported to the Internal Revenue
Service. As such, they would not be deductible for tax purposes until declared
as compensation by the recipients. Therefore no income tax expense (benefit) has
been recorded by the Company.
(5) Subsequent Events.
On February 19, 1999, Baraka Intracom, Inc., a California corporation,
sold certain assets, consisting primarily of intellectual property, to a
subsidiary of the Company. The price for these assets was $510,000, based on
$10,000 cash and the stipulated value of 50,000 shares of the Company at $10.00
per share. Of this value the purchase agreement allocated $450,000 to the
intellectual property, including software, a license agreement, trademarks and
other property. The remaining $50,000 is consideration for a 5-year
non-competition provision of the agreement.
On February 19, 1999, fifty-one percent (51%) of Modern Telenet Limited
was purchased by the Company. Modern Telenet Limited, a corporation in England
and Wales, was founded on January 13, 1999 and was established with capital of
50,000 British Pounds divided between 24,500 A shares and 25,500 B shares at one
British Pound per share. The Company bought the 25,500 B shares. Additionally,
the Company is obligated under an option agreement to purchase the 24,500 A
shares from the holder of the stock or assignees, at a price that the founder of
Modern Telenet Limited and the Company may agree or, failing agreement, a
formula based on net income of Modern Telenet Limited. The business of this
Company and the technology acquired are known as video streaming which allows a
computer the ability to transmit video and audio signals over the Internet.
14
<PAGE> 17
On February 19, 1999, the Company signed an exclusive distribution
agreement with Modern Telenet Limited, providing for certain specific non-US
Territories.
As part of the acquisition, the Company signed an agreement with a bank
to obtain the release of the security interest granted in the bank's favor over
certain assets of Modern Telenet Limited and Baraka Intracom, Inc. In return,
the Company issued 1,005,000 fully paid shares of common stock to the bank
pursuant to the bank's rights as pledgee and issued an additional 20,000 shares
of common stock to the bank to be held by the bank (or its nominee) absolutely
and beneficially. The bank also received an assignment, by way of security, and
all rights under a put option in respect of the remaining 49% interest (not
owned by the Company) in the share capital of Modern Telenet Limited. Modern
Telenet Limited, along with other entities, are joint guarantors of debts of
certain parties related to the former principal shareholder of Modern Telenet
Limited in the amount of $34,691,800. Finally, in connection with this
transaction the Company issued 1,983,750 shares to an affiliate of the former
principal shareholder of Modern Telenet Limited.
The Company has assigned a nominal value to the assets purchased in
this acquisition. The Company intends to appraise the intellectual property and
assign an appropriate value as a result of the appraisal.
On April 26, 1999, the Company entered into an agreement, subsequently
amended in May, to acquire the issued and outstanding common stock of Satellite
Access Systems, Inc. ("SAS"), a privately held Florida corporation with its
principal place of business in St. Petersburg, Florida, in exchange for
2,352,942 shares of common stock. This transaction is conditioned upon the
completion of due diligence by the Company of SAS's intellectual property, no
later than June 10, 1999. SAS is involved in the development of ultra high speed
satellite and Internet communications software and protocols for the world wide
transmission of voice, data and video signals.
(6) Status of Entity.
During the course of preparing the delinquent Forms 10-QSB and Forms
10-KSB for the period December 1, 1996 through December 31, 1998 and the 10-QSB
for the quarter ended March 31, 1999, present management uncovered the
following:
(i) that the State of Delaware requires that the revival and renewal of a
Certificate of Incorporation of an administratively dissolved
corporation be effectuated through the execution and filing of a
certificate on the authority of those who were the directors of the
corporation at the time of its expiration;
(ii) that the prior management's president (Paul L. Parshall) apparently did
not file such a certificate, but instead filed an original Certificate
of Incorporation under the same name as the dormant corporation which
was to have been revived (Acunet Corporation) and continued to file
reports with the SEC under the SEC file number of the non-revived
company;
15
<PAGE> 18
(iii) that the prior president had, on other occasions, incorporated new
companies with the same name as dissolved (or dormant) companies that
had common stock registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), continued to
file reports under the non-revived companies' file number, and in the
process, issued a significant amount of shares in these companies to
himself; and
(iv) that in September 1996, the Company's prior president until March,
1995, had been enjoined by the United States District Court, Utah (SEC
v. Axiom Securities Solutions, Inc. and Paul L. Parshall, Civil Action
No. 2-96CV-08245J) from violating the anti-fraud provisions of the
federal securities laws and was barred from serving as an officer or
director of a company filing reports with the SEC. In addition, in
September 1996, he was the subject of administrative proceedings before
the SEC barring him from participating in penny stock offerings and
association with a broker/dealer, investment company, investment
advisor, transfer agent or municipal securities dealer.
The Company, validly existing as a corporation under Delaware law,
while continuing to report under SEC File No. 0-17772, has determined to file a
Form 10-SB covering its common stock in order to properly register its common
stock under the Exchange Act and correct the existing deficiency.
(7) Going Concern.
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. However, the Company has sustained substantial
operating losses in the current year. In addition, the Company has used
substantial amounts of working capital in its operations. On December 31, 1998,
the Company had an accumulated deficit of $3,515,965.
In view of these matters, the ability of the Company to continue its
operations is dependent upon its ability to meet its financing requirements, and
the success of its future operations. Management believes that actions presently
being taken to fulfill the Company's financing requirements will provide the
opportunity for the Company to continue as a going concern.
(8) Contingent liabilities.
Subsequent to the year end, a complaint was filed in the state court
and the Company has received unfiled complaints seeking ordinary and punitive
damages from the Company from various parties. Management, in consultation with
its legal counsel, believes that these claims are without merit; therefore, the
likelihood of an unfavorable outcome is remote and will not affect the Company's
financial position.
16
<PAGE> 19
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
NET COMMAND TECH, INC.
Date: May 24, 1999
By: /s/ William R. Dunavant
------------------------------------
William R. Dunavant
President and Chief Executive Officer
In accordance with 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ William R. Dunavant
- ---------------------------------
William R. Dunavant Sole Director May 24, 1999
/s/ Robert I. Chalnick Principal Financial and
- --------------------------------- Accounting Officer May 24, 1999
Robert I. Chalnick
</TABLE>
17
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
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<CURRENT-ASSETS> 0
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0
0
<COMMON> 5,785
<OTHER-SE> 3,510,180
<TOTAL-LIABILITY-AND-EQUITY> 0
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<INCOME-PRETAX> (436,195)
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<EPS-BASIC> (.09)
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