<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
Current report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission file number: (33-20323)
GLOBENET INTERNATIONAL I, INC.
(Exact name of registrant as specified in its charter)
Incorporated under the laws of
the State of Delaware 75-2224643
(State or other jurisdiction of --------------
incorporation of organization) (IRS Employer
Identification Number)
10575 Newkirk, Suite 780, Dallas, Texas 75220
(Address of principal executive offices)
MIGHTY POWER U.S.A., INC.
9202 W. Royal Lane
Irving, Texas 75063
(Former Name and Address, if Changed since Last Report
INTRODUCTION.
Mighty Power U.S.A., Inc. (The "Company") f/k/a Seven Oaks Farms, Ltd. F/k/a
Jason Ray Corporation was incorporated under the laws of the State of Delaware
on February 12, 1988. Until the Company changed its name to Mighty Power
U.S.A., Inc. On December 4, 1995, and began doing business as a multi-level
product marketing entity, it had no operational history. The Company had
approximately $2,000,000 in sales for calendar year 1996.
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
On March 31, 1997, the Company and GlobeNet Inc. ("GNI"), a Texas
corporation, entered into a Plan and Agreement of Merger (the "Merger
Agreement"), with the Merger to have an effective date of April 4, 1997.
Immediately prior to the Merger, the shareholders of the Company approved a
1-for-7 reverse stock split of the Company's common stock, making the Company
have a total of 4,235,714 shares issued and outstanding. Following the reverse
split, under the terms of the Merger Agreement, 7,866,323 (post reverse split)
shares of the Company's common stock was issued to the shareholders of GNI in
exchange for all of the issued and outstanding stock of GNI. Additionally, a
total of 2,481,927 (post reverse split) shares of the Company's common stock
was purchased by Clinton H. Howard directly from several of the Company's
shareholders.
Immediately prior to the execution of the purchase of the stock by Mr.
Howard, Mr. Howard was the President and Chairman of the Board of Directors of
GNI. On March 31, 1997, a properly called shareholders' meeting was held. At
such shareholders' meeting, Mr. Howard was elected to serve as Chairman of the
Board and President of the Company. Forrest E. Watson resigned as the Chairman
of the Board of the Company, and a new Board of Directors was elected to serve
until the next annual meeting of the shareholders, and was comprised of the
following parties:
Clinton H. Howard
Steven E. Brown
Andrew V. Howard
Forrest E. Watson
R. Leon York
In connection with the Merger, the Company changed its name to
GlobeNet International I, Inc.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to a Stock Purchase Agreement, the Company purchased all of
the issued and outstanding stock of Great Xpectations Marketing, Inc. ("GXI"),
a Texas corporation (conducting marketing and sales support for the Company's
multi-level marketing operations), from Forrest E. Watson and Connie Marwitz.
The consideration for the stock was a $100,000.00 Promissory Note.
Immediately prior to the purchase of the stock of GXI by the Company,
GXI purchased:
a. All of the assets of Health Thru Nature, Inc., a Texas
corporation, for the consideration of a $50,000.00 Promissory
Note, guaranteed by the Company; and
b. All of the assets of Mighty Power U.S.A., LC, a Texas limited
liability company, for the consideration of a $50,000.00
Promissory Note, guaranteed by the Company, and the assumption
of certain liabilities.
<PAGE> 3
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
The Registrant has not filed a bankruptcy petition (and no parties
have petitioned to place the Registrant in involuntary bankruptcy) and the
Registrant is not in receivership.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
There have been no changes in the Registrant's certifying accountant.
ITEM 5. OTHER EVENTS.
There are no other noteworthy events to report.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
There have been no resignations of the registrant's directors or
declines to stand for re-election because of a disagreement with the Registrant
on any matter relating to the Registrant's operations, policies, or practices.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The financial statements of the acquired businesses are attached
hereto.
ITEM 8. CHANGE IN FISCAL YEAR.
The Registrant has not changed its fiscal year.
SIGNATURES.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
GLOBENET INTERNATIONAL I, INC.
A Delaware corporation
/s/ CLINTON H. HOWARD
--------------------------------
Clinton H. Howard
President
Date: June 3, 1997
<PAGE> 4
`
GLOBENET INC. AND SUBSIDIARIES
Financial Statements
December 31, 1996 and 1995
J. S. Osborn, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Accountants' Report 1
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Shareholders Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
</TABLE>
<PAGE> 6
INDEPENDENT AUDITORS' REPORT
Board of Directors
GlobeNet Inc.
Dallas, Texas
We have audited the accompanying consolidated balance sheets of GlobeNet Inc.
and subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity (deficit) and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements and schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
schedules are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and schedules. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements and schedules.
We believe that our audits provide a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of GlobeNet Inc. and
subsidiaries as of December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ J.S. OSBORN, P.C.
Dallas, Texas
March 31, 1997
<PAGE> 7
GLOBENET INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 94,630 $ 74,703
Accounts and notes receivable, net of
allowance for doubtful accounts 27,030 27,863
Inventories 1,229,672 1,125,143
Prepaid expenses 63,560 53,310
----------- -----------
Total current assets 1,414,892 1,281,019
Property and equipment, net of depreciation 487,803 481,837
Goodwill, net of accumulated amortization 2,009,803 685,417
Other assets 54,995 22,400
----------- -----------
$ 3,967,493 $ 2,470,673
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 843,151 $ 656,989
Accrued expenses 591,890 886,433
Notes payable 65,199 --
Current portion of long-term debt 63,833 68,663
----------- -----------
Total current liabilities 1,564,073 1,612,085
Long term debt, net of current portion 367,571 339,953
Note payable to shareholder 51,768 292,401
----------- -----------
Total liabilities 1,983,412 2,244,439
----------- -----------
Commitment
Shareholders' equity:
Common stock, $.01 par value; authorized 30,000,000 shares;
Outstanding; 1996 4,605,000 shares; 1995 3,885,000 shares 46,050 38,850
Paid in capital 9,269,662 7,489,362
Accumulated deficit (7,333,212) (7,307,765)
Cumulative translation adjustment 1,581 5,787
----------- -----------
1,984,081 226,234
----------- -----------
$ 3,967,493 $ 2,470,673
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE> 8
GLOBENET INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Sales $ 8,638,875 $ 6,082,728 $ 7,594,161
Cost of sales 2,538,428 1,941,242 2,107,927
----------- ----------- -----------
Gross profit 6,100,447 4,141,486 5,486,234
----------- ----------- -----------
Operating expenses:
General and administrative 2,838,395 2,595,985 3,955,308
Distributor commissions 3,025,838 2,234,733 2,811,387
Interest 55,989 63,679 4,649
Depreciation and amortization 188,257 162,356 194,487
----------- ----------- -----------
Total operating expenses 6,108,479 5,056,753 6,965,831
----------- ----------- -----------
Loss from continuing operations (8,032) (915,267) (1,479,597)
Discontinued operations -- (18,553) 60,708
----------- ----------- -----------
Net loss before income taxes (8,032) (896,714) (1,540,305)
Income taxes (benefit) 17,415 8,763 (7,328)
----------- ----------- -----------
Net loss $ (25,447) $ (905,477) $(1,532,977)
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 9
GLOBENET INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Accumulated Total
Common Stock Paid In Accumulated Translation Shareholders'
Shares Amount Capital Deficit Adjustment Equity
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993 -- $ -- $ 6,566,357 $(4,869,311) $ 11,479 $ 1,708,525
Equity contribution -- -- 259,295 -- -- 259,295
Net loss -- -- -- (1,532,977) -- (1,532,977)
Translation adjustment -- -- -- -- (369) (369)
----------- ----------- ----------- ----------- ----------- -----------
Balances, December 31, 1994 -- -- 6,825,652 (6,402,288) 11,110 434,474
Contribution of subsidiaries 3,600,000 36,000 (36,000) -- -- --
Private Placement 285,000 2,850 699,710 -- -- 702,560
Net loss -- -- -- (905,477) -- (905,477)
Translation adjustment -- -- -- -- (5,323) (5,323)
----------- ----------- ----------- ----------- ----------- -----------
Balances, December 31, 1995 3,885,000 38,850 7,489,362 (7,307,765) 5,787 226,234
Purchase of Lightforce 600,000 6,000 1,494,000 -- -- 1,500,000
Private Placement 120,000 1,200 286,300 -- -- 287,500
Net loss -- -- -- (25,447) -- (25,447)
Translation adjustment -- -- -- -- (4,206) (4,206)
----------- ----------- ----------- ----------- ----------- -----------
Balances, December 31, 1996 4,605,000 $ 46,050 $ 9,269,662 $(7,333,212) $ 1,581 $ 1,984,081
=========== =========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE> 10
GLOBENET INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flow from operating activities:
Net loss from operations $ (25,447) $ (905,477) $(1,532,977)
Adjustments to reconcile loss to net cash
provided by (used for) operations:
Depreciation and amortization 201,224 167,760 210,269
Loss on sale of equipment 2,254 33,386 --
Deferred income taxes 3,437 2,738 (17,727)
Translation adjustment (206) (195) (995)
Bad debts -- -- 15,000
Change in assets and liabilities:
Accounts receivable 833 (1,323) 48,537
Prepaid assets (10,250) (4,800) 51,818
Inventory (26,117) 102,992 (98,921)
Increase in other assets (36,031) 11,964 --
Accounts payable 236,938 (396,972) 918,046
Accrued expenses (295,449) 458,188 132,106
Notes payable 14,423 39,632 11,144
----------- ----------- -----------
Cash provided by (used for) operating activities 65,609 (492,107) (263,700)
----------- ----------- -----------
Cash flow from investing activities:
Purchase of furniture, fixtures and equipment (21,995) (26,800) (90,821)
Proceeds from sale of equipment 183 130,367 5,242
----------- ----------- -----------
Cash provided by (used for) investing activities (21,812) 103,567 (85,579)
----------- ----------- -----------
Cash flow from financing activities:
Capital contributions -- -- 259,295
Proceeds from private placement 287,500 702,560 --
Proceeds from long-term debt 24,602 22,047 --
Payments on long-term debt (21,222) (11,230) --
Payments on capital leases (64,115) (90,039) (11,716)
Shareholder advances -- -- 155,375
Repayment to stockholder (250,635) (257,404) --
----------- ----------- -----------
Cash provided by (used for) financing activities (23,870) 365,934 402,954
----------- ----------- -----------
Net increase (decrease) in cash 19,927 (22,606) 53,675
Cash, beginning of year 74,703 97,309 43,634
----------- ----------- -----------
Cash, end of year $ 94,630 $ 74,703 $ 97,309
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE> 11
GLOBENET INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of GlobeNet Inc., (GlobeNet or the Company) and its wholly owned
Subsidiaries; Royal Bodycare, Inc.(RBC-US), Royal Bodycare, Inc. (Canada)
(RBC-Canada), Pure Life International Products, Inc.(Pure Life), Arlington
Laboratories, Inc. (Arlington) and Royal Bodycare S.A. de C.V. (RBC-Mexico)
(collectively the Subsidiaries). RBC-Canada and Pure Life are organized under
the Canadian Business Corporation Act. All significant intercompany accounts
and transactions have been eliminated. A subsidiary of the Company, Kalo Vita,
Inc. (KV) filed for bankruptcy in 1994. The Company does not have control of
this entity, therefore it is not consolidated in these financial statements.
The common stock of the Subsidiaries was owned by Clinton H. Howard and members
of his family until July 1, 1995. On that date the common stock of the
Subsidiaries was contributed to GlobeNet in exchange for 3,600,000 shares of
common stock. The accompanying financial statements have been prepared as if
the Subsidiaries had been contributed to GlobeNet on the respective dates of
their affiliation with Mr. Howard.
COMPANY HISTORY - GlobeNet was incorporated in Texas in June 1995 by Clinton H.
Howard, to serve as a holding company for certain companies affiliated with Mr.
Howard. In July 1995, all of the outstanding capital stock of these affiliated
companies was contributed to GlobeNet by Mr. Howard and his immediate family.
The Company's principle U.S. marketing operations are conducted through RBC-US,
formed by Mr. Howard in 1991.
In 1991 Mr. Howard formed Arlington, a Texas corporation for the purpose of
operating a facility to test the Company's products and perform certain private
label manufacturing activities.
In 1992 Mr. Howard formed RBC-Canada to market products in Canada through a
network of independent distributors. RBC-Canada owns all the outstanding stock
of Pure Life which it purchased in 1992. Pure Life has been in business since
1982.
In 1993 Mr. Howard formed RBC-Mexico to market nutritional and skin care
products. RBC-Mexico ceased operations in late 1995 due to revenue below
expectations.
In 1995 the Company entered into separate agreements to license the exclusive
rights to sell its products in Indonesia and Sweden through office /warehouse
facilities owned and operated by third parties in the respective companies. In
1996 the Company entered into a similar arrangement with a third party licensee
to market the Company's products in Japan. Under these agreements distributors
in these countries are compensated according to the same compensation plan as
that used for the Company's independent distributors.
TRANSLATION OF FOREIGN CURRENCIES - All current assets and liabilities of
foreign subsidiaries were translated into U. S. dollars at the exchange rate in
effect at the balance sheet date. Long-term assets and equity were translated
at historical exchange rates. Revenue and expense accounts were translated at
weighted average exchange rates. Translation gains and losses are reflected as
a separate component of shareholders' equity.
-6-
<PAGE> 12
GLOBENET INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
REVENUE RECOGNITION - The Company sells its products through a network of
independent distributors. The Company recognizes revenue upon sale to its
distributors.
INVENTORIES - Inventories, consisting of finished goods held for resale and
packaging materials, are stated at the lower of cost or market using the
first-in first-out method. The Company may from time to time purchase raw
materials in bulk to be processed at third party locations. These materials are
stated at cost.
CASH EQUIVALENTS - For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Depreciation and amortization are being provided over the estimated useful
lives of the related assets, principally on the straight-line and declining
balance methods ranging from three to seven years.
The Company reviews its property and other noncurrent assets for impairment
when changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Impairment is measured as the amount by which the carrying
amount of the asset exceeds the fair market value of the asset less disposal
costs.
INCOME TAXES - The Company has adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes". SFAS 109 requires
an asset and liability approach to financial accounting for income taxes. In
the event differences between the financial reporting basis and the tax basis
of the Company's assets and liabilities result in deferred tax assets, SFAS 109
requires an evaluation of the probability of being able to realize the future
benefits indicated by such assets. A valuation allowance is provided for a
portion or all of the deferred tax assets when there is an uncertainty
regarding the Company's ability to recognize the benefits of the assets in
future years.
The Company files a consolidated tax return with its subsidiaries. Deferred
income taxes are the result of temporary differences between the amount of
assets and liabilities recognized for financial reporting and tax purposes for
the Company's Canadian subsidiaries.
GOODWILL - Goodwill is amortized over 20 years. Goodwill is reviewed for
impairment on an annual basis.
ACCOUNTING ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
-7-
<PAGE> 13
GLOBENET INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
2. INVENTORIES:
<TABLE>
<CAPTION>
At December 31, inventories consist of the following: 1996 1995
----------- -----------
<S> <C> <C>
Finished goods $ 1,057,998 $ 906,362
Packaging materials and other 171,674 218,781
----------- -----------
Total $ 1,229,672 $ 1,125,143
=========== ===========
</TABLE>
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
At December 31, property and equipment consist of the following: 1996 1995
----------- -----------
<S> <C> <C>
Furniture and fixtures $ 163,883 $ 158,478
Warehouse equipment 266,169 192,415
Automotive equipment 9,562 9,562
Computer equipment and software 625,409 588,750
Leasehold improvements 16,630 16,606
----------- -----------
Total property and equipment 1,081,653 965,811
Less accumulated depreciation and amortization (593,850) (483,974)
----------- -----------
Net property and equipment $ 487,803 $ 481,837
=========== ===========
</TABLE>
4. GOODWILL:
Goodwill was recorded as a result of the acquisition of Pure Life in April 1992
and Lightforce, Inc. (Lightforce) in June 1996 as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Light Force $ 1,407,623 $ --
Pure Life 843,622 843,622
----------- -----------
2,251,245 843,622
Accumulated amortization (241,442) (158,205)
----------- -----------
Net goodwill $ 2,009,803 $ 685,417
=========== ===========
</TABLE>
-8-
<PAGE> 14
GLOBENET INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
5. ACCRUED EXPENSES:
<TABLE>
<CAPTION>
At December 31, accrued expenses consist of the following: 1996 1995
-------- --------
<S> <C> <C>
Distributor commissions $386,263 $292,936
Accounting and legal 173,374 501,752
Sales tax 30,164 65,971
Interest 2,089 1,683
Other -- 24,091
-------- --------
Total $591,890 $886,433
======== ========
</TABLE>
6. NOTE PAYABLE:
At December 31, 1996 a note with a principal balance of $65,199 was payable to
a bank bearing interest at 10% per annum. This note has no scheduled maturity
but is reviewed annually for renewal.
7. LONG-TERM DEBT:
<TABLE>
<CAPTION>
At December 31, long-term debt consists of the following: 1996 1995
--------- ---------
<S> <C> <C>
Note payable - former KV shareholder $ 250,000 $ 250,000
Notes payable - banks 62,381 15,918
Debentures 50,000 50,000
Capital leases 69,023 92,698
--------- ---------
431,404 408,616
--------- ---------
Less - current portion (63,833) (68,663)
--------- ---------
Total $ 367,571 $ 339,953
========= =========
</TABLE>
In connection with Mr. Howard's acquisition of KV in November 1994, the former
owner of KV advanced to RBC-US $250,000 under a one-year note which, in
December 1995, was converted to a four-year note payable interest only on a
monthly basis until its maturity in December 1999, at which time all principal
and unpaid interest is due. Interest accrues on this note at the rate of 12.5%
per annum and the note is personally guaranteed by Mr. Howard.
Included in notes payable - banks is a note made in January 1995 by RBC-Canada
whereby it borrowed funds for a three-year term payable in monthly principal
installments of $600, plus interest, with interest calculated at prime plus
1.5%. Proceeds of this borrowing were used to purchase leasehold improvements
at RBC-Canada's office/warehouse facility in Vancouver, B.C., Canada.
Also included in notes payable - banks is a five year bank note acquired as
part of the Lightforce acquisition. The interest rate of this note is prime
plus 3%.
-9-
<PAGE> 15
GLOBENET INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
7. LONG-TERM DEBT (CONTINUED):
In 1994, the RBC-US sold two debentures in the amount of $25,000 each, the
proceeds of which were used for working capital. The principal portion of these
debentures is due upon maturity in 1998. Interest on the debentures is payable
monthly at a rate of 15% for one debenture and 10% for the other.
Certain purchases of telephone and computer equipment by RBC-US were financed
through capital leases. Such leases have terms ending in 1999 and have various
interest rates approximating 15%.
Long-term debt payments payable in the next four years are as follows:
<TABLE>
<CAPTION>
For the Year Ending December 31,
<S> <C> <C>
1997 $ 63,833
1998 43,751
1999 322,725
2000 1,095
-----------
$ 431,404
===========
</TABLE>
8. NOTE PAYABLE TO SHAREHOLDER:
The note payable to shareholder represents the net advances made to the Company
from time to time by Mr. Howard. These advances were used by the Company for
working capital. The amounts due are without interest and stated terms of
repayment.
9. COMMITMENT:
The Company leases its office and warehouse space and certain equipment using
operating leases for various periods to 2001. Basic annual rents for each of
the next five years are as follows:
<TABLE>
<S> <C> <C>
1997 $ 145,248
1998 102,200
1999 100,740
2000 100,010
2001 4,380
</TABLE>
10. CAPITAL TRANSACTIONS:
CAPITAL CONTRIBUTIONS - In 1994 Mr. Howard invested $259,295 in the various
companies that now make up GlobeNet.
-10-
<PAGE> 16
GLOBENET INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
10. CAPITAL TRANSACTIONS (CONTINUED):
PRIVATE PLACEMENT - In 1996 and 1995 the Company sold 120,000 and 285,000
shares of common stock, respectively, through a private placement offering at a
per share price of $2.50. The proceeds were used to pay accounts payable, to
repay a portion of the note to shareholder and for international expansion.
11. INCOME TAXES:
Until July 1995, RBC-US, Arlington and KV qualified under IRS regulations as
Subchapter S corporations. As such, all of their net operating losses prior to
July 1995 were passed through to their shareholders for inclusion in the
respective tax returns of such shareholders. Therefore the Company has no net
operating loss carryforwards for periods prior to July 1995 available to offset
future taxable income.
Income tax benefits in 1994 recognized by Canada are due to the application of
carry forward losses and capital cost allowances together with the recognition
of previously unclaimed capital loss allowances.
12. LIGHTFORCE ACQUISITION:
In June 1996 the Company acquired certain assets and assumed certain
liabilities of Lightforce, a network marketing company which distributed a line
of nutritional products, for 600,000 shares of the Company's common stock
valued at $1,500,000. In connection with the acquisition the company received
inventory and fixed assets and agreed to assume certain trade accounts payable,
notes payable and commissions payable.
The purchase agreement calls for additional shares of common stock to be paid
based on sales to the Lightforce distributors. Additional common stock, valued
at market price but in no event less than $2.50 per share, will be paid equal
to 25% of sales generated by the Lightforce distributor network during the
first year after the purchase; and 25% of incremental sales above the first
year generated during the second year.
In addition, the agreement specified that the seller will receive a 5%
commission on all sales of Lightforce products. This commission amounted to
$57,240 in 1996.
13. KV BANKRUPTCY:
On November 22, 1994, as a result of a lien filed related to an outstanding
payable, KV filed a petition for reorganization under Chapter 11 of the
bankruptcy code. In September 1996 a plan of liquidation was approved and
became effective for KV.
Until approval of the plan of liquidation, KV was operated under a Management
Agreement with RBC-US, which provided, among other things, that RBC-US operate
KV in exchange for KV's payment of a prorata share (based on the relative sales
volumes of the two companies) of the expenses incurred to support the
operations of RBC-US and KV.
-11-
<PAGE> 17
GLOBENET INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
14. DISCONTINUED OPERATION:
In 1994 the Company closed the Arlington facility and transferred its testing
and manufacturing activities to other entities. This closing has been accounted
for as a discontinued operation in these financial statements.
15. NON-CASH INVESTING AND FINANCING ACTIVITIES:
In 1996 the Company purchased Lightforce for 600,000 shares of common stock
valued at $1,500,000.
16. SUBSEQUENT EVENT:
On March 31, 1997 the company merged with Mighty Power USA, Inc.(Mighty Power),
a public company domiciled in the state of Delaware. Similar to the Company,
Mighty Power sells vitamins and health food products through a network of
independent distributors. Under the terms of the merger the Company exchanged
100% of its outstanding common stock for 10,407,750 shares, or 86%, of the
outstanding common stock of Mighty Power. This transaction, a purchase, will be
accounted for as a reverse merger with the Company being the acquirer.
Concurrent with the merger with Mighty Power, an affiliate of Mighty Power,
Great Xpectations Marketing, Inc. (GXI) acquired all of the assets and
liabilities of two other Mighty Power affiliates for $100,000 in notes payable.
Then, Mighty Power purchased all of the stock of GXI for a $100,000 promissory
note. As part of the merger Mighty Power changed its name to GlobeNet
International I, Inc.
The following unaudited pro forma summary presents the consolidated results of
operations of the Company as if the Mighty Power merger had occurred at the
beginning of periods presented, after including the impact of certain
adjustments including amortization of intangibles.
<TABLE>
<CAPTION>
(Unaudited)
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 10,799,502 $ 6,839,258 $ 7,887,907
Net loss (262,679) (1,141,946) (1,472,664)
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for the entire periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergy that might be achieved from combined
operations.
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