Rule 424(b)(4) Prospectus
Registration No. 333-47186
PROSPECTUS
E*MACHINERY.NET, INC.
2,430,000 Shares of Common Stock
This Prospectus relates to the resale of our Common Stock by
Selling Stockholders listed on Page 24.
Our common stock trades on the over-the-counter Bulletin
Board of the NASD, also called the OTCBB, under the trading
symbol: EMAC. On September 25, 2000, the closing bid for our
common stock as reported on the OTCBB was $1.37 per share.
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RISK FACTORS. OUR COMMON STOCK IS SPECULATIVE AND INVOLVES A
HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY READ AND CONSIDER OUR
RISK FACTORS SECTION BEGINNING ON PAGE 8 BEFORE MAKING AN
INVESTMENT DECISION.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of the
Prospectus. Any representation to the contrary is a criminal
offense.
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THE DATE OF THIS PROSPECTUS IS OCTOBER 25, 2000.
CAUTIONARY STATEMENT
You should rely only on the information contained in this
Prospectus. We have not authorized anyone to provide you with
information different from that contained in this Prospectus. The
selling shareholders are offering to sell, and seeking offers to
buy, shares of e*machinery.net, inc. common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
Prospectus is accurate only as of the date of this Prospectus,
regardless of the time of delivery of this Prospectus or of any
sale of the shares.
TABLE OF CONTENTS
Page
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Available Information. . . . . . . . . . . . . . . . . . . . . . 6
Summary of Information in the Prospectus . . . . . . . . . . . . 7
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . .12
Price Range of Our Common Stock. . . . . . . . . . . . . . . . .12
Our Dividend Policy. . . . . . . . . . . . . . . . . . . . . . .13
Management's Discussion and Analysis of Financial Condition
And Results of Operations . . . . . . . . . . . . . . . . . .13
Our Business. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Our Management. . . . . . . . . . . . . . . . . . . . . . . . . 19
Executive Compensation. . . . . . . . . . . . . . . . . . . . . 21
Certain Relationships and Related Transactions. . . . . . . . . 22
Security Ownership of Certain Beneficial Owners and Management .22
Description of Securities . . . . . . . . . . . . . . . . . . . 23
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . 24
Selling Stockholders. . . . . . . . . . . . . . . . . . . . . . 25
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .26
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . .26
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . .26
Changes in Registrant's Certifying Accountants. . . . . . . . . 27
Index to Financial Statements. . . . . . . . . . . . . . . . . .27
AVAILABLE INFORMATION
We are subject to the reporting requirements of the Securities and
Exchange Commission (the "Commission"). We file annual, quarterly
and special reports, proxy statements and other information with
the Securities and Exchange Commission under the Securities
Exchange Act of 1934. We will provide, without charge, to each
person who receives a copy of this Prospectus, upon written or
oral request, a copy of any information that is incorporated by
reference in this Prospectus (not including exhibits to the
information that are incorporated by reference unless the exhibits
are themselves specifically incorporated by reference). Requests
should be directed to:
Kevin McAndrew, Chief Financial Officer
e*machinery.net, inc.
1400 Medford Plaza
Route 70 & Hartford Road
Medford, New Jersey 08055
(609) 953-7985
We have filed a Registration Statement on Form SB-2 under the
Securities Act of 1993 with the Commission in connection with the
securities offered by this Prospectus. This Prospectus does not
contain all of the information that is in the Registration
Statement. For further information with respect to us and in the
Registration Statement, you may inspect without charge, and copy
our filings, at the public reference room maintained by the
Commission at 450 Fifth Street N.W., Washington, D.C. 20549.
Copies of this material may also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street N.W.,
Washington, D.C. 20549, at prescribed rates. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference
rooms.
The Commission maintains an Internet site that contains reports,
proxy and information statements and other information regarding
issuers that file electronically with the Commission. Our filings
are available to the public from the Commission's web site at
http://www.sec.gov. Visitors to the site may access such
information by searching the EDGAR archives on this web site. In
addition, we maintain a web site on the Internet at
"http://www.e*machinery.net."
SUMMARY OF INFORMATION IN THE PROSPECTUS
This Summary highlights selected information contained in this
Prospectus. To understand this offering fully, you should read
the entire Prospectus carefully, including the Risk Factors
beginning on Page and the Financial Statements beginning on
Page F-1.
Business of the Company
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e*machinery.net, inc. (hereinafter referred to as "the Registrant" or
"the Company") is engaged in the business of providing a "state of the art"
electronic exchange for the purchase and sale of new and used construction
and mining machinery. EMAC intends to also provide access to financing,
underwriting, shipping, inspection, appraisals, training and other associated
services. U.S. Machinery, Corp., a wholly owned subsidiary of
EMAC specializes in purchasing, rebuilding, refurbishing, and reselling used
Caterpillar(R), construction and mining machinery.
e*machinery.net, inc. will attempt to create a worldwide network of
manufacturers, dealers, suppliers and end users of construction and mining
machinery, goods, and services. The e*machinery.net portal can be an
important tool used to bring together a variety of important services to
complement this network. We have avoided becoming solely a
"listings" or "auction" site. We wish to make available an industry
specific and comprehensive daily mechanism to serve the construction and
mining industry.
References to us in this Prospectus include our wholly owned
subsidiaries U.S. Machinery Corp. and e*machinery, inc.
FORMATION GOAL
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e*machinery.net, inc. was formed to be an international Internet portal
to the construction and mining machinery industry. e*machinery.net
hopes to become an international trading company by networking buyers
and sellers of construction and mining machinery throughout the world.
By providing the industry with a listing of services, of which there is no
assurance, including financing, underwriting, shipping, machinery inspections,
etc., e*machinery.net hopes to be the definitive source for the
worldwide construction and mining machinery industry.
CONTACTING US
Our web site is www.e*machinery.net. However, the information contained
on our web site is not part of this Prospectus. Our principal executive
offices are located at: e*machinery.net, inc., 1400 Medford Plaza, Route
70 & Hartford Road, Medford, New Jersey 08055, voice: 609-953-7985.
THE OFFERING
Common Stock Outstanding.................................16,070,632 shares (1)
Common Stock to be offered by our Selling Shareholders....2,430,000 shares (2)
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(1) As of September 25, 2000.
(2) Included in the Company's 16,070,632 shares issued and outstanding.
THE MARKET FOR OUR COMMON STOCK
Our common stock trades on the Over-the-Counter Bulletin Board
of the NASD (the "OTCBB") under the trading symbol "EMAC". The market
for our common stock is highly volatile. We can provide no assurance
that there will be a market in the future for our common stock.
RISK FACTORS
Any investment in shares of our common stock involves a high
degree of risk. You should carefully consider the risks
described below together with the other information contained in
this Prospectus, before you decide to buy our common stock.
Please also note that there may be other risks and uncertainties
not presently known to us or that we currently deem immaterial.
If any of the following or such other risks actually occur, our
business, financial condition or results of operations would
likely suffer, the market price of our common stock could decline
and you may lose all or part of the money you paid to buy our
common stock.
Our limited operating history makes evaluating our business difficult.
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Our operating subsidiary U.S. Machinery, Inc., was incorporated in February,
2000. Accordingly, we have a limited operating history upon which to evaluate
our operations and future prospects. In addition, our revenue model is
evolving and relies substantially upon the growth of e-commerce spending
on the Internet and our ability to become a full-service Internet company.
As an early stage company in a new and rapidly evolving
market, we face risks and uncertainties relating to our ability to
successfully implement our business plan, which are described in more
detail below. We may not successfully address these risks.
We have not been profitable and may not become profitable, in which
event our business would be adversely affected.
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To date, we have not been profitable. We may never be profitable,
or, if we become profitable, we may be unable to sustain profitability.
We expect to continue to incur losses for the foreseeable future because
we expect to continue to spend significant resources to expand our business.
If the demand for worldwide purchase and support services for the
construction and mining industry decreases, our business will be harmed.
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Our success depends in part on the increased acceptance of online
business to business e-commerce, for such services has only recently
begun to develop and is evolving rapidly. The market for our services
may not grow and any growth may not be sustained.
Our success depends on our ability to attract visitors to
e*machinery.net website.
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In addition to our business activities in our U.S. Machinery Corp.
subsidiary, our future success depends upon our ability to continue to
attract and retain visitors, members, advertisers, licensees and other
service related suppliers such as banks and insurance companies. If we
are unable to attract these visitors, the effectiveness of our business,
results of operations and financial condition would be materially adversely
affected.
We may face significant competition.
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The market for Internet services is intensely competitive. We
expect competition in our market to continue to intensify as a result of
increasing market size, greater visibility of the market opportunity for
Internet services and minimal barriers to entry. Industry consolidation
may also increase competition. We compete with many types of companies,
including both online and offline companies, search engine and other
Internet portal companies, a variety of Internet-based advertising
networks and other companies that facilitate the marketing of products
and services on the Internet. Many of our existing competitors, as well
as a number of potential new competitors, have longer operating
histories, greater name recognition, larger client bases and
significantly greater financial, technical and marketing resources than
we do. This may allow them to compete more effectively and be more
responsive to industry and technological change than us. We may not be
able to compete successfully and competitive pressures may reduce our
revenues and result in increased losses or reduced profits.
Our business may suffer if we are unable to retain key personnel.
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Our future success is substantially dependent upon the continued
service of our founders, Arthur A. O'Shea, III, Chief Executive officer,
and Stuart R. Matthews, Vice President, and other executive officers.
The loss of the services of any of our executive officers could have a
material adverse affect on our business. We do not currently have "key
person" life insurance policies on any of our employees. We have employment
agreements only with the founders. Competition for senior
management is intense, and we may not be successful in attracting and
retaining key personnel.
The inability to protect our intellectual property rights, and any
infringement on the intellectual property rights of others, could
adversely affect our business.
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Third parties may infringe or misappropriate our patents,
trademarks or other intellectual property rights, which could have a
material adverse effect on our business, results of operations or
financial condition. The actions we take to protect our trademarks and
other proprietary rights may not be adequate. In addition, the
validity, enforceability and scope of protection of proprietary rights
in Internet-related industries is uncertain and still evolving.
Third parties may assert infringement claims against us. Any
claims and any resulting litigation, should they occur, could subject us
to significant liability for damages. In addition, even if we prevail,
litigation could be time-consuming and expensive to defend, and could
result in the diversion of our time and attention. Any claims from
third parties may also result in limitations on our ability to use the
intellectual property subject to these claims unless we are able to
enter into contractual arrangements with the third parties making these
claims, which arrangements may not be available on commercially reasonable
terms.
Privacy and security concerns may cause customers not to
participate in our portal/website which would have a material
adverse effect on our business.
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An important feature of the services we provide our clients is our
ability to develop and maintain a data base and other information about
customers participating in our portal. Privacy and other security concerns
may cause customers to resist providing us with business and personal data,
which would reduce the value of our services. Moreover, privacy and security
concerns may inhibit customer acceptance of the Internet as a means of
commerce. If privacy and other security concerns of customers are not
adequately addressed, our business would be materially adversely affected.
Our growth will depend on the growth of Internet usage.
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We depend on continued growth in the use of the Internet by
businesses and customers. If electronic commerce does not grow or grows
more slowly than expected, the use of the Internet by businesses may
decline or grow more slowly than anticipated. Even if Internet usage
grows, the Internet infrastructure may not be able to support the demands
placed on it and its performance or reliability may decline.
We may be unable to respond to technological change effectively.
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Our industry is characterized by rapid technological change,
frequent new service introductions, changing consumer demands and
evolving industry standards and practices. Our inability to anticipate
and effectively respond to these changes on a timely basis would
materially adversely affect our business, results of operations and
financial condition. Our future success will depend, in part on our
ability to cost-effectively adapt to rapidly changing technologies, to
enhance existing services and to develop and introduce a variety of new
services to address changing demands of customers and our clients on a
timely basis.
The failure of our computer or communications systems may
adversely affect our business.
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Our business depends on the efficient and uninterrupted operation
of our computer and communications systems. Any system failure,
including network, software or hardware failure, that causes an
interruption in our service or decreases the responsiveness of our
portal or website could materially adversely affect our business.
Laws and regulations pertaining to the Internet may adversely
affect our business
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There are an increasing number of laws and regulations pertaining
to the Internet. These laws and/or regulations may relate to liability
for information retrieved from or transmitted over the Internet, online
content regulation, user privacy, taxation and the quality of products
and services. Moreover, the applicability to the Internet of existing
laws governing intellectual property ownership and infringement,
copyright, trademark, trade secret, obscenity, libel, employment,
personal privacy and other issues is uncertain and developing. Any new
law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could decrease the demand for our
services, increase our cost of doing business or otherwise have a
material adverse effect on our business, results of operations and
financial condition.
Voting Control by Management; Potential Anti-Takeover Effect
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Management beneficially owns over 50% of the outstanding shares.
Accordingly, they may, by themselves, have sufficient shares to be able
to approve major corporate transactions including amending the
Certificate of Incorporation of the Company, the sale of substantially
all of the Company's assets, the election of all of the directors of the
Company and to control the Company's change in control of the Company
and may adversely affect at the rights of the shareholders of the Company.
In addition, the Company is subject to a State of Texas
statute regulating business combinations which may also hinder or delay
a change or control.
Purchasing Cores May Be Limited.
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The availability of quality cores (used "Caterpillar"
construction and mining equipment) to be purchased and then
refurbished may be limited, and the cost of doing so may not be
sufficient to make a profit.
Information About Forward-Looking Statements
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This Prospectus contains numerous forward-looking statements
about our business and future. The United States Private
Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. Our forward-looking
statements are expressed in good faith and we believe that there
is a reasonable basis for us to make them. However, readers are
cautioned not to place undue reliance on such statements. Forward-
looking statements include, but are not limited to, statements
about our:
- Plans;
- Objectives;
- Strategies;
- Expectations for the future;
- Future performance and events;
- Underlying assumption for all of the above; and
- Other statements that are not statements of historical fact.
We make these forward-looking statements based on our
analysis of internal and external historical trends and future
expectations. However, such statements involve risks and
uncertainties that could cause our actual results to materially
differ from our forward-looking statements and there can be no
assurance that we will achieve the results set forth in these
forward-looking statements. We have no obligation, or intent, to
update or revise these forward-looking statements to reflect
future events, new information or otherwise.
USE OF PROCEEDS
We will not receive any proceeds upon the sale of the Common
Stock in this offering. All net proceeds from the sale of Common
Stock under this Prospectus will go to the shareholders who offer
and sell their shares. Accordingly, the Company will not receive
any proceeds from such sales.
PRICE RANGE OF OUR COMMON STOCK
Our common stock trades on the OTCBB under the trading symbol
EMAC. This table summarizes the quarterly high and low bid prices
per share for our common stock. The bid prices reflect inter-
dealer prices, without retail markup, markdown, or commission and
may not represent actual transactions. The Company effectuated a
one for ten reverse stock split effective February 9, 2000, and
the Board of Directors changed the trading symbol stock from
"HRVD" to "EMAC". The high and low closing prices (adjusted to
reflect the 1 for 10 reverse stock split) of the Company's common
stock from January 1, 1998 through September 30, 2000 were as follows:
Market for Equity and Related Stockholder Matters
1998 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
High Low High Low High Low High Low
Common Stock $17.50 $3.125 $3.44 $3.125 $3.75 $3.125 $6.25 $2.19
1999 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
High Low High Low High Low High Low
Common Stock $2.30 $1.25 $1.30 $1.25 $5.93 $0.62 $2.60 $0.45
2000 1st Quarter 2nd Quarter 3rd Quarter
High Low High Low High Low
Common Stock $4.00 $0.62 $2.75 $1.50 $2.188 $1.125
The approximate number of record holders of the Company's common stock as
of September 25, 2000 as determined from the Company's transfer agent's list
of record holders was 75. Such list does not include beneficial owners of
securities whose shares are held in the names of various dealers and
clearing agencies. The Company believes that there are in excess of 300
beneficial holders.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock of the
Company is American Registrar & Transfer Co., 343 East 900 South,
Salt Lake City, Utah 84111.
OUR DIVIDEND POLICY
We have not paid, and do not intend to pay, cash dividends on
our common stock in the foreseeable future. Our current dividend
policy is to retain all earnings, if any, to provide funds for
operation and expansion of our business. Our declaration of
dividends, if any, will be subject to the discretion of our Board
of Directors, who may consider, without limitation, factors such
as our results of operations, financial condition, capital needs,
and acquisition strategy.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement
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When used in this Prospectus, and in other public statements, both
oral and written, by the Company and Company officers, the word
"estimates", "project", "intend", "believe", "anticipate", and similar
expressions, are intended to identify forward-looking statements regarding
events and financial trends that may affect the Company's future operating
results and financial position. Such statements are subject to risks and
uncertainties that could cause the Company's actual results and financial
position to differ materially. Such factors include, among others: (1) the
Company's success in attracting new business; (2) the Competition in
the industry in which the Company competes; (3) the Company's ability to
obtain financing on satisfactory terms; (4) the sensitivity of the
Company's business to general economic conditions; and (5) other economic,
competitive, governmental and technological factors affecting the Company's
operations, markets, products, services and prices. The Company undertakes
no obligations to publicly release the result of any revision of these
forward-looking statements to reflect events or circumstances after the date
they are made or to reflect the occurrence of unanticipated events.
RESULTS OF OPERATIONS
Results of Operations for the six months ended June 30, 2000.
Revenues
________
There were no revenues recorded during the first six months
of fiscal 2000. The first sale of equipment occurred in August,
2000. The Company sold two pieces of equipment during the third
quarter and it is anticipated that several more machines will be
sold during the fourth quarter.
Costs and Expenses
__________________
Costs and expenses for the quarter ended June 30, 2000
increased significantly over the first quarter of fiscal 2000.
The primary reason was a charge of $1,125,000 for the sale of
stock to certain officers at a discount against market. The
other reason for the increase was that salaries to employees were
paid for the full three months of the quarter. In the first
quarter, the salaries began to be paid in March, 2000
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources for the six months ended June 30,
2000.
Working capital at June 30, 2000 was $1,223,000. This was
an increase of $1,544,000 over December 31, 1999. The Company
finalized its seed capital funding by raising an additional
$1,324,000 in fiscal 2000.
The Company's wholly owned subsidiary, U.S. Machinery Corp.
also began operations during March, 2000 and as of June 30, 2000
had purchased over $700,000 of Caterpillar used heavy equipment.
It is anticipated that these cores would be refurbished and would
be sold during the fourth quarter of this year. The first sale
occurred in early August, 2000, with a total of two units of equipment
being sold during the third quarter.
The Company is also in the process of searching for a
revolving line of credit against its inventory. This would allow
for more rapid expansion of the business, and would free up
additional operating capital to allow for increased hiring of
sales and support personnel.
DESCRIPTION OF BUSINESS
It is our intention to design, manage, maintain, and constantly
update a vertically integrated website that will provide interplay
between the major manufacturers, distributors, and providers of
supportive goods and services to the construction and mining
machinery industry, and will also provide our members, licensees,
and business partners access to their own company wide intranets,
and other destinations on the web.
Companies that sell construction and mining machinery should
benefit from the following services:
* Photographs and basic descriptions placed in the Internet for
viewing by our buying members 24hours a day / 365 days a year.
* An informative web page for their company
E-mail links to specified personnel within their company.
* Sellers will receive the e*machinery Hit List which gives
them the contact information of potential buyers looking for specific
machines. (This service will send information via e-mail in order to
assist the seller with a current leads).
Buyers of construction and mining machinery should benefit from
the following services:
* Access to news and information from the e*machinery web site 24
hours a day/365 days a year to include all major manufactures and dealers.
* Access to updated machinery listings, including photos, in any.
Buyers will receive listings of specific information available machines
via e-mail or fax on a current basis. The Company believes that the
following advantages can also be considered in comparison to the usual
business practices in this field:
* Domestic and foreign financial services.
* Responsive Company hired personnel to answer questions and
expedite transactions.
* Hard copy advertisers provide exposure to limited number of
subscribers, and information is usually a minimum of 3 weeks old
before it reaches the prospective buyer.
* e*machinery website is intended to be updated daily and reach
around the globe, 24 hours a day / 365 days a year.
* e*machinery will be designed to show all inventory available, updated
on a daily basis. Specifications and photographs should be
available at the click of a mouse. Buyers historically must spend
hours digging through pages of ads unrelated to their search.
* e*machinery will focus the buyers' search to the machines they want
to see.
* Sharp declines in market trends can happen overnight and hard copy
advertisers will usually have to wait a minimum of 3 weeks to react to
these sharp declines.
* e*machinery can alert its members almost immediately to market trends.
Today, companies are pouring millions of dollars into web based
advertising and promotion. e*machinery intends to provide a full-stop
shopping portal for the construction and mining machinery industry.
e*machinery.net, our web site, will foster business to business e-commerce
for construction and mining machinery.
Competition
Although the Company believes that no existing Internet portal is
currently offering the depth of products and services for any
specific industry that e*machinery, inc. expects to offer for the
construction and mining machinery industry, there is potential
competition both on and off the Internet at this time.
Potential Competitors might include:
Verticalnet
Netgateway
Yahoo
Ariba
American Online
Stores
Iron Planet
Machinery Trader
Point2
Global Sourcing Network
GUIA
Centrack
imark.com
My Little Salesman
Equipment Central
Tradeyard
U.S. Machinery Corp.
U.S. Machinery Corp. (USMC) is a wholly owned subsidiary of
e*machinery, inc. that is concentrating on the rebuilding and marketing of
pre-owned construction and mining machinery. USMC offer rebuilt
machinery with a warranty. This is a potential advantage for
contractors and mining companies. They can upgrade their fleets
at a lower cost without the higher risks of buying used machines
without a warranty. The following sets forth additional
information regarding rebuilding, refurbishing and U.S. manufactured
construction and mining machinery.
Custom Rebuilt Machinery
U.S. Machinery Corp. has chosen to contract with Darr Equipment
Company to rebuild the cores or preowned machines purchased by USMC.
USMC would then sell the rebuilt machines at average
sales prices ranging from $300,000 to $900,000 per machine. USMC
also intends to purchase and sell machines that do not have to be
rebuilt, but merely refurbished. USMC has successfully acquired and
sold its first Caterpillar D10R crawler tractor. In addition, USMC
has acquired five other Caterpillar machines (cores) which are
presently being rebuilt and refurbished by Darr Equipment Company.
Darr Equipment Company is one of the largest Caterpillar dealers
and rebuilders in the world. Darr Equipment Company was founded in
1954 and now employs over 1,200 employees in seventeen locations.
Strength of U.S. Machinery Corp.
We use only genuine Caterpillar parts on our custom rebuild program
machines. Once rebuilt, the machines are processed through a blast
and paint facility which provides factory quality painting.
Warranty Options Available
1 year/2000 hour-powertrain
2 year/10,000 hour-powertrain
Customer Rebuilt/Certified Rebuild
1.The type of machinery we offer in this program is intended to include:
Wheel loaders, dozers, excavators, wheel dozers, scrapers, motorgraders and
end dump trucks.
2. The specific models of machinery primarily offered are:
Wheel loaders Excavators
992C & D 245B/375L
988F 235D/350L
980F
966F
Dozers Track Type Tractors Wheel Dozers
D11N 992/690
D10N B34B
D9N 824B
D8N
Pipelayers Scapers/Motor Scrapers
594 657E/651E
583 637E/631E/633E
572
Motor Graders End Dump Trucks
16G 50 785B
14G 60 777B&C
140G 70 773B
80 769C
Core Criteria (usual case)
A Not over 25,000 total frame hours
B No pitting or corrosion
C Not over 7 years old (Custom Rebuild)
D Not over 10 years old (Certified Rebuild)
E Preferably U.S. serial numbered units
F Within Core pricing sheet
G No major plating or breaks in frames (chassis or frame)
Licensing Agreements:
e*machinery, inc. has commenced qualifying Construction &
Mining Machinery sales companies around the world so that licensing
agreements can eventually be put into place, although there is
no assurance that any licenses can be sold or placed. One of our
goals is to have a world wide sales force that shares each others
inventories to immediately satisfy a customer's needs. The Company
will attempt to have this multifaceted sales force qualify
through criteria determined by the management of e*machinery, inc. to
comply as follows:
- Be well known in their area of the Industry with excellent
customer relations and reputation.
- Have a substantial inventory of quality Construction and
- Mining Machinery dedicated to their niche of the Industry.
- Ability to supply parts & service and product support to
their customer base and/or have relationships to subcontract.
- Provide Guarantees/Warranties specifically tailored to their
customers' needs.
- Sign a quality assurance contract with e*machinery.net to
insure our customers that they can purchase Construction &
- Mining Machinery with confidence.
- Ability to help qualified customers obtain financing or lease
options in their designated areas or territories.
- Ability to secure Sea, Air or Land transportation that makes
sense for their area of territory with respect to the
customer's purchases.
- Ability to perform or contract a qualified technical analysis
of Construction & Mining Machinery and stand behind their reports.
- Ability to perform or contract a qualified appraisal of one
or a whole fleet of Construction & Mining Machinery in their
niche of the market.
- Ability to perform or contract qualified residual values
based on market value and condition reports of Construction &
- Independent Dealers/leasing and rental agencies.
The major manufacturers of Construction & Mining Machinery have a
dominant position in the market for new sales but the Company
believes that there exists a significant worldwide market for rebuilt and used
Construction & Mining Machinery. Rental companies, used equipment
dealers and leasing agencies might be interested in joining our website.
These companies should benefit by being part of the
clientele of e*machinery.net. The international exposure could increase
these companies revenues. Also having their inventory on our
Intranationalnet will add a multifaceted, multilingual sales force
to their current sales force. A small commission is proposed to
be deducted from each sale that is executed through the
e*machinery.net family. A percentage will stay with e*machinery.net
and the rest will go to the licensed sales organization.
The e*machinery.net site map will provide quick access to
important sites within our industry. The Site Map should include
manufacturers, financial institutions, transportation companies
and government agencies that are an integral part of the global
machinery market. Up to the minute construction and mining news
should be available 24 hours a day by clicking the link at the top
of the page. This will provide members insight into the industry
at the click of a mouse.
Large photos and descriptions will highlight the machinery
information that we make available to our visitors. It is
intended that this would be enough information to get them to call
and request more, giving a sales
staff an opportunity to talk to a warm lead.
The e*machinery.net navigational bar stays at the top of the
screen during the entire visit at the site. This makes it easier to
jump from one section to another without numerous steps.
CURRENT EMPLOYEES
As of September 25, 2000, the Company had 2 employees and 4
consultants. The Company believes that the relationship with its
employees and consultants is satisfactory.
OUR BUSINESS LOCATIONS
The Company executed a Lease Agreement with 114 Millennium, Ltd.
to lease its sales/corporate office consisting of approximately 5,000
square feet located at 222 West Las Colinas Boulevard, Irving, Texas for
approximately $10,000 per month. The term of the Lease Agreement is five
years beginning on September 1, 2000.
The Company leases an additional 1,000 square feet at 1400 Medford Plaza,
Medford, New Jersey for aggregate annual rental payments of approximately
$10,000, on a month to month lease. This facility is used for investor
relations and finance.
OUR MANAGEMENT
Following is a list of our executive officers and members of
our Board of Directors:
Name Age Position Held with Company (1)
---- --- ------------------------------
Arthur A. O'Shea, III 39 Director, President and Chief Executive
Officer of the Company
Stuart R. Matthews 34 Director, Vice President and Treasurer
Kevin J. McAndrew 41 Director, Secretary
Stanton M. Pikus 59 Director
Frank A. Cappiello* 74 Director
---------------
(1) All directors hold office until the next annual meeting of stockholders
of the Company and thereafter until their successors are chosen and qualified.
All officers hold office at the selection and choice of the Board of
Directors of the Company.
*Independent Director
ARTHUR A O'SHEA, III, President, Chief Executive Officer and Director.
From 1999 to present, Mr. O'Shea was President and a Founder of
e*machinery.net, inc. From 1992 until late 1999, Mr. O'Shea was
employed in various capacities by Hoss Equipment Company, one of the
largest used equipment dealers in the United States. From 1998
through 1999, he was Vice President, Chief Operating Officer and
International Sales Director; in 1997, he was Vice President of Sales,
both domestic and international; and from 1992 through 1996, he was
International Sales Director. From 1990 through 1991, he was a consultant
with Industrial Metals Company and Liberty Iron & Metals. His assignment
was to dismantle and re-sell the major assets of Lafarge Corporation cement
processing plan located in Forth Worth, Texas. From 1986 through 1990, he
traveled extensively throughout Latin America, as well as Mexico, employed
there by three major dealers of Caterpillar equipment. He also, during
this period, was a consultant for five construction companies in Mexico with
regard to the utilization of construction machinery. From 1980 through
1985, he was employed by Darr Equipment Company, Inc., a North Texas and
Oklahoma based Caterpillar dealership.
STUART R. MATTHEWS, Director, Treasurer and Vice President. From 1999 to
present, Mr. Matthews was Vice President, Treasurer, and a founder of
e*machinery.net, inc. From 1994 to early 2000, Mr. Matthews was Marketing
Director of International Sales for Hoss Equipment Company. In 1994, he
worked for Alvis Arthur Machinery Company as Advertising and Marketing
Director. From 1993 through early 1994, he was Sales and Customer Service
Director for Dalworth Corporate Cleaning Company. From 1990 through 1993,
he was employed as General Manager of the retail division for Parkway
Paging Company. From 1987 through 1989, he was the Municipal Court Police
Liason for the City of Grand Prairie, Texas. From 1983 through 1986, Mr.
Matthews attended the Michael F. Price College of Business at the University
of Oklahoma, and also earned a degree in Advertising from the H.H. Herbert
School of Journalism and Mass Communications, also at the University of
Oklahoma.
KEVIN J. MCANDREW, Director, Chief Financial Officer and Secretary. Mr.
McAndrew is also the Chief Financial Officer, Executive Vice President and a
Director of Canterbury Information Technology, Inc., a public company listed
on National Market NASDAQ, and has been with the company since 1987. He is a
graduate of the University of Delaware (B.S. Accounting, 1980) and has been
a Certified Public Accountant since 1982. From 1980 through 1983, he was an
Auditor with the public accounting firm of Coopers and Lybrand in
Philadelphia. From 1984 through 1986, Mr. McAndrew was employed as a
Controller for a New Jersey based division of Allied Signal, Inc. As a
subsequent event, on March 27, 2000, Mr. McAndrew resigned as Vice President
and Treasurer of e*machinery.net, inc. and was appointed Secretary and
Chief Financial Officer by the Board of Directors.
STANTON M. PIKUS, Director. On March 27, 2000, Mr. Pikus resigned as Secretary
of e*machinery.net, inc. and was appointed as a Director. Mr. Pikus is also
the President and Chairman of the Board of Directors of Canterbury Information
Technology, Inc., a National Market NASDAQ public company that focuses on
information technology and training. Mr. Pikus was a founder of the company.
He graduated from the Wharton School of the University of Pennsylvania
(B.S. Economics and Accounting) in 1962. From 1968 through 1981, he had been
the President and the majority stock holder of Brown, Bailey and Pikus,
Inc., a mergers and acquisitions consulting firm that completed more than
twenty (20) transactions. In addition, Mr. Pikus has been retained in the
past by various small to medium sized public companies in the capacity of an
independent financial consultant.
FRANK A. CAPPIELLO, Director. Mr. Cappiello was elected Director in February
2000. He is the President of an investment counseling firm of McCollough,
Andrews & Cappiello, Inc., that provides management of more than $1 billion
of assets. He is Chairman of three no-load mutual funds; Founder and
Principal of Closed-End Fund Advisors, Inc.; publisher of Cappiello's
Closed-End Fund Digest; author of several books and a regular panelist on
"Wall Street Week with Louis Rukeyser." For more than 12 years, Mr. Cappiello
was Chief Investment Officer for an insurance holding company with overall
responsibility for managing assets of $800 million. Before that, he was the
Research Director of a major stock brokerage firm. Mr. Cappiello has been
and is a Director of Canterbury Information Technology, Inc. since 1995.
He is a graduate of the University of Notre Dame and Harvard University's
Graduate School of Business Administration.
EXECUTIVE COMPENSATION
Employment Contracts
--------------------
In January 2000, Arthur A. O'Shea, III, President and Chief Executive Officer
entered into a five year employment agreement with e*machinery, inc., and
since the acquisition was finalized, the employment agreement is with the
Company. The agreement provides for a base salary of $250,000 with a cash
bonus opportunity of $200,000 a year based upon the Company exceeding budget
by 10% to 50%. In conjunction with this contract, Mr. O'Shea agreed to a
covenant not to compete with the Company during his employment and for a
five-year period after his employment with the Company has terminated.
Also in January 2000, Stuart B. Matthews, Vice President and Treasurer,
entered into a five year employment agreement with e*machinery, inc. and
since the acquisition was finalized, the employment agreement is with the
Company. The agreement provides for a base salary of $150,000 with a cash
bonus opportunity of $100,000 a year based upon the Company exceeding budget
by 10% to 50%. In conjunction with this contract, Mr. Matthews agreed to a
covenant not to compete with the Company during his employment and for a
five-year period after his employment with the Company has terminated.
CASH COMPENSATION
The Company has 4 full-time employees as of September 29, 2000.
COMPENSATION OF DIRECTORS.
At this time, the Company is not compensating Directors. However,
in the future, it is at the discretion of the Board of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases its Medford, New Jersey office space under a
month to month operating lease from Canterbury Information
Technology, Inc., a company that owns stock in e*machinery.net, inc.
The Officers and Directors have the following relationships and related
transactions with the Company.
In August 1999, Louis Kassen received 35,000 shares of restricted common stock
(which reflects the 1 for 10 reverse stock split effective February 9, 2000)
of Harvard Financial Services Corp. for services rendered as President.
Stanton M. Pikus is the President, Chief Executive Officer and Chairman of
the Board of Directors of Canterbury Information Technology, Inc. and Kevin
J. McAndrew is the Executive Vice President, Chief Financial Officer and
a Director of Canterbury Information Technology, Inc. Canterbury Information
Technology, Inc. is an 11% shareholder in e*machinery.net, inc. and CALC/
Canterbury Corp., a wholly owned subsidiary of Canterbury Information
Technology, Inc. has been and will continue to work closely with
e*machinery.net, inc. to provide information technology services, and in
particular, will oversee the development of e*machinery.net, inc.'s website.
Frank Cappiello is a Director of the Company as well as a Director of
Canterbury Information Technology, Inc.
In addition, Mr. Pikus, Mr. McAndrew and Mr. Cappiello have purchased
significant shares of common stock in e*machinery.net, inc.
On January 28, 2000, as part of a settlement for debt, Canterbury Information
Technology, Inc. was issued 154,194 pre-split (15,420 post-split)restricted
shares of common stock of the Company as partial payment of services. Also
as part of the settlement of debt, Canterbury received $50,000 at
closing as well as any and all proceeds received by Harvard Financial
Services, Inc. (a wholly owned subsidiary of Harvard Financial Services Corp.)
relating to that company's student notes receivable except any proceeds due
Harvard from the students of Blake School of Business in New York.
In addition, on April 11, 2000, the Board of Directors of e*machinery.net, inc.
issued 278,133 shares of restricted common stock of the Company to Canterbury
Information Technology, Inc. for payment of information technology services.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A)(B) The following table sets forth certain information with regard
to the record and beneficial ownership of the Company's Common Stock on
August 31, 2000 by (i)each shareholder owning of record or beneficially 5%
or more of the Company's Common Stock (ii) each Director individually,
and (iii) all Officers and Directors of the Company as a group. All
numbers have been adjusted to reflect the 1 for 10 reverse stock split
effective February 9, 2000.
Shares Beneficially Owned on % Owned of
Name September 25, 2000 Company's Shares
------------------------------------------------------------------
----
Arthur A. O'Shea, III 5,000,000 32.90%
Stuart R. Matthews 2,500,000 16.45%
Stanton M. Pikus (1) 2,204,750 14.51%
Kevin J. McAndrew 845,000 5.56%
Frank A. Cappiello 220,602 1.45%
--------- ------
All Officers and Directors
as a group (5 in number) 10,770,352 70.88%
========== ======
(1) Included in the 2,204,750 shares beneficially owned by Stanton M. Pikus
are 3,000 shares owned by Jean Z. Pikus, his wife, and 10,000 shares owned
by Matthew Z. Pikus Trust, Mr. Pikus' son.
DESCRIPTION OF SECURITIES
Common Stock
Holders of shares of Common Stock of the Company are entitled to
cast one vote for each share held at all shareholders meetings for
all purposes, including the election of directors, and to share
equally on a per share basis in such dividends as may be declared
by the Board of Directors out of funds legally available therefor.
Upon liquidation or dissolution, each outstanding share of Common
Stock will be entitled to share equally in the assets of the
Company legally available for distribution to shareholders after
the payment of all debts and other liabilities. Shares of Common
Stock are not redeemable, have no conversion rights and carry no
preemptive or other rights to subscribe to or purchase additional
shares in the event of a subsequent offering. All outstanding
shares of Common Stock are, and the shares offered hereby will be
when issued, fully paid and non-assessable.
Non-Cumulative Voting
The Common Stock does not have cumulative voting rights which
means that the holders of more than fifty percent of the Common
Stock voting for election of directors can elect one hundred
percent of the directors of the Company if they choose to do so.
Dividends
There are no limitations or restrictions upon the right of the
Board of Directors to declare dividends out of any funds legally
available therefor. It is not anticipated that any dividends will
be paid in the foreseeable future. The Board of Directors may
follow a policy of retaining earnings to finance the future growth
of the Company. Accordingly, future dividends, if any, will
depend upon, among other considerations, the Company's need for
working capital and its financial condition at the time.
Reports to Shareholders
We will issue annual reports to our shareholders examined by
independent auditors as soon as practicable at the end of each
fiscal year. The Company also intends to issue quarterly reports to our
shareholders.
PLAN OF DISTRIBUTION
This Prospectus relates to the aggregate resale of 2,430,000
shares of the common stock that may be sold by the Selling
Shareholders.
The Selling Shareholders and any of their pledgees,
assignees, and successors-in-interest may, from time to time, sell
any or all of their shares of common stock on any stock exchange,
market, or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated
prices. There is no assurance that the Selling Shareholders will
sell any or all of the common stock in this offering. The Selling
Shareholders may use any one or more of the following methods when
selling shares:
- ordinary brokers transactions, which may include long
or short sales;
- transactions involving cross or block trades on the
NASD OTC Bulletin Board;
- purchases by brokers, dealers or underwriters as
principal and resale by such purchasers for their own account
pursuant to this Prospectus;
- through market makers or in ways not involving market
makers or established trading markets;
- through transactions in options, swaps or other
derivatives;
- privately negotiated transactions;
- through hedging or option transactions or with
broker-dealers; or
- in a combination of any of the above transactions.
- any other lawful method.
The Selling Shareholders may also engage in:
- Short selling against the box, which is making a short
sale when the seller already owns the shares;
- Buying puts, which is a contract whereby the person
buying the contract may sell shares at a specified price by a specified date.
- Selling calls, which is a contract giving the person
buying the contract the right to buy shares at a specified price
by a specified date.
- Selling under Rule 144 under the Securities Act, if
available, rather than under this Prospectus.
- Other transactions in our securities, and the subsequent
sale or delivery of shares by the stockholder.
- Pledging shares to their brokers under the margin
provisions of customers agreements. If a selling stockholder
defaults on a margin loan, the broker may, from time to time,
offer and sell the pledged shares.
Broker-dealers engaged by the selling stockholders may
arrange for other broker-dealers to participate in sales. Broker-
dealers may receive commissions or discounts from the selling
stockholders in amounts to be negotiated.
If any broker-dealer acts as agent for the purchasers of
shares, the broker-dealer may received commission from the
purchaser in amounts to be negotiated. The selling stockholders
do not expect these commissions and discounts to exceed what is
customary in the types of transactions involved.
The selling stockholders and any broker-dealers or agents
that are involved in selling the shares may be considered to be
"underwriters" within the meaning of the Securities Act for such
sales. An underwriter is a person who has purchased shares from
an issuer with view towards distributing the shares to the public.
In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by
them may be considered to be underwriting commissions or discounts
under the Securities Act.
SELLING SHAREHOLDERS
2,430,000 of the shares covered by this Prospectus were
acquired from the Company under a Private Placement in April of
2000 for an aggregate purchase price of $972,000 at $.40 per
share. The offer and sale by the Company of this common stock to
the selling shareholders were made under an exemption from the
registration requirements of the Security Act provided in Section
4(2).
The Company will not receive any proceeds from the resale of
the common stock by the Selling Shareholders. The Company agreed
to register the Common Stock that was issued to the selling
shareholders. Our registration of the Common
Stock does not necessarily mean that the selling shareholders will
sell all or any of their shares. None of the selling shareholders
has had a material relationship with the Company within the past
three years except as a result of the ownership of the shares or
other securities of the Company.
The following table shows:
(i) the name of the selling shareholders;
(ii) the number of shares of Common Stock
beneficially owned by the selling shareholders;
(iii) the aggregate number of shares of Common Stock
to be resold by each shareholder from time to time under this
Prospectus;
(iv) the percentage owned of Company prior to resale
(as of September 15, 2000; and
(v) the number of shares beneficially owned after
the sale of all of the shares offered under this Prospectus.
This information is based upon information provided by the
selling shareholders. The shares are being registered to permit
public secondary trading of the shares, and the selling
shareholders may offer the shares for resale from time to time.
RESALE BY SELLING STOCKHOLDERS OF SHARES CURRENTLY OUTSTANDING
Name of Shares Shares to be Percentage Shares
Selling Beneficially Resold in the of Company Beneficially
Shareholder Owned Before Resale Offering Owned Prior Owned After
To Resale the Offering
_________________________________________________________________________
Almond Resources 450,000 450,000 2.96% 0
Fidra Holdings 450,000 450,000 2.96% 0
Chivas Holdings 450,000 450,000 2.96% 0
FMS Distributors 450,000 450,000 2.96% 0
Raffles Toho 450,000 450,000 2.96% 0
Vivie Matteos 180,000 180,000 1.19% 0
As of the date of this Prospectus, we have issued and outstanding
16,070,232 shares of our common stock and no shares of our preferred stock.
A current Prospectus must be in effect at the time of sale of
the common stock to which this Prospectus relates. Any Selling
Shareholder or dealer effecting a transaction in the registered
securities, whether or not participating in a distribution, is
required to deliver a Prospectus. Unless otherwise exempted, the
Selling Shareholders and their agents engaged in the resale of the
Common Stock may be deemed underwriters under the Securities Act.
LEGAL PROCEEDINGS
There are no legal proceedings.
LEGAL MATTERS
Our legal counsel, Levy & Levy, P.A., has rendered an
opinion to the effect that the Common Stock offered for resale
pursuant to this Prospectus is duly and validly issued, fully paid
and non-assessable. William N. Levy, Esq., a partner in this
firm, is a non-affiliate stockholder of e*machinery.net, inc. and
a non-affiliate stockholder and option holder of Canterbury
Information Technology, Inc.
EXPERTS
The financial statements of e*machinery.net, inc. Form 8-K/A
for the period ended from September 29, 1999 to December 31, 1999,
have been audited by Baratz & Associates, P.A., independent
auditors, as set forth in their report thereon included herein.
Such financial statements therein are relied upon and such report
given on the authority of such firm as experts in accounting and
auditing.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors,
officers, and controlling persons of the Company pursuant to the
foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Company of expenses incurred or paid by a director,
officer, or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such
directors, officers or controlling persons in connection with the
securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
CHANGE IN CONTROL
On January 28, 2000, a quorum and majority of Shareholders and the Board
of Directors voted to acquire 100% of the stock e*machinery, inc. which
was ratified by its shareholders at a Shareholders Meeting on March 27, 2000.
Pursuant to said agreement, the Company agreed to reverse split its stock
on a 1 for 10 basis as of February 9, 2000. Also pursuant to the said
agreement, e*machinery, inc. stock was exchanged on a one for one basis for
e*machinery.net, inc. common stock.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
FINANCIAL STATEMENTS
The following comprise our audited financial statements for
the period from September 29, 1999 to December 31, 1999 and our
unaudited consolidated interim financial statements for the three
months ended March 31, 2000 and the six months ended June 30, 2000.
C O N T E N T S
Page(s)
INDEPENDENT AUDITORS' REPORT 29
AUDITED FINANCIAL STATEMENTS
Balance Sheet as of December 31, 1999 30
Statement of Operations for the period from September 29, 1999
(inception) to December 31, 1999 31
Statement of Stockholders' Equity 32
Statement of Cash Flows 33
Notes to Financial Statements 34-36
PRO FORMA FINANCIAL STATEMENTS (Unaudited)
Balance Sheet as of December 31, 1999 37
Notes to Pro forma Balance Sheet 40
UNAUDITED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 2000 42
Consolidated Statement of Income for the three and six month
periods ended June 30, 2000 44
Consolidated Statements of Cash Flows for the six months ended
June 30, 2000 46
Notes to Financial Statements 46-51
Consolidated Balance Sheet as of March 31, 2000 52
Consolidated Statement of Income for the three month period ended
March 31, 2000 54
Consolidated Statement of Cash Flow for the three months ended
March 31, 2000 55
Notes to Financial Statements 56-59
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
e*machinery, inc.
1400 Medford Plaza
Medford, N.J. 08055
We have audited the accompanying balance sheet of e*machinery, inc.
(a development stage company) as of December 31, 1999, and the related
statements of operations, stockholders' equity and cash flows for the period
from September 29, 1999 (inception) to December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of e*machinery, inc. (a
development stage company) as of December 31, 1999, and the results of its
operations and its cash flows for the period from September 29, 1999
(inception) to December 31, 1999 in conformity with generally accepted
accounting principles.
BARATZ & ASSOCIATES, P.A.
May 2, 2000
e*machinery, inc.
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 1999
Assets
______
Cash $ 200,861
---------
Total Current Assets 200,861
____________________
Software development cost 446,500
Deferred tax asset 13,785
---------
Total Assets $ 661,146
____________ ---------
Liabilities and
Stockholders' Equity
______________________
Current Liabilities
___________________
Accounts payable $ 521,500
---------
Stockholders' Equity
____________________
Common stock, $.0001 par value,
50,000,000 shares authorized;
8,800,000 shares issued and
outstanding at December 31, 1999 880
Additional paid-in capital 200,120
Deficit accumulated during the development stage ( 61,354)
---------
Total Stockholders' Equity 139,646
__________________________ ---------
Total Liabilities and
Stockholders' Equity $ 661,146
____________________________ =========
The accompanying notes are an integral part of these financial statements.
e*machinery, inc.
(A Development Stage Company)
STATEMENT OF OPERATIONS
PERIOD FROM SEPTEMBER 29, 1999 (INCEPTION) TO DECEMBER 31, 1999
Revenue $ -
Expenses
--------
Software development 75,000
Bank charges 139
--------
Total Expenses 75,139
-------------- --------
Loss Before Income Taxes/(Benefit) (75,139)
----------------------------------
Income Taxes/(Benefit) (13,785)
--------------------- --------
Net Loss $(61,354)
------- ========
Net Loss Per Common Share $( .007)
========
Weighted Common Shares Outstanding 8,648,936
=========
Pro Forma Net Loss Per Common Share (see note 5) $( .007)
========
The accompanying notes are an integral part of these financial statements.
e*machinery, inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM SEPTEMBER 29,1999 (INCEPTION) TO DECEMBER 31, 1999
Additional
Common Stock Paid-In
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
Stock issued for cash:
Stock issued to founders
at inception 8,600,000 $ 860 $ 140 $ 1,000
Stock issued in private placement
at December 9, 1999 200,000 20 199,980 200,000
Net Loss for the period (61,354) (61,354)
--------- ----- --------- -------- -------
Balance,
December 31, 1999 8,800,000 $ 880 $ 200,120 $(61,354) $ 139,646
========= ===== ========= ======== ========
The accompanying notes are an integral part of these financial statements.
e*machinery, inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
PERIOD FROM SEPTEMBER 29, 1999 (INCEPTION) TO DECEMBER 31, 1999
Cash Flows From Operating Activities
------------------------------------
Net loss for the period $( 61,354)
Changes In Operating Assets And Liabilities:
Increase in deferred tax asset ( 13,785)
Increase in accounts payable 75,000
---------
Net Cash Used In Operating Activities ( 139)
-------------------------------------
Cash Flows Provided By Financing Activities
-------------------------------------------
Proceeds from issuance of stock 201,000
---------
Net Increase In Cash 200,861
--------------------
Cash, Beginning -
--------------- ---------
Cash, Ending $ 200,861
------------ =========
The accompanying notes are an integral part of these financial statements.
e*machinery, inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM SEPTEMBER 29, 1999 (INCEPTION) TO DECEMBER 31, 1999
1. Summary of Significant Accounting Policies
------------------------------------------
Nature of Operations
The company is in the process of developing an internet based distribution
business for heavy machinery used primarily in the construction and mining
industries. Software development of a web site began in 1999 and is ongoing.
The intention is to develop an internet portal which will provide interplay
between major manufacturers, distributors, and providers of supportive goods
and services to the heavy machinery industry. Anticipated sources of revenue
include fees related to access to the information maintained on the web site
along with sales to be generated from distribution of heavy machinery.
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
Software Development
The company accounts for software development costs related to development
of its web site in accordance with AICPA Statement of Position (SOP) 98-1 which
provides guidance on accounting for the costs of computer software developed or
obtained for internal use. SOP 98-1 requires computer software costs incurred
in the preliminary project stage to be expensed. The preliminary project stage
relates to the planning of the project through the formulation, evaluation, and
final selection of alternatives. SOP 98-1 requires capitalization of costs
incurred during the application development phase when the preliminary project
stage is completed, management commits to funding the project, and it is
probable that the project will be completed and the software will be used for
the function intended. The application development stage relates to the
design, coding, installation, and testing of the software. The company
incurred an expense of $ 75,000 during the preliminary project stage and
capitalized costs of $ 446,500 related to application development during
the period from September 29, 1999 (inception) to December 31, 1999.
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No.
109, Accounting For Income Taxes, which requires an asset and liability approach
for financial accounting and reporting of income taxes. Under this approach,
deferred income taxes are recognized for the estimated taxes ultimately payable
or recoverable based on enacted tax law. Changes in enacted tax law will be
reflected in the tax provision as they occur.
Net Loss Per Common Share
The net loss per common share computation has been made in accordance with
Statement of Financial Accounting Standards No. 128. Net loss per common share
is computed using the weighted average number of common shares outstanding
during the period. Diluted net loss per common share is not presented because
the dilutive effect would be to reduce net loss per common share.
2. Income Taxes/(Benefit)
----------------------
No income tax expense was incurred during the period from September 29,
1999 (inception) to December 31, 1999. An income tax benefit of $ 13,785
was recognized for the period from a deferred tax asset described below.
Deferred income taxes reflect the net tax effects of (a) temporary
differences between carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (b) net
operating loss carryforwards.
The only temporary difference relates to the higher carrying amount for
tax purposes of $ 521,639 for capitalized software development cost compared to
$446,500 reported on the balance sheet which results in a temporary difference
of $ 75,139. This resulted in a deferred tax asset of $ 13,785.
The company did not have a net operating loss carryforward at December 31,
1999.
3. Supplemental Cash Flow Information
----------------------------------
Capitalized software development costs of $ 446,500 are included in
accounts payable at December 31, 1999 representing the only noncash investing
and financing transaction during the period.
No cash payments were made during the period for interest or taxes.
4. Subsequent Events
-----------------
At March 27, 2000, the Company was acquired by e*machinery.net, inc.
(renamed at February 2000; formerly Harvard Financial Services Corporation)
through an exchange of stock at a 1 for 1 ratio whereas e*machinery.net, inc.
issued stock to the shareholders of e*machinery, inc. in exchange for stock
representing 100% of the outstanding shares of e*machinery, inc.
e*machinery.net, inc. is currently traded on the Nasdaq Over-The-Counter
Bulletin Board under the stock symbol "EMAC". Pursuant to the acquisition
agreement, the directors and officers of e*machinery.net, inc. resigned in
favor of the directors and officers of e*machinery, inc.
Immediately after the transaction, the stock ownership of e*machinery.net,
inc. is as follows:
Shares Percent
------ -------
Original Shareholders 1,200,000 9
(including public owners)
Former shareholders of e*machinery, inc. 11,935,000 91
---------- -----
Total 13,135,000 100
========== =====
Because the former owners of e*machinery, inc. acquire control of
e*machinery.net, inc., the transaction would normally be considered a "reverse
acquisition" by e*machinery, inc. for accounting purposes. However,
e*machinery.net, inc. did not have any ongoing business operations at the date
of the transaction. Since e*machinery.net, inc. had no business, the
transaction is not being treated as a business combination. Instead, the
transaction is treated for accounting purposes as a recapitalization of
e*machinery, inc. and an issuance of stock by e*machinery, inc. (represented
by the outstanding shares of e*machinery.net, inc.) for the assets and
liabilities of e*machinery.net, inc.
Accounts payable of $521,500 due to Canterbury Information Technology,
Inc. was paid through the issuance of 278,333 shares of e*machinery.net, inc.
stock at March 27, 2000. Prior to March 27, 2000, Canterbury Information
Technology, Inc. was not a related party to e*machinery, inc.
5. Pro Forma Net Loss Per Common Share
---------------------------------
Pro forma net loss per common share is presented to give effect to the
March 27, 2000 acquisition of the company by e*machinery.net, inc., as set
forth in note 4, as if such transaction had occurred at December 31, 1999.
Had such transaction occurred at December 31, 1999, another 1,180,000 shares
of common stock would have been issued at December 31, 1999 represented by the
outstanding shares of e*machinery.net, inc. as described in note 4. This
would have resulted in a small increase in weighted common shares outstanding
from 8,648,936 (actual) to 8,661,489 on a pro forma basis. This small increase
in weighted common shares outstanding would have resulted in a fractional
reduction to net loss per common share. Therefore, net loss per common share
(actual) and pro forma net loss per common share are both stated as $.007 for
the period from September 29, 1999 (inception) to December 31, 1999.
B. Pro forma Financial Statements
e*machinery.net, inc.
(Formerly Harvard Financial Services Corporation)
(A Development Stage Company)
PRO FORMA BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1999
The Company's pro forma balance sheet gives effect to the March 27, 2000
acquisition of e*machinery, inc., as set forth in note (1), as if such
transaction had occurred at December 31, 1999. Because the former owners of
e*machinery, inc. acquire control of e*machinery.net, inc., the transaction
normally would be considered a "reverse acquisition" by e*machinery, inc. for
accounting purposes. However, e*machinery.net, inc. did not have any ongoing
business operations at March 27, 2000 or at any date in 1999. Therefore, the
transaction is not being treated as a business combination. Instead, the
transaction is treated for accounting purposes as a recapitalization of
e*machinery, inc. and an issuance of stock by e*machinery, inc. for the net
liabilities of e*machinery.net, inc.
The historical financial statements prior to March 27, 2000 are those of
e*machinery, inc. A pro forma statement of operations is not presented because
there would be no pro forma adjustment to the audited statement of operations
of e*machinery, inc. for the period from September 29, 1999 (inception) to
December 31, 1999. The pro forma balance sheet and accompanying notes 1 and 2
should be read in conjunction with a reading of the audited financial
statements of e*machinery, inc. as of December 31, 1999. All pro forma
adjustment note references pertain to note 2.
<TABLE>
<CAPTION>
Historical Pro Forma
e*machinery.net, inc. e*machinery, inc. Adjustments Pro Forma
(registrant)
-------------------- ---------------- ----------- ---------
</CAPTION>
<S> <C> <C> <C> <C>
Assets
------
Cash $ 4,362 $ 200,861 $(4,362)(b) $ 200,861
Receivables 11,466 - (11,466)(b) -
Prepaid expense 500 - (500)(b) -
Software development - 446,500 - 446,500
Property and equipment 6,959 - (6,959)(b) -
Deferred tax asset - 13,785 - 13,785
--------- --------- -------- ---------
Total Assets $ 23,287 $ 661,146 $(23,287) $ 661,146
------------ ========= ========= ========= =========
</TABLE>
e*machinery.net, inc.
(Formerly Harvard Financial Services Corporation)
(A Development Stage Company)
PRO FORMA BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Historical Pro Forma
e*machinery.net, inc. e*machinery, inc. Adjustments Pro Forma (registrant)
-------------------- ---------------- ----------- ------
</CAPTION>
<S> <C> <C> <C> <C>
Liabilities and
Stockholders' Equity/(Deficit)
-------------------------------
Liabilities
-----------
Accounts payable and
Accrued liabilities $ 148,952 $ 521,500 $(148,952)(a,b) $ 521,500
Unearned discounts 1,147 - (1,147)(b) -
Stockholder loans 273,000 - (123,000)(a) 150,000
Due to related party 121,840 - ( 71,840)(b) 50,000
--------- --------- ---------- ---------
Total Liabilities 544,939 521,500 (344,939) 721,500
--------- --------- ---------- ---------
Stockholders' Equity/(Deficit)
-----------------------------
Common stock 116 880 2 998
Additional paid-in
capital 465,756 200,120 (665,874) 2
Accumulated Deficit (987,524) ( 61,354) 987,524 ( 61,354)
--------- --------- ---------- ---------
Total Stockholders'
Equity/(Deficit) (521,652) 139,646 321,652 (c) ( 60,354)
----------------- --------- --------- ---------- --------
Total Liabilities and
Stockholders' Equity/ $ 23,287 $ 661,146 $(23,287) $661,146
(Deficit) ========= ========= ========= ========
---------------------
</TABLE>
e*machinery.net, inc.
(Formerly Harvard Financial Services Corporation)
(A Development Stage Company)
NOTES TO PRO FORMA BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1999
1. Acquisition of e*machinery, inc.
-------------------------------
At March 27, 2000, the Company (renamed e.machinery.net, inc. at February
2000; formerly Harvard Financial Services Corporation) acquired e*machinery,
inc. through an exchange of stock at a 1 for 1 ratio whereas e*machinery.net,
inc. issued stock to the shareholders of e*machinery, inc. in exchange for
stock representing 100% of the outstanding shares of e*machinery, inc.
e*machinery.net, inc. is currently traded on the Nasdaq Over-The-Counter
Bulletin Board under the stock symbol "EMAC". Pursuant to the acquisition
agreement, the directors and officers of e*machinery.net, inc. resigned in
favor of the directors and officers of e*machinery, inc.
Immediately after the transaction, the stock ownership of e*machinery.net,
inc. is as follows:
Shares Percent
------ -------
Original Shareholders 1,200,000 9
(including public owners)
Former shareholders of e*machinery, inc. 11,935,000 91
---------- -----
Total 13,135,000 100
========== =====
Because the former owners of e*machinery, inc. acquire control of
e*machinery.net, inc., the transaction would normally be considered a "reverse
acquisition" by e*machinery, inc. for accounting purposes. However,
e*machinery.net, inc. did not have any ongoing business operations at the date
of the transaction. Since e*machinery.net, inc. had no business, the
transaction is not being treated as a business combination. Instead, the
transaction is treated for accounting purposes as a recapitalization of
e*machinery, inc. and an issuance of stock by e*machinery, inc. (represented
by the outstanding shares of e*machinery.net, inc.) for the assets and
liabilities of e*machinery.net, inc. e*machinery.net, inc. had liabilities
of $200,000 with no assets based upon historical book value at March 27, 2000.
2.) Pro Forma Adjustments
---------------------
Subsequent to the period ended December 31, 1999 and prior to March 27,
2000, e*machinery.net, inc. entered into the following agreements which result
in pro forma adjustments to the balance sheet at December 31, 1999.
a.) An agreement with stockholders who were also creditors to accept an
aggregate payment of $150,000 in full satisfaction of loans payable of $273,000
and accrued interest of $141,457.
b.) An agreement with Canterbury Information Technology, Inc. to accept
$50,000 along with 15,419 shares of the company's post-split common stock and
assignment of remaining cash, accounts receivable, prepaid expense, property &
equipment, accounts payable, accrued liabilities, and unearned discounts at
their recorded values in full satisfaction of liabilities due to Canterbury in
the amount of $121,840.
Both of the aforementioned agreements related to debt cancellation were
prerequisites to the March 27, 2000 acquisition agreement. The $200,000 of
aggregate liabilities that remained pursuant to the aforementioned agreements
were paid at March 29, 2000. Pursuant to the aforementioned agreements,
e*machinery.net, inc. had no assets immediately prior to the acquisition
transaction at March 27, 2000. The pro forma balance sheet reflects
adjustments related to the two aforementioned agreements because these
agreements were prerequisite to the March 27, 2000 acquisition of e*machinery,
inc.
c.) The accounting treatment of the acquisition of e*machinery, inc. at
March 27, 2000 is a recapitalization of e*machinery, inc. and an issuance of
stock for the $200,000 of net liabilities of e*machinery.net, inc. as explained
in note 1. The historical financial statements are those of e*machinery, inc.
This results in a pro forma adjustment to reduce stockholders' equity recorded
by e*machinery, inc. by $200,000 to record the issuance of stock for
liabilities.
The net effect of these pro forma adjustments is to reduce the amount of assets
of e*machinery.net, inc. to $0 and the amount of liabilities to $200,000
pursuant to the aforementioned debt cancellation agreements and to present a
pro forma balance sheet which reflects the acquisition transaction for
accounting purposes as a recapitalization of e*machinery, inc. and an issuance
of stock by e*machinery, inc. for $200,000 of net liabilities of
e*machinery.net, inc. as if the transactions occurred at December 31, 1999.
E*MACHINERY.NET, INC.
CONSOLIDATED BALANCE SHEETS
_________________________________
ASSETS
______
June 30,
2000 December 31,
(Unaudited) 1999
___________ ___________
Current Assets
Cash $ 516,567 $ 200,861
Inventory at cost 719,500 -
Employee advances 124,658 -
___________ __________
Total current assets $1,360,725 $ 200,861
Developed software 490,373 446,500
Deferred income taxes 86,985 13,785
Property and equipment, net 16,843 -
Other assets 4,814 -
_________ __________
Total assets $1,959,740 $ 661,146
========== ==========
See Accompanying Notes
E*MACHINERY.NET, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
June 30,
2000 December 31,
(Unaudited) 1999
___________ ____________
Liabilities:
Accounts payable $ 72,990 $ 521,500
Accrued liabilities 65,180 -
___________ _________
Total Liabilities 138,170 521,500
Stockholders' Equity:
Common stock, $.0001 par value,
50,000,000 shares authorized;
issued and outstanding
16,070,632 and 8,800,000,
respectively 1,607 880
Notes receivable for capital stock (2,437,500) -
Additional paid-in capital 5,607,817 200,120
Accumulated deficit (1,350,354) (61,354)
___________ _________
Total Stockholders' Equity 1,821,570 139,646
___________ _________
Total Liabilities and
Stockholders' Equity $1,959,740 $661,146
=========== =========
See Accompanying Notes
E*MACHINERY.NET, INC.
CONSOLIDATED STATEMENT OF INCOME
The following Consolidated Statement of Income for the three-month
and six-month periods ended June 30, 2000, is unaudited, but the
Company believes that all adjustments (which consist only of
normal recurring accruals) necessary for a fair presentation of
the results of operations for the respective period have been
included. Quarterly results of operations are not necessarily
indicative of results for the full year. There is no comparison
to previous year due to the fact that operations commenced in
fiscal 2000.
Three-Months Ended Six-Months Ended
June 30, 2000 June 30, 2000
------------- ----------------
(Unaudited) (Unaudited)
Revenues $ - $ -
Cost of sales - -
---------- ----------
Gross profit - -
Expenses
Selling 260 -
General and administrative 1,332,869 1,384,305
--------- ---------
Total expenses 1,333,129 1,384,565
Other income/(expense)
Interest income 17,985 22,365
Other (410) -
--------- ---------
Total other income 17,575 22,365
Loss before income taxes (1,315,554) (1,362,200)
Income taxes (benefit) (65,000) (73,200)
--------- ---------
Net loss $(1,250,554) $(1,289,000)
========== ==========
Basic net loss per common
share $ (.091) $ (.111)
========== ==========
Weighted average:
Average common shares
outstanding(Basic) 13,700,700 11,577,200
========== ==========
See Accompanying Notes
E*MACHINERY.NET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTHS ENDED JUNE 30, 2000
June 30,
2000
---------
Cash flows from operating activities
Net loss $(1,289,000)
Adjustments to reconcile net loss to
net cash used in operating activities
Stock issued for services and compensation 1,646,500
Changes in operating assets and liabilities
Increase in employee advances (124,658)
Increase in inventory (719,500)
Increase in deferred income taxes (73,200)
Increase in other assets (4,814)
Decrease in accounts payable and
accrued liabilities (383,330)
---------
Net cash used in operating activities (948,002)
Investing activities
Capital expenditures (60,716)
---------
Net cash used in investing activities (60,716)
Cash flows provided by financing activities
Proceeds from issuance of common stock, net 1,324,424
---------
Net cash provided by financing activities 1,324,424
Net increase in cash 315,706
Cash, beginning 200,861
---------
Cash, ending $ 516,567
=========
See Accompanying Notes
e*machinery.net, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Nature of Operations
--------------------
Subsequent to the year ended December 31, 1999, Harvard
Financial Services Corp. amended its Certificate of Incorporation
to change its name to e*machinery.net, inc. (The "Company"). The
Company was formerly in the business of purchasing installment
loans from vocational schools and higher educational
institutions. During 1999, the Company ceased all operations in
the area of installment loan purchasing due to the inability to
obtain new financing. The Company was not actively involved in
any business operations during 1999, except for the collection of
existing loans receivable.
On March 27, 2000, the Company acquired e*machinery, inc.
through an exchange of stock at a 1 for 10 ratio whereas
e*machinery.net, inc. issued stock to the shareholders of
e*machinery, inc. in exchange for shares representing 100% of the
outstanding shares of e*machinery, inc. e*machinery.net, inc. is
currently traded on the Over-The-Counter Bulletin Board under the
stock symbol "EMAC". Pursuant to the transaction, the directors
and officers of e*machinery.net, inc. resigned in favor of the
directors and officers of e*machinery, inc.
Immediately after the transaction, the stock ownership of
e*machinery.net, inc. was as follows:
Shares Percent
Original Shareholders
(including public owners) 1,200,000 9%
Former shareholders of
e*machinery, inc. 11,935,000 91%
---------- ----
Total 13,135,000 100%
========== ====
Because the former owners of the stock of e*machinery, inc.
maintain control of e*machinery.net, inc., the transaction would
normally be considered a purchase by e*machinery, inc. for
accounting purposes. However, e*machinery.net, inc. did not have
any ongoing business operations at the date of the transaction.
Since e*machinery.net, inc. had no business, the transaction is
not being treated as a business combination. Instead, the
transaction is being treated for accounting purposes as a
recapitalization of e*machinery, inc. and as an issuance of stock
by e*machinery, inc. (represented by the outstanding shares of
e*machinery.net, inc.) for the assets and liabilities of
e*machinery, inc. e*machinery.net, inc. had liabilities of
$200,000 with no assets based upon historical book value at March
27, 2000. The recording of the liabilities resulted in a charge
to additional paid in capital.
The future business plan is focused on the continued
development of an internet based portal specializing in business
to business e-commerce in the construction and mining industries,
as well as the purchase, rebuild and sale of Caterpillar(R) used
construction and mining machinery through Caterpillar(R) dealers
and end users around the world.
The Company is in the process of developing an internet
based distribution business for heavy machinery used primarily in
the construction and mining industries. Software development of
a web site began in 1999 and is ongoing. The intention is to
develop a vertically integrated portal which will provide
interplay between buyers and sellers of used Caterpillar(R)
machinery, major manufacturers, distributors, and providers of
supportive goods and services to the heavy machinery industry.
Anticipated sources of revenue include fees related to access to
the information maintained on the web site along with revenues
related to distribution of heavy machinery.
U.S. Machinery Corp. (USMC) is a wholly owned subsidiary of
e*machinery, inc. that is focused on the rebuilding and marketing
of construction and mining machinery. Utilizing relationships
with Caterpillar dealers, USMC offers like new machinery with a
warranty at a fraction of the cost of new. This is a tremendous
advantage for contractors and mining companies. They can upgrade
their fleets at a lower cost without the risk of buying used
machines without a warranty.
U.S. Machinery Corp. has contracted with Darr Equipment
Company to rebuild the cores or preowned machines purchased by
USMC and then USMC would then sell the rebuilt machines at target
average sales prices ranging from $500,000 to $700,000 per
machine. USMC also intends to purchase and sell machines that do
not have to be rebuilt, but merely cleaned and serviced. USMC
has successfully acquired and sold one D10R crawler tractor. In
addition, USMC has acquired at least four other machines which
are presently being rebuilt and refurbished by Darr Equipment
Company. Darr Equipment Company is one of the largest
Caterpillar(R) dealers in the world.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary. All significant
intercompany accounts and transactions are eliminated in
consolidation.
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 disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
Software Development
--------------------
The Company accounts for software development costs related to
development of the web site in accordance with AICPA Statement of
Position (SOP) 98-1 which provides guidance on accounting for the
costs of computer software developed or obtained for internal use.
SOP 98-1 requires computer software costs which are incurred in
the preliminary project stage to be expensed as incurred. The
preliminary project stage relates to the planning of the project
through the formulation, evaluation, and final selection of
alternatives. SOP 98-1 requires capitalization of costs incurred
during the application development phase when the preliminary
project stage is completed, management commits to funding the
project, and it is probable that the project will be completed and
the software will be used for the function intended. The
application development stage relates to the design, coding,
installation, and testing of the software. The Company incurred
an expense of $75,000 during the preliminary project stage (fiscal
1999) and capitalized costs of $490,373 related to application
development through the end of the second quarter of Fiscal 2000.
Property and Equipment
----------------------
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is computed by the straight line
method over the estimated useful lives of the respective assets.
Expenditures for maintenance and repairs are charged against
income as incurred. When assets are sold or retired, the cost and
accumulated depreciation are removed from the accounts and any
gain or loss is included in income.
Property and equipment consisted of the following at June 30:
2000
----
Equipment $13,843
Furniture 3,000
-------
Less accumulated depreciation -
-------
Net property and equipment $16,843
=======
Income Taxes
------------
The Company accounts for income taxes under the provisions
of SFAS No 109, Accounting For Income Taxes, which requires an
asset and liability approach for financial accounting and
reporting of income taxes. Under this approach, deferred income
taxes are recognized for the estimated taxes ultimately payable
or recoverable based on enacted tax law. Changes in enacted tax
law will be reflected in the tax provision as they occur.
Earnings Per Share
------------------
The earnings per share computation have been made in
accordance with Statement of Financial Accounting Standards No.
128. Basic earnings (loss) per common share is computed using the
weighted average number of common shares outstanding during the
period. Diluted earnings per common share is computed using the
combination of dilutive common share equivalents and the weighted
average number of common shares outstanding during the period.
2. Income Taxes/(Benefit)
No income tax expense was incurred during the quarter ended
June 30, 2000. An income tax benefit of $65,000 was recognized
for the period from a deferred tax asset described below.
Deferred income taxes reflect the net tax effects of (a)
temporary differences between carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes, and (b) net operating loss carryforwards.
The Company did not have a net operating loss carryforward at
June 30, 2000.
3. Related Party Transactions
The Company contracted with Canterbury Information
Technology, Inc. ("CITI") to obtain software development services
for its web site. Total costs incurred to date amounted to
$565,373 which included capitalized costs of $490,373 and an
expense of $75,000 (fiscal 1999) as described in Footnote 1.
Certain stockholders, officers, and directors of CITI own
substantial number of shares of the Company. During the quarter,
the Company issued 278,133 shares of its common stock as payment
for these services.
4. Supplemental Cash Flow Information
Capitalized software development costs of $29,588 are
included in accounts payable at June 30, 2000. Also during the
quarter, the Company issued 278,133 shares of its common stock in
satisfaction of a $521,500 payable to CITI related to development
of its web site.
No cash payments were made during the period for interest or taxes.
5. Equity Transactions
During fiscal 2000, CITI also assisted in raising capital as
part of the initial seed capital for the Company. For these
services, 250,000 shares of e*machinery.net, inc. restricted
common stock were issued to Canterbury Information Technology,
Inc. during the second quarter. The net value of these shares
was charged against shareholder's equity.
In June, 2000 the Board of Directors voted to allow
officers, directors, certain advisors and individuals valuable to
e*machinery.net, inc. the opportunity to increase their equity
positions in the Company, as an incentive to continue and
increase their efforts on behalf of the Company. A total of
2,375,000 shares of restricted common stock were purchased with
an interest bearing, non-recourse note to the Company. The notes
and accrued interest are collateralized by the shares being
issued. Each recipient also has granted a 15-day right of first
refusal, in any sales of these shares. 1,500,000 of these shares
were sold to certain officers at a price of $.75 per share, which
represents a 50% discount from the current price. Interest on
these notes accrue at the Prime rate. Based on the discounted
sale of these shares, a non-cash charge to expense of $1,125,000
was made during the second quarter. The remaining 875,000 shares
were sold at market and the notes for these purchases accrue
interest at 6.6% per annum. No charge to expense was made on
these 875,000 shares.
Item 2. Management Discussion of Financial Condition and Results
_________________________________________________________________
of Operations
_____________
Liquidity and Capital Resources
Working capital at June 30, 2000 was $1,223,000. This was
an increase of $1,544,000 over December 31, 1999. The Company
finalized its seed capital funding by raising an additional
$1,324,000 in fiscal 2000.
The Company's wholly owned subsidiary, U.S. Machinery Corp.
also began operations during March, 2000 and as of June 30, 2000
had purchased over $700,000 of Caterpillar used heavy equipment.
It is anticipated that these cores would be refurbished and would
be sold during the third quarter of this year. The first sale
occurred in early August, 2000.
The Company is also in the process of searching for a
revolving line of credit against its inventory. This would allow
for more rapid expansion of the business, and would free up
additional operating capital to allow for increased hiring of
sales and support personnel.
Results of Operations
Revenues
________
There were no revenues recorded during the first six months
of fiscal 2000. The first sale of equipment occurred in August,
2000. It is anticipated that several more machines will be sold
during this quarter.
Costs and Expenses
__________________
Costs and expenses for the quarter ended June 30, 2000
increased significantly over the first quarter of fiscal 2000.
The primary reason was a charge of $1,125,000 for the sale of
stock to certain officers at a discount against market. The
other reason for the increase was that salaries to employees were
paid for the full three months of the quarter. In the first
quarter, the salaries began to be paid in March, 2000.
E*MACHINERY.NET, INC.
CONSOLIDATED BALANCE SHEETS
___________________________________
ASSETS
_______
March 31,
2000 December 31,
(Unaudited) 1999
___________ ___________
Current Assets
Cash $1,489,917 $ 200,861
Prepaid expenses and other assets 57,143 -
__________ __________
Total current assets $1,547,060 $ 200,861
Developed software 476,088 446,500
Deferred income taxes 21,985 13,785
Property and equipment, net 9,199 -
_________ __________
Total assets $2,054,332 $ 661,146
========== ==========
See Accompanying Notes
E*MACHINERY.NET, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
March 31,
2000 December 31,
(Unaudited) 1999
_________ ____________
Liabilities:
Accounts payable $ 29,588 $ 521,500
Accrued liabilities 67,119 -
--------- ---------
Total Liabilities 96,707 521,500
Stockholders' Equity:
Common stock, $.0001 par value,
50,000,000 shares authorized;
issued and outstanding
13,413,133 and 8,800,000,
respectively 1,341 880
Additional paid-in capital 2,056,084 200,120
Accumulated deficit (99,800) (61,354)
---------- --------
Total Stockholders' Equity 1,957,625 139,646
---------- --------
Total Liabilities and
Stockholders' Equity $2,054,332 $661,146
========== ========
See Accompanying Notes
E*MACHINERY.NET, INC.
CONSOLIDATED STATEMENT OF INCOME
The following Consolidated Statement of Income for the three-month
period ended March 31, 2000, is unaudited, but the Company believes
that all adjustments (which consist only of normal recurring
accruals) necessary for a fair presentation of the results of
operations for the respective period have been included. Quarterly
results of operations are not necessarily indicative of results for
the full year.
Three-Months Ended
March 31, 2000
(Unaudited)
-----------------
Revenues $ -
Cost of sales -
----------
Gross profit -
Expenses
Selling -
General and administrative 51,436
----------
Total expenses 51,436
Other income/(expense)
Interest income 4,380
Other 410
----------
Total other income 4,790
Loss before income taxes (46,646)
Income taxes (benefit) (8,200)
----------
Net loss $ (38,446)
==========
Basic net loss per common share $ (.004)
==========
Weighted average:
Average common shares outstanding
(Basic) 9,436,300
==========
See Accompanying Notes
E*MACHINERY.NET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTHS ENDED MARCH 31, 2000
March 31,
2000
--------
Cash flows from operating activities
Net loss $(38,446)
Adjustments to reconcile net loss to
net cash used in operating activities
Changes in operating assets and liabilities
Increase in prepaid expenses (57,143)
Increase in deferred income taxes (8,200)
Increase in accounts payable and
accrued liabilities 96,707
--------
Net cash used in operating activities (7,082)
--------
Investing activities
Capital expenditures (38,787)
--------
Net cash used in investing activities (38,787)
Cash flows provided by financing activities
Proceeds from issuance of common stock, net 1,334,925
----------
Net cash provided by financing
activities 1,334,925
Net increase in cash 1,289,056
Cash, beginning 200,861
---------
Cash, ending $ 1,489,917
===========
See Accompanying Notes
e*machinery.net, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Nature of Operations
--------------------
Subsequent to the year ended December 31, 1999, Harvard
Financial Services Corp. amended its Certificate of Incorporation
to change its name to e*machinery.net, inc. (The "Company"). The
Company was formerly in the business of purchasing installment
loans from vocational schools and higher educational institutions.
During 1999, the Company ceased all operations in the area of
installment loan purchasing due to the inability to obtain new
financing. The Company was not actively involved in any business
operations during 1999, except for the collection of existing loans
receivable.
On March 27, 2000, the Company acquired e*machinery, inc.
through an exchange of stock at a 1 for 1 ratio whereas
e*machinery.net, inc. issued stock to the shareholders of
e*machinery, inc. in exchange for shares representing 100% of the
outstanding shares of e*machinery, inc. e*machinery.net, inc. is
currently traded on the Nasdaq Over-The-Counter Bulletin Board
under the stock symbol "EMAC". Pursuant to the transaction, the
directors and officers of e*machinery.net, inc. resigned in favor
of the directors and officers of e*machinery, inc.
Immediately after the transaction, the stock ownership of
e*machinery.net, inc. was as follows:
Shares Percent
Original Shareholders
(including public owners) 1,200,000 9%
Former shareholders of
e*machinery, inc. 11,935,000 91%
---------- ----
Total 13,135,000 100%
========== ====
Because the former owners of the stock of e*machinery, inc.
maintain control of e*machinery.net, inc., the transaction would
normally be considered a purchase by e*machinery, inc. for
accounting purposes. However, e*machinery.net, inc. did not have
any ongoing business operations at the date of the transaction.
Since e*machinery.net, inc. had no business, the transaction is not
being treated as a business combination. Instead, the transaction
is being treated for accounting purposes as a recapitalization of
e*machinery, inc. and as an issuance of stock by e*machinery, inc.
(represented by the outstanding shares of e*machinery.net, inc.)
for the assets and liabilities of e*machinery, inc.
e*machinery.net, inc. had liabilities of $200,000 with no assets
based upon historical book value at March 27, 2000. The recording
of the liabilities resulted in a charge to additional paid in capital.
The future business plan is focused on the continued
development of an Internet based portal specializing in business to
business e-commerce in the construction and mining industries, as
well as the sales and distribution of heavy machinery.
The Company is in the process of developing an Internet based
distribution business for heavy machinery used primarily in the
construction and mining industries. Software development of a web
site began in 1999 and is ongoing. The intention is to develop a
vertically integrated portal which will provide interplay between
major manufacturers, distributors, and providers of supportive
goods and services to the heavy machinery industry. Anticipated
sources of revenue include fees related to access to the
information maintained on the web site along with revenues related
to distribution of heavy machinery.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary. All significant
intercompany accounts and transactions are eliminated in
consolidation.
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 disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
Software Development
--------------------
The Company accounts for software development costs related to
development of the web site in accordance with AICPA Statement of
Position (SOP) 98-1 which provides guidance on accounting for the
costs of computer software developed or obtained for internal use.
SOP 98-1 requires computer software costs which are incurred in the
preliminary project stage to be expensed as incurred. The
preliminary project stage relates to the planning of the project
through the formulation, evaluation, and final selection of
alternatives. SOP 98-1 requires capitalization of costs incurred
during the application development phase when the preliminary
project stage is completed, management commits to funding the
project, and it is probable that the project will be completed and
the software will be used for the function intended. The
application development stage relates to the design, coding,
installation, and testing of the software. The Company incurred an
expense of $75,000 during the preliminary project stage (fiscal
1999) and capitalized costs of $476,088 related to application
development through the end of the first quarter of Fiscal 2000.
Property and Equipment
----------------------
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is computed by the straight line method
over the estimated useful lives of the respective assets.
Expenditures for maintenance and repairs are charged against income
as incurred. When assets are sold or retired, the cost and
accumulated depreciation are removed from the accounts and any gain
or loss is included in income.
Property and equipment consisted of the following at March 31:
2000
----
Equipment $ 6,199
Furniture 3,000
-------
Less accumulated depreciation -
-------
Net property and equipment $ 9,199
=======
Income Taxes
------------
The Company accounts for income taxes under the provisions of
SFAS No 109, Accounting For Income Taxes, which requires an asset
and liability approach for financial accounting and reporting of
income taxes. Under this approach, deferred income taxes are
recognized for the estimated taxes ultimately payable or
recoverable based on enacted tax law. Changes in enacted tax law
will be reflected in the tax provision as they occur.
Earnings Per Share
------------------
The earnings per share computation have been made in
accordance with Statement of Financial Accounting Standards No.
128, which the Company adopted in 1998; prior period accounts were
restated. Basic earnings (loss) per common share is computed using
the weighted average number of common shares outstanding during the
period. Diluted earnings per common share is computed using the
combination of dilutive common share equivalents and the weighted
average number of common shares outstanding during the period.
2. Income Taxes/(Benefit)
No income tax expense was incurred during the quarter ended
March 31, 2000. An income tax benefit of $8,200 was recognized for
the period from a deferred tax asset described below.
Deferred income taxes reflect the net tax effects of (a)
temporary differences between carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes, and (b) net operating loss carryforwards.
The Company did not have a net operating loss carryforward at
March 31, 2000.
3. Related Party Transactions
The Company contracted with Canterbury Information Technology,
Inc. ("CITI") to obtain software development services for its web
site. Total costs incurred to date amounted to $551,088 which
included capitalized costs of $476,088 and an expense of $75,000
(fiscal 1999) as described in Footnote 1. Certain stockholders,
Officers and Directors of CITI own a substantial number of shares
of the Company.
4. Supplemental Cash Flow Information
Capitalized software development costs of $29,588 are
included in accounts payable at March 31, 2000 representing the
only noncash investing and financing transaction during the
period.
No cash payments were made during the period for interest or taxes.
