<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 1999. Commission File No. 33-27652-NY
BUSINESSNET HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware 22-2946374
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6 Prospect Street, Suite 3C Midland Park, NJ 07432
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code:(201) 493-0248
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Securities registered pursuant to Section 12 (b) of the Act: None
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Securities registered pursuant to Section 12 (g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934,
during the preceding 12 months (or for shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes: X No:
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The issuer had no revenue during the fiscal year ended December 31, 1999.
The number of shares outstanding of the registrant's classes of common stock
as of April 10, 2000 is 5,047,636 shares of $.01 par value common stock and
30,000 shares of $.10 par value convertible preferred stock. The Aggregate
Market Value of the voting common stock held by non-affiliates based upon a
price of $2.85 on April 10, 2000 is $4,438,544.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Current Report on Form 8-K dated April 4, 2000
SUPPLEMENTAL INFORMATION
See "Supplemental Information and Exhibits" with respect to additional documents
furnished or to be furnished to the Securities and Exchange Commission but not
deemed to be "filed" with the Securities and Exchange Commission or otherwise
subject to liabilities of Section 18 of the Securities Act.
Affiliates for the purposes of this item refer to the officers, directors and/or
any persons or firms owning 5% or more of the Company's common stock, both of
record and beneficially.
<PAGE>
BusinessNet Holdings Corp.
FORM 10-KSB,
Fiscal Year Ended December 31, 1999
TABLE OF CONTENTS
PART I
Item 1- BUSINESS
Item 2- PROPERTIES
Item 3- LEGAL PROCEEDINGS
Item 4- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
Item 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
Item 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS AND PLAN OF OPERATIONS
Item 7 - FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
Item 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
PART III
Item 9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Item 10- EXECUTIVE COMPENSATION
Item 11- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 12- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
Item 13 -EXHIBITS, SCHEDULES AND REPORTS ON FORM 8-K
Signatures
<PAGE>
PART I
ITEM 1 - BUSINESS
GENERAL
BusinessNet Holdings Corp. (the "Company"), formerly BusinessNet
International, Inc., was incorporated under the laws of the State of Delaware
on January 10, 1989.
On August 1, 1998 the Registrant changed its name to BusinessNet
Holdings Corp., and undertook a reverse-split of its Common Stock on the basis
of one new Share for each fifty (50) issued and outstanding Shares.
On July 30, 1999, the Registrant paid a Common Stock dividend to its
shareholders of record on that date of one (1) Share for each one (1) Share
owned of record as of July 23, 1999.
The Registrant maintains executive and administrative offices at 6
Prospect Street, Suite 3-C, Midland Park, NJ 07432. The telephone number is
(201) 493-0248. The Registrant's Eyeamerica, Inc. subsidiary maintains its
executive offices at 1121 Holland Drive, Boca Raton, FL 33487.
BUSINESS STRATEGY
BusinessNet Holdings Corp. is presently structured as a technology
holding and operating company which is seeking to acquire and/or develop
start-up companies providing information technology services and applications
including Internet Services, on-line entertainment content and programming, e-
commerce and multi-media telecommunication services to the United States and
International business communities.
The mission of the Registrant is to acquire or invest in companies who
are providing cutting-edge technology, products and services, particularly those
that support Internet commerce. Management's growth and investment strategy is
to focus on those firms which have unique Internet and telecommunications
products or services and will benefit from the inevitable growth of Internet
commerce; and, IN ADDITION, have the potential to become public companies. BNHC
not only provides needed capital but also assists management in organizing their
IPO's.
Management's strategic near-term and medium-term goals include:
To acquire a CONTROLLING INTEREST in technology and Internet-related
companies that can develop a profitable cash flow operation within ONE YEAR and
are NOT CAPITAL INTENSIVE.
To make strategic MINORITY investments in technology and Internet-
related companies that have a NEAR-TERM IPO potential and in which the timing
and terms of our investment create a significant near-term capital gain
potential.
To permit the Registrant's shareholders to not only to participate in
the potential capital appreciation if and when its operating subsidiaries and
other investments "go public" BUT ALSO to allow investors in the subsidiary
companies have the liquidity of converting their investment into the
Registrant's common stock. This is accomplished by having a different series of
the Registrant's convertible preferred stock created for each investment and
establishing an "either-or" conversion right.
<PAGE>
PRESENT BUSINESS OPERATIONS
OMNICAST CORPORATION
On May 11, 1999, the Company announced that it had acquired a 60%
controlling interest in Omnicast Corp., developer of OMNICASTLIVE.COM, an
Internet entertainment content producer and web site. In exchange for its
controlling interest, the Company has agreed to provide its subsidiary Omnicast
Corp. with $2 million in working capital to immediately launch on the Internet
its full-time, video-based transactional network via on-line services, and to
acquire additional Internet entertainment properties.
Through prospective licensing agreements, OMNICASTLIVE.COM will provide
scheduled on-line video events such as live concerts, interviews with classic
rock artists, concert videos-on-demand, and an e-commerce component to market
music and music-related products as well as sponsor advertising.
The business operations of Omnicast Corporation during this calendar
year have consisted of website development and the acquisition of $40,000 of
inventory for sale on its Internet e-commerce site. As a result of this and
other product acquisitions, the Registrant expects to report revenue from
operations, including sales of merchandise and services, during the second
quarter of 2000 and continuing thereafter.
EYEAMERICA, INC.
On January 31, 2000, we completed our acquisition of 100% of the
capital stock of EyeAmerica, Inc. (formerly Chemko International, Inc.)
through an exchange of Shares. EyeAmerica, Inc. is an optical chemicals
manufacturer that recently developed and was awarded the first (and only)
process patent that allows the conversion of plastic CR-39 lenses into
photochromic lenses. The Company's research and development facility is based
in Hudson, FL, and an and an additional optical laboratory, production and
warehouse facility in Boca Raton, FL was acquired by the Registrant in
February, 2000 as the main production facility.
In March, 2000, the EyeAmerica, Inc. subsidiary launched a national
marketing campaign for its revolutionary "SOLERA-TM-" line of photochromic
eyeglass lenses at the International Vision Expo to be held at the Jacob Javits
Convention Center in New York City.
The CR-39 plastic lenses, renowned for their durability and optical
precision, represent 57% of all lenses sold in the United States with about $4.6
billion in retail sales in 1998. Photochromic tinting permits lenses to change
shade and darken as brightness levels increase, and provide comfort from glare.
Until the application of the Company's process chemistry to the more widely
available CR-39 lens, photochromic tinting was restricted to inferior
polycarbonate and glass lenses, and color choices solely in gray or brown. About
15.5% of all lenses processed in the United States, or $1.3 billion at retail in
1998, are photochromic lenses, with a compound growth rate of 12% per year (by
pairs sold).
The EyeAmerica photochromic patent substantially expands the market for
photochromic lenses to the most popular plastic lenses and a full spectrum of
fashion colors. The founder of the Company, George Kohan, has been an optical
industry pioneer for 40 years. Mr. Kohan created the first one-hour eye wear
company, later sold to Pearle Vision in 1970.
<PAGE>
SUNRISE ENTERTAINMENT, INC.
On January 6, 2000, we completed our acquisition of 40% of the
outstanding Common Stock of Sunrise Entertainment, Inc., a Nashville, TN
based television and video production company specializing in high-definition
TV (HDTV) production and distribution through its wholly-owned subsidiary,
Sunrise Television, Inc.
Sunrises' latest introduction to the high-definition programming
market is "LIVING LEGENDS OF ROCK & ROLL: LIVE FROM ITCHYKOO PARK", the first
major rock & roll festival to be shot in HDTV format. The programming has
been packaged as both a two-hour special, complete with artists' interviews,
and as a 90-minute, music-only version edited for NHK Enterprises America for
broadcast on the NHK Japan Network. Sunrise will also begin distribution of
its extensive library of finished products, as well as projects in
development.
The Registrant announced on January 18, 2000 that it had received
shareholder approval to distribute its 40% interest in its Sunrise
Entertainment, Inc. subsidiary to BusinessNet shareholders, subject to receipt
of a ruling from the Internal Revenue Service to the effect that for United
States federal income tax purposes no gain or loss will be recognized by holders
of BusinessNet Common Stock upon receipt of Sunrise Entertainment Common Stock.
The fixing of the Shareholder Record Date for this distribution will be made
upon the receipt of such ruling, or a determination by the Board of Directors to
proceed without such a ruling. The distribution of shares and listing of Sunrise
Entertainment, Inc. will take place upon the completion of the appropriate
securities registrations.
PRESENT INVESTMENTS IN MINORITY INTERESTS
Investment in Docunet, Inc. Common Stock
On August 17, 1999, the Registrant exchanged 10,000 Shares of its
Common Stock for 80,000 Shares of Common Stock of Docunet, Inc., and the right
to exchange an additional 20,000 Shares of Common Stock.
Docunet, Inc. is a privately-held Internet-based e-commerce company
that has a patented technology and proprietary "Super ATM" machine that will be
capable of issuing airline tickets, event tickets, and prepaid phone cards as
well as cash.
Docunet's initial focus is on the U.S. travel industry, where its
Personal Travel Agent (PTA) system search engine software allows end users to
reduce transaction time and to self-process travel reservations and itineraries
over the Internet while providing them with instantaneous access to a database
of pricing, scheduling and seat availability information.
This company, Docunet, contemplates completing an initial public
offering or other capital event in 2000.
Investment in Linuxlab, Inc. Convertible Preferred Stock
On October 6, 1999, the Registrant completed a private placement of
30,000 Shares of Series A Convertible Preferred Stock for total consideration
of $300,000. The proceeds of this transaction were used to purchase 30,000
Shares of Class A PIK Convertible Preferred Stock of Linuxlab, Inc. Linuxlab,
located in Silicon Valley, is a designer and producer of servers utilizing
the Linux operating system. Their servers are designed for web site hosting,
file sharing, and providing Internet audio, video and data transmission.
This company, Linuxlab, also contemplates completing an initial public
offering or other capital event in 2000.
<PAGE>
SUBSEQUENT EVENTS
On January 6, 2000 the Company acquired 40% of the issued and
outstanding Common Stock of Sunrise Entertainment, Inc. by the issuance of an
aggregate of 800,000 shares of BusinessNet's Common Stock in exchange for
2,400,000 shares of Sunrise's Common Stock.
On January 31, 2000 the Company acquired 100% of the issued and
outstanding Common Stock of EyeAmerica, Inc. (formerly Chemko International,
Inc) by the issuance of 1,750,000 shares of BusinessNet Common Stock.
Management is continuing to evaluate additional opportunities for
investments by the Registrant in newly-formed enterprises with high growth
prospects, primarily focusing on the Internet, e-commerce and telecommunications
industries, and to acquire and/or develop new business operations for the
Registrant, including mergers with or acquisitions of other business
corporations.
EMPLOYEES
At December 31, 1999 the Company had no salaried employees.
ITEM 2 - PROPERTIES
The Company's principal office facility is located at 6 Prospect
Street, Suite 3-C, Midland Park, NJ 07432. The office facility encompasses
approximately 1,250 sq. ft. and is leased at a monthly rent of $2,077 for two
years commencing in January, 2000 with an option for three annual renewals with
increases of 3% each renewal.
The Company's EyeAmerica, Inc. subsidiary maintains its executive
offices, manufacturing & warehouse facility in leased premises at 1121
Holland Drive, Boca Raton, FL 33487. This facility is presently occupied on a
month-to-month basis for approximately $6,000 per month and a long-term lease
is being negotiated.
The Registrant believes that these lease arrangements are adequate for the
immediately foreseeable business needs of the Registrant.
ITEM 3 - LEGAL PROCEEDINGS
The Registrant and its subsidiaries are at present not involved in any
legal proceedings, nor are any legal proceedings anticipated.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 1, 1998 the Shareholders of the Registrant, acting on written
consent in lieu of an Annual Meeting in accordance with the laws of the State of
Delaware, authorized the change of name of the Registrant and the retention of
Schuhalter, Coughlin & Suozzo, LLC, as independent auditors for calendar year
1998 and 1999.
<PAGE>
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
(a) The Company's Common Stock was listed on the OTC Bulletin Board
Market (Symbol: BNHC; prior to August 1, 1998 "BUII") for the four quarters of
1999 and 1998, respectively, as reported by the National Quotation Bureau, Inc.
and NASD. Prices for the third and fourth quarters of 1998 reflect the
one-for-fifty reverse split of Common Stock; prices for the third and fourth
quarters of 1999 reflect the two-for-one stock dividend paid on July 30, 1999:
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HIGH LOW HIGH LOW
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1998 BID PRICES ASK PRICES
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<S> <C> <C> <C> <C>
January 1 - March 31 1 1/4 1 2 1/2 1 1/8
April 1 - June 30 5 1 1/4 7 1/2 1 1/8
July 1 - September 30 1 1/4 1/2 1 1/2 3/4
October 1 - December 31 3 3/4 2 1/4 2 1/4 4
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HIGH LOW HIGH LOW
---- --- ---- ---
1999 BID PRICES ASK PRICES
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<S> <C> <C> <C> <C>
January 1 - March 31 6 1/4 2 1/2 10 5 3/4
April 1 - June 30 11 5 11 1/4 6
July 1 - September 30 11 3/4 9 3/8 13 9 3/4
October 1 - December 31 9 1/4 1 7/8 9 3/4 2
</TABLE>
Sales prices do not include commissions or other adjustments to
the selling price.
(b) HOLDERS- As of April 10, 2000 there were 105 stockholders of record of the
Company's Common Stock. Based upon information from nominee holders, the Company
believes that the number of beneficial holders of its Common Stock exceeds 200.
(c) DIVIDENDS - The Company has not paid or declared any dividends upon its
common stock and it intends for the foreseeable future to retain any earnings to
support the growth of its business. Any payment of cash dividends in the future,
as determined at the discretion of the Board of Directors, will be dependent
upon the Company's earnings and financial condition, capital requirements, and
other factors deemed relevant.
(d) WARRANTS AND OPTIONS- In addition to the Company's aforesaid outstanding
Common Stock, there are, as of April 10, 2000, issued and outstanding Common
Stock Purchase Warrants and Options which are exercisable at the price-per-
share indicated, and which expire on the date indicated, as follows:
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<CAPTION>
Description Number Exercise Price Expiration
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<S> <C> <C> <C>
Class "B" Warrants 750,000 $ 2.50 12/31/03
Class "C" Warrants 750,000 $ 5.00 12/31/04
</TABLE>
<PAGE>
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS AND PLAN OF OPERATIONS
RESULTS OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1999 VS. DECEMBER 31, 1998
The Company reported no revenue in 1999 or 1998.
The Company reported a net loss of $1,395,882 for the year ended
December 31, 1999 as compared to a loss of $100,147 for the comparable period
ended December 31, 1998. This loss represents a loss per common share of $.74
for 1999 as compared to a loss of $.08 for 1998.
Selling and Administrative expenses were $180,079 for 1999 as
compared to $5,147 in 1998. The biggest increase in expenses were the
non-cash charges for stock based compensation which totalled $1,201,575 in
1999 vs. $95,000 in 1998.
PLAN OF OPERATIONS
We anticipate 2000 to show the first material sales volume since the
reorganization primarily due to sales from the Eyeamerica, Inc. subsidiary. We
also anticipate the Company's shared investment in the Itchykoo Park production
in the Omnicast and Sunrise subsidiaries to begin commercial release and in turn
provide a return on the Company's investment in the production. It is also
anticipated that either Docunet or Linuxlabs, Inc., or both, will complete their
initial IPO in 2000.
EFFECT OF INFLATION ON OPERATION
Management believes inflation had no material effect on operations
during 1999 and 1998.
SEASONALITY
Management believes seasonality had no material effect on
operations during 1999 and 1998.
CAPITAL RESOURCES AND LIQUIDITY
The Company had no material financial commitments at December 31,
1999. The Company expects that it will develop and/or acquire new business
operations in the future, and that it will finance its capital requirements
in the future through equity offerings, cash generated from acquired
operations and borrowings from possible new credit facilities. The Company's
independent auditor's report on the December 31, 1999 financial statements
includes a going concern qualification based on the Company's lack of capital
and losses since the reorganization.
At December 31, 1999 the Company had a working capital deficit of
$36,423. Based upon present lack of business operations or financial
commitments, management believes that the Registrant's financial condition is
adequate for the foreseeable future as it believes it can raise equity
capital through the issuance of common stock until such time it obtains
profitable operations.
There can be no future assurance, that the Registrant's future business
operations will generate sufficient cash flow from operations or that future
working capital borrowings will be available in sufficient amounts and required
time frames to accomplish all of the Registrant's potential future operating
requirements.
DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS
The disclosures included in this Form 10-KSB, incorporated documents
included by reference herein and therein, contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
are identified by words such as "expects", "very satisfactory", "confident" and
words of similar import. Forward-looking statements are inherently subject to
risks and uncertainties, many of which cannot be predicted with accuracy and
some of which might not even be anticipated. Future events and actual results,
financial and otherwise, may differ materially from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in this Form 10-KSB and other matters
detailed from time-to-time in the Company's Securities and Exchange filings,
including the Company's periodic filings on Form 10-QSB and Form 10-KSB.
<PAGE>
RISK FACTORS WHICH MAY AFFECT OUR BUSINESS
We have a limited operating history upon which you can evaluate our
performance. Before investing in our common stock, you should consider the risks
and difficulties we may encounter as an early-stage company in the new and
rapidly evolving e-commerce market. These risks include our ability to:
- implement our business model;
- anticipate and adapt to rapid changes in our markets;
- attract new customers and maintain customer satisfaction;
- introduce new and enhanced Web sites, services, products and
alliances;
- minimize technical difficulties, system downtime and the
effect of Internet brown-outs; and
- manage the timing or promotions and sales programs.
If we do not successfully manage these risks, our business will suffer.
We cannot assure you that we will successfully address these risks or that our
business strategy will be successful.
WE MAY NEED ADDITIONAL CAPITAL TO CONTINUE OUR BUSINESS IF WE DO NOT GENERATE
ENOUGH REVENUE.
We require substantial working capital to fund our business and may
need more in the future. We will likely experience negative cash flow from
operations for the foreseeable future. If we need to raise additional funds
through the issuance of equity, equity-related or debt securities, your rights
may be subordinate to other investors and your stock ownership percentage may be
diluted. We cannot be certain that additional financing will be available to us.
OUR MANAGEMENT'S EXPERIENCE IN THE E-COMMERCE INDUSTRY IS LIMITED AND WE MAY
FAIL TO HIRE, RETAIN AND INTEGRATE KEY PERSONNEL.
Our success depends on the expertise of our key technical, sales and
senior management personnel. The Company's senior management has limited
experience operating and managing on-line stores engaged in the sale of various
merchandise.
Our success depends on our ability to continue to attract, retain and
motivate skilled employees who can effectively manage an online business.
Competition for qualified e-commerce employees is intense. We may be unable to
retain our present key employees in the future. We may experience difficulty in
hiring and retaining skilled employees with appropriate qualifications. Our
business will be harmed if we fail to attract and retain key employees.
OUR OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.
Our revenues and operating results may vary significantly from quarter
to quarter due to a number of factors. Many of these factors are outside our
control and include:
- timing of production and market acceptance of our products;
- fluctuations in consumer purchasing patterns and advertising
spending;
- changes in the growth rate of Internet usage and online user
traffic levels;
- actions of our competitors;
- the timing and amount of costs relating to the expansion of
our operations and acquisitions of technology or business; and
- general economic and market conditions.
<PAGE>
Because we have a limited operating history, our future revenues are
difficult to forecast. A shortfall in revenues will damage our business and
would likely affect the market price of our common stock. Our limited operating
history and the new and rapidly evolving Internet market make it difficult to
ascertain the effects of seasonality on our business. If seasonal and cyclical
patterns emerge in Internet purchasing, our results of operations from quarter
to quarter may vary greatly and may cause our business to suffer.
WE MAY NOT BE ABLE TO SUCCESSFULLY COMPETE AS WE FACE INTENSE COMPETITION FROM
INTERNET-BASED AND RETAIL-BASED BUSINESS.
We cannot assure you that we will be able to compete successfully or
that competitive pressures will not damage our business. Our competition
includes:
- traditional retailers;
- Web sites maintained by online retailers of similar
merchandise; and
- Internet portals and online service providers that feature
shopping services, such as America Online, Yahoo!, Excite and
Lycos.
We believe that our ability to compete depends on many factors,
including:
- The quality of our products;
- the market acceptance of our products, Web sites and online
services; and
- the success of our sales and marketing efforts.
Our competitors may be larger than us and may have substantially
greater financial, distribution and marketing resources. In addition, our
competitors may be able to secure products from vendors on more favorable terms,
fulfill customer orders more efficiently and adopt more aggressive pricing or
inventory availability policies than we can.
WE MAY BE UNABLE TO SUPPORT INCREASED VOLUME ON OUR WEB SITES.
A key element of our strategy is to generate a high volume of traffic
on our Web sites. However, growth in the number of users of our online stores
may strain or exceed the capacity of our computer systems and lead to declines
in performance or system failures.
We must also introduce additional or enhanced features and services to
attract new users to our online stores. These new services or features may not
function well and we may need to significantly modify the design of these
services to correct errors. If users encounter difficulty with or do not accept
our services or features, our business would be damaged.
WE NEED TO EFFECTIVELY MANAGE GROWTH OF OUR OPERATIONS.
Our success depends upon effective planning and growth management.
Excluding part-time employees, at December 31, 1999 we had a total of six
employees. We intend to continue to increase the scope of our operations and the
number of our employees. We also face challenges associated with upgrading and
maintaining our information systems and internal controls, particularly those
related to our purchase and receipt of inventory. If we do not successfully
implement and integrate these new systems or fail to scale
<PAGE>
these systems with our growth, we may not have adequate, accurate and timely
forecasting and financial information.
WE MAY BE LIABLE FOR BREACHES OF ONLINE SECURITY.
Consumer concerns over the security of transactions conducted on the
Internet or the privacy of users may inhibit the growth of the Internet and
online commerce. We will rely on encryption and authentication technology
licensed from third parties to securely transmit confidential information, such
as customer credit card numbers. A compromise or breach of our technology used
to protect customer transaction data may occur. Furthermore, our servers may be
vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions.
We may need to expend significant additional capital and other
resources to protect against a security breach or to alleviate problems caused
by any breaches or to alleviate problems caused by any breaches. Our business
and your investment may be harmed if security measures do not prevent security
breaches. This is a risk in e-commerce. Under current credit card practices, a
merchant is liable for fraudulent credit card transactions where, as is our
case, merchant does not obtain a cardholder's signature. A failure to adequately
control fraudulent credit card transactions would injure our business.
WE MAY BE SUED REGARDING PRIVACY CONCERNS.
Any penetration of our network security or misappropriation of our
users' personal or credit card information could subject us to liability. We may
be liable for claims based on unauthorized purchases with credit card
information, impersonation or other similar fraud claims. Claims could also be
based on other misuses of personal information, such as for unauthorized
marketing purposes. These claims could result in litigation.
In addition, the Federal Trade Commission and several states have
investigated the use by Internet companies of personal information. In 1998, the
U.S. congress enacted the Children's Online Privacy Protection Act of 1998. The
Federal Trade Commission has not yet promulgated regulations interpreting this
act. We depend upon collecting personal information from our customers and we
believe that the promulgation of regulations under this act will make it more
difficult for us to collect personal information from some of our customers. We
could incur expenses if new regulations regarding the use of personal
information are introduced or if our privacy practices were investigated.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD BURDEN OUR BUSINESS.
The adoption or modification of laws or regulations applicable to the
Internet could harm our business. The U.S. Congress recently passed laws
regarding online children's privacy, copyrights and taxation. The law governing
the Internet, however, remains largely unsettled. New laws may impose burdens on
companies conducting business over the Internet. It may take years to determine
whether and how existing laws governing intellectual property, privacy, libel
and taxation apply to the Internet and online advertising. In addition, the
growth and development of online commerce may prompt calls for more stringent
consumer protection laws, both in the United States and abroad. We also may be
subject to regulation not specifically related to the Internet, including laws
affecting direct marketers.
<PAGE>
WEB SECURITY CONCERNS MAY HINDER ONLINE E-COMMERCE AND ADVERTISING.
The need to securely transmit confidential information such as credit
card and other personal information over the Internet has been a significant
barrier to e-commerce and communications. Any publicized compromise of security
could deter people from accessing the Web or from using it to transmit
confidential information. Furthermore, decreased online traffic and sales as a
result of general security concerns could cause advertisers to reduce their
amount of online spending. Such security concerns could reduce our market for
e-commerce.
OUR STOCK PRICE COULD BE EXTREMELY VOLATILE, AS IS TYPICAL OF INTERNET-RELATED
COMPANIES.
Our stock price has been volatile and is likely to continue to be
volatile. The stock market has experienced significant price and volume
fluctuations, and the market price of securities of technology companies,
particularly Internet-related companies, have been highly volatile.
The market price for BusinessNet's stock is likely to be highly
volatile and subject to wide fluctuations in response to the following factors:
- actual or anticipated variations in our quarterly operating
results;
- announcements of technological innovations or new products or
services by us or our competitors;
- changes in financial estimated by securities analysts;
- conditions or trends in e-commerce;
- changes in the economic performance or market valuations of
other media, Internet, e-commerce or retail companies;
- announcements by us or our competitors of significant
acquisitions, strategic partnership, joint ventures or capital
commitments;
- additions or departures of key personnel;
- release of lock-up or other transfer restrictions on our
outstanding shares of common stock or sales of additional
shares of common stock; and
- potential litigation.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against such a company. The institution of such litigation against us
could result in substantial costs to us and a diversion of our management's
attention and resources.
<PAGE>
PART IV
ITEM 7. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
(a) The following documents are filed as part of this report:
a. CONSOLIDATED FINANCIAL STATEMENTS OF THE REGISTRANT, BUSINESSNET
HOLDINGS CORP. (FORMERLY BUSINESSNET INTERNATIONAL, INC.)
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Auditors' F-1
Consolidated Balance Sheet of BusinessNet Holdings Corp.
as of December 31, 1999 F-2
Consolidated Statements of Operations of BusinessNet Holdings
Corp. for the years ended December 31, 1999 and 1998 and for
the period from January 1, 1998 (date of reorganization)
through December 31, 1999 F-3
Consolidated Statements of Changes in Stockholders Equity
BusinessNet Holdings Corp. for the period from January 1, 1998
(Date of Reorganization) to December 31, 1999 F-4
Consolidated Statements of Cash Flows of BusinessNet Holdings
Corp. for the years ended December 31, 1999 and 1998 and for
the period from January 1, 1998 (date of reorganization)
through December 31, 1999
F-5
Notes to the Financial Statements of BusinessNet
International, Inc. F-6 to F-15
</TABLE>
b. INTERIM FINANCIAL STATEMENTS
Not Applicable
c. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
AND TO BE ACQUIRED
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
BusinessNet Holdings Corp. (formerly BusinessNet International, Inc.)
We have audited the accompanying balance sheet of BusinessNet Holdings Corp.
(formerly BusinessNet International, 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 January 1, 1998 (date of reorganization) 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 BusinessNet Holdings Corp.
(formerly BusinessNet International, Inc.) at December 31, 1999, and the results
of its operations and its cash flows for the period from January 1, 1998 (date
of reorganization) to December 31, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1, conditions
exist which raise substantial doubt about the Company's ability to continue as a
going concern unless it is able to generate sufficient cash flows to meet its
present and future obligations and sustain its operations. Management's plan in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/SCHUHALTER, COUGHLIN & SUOZZO, LLC
--------------------------------------
SCHUHALTER, COUGHLIN & SUOZZO, LLC
Raritan, New Jersey
April 14, 2000
F-1
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
Assets
Current Assets
Cash and cash equivalents $ 150
Photo inventory 41,795
----------
Total Current Assets 41,945
Shared production rights and syndication costs 605,000
Investment in Docunet, Inc. common stock, 80,000 shares,
at cost, held for investment 107,500
Investment in Linuxlabs, Inc. 6% convertible preferred stock,
held for investment 300,000
Fixed assets, net of accumulated depreciation of $305 2,741
----------
Total Assets 1,057,186
==========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses 78,368
----------
Total Current Liabilities 78,368
Stockholders' Equity
Common stock, par value $.01 per share, authorized
50,000,000 shares, issued and outstanding
2,232,964 shares at December 31, 1999 22,330
Convertible preferred stock, $.10 par value, 30,000
issued and outstanding 300,000
Preferred stock, authorized 1,000,000 shares,
par value $5.00 no shares issued -
Additional paid in capital 2,152,517
Retained deficit subsequent to reorganization (1-1-98) (1,496,029)
----------
Total Stockholders' Equity 978,818
----------
Total Liabilities and Stockholders' Equity $1,057,186
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From
January 1,
1998
For The (Date of
Year Ended Reorganization)
December 31, December 31,
1998 1999 1999
---------- ----------- -----------
<S> <C> <C> <C>
Total Revenue $ - $ - $ -
---------- ----------- -----------
Operating Expenses
Direct Operating Expenses - 13,923 13,923
Selling and administrative expenses 5,147 180,079 185,226
Depreciation expense - 305 305
Non-cash charges for stock-based
compensation 95,000 1,201,575 1,296,575
---------- ----------- -----------
Total Operating Expenses 100,147 1,395,882 1,496,029
---------- ----------- -----------
Loss from operations (100,147) (1,395,882) (1,496,029)
---------- ----------- -----------
(Loss) before taxes (100,147) (1,395,882) (1,496,029)
---------- ----------- -----------
Provision for taxes - - -
---------- ----------- -----------
Net (Loss) $ (100,147) $(1,395,882) $(1,496,029)
========== =========== ===========
(Loss) per share $ (.08) $ (.74)
========== ===========
Weighted average shares outstanding
Basic and Diluted 1,256,464 1,879,048
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1998
THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
Additional
Common Stock Paid In
Shares Amount Capital
--------- --------- ----------
<S> <C> <C> <C>
Balance, January 1, 1998 15,824,010 158,240 (177,968)
Reverse split of 1 share for every
50 shares held (15,507,528) (155,075) 155,075
Issuance of shares at $.50 per share 270,000 2,700 132,300
Issuance of shares for services 190,000 1,900 93,100
Net loss for the year - - -
--------- --------- ----------
Balance, December 31, 1998 776,482 7,765 202,507
Issuance of shares at $.50 per share 141,000 1,410 69,090
Stock dividend, one share for each share
outstanding on July 31, 1999 917,482 9,175 (9,175)
Issuance of shares at $.50, $2.50 and $10.00, net
of offering costs of $12,500 288,000 2,880 582,120
Issuance of 10,000 shares in exchange
for 80,000 shares of Docunet, Inc. 10,000 100 107,400
Issuance of stock options and warrants
for service - - 994,700
Issuance of 30,000 shares of convertible
preferred stock at $10 per share - - -
Issuance of shares for services 100,000 1,000 205,875
Net loss for the year - - -
--------- --------- ----------
Balance, December 31, 1999 2,232,964 $ 22,330 $2,152,517
========= ========= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Convertible
Preferred Stock Retained
Shares Amount Deficit Total
------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Balance, January 1, 1998 - - - -
Reverse split of 1 share for every - - - 135,000
50 shares held
Issuance of shares at $.50 per share - - - 95,000
Issuance of shares for services - - (100,147) (100,147)
------- ------- --------- ---------
Net loss for the year - - (100,147) 110,125
Balance, December 31, 1998
Issuance of shares at $.50 per share - - - 70,500
Stock dividend, on share for each share
outstanding on July 31, 1999 - - - -
Issuance of shares at $.50, $2.50 and $10.00,
net of offering costs of $12,500 - - - 585,000
Issuance of 10,000 shares in exchange
for 80,000 shares of Docunet, Inc. - - - 107,500
Issuance of stock options and warrants
for service - - - 994,700
Issuance of 30,000 shares of convertible
preferred stock at $10 per share 30,000 300,000 - 300,000
Issuance of shares for services - - - 206,875
Net loss for the year - - (1,395,882) (1,395,882)
------ --------- ----------- ----------
Balance, December 31, 1999 30,000 $ 300,000 $(1,496,029) $ 978,818
====== ========= =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From
January 1,
1998
For The (Date of
Year Ended Reorganization)
December 31, December 31,
1998 1999 1999
---------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Cash Flows provided by Operating
Activities:
Net (Loss) $ (100,147) $(1,395,882) $(1,496,029)
Adjustments to reconcile net
loss to cash provided by
operating activities:
Expense paid by issuance of
common stock and warrants 95,000 1,201,575 1,296,575
Depreciation and amortization - 305 305
(Increase) in photo inventory - (41,795) (41,795)
Increase in accounts payable and
accrued expenses 4,500 52,993 57,493
---------- ----------- -----------
Net cash (used in) operating
activities (647) (182,804) (183,451)
INVESTING ACTIVITIES
Cash Flows Used In Investment Activities:
Shared production rights and
syndication costs - (605,000) (605,000)
Acquisition of fixed assets - (3,046) (3,046)
Investment in Linux Labs - (300,000) (300,000)
---------- ----------- -----------
Net cash used in investing
activities - (908,046) (908,046)
---------- ----------- -----------
FINANCING ACTIVITIES
Cash Flows Used In Financing Activities:
Proceeds from the issuance of
convertible preferred stock - 300,000 300,000
Proceeds from the issuance of
common stock 135,500 655,500 791,000
---------- ----------- -----------
Net cash provided by financing
activities 135,500 955,500 1,091,000
---------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 134,853 (135,350) (497)
Cash and cash equivalents,
beginning of the period 647 135,500 647
---------- ----------- -----------
Cash and cash equivalents,
end of the period $ 135,500 $ 150 $ 150
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - LOSSES DURING THE DEVELOPMENT STAGE
The Company has recorded losses since the reorganization effective
January 1, 1998 totaling $1,496,029. The Company has a working capital
deficit of $36,423 and has not recorded operating revenue to date.
Management plans to raise additional capital, primarily through the
issuance of common stock, until successful operations are obtained and
the Company is no longer in the development stage.
In view of these matters, realization of a major portion of the assets
in the accompanying balance sheet is dependent upon the Company's
ability to meet its financing requirements, and the success of its
future operations. Management believes that actions presently being
taken to underwrite the Company's development stage through completion
will provide the necessary financial requirements which in turn will
provide the opportunity for the Company to continue as a going concern.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF BUSINESS
BusinessNet Holdings Corp. (formerly BusinessNet International, Inc.
and Navigato International, Inc.) (the "Company") was originally
incorporated under the laws of the State of Delaware on January 10,
1989 as Portfolio Publishing, Inc.
After the completion of its public offering in February, 1990 as
Portfolio Promotions, the company went through management and
operational changes and on January 31, 1994 completed a reverse
acquisition discussed in Note 3.
On January 31, 1994, the Company acquired 100% of the outstanding stock
of Navigato A/S, a Danish company which had concluded the development
of its first product line, a complete system for fleet management,
including on-board computer, satellite communication equipment and
software for the base station. Navigato A/S had also signed agreements
that give Navigato A/S the exclusive right to market a number of
products within its business area in Denmark. BusinessNet U.K., LTD
was acquired by the Company on June 4, 1996 by the issuance of
9,000,000 shares of common stock, $.01 par value, in exchange for all
of the outstanding capital stock of BusinessNet U.K., LTD The business
combination has been accounted for as a pooling of interests pursuant
to APB16, and, accordingly, the consolidated financial statements
include the combined results of operations for 1996 and historical
equity from the date BusinessNet U.K. commenced operations
(January 10, 1992). During 1997 these subsidiaries became insolvent
and ceased operations and the Company completed a quasi-reorganization.
On August 1, 1998 the Registrant changed its name to BusinessNet
Holdings Corp., and undertook a reverse-split of its Common Stock on
the basis of one new Share for each fifty (50) issued and outstanding
Shares. The primary business has been the holding of certain
operating and investment interests of various technology companies.
At December 31, 1999, the Company was in the development stage and
held a 60% interest in Omnicast Corporation, an operating subsidiary
which holds certain shared production rights and return on investment
provisions to an unreleased DVDS productions involving certain classic
rock artists, and minority interests in Docunet, Inc. and Linuxlabs,
Inc., two privately held companies which contemplate completing
IPOs (initial public offerings) or some other capital event in 2000.
F-6
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
RECENT REORGANIZATION
During 1997, a financial reorganization of the Company's foreign
subsidiaries was required as a result of the failure of subsidiary
Options Invest Danmark A/S to obtain a required financial services
license from the Government of Denmark. As a result of this financial
reorganization, the Company has discontinued its European business
operations effective June 30, 1997. The Company has had no
administrative or operating control of any of the former subsidiary
operations since then, and accounted for the abandonment of these
subsidiaries during the year ended December 31, 1997.
Consequently, the business operations of the Company since January
1, 1998 have been primarily developmental.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its 60% owned Omnicast Corp. subsidiary. Significant
intercompany accounts and transactions have been eliminated in
consolidation. No minority interest has been recorded for the
Omnicast subsidiary as this has recorded losses since inception.
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 statement and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from these estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, cash equivalents include
time deposits, certificates of deposit, and all highly liquid debt
instruments with original maturities of three months or less.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided
on the straight-line method over the estimated useful life of the
asset.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash, cash equivalents and accounts payable
approximate their fair values due to their short maturities. The
carrying value of the Company's investments in Docunet, Inc. and
Linuxlabs, Inc. approximate their fair market value.
F-7
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Investments in Unconsolidated Entities at Cost
At December 31, 1999, the Company's investments in Docunet, Inc. and
Linuxlabs, Inc. are carried at cost. These companies are privately
held and although both contemplate completing their initial public
offering or another capital event in 2000, no quoted market for
their common or preferred stock is available.
Additionally, both Docunet and Linuxlabs have a limited operating
history and no public financial information is available at this
time. Management believes its interest, as convertible to common
shares, in each company, will exceed the carrying value when these
company's become publicly traded.
PHOTO INVENTORY
Photo Inventory consists of commercial quality prints of classic rock
artists, and are stated at the lower of cost, determined by specific
identification, or market.
F-8
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
LOSS PER COMMON SHARE, BASIC AND DILUTED
The Company accounts for net loss per common share in accordance
with the provisions of Statements of Financial Accounting Standards
("SFAS") No. 128 "Earnings per Share" ("EPS"). SFAS No. 128 reflects
the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that then
shared in the earnings of the entity. Common equivalent shares have
been excluded from the computation of diluted EPS since their
effect is antidilutive.
Loss per share are based on the weighted average shares outstanding
for all periods presented giving retroactive recognition for reverse
stock split of 1 share for each 50 shares held on August 1, 1998 and
the stock dividend in July, 1991 of 917,482 shares for both periods
presented.
<TABLE>
<CAPTION>
For the Year Ended
December 31,
1998 1999
-------- --------
<S> <C> <C>
SCHEDULE OF NON CASH INVESTING
AND FINANCING ACTIVITIES:
190,000 and 100,000 shares issued
in 1998 and 1999 for services $ 95,000 $206,875
======== ========
Investment in 80,000 shares of common stock
of Docunet, Inc. at cost, based upon trading
price of 10,000 shares of BusinessNet Holdings 0 $107,500
======== ========
</TABLE>
F-9
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
LONG-LIVED ASSETS
The Company accounts for long-lived assets under the provisions of SFAS
No. 121, "Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to Be Disposed of, " which states that whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable and long-lived assets and certain
identifiable intangibles are to be disposed of, they should be reported
at the lower of carrying amount or fair value less cost to sell. The
Company does not believe that any such changes in circumstances have
occurred.
INCOME TAXES
The Company accounts for income taxes using the asset and liability
method. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using currently enacted tax rates. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in results of
operations in the period that includes the enactment date. Because of
the uncertainty regarding the Company's future profitability, the
future tax benefit of its losses have been fully reserved for.
Therefore, no benefit for the net operating loss has been recorded in
the accompanying consolidated financial statements.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with
SFAS No. 123, "Accounting for Stock-Based Compensation," which
permits entities to recognize as expense over the vesting period,
the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to
apply the provisions of Accounting Principles Board ("APB") Opinion
No. 25 and provide pro forma net income and pro forma earnings per
share disclosures for employee stock option grants as if the fair
value-based method, as defined, had been applied. The Company has
elected to continue to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure required by SFAS No. 123.
Compensation expense is generally recorded on the date of grant only
if the current market price of the underlying stock exceeded the
exercise price.
The Company accounts for nonemployee stock-based awards in which
goods or services are the consideration received for the equity
instruments issued based on the fair value of the consideration
received or the fair value of the equity instrument issued,
whichever is more readily determinable.
F-10
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 3 - CAPITAL STOCK
Common Stock
The Company has authorized 50,000 shares of common stock with a par
value of $.001.
In August 1998, the Company effected a 1 for 50 reverse split of shares
of its common stock.
In November 1998 the Company issued 270,000 shares of its common stock
at $.50 per share including 50,000 shares pursuant to a warrant plan,
in private transactions, generating $135,500 proceeds to the Company.
In December 1998, the Company issued 190,000 shares valued at $95,000
to the acting president.
In May, 1999 the Company formed its wholly owned subsidiary, Omnicast
Corporation. In July 1999 the Company issued shares of the
subsidiary representing a total of 40% to the subsidiaries President
and Vice President.
Through June of 1999, the Company issued 141,000 shares of its
common stock at $.50 per share pursuant to a warrant plan, in
private transactions, generating $70,500 proceeds to the Company.
On August 17, 1999, the Company issued 10,000 shares of the common
stock in exchange for 80,000 shares of common stock of Docunet, Inc.,
a privately held company contemplating its initial public offering.
Through December 1999, the Company issued 286,000 shares of its
common stock at $.50, $2.50 and $10.00 in private transactions;
generating $585,000 proceeds to the Company. In connection with
these transactions 2,000 shares were issued to consultants and
$12,500 was recorded as an [??]
Through December 1999, the Company issued 100,000 shares for
services, valued at $206,875.
In July, 1999 the Company issued a common stock dividend, which granted
one share of common stock to each holder of the Company's then 917,492
shares outstanding, increasing the shares outstanding on July 31, 1999
to 1,834,964. Per share amounts have been adjusted for this
dividend.
F-11
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 3 - CAPITAL STOCK (Continued)
Stock Options and Warrants
In connection with the consulting agreements and incentives to
management the Company issued stock 750,000 warrants to consultants and
employees which expire in five years.
A summary of the stock option activity for the year ended
December 31, 1999, all of which were nonqualified stock warrants,
is set forth below:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Warrants Price
--------- ----------
<S> <C> <C>
Outstanding, January 1, 1999 1,000,000 $ 2.50
Granted 750,000 5.00
Exercised 250,000 2.50
Canceled - -
--------- --------
Outstanding at December 31, 1999 1,500,000 $ 3.75
--------- --------
Exercisable at December 31, 1999 1,500,000 $ 3.75
========= ========
</TABLE>
The weighted average fair value of options granted in 1999 was
estimated as of the date of grant using the Black-Scholes stock option
pricing model, based on the following weighted average assumptions;
annual expected return of 0%, annual volatility of 197%, risk-free
interest rate of 4.74 and expected warrants life of years.
F-12
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 3 - CAPITAL STOCK (Continued)
The per share weighted-average fair value of stock options granted
during 1999 was $ . The price per share weighted average remaining
life of the warrants outstanding at December 31, 1999 is 4.5 years.
The Company has elected to continue to account for stock-based
compensation under APB Opinion No. 25, under which no compensation
expense has been recognized for stock options granted to employees at
fair market value. Had compensation expense for stock options granted
under the Plan been determined based on fair value at the grant dates,
the Company's net loss for 1999 would have been increased to the pro
forma amounts shown below.
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Net loss:
As reported (1,395,882)
=============
Pro forma (2,250,932)
=============
</TABLE>
For the year ended December 31, 1999, the Company recorded noncash
charges totaling $977,200, in connection with the grant of 400,000
options to consultants. Such charges are the result the fair value
of the warrants granted using the Black-Scholes stock option pricing
model applied warrants granted to non-employees.
Incentive stock option plan
On October 1, 1994 the Company adopted a stock option plan for
employees, directors, consultants and advisors, which provide for the
issuance of up to 500,000 shares of common stock. The Board of
Directors authorized the issuance of up to 150,000 shares on October
14, 1994 based upon certain performance goals. No options have been
granted under this plan as of December 31, 1998.
F-13
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 3 - CAPITAL STOCK (Continued)
Convertible Preferred Stock
In October, 1999 the Company issued 30,000 shares of $.10 par value
Convertible Preferred Stock. This is convertible to common stock at an
exchange rate of $10 per share.
Preferred Stock
The certificate of incorporation of the Company authorizes its board of
directors to issue for value 1,000,000 shares of preferred stock, $5
par value. Preferred stock may be issued in series with such
designations, relative rights, preferences and limitations as may be
fixed from time to time by the board of directors of the Company. None
of these shares have ever been issued and there are no shares of
preferred stock outstanding.
Reserved Shares
During 1998, the Company issued warrants (the "A" warrants) to purchase
150,000 at $.50 per share through December 31, 2002 of which 50,000
were exercised in November 1998. 100,000 warrants were exercised
under this plan in 1999. No warrants "A" remain outstanding as of
December 31, 1999.
F-14
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 3 - CAPITAL STOCK (Continued)
Reserved Shares (Continued)
During 1998 the Company issued warrants (the "B" warrants) to purchase
1,000,000 shares at $2.50 (as adjusted for the stock dividend in
July of 1999) per share, which expire December 31, 2003. During
1999 250,000 warrants were exercised and 750,000 remain unexercised
at December 31, 1999.
During 1999 the Company issued 750,000 warrants (the "C" warrants)
to purchase 750,000 shares at $5.00 (as adjusted for the stock
dividend in July 1999) which expire December 31, 2004.
Acquisitions
The Company reserved 800,000 and 1,750,000 shares of its common stock
for the acquisitions of Sunrise Entertainment, Inc. and Eyeamerica,
Inc. in January 2000.
NOTE 4 - TRANSACTIONS WITH RELATED PARTIES
In 1998 the Company issued 190,000 shares to the acting president,
valued at $95,000 for services.
The Company paid $5,000 in 1998 and $6,000 in 1999 for facilities
fees to the interim management.
In 1998, the Company paid $36,000 in legal fees to the former
director and president who received 190,000 shares in 1998. In
1999, 30,000 shares were also granted the former director and
president for services.
F-15
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 5 - PROPERTY AND EQUIPMENT
The Company generally estimated useful lives of 3-5 years on plant and
machinery, 10 years on leasehold improvements and 50 years for
buildings.
Fixed assets, at cost, at December 31, 1999 is as follows:
<TABLE>
<S> <C>
Office equipment $3,046
Less - Accumulated Depreciation (305)
------
$2,741
======
</TABLE>
NOTE 6 - LEASES
In 1998 and 1999 $5,000 and $6,000 per year was paid to the acting
president for a month to month sublease of administrative offices.
The Company entered into a premises lease for its corporate
headquarters in Midland Park, NJ, commencing in January 2000 for a
period of two years with monthly rentals of $2,077 per month. The
Company has the option for three annual renewals with increases
of 3% each renewal.
The total future minimum rental payments at December 31, 1999 are as
follows:
<TABLE>
<S> <C>
2000 $24,860
2001 25,606
-------
Total $50,466
=======
</TABLE>
F-16
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company's predecessor financial services subsidiaries primarily
operated in Denmark and as such have not been subject to the control of
a regulatory body. In December 1995, the Danish authorities announced
it would put into place such controls by June of 1997, including
certain criteria for having the authority to perform many of the
revenue producing activities the Company had performed and the
requirement to maintain minimum levels of capital. The Company had
applied for this approval and anticipated receiving the same by the
required date. The Company did not anticipate it would be unable to
obtain this approval. In accordance with Danish law, salaried employees
are entitled to three months notice of termination after six months of
employment with the terms of notice increasing one month for each three
years of employment. The prior years financial statements did not
include any liabilities for such obligations as the Company had not
prematurely terminated any current employees. On July 2, 1997 the
Company was informed that in fact it did not receive such approval,
which rendered substantially all of the Company's operating
subsidiaries in Europe insolvent, including a substantial liability for
premature termination. As such, the Company has abandoned these
subsidiaries, as discussed in Note 2, and the Company has been informed
by counsel that liabilities in excess of the subsidiaries assets cannot
be passed through to the parent of the present company under US law and
the laws of Delaware, and as such the Company has accounted for the
abandonment of these subsidiaries and the reorganization of the parent
company.
In January 2000 the Company agreed to acquire 40% of Sunrise
Entertainment, Inc. and 100% of EyeAmerica, Inc., the primary
consideration being 800,000 and 1,750,000 shares of the Company's
common stock.
F-17
<PAGE>
BUSINESSNET HOLDINGS CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES
INCOME TAXES
No provision has been made for corporate income taxes due to
cumulative losses incurred. The Company has available unrealized tax benefits
of approximately $417,860 in the form of net operating loss ('NOL')
carryforwards of approximately 1,229,000 for federal income tax purposes. If
not utilized, the federal NOL's expire at various dates through 2014. Certain
changes in stock ownership can result in a limitation in the amount of net
operating loss and tax credit carryovers that can be utilized each year.
The Company has recognized tax benefits as a deferred tax asset
subject to a 100% valuation allowance since it is uncertain whether or not
these tax benefits will be realized.
NOTE 9 - SUBSEQUENT EVENTS
Effective for January 6, 2000 the Company acquired 40% of the issued
and outstanding stock of Sunrise Entertainment, Inc., a privately held
Company by the issuance of an aggregate of 800,000 shares of the Company's
common stock, at this time audited financial information is not available,
and the Company anticipates such information will be available separately on
Form 8-K in May, 2000.
Effective for January 31, 2000, the Company acquired 100% of the
issued and outstanding common stock of EyeAmerica, Inc., a privately held
Company, by the issuance of an aggregate of 1,750,000 shares of the Company's
common stock. At this time audited financial information is not available,
and the Company anticipates such information will be available separately, on
Form 8-K in May, 2000.
F-18
<PAGE>
Item 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE.
PART III
ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Directors and Executive Officers of the Company as of April 10, 2000 were as
follows:
<TABLE>
<CAPTION>
Name & Address Age Position
<S> <C> <C>
Leslie Bocskor 35 President and
Address c/o Company, Director
6 Prospect Street, Suite 3C,
Midland Park, NJ 07432
Kenneth A. Brown 60 Secretary-
1007 Bismark Street Treasurer and
Klamath Falls, OR 97601 Director
Joseph DeGise 27 Director
Address c/o Company,
6 Prospect Street, Suite 3C,
Midland Park, NJ 07432
Charles Phillips 54 Director
Kells Building
Doylestown, PA 18901
Robert Swope 34 Director
Address c/o Company,
6 Prospect Street, Suite 3C,
Midland Park, NJ 07432
Christopher Toyne 52 Director
Address c/o Company,
6 Prospect Street, Suite 3C,
Midland Park, NJ 07432
</TABLE>
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and have qualified. Officers are
appointed to serve until the meeting of the Board of Directors following the
next annual meeting of stockholders and until their successors have been elected
and qualified.
<PAGE>
ITEM 10 - EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or paid
by the Company for services rendered in all capacities to the Company during
each of the fiscal years ended December 31, 1999 and 1998. (1) the Registrant's
Chief Executive Officer, and (2) each of the other executive officers whose
total salary and bonus for the fiscal year ended December 31, 1999 exceeded
$100,000.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
NAME AND POSITION Year Salary
<S> <C> <C>
</TABLE>
No Officer or Director of the Registrant received cash compensation for services
rendered during calendar year 1999.
<PAGE>
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - the following persons are
known to the Company to be the beneficial owners of more than 5% of the 896,482
shares of the Company's outstanding Common Stock as of May 31, 1999.
(b) Security Ownership of Management - the number and percentage of shares of
common stock of the Company owned of record and beneficially, by each officer
and director of the Company and by all officers and directors of the Company as
a group, is as follows as of April 15, 2000:
<TABLE>
<CAPTION>
Name and Address of Position Amount and Nature of Percent of
Owner Beneficial Ownership Class
<S> <C> <C> <C>
Leslie Bocskor President 20,000 Shares .4%
and Chief
Executive
Officer,
Director
Kenneth Brown Secretary, 40,000 .8%
1007 Bismark Street Director
Klamath Falls, OR
97601
Joseph DeGise Director 337,500 6.7%
Charles Phillips Director 20,000
Kells Building .4%
Doylestown, PA 18901
Robert Swope Director 15,000 .3%
Christopher Toyne Director 15,000 .3%
George Kohan Shareholder 850,000 16.4%
Heimann Burckhardt Shareholder 337,500 6.7%
--------- ----
TOTAL OFFICERS, DIRECTORS &
SIGNIFICANT SHAREHOLDERS
AS A GROUP: 1,635,000 32%
========= ====
</TABLE>
<PAGE>
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For the fiscal year ended December 31, 1999 there have not been any material
transactions between the Company and any of its officers and/or directors,
except as set forth in its aforesaid Financial Statements for the year then
ended December 31, 1999, the contents of which commence on Page F1.
<PAGE>
PART IV
ITEM 13 - EXHIBITS, SCHEDULES AND REPORTS ON FORM 8-K
Following is a list of exhibits filed as part of this Annual Report on
Form 10-KSB. Where so indicated by footnote, exhibits which were previously
filed are incorporated by reference.
EXHIBIT NUMBER
REFERENCE DESCRIPTION
(3a)* Articles of Incorporation, as amended
(3b)* By-laws, as amended
(4)* Specimen of Common Stock certificate
REPORTS ON FORM 8-K
Filed on April 4, 2000
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BUSINESSNET HOLDINGS CORP.
April 18, 2000 by:/s/
-------------------------------------
Joseph DeGise
Chairman
April 18, 2000 by:/s/
_______________________________
Leslie Bocskor
President, Acting CFO
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
April 18, 2000 by:/s/
______________________________
Joseph DeGise, Director
April 18, 2000 By:/s/__________________________
Leslie Bocskor, President and
Director
April 18, 2000 By:/s/__________________________
Kenneth Brown, Secretary and
Director
April 18, 2000 By:/s/__________________________
Charles Phillips, Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 150
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 41,795
<CURRENT-ASSETS> 41,795
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,057,186
<CURRENT-LIABILITIES> 78,368
<BONDS> 0
0
0
<COMMON> 22,330
<OTHER-SE> 2,152,517
<TOTAL-LIABILITY-AND-EQUITY> 1,057,186
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 13,923
<TOTAL-COSTS> 1,395,882
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,395,882)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,395,882)
<EPS-BASIC> (.74)
<EPS-DILUTED> 0
</TABLE>
