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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB-A
(Mark One)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
[ ] Transitional Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended April 30, 1999
Commission File No. 0-24512
E-NET FINANCIAL CORPORATION
(Name of small business issuer in its charter)
E-NET CORPORATION
(Former name of small business issuer)
Nevada 84-1273503
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2102 Business Center Drive, Suite 115E
Irvine, CA 92612
(949) 253-4633
(Address, including zip code and telephone number, including area code, of
registrant's executive offices)
Securities registered under Section 12(b) of the Exchange Act:
none
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock
(Title of class)
Check whether the issuer (1) 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 such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [ ] No [x]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. x
Issuer's revenues for its most recent fiscal year: $138,111
State the aggregate market value of the voting stock held by non-affiliates,
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days: As of August 4, 1999: $10,000,000.
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State the number of shares outstanding of each of the issuer's common equity, as
of the latest practicable date: As of August 4, 1999, there were 4,500,000
shares of the Company's common stock issued and outstanding.
Documents Incorporated by Reference: None
This Form 10-KSB consists of 38 Pages excluding exhibits.
Exhibit Index is Located at Page 37
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TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
E-NET FINANCIAL CORPORATION
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PAGE
<S> <C>
Facing Page
Index
PART I
Item 1. Description of Business......................... 4
Item 2. Description of Property......................... 11
Item 3. Legal Proceedings............................... 11
Item 4. Submission of Matters to a Vote of
Security Holders........................... 11
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters........... 11
Item 6. Management's Discussion and Analysis
or plan of Operations...................... 12
Item 7. Financial Statements............................ 15
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 30
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act.......... 31
Item 10. Executive Compensation.......................... 33
Item 11. Security Ownership of Certain Beneficial
Owners and Management...................... 34
Item 12. Certain Relationships and Related
Transactions............................... 36
PART IV
Item 13. Exhibits and Reports on Form 8-K............... 37
SIGNATURES................................................ 38
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STATEMENTS IN THIS REPORT THAT RELATE TO FUTURE RESULTS AND EVENTS ARE BASED ON
THE COMPANY'S CURRENT EXPECTATIONS. ACTUAL RESULTS IN FUTURE PERIODS MAY DIFFER
MATERIALLY FROM THOSE CURRENTLY EXPECTED OR DESIRED BECAUSE OF A NUMBER OF RISKS
AND UNCERTAINTIES. FOR A DISCUSSION OF FACTORS AFFECTING THE COMPANY'S BUSINESS
AND PROSPECTS, SEE "ITEM 1 - FACTORS AFFECTING THE COMPANY'S BUSINESS AND
PROSPECTS."
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
E-Net Financial Corporation, f/k/a E-Net Corporation and Suarro
Communications, Inc. (the "Company") was incorporated on August 18, 1988, under
the laws of the State of Nevada to engage in any lawful corporate undertaking.
On July 11, 1994 the Company submitted its Form 10-SB to the Securities and
Exchange Commission, which was declared effective on December 22, 1994, at which
time the Company became a reporting company under Section 12(g) of the 1934
Securities and Exchange Act. On August 16, 1996 the Company changed its name to
Suarro Communications, Inc., and on February 12, 1999 and May 12, 1999,
respectively, the Company changed it name to E-Net Corporation and E-Net
Financial Corporation. The Company is also qualified to do business in
California
RECENT CHANGE IN BUSINESS STRATEGY AND CHANGE IN CONTROL
Effective March 1, 1999 the Company acquired E-Net Mortgage
Corporation, a Nevada Corporation, and City Pacific International, U.S.A., Inc.,
a Nevada corporation, in exchange for 2,500,000 restricted shares of common
stock of the Company (allocated 2 million shares for the mortgage company and
500,000 shares for City Pacific). Pursuant to the Share Exchange Agreement and
Plan of Reorganization dated March 1, 1999, the Company issued these shares in
exchange for all of the issued and outstanding shares of both entities. E-Net
Mortgage Corporation and City Pacific International, U.S.A., Inc., will be
operated as wholly owned subsidiaries of the Company. E-Net Mortgage will
operate from the Company's offices at 2102 Business Center Dr., Suite 115E,
Irvine, California and branch offices in Costa Mesa, San Jose and Las Vegas and
City Pacific will operate from the Company's offices located at 1061 East
Flamingo Road, Suite 3, Las Vegas, Nevada.
Members of the Company's Board of Directors prior to the acquisitions
resigned. The following persons were appointed to the Board of Directors and
elected as officers: Michael P. Roth, President and Ted A. Bohrer,
Vice-President. Additionally, Jean Oliver was appointed as Secretary-Treasurer
and Controller.
The Company intends to act as a technology driven financial resource to
serve the needs of both the commercial and consumer markets in supplying fast
and affordable mortgages and telecommunications via the Internet and through
strategic alliances and partnering with established industry leaders. The
Company will engage in the business of providing mortgage products and services
on both the retail and wholesale levels, as well as providing telecommunications
products and services for commercial and residential customers, directly or
through joint ventures with strategic partners. With respect to its mortgage
business, the approach to accomplishing the Company's goals is to utilize
innovative technological products to improve the mortgage-related processes.
This will enable E-Net Mortgage Corporation to be more responsive to its
customer base by rapidly providing top quality products and services.
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In its telecommunications subsidiary, the Company intends to act as a
facilitator to other telecommunications companies to provide them with resources
such as equipment and financing in strategic alliances with customers.
Through E-Net Mortgage Corporation, which is licensed with the
California Department of Real Estate, this subsidiary will offer residential
mortgages for both owner occupied properties as well as residential income
properties. The services to be offered will include a paperless on-line system
over the internet allowing an immediate direct relationship between the point of
sale, customer, and the investor community.
Through City Pacific International U.S.A., Inc., the Company intends to
provide products and interconnectivity to telecommunications companies by
purchase of essential equipment and/or lease of communication lines or satellite
pathways to enable the carriers to transport voice and date information. On the
retail level, through joint ventures with other providers, this subsidiary will
offer debit cards for corporate customers, calling card services, long distance
services and international termination. This entity will also provide switch
co-location and billing services.
RECENT ACTIVITIES OF THE COMPANY
Activities of the Parent Company
The Company announced in June 1999 that it had executed a joint venture
agreement with Genesis Residential Healthcare, Inc. to develop a mixed use
residential/health care project. The project integrates residential developments
and senior healthcare facilities onto campuses that are tied together with
cutting edge communication technology. The result is senior residential living
areas that deliver various levels of assisted care. This model makes it possible
to shift available resources from administrative overhead to client oriented
benefits. Genesis has been in the development and construction business for over
thirty years with its principal focus on healthcare facilities. The project is
currently in the developmental stage; operations have not yet started.
Activities of E-Net Mortgage Corporation
This subsidiary has opened branch offices in San Jose, Las Vegas and
Costa Mesa in May, June and August 1999, respectively. The offices are part of a
planned series of efficient, high technology facilities based on a dynamically
improved business model in the real estate financing industry. The model
implements the use of modern website and network technologies and procedures to
speed up the loan process, reduce costs and increase client satisfaction. Six
additional satellite office facilities are planned during the remainder of this
year. Each satellite office will be strategically located near its client base
in order to maintain that personal service touch so vital in a people-oriented
industry.
Activities of City Pacific International, U.S.A., Inc.
On February 25, 1999 this subsidiary executed a joint venture contract
with Omnetrix International Inc., a Los Angeles-based communications company.
One of the first projects to be launched is the "500 Minute Prepaid Calling
Card." This card will provide for fifteen cents per minute calls within the
continental United States and additionally an international service at unusually
competitive rates. Marketing strategies are aimed at corporations, businesses as
well as public consumers, attracted through the Internet ads, the Omnetrix web
site, print media, and direct mail.
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BUSINESS STRATEGY OF E-NET MORTGAGE CORPORATION
Business Concept
E-Net Mortgage's core strategy is a new management model for the
mortgage industry. A team of two specialists will staff each office. The first
is the Loan Officer. The Loan Officer is the licensee and is ultimately
responsible for the loan process. The second team member is the marketer. It is
the responsibility of this individual to get the deals. Other functions will be
handled by outside consultants.
It is projected that the team will close an average of one loan per
day. Each loan will be originated, processed and closed within ten business
days. Achieving this rate will reduce production costs to approximately 50% of
the industry standard. This efficiency will be achieved through the
specialization just described. Each office will be semi-autonomous. But, it will
be electronically linked to corporate management on a virtual private network.
Local offices will be organized in "Stars." Each office will be a
satellite of a Star. Each Star will be a cluster of five satellites. Stars will
be placed strategically, nationwide, in areas of high property value. This will
assure a high average loan amount. Continuing the metaphor, E-Net will be a
nationwide galaxy of semi-autonomous but uniformly run mortgage offices.
E-Net will establish its first satellite office in the heart of the
Silicon Valley at the San Jose International Jet Center. The Silicon Valley was
selected as the first unit because of the favorable demographics and because of
the availability of qualified personnel. The San Jose International Jet Center
compliments the image presented by E-Net's new business model. About the time
that the fourth and fifth satellites are coming on line in the Silicon Valley
Star, E-Net will begin deploying additional Stars in Orange County, Los Angeles,
Las Vegas, Austin, San Diego, Honolulu and similar locations. As of the date of
this report, offices have been set up and are being staffed in Orange County and
Las Vegas in addition to the San Jose facility.
Products and Services
As a retail mortgage broker, E-Net Mortgage has developed relationships
with many of the key mortgage lenders in the State of California. This
subsidiary is in the process of putting similar relationships in place
nationwide. With these relationships in place this subsidiary believes that it
will be able to offer a wide range of mortgage loan products and services.
E-Net Mortgage is active as a mortgage broker, using the trade name
"E-Net Mortgage". E-Net Mortgage originates its own loans on a retail basis and
provides lending services to its satellite offices. E-Net Mortgage assists its
brokers by reviewing their activities and business development plans on a
continuing basis. E-Net Mortgage management regularly meets with its loan
officers and staff to train, develop rapport, explain objectives, and describe
methods of operation. In addition, after set up, E-Net Mortgage provides loan
origination, processing support, and underwriting assistance to ensure efficient
and timely closings.
In addition to initial training, continuous retraining and activity
monitoring, E-Net Mortgage will provide each Broker with a Policies and
Procedures Manual. This outlines and explains E-Net's method of operation and
quality control guidelines. These policies and procedures, when followed, should
significantly reduce the incidence of problems that cause delay in loan
processing. E-Net Mortgage expects to finalize the Policies and Procedures
Manual in the near future. E-Net Mortgage provides its Brokers with current
mortgage product descriptions and guidelines, continuously updating the rates
for all of its products on its virtual private network.
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Target Markets
E-Net Mortgage is mainly in the residential mortgage business,
providing residential mortgages at the retail level. At the present time, the
retail business is providing 100% of current revenue. The wholesale business is
under development. E-Net Mortgage's current target market is direct consumers.
Currently, E-Net Mortgage is hiring and training personnel who will service this
customer base. This direct relationship enables E-Net Mortgage to establish
point-of-sale opportunities to originate and process mortgage loans.
E-Net Mortgage plans to expand its market base by including a
commercial element. Potentially, it plans to target: developers and builders,
housing manufacturers, lawyers and accountants, insurance companies, the
securities industry, and credit counseling agencies.
BUSINESS STRATEGY OF CITY PACIFIC INTERNATIONAL U.S.A., INC.
Business Concept
City Pacific International, U.S.A., Inc. ("CPI"), is a
telecommunications company. This subsidiary takes advantage of rapid changes in
the industry to offer innovative, cost effective, quality products and services
more quickly than can larger, more traditional companies. CPI's business focuses
on providing its customers products and telecommunication services that are
innovative, timely, and cost effective. CPI constantly reassesses its marketing
campaigns, sales tools, and product packages. It works continuously to identify
reliable marketing and distribution channels.
Target Markets
Latin America is of special interest. CPI has identified an opportunity
to create a unique competitive advantage over major telecommunication service
providers by providing wholesale telecommunication services to carriers. AT&T,
for example, does not have its own network to Mexico. AT&T purchases this
traffic directly from TelMex. The focus of this project is to take advantage of
the wholesale market for terminating long distance telecommunications traffic
into Mexico from the United States.
CPI will phase in a number of switch sites in Mexico, including Mexico
City, Monterey, Nueva Laredo, Ciudad Juarez, and Guadalajara. The Mexican
government prohibits voice transmission into Mexico. However, voice over data
transmission is allowed. This project will achieve this edge by dividing voice
bit streams and compressing them into data packets. These compressed voice
packets are transmitted over data lines, providing toll-quality sound and
network reliability.
Products and Services
In the telecommunications industry, equipment and products not only
change rapidly but constantly. In today's global marketplace, a broadly based
telecommunications organization must offer a wide range of products and services
- - debit cards, internet access, local and long distance services, voice response
units, information services, and many other products and services.
Telecommunications is experiencing explosive growth as well as rapid
technological change.
PRIOR BUSINESS HISTORY OF THE COMPANY
Prior to the acquisitions of E-Net Mortgage Corporation and City
Pacific International, U.S.A., Inc. the Company was inactive. It operated as a
shell company without revenues, while it sought an appropriate merger with a
private company.
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In August, 1996, the Company acquired all of the issued and outstanding
common stock of Suarro Communications, Inc., a Texas corporation ("Suarro"),
wherein it undertook a forward split of its issued and outstanding common stock
whereby twenty (20) shares of common stock were issued in exchange for each
share of common stock previously issued and outstanding. Thereafter, the Company
acquired all of the issued and outstanding securities of Suarro in exchange for
issuance by the Company of 5,200,000 shares of "restricted" common stock of the
Company to Suarro shareholders. The consideration given and received was
determined by arms-length negotiations between the principals of the Company and
Suarro. As part of the terms of the aforesaid transaction, the Company also
changed its name to "Suarro Communications, Inc."
Various disputes arose subsequent to the closing of the Suarro
transaction referenced above. Applicable thereto, an action was filed in the
Second Judicial District Court of the State of Nevada, in and for the County of
Washoe, entitled Lee R. Goldberg v. Suarro Communications, Inc. et al., Cause
No. CV-97-05053, relevant to certain claims held by shareholders of the Company
relating to representations made by the shareholders of Suarro in the
reorganization between the companies. A stipulation, Mutual Release and
Indemnity Agreement was reached in relation to such action, with the results of
such settlement being that the Suarro transaction described above was rescinded
effective September 9, 1997, with all of the 5,200,000 shares issued in favor of
the Suarro shareholders being returned to the Company's treasury.
Certain additional matters were undertaken by the Company at the time
of the Suarro transaction described above, including the shareholders
undertaking adoption of an amendment to the Company's Articles of Incorporation
whereby the Company's shareholders increased the number of shares of common
stock authorized for issuance from 1,000,000 common shares, par value $0.001 per
share, to 20,000,000 common shares, par value $0.001 per share. Additionally,
1,000,000 shares of preferred stock, no par value per share, were also
authorized. Further, as a result of the rescission of the Suarro transaction,
management of the Company changed.
FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTS
The following discussion should be read in conjunction with the audited
consolidated financial statements contained herein. In addition to the factors
set forth herein, there may be other factors, or factors which arise in the
future which may affect the future performance of the Company.
GOING CONCERN; LIMITED OPERATING HISTORY AND REVENUES AND MINIMAL ASSETS
The Company's financial statements accompanying this report have been
prepared assuming that the Company will continue as a going concern, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The financial statements do not include any
adjustment that might result from the outcome of this uncertainty. The Company
has had limited operating history. It has had no revenues from operations prior
to the acquisition of its E-Net Mortgage and City Pacific International
subsidiaries on March 1, 1999. In addition, the Company had no significant
assets or financial resources prior to these acquisitions.
SPECULATIVE NATURE OF COMPANY'S PROPOSED OPERATIONS
The success of the Company's proposed plan of operation will depend to
a great extent on the operations, financial condition and management of its
recently acquired subsidiaries. The Company's ability to integrate these
subsidiaries' activities into its consolidated operations is uncertain. The
success of the Company's operations may be dependent upon numerous factors
beyond the Company's control.
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COMPETITION
Competition is vigorous in all sectors of the markets in which the
Company competes. The Company has numerous competitors in each of its business
lines, which vary widely in their size, capabilities, market segments and
geographic areas, many of which are larger and have financial resources far
greater than the Company. There can be no assurance that the Company can
effectively compete with any or all of its competitors in any of its business
lines.
DEPENDENCE ON KEY PERSONNEL
Competition for qualified personnel in the Company's market segments is
intense and there can be no assurance that the Company will be able to attract
and retain a sufficient number of qualified employees. As the business of the
Company grows, it may become increasingly difficult for it to hire, train and
assimilate the new employees needed. The Company's success depends to a
significant degree upon the continued contributions of its key management and
operational personnel. The Company's officers have entered into written
employment agreements, but the ability of the Company to enforce such contracts
is uncertain. The Company has not obtained key man life insurance on any of its
officers or directors. Loss of the services of any of these individuals would
adversely affect development of the Company's business and its likelihood of
continuing operations. See "PART III, Item 9 - Directors, Executive Officers,
Promoters and Control Persons; Compliance With Section 16(a) of the Exchange
Act."
CONFLICTS OF INTEREST - GENERAL
Officers and directors of the Company may in the future participate in
business ventures which could be deemed to compete directly with the Company.
Additional conflicts of interest and non-arms length transactions may also arise
in the future in the event the Company's officers or directors are involved in
the management of any firm with which the Company transacts business.
NEED FOR ADDITIONAL FINANCING; REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING
FINANCING
The Company's primary plan of operation will require additional
capitalization to allow for its implementation. Any financing, would in all
likelihood, result in the Company issuing a substantial amount of new Common
Shares to third parties. The issuance of previously authorized and unissued
Common Shares of the Company would result in reduction in percentage of shares
owned by present and prospective shareholders of the Company and may result in a
change in control or management of the Company.
LIQUIDITY: VOLATILITY OF STOCK PRICE
Historically, trading volume of the Company's Common Stock has been
small or non-existent, and the market for the Common Stock has been less liquid
than that of many other publicly traded companies. There can be no assurance
that a stockholder who desires to sell shares of Common Stock can sell all of
the shares that the stockholder desires to sell, either at all or at the desired
times or prices. The Company expects that the market price of the Common Stock
will be volatile. Factors such as quarterly fluctuations in the Company's
results of operations, trading volume, the announcement of technological
innovations or new products by the Company or its competitors, general
conditions in the Company's market segments, and economic conditions generally,
may have a significant impact on the market price of the Common Stock.
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RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS AND SERVICES
The Company's activities in the mortgage loan and telecommunications
businesses will continue to be subject to frequent and rapid changes in
technology and customer preferences. Customers may delay purchases in
anticipation of technological changes. Any failure by the Company to anticipate
or respond adequately to the changes in technology and customer preferences, or
to develop and introduce new products or services in a timely fashion, could
materially adversely affect the Company's business and operating results.
YEAR 2000 COMPLIANCE RISKS
The Year 2000 compliance issue arises from the fact that a significant
percentage of the software utilized by United States businesses relies on
two-digit date codes to perform computations and decision-making functions.
Commencing on January 1, 2000, these computer programs may fail from an
inability to interpret date codes properly, misinterpreting "00" as the year
1900 rather than 2000. The Company is currently in the process of evaluating its
information technology systems for year 2000 compliance and believes that most
of its operating systems have been modified to address Year 2000 issues. At this
time, the Company does not believe that the costs associated with implementing
its Year 2000 compliance plan will be material to the Company's financial
condition or operations.
The Company's E-Net Mortgage computers consist of a mixture of personal
computers and Macintoshes that are Y2K ready. Mission critical software (Loan
processing program called Point by Calyx Software Company) is also Y2K ready
compliant. Point is also compliant with the Fannie Mae and Freddie Mac
interfaces, certified Y2K compliant by both organizations.
Any business disruptions to E-Net Mortgage would be the result of
Y2K conflicts from our lenders, credit reporting agency, or title companies. The
Company relies substantially on each of these service providers for business
continuity. There can be no assurance that such third party software will be
free of errors and defects or be Year 2000 compliant. Any business interruptions
of third party service suppliers could result in loss of revenues, and could
adversely affect the Company's market penetration and reputation, any of which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company's operations in its City Pacific International subsidiary are not
believed to have any material Year 2000 concerns as the telecommunications
equipment utilized by this subsidiary have been deemed Y2K compliant by the
manufacturers.
EMPLOYEES
During the fiscal year ended April 30, 1999, the Company and
subsidiaries employed four executive personnel (its President, Vice President
and Secretary/Treasurer and the President of City Pacific International U.S.A.,
Inc.) and three non-executive personnel. See "PART II, Item 9 - Directors,
Executive Officers, Promoters and Control Persons; Compliance With Section 16(a)
of the Exchange Act."
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ITEM 2. DESCRIPTION OF PROPERTY
FACILITIES. The Company operates its primary executive offices from
2102 Business Center Drive, Suite 115E, Irvine, CA 92612. The lease is on a
month-to-month basis commencing February 19, 1999 for a monthly rental of
$1,195. The Company has also executed a lease for a term of 38 months commencing
August 15, 1999 for 2,071 square feet located at 3200 Bristol Street, Suite 700,
Costa Mesa, California, where the monthly rental is $4,660. The Company also has
an office in Las Vegas, Nevada on a month-to-month basis wherein the rental is
$850 per month. The Company's E-Net Mortgage division also maintains a separate
branch office in San Jose and operates its executive offices and other branch
offices, respectively, in the Company's Irvine, Costa Mesa and Las Vegas
offices. The San Jose office lease is month-to-month for a rental of $850 per
month. The Company's City Pacific division maintains its executive offices at
the Company's offices in Las Vegas. The Company maintains certain business
property at each of these locations consisting of office furniture, computers,
software, copiers, telecommunications equipment, and internet and networking
systems.
OTHER PROPERTY. The Company owns no other property.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings which are pending or have been
threatened against the Company of which management is aware as of the date of
this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Effective February 15, 1999 the Company acquired E-Net Mortgage
Corporation, a Nevada Corporation, and City Pacific International, U.S.A., Inc.,
a Nevada corporation, in exchange for 2,500,000 restricted shares of common
stock of the Company. Pursuant to the Share Exchange Agreement and Plan of
Reorganization dated March 1, 1999, the Company issued these shares in exchange
for all of the issued and outstanding shares of both entities. E-Net Mortgage
Corporation and City Pacific International, U.S.A., Inc. At the same time the
shareholders of the Company authorized a 2:1 forward split of the 1,000,000
outstanding shares of the Company's stock resulting in 2,000,000 shares being
outstanding prior to the issuance of the additional 2.5 million shares.
In May 1996, the Company's Board of Directors called a special meeting
of the Company's shareholders in order to obtain approval of various matters,
including approval of the reorganization between the Company and Suarro, as well
as authorizing various amendments to the Company's Articles of Incorporation.
All matters presented to the Company's shareholders were approved. However,
subsequent to approval, the reorganization between the Company and Suarro was
rescinded. See "PART I, Item 1 -Description of Business," above for a more
detailed description of these events. The amendments authorized at the meeting
of shareholders remain in effect.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
(a) Market Information. The Company's common stock was approved for
trading on the OTC Bulletin Board operated by the National Association of
Securities Dealers in April 1997. Prior to that date none of the Company's
securities were traded. The initial trading price on April 30, 1997 was $5.25
bid, $6.00 asked. Since April 30, 1997, the price of the Company's common stock
has traded between $2.00 and $8.00. The Company's common stock presently trades
under the symbol "ENNT". The transfer agent is Holladay Stock Transfer, 2939
North 67th Place, Scottsdale, AZ 85251. The CUSIP number is 26874T104.
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(b) Holders. There are nine (9) holders of the Company's Common Stock,
not including those persons or entities who hold their securities in "street
name" as of April 30, 1999. There are eighteen (18) holders of the Company's
Common Stock, not including those persons or entities who hold their securities
in "street name" as of August 31, 1999. There are presently outstanding
4,500,000 shares of Common Stock of the 20,000,000 shares authorized.
As of the date of this report all but 2,500,000 shares of the Company's
Common Stock are eligible for sale under Rule 144 promulgated under the
Securities Act of 1933, as amended, subject to certain limitations included in
said Rule. In general, under Rule 144, a person (or persons whose shares are
aggregated), who has satisfied a two year holding period, under certain
circumstances, may sell within any three-month period a number of shares which
does not exceed the greater of one percent of the then outstanding Common Stock
or the average weekly trading volume during the four calendar weeks prior to
such sale. Rule 144 also permits, under certain circumstances, the sale of
shares without any quantity limitation by a person who has satisfied a
three-year holding period and who is not, and has not been for the preceding
three months, an affiliate of the Company.
(c) Dividends.
(1) The Company has not paid any dividends on its Common Stock. The
Company does not foresee that the Company will pay dividends in the immediate
future as it intends to reinvest any net income for the purpose of
implementation of its business plan and the business plans of its wholly owned
subsidiaries.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion should be read in conjunction with the
Company's audited financial statements and notes thereto included herein. In
connection with, and because it desires to take advantage of, the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, the Company
cautions readers regarding certain forward looking statements in the following
discussion and elsewhere in this report and in any other statement made by, or
on the behalf of the Company, whether or not in future filings with the
Securities and Exchange Commission. Forward looking statements are statements
not based on historical information and which relate to future operations,
strategies, financial results or other developments. Forward looking statements
are necessarily based upon estimates and assumptions that are inherently subject
to significant business, economic and competitive uncertainties and
contingencies, many of which are beyond the Company's control and many of which,
with respect to future business decisions, are subject to change. These
uncertainties and contingencies can affect actual results and could cause actual
results to differ materially from those expressed in any forward looking
statements made by, or on behalf of, the Company. The Company disclaims any
obligation to update forward looking statements.
(a) Plan of Operation.
It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan described herein. Because the Company has
limited capital with which to pay these anticipated expenses, present management
of the Company will pay these charges with their personal funds, as interest
free loans to the Company. Management has agreed among themselves that the
repayment of any loans made on behalf of the Company will not impede, or be made
conditional in any manner, to consummation of a proposed transaction.
<PAGE> 13
Revenues are projected to be derived from fees earned by e-Net Mortgage
based on real estate loans brokered, and from City Pacific's joint venture with
Omnetrix. Until these revenues provide sufficient cash flow to cover operations,
the company will continue to rely upon such loans while seeking private
placement of its securities. Plans are also being developed for a possible
public offering of common stock.
Because the Company presently has nominal overhead or other material
financial obligations, management of the Company believes that the Company's
short term cash requirements can be satisfied by management injecting whatever
nominal amounts of cash into the Company to cover these incidental expenses.
There are no assurances whatsoever that any additional cash will be made
available to the Company through any means. These uncertainties and
contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward looking statements made by, or on
behalf of, the Company. The Company disclaims any obligation to update forward
looking statements.
The Company's E-Net Mortgage Corporation subsidiary is engaged in the
mortgage loan industry as a full service mortgage loan broker. It is in the
process of developing a replicable structure of satellite mortgage loan
brokerage offices. On May 19, 1999 this subsidiary opened its first branch
office in San Jose, California. On June 7, 1999 this subsidiary, opened another
mortgage loan origination and financial services office in Las Vegas, Nevada,
and a third office was opened in Costa Mesa, California in August 1999. These
offices are part of a planned series of efficient, high technology facilities
based on a dynamically improved business model in the real estate financing
industry. The model uses modern website and network technologies and procedures
to speed up the loan process, reduce costs and increase client satisfaction.
The technology involves extensive use of the Internet, both as a
channel to the Company's retail customers and business-to-business connectivity
among its offices and associate relationships. This subsidiary has selected LION
(Lenders Interactive Online Network) as its on-line mortgage server. E-Net
Mortgage has an Internet site accepting retail loan applications. E-Net Mortgage
can also initiate real-time loan program searches. The LION loan search database
is updated daily and represents 400,000 to 600,000 pricing variants from up to
80 wholesale lenders on a regional basis with over 400 wholesale lenders in
total). This is significant benefit for the Company's clients and a major
competitive advantage for E-Net Mortgage Corporation.
The prototypical office consists of a two-person crew and incorporates
the latest in technology, software and processes. The crewmembers are
independent contractors and remunerated on a percentage basis per funded loan.
E-Net Mortgage also has customized procedural relationships with strategic
partners that provide loan processing, credit, title, escrow and funding
services. As strategic partners, e-Net does not incur any overhead expenses
normally associated with these services; the costs are paid for on a
transactional basis. The Silicon Valley satellite office represents a successful
beta test for an improved business model in the industry. Compared to industry
standard, e-Net's model offers lower operating costs, higher production levels,
and enhanced profitability.
City Pacific International, U.S.A., Inc. is a telecommunications
company. It is engaged in the business of providing access to the Internet, as
an Internet service provider (ISP) to both commercial clients and to
individuals. It will market this service aggressively in under-served markets,
worldwide. It will build an integrated network to interface with the backbone of
the Internet through both acquisition and original development.
<PAGE> 14
On March 19, 1999 City Pacific International, U.S.A., Inc. negotiated a
joint venture partnership contract with Omnetrix International Inc., a Los
Angeles-based communications company. One of the first projects to be launched
is the "500 Minute Prepaid Calling Card."
The card provides fifteen cents per minute calls within the continental
United States and additionally provides international service at unusually
competitive rates. Marketing strategies are aimed at corporations, and
businesses as well as public consumers. Advertising is through Internet ads, the
Omnetrix web site, print media, and direct mail.
City Pacific International, U.S.A., Inc. through its joint venture
partner Omnetrix is also involved in traditional telecommunications services as
a carrier of long distance service. In addition the Omnetrix joint venture
provides carrier services: international termination, switch co-location,
billing and customer service.
On July 1, 1999, the company entered into a joint venture with Genesis
Residential Healthcare Inc. for the purpose of developing residential healthcare
facilities under a limited partnership. Genesis will be providing in-depth
planning and study for a highly innovative national program for the 21st century
by creating well planned communities that provide the best services in
healthcare, social, spiritual, and financial benefits at an affordable cost. The
result of this cost-effective program will generate a substantial return on
investment while still providing the best in senior care.
On May 26, 1999 the company engaged Atlantic Union Distribution Ltd. as
an investment-banking consultant to access $20,000,000 from foreign sources
under an investment banking agreement. The purpose of this agreement is to
finance the Genesis project. Funds will go to the Limited Partnership.
Under this partnership agreement, the Company will act as the general
partner and pledge its preferred stock as security for investors. The terms and
conditions of this class of preferred stock have not yet been determined.
Effective July 1, 1999, D. Weckstein & Co., Inc. was retained to raise
funds through public or private offerings, of debt or equity securities. This
agreement was executed on June 22, 1999. Under terms of this agreement D.
Weckstein & Co., Inc. will also seek merger and acquisition candidates and serve
as a financial consultant to The Company.
<PAGE> 15
ITEM 7. FINANCIAL STATEMENTS
E-NET FINANCIAL CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Financial Statements
April 30, 1999
<PAGE> 16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
E-net Financial Corporation
We have audited the accompanying consolidated balance sheet of E-NET FINANCIAL
CORPORATION and subsidiaries (a development stage company) (the "Company") as of
April 30, 1999, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the two years in the period
ended April 30, 1999 and for the period from inception (November 20, 1996) to
April 30, 1999. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes, on a test basis, examination of 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 consolidated financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of E-NET
FINANCIAL CORPORATION and subsidiaries as of April 30, 1999, and the results of
their consolidated operations and cash flows for each of the two years in the
period ended April 30, 1999 and for the period from inception (November 20,
1996) to April 30, 1999, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 10 to
the financial statements, the Company has very limited operations, remains in
the development stage, and does not have sufficient cash to cover operating
needs. These conditions raise substantial doubt about its ability to continue as
a going concern. Management's plans regarding those matters are also described
in Note 10. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
CACCIAMATTA ACCOUNTANCY CORPORATION
Irvine, California
September 1, 1999
<PAGE> 17
E-NET FINANCIAL CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Consolidated Balance Sheet
<TABLE>
<CAPTION>
APRIL 30, 1999
--------------
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and equivalents $ 4,282
Note receivable 87,500
Other current assets 14,418
--------
TOTAL CURRENT ASSETS 106,200
MARKETABLE EQUITY SECURITIES HELD FOR SALE 162,500
EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF $1,995 40,030
INVESTMENT IN JOINT VENTURE 18,800
--------
$327,530
========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of deferred revenue $ 83,300
Notes payable to officers 38,606
Accrued expenses 56,754
Income tax liability 17,700
--------
TOTAL CURRENT LIABILITIES 196,360
DEFERRED REVENUE 75,458
--------
TOTAL LIABILITIES 271,818
--------
COMMITMENTS AND CONTINGENCIES --
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 1,000,000 shares authorized,
none issued and outstanding --
Common stock, $.001 par value, 20,000,000 shares authorized,
4,500,000 shares issued and outstanding 4,500
Additional paid-in capital 45,175
Retained earnings 6,037
--------
TOTAL SHAREHOLDERS' EQUITY 55,712
--------
$327,530
========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 18
E-NET FINANCIAL CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
CUMULATIVE
YEAR ENDED APRIL 30, FROM INCEPTION
-------------------------------- (NOVEMBER 20, 1996)
1999 1998 TO APRIL 30, 1999
--------------- ----------------- ------------------
<S> <C> <C> <C>
Consulting fee revenue $ 83,911 $ 6,942 $ 90,853
General and administrative 77,091 -- 79,091
----------- ----------- -----------
OPERATING INCOME 6,820 6,942 11,762
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (192) -- (192)
Interest income 11,167 -- 11,167
----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 17,795 6,942 22,737
Provision for income taxes 15,000 1,700 16,700
----------- ----------- -----------
NET INCOME $ 2,795 $ 5,242 $ 6,037
=========== =========== ===========
BASIC AND DILUTED NET INCOME PER SHARE $ 0.00 $ 0.00
=========== ===========
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 2,417,808 2,000,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 19
E-NET FINANCIAL CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Shareholders' Equity From
inception (November 20, 1996) to April 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK(1)
---------------------------------------- RETAINED
AMOUNT EARNINGS
------------------------- ADDITIONAL DURING THE TOTAL
NUMBER PER PAID-IN DEVELOPMENT SHAREHOLDERS'
OF SHARES SHARE TOTAL CAPITAL STAGE EQUITY
--------- --------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization 2,000,000 $ 0.001 $ 2,000 $ -- $ -- $ 2,000
Net loss for 1997 -- -- -- -- (2,000) (2,000)
--------- --------- --------- ----------- ------------
BALANCE, APRIL 30, 1997 2,000,000 2,000 -- (2,000) --
Net income for 1998 -- -- -- -- 5,242 5,242
--------- --------- --------- ----------- ------------
BALANCE, APRIL 30, 1998 2,000,000 2,000 -- 3,242 5,242
-- -- -- -- --
Contributed capital -- -- -- 10,000 -- 10,000
E-net reorganization 2,500,000 0.023 2,500 35,175 -- 37,675
Net income for 1999 -- -- -- -- 2,795 2,795
--------- --------- --------- ----------- ------------
BALANCE, APRIL 30, 1999 4,500,000 -- $ 4,500 $ 45,175 $ 6,037 $ 55,712
========= ========= ========= ========= ===========
</TABLE>
(1) Common stock and additional paid in capital have been retroactively restated
to give effect to the E-net reorganization. (see Note 1 to the consolidated
financial statements.)
The accompanying notes are an integral part of these financial
statements.
<PAGE> 20
E-NET FINANCIAL CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
CUMULATIVE
YEAR ENDED APRIL 30, FROM INCEPTION
--------------------------- (NOVEMBER 20, 1996)
1999 1998 TO APRIL 30, 1999
--------- --------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,795 $ 5,242 $ 6,037
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 1,995 -- 1,995
Increase (decrease) in deferred revenue (84,300) 243,058 158,758
Increase in other assets (33,218) -- (33,218)
Increase in accrued expenses 56,754 -- 56,754
Increase in income tax liability 16,000 1,700 17,700
Marketable equity securities received as
payment on consulting agreement -- (250,000) (250,000)
--------- --------- ---------
Net cash used by operating activities (39,974) -- (41,974)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (4,550) -- (4,550)
--------- --------- ---------
Net cash used by investing activities (4,550) -- (4,550)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock -- -- 2,000
Proceeds from notes payable to officers 44,606 -- 44,606
Payments on notes payable to officers (6,000) -- (6,000)
Contributed capital 10,200 -- 10,200
--------- --------- ---------
Net cash provided by financing activities 48,806 -- 50,806
--------- --------- ---------
Net increase in cash 4,282 -- 4,282
CASH, BEGINNING OF PERIOD -- -- --
--------- --------- ---------
CASH, END OF PERIOD $ 4,282 $ -- $ 4,282
========= ========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for equipment $ 37,475 $ -- $ 37,475
Sale of marketable equity securities in exchange
for note receivable $ 87,500 $ -- $ 87,500
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 21
April 30, 1999
1. REORGANIZATION
E-net Financial Corporation ("E-net"), a Nevada corporation, was
incorporated on August 18, 1988 under the name of Solutions, Inc.;
subsequently it changed its name to Suarro Communications, Inc. on
August 16, 1996, to E-net Corporation on February 12, 1999, and to
E-net Financial Corporation on April 6, 1999. From inception, E-net has
been essentially inactive with no significant operations.
On March 1, 1999, E-net, E-net Mortgage Corporation ("E-net Mortgage")
and City Pacific International, Inc. ("City Pacific") agreed to merge
under a Plan of Reorganization whereby E-net issued 2,000,000 and
500,000 shares of its common stock in exchange for all of the
outstanding common shares of E-net Mortgage and City Pacific,
respectively. E-net retained its 2,000,000 million shares of common
stock, its officers and directors resigned their positions, and the
sole principal of E-net Mortgage assumed control of these three
entities (collectively "the Company"). Accordingly, E-net Mortgage was
deemed the accounting acquiror of E-net in this reverse merger. The
acquisition of City Pacific, whose assets, liabilities and operations
were immaterial, was accounted for as a purchase.
E-net Mortgage, a Nevada corporation, formally known as the Hospitality
Group, Inc., was formed on November 20, 1996 to engage in the business
of providing mortgage products and services on both the retail and
wholesale basis.
City Pacific, a Nevada corporation, was formed on July 10, 1997 to
provide telecommunications products and services for commercial and
residential customers and clientele, directly or through joint ventures
with strategic partners.
The Company is classified as a development stage company because its
principal activities involve obtaining the capital necessary to execute
its strategic business plan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying consolidated financial statements include the accounts
of E-net and its wholly owned subsidiaries E-net Mortgage and City
Pacific. All significant intercompany transactions and balances have
been eliminated in consolidation.
Cash and equivalents
The Company considers all liquid investments with a maturity of three
months or less from the date of purchase that are readily convertible
into cash to be cash equivalents. Balances in bank accounts may, from
time to time, exceed federally insured limits.
<PAGE> 22
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Equipment
Depreciation expense is provided over the estimated useful life of 5
years using the straight-line method.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Income taxes
The Company reports certain expenses differently for financial and tax
reporting purposes and, accordingly, provides for the related deferred
taxes. Income taxes are accounted for under the liability method in
accordance with SFAS 109.
Revenue recognition
Consulting fee revenue is recognized when the service is performed.
Basic and diluted net loss per share
Net loss per share is calculated in accordance with Statement of
Financial Accounting Standards 128, Earnings Per Share ("SFAS 128"),
which superseded Accounting Principles Board Opinion 15 ("APB 15"). Net
loss per share for all periods presented has been restated to reflect
the adoption of SFAS 128. Basic net loss per share is based upon the
weighted average number of common shares outstanding. Diluted net loss
per share is based on the assumption that all dilutive convertible
shares and stock options were converted or exercised. Dilution is
computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of
the period (or at the time of issuance, if later), and as if funds
obtained thereby were used to purchase common stock at the average
market price during the period.
3. NOTE RECEIVABLE
In 1998 the Company sold 100,000 shares of its marketable equity
securities for a $87,500 demand note bearing an interest rate of ten
percent. The fair value of this note receivable approximates its
carrying value based on interest rates available to the Company.
<PAGE> 23
4. MARKETABLE EQUITY SECURITIES HELD FOR SALE
In April 1998, E-net Mortgage entered into a contract to provide
consulting services for a three year period to an unrelated company in
exchange for 300,000 shares of that company's Bulletin Board common
stock. These shares vest 100,000 after 90 days and the balance of
200,000 shares on a pro rata basis over the life of the contract
commencing at the beginning of year two. The indicative trading price
of this stock in April 1998 of $1.375 per share was discounted to
$0.833 to reflect such trading restriction. The unearned portion of
this contract is recorded as deferred revenue.
5. NOTES PAYABLE TO OFFICERS
Certain officers and their affiliates have loaned funds to the Company
for various cashflow requirements. All these advances are reflected in
unsecured notes payable issued in March and April 1999, due in 90 days,
bearing an interest rate of 10 percent. On August 6, 1999 all the
original notes were consolidated with subsequent notes payable on new
terms. (See note 11). The fair value of these notes payable
approximates carrying value based on interest rates available to the
Company.
6. BASIC AND DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
BASIC AND DILUTED EARNINGS PER SHARE:
Numerator
Net income $ 2,795 $ 5,242
---------- ----------
Denominator
Basic and diluted weighted average number of
common shares outstanding during the period 2,417,808 2,000,000
---------- ----------
Basic and diluted earnings per share $ 0.00 $ 0.00
========== ==========
</TABLE>
<PAGE> 24
7. REPORTABLE SEGMENTS
The company has two segments analyzed by the chief operating officer.
The first segment provides mortgage services and the second segment
provides telecommunications services. For fiscal 1999, the only revenue
was derived from consulting services rendered to a mortgage company.
Prior to fiscal 1999, the Company had only the mortgage services
segment.
The following table provides financial information on (1) the mortgage
services segment and (2) the telecommunications services segment.
<TABLE>
<CAPTION>
SEGMENT
------------------------
1 2 TOTALS
--------- --------- ---------
<S> <C> <C> <C>
External Revenue $ 83,911 $ -- $ 83,911
Intersegment revenue $ -- $ -- $ --
Profit (loss) before income taxes $ 43,911 $ (15,651) $ 28,260
Assets $ 264,575 $ 59,787 $ 324,362
Following is a reconciliation of profits of operating segments to income
before income taxes for the year ended April 30, 1999:
Total for reportable segments $ 28,260
Intersegment profit $ --
Corporate expenses $ (10,465)
---------
Income before income taxes $ 17,795
=========
Following is a reconciliation of the assets of the operating segments to total
assets for the Company for the year ended April 30, 1999:
Total for reportable segments $ 324,362
Corporate $ 3,168
---------
Total assets $ 327,530
=========
</TABLE>
<PAGE> 25
8. COMMITMENTS
Leases
The Company leases office furniture and equipment from its President
for a term of 60 months at $500 per month. This provides for an annual
lease commitment of $6,000 for each year ending April 30, 2000, 2001,
2002 and 2003 and $5,000 for the year ending April 30, 2004. At the end
of the lease there is an option to renew the lease based on agreement
of both parties.
The Company leases its corporate office space on a month-to-month basis
at $1,195 per month.
Actual rent expense was $2,622 in 1999 and $0 for 1998.
Joint Venture Agreement
On February 25, 1999 City Pacific entered into a joint venture
agreement with Omnetrix International Inc. to conduct business under
the name "eNet.com JV Partners". The joint venture operations will be
promoting the marketing of retail telecommunications services, creating
co-location business for telco carriers and internet service providers
and acquiring resources required to build a global network of telecom
connectivity. The term of the joint venture is five years. All net
profits will be shared equally between the joint venture partners. City
Pacific's contribution will be to fund costs of printing and web
marketing, co-location lease and equipment costs and provide additional
funding and guarantees required for operations. As of year-end and
September 1, 1999 the Company had invested $18,800 and $82,000,
respectively, in this joint venture. As of September 1, 1999 the joint
venture had not generated any revenues.
Employment agreements
In March 1999, the Company entered into employment agreements with five
of its key employees. The agreements are for a term of one year,
provide for annual base salaries ranging from $52,000 to $78,000, and
are renewable automatically each year unless terminated by either party
with a 30 day written notice. There is a guaranteed severance pay of
$5,000 if the Company elects to terminate the agreement and there is a
death benefit of $10,000 for each employee. Also offered in these
agreements, were 375,000 options to purchase Company shares of common
stock at an exercise price of $1.50 per share, granted July 6, 1999,
vesting after one year from the original date of each employment
agreement and exercisable for the following five years. Each quarter
the employees also have the option, effective August 1, 1999, to defer
one-third of their total quarterly salaries and convert each dollar
deferred to one share of common stock by giving seven days written
notice following the close of each quarter.
<PAGE> 26
9. INCOME TAXES
The components of the provision for the income taxes consist of the
following as of April 30:
The reconciliation of income tax expense computed at the U.S. Federal
statutory rate to income tax expense is as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Current:
Federal $12,600 $ 1,100
State 2,400 600
------- -------
15,000 1,700
------- -------
Deferred:
Federal -- --
State -- --
------- -------
-- --
------- -------
$15,000 $ 1,700
======= =======
</TABLE>
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Tax at U.S. Federal statutory rates $ 2,700 $ 1,100
State income taxes, net of federal effect 1,400 600
Accrued salaries 10,900 --
------- -------
$15,000 $ 1,700
======= =======
</TABLE>
The deferred tax asset for the year ended April 30, 1999 was $10,900
for accrued salaries. This deferred tax asset had a valuation allowance
applied to it in the same amount. There were no significant deferred
tax liabilities as of April 30, 1999.
There were no significant deferred tax assets or liabilities as of
April 30, 1998.
As of September 1, 1999 there were no federal or state tax returns
filed for E-net or its subsidiaries for the current year or any prior
years. Management does not expect the Company's tax liability to be
material.
<PAGE> 27
10. GOING CONCERN
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company is
still in the development stage, does not have sufficient cash to cover
its current operating needs and is continuing to borrow funds from
officers and other related parties to meet its cash requirements. There
is no assurance that the Company's borrowing ability with the officers
and related parties will continue to be able to fund the Company's
operations.
Management plans to become an operating entity by continuing their
efforts to develop and market the Company's mortgage and
telecommunications products and services businesses and to continue to
focus on joint ventures and mergers. In addition, the Company plans to
raise additional funds through an equity or debt offering and has
entered into two investment banking agreements subsequent to year-end.
11. SUBSEQUENT EVENTS
Limited Partnership Agreement
As of July 19, 1999 the Company entered into a limited partnership with
Genesis Residential Healthcare, Inc. for the purpose of purchasing
land, planning, engineering, development, and construction of a
residential healthcare senior citizen community, and operation of new
and environmentally safer community. The Partnership may sell, lease,
operate, maintain or otherwise dispose of all or part of the units to
be built. The Partnership's name is Genesis Residential Healthcare
Community - Perris, Ltd. The partnership agreement will expire on July
1, 2019. However, the general partners with the majority vote of the
limited partners may terminate this partnership at any time. All items
of income will be allocated amount the Partners in accordance with
their allocable share. As of September 1, 1999 the partnership has had
no operations.
Notes payable to officers
As of August 6, 1999 certain notes payable to officers and their
affiliates, including the notes payable outstanding at year-end, had
the due dates extended to January 31, 2000 and the interest rates
increased from 10 percent to 12 percent. Subsequent to year-end
additional notes payable to officers, stockholders and their affiliates
were issued for $235,550, with interest rates from 10 - 12 percent, and
due dates from January 31, 2000 to August 31, 2000.
<PAGE> 28
SUBSEQUENT EVENTS (CONTINUED)
Lease commitments
Subsequent to year-end the Company has entered into three leases for
office space.
Two of the leases are $850 per month; one has a term of six months and
the other has a term of month to month.
The third lease is for $4,660 per month, commences on August 15, 1999
and expires on October 31, 2002. This provides for an annual lease
commitment of $37,280 for the year ending April 30, 2000 and $55,920
for the years ending April 30, 2001 and 2002 and $27,960 for the year
ending April 30, 2003.
Investment banking agreements
On May 26, 1999 the Company entered into an agreement with an
investment banker to raise $20,000,000 through a private placement,
initial public offering, direct public offering, general or limited
partnership, finance, refinance, or secondary offering. The investment
banking firm requires an initial retainer of $25,000 plus eight percent
of the sum raised as well as shares representing a percent (to be
determined) of the capital raised plus options and/or warrants for a
like amount of shares. As of September 1, 1999 no transactions under
this agreement have consummated and the $25,000 retainer has not been
paid.
On June 22, 1999 the Company entered into another agreement with an
investment banker to seek debt financing through public or private
offerings or debt or equity securities and in seeking merger and
acquisition candidates. The investment banking firm requires 100,000
registered shares of the Company upon termination of this agreement and
$5,000 per month for the next twelve months, commencing on July 1,
1999; plus a percentage of consideration received in merger,
acquisitions, joint ventures, debt or lease placements and similar
transactions. As of September 1, 1999 no transactions under this
agreement have consummated.
Stock Purchase Option Agreement
There are six employees and one consultant that have stock purchase
option agreements issued on July 6, 1999. All these options expire on
August 31, 2004. The agreements allow the employees or consultant to
purchase the Company's common stock at a price of $1.50. These shares
of stock will not be registered under the Securities Act of 1933 and
consequently may not be resold, assigned or transferred until the
shares are registered. The Company has granted 475,000 options to
purchase stock under this agreement. The 475,000 shares granted include
the 375,000 shares granted in the employment agreements, described in
Note 8.
<PAGE> 29
12. QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------
JULY 31, 1998 OCTOBER 31, 1998 JANUARY 31, 1999
------------- ---------------- ----------------
<S> <C> <C> <C>
Consulting fee revenue $ 20,825 $ 20,825 $ 20,825
General and administrative -- -- --
------------- ---------------- ----------------
Operating income 20,825 20,825 20,825
Provision for income taxes (3,200) (3,200) (3,200)
------------- ---------------- ----------------
Net income $ 17,625 $ 17,625 $ 17,625
============= ================ ================
Basic and diluted net
income per share $ 0.01 $ 0.01 $ 0.01
============= ================ ================
Basic and diluted weighted
average number of shares
outstanding 2,000,000 2,000,000 2,000,000
============= ================ ================
</TABLE>
<PAGE> 30
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On April 30, 1998 R. E. Bassie & Co., the Registrant's independent
accountant for the Registrant's three most recent fiscal years, resigned. The
Registrant's financial statements for the last three fiscal years (the years
ending April 30, 1996, 1997 and 1998) prepared by R. E. Bassie & Co. contained
no adverse opinion or disclaimer of opinion, or was qualified as to uncertainty,
audit scope, or accounting principles.
There were no disagreements within the last three fiscal years and
subsequent periods with R. E. Bassie & Co. on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope of
procedure, which disagreement(s), if not resolved to the satisfaction of R. E.
Bassie & Co. would have caused that firm to make reference in connection with
its reports to the subject matter of the disagreement(s) or any reportable
events.
Also on July 23, 1999, the Registrant engaged the accounting firm of
Cacciamatta Accountancy Corporation as the independent public accountants to
audit the Registrant's fiscal year ended April 30, 1999, as well as future
financial statements, to replace the firm of R. E. Bassie & Co. This change in
independent accountants was approved by the Board of Directors of the
Registrant.
<PAGE> 31
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors are elected for one-year terms or until the next annual
meeting of shareholders and until their successors are duly elected and
qualified. Officers continue in office at the pleasure of the Board of
Directors.
The Directors and Officers of the Company as of the date of this report
are as follows:
NAME POSITION
Michael Roth President, Director
Theodore A. Bohrer Vice President, Director
Jean Oliver Secretary/Treasurer
All Directors of the Company will hold office until the next annual meeting of
the shareholders and until successors have been elected and qualified. Officers
of the Company are elected by the Board of Directors and hold office until their
death or until they resign or are removed from office.
There are no family relationships among the officers and directors.
There is no arrangement or understanding between the Company (or any of its
directors or officers) and any other person pursuant to which such person was or
is to be selected as a director or officer.
(b) RESUMES
Set forth below is biographical information about each of the Company's
executive officers, and a key employee of one of the Company's subsidiaries.
MICHAEL ROTH has served as President and Director of the Company since March
1999. He has also served as President and Director of E-Net Mortgage Corporation
since March 1, 1998. He has had over 13 years experience in real estate lending
and consumer finance including branch management positions with Standard
Financial Services and TransAmerica, with experience in networking,
underwriting, customer service and sales in FNMA and Freddie Mac Loans.
THEODORE A. BOHRER has served as Vice President and Director of the Company
since March 1999. He has also served as Vice President and a Director of E-Net
Mortgage Corporation since February 1, 1999. Mr. Bohrer's career in financial
institutions and information services has spanned 25 years after serving as a
Naval Lieutenant Commander. Before joining E-Net Mortgage as broker of record,
his most recent position involved developing Net Fund, a mortgage company in San
Jose. Positions in the financial community include banking experience as Vice
President and broker of record
<PAGE> 32
of San Francisco Bancorp from 1980-83, Director for State Wide Thrift and Loan
Association (F.D.I.C. approved) 1984-88; and founder and President of Concept
2001 from 1989-1997.
JEAN OLIVER has been Secretary/Treasurer and Controller of the Company
and E-Net Mortgage Corporation since April 5, 1999. From February 1996 to March
1999 she served as Comptroller for Copp Materials, Inc., a rock crushing
company. From October 1994 to January 1996 she served as Comptroller for
Rar-Bro, Inc., a construction firm. From August 1993 through September 1994 she
served as Comptroller for Pacific Print Works, a silk screen printing company.
E.G. MARCHI has been President, Secretary/Treasurer and sole Director
of City Pacific International, U.S.A., Inc., a wholly owned subsidiary of the
Company, since March 1999. From 1997 through 1998, in addition to his executive
consulting business, Mr. Marchi served as Chief Executive Officer of a publicly
held company, Alliance Biotechnology International, where he directed its
activities towards its ultimate sale and merger. From 1994 through 1997, he was
general partner of American Capital Growth, where he assisted in capitalization
and starting an investment banking organization raising over 7 million dollars
to finance emerging companies through IPO's. From 1983 through 1994 he
subsequently established and operated a management consulting practice providing
service to a variety of industries, including serving in short term full time
positions as a top executive for a variety of clients, specializing in mergers,
acquisitions, divestitures, and capital formation.
Mr. Marchi is a seasoned business executive whose early career has
included positions as a corporate marketing executive with IBM from 1957 to
1969, and from 1969 to 1977 as vice-president of Marketing for Greyhound
Corporation and vice-president and founder of the Government Services Division
for Greyhound. From 1977 to 1980 served as President of Control Information,
Inc., a manufacturing consulting company, where he successfully conducted and
expanded this 30 member business, and ultimately sold this enterprise to a
national consulting corporation. From 1980 to 1983 he was Vice President of
South Pacific Industries, a plastic manufacturing company where he directed its
growth, internally and through acquisitions, developing sales to over 12 million
dollars annually.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and person who own more than 10% of the Company's
Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. All of the aforesaid persons are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. As of the date of this report, the Company has not received any such
filings from the applicable persons responsible for filing these reports.
However, it is believed that there has been no change in each applicable
persons' ownership of the Company's securities since they acquired the same.
<PAGE> 33
ITEM 10. EXECUTIVE COMPENSATION.
REMUNERATION
The following table reflects all forms of compensation for services to
the Company for the fiscal year ended April 30, 1999 for the chief executive
officer of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------
Annual Compensation Awards Payouts
--------------------- -------------------- -------
Securities
Other Under- All
Name Annual Restricted lying Other
and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
- ---------- ---- ------ ----- ------ -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael Roth
President & 1999 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
Director(1)
- -------------------------
</TABLE>
Mr. Roth assumed his positions with the Company in April 1999 under the
terms of the Share Exchange Agreement and Plan of Reorganization with E-Net
Mortgage Corporation and City Pacific International, U.S.A., Inc. See "PART I,
Item - Description of Business."
The Company maintains a policy whereby the directors of the Company may
be compensated for out of pocket expenses incurred by each of them in the
performance of their relevant duties. The Company did not reimburse any director
for such expenses during the fiscal year ended April 30, 1999.
In addition to the cash compensation set forth above, the Company
reimburses each executive officer for expenses incurred on behalf of the Company
on an out-of-pocket basis. The Company cannot determine, without undue expense,
the exact amount of such expense reimbursement. However, such reimbursements did
not exceed, in the aggregate, $1,000 during fiscal year 1999.
<PAGE> 34
The Company or its principal subsidiaries have executed the following
employment agreements with its officers: (a) the Company has executed a one year
employment agreement with Michael Roth effective March 1, 1999 to act as
President of the Company and E-Net Mortgage Corporation at an annual salary of
$78,000; Mr. Roth has also received options granted July 6, 1999 to acquire
100,000 shares of the common stock of the Company at $1.50 per share, which vest
on the first anniversary date of his employment agreement; (b) the Company has
executed a one year employment agreement with Theodore Bohrer effective March 1,
1999 to act as Vice President of the Company and E-Net Mortgage Corporation at
an annual salary of $78,000; Mr. Bohrer has also received options granted July
6, 1999 to acquire 75,000 shares of the common stock of the Company at $1.50 per
share, which vest on the first anniversary date of his employment agreement;(c)
the Company has executed a one year employment agreement with Jean Oliver
effective April 5, 1999 to act as Secretary/Treasurer and Comptroller of the
Company at an annual salary of $71,500. Ms. Oliver has also received options
granted July 6, 1999 to acquire 50,000 shares of the common stock of the Company
at $1.50 per share, which vest on July 6, 2000; and (d) City Pacific
International U.S.A., Inc has executed a one year employment agreement with E.G.
Marchi effective March 1, 1999 to act as President of this subsidiary at an
annual salary of $78,000; Mr. Marchi has also received options granted July 6,
1999 to acquire 100,000 shares of the common stock of the Company at $1.50 per
share, which vest on the first anniversary date of his employment agreement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) and (b) Security Ownership of Certain Beneficial Owners and
Management.
The table below lists the beneficial ownership of the Company's voting
securities by each person known by the Company to be the beneficial owner of
more than 5% of such securities, as well as by all directors and officers of the
issuer. Unless otherwise indicated, the shareholders listed possess sole voting
and investment power with respect to the shares shown.
<PAGE> 35
NAME AND AMOUNT AND
ADDRESS OF NATURE OF
BENEFICIAL BENEFICIAL PERCENT OF
TITLE OF CLASS OWNER OWNER CLASS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Common H-Group, LLC(1) 2,000,000 44.44%
3601 Empire Avenue
Burbank, CA 91505
Common Jim Thuney 791,600 17.59%
11017 NE Sherwood Dr.
Vancouver, WA 98686
Common Joseph J. Thuney 600,000 13.33%
11506 NE 33rd Ave.
Vancouver, WA 98686
Common Michael Roth(1)(2) 2,000,000 -
2102 Business Center Dr.,
Suite 115E
Irvine, CA 92612
Common E.G. Marchi(2) 500,000 11.11%
2102 Business Center Dr.,
Suite 115E
Irvine, CA 92612
Common Dovecote Ltd. 405,600 9.01%
Watergardens 5, Suite 14
Gibralter
Common Theodore A. Bohrer(2) 0 -
2102 Business Center Drive,
Suite 115E
Irvine, CA 92612
Common Jean Oliver(2) 0 -
2102 Business Center Drive,
Suite 115E
Irvine, CA 92612
Common All Officers and 2,500,000 55.55%
Directors as a
Group (4 persons)(3)
</TABLE>
- --------------------------------------------------------------------------------
(1) Michael Roth is the beneficial owner of 100% of the equity interests in
H-Group, LLC. Mr. Roth accrued a salary of $13,500 during the period
March 1, 1999 to April 30, 1999.
(2) Officer and/or director.
(3) Includes E.G. Marchi who is President and Director of one of the
Company's wholly owned subsidiaries, City Pacific International,
U.S.A., Inc.
<PAGE> 36
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The following related party transactions occurred during the past fiscal year
and through the period ending August 31, 1999:
On March 1, 1999, Michael Roth, President of the Company, executed an equipment
lease for office equipment and furniture with e-Net Mortgage Corp. for a term
expiring February 28, 2004 and monthly lease payment of $500.00.
On March 11, 1999 Michael Roth, President of the Company, loaned e-Net Mortgage
Corp. $2,950.00 for a term of 90 days which term has been extended through
January 31, 2000 at 12% interest. The balance due on the loan as of August 31,
1999 was $3,092.60.
Commencing on March 25, 1999 through May 21, 1999, a total of $31,500.00 in four
advances was loaned by Lohr Group Limited, an affiliate of Theodore Bohrer, Vice
President of the Company, to e-Net Mortgage Corp. with extended due dates
through January 31, 2000 at 12% interest. The balance due on the loans as of
August 31, 1999 was $ 4,465.23.
Commencing on June 14, 1999 through June 28, 1999, a total of $12,000.00 in
three advances was loaned by Market Ability Incorporated, an affiliate of E.G.
Marchi, President of City Pacific International USA Inc. to e-Net Mortgage Corp.
with extended due dates through January 31, 2000 at 12% interest. The balance
due on the loans as of August 31, 1999 was $12,238.14.
Commencing March 16, 1999 through August 19, 1999, a total of $75,350,00 was
loaned by Market Ability Incorporated, an affiliate of E.G. Marchi, President of
City Pacific International USA Inc. to City Pacific International USA Inc. with
due dates ranging from January 31, 2000 and August 18, 2000 at interest rates
ranging between 10% and 12%. The balance due on the loans as of August 31, 1999
was $71,723.16.
Commencing on April 23, 1999 through April 30, 1999, a total of $6,500.00 in
three advances was loaned by Lohr Group Limited, an affiliate of Theodore
Bohrer, Vice President of the Company, to City Pacific International USA Inc.
with extended due dates through January 31, 2000 at 12% interest. The balance
due on the loans as of August 31, 1999 was $6,727.07.
On March 31, 1999 City Pacific International USA Inc. sold $4,550.00 of
communication equipment to the Company. The balance due to City Pacific
International USA Inc. as of August 31, 1999 is $4,751.94 including interest.
On June 7, 1999 Foothill Equities Corporation, an affiliate of Jim Thuney, a
former director and current 5% shareholder, loaned the Company $3,000.00 for a
term of 365 days at 10% interest. The balance due as of August 31, 1999 is
$3,070.40.
On May 13, 1999 Lohr Group Limited, an affiliate of Theodore Bohrer, Vice
President of the Company, loaned the Company $15,000.00 with an extended due
date of January 31, 2000 at 12% interest. The balance due as of August 31, 1999
is $14,449.85.
Commencing May 17, 1999 through July 28, 1999, Market Ability Incorporated, an
affiliate of E.G. Marchi, President of City Pacific International USA Inc.,
loaned the Company $22,500.00 with extended due dates of January 31, 2000 at 12%
interest. The balance due as of August 31, 1999 is $35,402.74.
<PAGE> 37
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
2.0 Letter of Intent between the Company and Suarro Communications,
Inc. as filed in the Exhibits to Form 8-K, on or about June 6, 1996 *
2.1 Plan of Reorganization between the Company and Suarro
Communications, Inc. as filed in the Company's Definitive Proxy
Statement on or about August 16, 1996 *
2.2 Rescission Agreement dated September 9, 1997 in the Company's Form
10- KSB filed on or about January 4, 1998 *
2.3 Share Exchange Agreement and Plan of Reorganization dated March 1,
1999 between the Company and E-Net Mortgage Corporation *
2.4 Share Exchange Agreement and Plan of Reorganization dated March 1,
1999 between the Company and City Pacific International, U.S.A, Inc. *
3.1 Certificate and Articles of Incorporation, as filed in the Exhibits
to Form 10-SB, on or about September 1, 1994 *
3.2 Bylaws, as filed in the Exhibits to Form 10-SB, on or about
September 1, 1994 *
3.3 Certificate of Amendment to Articles of Incorporation in the
Company's Form 10-KSB filed on or about January 4, 1998 *
3.4 Certificate of Amendment to Articles of Incorporation in as filed
with the Nevada Secretary of State on or about February 19, 1999 *
3.5 Certificate of Amendment to Articles of Incorporation as filed with
the Nevada Secretary of State on May 12, 1999 *
10.1 Joint Venture Agreement between City Pacific International U.S.A.,
Inc. and Omnetrix International, Inc. dated February 25, 1999 *
10.2 Limited Partnership Agreement between the Company and Genesis
Residential Healthcare, Inc. dated July 1, 1999 *
10.3 Amended Employment Agreement between the Company and Michael Roth,
dated March 1, 1999
10.4 Amended Employment Agreement between the Company and Theodore A.
Bohrer dated March 1, 1999
10.5 Amended Employment Agreement between the Company and Jean Oliver
dated March 22, 1999
10.6 Amended Employment Agreement between City Pacific International
U.S.A., Inc. and E.G. Marchi dated March 1, 1999
<PAGE> 38
10.7 The Amended Agreement between EMB Corporation and Hospitality
Group Inc., dated May 1, 1998. 16.1 Letter from Kish, Leake &
Associates, P.C., resigning as independent accountant for the Company
in Company's Form 8-K filed on or about August 28, 1996 *
21.1 Subsidiaries of E-Net Financial Corporation *
27 Financial Data Schedule
Previously Filed *
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on March 5, 1999, reflecting a
change in its name.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Company caused this amendment to its report to be signed on its
behalf by the undersigned, thereunto duly authorized, on September 17, 1999.
E-NET FINANCIAL CORPORATION
f/k/a E-NET CORPORATION and SUARRO
COMMUNICATIONS, INC. (Registrant)
By: /s/ Michael Roth
----------------------------------
Michael Roth, President
In accordance with the Exchange Act, this amendment to its report has
been signed below by the following persons on behalf of the Registrant and in
the capacities indicated on September 17, 1999.
/s/ Michael Roth
- ------------------------------
Michael Roth, Director
/s/ Theodore A. Bohrer
- ------------------------------
Theodore A. Bohrer, Director
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
Employment Agreement this 1st day of March 1999 by an between the parties
hereto:
e-Net Corporation, a Nevada Corporation ("Employer") and Michael P Roth
("Employee").
Employer employs the Employee and the Employee accepts employment, upon the
terms conditions and covenants as follows:
1. The term of employment shall be for one year, commencing from March 1,1999
and renewable annually automatically unless terminated by either party by
written 30 day notice to the other.
2. Effective March 1, 1999 employee shall receive, for all services rendered, a
salary of $1500 per week, payable biweekly within three days after the end of
each pay period. Salary payments shall be subject to withholding and other
applicable deductions.
3. The duties of Employee shall be to serve as the President for the Employer
and for the subsidiaries and affiliates of the Employers business. The Employee
shall devote his full and entire time and attention to the Employer's business.
4. Employee shall have an office, facilities and services that are suitable to
the position and appropriate for the performance of Employee's duties.
5. Employer shall reimburse Employee for all reasonable expenses incurred in the
performance of Employee's business, e.g. entertainment, travel, etc. Employee
will be reimbursed upon submission of an itemized account of such expenditures
with receipts where practicable.
6. Employee shall be entitled to two weeks of paid vacation each year,
commencing after January 1,2000.
7. If Employee is unable to perform Employee's duties by reason of illness or
incapacity for a consecutive period of more than 2 weeks, the compensation
payable after the aforesaid period shall be $500 per week for the following 12
weeks. Upon return to full employment, full compensation shall be reinstated.
8. Notwithstanding any provision in this Employment Agreement to the contrary,
if Employee is unable to perform or is absent from employment for a period of
more than 3 months, Employer may terminate this Employment Agreement, without
further cause, and all obligations of Employer hereunder shall terminate.
<PAGE> 2
9. This Employment Agreement may be terminated, at will, at any time and without
cause, by either party upon thirty days' written notice to the other. If
Employer elects to terminate, Employer shall pay to Employee on the last day of
employment severance pay of $5000.00 subject to withholding and deductions. If
Employee elects to terminate, Employee shall receive salary up to the last day
of employment but no severance pay.
10. In the event Employee dies during the term of Employment, Employer shall pay
to Employee's estate the salary that would otherwise be payable to the end of
the month in which the Employee died, and as a death benefit a sum equal to
$10,000. Employee agrees to be covered by insurance procured by the Employer at
Employer's expense for this purpose.
11. Any controversy or claim arising out of, or relating to this Employment
Agreement, or the breach thereof, shall be settled by arbitration in the City of
Irvine, State of California, in accordance with the then governing rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction.
12. Any notice required to be given shall be either: (i) personally delivered,
or (ii) sent by U.S. Postal Service, postage pre-paid, Certified Mail, Return
Receipt Requested to the Employer at the place of employment and to the Employee
at the last residence address given to and on file with the Employer.
13. A waiver of a breach of any provision of this Employment Agreement shall not
operate or be construed as a waiver of any subsequent breach.
14. The services of Employee are personal and unique and therefore Employee may
not assign this Employment Agreement nor delegate the duties and obligations
hereunder except In the normal course of business.
15. Stock Purchase Option:
Effective July 6,1999 as further compensation you will be entitled to the
following stock options:
1. Stock purchase option
The corporation hereby grants the employee the option, for five years to
purchase One Hundred Thousand (100,000) shares of stock at one dollar and fifty
cents per share. The rights granted under this option vest after one year
following the effective date of this contract and are subject to the terms and
conditions of the Stock Purchase Option Agreement.
2. Deferred Stock Option
Each quarter any salary payment which has been deferred by the employee (not to
exceed 1/3 of the total quarterly salary) may at the election of the employee be
converted to an option to purchase stock at one dollar per share, exercisable by
giving
<PAGE> 3
seven days written notice following the close of the quarter subject to the
terms and conditions of the Stock Purchase Agreement.
Rights granted hereby are assignable and may be hypothecated.
16. This Employment Agreement and the related Stock Purchase Options Agreements
contains the entire understanding of the parties, except as may be set forth in
writing signed by the party against whom enforcement may be sought,
simultaneously with or subsequent to the execution of this Employment Agreement.
17. At this time, other than establishing a stock option plan for employees, the
Board of Directors has not taken action with respect to the establishment of any
other employee benefit plans, such as bonus, profit sharing, pension,
retirement, medical, and life and disability insurance, or similar plans and
programs. It is presently contemplated that the Board of Directors will take
action to institute one or more of such plans and programs in the near future.
INTENDING TO BE LEGALLY BOUND, the parties have executed this Employment
Agreement as of the date first above written Employer: e-Net Financial
Corporation
BY /s/ MICHAEL P. ROTH
- ----------------------------------------
MICHAEL P. ROTH
Employee: /s/ MICHAEL P. ROTH
- ----------------------------------------
MICHAEL P. ROTH
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
Employment Agreement this 1st day of March 1999 by an between the parties
hereto:
e-Net Corporation, a Nevada Corporation ("Employer") and Theodore
Bohrer("Employee").
Employer employs the Employee and the Employee accepts employment, upon the
terms conditions and covenants as follows:
1. The term of employment shall be for one year, commencing from March 1,1999
and renewable annually automatically unless terminated by either party by
written 30 day notice to the other.
2. Effective March 1, 1999 employee shall receive, for all services rendered, a
salary of $1500 per week, payable biweekly within three days after the end of
each pay period. Salary payments shall be subject to withholding and other
applicable deductions.
3. The duties of Employee shall be to serve as the Vice President for the
Employer and for the subsidiaries and affiliates of the Employers business. The
Employee shall devote his full and entire time and attention to the Employer's
business.
4. Employee shall have an office, facilities and services that are suitable to
the position and appropriate for the performance of Employee's duties.
5. Employer shall reimburse Employee for all reasonable expenses incurred in the
performance of Employee's business, e.g. entertainment, travel, etc. Employee
will be reimbursed upon submission of an itemized account of such expenditures
with receipts where practicable.
6. Employee shall be entitled to two weeks of paid vacation each year,
commencing after January 1,2000.
7. If Employee is unable to perform Employee's duties by reason of illness or
incapacity for a consecutive period of more than 2 weeks, the compensation
payable after the aforesaid period shall be $500 per week for the following 12
weeks. Upon return to full employment, full compensation shall be reinstated.
8. Notwithstanding any provision in this Employment Agreement to the contrary,
if Employee is unable to perform or is absent from employment for a period of
more than 3 months, Employer may terminate this Employment Agreement, without
further cause, and all obligations of Employer hereunder shall terminate.
9. This Employment Agreement may be terminated, at will, at any time and without
<PAGE> 2
cause, by either party upon thirty days' written notice to the other. If
Employer elects to terminate, Employer shall pay to Employee on the last day of
employment severance pay of $5000.00 subject to withholding and deductions. If
Employee elects to terminate, Employee shall receive salary up to the last day
of employment but no severance pay.
10. In the event Employee dies during the term of Employment, Employer shall pay
to Employee's estate the salary that would otherwise be payable to the end of
the month in which the Employee died, and as a death benefit a sum equal to
$10,000. Employee agrees to be covered by insurance procured by the Employer at
Employer's expense for this purpose.
11. Any controversy or claim arising out of, or relating to this Employment
Agreement, or the breach thereof, shall be settled by arbitration in the City of
Irvine, State of California, in accordance with the then governing rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction.
12. Any notice required to be given shall be either: (i) personally delivered,
or (ii) sent by U.S. Postal Service, postage pre-paid, Certified Mail, Return
Receipt Requested to the Employer at the place of employment and to the Employee
at the last residence address given to and on file with the Employer.
13. A waiver of a breach of any provision of this Employment Agreement shall not
operate or be construed as a waiver of any subsequent breach.
14. The services of Employee are personal and unique and therefore Employee may
not assign this Employment Agreement nor delegate the duties and obligations
hereunder except In the normal course of business.
15. Stock Purchase Option:
Effective July 6,1999 as further compensation you will be entitled to the
following stock options:
1. Stock purchase option
The corporation hereby grants the employee the option, for five years to
purchase Seventy Five Thousand (75,000) shares of stock at one dollar and fifty
cents per share. The rights granted under this option vest after one year
following the effective date of this contract and are subject to the terms and
conditions of the Stock Purchase Option Agreement.
2. Deferred Stock Option
Each quarter any salary payment which has been deferred by the employee (not to
exceed 1/3 of the total quarterly salary) may at the election of the employee be
converted to an option to purchase stock at one dollar per share, exercisable by
giving
<PAGE> 3
seven days written notice following the close of the quarter subject to the
terms and conditions of the Stock Purchase Agreement.
Rights granted hereby are assignable and may be hypothecated.
16. This Employment Agreement and the related Stock Purchase Options Agreements
contains the entire understanding of the parties, except as may be set forth in
writing signed by the party against whom enforcement may be sought,
simultaneously with or subsequent to the execution of this Employment Agreement.
17. At this time, other than establishing a stock option plan for employees, the
Board of Directors has not taken action with respect to the establishment of any
other employee benefit plans, such as bonus, profit sharing, pension,
retirement, medical, and life and disability insurance, or similar plans and
programs. It is presently contemplated that the Board of Directors will take
action to institute one or more of such plans and programs in the near future.
INTENDING TO BE LEGALLY BOUND, the parties have executed this Employment
Agreement as of the date first above written
Employer: e-Net Financial Corporation
BY /s/ MICHAEL P. ROTH
- ---------------------------------------
MICHAEL P. ROTH
Employee: /s/ THEODORE BOHRER
- ---------------------------------------
THEODORE BOHRER
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
Employment Agreement this 22nd day of March 1999 by and between parties hereto
e-Net Corporation (Employer) and Jean Oliver (Employee).
Employer employs the Employee and the Employee accepts employment upon the
term's conditions and covenants as follows:
1. The term of the employment shall be for one year commencing from April 5th,
1999 and renewable annually automatically unless terminated by either party by
written 30 day notice to the other.
2. Employee shall receive for all services a salary of $1,375.00 per week
payable biweekly within three days after the end of each pay period. Salary
payments shall be subject to withholding and other applicable deductions.
3. The duties of the Employee shall be to serve as the Comptroller for the
Employer and for the subsidiaries and affiliates of the Employers business.
4. Employee shall have an office, facilities and services that are suitable to
the position and appropriate for the performance of the Employee's duties.
5. Employer shall reimburse Employee for all reasonable expenses incurred in the
performance of Employee's business, e.g. entertainment, travel, etc. Employee
will be reimbursed upon submission of an itemized account of such expenditures
with receipts where practicable.
6. Employee shall be entitled to two weeks of paid vacation each year.
7. If employee is unable to perform Employee's duties by reason of illness or
incapacity for a consecutive period of more than two weeks, the compensation
payable after the aforesaid period shall be $500.00 per week for the following
12 weeks. Upon return to full employment full compensation shall be reinstated.
8. Notwithstanding any provision in this Employment Agreement to the contrary,
if Employee's unable to perform or is absent from employment for a period of
more than three months. Employer may terminate this Employment Agreement,
without further cause and all obligations of Employer hereunder shall terminate.
<PAGE> 2
9. The Employment Agreement may be terminated at anytime and without cause by
either party upon thirty days written notice to the other. If Employer elects to
terminate, Employer shall pay to the Employee on the last day of employment
severance pay of $5,000.00 subject to withholding and deductions. If Employee
elects to terminate Employee shall receive salary up to the last day of
employment but no severance pay.
10. In the event Employee dies during the term of employment, Employer shall pay
to employee's estate the salary that would otherwise be payable to the end of
the month in which the Employee died and as a death benefit the sum equal to
$10,000.00. Employee agrees to be covered by insurance procured by Employer at
Employer's expense for this purpose.
11. Any controversy or claim arising out of or relating to this Employment
Agreement or the breach thereof shall be settled by arbitration in the City of
Irvine, State of California, in accordance with the then governing rules of the
American Arbitration Association. Judgement upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction.
12. Any notice required to be given shall be either: (i) personally delivered,
or (ii) sent by U S Postal Service, postage prepaid, Certified Mail, Return
Receipt Requested to the Employer at the place of employment and the Employee at
the residence address given to and on file with the Employer.
13. A waiver of a breach of any provision of this Employment Agreement shall not
operate or be construed as a waiver of any subsequent breach.
14. The services of Employee are personal and unique and therefore Employee may
not assign this Employment Agreement nor delegate the duties and obligations
hereunder except in the normal course of business.
15. This Employment Agreement contains the entire understanding of the parties,
except as may be set forth in writing signed by the party against whom
enforcement may be sought simultaneously with or subsequent to the execution of
this Employment Agreement.
<PAGE> 3
INTENDING TO BE LEGALLY BOUND, the parties have executed this Employment
Agreement as of the date first above written.
Employer:
e-Net Corporation
BY: /s/ MICHAEL P. ROTH
- ------------------------------------
MICHAEL P. ROTH
Employee:
/s/ JEAN OLIVER
- ------------------------------------
<PAGE> 4
EMPLOYMENT AGREEMENT
Addendum
JEAN OLIVER
This is an addendum to the contact between e-Net Financial Corporation and Jean
Oliver dated March 22,1999. The following paragraphs are to be read as being
consistent with the terms of that employment agreement.
Stock Purchase Option:
Effective July 6, 1999 as further compensation you will be entitled to the
following stock options:
1. Stock purchase option
The corporation hereby grants the employee the option, for five years to
purchase Fifty Thousand (50,000) shares of stock at one dollar and fifty cents
per share. The rights granted under this option vest after one year following
the effective date of this contract and are subject to the terms and conditions
of the Stock Purchase Option Agreement.
2. Deferred Stock Option
Each quarter any salary payment which has been deferred by the employee (not to
exceed 1/3 of the total quarterly salary) may at the election of the employee be
converted to an option to purchase stock at one dollar per share, exercisable by
giving seven days written notice following the close of the quarter subject to
the terms and conditions of the Stock Purchase Agreement.
Rights granted hereby are assignable and may be hypothecated.
I have read and understood the statements contained in this document.
BY: /s/ MICHAEL P. ROTH
- ---------------------------------
MICHAEL P. ROTH
BY: /s/ JEAN OLIVER
- ---------------------------------
JEAN OLIVER
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
Employment Agreement this 1st day of March 1999 by an between the parties
hereto:
City Pacific International USA Inc., a Nevada Corporation ("Employer") and E G
Marchi ("Employee").
Employer employs the Employee and the Employee accepts employment, upon the
terms conditions and covenants as follows:
1. The term of employment shall be for one year, commencing from March 1,1999
and renewable annually automatically unless terminated by either party by
written 30 day notice to the other.
2. Effective March 1, 1999 employee shall receive, for all services rendered, a
salary of $1500 per week, payable biweekly within three days after the end of
each pay period. Salary payments shall be subject to withholding and other
applicable deductions.
3. The duties of Employee shall be to serve as the President for the Employer
and for the subsidiaries and affiliates of the Employers business. The Employee
shall devote his full and entire time and attention to the Employer's business.
4. Employee shall have an office, facilities and services that are suitable to
the position and appropriate for the performance of Employee's duties.
5. Employer shall reimburse Employee for all reasonable expenses incurred in the
performance of Employee's business, e.g. entertainment, travel, etc. Employee
will be reimbursed upon submission of an itemized account of such expenditures
with receipts where practicable.
6. Employee shall be entitled to two weeks of paid vacation each year,
commencing after January 1, 2000.
7. If Employee is unable to perform Employee's duties by reason of illness or
incapacity for a consecutive period of more than 2 weeks, the compensation
payable after the aforesaid period shall be $500 per week for the following 12
weeks. Upon return to full employment, full compensation shall be reinstated.
8. Notwithstanding any provision in this Employment Agreement to the contrary,
if Employee is unable to perform or is absent from employment for a period of
more than 3 months, Employer may terminate this Employment Agreement, without
further cause, and all obligations of Employer hereunder shall terminate.
9. This Employment Agreement may be terminated, at will, at any time and without
cause, by either party upon thirty days' written notice to the other. If
Employer elects to terminate, Employer shall pay to Employee on the last day of
employment severance pay of $5000.00 subject to withholding and deductions. If
Employee elects to terminate, Employee shall receive salary up to the last day
of employment but no severance pay.
10. In the event Employee dies during the term of Employment, Employer shall pay
to Employee's estate the salary that would otherwise be payable to the end of
the month in which the Employee died, and as a death benefit a sum equal to
<PAGE> 2
$10,000. Employee agrees to be covered by insurance procured by the Employer
at Employer's expense for this purpose.
11. Any controversy or claim arising out of, or relating to this Employment
Agreement, or the breach thereof, shall be settled by arbitration in the City of
Irvine, State of California, in accordance with the then governing rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction.
12. Any notice required to be given shall be either: (i) personally delivered,
or (ii) sent by U.S. Postal Service, postage pre-paid, Certified Mail, Return
Receipt Requested to the Employer at the place of employment and to the Employee
at the last residence address given to and on file with the Employer.
13. A waiver of a breach of any provision of this Employment Agreement shall not
operate or be construed as a waiver of any subsequent breach.
14. The services of Employee are personal and unique and therefore Employee may
not assign this Employment Agreement nor delegate the duties and obligations
hereunder except In the normal course of business.
15. Stock Purchase Option:
As further compensation you will be entitled to the following stock options:
1. Stock purchase option
The corporation hereby grants the employee the option, for five years to
purchase One Hundred Thousand (100,000) shares of stock of the parent company
e-Net Financial Corporation, at one dollar and fifty cents per share. The rights
granted under this option vest after one year following the effective date of
this contract and are subject to the terms and conditions of the Stock Purchase
Option Agreement.
Rights granted hereby are assignable and may be hypothecated.
2. Deferred Stock Option
Each quarter any salary payment which has been deferred by the employee (not to
exceed 1/3 of the total quarterly salary) may at the election of the employee be
converted to an option to purchase stock at one dollar per share, exercisable by
giving seven days written notice following the close of the quarter subject to
the terms and conditions of the Stock Purchase Agreement.
16. This Employment Agreement and the related Stock Purchase Options Agreements
contains the entire understanding of the parties, except as may be set forth in
writing signed by the party against whom enforcement may be sought,
simultaneously with or subsequent to the execution of this Employment Agreement.
17. At this time, other than establishing a stock option plan for employees, the
Board of Directors has not taken action with respect to the establishment of any
other employee benefit plans, such as bonus, profit sharing, pension,
retirement, medical, and life and disability insurance, or similar plans and
programs. It is presently contemplated that the Board of Directors will take
action to institute one or more of such plans and programs in the near future.
INTENDING TO BE LEGALLY BOUND, the parties have executed this Employment
Agreement
<PAGE> 3
as of the date first above written
Employer: City Pacific International USA, Inc.
BY /s/ MICHAEL R. ROTH
- - ----------------------------
MICHAEL P. ROTH
Employee: /s/ E.G. MARCHI
- ------------------------------
E.G. MARCHI
<PAGE> 1
Exhibit 10.7
AMENDED
AGREEMENT
This Agreement is entered into by and between EMB Corporation, a Hawaii
corporation ("Company"), and Hospitality Group Inc.("Consultant"), a Nevada
corporation. The effective date of this agreement is April 1, 1998. This
Agreement is hereby amended by the parties as of May 1, 1998.
RECITALS
Company wishes to obtain the consulting services of Consultant to assist Company
in connection with developing consumer financial assistance centers, and
Consultant has negotiated the terms of such an agreement with Company and has
agreed to the terms as set forth hereafter, and as agreed and set forth more
particularly by amended attachment hereto from time to time.
AGREEMENT
The parties hereby agree as follows:
1. Term of Agreement
Company hereby hires Consultant and Consultant accepts such employment for a
term of three years commencing April 1, 1998, and terminating March 31, 2001,
unless sooner terminated as hereinafter provided.
1.1. General Provisions
1.1.1 Survival of Agreement. This Agreement shall not
be terminated by a restructuring of the company or of the
Consultant. If either of the parties restructures but remains
in the business, the contract shall survive.
1.1.2 Legal Representation. Each party acknowledges
that they were advised that they were entitled to separate
counsel and they have either employed such counsel or
voluntarily waived their right to consult with counsel.
1.1.3 Notices. All notices and other communications
provided for or permitted hereunder shall be in writing and
shall be made by hand delivery, first class mail, telex or
telecopier, addressed as follows:
PARTY ADDRESS
EMB Corporation 3800 South Bristol Street , Suite 800
Costa Mesa, California 92626
Hospitality Group Inc. 1061 E. Flamingo Road, Suite 11
Las Vegas, Nevada 89119
All such notices and communications shall be deemed to have been duly given when
delivered by hand, if personally delivered; three (3) business days after
deposit in any United States Post Office in the Continental United States,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged, if telecopied.
1.1.4 Attorneys' Fees. In the event that a dispute
arises with respect to this Agreement, the party prevailing in
such dispute shall be entitled to recover all expenses,
including, without limitation, reasonable attorneys' fees and
expenses, incurred in ascertaining such party's rights or in
preparing to enforce, or in enforcing, such party's rights
under this Agreement, whether or not it was necessary for such
party to institute suit.
1.1.5 Complete Agreement of the Parties. This is the
complete agreement of the parties and it supersedes any
agreement that has been made prior to this agreement.
1.1.6 Assignment. This Agreement is of a personal
nature and may not be assigned.
<PAGE> 2
1.1.7 Binding. This Agreement shall be binding both
of the parties hereto. 1.1.8 Number and Gender. Whenever the
singular number is used in this Agreement and when required by
the context, the same shall include the plural.. The masculine
gender shall include the feminine and neuter genders, and the
word "person" shall include a corporation, firm, partnership,
or other form of association.
1.1.9 Governing Law. The parties hereby expressly
acknowledge and agree that this Agreement is entered into in
the State of Nevada and, to the extent permitted by law, this
Agreement shall be construed, and enforced in accordance with
the laws of the State of Nevada.
1.1.10 Failure to Object Not a Waiver. The failure of
a party to object to, or to take affirmative action with
respect to, any conduct of the other which is in violation of
the terms of this Agreement shall not be construed as a waiver
of the violation or breach or of any future violation, breach,
or wrongful conduct until 180 since the wrongful act or
omission to act has passed.
1.1.11 Unenforceable Terms. Any provision hereof
prohibited or unenforceable under any applicable law of any
jurisdiction shall as to such jurisdiction be ineffective
without affecting any other provision of this Agreement. To
the full extent, however, that the provisions of such
applicable law may be waived, they are hereby waived to the
end that this Agreement be deemed to be a valid and binding
agreement enforceable in accordance with its terms.
1.1.12 Execution In Counterparts. This Agreement may
be executed in several counterparts and when so executed shall
constitute shall constitute one agreement binding on all the
parties, notwithstanding that all the parties are not
signatory to the original and same counterpart.
1.1.13 Further Assurance. From time to time each
party shall execute and deliver such further instruments and
shall take such other action as any other party may reasonably
request in order to discharge and perform their obligations
and agreements hereunder and to give effect to the intentions
expressed in this Agreement.
1.1.14 Incorporation By Reference. All exhibits
referred to in this Agreement are incorporated herein in their
entirety by such reference.
1.1.15 Cross-References. All cross-references in
this Agreement, unless specifically directed to another
agreement or document, refer to provisions in this Agreement,
and shall not be deemed to be references to any overall
transaction or to any other agreements or documents.
1.1.16 Miscellaneous Provisions. The various headings
and numbers herein and the grouping of provisions of this
Agreement into separate divisions are for the purpose of
convenience only and shall not be considered a part hereof.
The language in all parts of this Agreement shall in all cases
be construed in accordance to its fair meaning as if prepared
by all parties to the Agreement and not strictly for or
against any of the parties.
2. Services of Consultant
Consultant agrees to provide to Company, the following advice and
consulting services:
2.1 At the Company's request from time to time review its
programs and plans for developing consumer financial
assistance centers and provide Company with the benefit of
Consultant's experience and perspectives.
2.2 Actively contact potential and actual interested parties
and present the Company and its programs in the most favorable
light to such parties in soliciting their participation in the
activities of the Company in developing such centers.
2.3 Analyze the Company's present goals and projected programs
for financial centers, cash flow requirements and budgets; and
through personal contacts develop and recommend sources,
methods, schedules, and formats to obtain the assistance and
necessary staffing and facility resources necessary for
Company operations.
Consultant shall personally provide such advice and services to Company. the
consultant may with the written consent of the Company also provide up to fifty
(50%) percent of the advice through a consulting Agent, acceptable to company.
The term "Consulting Agent" may be used herein to refer to such officer,
employee. or subcontractor of Consultant.
<PAGE> 3
3. Necessary Services
3.1 Performance of Duties. Consultant agrees that he shall and any
Consulting Agent shall perform at all times faithfully, industriously,
and to the best of their ability, experience, and talents all of the
duties that may reasonably be assigned to them hereunder and, shall
devote such time to the performance of such duties as may be necessary
therefor.
4. Compensation
In consideration for the services required of Consultant hereunder,
Company agrees to compensate Consultant as follows:
4.1 Retainer Stock. At the commencement of this contract, the Company
shall compensate Consultant with a retainer of $250,000.00 in the form
of shares of the Company's common stock, and shall deliver to
Consultant such number of shares valued at the average trading bid
price for each share calculated over the first calendar quarter of
1998. All such shares shall be registered with respect to resale
pursuant to Regulation S-8 promulgated by the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, and
Company shall deliver such shares to Consultant at such times and in
such one or more portions as Consultant shall specify by written notice
to Company. Each such delivery shall be made within five (5) days after
Company's receipt of Consultant's written notice requesting such
delivery. AMENDMENT: Consultant agrees that the first 100,000 shares
are fully earned ninety (90) days after execution hereof , and the
balance of the shares, not less than 200,000, shall be earned on a
pro-rata basis over the three year term of the agreement at 8,333
shares per month commencing with the start of the second year.
4.2 Guarantee of Value. As a guarantee of value of the compensation set
forth in the preceding paragraph, Company shall provide a separate
Financial Guarantee that the above mentioned retainer in the form of
shares shall be have a value of not less than $250,000.00 in the
aggregate during the initial period of this Agreement; and that at the
option of Consultant, Company shall make up the difference between that
actual value derived from such aggregate shares and the sum of
$250,000.00.
4.3 Expense Reimbursement. Company shall reimburse Consultant for any
out-of-pocket expenses incurred in connection with the negotiation and
execution of this Agreement and the performance of services required of
Consultant hereunder.
5. Independent Contractor
In performing services and duties hereunder, Consultant and any person
acting on Consultant's behalf shall do so as independent contractors and are
not, and are not to be deemed, employees or agents of Company or any other
person acting on behalf of Company. Consultant shall be responsible for meeting
any legal requirements imposed on Consultant or any person acting on his behalf
as a result of this Agreement, including but not limited to the filing of income
tax returns and the payment of taxes; and Consultant agrees to indemnify Company
for the failure to do so, if Company is required to make any such payment
otherwise due by Consultant or any such person acting on Consultant's behalf.
6. Remedy for Breach
Consultant acknowledges that the services to be rendered by him
hereunder are of a special, unique, and extraordinary character which gives this
Agreement a peculiar value to Company, the loss of which cannot be reasonably or
adequately compensated in damages in an action at law, and that a breach by
Consultant of this Agreement shall cause Company irreparable injury. Therefore,
Consultant expressly acknowledges that this Agreement may be enforced against
him by injunction and other equitable remedies, without bond. Such relief shall
not be exclusive, but shall be in addition to any other rights or remedies
Company may have for such breach.
<PAGE> 4
Company acknowledges that the services to be rendered to it hereunder are of a
special, unique, and extraordinary character which gives this Agreement a
peculiar value to consultant, the loss of which cannot be reasonably or
adequately compensated in damages in an action at law, and that a breach by
Company of this Agreement shall cause Consultant irreparable injury. Therefore,
company expressly acknowledges that this Agreement may be enforced against it by
injunction and other equitable remedies, without bond. Such relief shall not be
exclusive, but shall be in addition to any other rights or remedies Consultant
may have for such breach.
7. Termination
7.1 Causes for Termination. This Agreement shall terminate immediately
upon the occurrence of any one of the following events:
7.1.1. The expiration of the term hereof; 7.1.2 The written
agreement of the parties;
7.1.3. The occurrence of circumstances that make it impossible
for the business of Company to be continued;
7.1.4. The occurrence of circumstances that make it impossible
for the business of consultant to be continued;
7.1.5. Consultant's breach of his duties hereunder, unless
waived by Company or cured by Consultant within 30 days after
Company's having given written notice thereof to Consultant;
7.1.6. Company's breach of its duties hereunder, unless waived
by Consultant or cured by Company within 30 days after
Consultant's having given written notice thereof to Company
7.2 Compensation upon Termination. Unless otherwise mutually agreed in
writing by the parties, the termination of this Agreement due to any
cause other than that specified in subsection 7.1.4 shall not relieve
Company of its obligation to make any payment of money or any delivery
of shares or securities which would have been required, or could have
been required by Consultant, pursuant to Sections 4.1, 4.2, and 4.3, if
this Agreement had not been so terminated.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above, together with the amendment contained herein as of May 1, 1998.
COMPANY:
EMB Corporation
By:
---------------------------------------
Title:
CONSULTANT:
Hospitality Group Inc.
By: /s/MICHAEL P. ROTH
---------------------------------------
Michael P. Roth Title: President
