SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File Number:
May 31, 1999 1-13360
Cornerstone Internet Solutions Company
( Name of Small Business Issuer as Specified in its Charter)
Delaware 22-3272662
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
584 Broadway, Suite 509
New York, NY 10012
(Address of principal executive offices) (Zip Code)
(212) 343-3920
(Issuer's telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Exchange
Act: Common Stock par value
$.01 per share
Securities Registered pursuant to Section 12(g)of the Exchange Act: None
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes /X/ No //
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not 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 ]
Revenues for the Fiscal year ended May 31, 1999 were $3,257,069.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing price of the Common Stock on August 23, 1999,
was approximately $28,098,630. As of August 23, 1999, the Registrant had
outstanding 13,626,145 shares of Common Stock.
<PAGE>
PART 3
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
Executive Officers and Directors
The executive officers and directors of Cornerstone Internet Solutions Company
(the "Company") as of August 1, 1999 are as follows:
Name Age Position
Andrew Gyenes 63 Chairman of the Board
Edward Schroeder 50 President and Chief Executive Officer
David Rowe 33 Chief Operating Officer
Rino Bergonzi 53 Director
Peter Gyenes 54 Director
Harrison Weaver 67 Director
Andrew Gyenes has been Chairman of the Board since January 1994 and Chief
Executive Officer of the Company from January 1994 to December 1997. He was
President and a director of the Company from January 1994 through May 1994. For
more than five years before joining the Company, Mr. Gyenes was Vice President
of Gyenes & Co., a computer software consulting company, and Marketing Manager
of Ann-Mar Manufacturing, Inc. ("Ann-Mar"), a family owned textile company. Mr.
Gyenes continued in such positions on a part-time basis through January 1995,
and since January 1995, has been a consultant to Ann-Mar. Most of Mr. Gyenes'
career has been in the computer industry, including positions with Warner
Communications (last serving as an Assistant Vice President responsible for
Worldwide Information Systems), with IBM Corporation (last serving as Eastern
Regional Manager for Scientific Systems at Service Bureau Corporation, a former
wholly-owned IBM subsidiary), and with Western Union (last serving as Assistant
Vice President of Data Processing).
Edward Schroeder has been the Company's President and Chief Executive Officer
and a member of the Board of Directors since December 1997. From September 1997
to December 1997, Mr. Schroeder was a Vice President and General Manager of
USWeb/CKS Cornerstone ("USWeb"), a wholly-owned subsidiary of the Company.
Before joining USWeb, Mr. Schroeder had been affiliated with IBM Corporation for
over 25 years. Most recently he was the Vice President, Northeast Area.
David Rowe has been the Company's Chief Operating Officer since May 1999. From
April 1998 to April 1999, Mr. Rowe was a Vice President of Development of USWeb.
Before joining USWeb/CKS Cornerstone, Mr. Rowe had been affiliated with New
Technology Partners ("NTP") where he managed a variety of e-commerce web site
development projects. Prior to NTP, Mr. Rowe spent close to 10 years in the
financial services area where he held the positions of Vice President of Systems
and Technology at Financial Times Information, and Director of Technical
Services at Interactive Data.
Rino Bergonzi has served as a director of the Company since January 1995. Since
November 1993, Mr. Bergonzi has served as Vice President and Division Executive
of Corporate Information Technology Services at AT&T, and has 25 years of
experience in the information services field that includes working for such
companies as Western Union, United Parcel Service Information Services and EDS
Corp. Mr. Bergonzi is a director of QueryObject Systems Corporation, a public
company which develops and markets proprietary business intelligence solutions.
Peter Gyenes has served as a director of the Company since January 1995. Mr.
Peter Gyenes has served as Chairman and Chief Executive Officer and Executive
Vice President, International Operations and Worldwide Sales
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of Ardent Software, Inc. formerly VMARK Software, Inc., ("Ardent") since August
1996. From May 1996 to August 1996, he served as Executive Vice President of
International Operations of Ardent. Mr. Gyenes served as President and Chief
Executive Officer of Racal InterLan, Inc., a leading supplier of local area
networking products, from May 1995 to May 1996. Since January 1986, he has also
served as a director of Axis Computer Systems, Inc. From January 1994 to April
1995 he was President of the Americas Division of Fibronic International, Inc.
and from August 1990 to December 1993, Vice President and General Manager of
Data General Corporation's international operations and mini-computer business
unit. Mr. Peter Gyenes has also held management, marketing, sales and technical
positions with Encore Computer, Prime Computer, Xerox and IBM. Mr. Peter Gyenes
is the brother of Andrew Gyenes, Chairman of the Board of the Company.
Harrison Weaver has been a director of the Company since December 1993. He was a
Vice President of the Company from December 1993 through May 1994. He has been a
director of The Continuum Group, Inc. ("Continuum") since 1987, the Chairman of
the Board and Chief Executive Officer of Continuum since December 1991 and the
President of Continuum since August 1994. In September 1995 Continuum applied
for protection under Chapter 11 of the United States Bankruptcy Code. Mr. Weaver
is the founder and President of Weaver Associates, a diversified printing
concern located in Cranford, New Jersey, which has been in business for over 25
years. He served for thirteen years as President of the New Jersey State Opera,
becoming President Emeritus in 1987. Mr. Weaver has received many distinguished
achievement awards, including the Governor's Award Medal for outstanding
contributions to the Arts for the State of New Jersey in 1978.
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Item 10 Executive Compensation
The following table sets forth, for fiscal 1999, 1998 and 1997, all compensation
awarded to, earned by or paid to Andrew Gyenes, the Chairman of the Board,
Edward Schroeder, President and Chief Executive Officer of the Company, and
David Rove, Chief Operating Officer of the Company, the only other executive
officers of the Company whose salary and bonus exceeded $100,000 with respect to
the fiscal year ended May 31, 1999 (the "Named Executive Officers.")
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term
Compensation
Awards
Securities
Name and Principal Salary Bonus Other Annual Underlying
position Fiscal Year ($) ($) Compensation Options(#)
- -------- ----------- --- --- ------------ ----------
<S> <C> <C> <C> <C> <C>
Andrew Gyenes 1999 $125,000 -- $10,851(1)
Chairman of the Board 1998 $125,000 -- $10,500(1)
and Chief Executive 1997 $100,000 -- $13,357(1) 575,000
Officer
Edward Schroeder 1999 $120,000 $30,000 $10,882(1) 100,000
President, CEO 1998 $ 85,500(2) $41,250 $ 4,676(1) 300,000
and Principal Financial 1997 -- -- -- --
Officer
David Rowe 1999 $140,000 $58,000 $ 3,664(1) 225,000
Chief Operating Officer 1998 $ 11,818(3) $ 7,500 $ 612(1)
1997 -- -- --
</TABLE>
(1) Represents payments by the Company for a leased automobile and related
insurance and amounts paid by the Company toward health insurance
premiums.
(2) Mr. Schroeder's employment commenced September 15, 1997.
(3) Mr. Rowe's employment commenced April 27, 1998.
Stock option grants in last fiscal year
The following table provides further information with respect to the options
granted in fiscal 1999 to Mr. Schroeder and Mr. Rowe under the 1994 Plan.
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<PAGE>
STOCK OPTION TABLE
% of Total
Number of Options
Securities Granted to
Name and Principal Underlying Employees in Exercise of Expiration
Position Option Fiscal Year Base Price Date
Edward Schroeder 100,000 9.5% $1.06 9/4/03
President and Chief
Executive Officer
David Rowe 35,000 3.0% $2.40 4/27/03
Chief Operating Officer 65,000 6.0% $1.75 6/1/03
50,000 4.7% $0.83 9/15/03
25,000 2.3% $0.83 9/15/08
50,000 4.7% $1.40 12/24/03
Fiscal Year End Option Values
No options were exercised by the Named Executive Officers during fiscal 1999.
The following table shows, for the Named Executive Officers, the number of
shares covered by both exercisable and unexercisable employee stock options as
of May 31, 1999, and the values for "in-the-money" options, which represent the
positive spread between the exercise price of any outstanding stock option and
the price of the Common Stock as of May 31, 1999, which was $2.625.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised in-the-Money
Unexercised Options at FY Year End(#) Options at FY-end($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C>
Andrew Gyenes 875,000/25,000 $336,875/$0
Edward Schroeder 175,000/225,000 $97,211/$183,989
David Rowe 52,222/172,778 $51,763/$209,617
</TABLE>
Item 11 Security Ownership of Certain Beneficial Owners and Management
The following table sets forth beneficial ownership (as it relates to
dispositive power) of the Company's Common Stock and Class C Preferred Stock and
Class D Preferred Stock in the aggregate (Class C Preferred Stock and Class D
Preferred Stock are collectively referred to herein as the "Preferred Stock") as
of July 31, 1999 by (a) each stockholder known by the
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Company to be the beneficial owner of five percent or more of the outstanding
Common Stock and Preferred Stock, (b) each director and Named Executive Officer
(as defined below) of the Company individually, and (c) all directors and
executive officers as a group. Except as otherwise indicated in the footnotes
below, (x) the Company believes that each of the beneficial owners of the Common
Stock and Preferred Stock listed in the table, based on information furnished by
such owner, has sole investment and voting power with respect to such shares,
and (y) where no address is indicated, the address of the beneficial owner is
the address of the principal executive offices of the Company. As of July 31,
1999, holders of Class C Preferred Stock are entitled to approximately 1,010.25
votes per share aggregating 40,410 votes for all outstanding shares of Class C
Preferred Stock. Holders of each share of Class D Preferred Stock are entitled
to 1,250 votes per share, aggregating 10,050,000 votes for all outstanding
shares of Class D Preferred Stock. Accordingly, beneficial ownership of Common
Stock as it relates to voting power will be higher than the amounts reflected in
the table below with respect to those stockholders who hold Preferred Stock.
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Number of Shares Number of
Name and Address of Beneficial Owner (1) % of Class Shares % of Class
<S> <C> <C> <C> <C>
Barry Rubenstein 12,600,486(2) 48.5% 7,560(2) 94.0%
68 Wheatley Road
Brookville, NY 11545
Woodland Venture Fund 1,921,002(3) 13.3% 760(3) 9.4%
68 Wheatley Road
Brookville, NY 11545
Seneca Ventures 1,921,002(4) 13.3% 760(4) 9.4%
68 Wheatley Road
Brookville, NY 11545
Woodland Services Corp. 1,921,002(5) 13.3% 760(5) 9.4%
68 Wheatley Road
Brookville, NY 11545
Woodland Partners 1,921,002(6) 13.3% 760(6) 9.4%
68 Wheatley Road
Brookville, NY 11545
Irwin Lieber 10,302,484(7) 46.5% 6,800(7) 84.6%
767 Fifth Avenue
45th Floor
NY, NY 10153
21st Century 4,532,951(8) 25.0% 2,800(11) 34.8%
Communications Foreign
Partners, L.P.
c/o Fiduciary Trust
(Cayman) Limited
P.O. Box 1062
Grand Cayman,
B.W.I
21st Century 4,532,951(9) 25.0% 2,800(11) 34.8%
Communications Partners, L.P.
767 Fifth Avenue
45th floor
New York, NY 10153
21st Century 4,532,951(10) 25.0% 2,800(11) 34.8%
Communications T-E Partners, L.P.
767 Fifth Avenue
45th floor
NY, NY 10153
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Michael J. Marocco 4,532,951(12) 25.0% 2,800(12) 34.8%
767 Fifth Avenue
45th floor
NY, NY 10153
John Kornreich 4,532,951(12) 25.5% 2,800(12) 34.8%
767 Fifth Avenue
45th floor
NY, NY 10153
Harvey Sandler 4,532,951(12) 25.0% 2,800(12) 34.8%
767 Fifth Avenue
45th floor
NY, NY 10153
Andrew Sandler 4,532,951(12) 25.0 % 2,800(12) 34.8%
767 Fifth Avenue
45th floor
NY, NY 10153
Barry Fingerhut 10,280,484(13) 46.5% 6,800(13) 84.6%
767 Fifth Avenue
45th floor
NY, NY 10153
Wheatley Partners II, L.P. 5,746,333(14) 30.9% 4,000(14) 49.8%
68 Wheatley Road
Brookville, NY 11545
Applewood Capital Corp. 5,746,333(14) 30.9% 4,000(14) 49.8%
68 Wheatley Road
Brookville, NY 11545
Seth Lieber 5,746,333(14) 30.9% 4,000(14) 49.8%
767 Fifth Avenue
New York, NY 10153
Jonathan Lieber 5,746,333(14) 30.9% 4,000(14) 49.8%
767 Fifth Avenue
New York, NY 10153
Marilyn Rubenstein 1,921,002(15) 13.3% 760(15) 9.4%
68 Wheatley Road
Brookville, NY 11545
The Marilyn & Barry Rubenstein Family 1,921,002(16) 13.3% 760(16) 9.4%
Foundation
68 Wheatley Road
Brookville, NY 11545
Eli Oxenhorn 825,000(17) 5.8% 0 *
56 The Intervale
Roslyn Estates, NY 11576
Andrew Gyenes 895,000(18) 6.2% 0 *
Harrison Weaver 47,500(19) * 0 *
Rino Bergonzi 30,000(20) * 0 *
Peter Gyenes 38,000(21) * 0 *
Edward Schroeder 175,000(22) 1.3% 0 *
David Rowe 52,222(22) *
All directors and executive officers as a group 1,237,722(23) 8.0% 0 *
</TABLE>
- -----------------------
* less than 1%
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<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes any person
who, directly or indirectly, through any contract, arrangement,
understanding or otherwise, has or shares voting or investment power
with respect to securities. Shares of Common Stock issuable upon the
exercise of options, warrants and convertible notes currently
exercisable or convertible, or exercisable or convertible within 60
days are deemed outstanding for computing the percentage ownership of
the person holding such options or warrants or convertible notes but
are not deemed outstanding for computing the percentage ownership of
any other person.
(2) Based on Amendment Number 10 to a Schedule 13D filed in January 1999 by
Barry Rubenstein, Woodland Venture Fund ("Woodland Fund"), Seneca
Ventures ("Seneca"), Woodland Services Corp. ("Woodland Corp."), 21st
Century Communications Partners, L.P. ("21st Partners"), 21st Century
Communications T-E Partners, L.P. ("21st T-E"), 21st Century
Communications Foreign Partners, L.P. ("21st Foreign"), Michael J.
Marocco, John Kornreich, Harvey Sandler, Andrew Sandler, Barry
Fingerhut, Irwin Lieber, Woodland Partners, Wheatley Partners II, L.P.
formerly known as Applewood Associates, L.P. ("Applewood"), Applewood
Capital Corp. ("Applewood Capital"), Seth Lieber, Jonathan Lieber,
Marilyn Rubenstein, The Marilyn and Barry Rubenstein Family Foundation
(the "Foundation"), and Brian Rubenstein and Rebecca Rubenstein (the
"January 1999 13D"), Barry Rubenstein has sole beneficial ownership of
473,000 shares of Common Stock (including 175,000 shares of Common
Stock underlying presently exercisable options). Mr. Rubenstein may
also be deemed to share beneficial ownership of 12,127,486 shares of
Common Stock (including 9,450,000 shares of Common Stock underlying
Class D Preferred Stock and 400,000 shares of Common Stock underlying
the exercise of a Warrant) by virtue of being: (i) a stockholder,
officer and director of InfoMedia Associates, Ltd. ("InfoMedia") which
is a general partner of 21st Partners, 21st T-E and 21st Foreign; (ii)
a trustee of the Foundation; and (iii) a general partner of each of
Applewood, Seneca, the Woodland Fund, Woodland Partners and Rev-Wood
Partners ("Rev-Wood"). In addition, Mr. Rubenstein shares beneficial
ownership of 7,560 shares of Class D Preferred Stock with the above
listed entities. Mr. Rubenstein disclaims beneficial ownership of these
securities, except to the extent of his equity interest therein.
(3) Based on the January 1999 13D, the Woodland Fund has sole beneficial
ownership of 514,415 shares of Common Stock (including 300,000 shares
of Common Stock underlying Class D Preferred Stock). The Woodland Fund
may also be deemed to share beneficial ownership of 1,406,587 shares of
Common Stock (including 175,000 Shares of Common Stock underlying
presently exercisable options and 650,000 shares of Common Stock
underlying Class D Preferred Stock) with Seneca, Woodland Corp.,
Woodland Partners, and the Foundation. In addition, the Woodland Fund
has sole beneficial ownership of 240 shares of Class D Preferred Stock
and shares beneficial ownership of 520 shares of Class D Preferred
Stock, with the above listed entities. The Woodland Fund disclaims
beneficial ownership of these securities, except to the extent of its
equity interest therein.
(4) Based on the January 1999 13D, Seneca has sole beneficial ownership of
343,636 shares of Common Stock (including 200,000 shares of Common
Stock underlying Class D Preferred Stock). Seneca may also be deemed to
share beneficial ownership of 1,577,366 shares of Common Stock
(including 175,000 shares of Common Stock underlying presently
exercisable options and 750,000 shares underlying Class D Preferred
Stock) with the Woodland Fund, Woodland Corp., Woodland Partners, and
the Foundation. In addition, Seneca has sole beneficial ownership of
160 shares of Class D Preferred Stock and shares beneficial ownership
of 600 shares of Class D Preferred Stock with the above listed
entities. Seneca disclaims beneficial ownership of these securities,
except to the extent of its equity interest therein.
(5) Based on the January 1999 13D, Woodland Corp. shares beneficial
ownership of 1,921,002 Shares of Common Stock (including 175,000 shares
underlying options and 950,000 shares underlying Class D Preferred
Stock) and 760 shares of Class D Preferred Stock with the Woodland
Fund, Seneca, Woodland Partners, and the Foundation. Woodland Corp.
disclaims beneficial ownership of these securities, except to the
extent of its equity interest therein.
(6) Based on the January 1999 13D, Woodland Partners has sole beneficial
ownership of 485,714 shares of Common Stock (including 450,000 shares
underlying Class D Preferred Stock). Woodland Partners may also be
deemed to share beneficial ownership of 1,435,288 shares of Common
Stock (including 175,000 shares of Common Stock underlying presently
exercisable options and 500,000 shares underlying Class D Preferred
Stock) with the Woodland Fund, Seneca, Woodland Corp., and the
Foundation. In addition, Woodland Partners has sole beneficial
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ownership of 360 Shares of Class D Preferred Stock and shares
beneficial ownership of 400 shares of Class D Preferred Stock with the
above listed entities. Woodland Partners disclaims beneficial ownership
of these securities, except to the extent of its equity interest
therein.
(7) Based on the January 1999 13D, Irwin Lieber has sole beneficial
ownership of 23,000 shares of Common Stock (including 17,000 shares
underlying warrants). By virtue of being a stockholder, officer and
director of InfoMedia and a general partner of Applewood, Irwin Lieber
may be deemed to share beneficial ownership of 10,279,484 shares of
Common Stock (including 8,500,000 shares of Common Stock underlying
Class D Preferred Stock). In addition, Mr. Lieber shares beneficial
ownership of 6,800 shares of Class D Preferred Stock with the above
listed entities. Mr. Lieber disclaims beneficial ownership of these
securities, except to the extent of his equity ownership therein.
(8) Based on the January 1999 13D, this amount includes 408,610 shares of
Common Stock (including 319,000 shares of Common Stock underlying Class
D Preferred Stock). 21st Foreign disclaims beneficial ownership of
3,074,169 shares of Common Stock owned by 21st Partners and 1,050,132
shares of Common Stock owned by 21st T-E.
(9) Based on the January 1999 13D, this amount includes 3,074,169 shares of
Common Stock (including 2,373,000 shares underlying Class D Preferred
Stock). 21st Partners disclaims beneficial ownership of 1,050,172
shares of Common Stock owned by 21st T-E and 408,610 shares of Common
Stock owned by 21st Foreign.
(10) Based on the January 1999 13D, this amount includes 1,050,172 shares of
Common Stock (including 808,000 shares underlying Class D Preferred
Stock). 21st T-E disclaims beneficial ownership of 3,074,169 shares of
Common Stock owned by 21st Partners and 408,610 shares of Common Stock
owned by 21st Foreign.
(11) Beneficial ownership of these shares of Class D Preferred Stock is
shared by 21st Foreign, 21st T-E, and 21st Partners.
(12) Based on the January 1999 13D, Messrs. Marocco, Lewis, Kornreich, H.
Sandler and A. Sandler are each the sole stockholder, officer and
director of an entity which is a general partner of an entity which is
a general partner of 21st Partners, 21st T-E and 21st Foreign.
Accordingly, they may each be deemed to share beneficial ownership of
4,532,951 shares of Common Stock and 2,800 shares of Preferred Stock
which are collectively held by 21st Partners, 21st T-E and 21st
Foreign. Each individual disclaims beneficial ownership of these
securities, except to the extent of his equity interest therein.
(13) Based on the January 1999 13D, Barry Fingerhut has sole beneficial
ownership of 1,000 shares of Common Stock. By virtue of being a
stockholder, officer and director of InfoMedia and a general partner of
Applewood, Barry Fingerhut may be deemed to share beneficial ownership
of 10,279,484 shares of Common Stock (including 8,500,000 shares
underlying Class D Preferred Stock) and 6,800 shares of Class D
Preferred Stock. Mr. Fingerhut disclaims beneficial ownership of these
securities, except to the extent of his equity interest therein.
(14) Based on the January 1999 13D, these amounts include 5,746,533 shares
of Common Stock (including 5,000,000 shares underlying Class D
Preferred Stock) and 4,000 shares of Class D Preferred Stock
beneficially owned by Applewood. By virtue of being a general partner
of Applewood, Applewood Capital may be deemed to share beneficial
ownership of these shares. In addition, by virtue of being officers of
Applewood Capital, Seth and Jonathan Lieber may also be deemed to share
beneficial ownership of these shares. Applewood Capital, Seth Lieber,
and Jonathan Lieber each disclaim beneficial ownership of these
securities, except to the extent of their equity interests therein.
(15) Based on the January 1999 13D, by virtue of being a general partner of
Woodland Partners, a trustee of the Foundation, and the wife of Barry
Rubenstein, Marilyn Rubenstein may be deemed to share beneficial
ownership of 1,921,002 shares of Common Stock (including 175,000 shares
of Common Stock underlying presently exercisable Common Stock Warrants
and 950,000 shares underlying Class D Preferred Stock) and 760 shares
of Class D
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Preferred Stock. Ms. Rubenstein disclaims beneficial ownership of these
securities, except to the extent of her equity interest therein.
(16) Based on the January 1999 13D, the Foundation has sole beneficial
ownership of 104,237 shares of Common Stock. In addition, the
Foundation may be deemed to share beneficial ownership of 1,816,765
shares of Common Stock (including 175,000 shares of Common Stock
underlying presently exercisable Options and 950,000 shares underlying
Class D Preferred Stock) and 760 shares of Class D Preferred Stock with
Mr. and Ms. Rubenstein, the Woodland Fund, Seneca, Woodland Corp. and
Woodland Partners. The Foundation disclaims beneficial ownership of
these securities, except to the extent of its equity interest therein.
(17) Based on Amendment Number 2 to a Schedule 13D filed by Mr. Eli Oxenhorn
in September 1998, these share amounts consist of 250,000 shares of
Common Stock, 175,000 shares of Common Stock issuable upon the exercise
of presently exercisable options or warrants held by Mr. Oxenhorn and
400,000 shares of Common Stock issuable upon the exercise of presently
exercisable options or warrants held by an entity of which Mr. Oxenhorn
is a General Partner.
(18) Consists of 875,000 shares of Common Stock issuable upon exercise of
presently exercisable options and 10,000 shares owned by the AnnMar
Manufacturing Inc. Employee Pension Plan as trustee and 10,000 shares
owned jointly by Mr. Gyenes and his wife.
(19) Consists of 20,000 shares of Common Stock issuable upon exercise of
presently exercisable options and 25,000 shares of Common Stock
issuable upon exercise of presently exercisable options granted
pursuant to the 1995 Stock Option Plan for Outside Directors (the
"Outside Directors' Plan"). Excludes 50,000 presently exercisable
options held by The Continuum Group, Inc., which options Mr. Weaver
disclaims beneficial ownership of.
(20) Consists of 5,000 shares of Common Stock owned by Mr. Bergonzi and
25,000 shares of Common Stock issuable upon exercise of presently
exercisable options granted pursuant to the Outside Directors' Plan.
(21) Consists of 3,000 shares of Common Stock owned by Mr. Peter Gyenes,
25,000 shares of Common Stock issuable upon exercise of presently
exercisable options granted pursuant to the Outside Directors' Plan,
and 10,000 shares owned by the AnnMar Manufacturing Inc. Employee
Pension Plan as trustee.
(22) Consists of shares of Common Stock issuable upon the exercise of
presently exercisable options.
(23) Also includes presently exercisable options to purchase 1,210,222
shares of Common Stock.
Item 12 Certain Relationships and Related Transactions
In February 1998, the Company consummated an exchange offer whereby the Company
issued one share of Common Stock for every 2.8 Common Stock Purchase Warrants
tendered in the exchange offer. Each of Applewood, Seneca, 21st Foreign
Partners, 21st T-E, Woodland and Woodland Fund participated in the exchange
offer. Applewood received approximately 446,429 shares, Seneca received
approximately 35,714 shares, 21st Foreign Partners received approximately 39,286
shares, 21st T-E received approximately 103,036 shares, Woodland received
approximately 35,714 shares, and Woodland Fund received approximately 53,571
shares.
In February 1998, the Company consummated a private placement of 2,000 shares of
Class B Preferred Stock at a purchase price of $1,000 per share. The following
entities which may be deemed to be 5% stockholders of the Company purchased
Class B Preferred Stock in the private placement: Applewood Associates, L.P.
(1,500 Shares) and Woodland Partners (250 Shares). Each share of Class B
Preferred Stock was subsequently exchanged for .8 of a share of Class D
Preferred Stock.
On November 10, 1998, the Company consummated a private placement of 1,600
shares of newly created Class D Preferred Stock for $1,250 per share. The
following entities which may be deemed to be 5% stockholders of the Company
purchased Class D Preferred Stock in the private placement: Applewood
Associates, L.P. (Now known as Wheatley Partners II, L.P.), 21st Foreign
Partners, 21st T-E and 21st Partners.
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<PAGE>
In January and February 1999 the Company received $619,614 from the exercise of
warrants and options. Eli Oxenhorn a 5% Stockholder of the Company exercised
warrants to purchase 25,500 shares at an exercise price of $2.35 per share.
Certain entities which may be deemed to be 5% stockholders of the Company
acquired shares of B2B Class A Preferred Stock of the Company's subsidiary
B2Bgalaxy.Com, Inc. ("B2Bgalaxy") in a Private Placement of Class A Preferred
Stock of B2B Galaxy. The purchase price per share was $1,000. Each share of
Class A Convertible Preferred Stock of B2Bgalaxy can be converted into Common
Stock of the Company under certain conditions. The following 5% or greater
stockholders (or entities affiliated with 5% or greater stockholders) purchased
shares of Class A Preferred Stock of B2Bgalaxy.com: Seneca Ventures, 50 shares,
Wheatley Foreign Partners, L.P. 24 shares, Wheatley Partners, L.P. 276 shares,
Woodland Partners, 50 shares, and Woodland Venture Fund, 100 shares.
All of the above transactions resulted from arms-length negotiations and were
approved by the independent members of the Company's Board of Directors who did
not have an interest in the transactions. The Company believes that the terms of
such transaction were on terms that were no less favorable than were available
from unaffiliated third parties. Future and ongoing transactions with affiliates
of the Company, if any, will be on terms believed by the Company to be no less
favorable than are available from unaffiliated third parties and will be
approved by a majority of the independent members of the Company's Board of
Directors who do not have an interest in the transaction.
10
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Amendment to Form 10-KSB to be
signed on its behalf by the undersigned, thereunto duly authorized.
CORNERSTONE INTERNET SOLUTIONS COMPANY, INC.
Date: September 27, 1999 By: /s/ Edward Schroeder
------------------------
EDWARD SCHROEDER
Edward Schroeder, President and
Chief Executive Officer
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