UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 20-F/A
[_] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 2(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended FEBRUARY 28, 2005
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
OR
[_] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report: Not applicable
ALLSHIPS LTD.
(formerly OMNINET INTERNATIONAL LTD)
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(Exact name of Registrant as specified in its charter)
ALLSHIPS LTD.
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(Translation of Registrant's name into English)
BERMUDA
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(Jurisdiction of incorporation or organization)
Covenant House
85 Reid Street
Hamilton, Bermuda HM 12
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(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b)
of the Act: None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common stock, $0.000167 par value
---------------------------------
Title of class
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:
As of February 28, 2005, there were 44,873,897 shares of the registrant's
common stock outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
[_] Yes [X] No
If this report is an annual report or transition report, indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.
[_] Yes [X] No
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for 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.
[X] Yes [_] No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
Large accelerated filer [_] Accelerated filer [_] Non-accelerated filer [X]
Indicate by check mark which financial statement item the
registrant has elected to follow.
[_] Item 17 [X] Item 18
If this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).
[X] Yes [_] No
Explanatory Note
This amended and restated annual report of Allships Ltd. for the fiscal
year ended February 28, 2005 is being filed for the purpose of providing
additional disclosure with respect to the results of operations for the
Company's fiscal year ended February 28, 2005 and to address certain comments
contained in the letters of the Staff dated May 18, 2006 and August 30, 2006.
The Company amended its annual report for 2005 to include audited financial
statements for the year ended February 28, 2005 rather than the unaudited
financial statements included in its 2005 annual report previously filed with
the Securities and Exchange Commission on August 30, 2005. The financial
statements included in this annual report have been restated for the reasons
described in Item 3 "Key Information" and in the financial statements included
elsewhere in this annual report. This annual report has only been updated to
reflect the restatement of financial statements discussed above.
FORWARD-LOOKING STATEMENTS
Allships Ltd., or the Company, desires to take advantage of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 and is
including this cautionary statement in connection with this safe harbor
legislation. This document and any other written or oral statements made by us
or on our behalf may include forward-looking statements, which reflect our
current views with respect to future events and financial performance. The words
"believe," "except," "anticipate," "intends," "estimate," "forecast," "project,"
"plan," "potential," "will," "may," "should," "expect" and similar expressions
identify forward-looking statements.
Please note in this annual report, "we," "us," "our," "The Company," all refer
to Allships Ltd.
The forward-looking statements in this document are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, management's examination of historical operating
trends, data contained in our records and other data available from third
parties. Although we believe that these assumptions were reasonable when made,
because these assumptions are inherently subject to significant uncertainties
and contingencies which are difficult or impossible to predict and are beyond
our control, we cannot assure you that we will achieve or accomplish these
expectations, beliefs or projections.
In addition to these important factors and matters discussed elsewhere herein,
important factors that, in our view, could cause actual results to differ
materially from those discussed in the forward-looking statements include the
strength of world economies, fluctuations in currencies and interest rates,
general market conditions, including fluctuations in charterhire rates and
vessel values, changes in demand in the dry-bulk shipping industry, changes in
the Company's operating expenses, including bunker prices, drydocking and
insurance costs, changes in governmental rules and regulations or actions taken
by regulatory authorities, potential liability from pending or future
litigation, general domestic and international political conditions, potential
disruption of shipping routes due to accidents or political events, and other
important factors described from time to time in the reports filed by the
Company with the Securities and Exchange Commission.
TABLE OF CONTENTS
Page
PART I ......................................................................1
Item 1 Identity of Directors, Senior Management and Advisers..........1
Item 2 Offer Statistics and Expected Timetable........................1
Item 3 Key Information................................................1
Item 4 Information on the Company....................................4
Item 4A Unresolved Staff Comments....................................6
Item 5 Operating and Financial Review and Prospects...................6
Item 6 Directors, Senior Management and Employees....................7
Item 7 Major Shareholders and Related Party Transactions.............8
Item 8 Financial information.........................................9
Item 9 The offer and Listing........................................10
Item 10 Additional Information......................................10
Item 11 Quantitative and Qualitative Disclosures about Market Risk..13
Item 12 Description of Securities Other than Equity Securities......13
PART II .....................................................................13
Item 13 Defaults, Dividend Arrearages and Delinquencies.............13
Item 14 Material Modifications to the Rights of Security Holders
and Use of Proceeds ........................................13
Item 15 Controls and Procedures.....................................13
Item 16A Audit Committee Financial Expert...........................13
Item 16B Code of Ethics.............................................13
Item 16C Principal Accountant Fees and Services.....................13
Item 16D Exemptions from the Listing Standards for Audit
Committees ................................................14
Item 16E Purchases of Equity Securities by the Issuer and
Affiliated Purchasers .....................................14
PART III.....................................................................14
Item 17 Financial Statements........................................14
Item 18 Financial Statements........................................14
Item 19 Exhibits....................................................14
PART I
Item 1 Identity of Directors, Senior Management and Advisers
Not Applicable.
Item 2 Offer Statistics and Expected Timetable
Not Applicable.
Item 3 Key Information
A. Selected Financial Data
The following table sets forth our selected financial data as of February 28,
2001, 2002 and 2003, February 29, 2004 and February 28, 2005 and for each of the
five years in the period ended February 28, 2005. The following information
should be read in conjunction with Item 5 "Operating and Financial Review and
Prospects" and the financial statements and related notes included herein. The
selected financial data for the fiscal years 2003, 2004 and 2005 are derived
from our financial statements and notes thereto which have been prepared in
accordance with U.S. generally accepted accounting principles ("US GAAP")
included elsewhere in this annual report. The selected financial data for the
fiscal years 2001 and 2002 are derived from our financial statements and related
notes previously filed with the Securities and Exchange Commission (the
financial statements for the fiscal year 2002 were restated for the matters
described below).
Year Ended
Year Ended February 28, February 29, February 28,
2001 2002 2003 2004 2005
Restated (1) Restated (1) Restated (1) Restated (1)
------------ ------------ ------------ ----------- -----------
(in U.S. dollars)
STATEMENT OF LOSS
Revenue $0 $0 $0 $0 $0
General & administrative
expenses (339,712) (124,755) (95,506) (60,040) (189,017)
Net Loss (339,712) (124,755) (95,506) (60,040) (189,017)
Preferential deemed
dividend 0 0 0 0 (1,500,000)
Loss attributable to
common stockholders $(339,712) $(124,755) $(95,506) $(60,040) $(1,689,017)
Loss per common share,
basic and diluted (2) (0.05) (0.02) (0.01) (0.01) (0.06)
Weighted average basic
and diluted shares outstanding 6,942,098 7,164,419 7,947,828 10,060,165 27,095,500
Year Ended
Year Ended February 28, February 29, February 28,
2001 2002 2003 2004 2005
Restated (1) Restated (1) Restated (1) Restated (1)
(in U.S. dollars)
BALANCE SHEET DATA
(at period end)
Current assets, including 6,212 1,146 7,019 5,528 312,842
cash
Total assets 6,212 1,146 7,019 5,528 312,842
Current liabilities 191,600 194,095 268,474 69,030 158,971
Total liabilities 191,600 194,095 268,474 69,030 158,971
Stockholders' equity/(Deficit) (185,388) (192,949) (261,455) (63,502) 153,871
-------- -------- -------- ------- -------
(1) In 2006, the Company restated its financial statements previously issued for
the years ended February 28, 2002 and 2003, February 29, 2004 and February 28,
2005 (see Note 9 of our audited financial statements included in this annual
report), in order to (a) account for stock-based compensation of 90,000 shares
at $0.15 per share at the date they were granted (year ended February 28, 2003)
instead of accruing their $13,500 fair value in the prior year ended February
28, 2002, (b) account for stock-based compensation of 270,000 shares at $0.05
per share at the date they were granted (year ended February 29, 2004) instead
of accruing their $13,500 fair value in the prior year ended February 28, 2003,
(c) (i) account for stock-based compensation of 90,000 shares at $0.15 per share
at the date they were granted (year ended February 28, 2003); such stock-based
compensation was not previously recorded and (ii) reclassify the par value of
such shares ($15) from Additional Paid in Capital to Common Stock at the date of
their physical issuance (year ended February 29, 2004), (d) reverse accrual for
legal expenses which had already been paid (initially paid in the year ended
February 28, 2002), (e) account for stock-based compensation of 270,000 shares
at $ 0.05 per share at the date they were granted (year ended February 28, 2005)
instead of accruing the fair value of shares issued of $ 13,500 prior to their
grant date in the year ended February 29, 2004, (f) reclassify, as of February
29, 2004, as a liability $52,690 representing the fair value of 1,053,807 shares
issued at $ 0.05 per share to settle stockholder's advances from Common stock
and Additional paid-in capital to Due to related parties, as these shares were
not physically issued until May 2004. Although the agreement with the
Stockholder for such settlement was concluded in February 2004, the liability to
the stockholder should not have been derecognized in the financial statements
until the shares were actually issued in settlement of the outstanding advances
due to stockholder, (g) to account for a preferential deemed dividend of
$1,500,000 relating to the issuance of 30,000,000 shares in October 2004 as
further discussed in Note 5 to our audited financial statements included
elsewhere in this annual report and reclassify the par value of such shares
($5,010) from Additional Paid in Capital where it was originally recorded to
Common Stock, (h) to account for the August 2004 issuance of 645,832 shares at
$0.05 per share in settlement of Stockholder advances; such issuance was not
previously recorded, (i) to account for stock-based compensation of 356,796
shares at $0.06 per share at the date they were granted (year ended February 28,
2005); such stock-based compensation was not previously recorded, (j) to account
for various administrative, listing, registration and audit expenses of $80,191
for the year ended February 28, 2005; such expenses were not previously
recorded, (k) adjust, for the years ended February 28, 2002 and 2003, for the
year ended February 29, 2004 and for the year ended February 28, 2005, the
weighted average number of common shares outstanding to 7,164,419, 7,947,828,
10,060,165 and 27,095,500 shares, compared to 7,834,403, 7,924,403, 12,808,298
and 44,138,065 shares, respectively, as previously reported, to reflect the
number of days outstanding from the grant date of the shares.
(2) The effect of the above restatement on loss per common share for the years
ended February 28, 2002, February 28, 2003, February 29, 2004 and February 28,
2005 was $(0.00), $(0.00), $(0.00) and $(0.06) per share, respectively.
B. Capitalization and Indebtedness
Not Applicable.
C. Reasons for the Offer and Use of Proceeds
Not Applicable.
D. Risk factors
The company has identified the following risk factors as significant. The order
in which they appear is not intended to reflect our management's prioritizing of
such risks.
WE HAVE A HISTORY OF LOSSES AND CANNOT BE CERTAIN TO ACHIEVE POSITIVE CASH FLOW.
We had net losses of $189,017 (before a preferential deemed dividend of
$1,500,000), $60,040 and $95,506 for the years ended February 28, 2005, February
29, 2004 and February 28, 2003, respectively. In addition, we had an accumulated
deficit of $3,180,792 through February 28, 2005. At present we do not have any
revenue producing operations and we anticipate monthly operating expenses of
approximately $18,000, including administration, salaries, listing and audit
costs.
Even if we acquire an operating entity or individual assets, we cannot be
certain that we will achieve or sustain positive cash flow or profitability from
our operations. Our net losses and negative cash flow are likely to continue
even longer than we currently anticipate if we do not acquire a viable operating
entity or asset and if we do not attract and retain qualified personnel. Our
ability to achieve our objectives is subject to financial, competitive,
regulatory, legal, technical and other factors, many of which are beyond our
control.
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO ASSESS PAST PERFORMANCE AND
FUTURE PROSPECTS. There is only limited historical operating and financial
information on which to base an evaluation of our performance and prospects. We
have acquired and disposed of one company since our inception in March 1998. Any
company which we may acquire in the future may be in a completely different
business than the company that we previously owned. This limits the
comparability of our operating and financial information from period to period.
WE ARE SUBJECT TO RISKS AS WE MAKE ACQUISITIONS. As part of our business
strategy, we intend to acquire, make investments in, as yet unidentified
operating companies and assets. Any such future acquisitions, investments would
involve risks, such as:
- incorrect assessment of the value, strengths and weaknesses of
acquisition and investment opportunities;
- underestimating the difficulty of integrating the operations and
personnel of newly acquired companies with other companies we may
acquire;
- the potential disruption of any ongoing business, including possible
diversions of resources and management time; and
- the threat of impairing relationships with employees and customers
as a result of changes in management or ownership.
We cannot assure you that we will be successful in overcoming these risks.
Moreover, we cannot be certain that any desired acquisition, investment or asset
could be made in a timely manner or on terms and conditions acceptable to us.
Neither can we assure you that we will be successful in identifying attractive
acquisition candidates. We expect that competition for such acquisitions may be
significant. We may compete with others who have similar acquisition strategies,
many of whom may be larger and have greater financial and other resources than
us.
An additional risk associated with acquisitions is that many attractive
acquisition candidates do not have audited financial statements and have varying
degrees of internal controls. Although we may believe that the available
financial information for a particular business is reliable, we cannot guarantee
that a subsequent audit would not reveal matters of significance, including with
respect to liabilities, contingent or otherwise. We expect that, from time to
time in the future, we will enter into acquisition agreements, the pro forma
effect of which is not known and cannot be predicted.
WE DO NOT EXPECT TO PAY DIVIDENDS. We do not anticipate paying cash dividends in
the foreseeable future.
RISKS INHERENT IN INTERNATIONAL OPERATIONS. We are not currently conducting
business. In the future, however, we may acquire an operating company or asset
located outside of the United States. If we acquire a non-U.S. operating
company, it is possible that a substantial portion of our business may be
conducted outside of the United States. In this event, our operations could be
subject to various risks such as the possibility of the loss of revenue,
property or equipment due to expropriation, nationalization, war, insurrection,
terrorism or civil disturbance, the instability of foreign economies, currency
fluctuations, and devaluations, adverse tax policies and governmental activities
that may limit or disrupt markets, restrict payments or the movement of funds or
result in the deprivation of contract rights. Additionally, our ability to
compete could be adversely affected by foreign governmental regulations that
encourage or mandate the hiring of local contractors, or by regulations that
require foreign contractors to employ citizens of, or purchase supplies from
vendors in, a particular jurisdiction. We could also be subject to taxation in a
number of jurisdictions, and the final determination of our tax liabilities
might involve the interpretation of the statutes and requirements of various
domestic and foreign taxing authorities. Any of these risks could have an
adverse effect on our operations.
DEPENDENCE ON KEY EMPLOYEES. Our growth and profitability are dependent upon,
among other things, the abilities and experience of our management team
including Mr. George Economou, our Chairman and Director. If the services of Mr.
George Economou or our other directors or executive officers become unavailable,
our business, financial condition and results of operations could be adversely
affected. In addition, on October 6, 2006, our Chief Financial Officer, Mr.
Christopher Thomas, resigned from our Company. As of the date of the filing of
this amended Form 20-F, Mr. Aristeidis Ioannidis has been appointed to replace
Mr. Thomas as our Chief Financial Officer.
RIGHTS OF SHAREHOLDERS UNDER BERMUDA LAW. We are incorporated under the laws of
Bermuda. Principles of law relating to such matters as the validity of corporate
procedures, the fiduciary duties of our management and directors and the rights
of our shareholders, are governed by Bermuda law and our Memorandum of
Association and Bye-laws. Such principles of law may differ from those that
would apply if we were incorporated in a jurisdiction in the United States.
Investors may have more difficulty in protecting their interests in the face of
actions by management, directors or controlling shareholders than would
shareholders of a corporation incorporated in a United States jurisdiction.
Under Bermuda law, a director generally owes a fiduciary duty only to the
company, not to the company's shareholders. Our shareholders may not have a
direct cause of action against our directors. In addition, Bermuda law does not
provide a mechanism for our shareholders to bring a class action lawsuit under
Bermuda law. Further, our bye-laws provide that we must indemnify our directors,
officers and members of committees to the fullest extent authorized by law. For
further information concerning our Memorandum of Association and Bye-laws, see
"Item 10 - Additional Information - Memorandum and Articles of Association."
In addition, there is uncertainty as to whether the courts of Bermuda would
enforce (i) judgments of United States courts obtained against us or our
officers and directors predicated upon the civil liability provisions of the
securities laws of the United States or any state or (ii) in original actions
brought in Bermuda, liabilities against us or such persons predicated upon the
securities laws of the United States or any state.
Item 4 Information on the Company
A. History and Development of the Company.
We were originally organized under the laws of Bermuda on March 24, 1998 under
the legal name, "Omninet International Ltd." The term of the Company is
perpetual. We amended our memorandum of association on June 30, 1998 in order to
increase the amount of our authorized common stock to 25,000,000 shares, par
value $0.001. On April 10, 2000, we further amended our memorandum of
association to increase the amount of our authorized common stock to 150,000,000
shares, par value $.000167. On September 28, 2004 we issued 30,000,000
additional common shares and increased our share capital by $300,000.
We are a Bermuda exempted company. A Bermuda exempted company is legislatively
exempt from Bermuda's usual requirement that Bermuda-formed businesses be 60%
owned by Bermuda citizens. A Bermuda exempted company may reside in Bermuda, but
must carry on its business transactions in other countries. Bermuda exempted
companies may not own real estate in Bermuda. There is no income tax,
withholding tax, capital gains tax, capital transfer tax, estate duty or
inheritance tax payable by a Bermuda exempted company or its shareholders to the
Bermuda Government.
A Bermuda exempted company is required to pay an annual fee to the Bermuda
Registrar by January 31 of each year. Annual fees are calculated based upon the
exempted company's assessable capital (authorized share capital plus any share
premiums) as of August 31 of the prior year. Exempted companies with assessable
capital of between $0 - $12,000, $12,001 - $120,000 and $120,001 - $1,200,000
must pay fees of $1,780, $3,635 and $5,610, respectively. Annual fees continue
to increase as the amount of assessable capital increases above $1,200,000. As
of August 31, 2005, we had assessable capital of $25,000 (150,000,000 authorized
shares of common stock with par value of $.000167). Accordingly, our annual fee
for the Year 2005 was $3,935. If an exempted company fails to timely pay its
annual fee, the Bermuda Registrar will charge that company $300 as a late fee in
addition to the annual fee. In extreme cases, the Bermuda Registrar may cause
the exempted company's charter to be suspended or revoked so that it is no
longer permitted to operate in Bermuda.
In addition, a Bermuda exempted company may apply under the Exempted
undertakings Tax Protection Act, 1966 for an assurance from the Bermuda
government that any tax imposing legislation will not be applied to the company
until after March 2016. We were granted such tax assurance on March 30, 1998.
Except as described above, we are subject to the laws and regulations applicable
to Bermuda-based corporations. Although Bermuda law at present is structured to
encourage foreign investment, there can be no assurance that future laws and
regulations will not have a negative impact on our operations. See also "Risks
Inherent in International Operations" in Item 3.D. above. At present, we are not
aware of any special country risks, such as existing or probable government
regulations, that could materially affect our operations.
B. Business Overview
We are a company that intends to own and operate ship operating businesses or to
acquire ocean-going cargo vessels. We are not presently engaged in any business.
Our only plan of operation is seeking a viable shipping business or ships to
acquire. At present, we have not identified another business or asset suitable
for acquisition. We intend to continue our search to acquire suitable shipping
businesses or individual vessels.
In general, we intend to identify potential acquisitions through research and
referrals. Once identified, we will screen the target to determine whether or
not it might be suitable for acquisition. The initial screening will consist of
an evaluation of the candidate's potential, which may include factors such as
estimated future growth and income. If an existing shipping company is
identified as a potential target, we will conduct a detailed analysis of the
cost of acquisition, the target's fair market value, the prospective rate of
return on an investment in the target and the likelihood of achieving such
return. The detailed analysis may vary for each target and include criteria such
as an evaluation of the target against comparable companies in the shipping
industry, scrutiny of the target's financial condition and future earnings
potential and discounted cash flow analysis. We are particularly interested in
identifying and acquiring shipowning companies and/or individual ocean-going
cargo vessels. If we decide that a company is a suitable acquisition candidate,
we anticipate that we will enter into an agreement to acquire such target,
subject to obtaining any financing and approvals necessary to carryout the
transaction.
We will need additional financing or future profitability to continue as a going
concern. We will also need additional capital in order to acquire either a
shipping company or ocean-going vessel. We plan to raise such funds through a
private placement of common stock or by borrowing from a lending institution.
There can be no assurance that we will be able to raise such funds. See "Item 5
- - Operating and Financial Review and Prospects".
Since our formation, we have explored entering into certain businesses but
commenced operations in only one business. In particular:
o In the spring of 1998, we explored providing Internet services to
users in the United Kingdom. On July 2, 1998, we acquired all of
the issued and outstanding shares (254,453 shares) of the common
stock of Colloquium Ltd. ("Colloquium"), a Scotland based
provider of connectivity and value-added Internet services to the
United Kingdom, in exchange for 954,964 shares of our common
stock.
o Colloquium generated net operating losses from the date of its
acquisition until May 26, 1999. As Colloquium's losses increased,
it became clear that additional financing would be required in
order to fund its operations, and we were not certain when, if
ever, Colloquium would achieve profitability. These factors,
among others, led to disagreement between our management and that
of Colloquium. In order to avoid continuing liabilities, our
Board of Directors determined to sell Colloquium even if that
involved realizing a one-time loss. On May 26, 1999, we
contributed $24,000 to the capital of Colloquium and thereafter
sold all of the issued and outstanding shares of Colloquium to
Brian McMillan and others in exchange for 479,988 of our shares
held by them. We incurred a loss upon the sale of Colloquium
because Colloquium's poor operating performance negatively
impacted the subsidiary's value.
o On September 8, 1998, we entered into a Plan and Agreement of
Merger - Reorganization with E&M Management, Inc. whereby,
subject to numerous terms and conditions, E&M was to be merged
with and into us and we would be the surviving corporation. E&M
was a development stage company originally incorporated in Nevada
on November 2, 1992. E&M was not engaged in any operations;
however, trades in E&M's common stock were quoted on the OTC
Bulletin Board. As of October 15, 1999, E&M had not obtained the
requisite approval of the merger by its shareholders as required
by Nevada law and, on November 2, 1999, the companies terminated
the merger agreement by executing a Mutual Termination Agreement
and Release. We do not believe that we incurred any liabilities
as a result of termination of the merger agreement.
o During the fiscal year ended February 28, 2002, we entered into
negotiations for the acquisition of an Australian software
company. Because basic terms could not be agreed upon with that
company's management, we terminated our negotiations for such
transaction before any letter of intent or other agreements were
prepared or executed.
o Since March 2002, we explored the acquisition of several
companies, however, no formal negotiations or agreements were
entered into.
C. Organizational Structure
We are not a member of any group of companies. We do not presently have any
subsidiaries, although if we are successful in implementing our plan of
operation and identifying a company to acquire, we may form or acquire one or
more subsidiaries for such acquisition.
D. Property, Plant and Equipment
We do not own any material property, plant, or equipment. We have no material
assets except for cash in the amount of $312,842 as of February 28, 2005. We
have no office facilities or real property holdings. Our registered office is
located at the offices of Atlantic Corporate Management, Warner Building, 85
Reid Street, Hamilton, Bermuda HM 12. Our registered office address is provided
by Atlantic Corporate Management Ltd., our corporate Secretary, in exchange for
an annual fee of $4,000. Atlantic Corporate Management Ltd. can terminate this
arrangement for any reason at 120 days notice. We believe that our existing
arrangement is adequate to meet our current needs.
Item 4A Unresolved Staff Comments
This amended filing is being made to address certain comments contained in the
letters of the Staff of the SEC dated May 18, 2006 and August 30, 2006. The
Company believes that this amended filing fully addresses the comments raised by
the Staff in these letters. There are no other currently outstanding comments of
the Staff relating to the Company.
Item 5 Operating and Financial Review and Prospects
A. Operating Results
The following discussion is based on our audited financial data for the years
ended February 28, 2005, February 29, 2004 and February 28, 2003. In the period
between July 2, 1998 and May 26, 1999, we were engaged in the business of
providing connectivity and value added Internet services through our subsidiary
Colloquium. We discontinued our Internet-related operations on May 26, 1999 when
we sold Colloquium due to increasing net operating losses. We are not presently
engaged in that or any other business, and our sole activity is seeking shipping
companies and individual ocean-going cargo vessels to acquire. We have not begun
new operations since selling Colloquium because we have not acquired any company
or individual asset.
Our expenses are primarily administrative in nature and include salaries,
professional fees, legal fees, and transfer agent fees. Our general and
administrative expenses increased from $60,040 in 2004 to $189,017 in 2005
primarily due to increased directors' remuneration expenses. Our general and
administrative expenses decreased from $95,506 in 2003 to $60,040 in 2004
primarily due to decreased legal expenses. Similarly, our net loss for 2005 was
$189,017 compared to a net loss in 2004 and 2003 of $60,040 and $95,506,
respectively. The 2005 net loss does not include a preferential deemed dividend
(see Note 5 to our audited financial statements) of $1,500,000 which increased
the 2005 loss attributable to common stockholders to $1,689,017.
B. Liquidity and Capital Resources
As of February 28, 2005, our total cash and cash equivalents was $312,842 and
our total current assets were $312,842 and our current liabilities were
$158,971. At the prior year end of February 29, 2004 our total cash and cash
equivalents was $2,250 and our total current assets were $5,528 and our current
liabilities were $69,030.
During our fiscal year ending February 28, 2005 and February 29, 2004, we
derived most of our operating capital from the issuance of 30,000,000 shares at
$0.01 thereby raising $300,000 on September 28, 2004. We have no planned capital
expenditures at this time; however the implementation of our business plan will
require additional capital.
Operating activities absorbed cash of $21,700 in the year ended February 28,
2005, compared to $244,460 in the year ended February 29, 2004 and $25,706 in
the year ended February 28, 2003. These amounts were used for administrative
expenses, including salaries, accounting and legal.
For 2005, 2004 and 2003 there was no net cash used in or provided by investing
activities.
Net cash provided by financing activities was $332,292 for 2005, compared to
$242,970 for 2004 and to $28,300 for 2003. The 2005 amount reflects the proceeds
($300,000) from issuance of common stock and advances ($32,292) we received from
our stockholders and certain related parties. The 2004 and 2003 amounts
represent advances from, and repayment to, our then major stockholder and a
related party.
Our working capital surplus, defined as the excess of our current assets over
our current liabilities, was $153,871 at February 28, 2005 compared to a deficit
of $63,502 at February 29, 2004.
We do not presently have any borrowing facility established with a financial
institution. We will require additional capital to fund our operations in the
future. We anticipate raising such additional capital through a private offering
of our securities or by borrowing from a lending institution.
C. Research and Development, Patents and Licenses
Not applicable.
D. Trend Information
Not applicable as the Company is not an operating company.
E. Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Item 6 Directors, Senior Management and Employees
A. Directors and Senior Management
The following sets forth the name of our directors, executive officers and key
employees, the positions and offices held by each such person, and the period
each such person has held such position.
Name Position Held and Term
- ---- ----------------------
George Economou Chairman and Director since August 23, 2004.
Aristeidis Ioannidis Director since August 23, 2004 and Chief
Financial Officer since November 28, 2006
Atlantic Corporate Management Secretary from January 1, 2004.
The following is a description of the business experience and other positions
held by each of our directors and key employees as of the date of this amended
annual report:
George Economou - has been actively involved in the shipping industry for over
25 years. After graduating from the Massachusetts Institute of Technology in
1976 with a B.A. and an M.S. in Naval Architecture and Marine Engineering and an
M.S. in Shipping and Shipbuilding Management, George Economou commenced working
as a Superintendent Engineer in Thenamaris Ship Management in Greece. From 1978
until 1981 he worked as Sale and Purchase Manager at Brokerage and Management in
New York. From 1981 to 1986 he held the position of General Manager of Oceania
Maritime Agency in New York. In 1986 he invested and participated in the
formation of numerous individual shipping companies. Mr. Economou is also on the
board of directors of DryShips Inc., a company with securities registered under
the Securities Exchange Act of 1934.
Aristeidis Ioannidis - has served as our Chief Financial Officer since November
28, 2006. He graduated from Newcastle University with a B.Sc.(Hons) in Naval
Architecture. He graduated after moving to MIT with an M.S. in Naval
Architecture and Marine Engineering and an M.S. in Shipping and Shipbuilding
Management. He has worked in the shipping industry for over thirty years and has
held senior executive management positions in both shipyards and shipping
companies. In 1998 he was appointed as General Manager of Cardiff Marine Inc.
Christopher J. Thomas - served as our Chief Financial Officer and a director
from August of 2004 until October 6, 2006. Since November 2001, Mr. Thomas has
been an independent financial consultant to numerous international shipowning
and operating companies. Mr. Thomas is also on the board of directors of TOP
Tankers Inc. which is a publicly traded company with securities registered under
the Securities Exchange Act of 1934. From 1999 to 2004, Mr. Thomas was the Chief
Financial Officer and a director of Excel Maritime Carriers Ltd and from 2004 to
2006 was the Chief Financial Officer and a director of DryShips Inc. Prior to
joining Excel, he was Financial Manager of Cardiff Marine Inc. Mr. Thomas holds
a degree in Business Administration from Crawley University, England.
Atlantic Capital Management is a Bermuda corporation providing professional
services to other Bermuda corporations. The Company entered into a contract for
Atlantic Capital Management to serve as the registered office and secretary of
the Company effective as of January 1, 2004.
B. Compensation
During the year ended February 28, 2005 an aggregate of $76,408 compensation was
paid to our officers or directors in their capacity as officers and directors.
We did not set aside any amounts during the last fiscal year to provide pension,
retirement or similar benefits for our directors and officers. On June 5, 2000,
our shareholders approved our 2000 Outside Directors' Stock Option Plan and set
aside 100,000 shares of our common stock for issuance there under. Under the
terms of the Outside Directors' Plan, each non-employee director will
automatically be eligible to receive an option, which option may be granted by a
committee of our board of directors, to purchase 5,000 shares of our common
stock for each year that he serves as our director. Our shareholders also
approved our 2000 Stock Incentive Plan and set aside 1,100,000 shares of our
common stock for issuance there under. The Stock Incentive Plan allows a
committee of our Board of Directors to make awards of a variety of equity-based
incentives to officers and key employees including stock awards, options to
purchase shares of company common stock, stock appreciation rights, phantom
shares, dividend equivalent rights and similar rights; and is intended to
enhance our ability to attract and retain key personnel. As of the date of this
Annual Report, no options have been granted pursuant to the Outside Directors'
Plan or the Stock Incentive Plan.
C. Board Practices
The Company's directors are elected by the shareholders at our annual general
meeting, and serve a term of one year or until their successors are appointed
and duly elected to office. Executive officers are appointed by our Board of
Directors and serve a term of one year or until their successors are appointed.
The Company does not presently have a compensation committee and has not yet
appointed an audit committee. The Company's entire board of directors is
performing the functions of an audit committee. There are no director services
contracts that provide for benefits upon termination of service.
D. Employees
We have no full time or part time employees, except for senior management and
the Board of Directors.
E. Share Ownership
Other than as set forth below under "Item 7 - Major Shareholders and Related
Party Transactions," as of November 12, 2006, none of our directors or officers
owned any of our common stock.
Item 7 Major Shareholders and Related Party Transactions
A. Major Shareholders
To the best of our management's knowledge, the following are the only owners of
more than 5% of the Company's issued and outstanding common stock as at November
12, 2006.
No. of Percentage of
Name Shares Owned Class
------------------------ ------------ -------------
Eurotrade Marine Inc.(1) 16,103,227 35.60%
Fairmont Services Corp. 10,064,517 22.25%
Gulfwind Maritime Inc. 6,038,710 13.35%
(1) Mr. George Economou, our Chairman and director, controls the Entrepreneurial
Spirit Foundation, a Liechtenstein foundation that beneficially owns 100% of
Eurotrade Marine Inc.
None of the above shareholders have different voting rights from other
shareholders of the Company. All of our common shares have equal voting rights.
B. Related Party Transactions
In the years ended February 28, 2005, February 29, 2004 and February 28, 2003 we
paid $5,142, $2,000 and $1,000, respectively, to Barons S.A., Barons Financial
Services S.A. and to Barons Financial Services (UK) Limited in respect of
financial services provided to the Company. All three companies are controlled
by Mr. Eric Kohn, the Company's controlling shareholder and director until
August 23, 2004. As of February 29, 2004 and February 28, 2005, there were no
amounts due to these three companies.
During fiscal year 2003 the Company received a loan amounting to $26,000 from
First Bermuda Group Ltd., where Mr. Michael Schroter and Mr. Jeffrey Conyers
(Company directors until August 23, 2004, and Company shareholders up to date)
were officers, directors and shareholders. In fiscal year 2004 an additional
amount of $1,000 was borrowed from First Bermuda Group Ltd and the aggregate
amount of $27,000 was fully repaid in that year.
On September 9, 2003 and February 28, 2004, the Board of Directors resolved to
issue 4,889,855 shares and 1,053,807 shares, respectively, to settle advances
from Mr. Eric Kohn in the amounts of $244,493 and $52,690, respectively. The
4,889,855 shares and the 1,053,807 shares were issued on October 7, 2003 and on
May 28, 2004, respectively. Further, on August 3, 2004, the Board of Directors
resolved to issue 645,832 shares to settle advances from Mr. Eric Kohn in the
amount of $32,292. The 645,832 shares were issued on August 11, 2004.
In the year ended February 28, 2005 Cardiff Marine Inc. ("Cardiff"), a company
with which we are under common control, made direct payments to third parties on
behalf of us up to an amount of $30,219 for some of our operating expenses. The
account with Cardiff as of February 28, 2005 was settled in January 2006.
The General Manager of Cardiff is also the Company's Chief Financial Officer.
C. Interests of Experts and Counsel
Not Applicable.
Item 8 Financial information
A. Consolidated Statements and Other Financial Information.
See Item 18.
Legal Proceedings
Except as described below, no legal proceedings are known to us to be
contemplated, or threatened by or against us, by any party including any
governmental authority.
In 1999, we commenced litigation in Bermuda against Colloquium, Brian McMillan
and Catherine Matherson (two former directors) in relation to the withdrawal of
$50,691 from our bank account and seeking the return of the approximately
$24,000 paid by us into Colloquium's treasury as part of the May 26, 1999
Agreement for the sale of Colloquium, a copy of which was filed as Exhibit 3.3
to our Form 20-F filed on December 16, 1999. We claimed that the withdrawal of
funds was unauthorized and that the $24,000 payment made to Colloquium under the
May 26, 1999 agreement was made in error after a material default under that
agreement by Brian McMillan and Colloquium. A default judgment was obtained in
Bermuda against the defendants for $74,691, plus interest and costs. On June 29,
1999, we initiated an interdict proceeding in the Court of Session in Scotland
seeking an injunction to prevent the disposal of assets and seeking the
repayment of $50,691. We initiated the interdict proceeding in Scotland because
the defendants and their assets are located in that country.
Colloquium, Brian McMillan and Catherine Matherson have appealed the judgment in
Bermuda, seeking to set aside the default judgment on the grounds that the
defendants were improperly served notice of the Bermuda proceedings and that the
default judgment was obtained in error.
In April 2002, the Bermuda court overturned our previous judgment against
Colloquium, and held that Scotland was the appropriate jurisdiction for such
litigation. The litigation in Scotland has presently ceased, and no additional
expenses for such matter are anticipated by Management.
In November, 2001 the amount of Pound Sterling 10,000 (equivalent to $15,000)
was deposited to a Special Deposit account held with the Royal Bank of Scotland,
in the name of the Accountant of Court, as security of Colloquium's judicial
expenses to await the outcome of the litigation. This amount was expensed in the
year ended February 28, 2002. At that time, Colloquium's judicial expenses were
estimated to be in the region of approximately Pound Sterling 15,000.
In 2004 we entered into negotiations for an out of court settlement with
Colloquium representatives who requested a payment towards their judicial
expenses; however, such negotiations proved unsuccessful.
In May 2006, Colloquium representatives requested payment from the Company in
the sum of Pound Sterling 150,000 (equivalent to approximately $300,000) for the
reimbursement of judicial expenses on the full indemnity basis, compensation for
the management time and expense said to have been borne by their clients in
consequence of dealing with the litigation and damages for the adverse effect
on the business of Colloquium. According to the Company's legal advisor there is
a reasonable possibility that the Company will be required to pay judicial
expenses on the full indemnity basis, while the possibility for the Company to
pay compensation for the time and expense said to have been borne by Colloquium
management in consequence of dealing with the litigation and damages for the
adverse effect on the business of Colloquium is remote.
In a separate development, in late November 2006, the Company instructed its
legal counsel to seek the abandonment of the litigation. It is expected that the
case should be dealt with by the Court in Scotland in the week beginning
December 18, 2006. According to the Company's legal counsel, the Company's
decision in November 2006 to abandon the litigation, is highly likely to be
approved by the Court and makes it probable that payment will be required to be
made by the Company to the defending parties for judicial expenses on a full
indemnity basis. Such expenses are estimated to approximate Pound Sterling
15,000 (equivalent to approximately $30,000) incremental to the amount of Pound
Sterling 10,000 deposited by the Company, in the name of the Accountant of Court
to a Special Deposit account held with the Royal Bank of Scotland, in November
2001. However, the ultimate outcome of this litigation cannot be currently
determined.
Dividend policy
The Company has not paid dividends in any of the last three fiscal years and we
have no plans to pay dividends in the foreseeable future.
B. Significant Changes
Not Applicable.
Item 9 The offer and Listing
A. Offer and listing details
Since the inception of the quoting of the Company's stock on the OTC Bulletin
Board, the only trade occurred on August 6, 2001 at a price of $0.475.
B. Plan of Distribution
Not applicable.
C. Markets
Our common stock is eligible for trading on the pink sheets under the symbol
OMILF.PK. As of November 28, 2006 we had 30 stockholders of record, of which
our shareholder register indicates 3 have addresses in the United States. Our
common stock was first quoted on the OTC Bulletin Board on August 6, 2001. The
last quoted closing price of the common stock on the OTC Bulletin Board was
$0.475 per share. There has been no trading activity in our stock other than the
trade on August 6, 2001.
Item 10 Additional Information
A. Share Capital
Not Applicable.
B. Memorandum and articles of association
Company's Objects and Purposes
The objects for which the Company was formed and incorporated are: to carry on
the business of developing, designing, marketing, selling, researching and
dealing in information technology, office automation, electronic equipment,
computers and computer programs, data transmission products and systems and
related equipment and supplies of all kinds; to provide facility management
services by the accommodation, maintenance, supervision and management of
computer installations, computer hardware and software and all appurtenances
thereof, as agent for the buyer or hirer of such installations and equipment;
and to act as consultants, managers and advisors in connection with the business
described in objects (i) and (ii). The objects for which the Company was formed
also include paragraphs (b) to (n) and (p) to (u) inclusive of the Second
Schedule to the Bermuda Companies Act, 1981 (the "Companies Act") which such
items include: the business of: packaging of goods of all kinds; buying, selling
and dealing in goods of all kinds; designing and manufacturing of goods of all
kinds; mining and quarrying and exploration for metals, minerals, fossil fuels
and precious stones of all kinds and their preparation for sale or use;
exploring for, the drilling for, the moving, transporting and refining petroleum
and hydro carbon products including oil and oil products; scientific research
including the improvement, discovery and development or processes, inventions,
patents and designs and the construction, maintenance and operation of
laboratories and research centres; land, sea and air undertakings including the
land, ship and air carriage of passengers, mails and goods of all kinds; ships
and aircraft owners, managers, operators, agents, builders and repairers;
acquiring owning, selling, chartering, repairing or dealing in ships and
aircraft; travel agents, freight contractors and forwarding agents; dock owners,
wharfingers, warehousemen; ship chandlers and dealing in rope, canvas oil and
ship stores of all kinds; all forms of engineering; farmers, livestock breeders
and keepers, graziers, butchers, tanners and processors of and dealers in all
kinds of live and dead stock, wool, hides, tallow, grain, vegetables and other
produce; acquiring by purchase or otherwise and holding as an investment
inventions, patents, trade marks, trade names, trade secrets, designs and the
like; buying, selling, hiring, letting and dealing in conveyances of any sort;
employing, providing, hiring out and acting as agent for artists, actors,
entertainers of all sorts, authors, composers, producers, directors, engineers
and experts or specialists of any kind; to acquire by purchase or otherwise and
hold, sell, dispose of and deal in real property situated outside Bermuda and in
personal property of all kinds wheresoever situated; and to enter into any
guarantee, contract of indemnity or suretyship and to assure, support or secure
with or without consideration or benefit the performance of any obligation of
any person or persons and to guarantee the fidelity of individuals filling or
about to fill situations or trust or confidence. The Company also has the powers
as set out in clause no. 7 of the memorandum of association.
Modification of Rights
Subject to the Companies Acts, all or any of the special rights for the time
being attached to any class of shares for the time being issued may from time to
time (whether or not the Company is being wound up) be altered or abrogated with
the consent in writing of the holders of not less than seventy-five percent of
the issued shares of that class or with the sanction of a resolution passed at a
separate general meeting of the holders of such shares voting in person or by
proxy. To any such separate general meeting, all the provisions of our bye-laws
as to general meetings of the Company shall apply, but so that the necessary
quorum shall be two or more persons holding or representing by proxy any of the
shares of the relevant class, that every holder of shares of the relevant class
shall be entitled on a poll to one vote for every such share held by him and
that any holder of shares of the relevant class present in person or by proxy
may demand a poll.
Directors
Our directors are elected by a majority of the votes cast by stockholders
entitled to vote. There is no provision for cumulative voting. Our board of
directors shall be such number not less than two as the Company in general
meeting from time to time determines.
Each director shall be elected to serve until re-elected or his successor is
appointed at the next annual general meeting, except in the event of his death,
resignation, removal, or the earlier termination of his term of office. The
Company, in general meeting, has the authority to fix the amounts which shall be
payable to the members of the board of directors for attendance at any meeting
or for services rendered.
Stockholder Meetings
Under our bye-laws, annual stockholder meetings will be held at a time and place
selected by our board of directors. The meetings may be held in or outside of
Bermuda. The Company in general meeting or the Board may fix any date as the
record date for any dividend, distribution, allotment or issue or for the
purpose of identifying the persons entitled to receive notices of general
meetings.
Limitations on Liability and Indemnification of Officers and Directors
The Companies Acts authorize corporations to limit or eliminate the personal
liability of directors and officers to corporations and their stockholders for
monetary damages for breaches of directors' fiduciary duties.
Our bye-laws provide that we must indemnify our directors, officers and members
of committees to the fullest extent authorized by law. We are also expressly
authorized to advance certain expenses (including but not limited to an amount
paid to settle an action, satisfy a judgment, liabilities under contract, tort
and statute or any applicable foreign law or regulations and all reasonable
legal and other costs and expenses properly payable to our directors, officers
and members of committees. We believe that these indemnification provisions are
useful to attract and retain qualified directors and executive offices.
The indemnification provisions in our amended memorandum of association and
bye-laws may discourage stockholders from bringing a lawsuit against directors
for breach of their fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against directors, officers and
members of committees, even though such an action, if successful, might
otherwise benefit us and our stockholders. In addition, your investment may be
adversely affected to the extent we pay the costs of settlement and damage
awards against directors, officers and members of committees pursuant to these
indemnification provisions.
There is currently no pending material litigation or proceeding involving any of
our directors, officers, members of committees or employees for which
indemnification is sought.
Election and Removal of Directors
The Company may in special general meeting called for that purpose remove a
director provided notice of any such meeting shall be served upon the director
concerned not less than 14 days before the meeting and he shall be entitled to
be heard at that meeting. This provision may discourage, delay or prevent the
removal of incumbent officers and directors.
Limited Actions by Stockholders
Anything which may be done by resolution of the Company in general meetings or
by resolution of a meeting of any class of shareholders of the Company, may,
without a meeting and without any previous notice being required, be done by
resolution in writing signed by all shareholders who at the date of the
resolution would be entitled to attend the meeting and vote on the resolution.
The Board shall convene and the Company shall hold general meetings as annual
general meetings in accordance with the requirements of the Companies Acts at
such times and places as the Board shall appoint. The Board may, whenever it
thinks fit, and shall, when required by the Companies Acts, convene general
meetings other than annual general meetings which shall be called special
general meetings.
C. Material Contracts
We have no material contracts, as currently we do not have any operations.
D. Exchange Controls
Under Bermudan law, there are currently no restrictions on the export or import
of capital, including foreign exchange controls or restrictions that affect the
remittance of dividends, interest or other payments to non-resident holders of
our common stock.
E. Taxation
United States Taxation
Not Applicable.
Bermuda Tax Considerations
We are a Bermuda exempted company. A Bermuda exempted company is legislatively
exempt from Bermuda's usual requirement that Bermuda-formed businesses be 60%
owned by Bermuda citizens. There is no income tax, withholding tax, capital
gains tax, capital transfer tax, estate duty or inheritance tax payable by a
Bermuda exempted company or its shareholders to the Bermuda Government.
F. Dividends and paying agents
Not Applicable.
G. Statement by experts
Not Applicable.
H. Documents on display
We file reports and other information with the SEC. These materials, including
this annual report and the accompanying exhibits, may be inspected and copied at
the public reference facilities maintained by the Commission at 100 F Street,
N.E., Washington, D.C. 20549, or from the SEC's website http://www.sec.gov. You
may obtain information on the operation of the public reference room by calling
1 (800) SEC-0330 and you may obtain copies at prescribed rates.
I. Subsidiary information
Not Applicable.
Item 11 Quantitative and Qualitative Disclosures about Market Risk
Not Applicable.
Item 12 Description of Securities Other than Equity Securities
Not Applicable.
PART II
Item 13 Defaults, Dividend Arrearages and Delinquencies
None.
Item 14 Material Modifications to the Rights of Security Holders and Use of
Proceeds
None.
Item 15 Controls and Procedures
(a) Disclosure Controls and Procedures. An evaluation of the effectiveness of
the Company's disclosure controls and procedures as of the end of the
period covered by this report was carried out under the supervision, and
with the participation of the Principal Executive Officer and Principal
Financial Officer. Disclosure controls and procedures are defined under
Securities and Exchange Commission ("SEC") rules as controls and other
procedures that are designed to ensure that information required to be
disclosed by a company in the reports that it files under the Exchange Act
is recorded, processed, summarized and reported within required time
periods. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by an issuer in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the issuer's management,
including its Principal Executive and Principal Financial officers, or
persons performing similar functions, as appropriate, to allow timely
decisions regarding required disclosure. As a result of the material
weaknesses described below which resulted in the restatement of the
Company's financial statements for the years ended February 28, 2005,
February 29, 2004 and February 28, 2003 and 2002, as explained elsewhere in
this Form 20-F, the Principal Executive Officer and Principal Financial
Officer concluded that the Company's disclosure controls and procedures
were not effective as of February 28, 2005, as of February 29, 2004 and as
of February 28, 2003. Since February 28, 2005, management has made changes
to remediate certain of the material weaknesses described below, while
Management plans to remediate the remaining material weaknesses before the
filing of its Form 20-F for the year ending February 28, 2007. The
Company's Principal Executive Officer and Principal Financial Officer
believe that the material weaknesses in the Company's internal control over
financial reporting with respect to the matters which resulted in the
restatement of the Company's financial statements have been remediated by
improving their understanding of the requirements of U.S. generally
accepted accounting principles with respect to accrued legal and other
general and administrative expenses, stock-based compensation and
settlement of liabilities with common stock. Furthermore, procedures have
been put in place to review minutes of the meetings of the Board of
Directors and Shareholders before issuing financial statements to ensure
any matters reviewed and approved by the Board of Directors or shareholders
having financial statement impact are properly reflected therein. The
Company also plans (i) to establish procedures with its corporate secretary
and registered office to ensure the timely transmittal of correspondence
received by the corporate secretary to the Company and (ii) to improve the
understanding of the SEC rules and regulations in relation with filing
requirements.
(b) Management's Report on Internal Control Over Financial Reporting. Although
the Company is not required to file the report required by Item 15(b) of
Form 20-F for its fiscal years ended February 28, 2003, or February 29,
2004, or February 28, 2005, the Company's management is responsible for
establishing and maintaining adequate internal control over financial
reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")). Internal control over financial
reporting cannot provide absolute assurance of achieving financial
reporting objectives because of its inherent limitations. Effective
internal control over financial reporting can only provide reasonable
assurance that the objectives of the control process are met. Internal
control over financial reporting is a process that involves human diligence
and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting
also can be circumvented by collusion or improper management override.
Because of such limitations, there is a risk that material misstatements
may not be prevented or detected on a timely basis by internal control over
financial reporting. However, these inherent limitations are known features
of the financial reporting process. Therefore it is possible to design into
the process safeguards to reduce, though not eliminate, this risk. Further,
the design of internal control over financial reporting includes the
consideration of the benefits of each control relative to the cost of the
control.
In the Company's 2005 annual report on Form 20-F, filed on August 30, 2005, in
the section entitled "Item 15 - Controls and Procedures - Changes in Internal
Controls" management stated its belief that the Company's disclosure controls
and procedures were adequate to enable the Company to comply with its disclosure
obligations. As a result of the restatement of its financial statements
management has concluded that material weaknesses in internal control over
financial reporting existed as of February 28, 2005, as of February 29, 2004 and
as of February 28, 2003.
In the Company's 2006 annual report on Form 20-F, filed on August 29, 2006, in
the section entitled "Item 15 - Controls and Procedures - Changes in Internal
Controls" management stated its belief that the Company's disclosure controls
and procedures as of July 31, 2006, were adequate to enable the Company to
comply with its disclosure obligations. As a result of the comments contained in
two letters of the Staff dated May 18, 2006 and August 30, 2006, which resulted
in this amended filing, management has concluded that material weaknesses in
internal control over financial reporting existed as of July 31, 2006.
A material weakness is a control deficiency, or a combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.
In 2006, the Company restated its financial statements previously issued for the
years ended February 28, 2002 and 2003, February 29, 2004 and February 28, 2005
(see Note 9 of our audited financial statements included in this annual report),
in order to (a) account for stock-based compensation of 90,000 shares at $0.15
per share at the date they were granted (year ended February 28, 2003) instead
of accruing their $13,500 fair value in the prior year ended February 28, 2002,
(b) account for stock-based compensation of 270,000 shares at $0.05 per share at
the date they were granted (year ended February 29, 2004) instead of accruing
their $13,500 fair value in the prior year ended February 28, 2003, (c) (i)
account for stock-based compensation of 90,000 shares at $0.15 per share at the
date they were granted (year ended February 28, 2003); such stock-based
compensation was not previously recorded and (ii) reclassify the par value of
such shares ($15) from Additional Paid in Capital to Common Stock at the date of
their physical issuance (year ended February 29, 2004), (d) reverse accrual for
legal expenses which had already been paid (initially paid in the year ended
February 28, 2002), (e) account for stock-based compensation of 270,000 shares
at $ 0.05 per share at the date they were granted (year ended February 28, 2005)
instead of accruing the fair value of shares issued of $ 13,500 prior to their
grant date in the year ended February 29, 2004, (f) reclassify, as of February
29, 2004, as a liability $52,690 representing the fair value of 1,053,807 shares
issued at $ 0.05 per share to settle stockholder's advances from Common stock
and Additional paid-in capital to Due to related parties, as these shares were
not physically issued until May 2004. Although the agreement with the
Stockholder for such settlement was concluded in February 2004, the liability to
the stockholder should not have been derecognized in the financial statements
until the shares were actually issued in settlement of the outstanding advances
due to stockholder, (g) to account for a preferential deemed dividend of
$1,500,000 relating to the issuance of 30,000,000 shares in October 2004 as
further discussed in Note 5 to our audited financial statements included
elsewhere in this annual report and reclassify the par value of such shares
($5,010) from Additional Paid in Capital where it was originally recorded to
Common Stock, (h) to account for the August 2004 issuance of 645,832 shares at
$0.05 per share in settlement of Stockholder advances; such issuance was not
previously recorded, (i) to account for stock-based compensation of 356,796
shares at $0.06 per share at the date they were granted (year ended February 28,
2005); such stock-based compensation was not previously recorded, (j) to account
for various administrative, listing, registration and audit expenses of
$80,191 for the year ended February 28, 2005; such expenses were not previously
recorded, (k) adjust, for the years ended February 28, 2002 and 2003, for the
year ended February 29, 2004 and for the year ended February 28, 2005, the
weighted average number of common shares outstanding to 7,164,419, 7,947,828,
10,060,165 and 27,095,500 shares, compared to 7,834,403, 7,924,403, 12,808,298
and 44,138,065 shares, respectively, as previously reported, to reflect the
number of days outstanding from the grant date of the shares.
Management has concluded that the Company's internal control over financial
reporting was not effective as of February 28, 2005, as of February 29, 2004 and
as of February 28, 2003, solely as a result of the restatement of the Company's
results as described above (for Management's remediation actions see discussion
in (a) above).
(c) Attestation Report of Independent Registered Public Accounting Firm
Not applicable.
(d) Changes in Internal Controls
There have been no significant changes in our internal controls subsequent to
the date of our most recent evaluation of internal controls which was made as of
July 31, 2006, in connection with the preparation of the Form 20-F for the year
ended February 28, 2006 filed with the SEC on August 29, 2006. Some deficiencies
were noted in our internal controls since our last evaluation of internal
controls. As discussed in (a) above, these deficiencies are currently in the
process of being remediated.
Item 15T: Controls and Procedures
Not Applicable.
Item 16A Audit Committee Financial Expert
The Company has not appointed an Audit Committee or an Audit Committee financial
expert because the Company is not currently an operating company and the Board
has determined that the full Board of Directors is able to more efficiently
perform the Audit Committee functions.
Item 16B Code of Ethics
The Company has not adopted a code of ethics because the Company is not an
operating company.
Item 16C Principal Accountant Fees and Services.
Audit Fees
Our principal Accountants for the years ended February 28, 2003, February 29,
2004 and February 28, 2005, were Ernst & Young (Hellas), Certified Auditors
Accountants S.A. The related audit fees that they billed us amounted to Euro
63,000, Euro 20,000 and Euro 34,494, for 2003, 2004 and 2005, respectively.
There were no tax and audit related fees billed.
We have not paid any other fees to our Accountants except as listed above. All
fees paid to our Accountants are approved in advance by our Board of Directors.
Item 16D Exemptions from the Listing Standards for Audit Committees
Not Applicable.
Item 16E Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not Applicable.
PART III
Item 17 Financial Statements
See Item 18
Item 18 Financial Statements
The financial statements in response to this item are set forth on pages F-1
through F-13 and are filed as a part of this annual report.
Item 19 Exhibits
Exhibit
Number Description
- ------- -----------
1.1 Memorandum of Association of the Company, as amended by that
certain Certificate of Deposit of Memorandum of Increase of Share
Capital dated June 30, 1998 (filed as Exhibit 1.1 to the
Company's Form 20FR12G filed as of March 14, 2000, No. 001-15559,
and incorporated herein by reference).
1.2 Bye-laws of the Company (filed as Exhibit 1.2 to the Company's
Form 20FR12G filed as of December 1, 1999, No. 001-15559, and
incorporated herein by reference).
2.1 Form of Share Certificate (filed as Exhibit 2.1 to the Company's
Form 20FR12G filed as of December 1, 1999, No. 001-15559, and
incorporated herein by reference).
12.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
12.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
13.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
13.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
ALLSHIPS LTD.
(FORMERLY OMNINET INTERNATIONAL LTD.)
Index To Financial Statements
Page
----
Report of Independent Registered Public Accounting Firm F-2
Balance Sheets as of February 29, 2004 (as restated) and
February 28, 2005 (as restated) F-3
Statements of Loss for the years ended February 28, 2003
(as restated), February 29, 2004 (as restated) and
February 28, 2005 (as restated) F-4
Statements of Stockholders' Equity/(Deficit) for the years
ended February 28, 2003 (as restated), February 29, 2004
(as restated) and February 28, 2005 (as restated) F-5
Statements of Cash Flows for the years ended February 28, 2003
(as restated), February 29, 2004 (as restated) and February 28,
2005 (as restated) F-6
Notes to Financial Statements F-7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders of
Allships Ltd.
(Formerly Omninet International Ltd.)
We have audited the accompanying balance sheets of Allships Ltd. as of February
29, 2004 and February 28, 2005 and the related statements of loss, stockholders'
equity (deficit) and cash flows for each of the three years in the period ended
February 28, 2005. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Allships Ltd. at February 29,
2004 and February 28, 2005 and the results of its operations and its cash flows
for each of the three years in the period ended February 28, 2005, in conformity
with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As more fully described in Note 3, the Company
has no source of revenue and has continued to incur losses, and as of February
28, 2006 the Company has a working capital deficiency and stockholders' deficit.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to this matter are also
described in Note 3. The financial statements do not include any adjustments
relating to the recoverability of assets or the amounts of liabilities that may
result from the outcome of this uncertainty.
As further discussed in Note 9 to the financial statements, the Company restated
its financial statements as of and for each of the three years in the period
ended February 28, 2005 with respect to a preferential deemed dividend, legal
and general and administrative expenses, stock-based compensation and settlement
of liabilities with common stock.
/s/ Ernst & Young (Hellas) Certified Auditors Accountants S.A.
Athens, Greece,
December 19, 2006
ALLSHIPS LTD.
(Formerly Omninet International Ltd.)
Balance Sheets
February 29, 2004 and February 28, 2005
(Expressed in U.S. Dollars)
2004 2005
------------- -------------
(as restated, (as restated,
see Note 9) see Note 9)
------------- -------------
ASSETS
- ------
CURRENT ASSETS
Cash $ 2,250 $ 312,842
Prepaid expenses 3,278 --
------------- -------------
Total current assets $ 5,528 $ 312,842
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
- ----------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 1,007 $ 7,763
Accrued liabilities 15,333 120,989
Due to a related party 52,690 30,219
------------- -------------
Total current liabilities 69,030 158,971
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 8) -- --
------------- -------------
STOCKHOLDERS' EQUITY / (DEFICIT)
Common stock, $0.000167 par value;
150,000,000 shares authorized; 13,174,258 and
44,873,897 issued and outstanding as at
February 29, 2004 and February 28, 2005,
respectively 2,201 7,495
Additional paid-in capital 1,426,072 3,327,168
Accumulated deficit (1,491,775) (3,180,792)
------------- -------------
Total stockholders' equity/(deficit) (63,502) 153,871
------------- -------------
Total liabilities and stockholders' equity $ 5,528 $ 312,842
============= =============
The accompanying notes are an integral part of these financial statements.
ALLSHIPS LTD.
(Formerly Omninet International Ltd.)
Statements of Loss
For the years ended February 28, 2003, February 29, 2004 and February 28, 2005
(Expressed in U.S. Dollars)
2003 2004 2005
----------------- ----------------- -----------------
(as restated, see (as restated, see (as restated, see
Note 9) Note 9) Note 9)
General and administrative expenses $ (94,506) $ (58,040) $ (183,875)
General and administrative expenses - related
parties (1,000) (2,000) (5,142)
----------------- ----------------- -----------------
Net Loss $ (95,506) $ (60,040) $ (189,017)
================= ================= =================
Preferential deemed dividend (Note 5) $ -- $ -- $ (1,500,000)
----------------- ----------------- -----------------
Net loss attributable to common stockholders $ (95,506) $ (60,040) $ (1,689,017)
================= ================= =================
Loss per common share, basic and diluted $ (0.01) $ (0.01) $ (0.06)
================= ================= =================
Weighted average number of common shares, basic
and diluted 7,947,828 10,060,165 27,095,500
================= ================= =================
The accompanying notes are an integral part of these financial statements.
ALLSHIPS Ltd.
(Formerly Omninet International Ltd.)
Statements of Stockholders' Equity / (Deficit)
For the years ended February 28, 2003, February 29, 2004 and February 28, 2005
(Expressed in U.S. Dollars)
Common Stock
-------------------------
Additional
Comprehensive Paid-in Accumulated
Loss # of Shares Par Value Capital Deficit Total
------------- ----------- ----------- ----------- ----------- -----------
Balance, March 1, 2002, as restated
(Note 9) 7,834,403 $ 1,306 $ 1,141,974 $(1,336,229) $ (192,949)
Common stock issued in settlement of
directors' stock-based compensation 90,000 15 13,485 -- 13,500
Stock-based compensation expense -- -- 13,500 -- 13,500
Net loss (95,506) -- -- -- (95,506) (95,506)
-------------
Comprehensive loss (95,506)
============= ----------- ----------- ----------- ----------- -----------
Balance, February 28, 2003, as restated
(Note 9) 7,924,403 $ 1,321 $ 1,168,959 $(1,431,735) $ (261,455)
Common stock issued in settlement of
stockholders' advances 4,889,855 817 243,676 -- 244,493
Common stock issued in settlement of
directors' stock-based compensation 270,000 48 13,452 -- 13,500
Common stock issued in settlement of
directors' stock-based compensation 90,000 15 (15) -- --
Net loss (60,040) -- -- -- (60,040) (60,040)
-------------
Comprehensive loss (60,040)
============= ----------- ----------- ----------- ----------- -----------
Balance, February 29, 2004, as restated
(Note 9) 13,174,258 $ 2,201 $ 1,426,072 $(1,491,775) $ (63,502)
Common stock issued in settlement of
stockholders' advances 645,832 108 32,184 -- 32,292
Common stock issued in settlement of
stockholders' advances 1,053,807 176 52,514 -- 52,690
Issuance of common stock 30,000,000 5,010 294,990 -- 300,000
Preferential deemed dividend -- -- 1,500,000 (1,500,000) --
Stock-based compensation expense -- -- 21,408 -- 21,408
Net loss (189,017) -- -- -- (189,017) (189,017)
-------------
Comprehensive loss (189,017)
============= ----------- ----------- ----------- ----------- -----------
Balance, February 28, 2005, as restated
(Note 9) 44,873,897 $ 7,495 $ 3,327,168 $(3,180,792) $ 153,871
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
ALLSHIPS LTD.
(Formerly Omninet International Ltd.)
Statements of Cash Flows
For the years ended February 28, 2003, February 29, 2004 and February 28, 2005
(Expressed in U.S. Dollars)
2003 2004 2005
------------- ------------- -------------
(as restated, (as restated, (as restated,
see Note 9) see Note 9) see Note 9)
Cash flows from operating activities
Net Loss $ (95,506) $ (60,040) $ (189,017)
Non cash items:
Stock-based compensation expense 27,000 13,500 21,408
Changes in operating assets and liabilities:
Accounts Receivable (3,279) -- --
Prepaid expenses -- 1 3,278
Accounts payable 57,498 (199,254) 6,756
Accrued liabilities (12,465) 1,333 105,656
Due to/from related parties 1,046 -- 30,219
------------- ------------- -------------
Net cash used in operating activities $ (25,706) $ (244,460) $ (21,700)
------------- ------------- -------------
Cash flows from financing activities
Proceeds from issuance of common stock -- -- 300,000
Advances from stockholder and related parties 28,300 269,970 32,292
Cash repaid to stockholder and related parties -- (27,000) --
------------- ------------- -------------
Net cash provided by financing activities $ 28,300 $ 242,970 $ 332,292
------------- ------------- -------------
Net increase / (decrease) in cash 2,594 (1,490) 310,592
Cash, beginning of year 1,146 3,740 2,250
------------- ------------- -------------
Cash, end of year $ 3,740 $ 2,250 $ 312,842
============= ============= =============
SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash financing activities:
Settlement of advances from stockholder
with shares of common stock $ -- $ 244,493 $ 84,982
============= ============= =============
The accompanying notes are an integral part of these financial statements.
Allships Ltd.
(Formerly Omninet International Ltd.)
Notes to Financial Statements February 29, 2004 and February 28, 2005
(Expressed in United States Dollars)
1. Basis of Presentation and General Information:
The accompanying financial statements include the accounts of Allships Ltd.
(the "Company") which was incorporated in Bermuda on March 24, 1998 under
the name of Omninet International Ltd. On August 20, 2004 the Company's
major stockholder (Mr. Eric Kohn) sold his shares in the Company
(representing approximately 69% of the Company's outstanding common stock)
to 8 Marshall Island companies beneficially owned by Mr. George Economou
and members of his family (the "New Majority Stockholders"), at a price of
$ 0.06 per share. The Company was renamed to Allships Ltd. on March 18,
2005. The Company has no operations.
2. Significant Accounting Policies:
(a) Basis of Preparation: The accompanying financial statements have been
prepared in accordance with U.S. generally accepted accounting
principles.
(b) Use of Estimates: The preparation of financial statements in
conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(c) Foreign Currency Translation: The functional currency of the Company
is the U.S. dollar. The Company's books of accounts are maintained in
U.S. dollars. Transactions involving other currencies during the year
are converted into U.S. dollars using the exchange rates in effect at
the time of the transactions. At the balance sheet dates, monetary
assets and liabilities, which are denominated in other currencies, are
translated to reflect the reporting date exchange rates. Resulting
gains or losses are included in General and administrative expenses in
the accompanying statements of loss. There were no material gains or
losses during any of the periods presented.
(d) Stock-Based Compensation: Stock-based compensation related to employee
service and shares issued to non-employee directors for services
provided as directors is recognized using the intrinsic value method
in accordance with Accounting Principles Board Opinion No. 25
Accounting for Stock Issued to Employees ("APB 25"), and thus there is
no compensation expense for options granted with exercise prices equal
to the fair value of common stock on the date of grant. Compensation
expense associated with awards that immediately are vested or
attributable to past services is recognized when granted and
Additional paid-in capital is credited. Upon issuance of the awarded
shares, their par value is reclassified from Additional paid-in
capital to Common stock.
(e) Loss Per Common Share: Basic loss per common share is computed by
dividing the net loss attributable to common stockholders by the
weighted average number of common shares outstanding during the year.
Diluted loss per common share reflects the potential dilution that
could occur if securities or other contracts to issue common stock
result in the issuance of such stock. The Company had no dilutive
securities during the periods presented. For purposes of computing
basic and diluted loss per common share, shares without vesting
conditions committed to be issued under stock-based compensation
arrangements or in settlement of stockholders' advances are considered
outstanding on the grant date or the date the shares were actually
issued in settlement of the outstanding advances due to stockholders,
respectively. Net loss attributable to common stockholders for the
year ended February 28, 2005 includes a preferential deemed dividend
of $1,500,000, as further discussed in Note 5.
(f) Recent Accounting Pronouncements:
SFAS No.123(R): On December 16, 2004, the Financial Accounting
Standards Board (FASB) issued FASB Statement No. 123 (revised 2004),
Share-Based Payment, which is a revision of FASB Statement No. 123,
Accounting for Stock-Based Compensation. Statement 123(R) supersedes
APB Opinion No. 25, Accounting for Stock Issued to Employees, and
amends FASB Statement No. 95, Statement of Cash Flows. Generally, the
approach in Statement 123(R) is similar to the approach described in
Statement 123. However, Statement 123(R) requires all share-based
payments to employees, including grants of employee stock options, to
be recognized in the income statement based on their fair values. Pro
forma disclosure is no longer an alternative. Statement 123(R) must be
adopted no later than March 1, 2006. Early adoption will be permitted
in periods in which financial statements have not yet been issued. The
Company will adopt Statement 123(R) on March 1, 2006. Statement 123(R)
permits public companies to adopt its requirements using one of two
methods:
o A "modified prospective" method in which compensation cost is
recognized beginning with the effective date (a) based on the
requirements of Statement 123(R) for all share based payments
granted after the effective date and (b) based on the
requirements of Statement 123 for all awards granted to employees
prior to the effective date of Statement 123(R) that remain
unvested on the effective date.
o A "modified retrospective" method which includes the requirements
of the modified prospective method described above, but also
permits entities to restate based on the amounts previously
recognized under Statement 123 for purposes of pro forma
disclosures either (a) all prior periods presented or (b) prior
interim periods of the year of adoption.
The Company plans to adopt Statement 123(R) using the
modified-prospective method. The Company currently applies the
intrinsic value method of accounting for share-based payments in
accordance with APB 25. Historically, the Company has limited its
share-based payments activity to grants of Company shares with no
future vesting conditions to non-employee directors for their services
as directors (a practice that has been discontinued since November
2004) and, as such, there is no pro forma impact for the application
of FAS 123 for all periods presented. Furthermore, the Company does
not anticipate that adoption of Statement 123(R) will have a material
impact on its results of operations, financial position or cash flows.
SFAS No.154: In May 2005, the FASB issued FASB Statement No. 154,
"Accounting Changes and Error Corrections" (SFAS No. 154). SFAS No.
154 is a replacement of APB Opinion No. 20, "Accounting Changes" (APB
20) and FASB Statement No. 3, "Reporting Accounting Changes in Interim
Financial Statements" (SFAS No. 3). SFAS No. 154 provides guidance on
the accounting for and reporting of accounting changes and error
corrections. It establishes retrospective application as the required
method for reporting a voluntary change in accounting principle. APB
20 previously required that most voluntary changes in accounting
principle be recognized by including in net income of the period of
the change the cumulative effect of changing to the new accounting
principle. SFAS No. 154 provides guidance for determining whether
retrospective application of a change in accounting principle is
impracticable and for reporting a change when retrospective
application is impracticable. SFAS No. 154 also requires that a change
in method of depreciation, amortization, or depletion for long-lived,
nonfinancial assets be accounted for as a change in accounting
estimate that is effected by a change in accounting principle. APB 20
previously required that such a change be reported as a change in
accounting principle. SFAS No. 154 carries forward many provisions of
APB 20 without change, including the provisions related to the
reporting of a change in accounting estimate, a change in the
reporting entity, and the correction of an error. SFAS No. 154 also
carries forward the provisions of SFAS No. 3 that govern reporting
accounting changes in interim financial statements. SFAS No. 154 is
effective for accounting changes and corrections of errors made in
fiscal years beginning after December 31, 2005. The Company will adopt
this pronouncement beginning March 1, 2006.
3. Liquidity:
The Company has no source of revenues and has continued to incur losses
subsequent to February 28, 2005. As of February 28, 2006, the Company had
negative working capital of $62,506 and stockholders' deficit of an equal
amount. In order for the Company to continue as a going concern it will
require additional funding from its stockholders or borrowings from a
lending institution. Management's intention is to seek such funding;
however, there can be no assurance that the Company will be able to raise
such funding.
4. Related Party Transactions:
General and administrative expenses in the accompanying statements of loss
for 2003, 2004 and 2005 include $1,000, $2,000 and $5,142, respectively,
paid to Barons Financial Services (UK) Ltd., Barons S.A. and Barons
Financial Services S.A. in respect of financial services provided to the
Company. All three companies were controlled by Mr. Eric Kohn, the
Company's controlling shareholder and director until August 23, 2004. As of
February 29, 2004 and February 28, 2005, there were no amounts due to these
three companies.
During fiscal year 2003 the Company received a loan amounting to $26,000
from First Bermuda Group Ltd., where Mr. Michael Schroter and Mr. Jeffrey
Conyers (Company's directors until August 23, 2004 and Company shareholders
up to date) were officers, directors and shareholders. In fiscal year 2004
an additional amount of $1,000 was borrowed from First Bermuda Group Ltd.
and the aggregate amount of $27,000 was fully repaid in that year.
On September 9, 2003 and February 28, 2004, the Board of Directors resolved
to issue 4,889,855 shares and 1,053,807 shares, respectively, to settle
advances from Mr. Eric Kohn in the amounts of $244,493 and $52,690,
respectively. The 4,889,855 shares and the 1,053,807 shares were issued on
October 7, 2003 and on May 28, 2004, respectively. Further, on August 3,
2004, the Board of Directors resolved to issue 645,832 shares to settle
advances from Mr. Eric Kohn in the amount of $32,292. The 645,832 shares
were issued on August 11, 2004 (Note 5).
The amount of $30,219 included in the accompanying February 28, 2005
balance sheet represents amounts due to Cardiff Marine Inc. ("Cardiff"), a
related through common control company, as a result of Cardiff's direct
payments to third parties, on behalf of the Company, of some of the
Company's operating expenses. Cardiff is beneficially owned by the
Company's New Majority Stockholders. The account with Cardiff as of
February 28, 2005 was settled in January 2006.
The General Manager of Cardiff is also the Company's Chief Financial
Officer.
5. Common Stock:
Under the Company's Articles of Incorporation the Company's authorized
capital stock consists of 150,000,000 shares of common stock, par value
$0.000167 per share. The Board of Directors shall have the authority to
establish series of preferred stock and to designate preferences and
relative, participating, optional or special rights and qualifications,
limitations or restrictions.
During the year ended February 28, 2003 the following issuance of common
stock took place:
o On March 26, 2002, (a) 20,000 shares to each of Mssrs Jeffrey Conyers,
Michael Schroter and Martin Horst and (b) 30,000 shares to Mr. Eric
Kohn, as compensation for services as directors. These shares were
valued at a price of $0.15 per share, the estimated fair market value
at the date of grant as determined by management.
During the year ended February 29, 2004 the following issuances of common
stock took place:
o On September 18, 2003, (a) 20,000 shares to each of Mssrs Jeffrey
Conyers, Michael Schroter and Martin Horst and (b) 30,000 shares to
Mr. Eric Kohn, as compensation for services as directors. These shares
were valued at a price of $0.15 per share, the estimated fair market
value at the date of grant as determined by management. As these
shares were granted on November 6, 2002, the related compensation
expense was recorded in the financial statements for the fiscal year
2003;
o On October 7, 2003, 4,889,855 shares to Mr. Eric Kohn at a price of
$0.05 per share in settlement of cash advances received from Mr. Kohn;
and
o On January 16, 2004, (a) 60,000 shares to each of Messrs Jeffrey
Conyers, Michael Schroter and Martin Horst and (b) 90,000 shares to
Mr. Eric Kohn, as compensation for services as directors. These shares
were valued at a price of $0.05 per share, the estimated fair market
value at the date of grant as determined by management.
During the year ended February 28, 2005 the following issuances of common
stock took place:
o On May 28, 2004 and on August 11, 2004, 1,053,807 shares and 645,832
shares, respectively, to Mr. Eric Kohn at a price of $0.05 per share
in settlement of cash advances received from Mr. Kohn; and
o On October 6, 2004, 30,000,000 shares to the Company's New Majority
Stockholders at a price of $0.01 per share for a total cash
consideration of $300,000. The difference between the fair value of $
0.06 per share as evidenced by the share purchase which occurred in
August 2004 between unrelated parties (as discussed in Note 1, above)
and the issuance at $ 0.01 per share, is accounted for and reflected
as a preferential deemed dividend, increasing the 2005 loss
attributable to common stockholders and the accumulated deficit by $
1,500,000.
6. Taxation:
Under Bermuda law the Company is not required to pay any taxes in Bermuda
on either income or capital gains. The company has received Tax Assurance
from the Minister of Finance in Bermuda indicating that in event of any
subsequent legislation imposing such taxes, the Company will be exempted
from resulting taxation until the year 2016.
7. Stock Option Plans
On June 5, 2000, Company's stockholders approved the 2000 Outside
Directors' Stock Option Plan and set aside 100,000 shares of the Company's
common stock for issuance there under. Under the terms of the Outside
Directors' Plan, each non-employee director will automatically be eligible
to receive an option, which option may be granted by a committee of our
board of directors, to purchase 5,000 shares of our common stock for each
year that he serves as our director.
Company's stockholders also approved our 2000 Stock Incentive Plan and set
aside 1,100,000 shares of our common stock for issuance there under. The
Stock Incentive Plan allows our Board of Directors to grant certain of our
key employees options to purchase our common stock, and is intended to
enhance our ability to attract and retain key personnel. The Stock
Incentive Plan allows a committee of the Board of Directors to make awards
of a variety of equity-based incentives to employees including stock
awards, options to purchase shares of company common stock, stock
appreciation rights, phantom shares, dividend equivalent rights and similar
rights.
As of February 28, 2005 no options, shares or rights have been issued or
granted under either of the above plans.
8. Commitments and Contingencies
In 1999, the Company commenced litigation in Bermuda against two former
directors of Colloquium Ltd. ("Colloquium") (a former subsidiary of the
Company) and an entity related to them, in relation to the withdrawal of
$50,691 from Colloquium's bank account and seeking the return of the
approximately $24,000 paid by the Company to Colloquium in 1999 within the
context of an agreement to sell Colloquium back to its original
shareholders. The Company claimed that the withdrawal of funds was
unauthorized and that the $24,000 was paid after a material default under
the agreement with the former shareholders of Colloquium and accordingly is
seeking the return of these funds from these individuals. A default
judgment was obtained in Bermuda against the defendants for $74,691, plus
interest and costs. On June 29, 1999, the Company initiated an interdict
proceeding in the Court of Session in Scotland seeking an injunction to
prevent the disposal of assets and seeking the repayment of $50,691,
because the defendants and their assets are located in that country.
Colloquium appealed the judgment in Bermuda, seeking to set aside the
default judgment on the grounds that the defendants were improperly served
notice of the Bermuda proceedings and that the default judgment was
obtained in error. On November 13, 2001, the amount of Pound Sterling
10,000 (equivalent to $15,000) was deposited to a Special Deposit account
held with the Royal Bank of Scotland, in the name of the Accountant of
Court, as security of Colloquium's judicial expenses to await the outcome
of the litigation. This amount was expensed in the year ended February 28,
2002. At that time, Colloquium's judicial expenses were estimated to be in
the region of approximately Pound Sterling 15,000. In April 2002, the
Bermuda court overturned the previous judgment against Colloquium, and held
that Scotland was the appropriate jurisdiction for such litigation. In
2004, the Company entered into negotiations for an out of court settlement
with Colloquium representatives who requested a payment towards their
judicial expenses; however, such negotiations proved unsuccessful and since
then, there were no developments on the case until May 2006 (Note 10).
9. Restatement of Previously Issued Financial Statements:
(a) Restatement of 2003 and 2004 financial statements: The Company has
restated the previously issued financial statements for the years
ended February 28, 2003 and February 29, 2004, which were audited by
other auditors. The nature and effect of the above restatement is
presented below:
Stockholders' Deficit
---------------------------------------------------------
Common Additional Accumulated Net Loss
Stock Paid-in Capital Deficit Total for 2003
---------- --------------- ------------ ---------- ----------
I) February 28, 2003, as previously reported 1,321 1,155,459 (1,446,735) (289,955) (97,006)
---------- --------------- ------------ ---------- ----------
- Adjustments
1. Account for stock-based compensation
of 90,000 shares at $ 0.05 per share
at the date they were granted (year
ended February 29, 2003) instead of
accruing their $13,500 fair value in
the prior year ended February 28, 2002 -- -- -- -- (13,500)
2. Account for stock-based compensation
of 270,000 shares at $ 0.05 per share
at the date they were granted (year
ended February 29, 2004) instead of
accruing their $13,500 fair value in
the prior year ended February 28,
2003 -- -- 13,500 13,500 13,500
3. Account for stock-based compensation
of 90,000 shares at $ 0.15 per share
at the date they were granted (year
ended February 28, 2003); such
stock-based compensation was not
previously recorded -- 13,500 (13,500) -- (13,500)
4. Reverse accrual for legal expenses
which had already been paid (initially
paid in the year ended February 28,
2002) -- -- 15,000 15,000 15,000
5. Adjust the weighted average number of
common shares to 7,947,828 shares,
compared to 7,924,403 shares
previously reported, to reflect the
number of days outstanding from the
grant date of the shares. There was no
effect on the loss per common share -- -- -- -- --
---------- --------------- ------------ ---------- ----------
---------- --------------- ------------ ---------- ----------
Total effect of adjustments, February 28, 2003 -- 13,500 15,000 28,500 1,500
---------- --------------- ------------ ---------- ----------
February 28, 2003, as restated 1,321 1,168,959 (1,431,735) (261,455) (95,506)
========== =============== ============ ========== ==========
Stockholders' Deficit
----------------------------------------------------
Additional Due to
Common Paid-in Accumulated Net Loss Accrued a related
Stock Capital Deficit Total for 2004 Liabilities Party
---------- ---------- ----------- ---------- ---------- ----------- ----------
II) February 29, 2004, as
previously reported 2,362 1,465,101 (1,506,775) (39,312) (60,040) 43,833 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
- Adjustments
1. Total effect of adjustments,
February 28, 2003, - brought
forward -- 13,500 15,000 28,500 -- (28,500) --
2. Account for stock-based
compensation of 270,000 shares
at $ 0.05 per share at the
date they were granted (year
ended February 29, 2004)
instead of accruing their
$13,500 fair value in the
prior year ended February 28,
2003 -- -- (13,500) (13,500) (13,500) 13,500
3. Reclassify the par value of
90,000 shares, granted in year
ended February 28, 2003, from
Additional Paid in Capital to
Common Stock at the date of
their - - physical issuance
(year ended February 29, 2004) 15 (15) -- -- --
4. Account for stock-based
compensation of 270,000 shares
at $ 0.05 per share at the
date they were granted (year
ended February 28, 2005)
instead of accruing the fair
value of shares issued of $
13,500 prior to their grant
date in the year ended
February 29, 2004 -- -- 13,500 13,500 13,500 (13,500) --
5. Reclassify as a liability
$52,690 representing the fair
value of 1,053,807 shares
issued at $ 0.05 per share to
settle stockholder's advances
from Common stock and
Additional paid-in capital to
Due to related parties, as
these shares were not
physically issued until May
2004 Although the agreement
with the Stockholder for such
settlement was concluded in
February 2004, the liability
to the stockholder should not
have been derecognized in the
financial statements until the
shares were actually issued in
settlement of the outstanding
advances due to stockholder (176) (52,514) -- (52,690) -- -- 52,690
6. Adjust the weighted average
number of common shares to
10,060,165 shares, compared to
12,808,298 shares previously
reported, to reflect the
number of days outstanding
from the grant date of the
shares. There was no effect on
the loss per common share -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total effect of adjustments,
February 29, 2004 (161) (39,029) 15,000 (24,190) -- (28,500) 52,690
---------- ---------- ---------- ---------- ---------- ---------- ----------
February 29, 2004, as restated 2,201 1,426,072 (1,491,775) (63,502) (60,040) 15,333 52,690
========== ========== ========== ========== ========== ========== ==========
(b) Restatement of 2005 financial statements: The Company has restated the
previously issued unaudited financial statements for the year ended
February 28, 2005. The nature and effect of the above restatement is
presented below:
Stockholders' Equity
--------------------------------------------------------------------------------
Additional
Common Paid-in Accumulated Net Loss
Stock Capital Deficit Total for 2005 Cash
---------- ---------- ----------- ---------- ---------- ----------
February 28, 2005, as
previously reported 2,362 1,765,101 (1,565,693) 201,770 (58,918) 303,134
---------- ---------- ---------- ---------- ---------- ----------
- Adjustments
1. Total effect of adjustments,
February 29, 2004, brought
forward (161) (39,029) 15,000 (24,190) -- --
2. To account for the issuance of
1,053,807 shares at $0.05 per
share in settlement of
stockholders' advances and to
reclassify the par value
($176) of such shares from
Additional paid-in capital to
common stock 176 52,514 -- 52,690 -- --
3. To reflect a preferential
deemed dividend of $1,500,000
relating to the issuance of
30,000,000 shares below fair
value as further discussed in
Note 5 and reclassify the par
value of such shares ($5,010)
from Additional Paid in
Capital, where it was
originally recorded, to Common
Stock 5,010 1,494,990 (1,500,000) -- -- --
4. To account for the issuance of
645,832 shares at $0.05 in
settlement of Stockholder
advances; such issuance was
not previously recorded 108 32,184 32,292 -- 27,000 --
5. To account for stock-based
compensation of 356,796 shares
at $0.06 per share at the date
they were granted (year ended
February 28, 2005); such
stock-based compensation was
not previously recorded -- 21,408 (21,408) -- (21,408) --
6. Eliminate the reversal of an
accrual for legal expenses
which had already been paid in
the year ended February 28,
2002. Such reversal was
recorded in the 2005
previously issued financial
statements, while it is now
recorded as of March 1, 2003
(see Adjustment No 3 in Note
9(a)-I) -- -- (15,000) (15,000) (15,000) --
7. Eliminate the reversal of an
accrual for stock-based
compensation of 270,000 shares
at $0.05 shares. Such reversal
was recorded in the 2005
previously issued financial
statements, while it is now
recorded in the year ended
February 29, 2004 (see
Adjustment No 4 in Note
9(a)-II) -- -- (13,500) (13,500) (13,500) --
8. To account for various general
and administrative expenses
and related accruals -- -- (80,191) (80,191) (80,191) (17,292)
9. To reclassify directors'
remuneration from accounts
payable to accrued
liabilities -- -- -- -- -- --
10. Adjust the weighted average
number of common shares to
27,095,500 shares, compared to
44,138,065 shares previously
reported, to reflect the
number of days outstanding
from the grant date of the
shares. The effect of this
adjustment was to increase the
loss per common share to $0.06
compared to $0.001 previously
reported -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total effect of adjustments,
February 28, 2005 5,133 1,562,067 (1,615,099) (47,899) (130,099) 9,708
---------- ---------- ---------- ---------- ---------- ----------
February 28 ,2005, as restated 7,495 3,327,168 (3,180,792) 153,871 (189,017) 312,842
========== ========== ========== ========== ========== ==========
Stockholders' Equity
----------------------------------------
Due to a
Accounts related Accrued
Payable party liabilities
---------- ---------- -----------
February 28, 2005, as
previously reported 72,533 28,831 --
---------- ---------- ----------
- Adjustments
1. Total effect of adjustments,
February 29, 2004, brought
forward -- 52,690 (28,500)
2. To account for the issuance of
1,053,807 shares at $0.05 per
share in settlement of
stockholders' advances and to
reclassify the par value
($176) of such shares from
Additional paid-in capital to
common stock -- (52,690) --
3. To reflect a preferential
deemed dividend of $1,500,000
relating to the issuance of
30,000,000 shares below fair
value as further discussed in
Note 5 and reclassify the par
value of such shares ($5,010)
from Additional Paid in
Capital, where it was
originally recorded, to Common
Stock -- -- --
4. To account for the issuance of
645,832 shares at $0.05 in
settlement of Stockholder
advances; such issuance was
not previously recorded -- --
5. To account for stock-based
compensation of 356,796 shares
at $0.06 per share at the date
they were granted (year ended
February 28, 2005); such
stock-based compensation was
not previously recorded -- -- --
6. Eliminate the reversal of an
accrual for legal expenses
which had already been paid in
the year ended February 28,
2002. Such reversal was
recorded in the 2005
previously issued financial
statements, while it is now
recorded as of March 1, 2003
(see Adjustment No 3 in Note
9(a)-I) -- -- 15,000
7. Eliminate the reversal of an
accrual for stock-based
compensation of 270,000 shares
at $0.05 shares. Such reversal
was recorded in the 2005
previously issued financial
statements, while it is now
recorded in the year ended
February 29, 2004 (see
Adjustment No 4 in Note
9(a)-II) -- -- 13,500
8. To account for various general
and administrative expenses
and related accruals (9,770) 1,388 65,989
9. To reclassify directors'
remuneration from accounts
payable to accrued
liabilities (55,000) -- 55,000
10. Adjust the weighted average
number of common shares to
27,095,500 shares, compared to
44,138,065 shares previously
reported, to reflect the
number of days outstanding
from the grant date of the
shares. The effect of this
adjustment was to increase the
loss per common share to $0.06
compared to $0.001 previously
reported -- -- --
---------- ---------- ----------
Total effect of adjustments,
February 28, 2005 (64,770) 1,388 120,989
---------- ---------- ----------
February 28 ,2005, as restated 7,763 30,219 120,989
========== ========== ==========
10. Subsequent Events:
In May 2006, Colloquium representatives requested payment from the Company in
the sum of Pound Sterling 150,000 (equivalent to approximately $300,000) for the
reimbursement of judicial expenses on the full indemnity basis, compensation for
the management time and expense said to have been borne by their clients in
consequence of dealing with the litigation and damages for the adverse effect
on the business of Colloquium. According to the Company's legal advisor there is
a reasonable possibility that the Company will be required to pay judicial
expenses on the full indemnity basis, while the possibility for the Company to
pay compensation for the time and expense said to have been borne by Colloquium
management in consequence of dealing with the litigation and damages for the
adverse effect on the business of Colloquium is remote.
In a separate development, in late November 2006, the Company instructed its
legal counsel to seek the abandonment of the litigation. It is expected that the
case should be dealt with by the Court in Scotland in the week beginning
December 18, 2006. According to the Company's legal counsel, the Company's
decision in November 2006 to abandon the litigation, is highly likely to be
approved by the Court and makes it probable that payment will be required to be
made by the Company to the defending parties for judicial expenses on a full
indemnity basis. Such expenses are estimated to approximate Pound Sterling
15,000 (equivalent to approximately $30,000) incremental to the amount of Pound
Sterling 10,000 already paid by the Company as previously discussed in Note 8.
However, the ultimate outcome of this litigation cannot be currently determined.
SIGNATURES
Pursuant to the requirements of Sections 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this amended annual report to be signed on its
behalf by the undersigned, thereunto duly authorised.
Allships, Ltd.
---------------------------------
(Registrant)
Dated: December 19, 2006
/s/ Aristeidis Ioannidis
----------------------------------
Aristeidis Ioannidis
Chief Financial Officer