As Filed with the Securities and Exchange Commission on August 21, 2000,
Registration No. 333-93017
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
POST-EFFECTIVE AMENDMENT NO. 1
ON FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
HANNIBAL CAPITAL CORP.
------------------------------------------------------
(Exact name of Registrant as Specified in Its Charter)
Delaware 23-3018664
- ------------------------------- ---------------------------- -------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code) Identification No.)
HANNIBAL CAPITAL CORP.
1244 Main Street
Linfield, Pennsylvania 19468
(610) 495-8413
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
DAVID R. STITH
President
Hannibal Capital Corp.
1244 Main Street
Linfield, Pennsylvania 19468
(610) 495-8413
(Name, address, including zip code, and telephone number
including area code, of agents for service)
------------------------------------
Copies to:
STEVEN F. WASSERMAN, ESQ.
Berlack, Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
(212) 704-0100
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------
=============================================================================================================
Proposed Maximum
Proposed Maximum Aggregate
Title of Each Class of Amount To Be Offering Price Offering Price Amount Of
Securities To Be Registered Registered Per Unit (1) (1) Registration Fee
- -------------------------------------------------------------------------------------------------------------
Common Stock, $.001 1,323,392 (2) $.50 $661,696 $174.69
par value per share
- -------------------------------------------------------------------------------------------------------------
Common Stock, $.001 826,608 (3) $1.50 $1,239,912 $327.34
par value per share
- -------------------------------------------------------------------------------------------------------------
Common Stock, $.001 50,000 (4) $1.50 $75,000 $19.80
par value per share
=============================================================================================================
Total- $521.83
Previously Paid- $515.13
Total due- $6.70
(1) Estimated solely for the purpose of calculating the registration fee.
(2) 1,323,392 shares relate to the distribution by Hannibal Capital Corp. to
persons owning shares of Biofarm.
(3) 826,608 shares relate to the offering by Hannibal.
(4) 50,000 shares relate to the offering by the Selling Securityholder.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
Explanatory note
This registration statement contains two prospectuses: one relating to the
distribution by Hannibal Capital Corp. of 1,323,392 shares of its Common Stock,
par value $.001, per share to persons owning shares of Biofarm and the offering
by Hannibal of 826,608 shares of its Common Stock for cash and another
prospectus relating to the offering of 50,000 shares of Common Stock held by a
selling securityholder (the "Selling Securityholder") who may wish to sell his
Common Stock. The prospectus relating to the Selling Securityholder is referred
to as the Selling Securityholder Prospectus. Following the prospectus are
substitute pages of the Selling Securityholder Prospectus, including alternate
pages front outside and back cover pages, an alternative "The offering" section
of the "Prospectus summary" and section entitled "Plan of distribution." Each of
the alternate pages for the Selling Securityholder Prospectus is labeled
"Alternate page for Selling Securityholder Prospectus." All other sections of
the prospectus are to be used in the Selling Securityholder Prospectus. In
addition, cross-references in the prospectus will be adjusted in the Selling
Securityholder Prospectus to refer to the appropriate sections.
PROSPECTUS
HANNIBAL CAPITAL CORP.
2,200,000 shares of
Common Stock
-------------------------
This prospectus is being furnished in connection with our distribution of
an aggregate of 2,200,000 shares of our Common Stock, of which (a) 1,323,392
shares will be distributed to those persons owning shares of Biofarm, Inc.
("BIOF") and, (b) 826,608 shares will be offered for sale by us on a "best
efforts, all-or-none basis". Pending the sale of 826, 608 shares, all proceeds
will be held in an escrow account. If 826,608 shares are not sold within ___
days from the date hereof (which may be extended an additional ___ days by
mutual agreement of the parties), all monies received will be refunded to
subscribers in full without interest thereon.
We will distribute one share of our Common Stock for every four shares of
common stock of BIOF. This distribution will result in approximately 6.02% of
our issued and outstanding shares of Common Stock being held by the BIOF
distributees. The BIOF distributees will not be required to pay any
consideration or be required to surrender their shares of BIOF in order to
receive our distribution of our Common Stock. Approximately ninety (90%) percent
of the total number of shares of Common Stock to be issued and outstanding after
this offering and after the closing of the acquisition of United Source
Corporation ("USC") will be owned by the former shareholders of USC. (The USC
transaction is explained hereinafter under the caption "Prospectus Summary" and
elsewhere herein).
The shares of Common Stock being distributed hereby will be subject to
certain restrictions on resale. See "Risk Factors - Restrictions on Resale" and
"Plan of Distribution - Restriction on Resale".
-------------------------
Concurrent with this offering, we are registering 50,000 additional shares
of Common Stock for sale by a Selling Securityholder who may wish to sell his
shares in the open market or in privately negotiated transactions and is
identified in a separate prospectus.
-------------------------
No public trading market for our Common Stock exists. We anticipate
that our Common Stock will initially be traded on the OTC Bulletin Board after
this offering. We have not taken any steps to obtain a market maker for our
Common Stock.
-------------------------
Our Common Stock being distributed in this offering involves a high degree
of risk. See "Risk Factors" beginning on page 10.
-------------------------
Neither the Securities and Exchange Commission or any state commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
Dated August 21, 2000
TABLE OF CONTENTS
Prospectus summary.............................................................3
Selected Financial Data of Hannibal............................................8
Selected Financial Data of USC.................................................9
Risk factors..................................................................10
Forward-looking statements....................................................29
Use of proceeds...............................................................30
Dilution......................................................................31
Concurrent offering...........................................................31
Plan of distribution..........................................................32
Our business..................................................................35
The business of USC...........................................................36
Management's discussion and analysis of Hannibal's financial
condition and results of operations...........................................52
Management's discussion and analysis of USC's financial
condition and results of operations...........................................53
Hannibal Management...........................................................54
USC Management................................................................57
Security Ownership of Certain.................................................59
Description of securities.....................................................60
Legal matters.................................................................65
Experts.......................................................................65
Disclosure of commission position on..........................................66
You should rely only on the information contained in this document. We have not
authorized anyone to provide you with information that is different. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.
Prospectus summary
You should read the following summary together with the more detailed
information regarding Hannibal Capital Corp. and our financial statements and
the related notes appearing elsewhere in this prospectus.
Hannibal Capital Corp.
Hannibal is a Delaware corporation and, prior to the date hereof, a
wholly-owned subsidiary of Biofarm, Inc., a Nevada corporation. Hannibal was
initially organized to pursue securities litigation matters initiated by
Biofarm, Inc. and to take title to and receive the proceeds anticipated from
such litigation for the benefit of shareholders of Biofarm, Inc. Biofarm, Inc.
is referred to throughout this prospectus as "BIOF".
On July 24, 2000, Hannibal entered into a Stock Exchange Agreement (the
"Stock Exchange Agreement") with United Source Corporation, a Delaware
corporation. According to the Stock Exchange Agreement, USC will be acquired by
Hannibal in a tax-free reorganization in which our shares of Common Stock
(19,800,000) will be exchanged for all of the issued and outstanding shares of
USC common stock. At the closing of such exchange, we will change our name to
"United Source Corporation." Upon the receipt by the shareholders of USC of the
19,800,000 shares of our Common Stock in exchange for their shares of USC common
stock, the former shareholders of USC will hold ninety (90%) of our Common Stock
and will be entitled to designate four of the five members of our Board of
Directors. The shares being issued to the former shareholders of USC are not
being registered hereby.
The closing of the acquisition of USC by Hannibal is subject to (a) the
effectiveness of the registration statement of which this prospectus forms a
part (in order that the aggregate of 2,200,000 shares being distributed pursuant
hereto shall be fully registered for public distribution), (b) Hannibal changing
its name to United Source Corporation and amending and restating its Certificate
of Incorporation, (c) Hannibal adopting the 2000 Stock Incentive Plan of USC,
(d) the resignation of the Hannibal directors and the appointment of the USC
designees to the Board of Hannibal, and (e) the receipt of at least $1,200,000
from the sale of the 800,000 shares being offered for sale hereby.
United Source Corporation
USC is developing United-Source.com, an interactive, internet-based
business-to-business e-commerce office product procurement solution and blind
bid exchange for purchasers of corporate office products and supplies. USC's
online objective is to leverage the significant supplier and corporate customer
base developed by its founders and executives over the past 20 years to become a
one-stop-shopping source and to drive additional corporate purchasers to its
marketplace, which USC calls the "United Market(TM)." The United Market(TM)
database will utilize approximately 150,000 products, advanced search engines
and transaction software that enables users to easily identify, locate and
purchase the products they need. USC also provides
3
applications that enable its customers and suppliers to interface with the
United Market(TM) to automate their transactions. In addition to the United
Market(TM), USC provides professional and implementation services to enable its
customers to take full advantage of the capabilities of the United Market(TM).
The United Market and USC _________________ powered by Commerce One, Inc.
("Commerce One"). USC entered into five agreements on April 13, 1999 with
Commerce One regarding the development, operation, hosting and maintenance of
the USC United Market. USC has entered into a Buysite Portal Edition and
MarketBuilder License Agreement, a MarketSite Access Agreement, a Master Hosted
Application Service Agreement, an Auction Services Agreement and a Master
Consulting Services Agreement.
USC's procurement solution will enable enterprises to integrate their
customized workflow, business rules and processes, and negotiate supplier
pricing within the United Market(TM). The United Market(TM) will be fully
web-based and accessed over the internet, using a secure pass-code private
access methodology. Its procurement solution requires minimal investment of time
and capital by its enterprise customers to install, maintain and use. USC's
solution automates, consolidates and monitors the approval and invoicing process
as well as the order placement and delivery information for the enterprise. In
addition to reducing the cost of procurement, its solution allows its enterprise
customers to enforce their particular business rules and aggregate purchases
utilizing its blind bid exchange to obtain volume discounts and other economies
of scale. The United Market(TM) resides entirely on USC's servers, is accessible
by standard browsers and requires minimal or no software installation or
integration at the customer site.
Corporate purchasing officers and professionals and other users within
enterprises benefit from the United Market(TM) because it offers them a
convenient and easy one-stop shopping source. A purchaser can use its advanced
search engine to identify and locate products from a broad product database and
can use its automated ordering and approval process to purchase products. For
example, its solution allows a corporate purchaser to personalize a list of
product favorites to facilitate product selection and recurring orders. The
United Market(TM) offers other advantages over the traditional paper catalog
alternative, including the online ability to compare various products from a
single or multiple suppliers and track the progress of an order including
delivery and invoicing. These features result in significant time savings for
the corporate purchasing professional.
USC offers suppliers a cost-effective opportunity to reach more customers
and sell more products by establishing or enhancing their internet presence. The
United Market(TM) also offers supplier/service providers the capability to
respond to customer orders on a blind bid exchange basis, implement
customer-specific pricing, update product information and introduce new products
without being limited by specific catalog publication cycles. In many cases, the
United Market(TM) will appeal to suppliers/service providers as being lower cost
compared to traditional distribution or representation arrangements because,
among other factors, its purchasing discounts may be less than those of
traditional distributors. USC plans to provide tools to its suppliers/service
providers that enable the online update and modification of their product
databases hosted on its servers, or to link and integrate the United Market(TM)
directly with their systems. The United Market(TM) is neutral in that its search
capability identifies products that meet
4
the corporate purchaser's search criteria, and provides an unbiased comparison
of product characteristics and pricing to allow the purchaser to make a reasoned
choice based upon the information provided by suppliers and blind bids offered
by the supplier/service providers.
USC's executive offices are located at 1979 Marcus Avenue, Suite 210, Lake
Success, New York 11042 and its telephone number is (516) 622-2316.
5
Concurrent with this offering, we are registering additional shares of our
Common Stock for sale by a Selling Securityholder who may wish to sell his
50,000 shares in the open market or in privately negotiated transactions and is
identified in a separate prospectus. This shareholder is referred to throughout
this prospectus as the "Selling Securityholder."
The offering
Shares to be distributed by Hannibal to
persons owning BIOF shares....................... 1,323,392 shares of Common Stock.
Shares to be sold by Hannibal for cash........... 826,608 shares of Common Stock.
Shares to be sold by Selling Securityholder...... 50,000 shares of Common Stock.
Plan of distribution(1).......................... Hannibal will (a) issue one share of its
Common Stock for every four shares of BIOF
held of record on the distribution date
(with no consideration to be paid or BIOF
shares to be surrendered by the BIOF
owners), (b) itself offer and sell 826,608
shares for cash at the then prevailing
market price.
Use of proceeds.................................. Hannibal will not receive any proceeds
from the distribution of 1,323,392 shares
of its Common Stock to the shareholders of
BIOF. However, Hannibal will receive the
proceeds to be derived from the sale of an
aggregate of 826,608 shares of its Common
Stock.
Concurrent offering
Shares offered by Selling
Securityholder................................ 50,000 shares of Common Stock.
- ----------------
(1) The aggregate of 2,200,000 shares being registered and offered hereby is
exclusive of the 19,800,000 shares to be issued to the former shareholders
of USC and not being registered hereby
6
Plan of distribution............................. Selling Securityholder may sell his shares
in the open-market or in privately
negotiated transactions.
Use of proceeds.................................. Hannibal will not receive any proceeds
from the concurrent offering of 50,000
shares.
7
Selected Financial Data of Hannibal
Set forth below is selected financial data with respect to Hannibal for the
period from May 1, 1999 (inception of operations) to March 31, 2000 and the
three months ended June 30, 2000, as derived from the Company's financial
statements. This data should be read in conjunction with the financial
statements and Management's Discussions and Analysis included elsewhere in this
Prospectus.
Period Ended Three Months Ended
March 31, 2000 June 30, 2000
-------------- ------------------
Statement of Operations Data:
Revenue $ - $ -
Expenses (58,503) (5,350)
Other income 670 90
-------- --------
Net loss $(57,833) $ (5,260)
======== ========
Loss per share $(57,833) $ (5,260)
======== ========
Weighted average share of Common
Stock outstanding 1 1
======== ========
March 31, 2000 June 30, 2000
-------------- -------------
Balance Sheet Data:
Working capital deficiency $(57,833) $(63,093)
======== ========
Total assets $ 20,670 $ -
======== ========
Total liabilities $ 78,503 $(63,093)
======== ========
Total stockholders equity $(57,833) $(63,093)
======== ========
8
Selected Financial Data of USC
Set forth below is selected financial data with respect to USC for the
period from the inception of USC's operations on December 7, 1999, to March 31,
2000, and for the three months ended June 30, 2000, as derived from USC's
financial statements. This data should be read in conjunction with the financial
statements and management's discussions and analysis included elsewhere in this
prospectus.
Statement of Operations Data: Period Ended Three Months Ended
March 31, 2000 June 30, 2000
-------------- ------------------
Revenue $ - $ 32,212
Expenses $ 4,519 $ 439,265
Other Income 2,543
------- ---------
Net loss $(4,519) $(404,510)
======= =========
Loss per share $(4,519) $(3.85)
======= =========
Weighted average shares of Common Stock
outstanding 1 105,139
======= =========
March 31, 2000 June 30, 2000
-------------- -------------
Balance Sheet Data:
Working Capital $(4,518) $ 807,049
======= =========
Total Assets $ -0- $ 864,644
======= =========
Total liabilities $ 4,518 $ 24,105
======= =========
Total Stockholders Equity $ 4,518 $ 840,539
======= =========
9
Risk factors
You should carefully consider the following risk factors and all other
information contained in this prospectus before investing in our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could adversely affect our business, financial condition and
results of operations and could result in a complete loss of your investment.
The risks and uncertainties described below are not the only ones we may face.
On the other hand, the shareholders of BIOF who will receive our common stock
will not be risking any investment since they are not required to pay for our
common stock or surrender their shares of BIOF common stock in exchange for our
common Stock.
Risks related to Hannibal Capital Corp. prior to the USC acquisition
We are a development stage company and have no operating history.
We were incorporated on October 5, 1998, to assume and pursue BIOF's
interest in certain securities litigation. We divested ourselves of such
litigation matters when we agreed to acquire USC and when BIOF rescinded its
transaction with Litchfield Continental, Ltd. ("LCC"). As such, we have no
operating history upon which investors may rely to evaluate our prospects. Our
prospects must be considered in light of the problems, expenses, delays and
complications associated with a new business. Accordingly, we expect to incur
operating losses for the foreseeable future until such time, if ever, as the
business of USC proves to be profitable. However, there can be no assurance that
such profitability will occur.
Hannibal may require a significant amount of additional capital to fund our
on-going operation and such funding may not be available.
Our capital requirements are and will continue to be significant due to the
costs associated with any new business venture. Our current capital reserves and
the proceeds to be derived from the sale of 800,000 shares are expected to
sustain our operations for no more than the next nine months. In the event our
plans or assumptions change or prove inaccurate and our capital resources prove
to be insufficient to fund our operations, we could be required to seek
additional financing sooner than currently anticipated. There is no assurance
that additional funds will be available to us from any source when needed.
Accordingly, the inability to obtain additional financing would likely have a
material adverse affect on our business, financial condition and result of
operations.
Our shareholders have limited recourse against our directors' for a breach of a
fiduciary duty.
As permitted by Delaware law, our certificate of incorporation limits the
liability of our directors to our shareholders for monetary damages for breach
of a director's fiduciary duty. As a result of our charter provision and
Delaware law, shareholders may have limited rights to recover against directors
for breach of fiduciary duty.
10
Our future success is partially dependent upon our acquisition of USC.
An important element of our business strategy is the acquisition of USC.
Hannibal expects to close its acquisition with USC simultaneously with the
closing date of the offering contemplated by the registration statement of which
this prospectus forms a part. Hannibal presently has no outstanding letters of
intent concerning possible acquisitions or joint ventures (except for the Stock
Exchange Agreement with USC), and there can be no assurance that additional
acquisition candidates will be identified by us in the future, that suitable
financing for any such business combination can be obtained by us or that any
such business combinations will occur,
Our future success is also partially dependent upon our ability to
effectively integrate the acquired business with our own operations. Our
financial performance is and will be subject to various risks associated with
such potential business combinations, including the financial impact of expenses
associated with the integration of businesses. There can be no assurance that
any future acquisitions will not have an adverse impact on our business
operations or potential profitability.
Risks related to USC's business
USC has a limited history and anticipates losses for the foreseeable future.
USC was founded in December 1999. It anticipates incurring significant
expenses in 2000 and the foreseeable future as it further develops the United
Market(TM) web site and exchange, and as sales, marketing and technical expenses
increase. USC may incur losses if its revenues do not increase correspondingly.
The extent of these losses will also be contingent, in part, on the amount of
growth in its operating expenses, which it plans to increase. If its revenues
fail to grow at anticipated rates or its operating expenses increase without a
commensurate increase in its revenues, or it fails to adjust operating expense
levels accordingly, its business, revenues, results of operations and financial
condition will be negatively affected.
USC anticipates completing its interactive United Market(TM) web site in
the third quarter of 2000. In order to generate its revenue, it must, among
other things:
o attract new enterprise customers and retain existing enterprise customers
to its site;
o encourage purchasing officers employed by its enterprise customers to adopt
its internet-based procurement solution arid to use it frequently;
o increase its product offering by adding and maintaining supplier
relationships; and
o develop new sources of revenues beyond its existing revenue sources.
If USC is unable to accomplish one or more of these objectives, its
revenues may not grow as it anticipates, if at all, and its business, revenues,
financial condition and results of
11
operations will be negatively affected. Even if it does add additional products
or services, there are economic, legal, regulatory and other risks associated
with adding new revenue sources. For example, it may post advertisements on its
web site to generate advertising revenue. However, its supplier relationships
may be harmed if its suppliers associate advertisements posted on its web site
with a bias in its offering of office products.
USC's business model is not proven and may not be successful.
USC's business-to-business e-commerce model is based on the development of
the United Market(TM) exchange for the purchase and sale of corporate office
products. This business model is new and not proven and depends upon its ability
to, among other things:
o enroll and maintain its current corporate purchasers in its United Sourcing
Network(TM)and increase their use of its procurement solution;
o achieve high rates of adoption by new corporate purchasers;
o maintain its current suppliers and enter into agreements with additional
suppliers;
o generate significant revenues from the use of its internet-based procurement
solution; and
o obtain higher transaction volumes and leverage operating efficiencies.
USC cannot be certain that its business model will be successful or that it
can achieve or sustain revenue growth or generate any profits. The success of
this business model will require, among other things, that it develop and market
solutions with broad market acceptance by its customers, suppliers, users and
strategic partners. USC cannot be certain that business-to-business commerce on
the internet generally, or its procurement solution, services and brand in
particular, will achieve broad market acceptance. For example, purchasers may
continue purchasing products through their existing methods and may not adopt an
lnternet-based procurement solution because of their comfort with existing
off-line purchasing habits and direct supplier relationships, the costs and
resources required to switch to an online purchasing method, the need for
products not offered through the United Market(TM), security and privacy
concerns, or general reticence about technology or the internet.
USC may not be able to recruit and retain the personnel it needs to succeed.
USC is in the development stage and intends to hire a significant number of
additional technical, sales, support, marketing, and research and development
personnel. Competition for these individuals is intense, and it may not be able
to attract or retain additional highly qualified personnel in the future. Its
future success also depends upon the continued service of its executive officers
and other key sales, support, marketing, and research and development personnel.
In addition, its services and technologies are complex, and it depends on the
continued efforts of its existing technical personnel. Although all of its
executive officers are bound by employment agreements, its relationships with
other employees are at will. It does not have key person life insurance policies
covering any of its employees.
12
USC's business substantially depends upon the success of its United Market(TM).
USC's future growth substantially depends on the commercial success of its
United Market(TM). To date, its market serves a small number of customers. It is
initially targeting corporate purchasers with whom the founders and executives
have a pre-existing sales relationship, although USC is expanding its customer
prospects to include Fortune 1000 companies and other large purchasing
enterprises. Its ability to generate substantial and sustained revenues from its
United Market(TM) depends on achieving sales penetration in each of these market
segments.
USC's success depends on its ability to manage growing and changing operations.
USC's ability to successfully operate its United Market(TM), offer
additional services and implement its business plan in a rapidly evolving market
requires an effective planning and management process. Its anticipated growth of
future operations will place a significant strain on its management systems and
resources. It expects that it will need to continue to improve its financial and
managerial controls and reporting systems and procedures, enhance its internal
and external security systems, and continue to expand, train and manage its work
force worldwide. Furthermore, USC expects that it will be required to manage
multiple relationships with various customers and other third parties.
USC's current information systems, procedures and controls may not continue
to support its operations and may hinder its ability to exploit the market for
selling products to the life sciences industry. It is in the process of
implementing a new enterprise resource planning system that will replace its
existing accounting and management information systems and allow for future
scalability and enhancements. In addition, it anticipates requiring additional
space to accommodate its growth in the next six months. It could experience
interruptions to its business when it transitions to the new enterprise resource
planning system and when it relocates to new facilities. Even after it
implements its new system and relocates to new facilities, its personnel,
systems, procedures, controls and facilities may be inadequate to support its
future operations.
The markets in which USC operates is highly competitive and it may be unable to
compete successfully against new entrants and established companies with greater
resources.
USC competes in markets that are new, intensely competitive, highly
fragmented and rapidly changing. It has experienced and expects to continue to
experience increased competition from current and potential competitors, many of
which have significantly greater financial, technical, marketing and other
resources than it has.
Competition in the internet caching market continues to intensify as new
solutions are coming to market and several companies are forming technology
alliances to sell their products. USC directly competes with a number of
companies that provide caching products. In addition, it is aware of numerous
other major software developers as well as smaller entrepreneurial companies
that are focusing significant resources on developing and marketing products and
services that will compete with its United Source Network. USC also believes
that its United
13
Source Network may face competition from other providers of competing solutions
for network infrastructure problems, including networking hardware and software
manufacturers, content distribution providers, traditional hardware
manufacturers, telecommunications providers and large diversified software and
technology companies. Many of these companies provide or have announced their
intentions to provide a range of software and hardware products based on
internet protocols and to compete in the broad internet/intranet software market
as well as in specific market segments in which it competes.
USC's competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements than it can. In
addition, its current and potential competitors may bundle their products with
other software or hardware, including operating systems and browsers, in a
manner that may discourage users from using its services. Also, current and
potential competitors have greater name recognition and more extensive customer
bases. Increased competition could result in price reductions, reduced gross
margins and loss or failure to obtain market share.
USC currently relies on a limited number of United Sourcing Network(TM)
enterprise customers, and any loss of an enterprise customer could have a
negative effect on it.
USC expects that for the foreseeable future it will generate a significant
portion of its revenues from a limited number of enterprise customers in the
United Sourcing Network(TM). Further, its enterprise customers are not obligated
to use its procurement solution exclusively or for any minimum number of
transactions or dollar amounts. USC currently does not offer all of the life
science research products required by its customers, and it expects that its
customers will continue to use multiple sources to meet their needs. In
addition, its contracts with its customers are for limited terms and its
customers may discontinue use of its United Market(TM) at any time upon short
notice and without penalty. If it loses any of its enterprise customers, or if
it is unable to add new enterprise customers, its revenues will not increase as
expected, it will lose access to the purchasing officers employed by these
enterprises, it could lose a number of its product suppliers, and its brand name
and customer and supplier perceptions of its procurement solution would be
harmed.
USC's business model depends on building a critical mass of suppliers and
customers.
USC's business model depends in large part on its ability to build a
critical mass of products and suppliers. To attract and maintain suppliers, it
must build a critical mass of customers. However, customers must perceive value
in its procurement solution and this, in part, depends upon the breadth of its
product offerings from its suppliers. If USC is unable to increase the number of
suppliers and draw more customers to the United Market(TM), it will not be able
to benefit from any network effect, where the value to each participant in the
United Sourcing Network(TM) increases with the addition of each new participant.
As a result, the overall value of the United Sourcing Network(TM) and its
procurement solution would be harmed. Its failure to create and maintain this
network effect would negatively affect its business, revenues, financial
condition and results of operations.
14
If USC does not successfully market the United-Source.com brand, its business
may suffer.
USC believes that establishing, maintaining and enhancing the
United-Source.com brand is critical in attracting and expanding traffic to its
web sites. There are a number of web sites that offer generally competing
services and more are expected to develop as the usage and acceptance of the
internet by corporate purchasing agents expands. Some of these sites already
have well-established brands in online office products offered by a single
supplier, online catalogue companies such as Staples.com, or multiple supplier
sites in broad industry categories, such as VerticalNet in the industrial parts
and supply area, and Chemdex in chemical and laboratory research products.
Although these companies may compete generally, USC believes that it is one of
the first web based multiple supplier, "blind bid" exchanges that allow
corporate purchasers to submit their purchase orders, which may be aggregated
with other purchase orders, for bidding by the suppliers in the United Sourcing
Network(TM). As a result, it is critical that it establish and enhance the
United-Source.com brand. It believes that increased competition may make
establishing its brand significantly more expensive. Promotion of its brand will
depend largely on expanding its sales and marketing capabilities and providing a
high-quality online experience. USC cannot be certain that it will be successful
in marketing the United-Source.com brand. If it is unable to successfully
promote its brand, or if it incurs substantial expenses in attempting to do so,
its revenues and earnings could be materially and adversely affected.
If USC is unable to increase its transaction volume, its future revenues may
suffer.
USC expects that the products offered by it for sale through its e-commerce
marketplace will generate a substantial portion of its future revenues.
Accordingly, its revenues will be highly dependent on the dollar volume of
transactions conducted through its web sites. Its profits depend upon the
discount levels it is able to negotiate with its suppliers. To maintain revenue
growth, USC will need to increase the total dollar value of transactions
conducted through its web sites. In order to increase its transaction volume, it
will need to:
o generate higher and continuously increasing levels of traffic, from both
new and repeat visitors, to its web sites;
o increase the percentage of visitors to its web sites who purchase office
products; and
o increase the average transaction size.
Failure to do one or more of the foregoing could have a material adverse
effect on its revenues.
Unless USC negotiates favorable pricing terms with its suppliers, its profit
margins will be adversely affected.
USC's profits depend upon the prices it is able to negotiate with its
suppliers. It anticipates that the prices it negotiates with its suppliers will
vary based on a number of factors such as:
15
o size of supplier;
o product portfolio;
o relationship with key United-Source.com customers;
o degree to which products are critical to its customers;
o extent to which transactions are conducted electronically; and
o extent that costs are shared with USC.
USC's profit margins may decline in the future, particularly as competition
in the office products industry increases. A significant decline in profit
margins without a corresponding increase in transaction volume would adversely
affect its earnings.
The sales and implementation cycle for USC's solution is long, which could
negatively affect its revenue growth, if any, and make it difficult to predict
its revenues and results of operations.
A key element of USC's strategy is to market its solution directly to
corporate purchasers, and to succeed it must satisfy the enterprise purchasing
departments, the information technology groups and the individual purchasing
officer who are the users of its internet-based procurement solution. The sales
and implementation cycle for its solution is long and it will devote significant
sales, marketing and management resources to the sales process without any
assurance that the customer will use the United Market(TM). It is generally
required to provide a significant level of education to its customers and
potential customers regarding the use and benefits of its internet-based
procurement solution. Furthermore, potential enterprise customers and a number
of their departments typically engage in extensive internal review and analyses
before making purchase decisions. The sale and implementation of its solution
are subject to delays due to its customers' internal budgeting and procedures
for approving supply and capital expenditures and deploying new technologies
within their networks. These delays also could impair its ability to generate
revenue and could negatively affect its business, results of operations and
financial condition.
Even if enterprise customers adopt USC's procurement solution, it may not
increase its revenues if purchasing officers within these enterprises do not use
the United Market(TM)place.
USC's revenues are primarily derived from purchases of office products and
equipment by corporate purchasing officers and other users within its United
Sourcing Network(TM) enterprise customers. These persons may or may not use its
United Market(TM) to purchase their office products and supplies. Even if it
successfully maintains existing enterprise customers and adds new enterprise
customers, it may not be able to increase revenues if corporate purchasing
personnel within its enterprise customers do not adopt and use the United
Market(TM). Once an enterprise customer adopts its internet-based procurement
solution, it takes time for purchasing officers and other users within the
enterprise to become aware of, learn to use and begin using its United
Market(TM). The long sales cycle and the time it takes for purchasing officers
to begin using its
16
internet-based procurement solution could negatively affect its revenue growth,
if any, and makes it difficult to predict its results of operations. Also, its
efforts to attract purchasing officers to adopt and to increase their use of its
solution may not be successful, which would limit its ability to generate
revenues from these customers.
USC's revenues depend on the corporate office supply budgets of its customers.
USC's procurement solution is used by purchasing officers and their
assistants and staff at companies and academic institutions. Changes in the
office product budgets of these companies and institutions and the timing of
spending under these budgets can have a significant effect on the demand for
office products. These budgets are based on a wide variety of factors including
the resources available to make such expenditures, the spending priorities among
various types of corporations, and the policies regarding these expenditures
during recessionary periods. Any decrease in office product expenditures by
these companies and institutions could have a negative effect on its business,
revenues, results of operations and financial condition.
The success of its business depends on maintaining and expanding its supplier
base.
USC's future success depends in large part upon its ability to offer and
deliver a broad and corporate supply product offering to its customers. It
relies on independent suppliers and manufacturers for products offered through
its United Market(TM). To increase the breadth of its product offering,
including related products that it does not currently offer, it must establish
relationships with additional suppliers. Some potential suppliers may view USC
as detrimental to their business, since suppliers compete with one another and
with USC for sales and customers. Its agreements with suppliers are typically
for a maximum of one-year terms and it cannot assure you that these agreements
will be renewed beyond the initial term. In addition, these suppliers are not
required to accept purchase orders from USC. If it fails to secure products from
its suppliers or if a significant number of suppliers do not renew their
agreements with USC, the breadth and depth of products that it can offer users
would be decreased. In addition, there are significant cost, difficulties and
risks associated with adding new products in related markets, such as the
difficulty of signing up new suppliers, obtaining necessary permits, new
competition and integration of these new products into the United Market(TM).
These events could result in decreased adoption and use of its procurement
solution and decreased revenues, which could have a negative effect on its
business, results of operations and financial condition.
Its cost of revenues includes cost of goods payable to suppliers. USC
cannot assure you that its suppliers will enter into or renew agreements with it
on the same or similar terms as those currently in effect or that the cost of
goods payable to its suppliers will remain the same. Less favorable terms will
make it difficult for USC to achieve profitable operations. Any decreases in its
already low gross margins will have a significant negative effect on its
business, results of operations and financial condition.
Its supplier agreements are nonexclusive and many of its suppliers sell
their products directly to its customers. In addition, the growing reach and use
of the internet has further
17
intensified competition in this industry. Some suppliers provide customers with
direct access to products, and if suppliers, including its current suppliers,
provide products to enterprise customers and their purchasing officers at a cost
lower than USC, its business, revenues, results of operations and financial
condition could be negatively affected.
If USC cannot timely and accurately add supplier product data to its procurement
solution database its business will be harmed.
Currently, USC is responsible for loading supplier product information into
its database and categorizing the information for search purposes. This process
entails a number of risks, including dependence on its suppliers to provide us
in a timely manner with accurate, complete and current information about their
products, and to promptly update this information when it changes. USC currently
has a backlog of approximately 150,000 products to be loaded in its United
Market(TM), which are anticipated to be loaded in the United Market(TM) by the
third quarter of 2000 and that the remaining products will be loaded by the end
of the third quarter of 2000. USC will not derive revenue from these products
until these data are loaded in its system. The time period in which it estimates
loading these supplier product data is a forward-looking statement that is
subject to risks and uncertainties and actual results may differ materially from
those described in these forward-looking statements. Timely loading of these
products in its database depends upon a number of factors, including the file
formats of the data provided to it by suppliers and its ability to further
automate and expand its operations to accurately load these data in its product
database, any of which could delay the actual loading of these products beyond
the dates estimated by it.
In addition, USC is generally obligated under its supplier agreements to
load updated product data onto its database for access through the United
Market(TM) within a specified period of time following their delivery from the
supplier. USC's current supplier data backlog could make it difficult for it to
meet these data update obligations to its suppliers. While it intends to further
automate the loading and updating of supplier data on its system, USC cannot
assure you that it will be able to do so in a timely manner, in part because
achieving the highest level of such automation is dependent upon its suppliers'
automating their delivery of product data. If its suppliers do not provide USC
in a timely manner with accurate, complete and current information about the
products it offers, its database may be less useful to its customers and users
and may expose USC to liability. Although it screens its suppliers' information
before it makes it available to its customers and users, USC cannot guarantee
that the product information available in its United Market(TM) will always be
accurate, complete and current, or comply with governmental regulations. This
could expose USC to liability or result in decreased adoption and use of its
internet-based procurement solution, which could have a negative effect on its
business, results of operations and financial condition.
If USC's suppliers do not provide timely and professional delivery of products
to its customers its business will be harmed.
USC also relies on its suppliers and manufacturers to deliver office
products to its customers in a professional, safe and timely manner. If its
suppliers do not deliver the products to
18
its customers in a professional, safe and timely manner, then its service will
not meet customer expectations and its reputation and brand will be damaged. In
addition, deliveries that are nonconforming, late or are not accompanied by
information required by applicable law or regulations, could expose USC to
liability or result in decreased adoption and use of its internet-based
procurement solution, which could have a negative effect on its business,
results of operations and financial condition. Further USC , and not its
suppliers, typically bear the responsibility for product refunds and returns and
the risk of non-collectibility of accounts receivable from its customers.
USC must maintain marketplace neutrality to attract customers and suppliers to
its United Market(TM).
The corporate office products market consists of a complex set of
relationships among manufacturers, suppliers, distributors and customers.
Adoption of its solution by suppliers and customers is dependent on their
perception that USC provide a neutral, unbiased marketplace to purchase and sell
life sciences research products. To the extent that USC is perceived by its
customers or suppliers as favoring one supplier over another, customers and
suppliers may lose confidence in the United Market(TM) as a fair and neutral
marketplace and choose alternative solutions. Any bias, whether perceived or
actual, could have a negative impact on its ability to maintain or increase its
supplier base, which in turn may limit its ability to maintain or increase its
customer base and have a negative impact on its business, results of operations
and financial condition.
If USC does not meet performance requirements in its customer agreements, it
loses revenue and customers may cancel its service or choose a different
service.
USC's customer agreements typically include specific performance
requirements, including reliability, processing speed and the amount of data
served from its USC Network. If it fails to meet these performance requirements,
it does not collect revenue for the time periods specified in its customer
agreements, which range from a day to a month, depending on the particular
requirement and the service level that it achieved. In addition, USC believes it
is important to maintain features and functionality that are not explicitly
covered in its agreements, such as network roundtrip time, sufficient
statistical reporting and responsive customer service. If it does not meet these
requirements, customers may cancel its service.
USC's success depends on its ability to expand its sales and support
organizations.
USC will need to substantially expand its direct and indirect sales
operations, both domestically and internationally, in order to increase market
awareness and sales of its services. Its services require a sophisticated sales
effort targeted at several people within its prospective customers'
organizations. Competition for qualified sales personnel is intense, and USC
might not be able to hire the kind and number of sales personnel it is
targeting. In addition, USC believes that its future success depends on
establishing and maintaining productive relationships with a variety of
distribution partners, including resellers and joint marketing partners. USC
seeks to sign up distribution partners that have a substantial amount of
technical expertise in the
19
computer network and telecommunications industry. Even with this expertise, its
distribution partners generally require a significant amount of training and
support from USC. USC cannot be sure that it will be successful in signing up
desired distribution partners or that its distribution partners will devote
adequate resources or have the technical and other sales capabilities to sell
its services.
Similarly, the complexity of its USC Network requires highly trained
customer service and support personnel. It currently has a small customer
service and support organization and will need to increase its staff to support
new customers and the expanding needs of existing customers. Competition for
customer service and support personnel is intense in its industry due to the
limited number of people available with the necessary technical skills and
understanding of the internet.
USC faces intense competition that could negatively affect its business.
The market for business-to-business e-commerce and internet ordering and
purchasing is new and rapidly evolving, and competition is intense and is
expected to increase significantly in the future. USC faces competition from
four main areas: other companies with e-commerce offerings, traditional
suppliers and distributors of corporate office products, corporate office
product purchasers that have developed their own procurement solutions and
enterprise software companies that offer, or may develop, alternative
procurement solutions. USC may not be able to compete successfully against its
current or future competitors and competition could have a material adverse
effect on its business, results of operations and financial condition. Its
competitors and potential competitors may develop superior internet procurement
solutions that achieve greater market acceptance than its solution. In addition,
substantially all of its prospective customers have established long-standing
relationships with certain of its competitors or potential competitors,
including most of its suppliers. Accordingly, USC cannot be certain that it will
be able to expand its customer list and user base, or retain its current
customers or suppliers.
USC's solution and services are new and face rapid technological changes and if
it does not respond appropriately, its business would be harmed.
The market for USC's solution is characterized by rapid technological
advances, evolving standards in the internet and software markets, changes in
customer requirements and frequent new product and service introductions and
enhancements. As a result, its future success depends upon its ability to
enhance its current internet-based procurement solution and services, to develop
and introduce new solutions and services that will achieve market acceptance,
and where necessary to integrate its internet-based procurement solution with
its customers enterprise resource planning systems. If it does not adequately
respond to the need to develop and introduce new solutions or services, or to
integrate with its customers' enterprise resource planning systems, then its
business, revenues, results of operations and financial condition will be
negatively affected. For example, it may lose market share and ultimately
revenue as its customers switch to its competitors' offerings if:
20
o it is unable to develop technology that is a success in the marketplace;
o its technology does not integrate with its customers' systems; and
o its technology is surpassed by the superior technology of a competitor.
Further, USC may incur significant expense to integrate its procurement
solution with its customers' enterprise resource planning systems and business
rules, and to maintain this integration as its customers' enterprise resource
planning systems evolve. Failure to provide this integration may delay or
altogether dissuade the market or a particular customer from adopting its
internet-based procurement solution, which could have a material adverse effect
on its business, results of operations and financial condition.
If USC does not successfully develop and timely introduce new versions of its
procurement solution in the future, its business will be harmed.
USC will continually seek to upgrade and enhance its United Market(TM) and
integrate new technology into its internet-based procurement solution. These new
releases may include significant enhancements to the user interfaces, database
management and search technology, and security controls. The planned timing of
introduction of new releases of its procurement solution is a forward-looking
statement that is subject to risks and uncertainties, and actual timing may
differ materially from that set forth in these forward-looking statements as a
result of a number of factors. Enhancing and introducing new technology into its
purchasing solution involves numerous technical challenges and substantial
personnel resources, and often takes many months to complete. USC cannot be
certain that it will be successful at enhancing or integrating new technology
into its internet-based procurement solution on a timely basis, or in accordance
with its milestones or its product release objectives. In addition, it cannot be
certain that, once integrated, this technology or its internet-based procurement
solution will function as expected. If USC is unable to enhance and integrate
this new technology into its purchasing solution on a timely basis, it may lose
customers or experience difficulty obtaining new customers, which could
adversely affect its business, revenues, financial condition and results of
operations. Major enhancements and new solutions and services often require long
development and testing periods. In addition, its internet-based procurement
solution is complex and, despite vigorous testing and quality control
procedures, may contain undetected errors or "bugs" when first introduced or
updated Any inability to timely deliver a quality solution and services could
have a negative effect on its business, revenues, financial condition and
results of operations.
USC may not be able to determine or design the features and functionality that
its enterprise customers and purchasing officers require or prefer.
USC's success will depend upon its ability to accurately determine the
features and functionality that its enterprise and research customers require or
prefer in an e-commerce solution, and its ability to successfully design and
implement procurement solutions that include these features and functionality.
If it is unable to determine or design in the features and functionality that
enterprise and research customers require or prefer in an e-commerce solution,
its business will be negatively affected. USC is designing the United Market(TM)
based upon
21
internal development efforts, the advice of Commerce One, and feedback from a
relatively limited number of enterprise customers. It cannot be certain,
however, that the features and functionality that it will offer in the first
version of United Market(TM), or those that it may offer in future releases of
its solution, will satisfy the requirements or preferences of its current or
potential enterprise customers.
USC's quarterly results will likely be unpredictable.
USC's revenues and results of operations may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside of its
control. As a result, you should not rely on period-to-period comparisons of
revenues and results of operations as an indication of our future performance.
Some of the factors that may affect our revenues and results of operations
include:
o demand for and market acceptance of our internet-based procurement solution
and services;
o introduction of new and enhanced procurement solutions and services by USC
or our competitors; budgeting cycles of customers and users;
o loss of one or more of our key suppliers, customers or strategic
relationships;
o changes in our pricing policy or those of our competitors or suppliers;
o amount and timing of capital expenditures and other costs relating to the
expansion of its operations; timing and number of new hires;
o ability to comply with applicable laws and regulations or obtain necessary
permits and licenses to sell or ship products to customers;
o technical difficulties with our web site or internet-based procurement
solution; and
o general economic conditions
USC may from time to time make certain pricing, service or marketing
decisions or enter into strategic business combinations that could have a
negative effect on its business, revenues, financial condition or results of
operations for any number of quarterly periods. For example, it intends to
significantly expand its development and engineering expenses to improve its
internet-based procurement solution. In addition, in order to accelerate the
promotion of the United-Source brand, USC intends to increase its marketing
budget significantly.
These increases in expenses may negatively affect USC's results of
operations for a number of quarterly periods and it cannot assure that these
measures will increase its revenues.
Due to USC's relatively short operating history it has limited meaningful
historical financial data upon which to base its planned operating expenses.
Accordingly, its expense levels are based in part on its expectations as to
future revenues from new customers and are relatively fixed in the short term.
USC cannot be certain that it will be able to accurately predict its revenues,
particularly in light of its limited operating history, the intense competition
in the corporate offices supply industry and the resulting uncertainty as to the
success of its business
22
model. If USC fails to accurately predict revenues in relation to fixed expense
levels and it is unable to adjust its operating expenses in a timely manner in
response to lower-than-expected revenues, its business, revenues, results of
operations and financial condition could be negatively affected.
USC's business will suffer if the office products industry does not accept
internet solutions.
Business-to-business e-commerce is a new and emerging business practice
that remains largely untested in the marketplace. Growth in the demand for its
internet-based procurement solution and services depends on the adoption of
e-commerce and internet solutions by corporate supply industry participants,
which requires the acceptance of a new way of conducting business and purchasing
supplies. USC's business could suffer dramatically if e-commerce and internet
solutions are not accepted or not perceived to be effective.
The internet may not prove to be a viable commercial marketplace for the
corporate office supply industry for a number of reasons, including:
o inadequate development of the necessary infrastructure for internet-based
communications within corporate office supply purchasing organizations;
o security and confidentiality concerns of customers and suppliers;
o lack of development of complementary products, such as high-speed modems
and high-speed communication lines;
o implementation of competing procurement solutions; and
o lack of human contact that current, traditional suppliers provide.
The accelerated growth and increasing volume of internet traffic may cause
performance problems which may slow adoption of its internet-based procurement
solution and the United Market(TM).
The growth of internet traffic to very high volumes of use over a
relatively short period of time has caused frequent periods of decreased
internet performance, delays, and in certain cases, system outages. This
decreased performance is caused by limitations inherent in the technology
infrastructure supporting the internet and the internal networks of internet
users. If internet usage continues to grow rapidly, the infrastructure of the
internet and it users may be unable to support the demands of growing e-commerce
usage, and the internet's performance and reliability may decline. If its
existing or potential enterprise customers experience frequent outages or delays
on the internet, the adoption or use of its internet-based, e-commerce
procurement solution may grow more slowly than USC expects or even decline.
USC's ability to increase the speed and reliability of its internet-based
procurement solution is limited by and depends upon the reliability of both the
internet and the internal networks of its existing and potential customers. As a
result, if improvements in the infrastructure supporting both the internet and
the internal networks of its enterprise customers and their purchasing officers
are not made in a timely fashion, USC may have difficulty obtaining new
customers, or maintaining its existing
23
customers, either of which could have a negative impact on its business,
revenues, results of operations and financial condition.
Security and disruption problems with the internet or transacting business over
the internet may inhibit the growth of its internet-based procurement solution.
The secure transmission of confidential information over the internet is
essential to maintaining customer and supplier confidence in USC's United
Market(TM). Customers generally are concerned with security and privacy on the
internet and any publicized security problems could inhibit the growth of the
internet, and therefore its procurement solution, as a means of conducting
transactions. Substantial security breaches on its system could significantly
harm its business. A party that is able to circumvent its security systems could
misappropriate proprietary information or cause interruptions in its operations.
USC incurs substantial expense to protect against and remedy security breaches
and their consequences. Despite the implementation of security measures, its
networks may be vulnerable to unauthorized and illegal access, computer viruses
and other disruptive problems. Eliminating computer viruses and alleviating
other security problems may require interruptions, delays or cessation of
service to users accessing its solution, which could have a negative effect on
its business, results of operation and financial condition.
Internet service providers and on-line service providers have in the past
experienced, and may in the future experience, interruptions in service as a
result of the accidental or intentional actions of internet users, current and
former employees or others. USC may be required to expend significant capital or
other resources to protect against the threat of security breaches or to
alleviate problems caused by such breaches. Although USC intends to continue to
implement industry-standard security measures, it cannot be certain that
implemented measures will not be circumvented in the future.
If USC experiences a security breach that results in the misappropriation
of proprietary information maintained in its systems or if it experiences
interruptions in its service, its reputation and brand may be damaged and it may
be exposed to a risk of loss or litigation and possible liability. Damage to its
reputation and brand could cause us to lose suppliers and customers and
negatively affect its business, results of operations and financial condition.
Its insurance policies may not be adequate to reimburse us for losses caused by
security breaches or service disruption.
System failure may cause interruption of USC's services.
The performance of its server and networking hardware and software
infrastructure is critical to its business and reputation and its ability to
process transactions, provide high quality customer service, and attract and
retain customers, suppliers, users and strategic partners. Its infrastructure
and systems will initially be located at one hosting site maintained by Commerce
One. USC anticipates adding a mirror site at a different, distant location.
Until then, it depends on a single-site infrastructure and any disruption to
this infrastructure resulting from a natural disaster or other event could
result in an interruption in its service, fewer transactions and, if
24
sustained or repeated, could impair its reputation and the attractiveness of its
services, which would have an adverse effect on its business, revenues,
financial condition and results of operations.
USC's systems and operations are vulnerable to damage or interruption from
human error, natural disasters, power loss, telecommunications failures,
break-ins, sabotage, computer viruses, intentional acts of vandalism and similar
events. USC does not have a formal disaster recovery plan or alternative
provider of hosting services. In addition, it does not carry sufficient business
interruption insurance to compensate for losses that could occur. Any failure on
its part to expand its system or internet infrastructure to keep up with the
demands of its customers and users, or any system failure that causes an
interruption in service or a decrease in responsiveness of its internet- based
procurement solution or web site, could result in fewer transactions and, if
sustained or repeated, could impair its reputation and the attractiveness of its
brand name, which would adversely affect its business, revenues, financial
condition and results of operations.
USC may be exposed to product liability claims.
USC faces potential liability for claims based on the type and adequacy of
the information and data that it obtains from suppliers and makes available, and
the nature of the products that it sells and distributes utilizing the internet,
including claims for breach of warranty, product liability, misrepresentation,
violation of governmental regulations and other commercial claims. In
particular, USC bears the risk of liability for product loss, spill, or release,
and resulting damages to persons and property during delivery by the supplier to
the customer and return by the customer to the supplier. It does not pass
through the manufacturers' warranties on the products it distributes. However,
it bears the risk of loss of revenue from the product sale if a purchaser does
not pay for a defective product. Although USC will maintain general liability
insurance, its insurance may not cover some claims, penalties, or spills, is
subject to policy limits and exclusions, and may not be adequate to fully
indemnify it or its employees for any civil, governmental or criminal liability
that may be imposed. Furthermore, this insurance may not be available at
commercially reasonable rates in the future. Any liability not covered by its
insurance or in excess of its insurance coverage could have a negative effect on
its business, results of operations and financial condition. Its liability is
potentially greater with respect to sales to purchasing officers and others who
are not affiliated with an enterprise customer.
USC also seeks to obtain indemnification from its suppliers against some of
these claims. If, however, the scope of the indemnification is limited, a few of
its suppliers have not agreed to indemnify USC and some suppliers may be unable
or unwilling to indemnify USC in the future. In addition, it is not in a
position to monitor its suppliers' activities. Therefore, it is exposed to
liability and risk for these claims.
USC depends on its intellectual property rights and is subject to the risk of
infringement.
USC's intellectual property is important to its business, and it seeks to
protect its intellectual property through copyrights, trademarks, trade secrets,
confidentiality provisions in its customer, supplier and strategic relationship
agreements, nondisclosure agreements with third
25
parties, and invention assignment agreements with its employees and contractors.
USC cannot assure that measures it takes to protect its intellectual property
will be successful or that third parties will not develop alternative
procurement solutions that do not infringe upon its intellectual property. In
addition, it could be subject to intellectual property infringement claims by
others. Its failure to protect against misappropriation of its intellectual
property, or claims that it is infringing the intellectual property of third
parties could have a negative effect on its business, revenues, financial
condition and results of operations.
Intellectual property claims against USC could cause its business to suffer.
In recent years, there has been significant litigation in the United States
regarding patents and other intellectual property rights. Although USC has never
been involved in any intellectual property litigation, it expects that
internet-related products may be increasingly vulnerable to third-party
infringement claims as the number of competitors in its industry grows and the
functionality of products in the different industry segments overlap. It cannot
be sure that third parties will not make claims of infringement against them
with respect to its services and technology. Any such claims, regardless of
their merits, would likely be time consuming and expensive to resolve, would
divert management time and attention and could cause costly delays. Any
potential intellectual property litigation resulting from third-party
infringement claims could also force USC to do the following:
o stop the use or sale of its services;
o pay substantial damages;
o expend significant resources to reengineer its services to be
non-infringing; or
o obtain a license from the owner of the allegedly infringing property, which
license may not be available at reasonable terms, if at all.
If USC is forced to take any of the foregoing actions, its business may be
seriously harmed.
USC is dependent on proprietary technology licensed from third parties, the loss
of which could be costly.
USC licenses a significant portion of its exchange operating software from
Commerce One and certain content for its online services from third parties.
Additionally, it intends to license a significant portion of its transaction
fulfillment and inventory tracking systems from third parties. These third-party
content licenses may not be available to it on favorable terms, or at all, in
the future. In addition, it must be able to successfully integrate this content
in a timely and cost-effective manner to create an effective finished product.
If USC fails to obtain necessary content on favorable terms or is unable to
successfully integrate this content or if it is unable to continue to license
its order fulfillment transaction systems on favorable terms, it could have a
material adverse effect on its business operations.
26
Regulation or taxation of the internet or transacting business over the internet
may inhibit the growth of USC's internet-based procurement solution.
Due to the increasing popularity and use of the internet and of e-commerce,
it is possible that a number of taxes, laws and regulations may be adopted in
the U.S. and abroad with particular applicability to the internet and e-commerce
transactions. It is possible that governments will adopt taxes and enact
legislation that may be applicable to USC in areas such as content, product
distribution, network security, encryption and the use of key escrow, data and
privacy protection, electronic authentication or "digital" signatures, illegal
and harmful content, access charges and re-transmission activities. Moreover,
the applicability to the internet of existing laws governing issues such as
property ownership, content, taxation, defamation and personal privacy is
uncertain. Taxes, laws or regulations may limit the growth of the internet,
dampen e-commerce and reduce the number of transactions, increase USC's cost of
doing business or increase its legal exposure. Any of these factors could have a
negative effect on its business, revenues, and results of operations and
financial condition.
Risks relating to the securities market
Restrictions on Resale.
Certain restrictions are applicable to the 2,200,000 shares of our Common
Stock offered for sale by this prospectus. Twenty percent (20%) of the shares
being distributed to the shareholders of BIOF may be resold immediately and
eighty percent (80%) of the shares of the shares being distributed to the
shareholders of BIOF will not be eligible for resale until nine months have
elapsed from the date of this prospectus. Accordingly, the shares are being
distributed on a pro rata basis whereby 20 % of a distributee's may be resold
immediately and 80% of a distributee's shares will not be eligible for resale
until nine months have elapsed from the date of this prospectus. The sale in the
public market of such shares of Common Stock, or the expectation of sales, may
adversely affect the prevailing market prices of our Common Stock.
The price of our Common Stock in this offering has been arbitrarily determined.
The offering price of our Common Stock has been arbitrarily determined by
Hannibal and does not necessarily bear any relationship to our assets, book
value, revenues, prospects or other established criteria of value.
Since our Common Stock has never been traded, prices for the Common Stock may
decline after the offering.
There is no public market for our Common Stock and no assurance can be
given that a market will develop or that any shareholder will be able to
liquidate his investment without considerable delay, if at all. There is no
underwriter engaged in connection with this transaction and there can be no
assurance that any brokerage firm will act as a market maker of our securities.
If a market should develop, the price may be highly volatile. In addition, an
active
27
trading market for our Common Stock may not develop or be sustained. Our sale of
an aggregate of 826,708 shares for cash and the sale by the Selling
Securityholder of 50,000 shares of our Common Stock in the public market may
cause the market price of our Common Stock to fall. Factors such as those
discussed in this "Risk factors" section may have a significant impact on the
market price of our Common Stock. Due to the anticipated low price of our Common
Stock, many brokerage firms may not be willing to effect transactions in our
Common Stock. Even if a purchaser finds a broker willing to effect a transaction
in our Common Stock, the combination of brokerage commissions, state transfer
taxes, if any, and other selling costs may exceed the selling price.
Investors may face significant restrictions on the resale of our Common Stock
due to state and federal laws and regulations.
Because our Common Stock has not been registered for resale under the blue
sky laws of any state, our shareholders and those persons desiring to purchase
our Common Stock in any trading market that may develop in the future should be
aware that there may be significant state blue sky law restrictions on the
ability of investors to sell, and on purchasers to buy, our Common Stock.
Accordingly, investors should consider the secondary market for our Common Stock
to be a limited one. Investor may be unable to resell their stock without the
significant expense of state registration or qualification.
Penny stock regulations may hinder our shareholders' ability to sell our Common
Stock.
The Securities and Exchange Commission has adopted regulations which
generally define "penny stock" to be an equity security that has a market price
less than $5.00 per share or an exercise price less than $5.00 per share. During
such periods when our Common Stock does not qualify for inclusion on the NASDAQ
Small Cap Market, the Common Stock may become subject to rules that impose
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors.
For transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Additionally, for any
transaction involving a penny stock, unless exempt, the rules require the
delivery, prior to the transaction, of a disclosure schedule prepared by the
Securities and Exchange Commission relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations of the
securities, and, if the broker-dealer is the sole market maker, the broker
dealer must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. In addition, certain broker-dealers are
precluded from acting as market makers for non-NASDAQ securities and these
securities may be ineligible for margin loans. Consequently, the rule may affect
the ability of broker-dealers to sell our securities and may also affect the
ability of shareholders to sell the securities in the secondary market.
28
Shareholders should be aware that, according to the Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include:
o control of the market for the security by one or a few broker-dealers
that are often related to the promoter or issuer;
o manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases;
o "boiler room" practices involving high pressure sales tactics and
unrealistic price projections by inexperienced sales persons;
o excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
o the wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired level,
along with the inevitable collapse of those prices with consequent
investor losses.
Our management is aware of the abuses that have occurred historically in the
penny stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our Common Stock.
Hannibal may never qualify for listing on the NASDAQ Small Cap Market.
Hannibal's Common Stock is not presently included for trading on the NASDAQ
Small Cap Market, and there can be no assurances that we will ultimately qualify
for inclusion within such market. In order for an issuer to be included on the
NASDAQ Small Cap Market, it is required to have total assets of at least
$4,000,000, capital and surplus of at least $2,000,000, a minimum price per
share of not less than $3.00, have publicly-held shares with a market value of
at least $1,000,000 as well as certain other criteria. In addition to
quantitative standards the staff of NASDAQ may also consider other factors,
including, but not limited to, the nature and scope of a company's operations in
conjunction with any and all conditions and/or circumstances surrounding an
entity's operations. No assurance can be given that our Common Stock will ever
qualify for inclusion on the NASDAQ Small Cap Market and qualification for
inclusion is not a prerequisite to proceeding with the Offering. Until our
shares qualify for inclusion in the NASDAQ system, our securities will be traded
on the OTC Bulletin Board, which may limit our shareholders' ability to sell our
Common Stock.
29
Forward-looking statements
You should not rely on forward-looking statements in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates", "believes", "plans",
"expects", "future", "intends" and similar expressions to identify these
forward-looking statements. Prospective investors should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this prospectus. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by our company described in "Risk factors" and elsewhere in this
prospectus.
Use of proceeds
This prospectus is part of a registration statement that permits Hannibal
to distribute 1,323,392 shares of its Common Stock to shareholders of BIOF. The
shareholders of BIOF receiving shares of Hannibal Common Stock will not be
required to pay any consideration for the Hannibal Common Stock nor will they be
required to surrender or exchange their shares of BIOF. As such, Hannibal will
not receive any proceeds from the distribution of 1,323,392 shares of its Common
Stock to the BIOF shareholders.
However, Hannibal will receive the proceeds to be derived from the sale of
an aggregate of 826,608 shares of its Common Stock also being offered by this
prospectus. Such 826,608 shares are part of the total of 2,200,000 shares that
are being offered by this prospectus. Of such 826,608 shares, 800,000 thereof
are required to result in net proceeds of $1,200,000 to satisfy the terms of the
Stock Exchange Agreement between Hannibal and USC; and the balance of 26,608
shares are being sold by Hannibal to defray the costs and expenses of this
offering (including legal, accounting and printing and miscellaneous expenses.)
The additional 50,000 shares being offered hereby will be issued to the
financial intermediary instrumental in arranging the transaction between
Hannibal and USC.
Hannibal intends to make available to USC all of the net proceeds of
$1,200,000 from the sale of 800,000 of the 826,608 shares of its Common Stock.
USC intends to use such $1,200,000 to customization to make its platform as
unique as is possible and to sales and marketing costs necessary to obtain
increased revenues. The balance of 26,608 shares being sold by Hannibal are
intended to defray all of the costs and expenses of this offering.
30
Dilution
Net tangible book value per share consists of total assets minus intangible
assets and liabilities, divided by the total number of common shares issued and
outstanding. Hannibal has no warrants, options or convertible securities issued
and outstanding. USC has 1,000,000 shares of Preferred Stock issued and
outstanding (convertible into 1,000,000 shares of USC Common Stock) and
1,000,000 shares of Common Stock reserved for issuance pursuant to USC's 2000
Stock Incentive Plan.
a) At March 31, 2000, the date of the audited financial statements of
Hannibal and USC, Hannibal had a net tangible book value of $(57,833),
or $(57,833) per share and USC had a net tangible book value of
$(4,518), or $(4,518) per common share;
b) At June 30, 2000, the date of the unaudited financial statements of
Hannibal and USC including the receipt by USC of the sum of $1,240,000
from the sale of 310,000 shares of its Preferred Stock, Hannibal had a
net tangible book value of $63,093 or $63,093 per Common Share and USC
had a net tangible book value of $840,539 or $0.09 per Common share;
and
c) Assuming the consummation of the transaction described herein (the
issuance of an aggregate of 22,000,000 shares to acquire USC
(19,800,000 shares), to be distributed to the BIOF shareholders
(1,323,292 shares), to be sold for cash (800,000 shares), and to be
sold to defray the expenses hereof (26,708 shares) and to compensate a
financial intermediary (50,000 shares)), and further assuming that the
800,000 shares to be sold for cash result is net proceeds of
$1,200,000 and that all proceeds derived from the sale of the 26,708
shares do in fact discharge all of the costs of this offering), the
resulting combined entity will have a net tangible book value of
$2,017,358, or $0.09 per share.
Concurrent offering
The registration statement of which this prospectus is a part also includes
a prospectus with respect to an offering of up to 50,000 shares of Hannibal
Common Stock, all of which may be sold in the open market, in privately
negotiated transactions or otherwise, directly by one (1) Selling
Securityholder.
Hannibal will not receive any proceeds from the sale of such 50,000 shares
of Common Stock. Expenses of the offering incurred by the Selling
Securityholder, other than fees and expenses of counsel to the Selling
Securityholder, if any, and selling commissions, will be paid by Hannibal. Sales
of such 50,000 shares of Common Stock by the Selling Securityholder or the
potential of such sales may have a material adverse effect on the market price
of the Common Stock offered hereby.
31
PLAN OF DISTRIBUTION
Reasons for the distribution
Hannibal was created to pursue securities litigation matters on behalf of
the shareholders of BIOF. However, the rescission of the transaction between
BIOF and LCC and the acquisition of USC, obviated the need to have Hannibal
pursue these litigation matters. On July 24, 2000, Hannibal executed a Stock
Exchange Agreement with USC. According to the Stock Exchange Agreement, it is
anticipated that USC will be acquired by Hannibal. At the time of the closing of
the acquisition, Hannibal will change its name to United Source Corporation. In
connection with the acquisition, the common shareholders of USC will receive
19,800,000 shares of newly issued, fully paid Common Stock of Hannibal upon the
exchange and surrender of their common shares in USC or approximately 90% of the
outstanding shares of Common Stock of Hannibal.
Effecting the distribution
Each shareholder of BIOF, will receive one share of Hannibal Common Stock
for every four shares of BIOF Common Stock held of record on _______, 2000,
which date is referred to throughout this prospectus as the "Distribution Record
Date". Upon completion of the distribution of the 1,323,392 shares of Hannibal
Common Stock and the acquisition of USC, there will be an aggregate of
22,000,000 shares of Hannibal Common Stock issued and outstanding. Twenty
percent (20%) of the shares being distributed to the shareholders of BIOF may be
resold immediately and eighty percent (80%) of the shares being distributed to
the shareholders of BIOF will not be eligible for resale until nine months have
elapsed from the date of this prospectus. Accordingly, the shares are being
distributed on a pro rata basis whereby 20 % of a distributee's may be resold
immediately and 80% of a distributee's shares will not be eligible for resale
until nine months have elapsed from the date of this prospectus.
The distribution of the Hannibal Common Stock will be made on or about
______, 2000, to shareholders of record of BIOF, on the Distribution Record
Date. The BIOF recipients of our Common Stock in this offering will not be
required to pay for the shares of Hannibal Common Stock received in the
distribution, nor will they be required to surrender or exchange shares of BIOF
Common Stock in order to receive their shares of Hannibal Common Stock.
Shareholders of USC will receive their certificates representing shares of
Hannibal subsequent to the closing of the acquisition of USC by Hannibal.
Escrow of Offering Funds
826,608 shares will be offered on a "best efforts, all-or-none" basis. If
826,608 shares are not sold within ___ days from the date hereof, all monies
received will be refunded to subscribers in full without interest thereon
(unless the offering is extended for an additional ___ days). In addition,
during the period of escrow subscribers will not be entitled to a refund of
their subscription. If at the end of the offering period, 826, 608 shares have
been sold, all funds in the escrow account will be released to Hannibal.
32
Restrictions on Resale
Certain restrictions are applicable to 1,372,392 of the 2,200,000 shares of
our Common Stock offered for sale by this prospectus. Twenty percent (20%) of
the shares being distributed to the shareholders of BIOF may be resold
immediately and eighty percent (80%) of the shares being distributed to the
shareholders of BIOF will not be eligible for resale until nine months have
elapsed from the date of this prospectus. Accordingly, the shares are being
distributed on a pro rata basis whereby 20% of a distributee's may be resold
immediately and 80% of a distributee's shares will not be eligible for resale
until nine months have elapsed from the date of this prospectus.
However, Hannibal and USC reserve the right to modify such nine month date.
In any event, Hannibal will file an appropriate post-effective amendment to the
registration statement of which this prospectus forms a part to reflect any such
change, any change in the condition (financial or otherwise) of Hannibal, and
the then current market price of the Hannibal Common Stock.
Federal income tax consequences of the distribution of
Hannibal common stock to the shareholders of BIOF
Introduction
This discussion is a summary of the material tax consequences of the
distribution of the Hannibal shares (the "Spinoff"). This discussion does not
purport to be a complete analysis of all of the potential tax effects of the
Spinoff and this discussion is limited to United States Federal Income tax
matters. This discussion is based upon the Internal Revenue code of 1986,
Treasury regulations, Internal Revenue Service Rulings, and judicial decisions
now in effect. All of the foregoing are subject to change at any time, possibly
with retroactive effect, by legislative, judicial or administrative action. Nor
does this discussion affect or address possible tax consequences of the receipt
of Spinoff shares by taxpayers subject to special rules, including, inter alia,
life insurance companies, tax-exempt organizations, regulated investment
companies, S-corporations, financial institutions, broker-dealers in securities,
foreign entities and non-resident alien individuals.
Receipt of spinoff shares by BIOF shareholders
The Spinoff will be a taxable event to BIOF shareholders for Federal income
tax purposes. The amount received in the Spin-off by each BIOF shareholder for
Federal income tax purposes will be the fair market value of Hannibal Common
Stock received by each BIOF shareholder on the date of the distribution of the
Spinoff shares. The amount received in the Spinoff by each BIOF shareholder will
be treated as a dividend (as ordinary income) to such shareholder to the extent
of such stockholder's pro rata share of BIOF's current and accumulated earnings
and
33
profits as computed for Federal income tax purposes. (Hannibal is advised that,
as of April 30, 2000, BIOF shows no accumulated earnings and profits.) The
amount received in the Spinoff by each Hannibal shareholder that is not treated
as a dividend first will be treated as a non-taxable return of capital to the
extent of such shareholder's basis in his BIOF Common Stock, and then as an
amount received by such shareholder from the sale or exchange of property. The
amount that is treated as having been received by a BIOF shareholder from the
sale or exchange of property generally will be a capital gain (long-term if the
BIOF shares have been held for more than one year). For the purpose of
determining the amount received in the Spinoff by a BIOF shareholder that
constitutes a dividend, the shareholder's pro rata share of BIOF's current and
accumulated earnings and profits will be based on the shareholder's percentage
ownership of BIOF Common Stock. No fractional shares will be issued in
connection with the distribution. Stockholders who otherwise would be entitled
to receive fractional shares because they hold a number of shares of Common
Stock of BIOF not evenly divisible by four (4) will be entitled to a cash
payment in lieu thereof.
Assuming BIOF has current and accumulated tax losses, if and to the extent
that the Spinoff shares have a value in excess of BIOF's basis in the Hannibal
Common Stock, BIOF would then realize gain to the extent of such excess; and if
that gain causes BIOF to have current earnings and profits, the Spinoff share
recipients will recognize dividend income ratably to the extent thereof.
For Federal income tax purposes, each BIOF shareholder will acquire an
initial tax basis in its BIOF shares of Common Stock equal to the fair market
value of the BIOF shares (the value of the Hannibal share of Common Stock
received as of the distribution date thereof). Each BIOF shareholder's holding
period for Hannibal Common Stock received from the Spinoff will begin on the
distribution date. BIOF will make a determination of the fair market value of
the Hannibal shares as of the distribution date at a date thereafter based upon
a number of factors. These factors include, without limitation, the trading
price of Hannibal shares at or near the distribution date. Prior to _______ ___,
2000, BIOF will report the amount of the Spinoff received by each BIOF
shareholder to such shareholder and to the Internal Revenue Service. There can
be no assurance that the Internal Revenue Service or the courts will agree with
BIOF's determination of the amount received from the Spinoff. Should the
Internal Revenue Service or the courts determine that BIOF shareholders received
a larger distribution amount than the amounts reported to them by BIOF, and
challenge the Federal income tax return of the BIOF shareholder, the latter
would have to bear the expense and effort of defending against or resolving such
challenge.
Each BIOF shareholder is advised to consult its own tax adviser as to the
specific tax consequences to such shareholder of the proposed spinoff, including
the application and effect of state, local and foreign income and other tax
laws.
The aggregate of 19,800,000 shares of Hannibal to be issued to the
shareholders of USC will qualify as a tax-free reorganization pursuant to
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
34
Hannibal relationship with BIOF after the distribution
Background
Currently, Hannibal is a wholly-owned subsidiary of BIOF. After the
distribution, BIOF will no longer have an ownership interest in Hannibal.
Transfer of management
Upon consummation of the acquisition by Hannibal of USC, the Hannibal board
of directors shall be comprised of up to 5 members, 4 members of which will be
designated by USC. BIOF will have a right to appoint one nominee to the
remaining seat on the board of directors for a period of one year from the date
of the closing of the acquisition. Thereafter, the board of directors shall be
elected by the shareholders in accordance with its bylaws. Subject to the
approval of the board of directors, Mr. Ralph Bianculli will be responsible for
the appointment of the senior management. At the closing of the acquisition,
Hannibal shall have no employees and all the officers and directors of Hannibal
shall resign. (See "Management" hereinafter).
Our business
General
Pursuant to a Stock Purchase Agreement, dated April 1, 1998, between BIOF
and LCC, BIOF purchased approximately 87% of the issued and outstanding stock of
Biofarm, S.A. from LCC in exchange for a BIOF convertible debenture. As part of
this agreement, BIOF preserved the benefit of anticipated litigation proceeds
for its shareholders other than LCC. In October, 1999, the transaction between
LCC and BIOF was rescinded because the operations contributed by LCC to BIOF
collectively lost $3.6 million for the nine-month ended July 31, 1999, and such
loss exacerbated the auditors' previous going concern reservation.
As a result of a vote at an annual meeting of the BIOF shareholders held on
October 5, 1998, and the acquisition of the subsidiary of LCC, a subsidiary of
BIOF was incorporated under the laws of Nevada to pursue certain litigation
matters of BIOF for the benefit of BIOF's shareholders. Such subsidiary remained
inactive until May, 1999, when it received a necessary order from the New York
State Supreme Court assigning a litigation judgment to it from BIOF. We divested
ourselves of such litigation matters when we agreed to acquire USC and when BIOF
rescinded its transaction with LCC. In November, 1999, our board of directors
decided to change the state of incorporation of Hannibal from Nevada to
Delaware. The board approved a tax-free reorganization whereby Hannibal merged
with and into a Delaware corporation organized on December 2, 1999, under the
same name.
Hannibal is a wholly-owned subsidiary of BIOF.
35
To date, Hannibal has no significant assets or liabilities and is in the
development stage. Hannibal has recently entered into a Stock Exchange Agreement
for the acquisition of USC, subject to the consummation of the distribution and
satisfaction of certain other conditions.
Property
Hannibal does not currently own or lease any property.
Employees
Hannibal does not currently have employees.
The business of USC
General
USC is developing United-Source.com, an interactive, internet-based
business-to-business e-commerce corporate office supply procurement solution and
"blind bid" marketplace exchange for suppliers and purchasers of products and
services by corporate and industrial organizations. The office supply categories
provided through United-Source.com include:
o traditional office products;
o coffee services;
o janitorial and cleaning products;
o disposable food service packaging;
o vending services and products;
o snack products; and
o spring and filtered water products.
The delivery and installation of most of the office products will be
accomplished through local service providers or suppliers, who will also make
blind bids" on requests for quotations posted by the customer-end users on its
exchange. USC is using its extensive industry experience to design a
buyer-driven marketplace that streamlines the traditionally fragmented,
multi-channel, localized and inefficient corporate office supply chain. USC's
marketplace, which it calls the "United Market(TM)", is a secure, internet
procurement and market solution, which allows buyers of office products to
cross-search and source content and products, aggregate multiple buyer demand,
and purchase products from multiple suppliers/service providers with a single
order. Its procurement approach and its supplier and purchaser participants,
which it calls the "United Sourcing Network(TM)", does not give priority to any
particular office products supplier/service provider/distributor, but allows
each to bid on a "blind basis" on the aggregated purchase orders submitted by
corporate end-users. Corporate purchasers, office administrators and procurement
professionals and other users within the corporate enterprises benefit from the
United Market(TM) because it offers them convenient, aggregated purchasing,
one-stop-shopping, united in one web-based, business supplier/service provider
and customer focused marketplace
36
source. This approach allows USC to create an open and scalable marketplace that
it believes is more attractive to both buyers and sellers.
Since its founding in December 1999, USC has developed a comprehensive
database of over 100 suppliers and/or service providers with over 150,000 office
products. The online database is a tool that will be used by corporate buyers
and purchasing professionals to locate office supplies and products. USC is
developing the United Market(TM), which will utilize an advanced search engine
and transaction software to allow users to easily identify, locate and purchase
office products from a database of over 150,000 products from hundreds of
supplier/service providers. USC hopes to attract multiple, suppliers/service
providers by providing them with a neutral marketplace and allowing them to
reach incremental customers. USC believes that a growing number of
suppliers/service providers and products in the United Market(TM) will
potentially draw more enterprise customers to adopt its procurement solution and
accelerate its usage by corporate purchasers. To encourage adoption of its
solution by enterprises, USC minimizes the up-front commitment of time and
capital required to install, maintain and use its procurement solution, thereby
encouraging enterprise adoption. USC will also educate users within its United
Sourcing Network(TM) about the benefits of its solution and will provide
training on its use, thereby accelerating system usage.
USC believes the United Market(TM) and procurement solution and blind bid
exchange will provide significant benefits to corporate enterprises, purchasers
and suppliers/service providers. The United Market(TM) procurement solution will
enable enterprises to reduce procurement costs and obtain volume discounts and
other economies of scale by seamlessly aggregating their purchase order demand
with other purchasers in the United Market(TM), integrating their customized
workflow, business rules and processes, and to obtain lowest bid
supplier/service provider pricing within the United Market(TM). Its solution
automates, consolidates and monitors the approval and invoicing process as well
as order placement and delivery information for the enterprise. A corporate
purchaser will be able to use its automated ordering and approval process to
purchase and track orders, resulting in significant time savings. USC offers
suppliers a cost-effective opportunity to reach more customers and sell more
products by establishing or enhancing their internet presence and providing
information links to existing online or electronic catalogs. The United
Market(TM) also offers suppliers the capability to partially bid on aggregated
purchaser orders for items which the supplier has in inventory or has excess
production, and updates product information and introduces new products without
being limited by catalog publication cycles. USC believes that it is the first
web-based, multiple purchaser, multiple supplier, "blind bid" exchanges that
allow corporate purchasers of office products to submit their purchase orders on
an aggregated basis with other purchasers for open bidding by the suppliers in
the United Sourcing Network(TM).
United-Source.com originates and processes the purchase order from the
end-user, aggregates purchase orders from multiple purchasers, places a
corresponding order for bid with the participating suppliers in the "blind bid
exchange", collects payment from the purchaser, purchases and warehouses, if
necessary, the inventory from the bid winning supplier(s), and fulfills the
order by making delivery to the purchaser end-users through a common carrier
which is selected by the purchasers. USC has entered into a Supply and
Fulfillment Agreement with
37
Paradigm Marketing Consortium, Inc. which allows it to receive products from
suppliers and manufacturers, warehouse products and fulfill customer orders.
Industry overview
Growth of business-to-business commerce on the internet
The internet has emerged as the fastest growing communications medium in
history and is dramatically changing how businesses and individuals communicate
and share information. International Data Corporation estimates that the number
of internet users will grow from 142 million at the end of 1998 to 399 million
by 2002. The internet has created new opportunities for conducting commerce,
such as business-to-consumer and person-to-person e-commerce. Recently, the
widespread adoption of intranets and the acceptance of the internet as a
business communications platform has created a foundation for
business-to-business e-commerce that offers thc potential for organizations to
streamline complex processes, lower cost and improve productivity.
internet-based business-to-business e-commerce is poised for rapid growth and is
expected to represent a significantly larger opportunity than
business-to-consumer or person-to-person e-commerce. According to Forrester
Research, business-to-business e-commerce is expected to grow from $43 billion
in 1998 to $1.3 trillion in 2003, accounting for more than 90% of the dollar
value of e-commerce in the United States by 2003.
The dynamics of business-to-business e-commerce relationships differ
significantly from those of other e-commerce relationships. Business-to-business
e-commerce solutions frequently automate or otherwise impact workflows or
processes that are fundamental to a business's operations. In addition,
business-to-business e-commerce solutions must often be integrated with an
enterprise's existing information systems, a process that can be complex,
time-consuming and expensive. Finally, personnel throughout the enterprise must
be trained to use the solution. Consequently, selection and implementation of a
business-to-business e-commerce solution represents a significant commitment by
the enterprise, and the costs of switching solutions are high. In addition,
because business transactions are typically recurring and non-discretionary, the
average order size and lifetime value of a business-to-business e-commerce
customer is generally greater than that of a business-to-consumer e-commerce
customer.
Business-to-business e-commerce solutions that offer improved efficiency
through the automation of business processes and workflows are being targeted
toward a variety of industries. These solutions are likely to be most readily
accepted by industries characterized by a large number of buyers and sellers, a
high degree of fragmentation among buyers, sellers or both, significant
dependence on information exchanges, large transaction volume and user
acceptance of the internet.
The office products market
Based upon data from Dunn & Bradstreet, USC estimates that the market for
corporate office supply products in 2000 will be approximately $110 billion in
North America. Every year, thousands of corporations in North America purchase
office products from thousands of different
38
suppliers. As the demand for office products grows, the need for efficient
procurement processes becomes more critical.
The current office products market is characterized by:
o complex, information-intensive products;
o a highly fragmented, localized supply chain; and
o a heavy concentration of manual purchasing processes consisting of printed
catalogs, paper requisitions and telephone and fax orders.
There are, generally, six categories of office products, all of which will
be offered through the United Market(TM):
(1) traditional office supplies (such as printer and copy paper, writing
instruments and filing materials),
(2) janitorial supplies,
(3) coffee services,
(4) disposable food service packaging,
(5) vending services and products,
(6) snack products, spring and filtered water products.
Technical suppliers typically sell highly technical instruments and capital
equipment, such as photocopy machines and computers directly to customers,
whereas commodity products and specialty products are typically sold through
distributors. The office products market is highly fragmented and localized.
Limitations of the traditional supply chain
The traditional supply chain in the office products industry does not
adequately address the diverse needs of corporate purchasers, purchasing
professionals or suppliers.
Purchasing professionals
The product ordering process traditionally has been a paper-based process
that requires manual preparation of purchase orders, written approval by the
agent's purchasing manager and manual order tracking, billing and reporting
across multiple departments within the enterprise. Traditionally, corporations
requisition supplies through office administrators and purchasing professionals
within their organizations who place orders with multiple suppliers by
telephone, fax and e-mail. This multi-step manual process is highly susceptible
to errors. Additionally, the traditional process makes it difficult for office
administrators and purchasing professionals to enforce purchasing policies among
office personnel who specify and request products. Traditional purchasing
methods in the office industry are inefficient, costly and time consuming for
the office administrators and purchasing professional and the enterprise.
Purchasing professionals may spend several hours examining multiple paper
product catalogs and other information from different suppliers to identify the
most appropriate product. Additionally, the
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paper-based orders are costly for purchasers and suppliers to track and bill,
and the decentralized order process does not facilitate data collection, which
is required to take full advantage of volume discounts or other economies of
scale. Therefore it is difficult to integrate these purchases with the
enterprise's procurement policies and business rules.
Buying organizations in a variety of industries that were surveyed by the
Aberdeen Group, a computer and communications research and consulting
organization, reported that it typically costs $107 per requisition for orders
processed manually, compared with $30 on average to process an order through an
internet automated procurement system.
Further, corporate purchasers often:
o have immediate needs for critical items that are highly technical and have
exacting criteria;
o need new products that they have not purchased before; and
o must purchase these items from new and different suppliers.
As a result, it is difficult and time-consuming for corporate purchasers to
identify, compare, source pricing and purchase the office products required to
meet their needs using the traditional approach. In fact, USC estimates that a
typical corporate purchasing professional spends up to four hours weekly
searching through paper catalogs and product literature and requesting technical
data from various suppliers.
Suppliers
Traditionally, suppliers have used two sales channels: traditional
distributors and direct sales. While traditional distributors can give a
supplier access to a broad market, distributors separate suppliers from the
ultimate customer and may lack the ability to provide the technical and
information assistance required to sell products.
As a result, traditional distributors normally focus on selling commodity
products. Conversely, direct sales provide suppliers with greater control and
contact with their customers, enabling them to provide the technical assistance
necessary for the sale of technical products. However, direct sales are often
expensive and inefficient. Many suppliers have web sites that are essentially
online versions of their catalogs, but these sites do not address the primary
cause of inefficiency for buyers --the inability to find products, obtain lowest
cost comparative and consolidate orders from different suppliers quickly and
easily through a single service.
Traditional purchasing methods also present a number of challenges to
suppliers trying to reach corporate purchasing professionals with product
information. Due to the high cost of printing and distributing paper catalogs,
suppliers cannot cost-effectively manage frequent updates and distribution of
time-sensitive information. In addition, individual researchers frequently move
from enterprise to enterprise, making it difficult for suppliers to maintain
contact with them. While some suppliers have developed internet web sites to
communicate with
40
individual purchasers, few have invested the significant time and money required
to establish an effective e-commerce channel with their customer base
The online business-to-business market opportunity
Recognizing the limitations of traditional procurement methods, several
large companies have developed automated procurement and electronic data
intercharge systems ("EDI"). These systems attempt to streamline the purchasing
process and leverage purchasing volumes, but often have limitations. These
solutions may only offer access to the products of one or a limited number of
suppliers, are often closed systems with high up-front installation costs and
may not be scalable. In addition, enterprises incur significant costs developing
such internal EDI solutions, integrating them with other enterprise systems and
maintaining their compliance with the enterprise's business rules and purchasing
policies.
Despite such efforts by certain enterprises, the fragmentation and
complexities of the office products industry and the current paper-based
procurement process create the need for a business-to-business e-commerce
solution that seamlessly links suppliers and purchasers of products. To
effectively address the needs of the corporate purchaser, a solution be
cost-effective, easily implemented and maintained, enable the enterprise to
enforce its particular purchasing policies and business rules, enable the
collection of data to maximize volume purchase discounts and interface to
multiple suppliers. To effectively address the needs of the corporate purchaser,
a solution must be easy to use and provide comprehensive product selection,
in-depth product information, specialized search capabilities and an efficient
order and order-tracking mechanism. To effectively address the needs of
customers and suppliers, it is important that the solution offer a neutral and
fair marketplace with full catalog descriptions of products and retail product
pricing information. In addition, the solution should offer suppliers an
opportunity for incremental sales, the ability to offer customer-specific
pricing and an opportunity to leverage any existing electronic catalogs that may
be offered by the supplier. For these reasons, USC believes that the corporate
office products market will be an early adopter of business-to-business
e-commerce solutions and that it is well positioned to take advantage of this
market opportunity.
USC solution
The United Market(TM) solution will provide a comprehensive public web
sites and customized private sites that address the current limitations of the
office products supply chain by streamlining the process of buying and selling
of office products and reducing associated transaction costs. The USC
distributor-neutral approach allows it to create an open and scalable
marketplace that it believes is more attractive to both buyers and sellers.
USC's solutions serve two primary and distinct customers:
Office administrators and purchasing professionals
USC's solution allows office administrators and purchasing professionals to
automate order processing, submit a request for quotation, consolidate purchase
orders and payments and
41
obtain purchasing information. This provides office administrators and
purchasing professionals with greater access to purchasing information to better
monitor and control purchasing patterns and to implement and enforce uniform
purchasing policies that reduce procurement costs. Its solutions enable office
administrators and purchasing professionals to:
o consolidate purchases to obtain the best discounted price from multiple
suppliers/service providers onto one order;
o submit requests for quotations on a basket of goods, products and services
that they are seeking to purchase;
o streamline the purchasing process and reduce the likelihood of errors;
o communicate and control purchasing policies and rules;
o access detailed purchasing information and reports
o search its extensive database, using its industry-leading taxonomies, to
compare products, attributes and technical data across multiple suppliers;
o locate a specific product, equipment or supply item; and
o consolidate, purchase and track orders from multiple suppliers through the
convenience of a single web site, 24 hours a day, seven days a week.
In addition, USC's solutions are designed to be compatible with leading
enterprise software systems and do not require organizations to install
additional enterprise software systems. Any enterprise with internet access will
be able to access the United Market.(TM) This compatibility allows organizations
to avoid the expense, time and training typically required to install and
support new enterprise software.
Service providers/suppliers
USC's solutions offer service providers and suppliers a more efficient
sales channel that cost-effectively provides many of the benefits of direct
sales and distribution. As a result, by participating in its marketplace service
providers and suppliers can expand their market reach and reduce sales,
marketing and customer acquisition and order processing costs. USC's solutions
enable suppliers to;
o more cost-effectively market and sell products through access to its global
audience of corporate office supply purchasing professionals;
o access valuable market and customer data;
o leverage its e-commerce functionality without capital investment;
o easily update product information;
o introduce new products to qualified buyers quickly and economically; and
maintain contact with their customers.
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Strategy
USC's objective is to be the leading internet-based, interactive e-commerce
business-to-business solution for buying and selling office products. It intends
to achieve this objective through the following strategies:
Leverage USC's early to internet market position and build brand equity. USC
will invest significant resources to establish a strong brand identity. Its
brand recognition will enable it to attract a growing user base of qualified
corporate office supply buyers and participating service providers/suppliers. It
intends to continue to invest heavily in building the United-Source.com brand by
accelerating its marketing, sales, advertising and public relations efforts. USC
also intends to pursue strategic relationships with industry leaders, such as
those it has established with Commerce One, to accelerate market awareness and
demand for its e-commerce solution. USC intends to leverage its strategic
relationship with Paradigm to gain entry into and establish relationships with
their enterprise customers and office product service providers and suppliers.
USC also intend to pursue an aggressive brand development strategy through
targeted advertising and promotions, press coverage and participation in trade
associations and industry events.
Enhance customer loyalty to increase repeat purchases. USC intends to emphasize
a high level of customer service in order to enhance customer loyalty and
facilitate repeat purchases by its customers. In addition, it will provide its
customers with a comprehensive portfolio of solutions that delivers a compelling
user experience and an efficient fulfillment process.
Maintain blind bid service provider/supplier neutrality. USC intends to maintain
a "blind bid" service provider/supplier neutral position to better serve its
purchaser users by soliciting the lowest bid for a purchase order from the
service provider/suppliers in the United Sourcing Network(TM), which will
include aggregated orders to the extent practicable, and maximize its market
opportunity. It believes that its distributor neutral approach has and will
continue to allow us to provide its users access to broad and unbiased product
information. USC believes that this will maximize the attractiveness of its
United Market(TM) to all customer and supplier segments.
Increase usage of United Market(TM) and drive operating efficiencies. USC
intends to aggressively increase the base of enterprise customers using the
United Market(TM), and drive rapid adoption within current and future enterprise
customers. Its hosted, internet-based procurement solution can be quickly and
easily installed at the enterprise, reducing the initial commitment of time and
capital for new enterprises adopting its solution. To encourage implementation
throughout the enterprise, USC charges no initial fees. Additionally, it will
continue to educate users within its existing and future enterprise customers
about the benefits of its solution and provide training on its use, thereby
accelerating adoption The cost of processing individual transactions will drop
as the volume of transactions processed by the United Market(TM) continues to
grow, and through such increased volumes and further automation of its solution,
it will strive to achieve economies of scale across is business.
Maximize procurement software leadership and enterprise compatibility. USC will
concentrate its efforts on integrating its marketplace solution with Commerce
One and other leading
43
enterprise software vendors for ease of access over the internet. This
integration will allow it to accelerate buyer adoption of its services, offer
suppliers a broader sales channel and maximize its market opportunity. In
addition, its platform independence will allow USC to concentrate its technology
spending on its core procurement solutions rather than diverting its resources
to create redundant and potentially competitive enterprise software
functionality. USC will continue to expend substantial efforts to develop,
purchase or license technological advancements to its procurement solution to
enhance its reliability functionality and ease of integration with existing or
newly developed enterprise resource planning applications and other procurement
Systems. USC intends to further automate interfaces with key suppliers, which
will enable timely updates of product information, as well as Inventory
availability. USC also intends to improve its customer- and supplier-specific
pricing flexibility.
Expand USC's product and service offerings. USC intends to advance its market
leadership by continuing to expand the selection of office products offered on
its web site, which will allow it to attract additional purchasing professionals
and accelerate adoption by enterprises. USC is also committed to growing its
portfolio of services to provide the most efficient and comprehensive buying and
selling experience for the corporate office community. USC intends to develop
additional services and functionality internally as well as explore acquisitions
of complementary service offerings. A growing number of suppliers and products
in the United Market(TM) will potentially draw more enterprise customers and
accelerate adoption by purchasing officers. As the United Market(TM) attracts a
critical mass of enterprise customers and purchasing officers, USC believes the
buying power of these customers will attract additional suppliers to its
marketplace. USC also believes this growth cycle will help create a network
effect, where the value to each in the network increases with the addition of
each new participant, increasing the overall value of the United Market(TM).
Products and services
United-Source.com is a web-based marketplace that serves the needs of
corporate purchasing professionals by providing an easy to use, internet
accessed, comprehensive portfolio of solutions. Leveraging its existing customer
base and extensive industry knowledge, USC has built a market-driven portfolio
of services. In addition to its primary offering, an e-commerce marketplace for
public and private buyers, it offers customers extensive online products and
services, including a comprehensive sourcing guide, blind bid auctions,
discounted products and other resources. Its services enable buyers and
suppliers to efficiently gather and update product information, conduct
transactions and facilitate post-order activities. USC believes this
comprehensive interactive, "blind bid", aggregated purchase order offering
provides its customers with a unique online marketplace for office products. Set
forth below is a detailed description of its products and services.
The office product categories offered on the United Market(TM) include:
o Traditional Office Supplies
o Janitorial Supplies
o Disposable Food Service Packaging
o Coffee Services
o Vending services and Products
o Snack Products, Spring and Filtered Water Products
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United-Source.com market solution
A primary component of the United-Source.com market solution is its
electronic purchasing service that allows users to buy over 150,000 office
products and supplies from its growing database of over 100 service
provider/suppliers. Buyers are able to search its proprietary office product
taxonomy. Buyers can also search across multiple suppliers' products
simultaneously, compare product attributes, order products from multiple
suppliers on one consolidated order form, track order status, receive one
invoice and have a single point of contact for customer service. Buyers can also
track order history and create a customized list of frequently purchased
products for easy repurchase.
Once a buyer submits an order which has been accepted by the service
providers/suppliers at an open "blind bid", lowest winning bid price, its
customer care professionals oversee the order fulfillment process. USC purchases
the items from manufacturers/suppliers, and arranges either for shipment from
the manufacturers to its warehouse for fulfillment and delivery directly or
through the service providers to the customers. After the products are shipped,
USC presents to the buyer a consolidated invoice for the products purchased.
Buyers then pay USC by credit card/procurement card or through a more
traditional pre-approved credit account setup and payment system.
For customers requiring specific customization, such as pre-negotiated
pricing discounts from preferred service providers/suppliers or more advanced
integration with enterprise systems, USC offers customized versions of its
marketplace that allows purchasing agents in leading corporations and industrial
organizations to access enterprise-specific pricing while also facilitating
internal approval, workflow routing and financial system integration.
Sales, marketing and customer support
USC markets and sells its United Market(TM) and the United Sourcing
Network(TM) through direct sales, traditional and internet marketing initiatives
and co-marketing relationships. Its primary audiences in the corporate and
industrial markets are office administration executives, who drive the
decision-making process, and purchasing professionals, who drive the procurement
process. Since its potential customers and users fall within a defined market
segment, it is able to identify and target the purchasing decision makers and
potential users who will influence the decision to adopt a procurement solution.
Its experienced sales force concentrates on deploying its enterprise
compatible solutions to larger purchasing organizations. USC also sells its
purchasing solutions to medium-sized and smaller buyers. In addition, USC's
sales team assists suppliers in offering their products through its e-commerce
solutions. By leveraging their experience, it expects to continue to attract and
retain office administrators, purchasing professionals and suppliers, thereby
growing its
45
installed customer base and increasing repeat purchases.
USC leverages a variety of marketing channels to build its brand equity as
well as promotes its solutions to both buyers and suppliers. These channels
include direct marketing, print and online advertising, trade shows and
seminars. USC intends to use a public relations group to communicate new product
and service offerings and other enhancements to industry analysts and targeted
corporate office administration and business press on a regular basis through a
combination of press releases, phone briefings, in-person meetings and trade
show appointments.
USC believes that it can establish and maintain long-term relationships
with its customers and suppliers, and encourage repeat visits and purchases by
its customers if, among other things, it has good account management, customer
support and service. Its customer support and service personnel handle general
customer inquiries and basic technical questions, answer customer questions
about the ordering process and investigate the status of orders, shipments and
payments. USC has automated certain of the tools used by its customer support
and service staff, such as tracking screens that let its support staff track a
transaction by any of a variety of information sources. At any time in the
purchasing process, a customer can access its support staff by fax or e-mail by
following prompts located throughout its web site or by calling its call center
through its toll free telephone line.
Strategic relationships
USC believes that a key element to the successful implementation of its
business strategy is to establish strategic relationships with prominent buyers
and suppliers of office products. USC believes these relationships will assist
it in accelerating its aggregation of content, increasing the transaction volume
on the United Market(TM), achieving further brand awareness and building a
critical mass of important core customers.
Supplier relationships
Strategic relationship with paradigm
USC recently entered into a Supply and Fulfillment Agreement with Paradigm
to market Paradigm office products using the United Market(TM). The agreement
gives USC the right to offer approximately ____ Paradigm-distributed products to
its customers through the United Market(TM). USC currently expects to make the
majority of these products available through the United Market(TM) by the third
quarter of 2000.
USC will fulfill the winning bid suppliers/service providers through the
United Market(TM) by relying on Paradigm for fulfillment and customer service.
USC will be primarily responsible for fulfillment and customer service for all
core product and spot buying orders received from Paradigm customers through the
United Market(TM).
Paradigm and USC will jointly market the United Market(TM) to Paradigm's
existing and new customers and will jointly solicit several key existing
Paradigm suppliers to distribute,
46
market and sell their products through the United Market(TM) procurement
solution. USC believes the Paradigm strategic relationship will enhance and
broaden the United Market(TM), allow USC to obtain aggregated order pricing from
suppliers, and the spot buying services will enable USC to offer complete
fulfillment capability to current and future Paradigm customers through the
United Market(TM). USC believes the Paradigm strategic relationship will
accelerate adoption of the United Market(TM) by Paradigm customers, which
include major U.S. companies, and will enable it to establish relationships with
additional key suppliers and customers.
A majority of the shares of USC are owned by shareholders of Paradigm See
"Related Party Transactions."
Service provider/suppliers
The twenty largest product manufacturers of the products to be offered on the
United Market(TM) are:
Kimberly Clark Corp. Sweetheart Cup Company Southern Container Corp.
Uniwest New York Tenneco/PCA Dart Container Corp.
Fort James Corp. American Tissue Corp. Sealed Air Corp.
Ranpak Corp. Georgia Pacific Corp International Paper
Stone Container Corp. Proctor & Gamble Company Prairie Packaging Inc.
Solo Cup Co. The Chinet Co. Genpak Corp.
The Fonda Group Marcal Paper Mills Inc. James River/Dixie
Bagcraft Packaging LLC The Dial Corp
USC has endeavored to enter into agreements to be the exclusive third party
provider of electronic marketplace services in the United States for office
products service providers in the United Sourcing Network(TM).
USC anticipates that these agreements will provide that:
o USC will be the exclusive third party provider of electronic marketplace
services in the United States for the service provider/supplier for a
period of time;
o the service provider/suppliers will promote its marketplace, including
participating in co-marketing and advertising programs;
o these service provider/suppliers will serve as an advisory board for its
management by providing suggestions and feedback and reviewing potential
new services;
o these service provider/suppliers will utilize its marketplace for their
purchases of office products; and
o these agreements may be terminated by either party for material breach or
upon the occurrence of bankruptcy or similar events.
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USC believes that these exclusive supplier relationships will provide it
with a competitive advantage by assisting it in accelerating its aggregation of
product content and providing potential buyers with a broader range of products.
The twenty largest (by volume of Paradigm sales to them) service
providers/suppliers that have been Paradigm customer's, which USC anticipates
will become service provider/suppliers in the United Sourcing Network(TM) are:
Aramark Corp. Allied Strauss Office Supply Lackmann Food Service
Corporate Coffee Systems Wechsler Coffee Corp. Balducci
Corporate Essential Luv A Cup Coffee Distribution Corp.
Physician Sales Services Eagle Box Company Marriott Corp.
Jittney Food Sunget Supply Inc. Filterfresh Corp.
Candler Coffee Inc. Penn Paper Inc. Aramaday Paper Products
Regal Coffee Service Service America Corp.
Technology
The United Market(TM) is a hosted procurement solution that will reside
entirely on fault-tolerant servers hosted by Commerce One and is accessible by
standard browsers, requiring minimal software installation at the customer site,
and enabling rapid deployment of applications, enhancements and updates. USC's
production data center will be hosted at Commerce One. USC entered into five
agreements on April 13, 1999 with Commerce One regarding the development,
operation, hosting and maintenance of the USC United Market.(TM) USC has entered
into a Buyside Portal Edition and MarketBuilder License Agreement, a MarketSite
Access Agreement, a Master Hosted Application Service Agreement, an Auction
Services Agreement and a Master Consulting Services Agreement.
System architecture. The United Market(TM) will include three layers of
technology:
Process and communication layer. This layer integrates its system with its
customers' client applications Using protocols that traverse corporate
firewalls, such as http, ftp and EDI, to provide a seamless operation of the
United Market(TM) and procurement solution. This layer is implemented using
standard web servers, and supports standard internet protocols such as http, ftp
and XML.
Electronic services layer. This layer delivers all of its system's
functionality. The United Market(TM) and procurement solution uses existing and
proprietary software to deliver proprietary services including internet catalog
development and maintenance tools, search functionality, workflow integration,
product pricing and estimated shipping handling and freight charges.
Enterprise services layer. This layer delivers certain services required to run
the United Sourcing Network(TM) system, including financial services,
development and maintenance of the product master database, customer service
systems and the data warehouse. To meet its unique scale
48
requirements for product information management, USC developed a proprietary
data warehouse system.
Customer integration. The United Market(TM) can be configured and integrated to
meet an enterprise customer's needs, including.
Customer view. The procurement solution graphical user interface may be
tailored for each enterprise customer, allowing an enterprise customer to select
specific suppliers from its supplier list, and to customize the user's view in
accordance with business rules and policies implemented by the purchasing
department.
Login and authentication. For enterprises that do not have a single
authoritative directory services system enabling single login functionality
across the enterprise, the USC procurement solution provides an authoritative
enterprise authentication and authorization list along with the user roles,
credit limits, and approval workflow. For enterprises that have a single
authoritative directory services system, the USC procurement solution directly
integrates with the enterprise's authoritative data source to maintain the
current permitted user list, and provides seamless access by the user and simple
management for the enterprise.
Purchasing application integration. The USC procurement solution integrates
with commercial purchasing applications, such as Ariba or Commerce One, as well
as internally developed purchasing applications, through Open Buying on the
internet, an industry standard protocol for internet purchasing, or by
integrating directly with a proprietary format such as Commerce One's protocol.
Custom pricing. USC has developed algorithms to support existing contract
pricing agreements between customers and suppliers. This custom pricing can be
implemented either by (a) pricing contract tables that list discount rates for a
specific product, buyer or supplier relationship; or (b) direct integration with
the supplier systems to extract real time pricing and availability information.
Search services. USC's search software leverages a combination of full text
search and relational technology to deliver a unique search tool customized to
the office products industry. Each of the product specific search levels also
includes parametric searching capabilities to search for products with specific
attributes, or ranges of attributes.
Product pricing estimation. USC has developed algorithms to estimate
shipping, handling and freight charges associated with any customer order. These
algorithms integrate customer requirements for shipping delivery time, product
weight, and product type (including requirements for hazardous materials and
product packaging such as blue ice). These algorithms provide its users with
estimated shipping, handling and freight cost, and make appropriate decisions
given their delivery timing requirements.
Workflow. USC has developed simple workflow technology to implement each
enterprise customer's business rules and processes. These workflow rules include
credit limit checks, multilevel approval and e-mail based notification of any
order changes. This system streamlines the purchasing process by automating
approval routing, and enables real time customer service through direct customer
notification.
49
Technical support. USC offers technical support to respond to any customer
service disruption. In addition to off-the-shelf site instrumentation and
monitoring software, it has developed custom monitoring agents that measure key
USC application parameters. This proprietary software enables it to provide high
quality technical support.
Intellectual property
USC relies on a combination of trade secret, copyright and trademark laws,
license agreements, nondisclosure and other contractual provisions and technical
measures to protect its proprietary' rights in its products, technology and
processes. USC pursues the registration of its trademarks in the United States
and internationally, however, it may not be able to secure adequate protection
for its trademarks in the United States and other countries. USC has applied for
registration of the marks United-Source.Com, United Sourcing Network(TM), USC
and the Blind Bid Exchange and the United-Source.com logo in the United States.
USC's software technology is not patented and existing copyright laws offer only
limited practical protection. USC cannot guarantee that the legal protections on
which it relies will be adequate to prevent misappropriation of its technology.
Moreover, these protections do not prevent independent third-party development
of competitive products or services. Furthermore, the validity, enforceability
and scope of protection of intellectual property in internet-related industries
is uncertain and still evolving. The laws of some foreign countries do not
protect intellectual property to the same extent as do the laws of the United
States. USC believes its products, trademarks and other proprietary rights do
not infringe upon the proprietary rights of third parties. However, USC cannot
provide any guarantees about the third party products sold on its web site or
that third parties will not assert infringement claims against it in the future
or that any such assertion will not require it to enter into a license agreement
or royalty agreement with the party asserting a claim. If the products sold on
its web site infringe the proprietary rights of third parties, it may be deemed
to infringe those rights by selling such products. Even the successful defense
of an infringement claim could result in substantial costs and diversion of its
management's efforts.
USC also licenses, and will continue to license, certain content for its
online services from third parties. Additionally, it intends to license a
significant portion of its transaction fulfillment system from third parties.
These third-party content licenses may not be available to it on favorable terms
in the future. In addition, it must be able to successfully integrate this
content in a timely arid cost-effective manner to create an effective finished
product. If it fails to obtain necessary content on favorable terms, is unable
to successfully integrate this content or if it is unable to continue to license
its order fulfillment transaction systems on favorable terms, it could have a
material adverse effect on its business operations.
Competition
The online office products market is new, rapidly evolving and intensely
competitive. USC's primary competition includes the following:
E-commerce providers. A number of e-commerce providers have established online
stores and/or
50
catalogues and are attempting to build an online e-commerce brand in the office
products market. These competitors include companies such as US Office Products
and Staples.com.
Suppliers' e-commerce initiatives. Many suppliers have developed their own
e-commerce enabled web sites, which tend to be online catalogues of their
traditional off-line product list. As the online market for office products and
services grows, USC expects that these and other office suppliers will further
develop their own online services.
USC believes that companies in this market compete based on:
o brand recognition;
o number and quality of product offerings;
o price;
o ease of use; and
o customer service and fulfillment capabilities.
Competition is likely to intensify as this market matures. As competitive
conditions intensify, competitors may:
o enter into strategic or commercial relationships with larger, more
established and well-financed companies; secure services and products from
suppliers on more favorable terms;
o devote greater resources to marketing and promotional campaigns;
o secure exclusive arrangements with buyers that impede its sales; and
o devote substantially more resources to web site and systems development.
USC's current and potential competitors' web sites may achieve greater
market acceptance than USC. Many of its existing and potential competitors,
including large traditional distributors, have longer operating histories in the
office products market, greater name recognition, larger customer bases and
greater financial, technical and market resources than it does.
In addition, new technologies and the expansion of existing technologies
may increase competitive pressures. As a result of increased competition, it may
experience reduced operating margins, as well as loss of market share and brand
recognition. USC cannot be certain that it will be able to compete successfully
against current and future competitors and competition could have a material
adverse effect on its revenue growth and earnings.
Government regulation
Due to the increasing popularity and use of the internet, it is possible
that a number of
51
laws and regulations may be adopted or interpreted in the United States and
abroad with particular applicability to the internet. It is also possible that
new laws and regulations may be adopted or interpreted by the United States and
foreign governments, to address the sale and distribution of office products
utilizing the internet. In addition, it is possible that government may enact
legislation that may be applicable to USC in areas such as content, product
distribution, network security, encryption and the use of key escrow, data and
privacy protection, electronic authentication or "digital" signatures, illegal
and harmful content, access charges and re-transmission activities. Moreover,
the applicability to the internet of existing laws governing issues such as
property, ownership, content, taxation, defamation, personal privacy, product
liability and environmental protection, as well as the necessity for
governmental permits, labeling, certifications and the need to supply
information to relevant parties, is uncertain. Most of these laws were adopted
before the widespread use and commercialization of the internet and, as a
result, do not contemplate or address the unique issues of the internet and
related technologies. Any export or import restrictions, new legislation or
regulation or governmental enforcement of existing regulations may limit the
growth of the internet, increase its cost of doing business or increase its
legal exposure. Any of these factors could have a negative effect on its
business, revenues, and results of operations arid financial condition.
Property
USC is currently located at 1979 Marcus Avenue (Suite 210), Lake Success,
New York 11042, where it currently leases approximately 800 square feet of
office space. USC expects these facilities to be sufficient to the foreseeable
future.
USC has also entered into the Supply and Fulfillment Agreement with
Paradigm, wherein Paradigm houses its inventory ready for shipment to its
customers. The warehouse is located in Brooklyn, New York. As it rolls-out its
United Sourcing Network(TM) on a national basis, it anticipates that additional
warehousing and fulfillment facilities will be required.
Employees
USC currently has three full time management employees. None of its
employees are covered by a collective bargaining agreement. It considers its
relations with its employees to be good.
Legal proceedings
USC is not a party to any material legal proceedings.
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Management's discussion and analysis of Hannibal's financial condition and
results of operations
Giving effect to the tax-free reorganization resulting in the organization
of Hannibal as a Delaware entity, and picking-up of the operations of the Nevada
entity from inception in May, 1999, Hannibal has been able to fund all of its
commitments from funds made available to it by its parent, BIOF. In the opinion
of management, funds to be received from the parent corporation will be more
than sufficient to meet all of Hannibal's anticipated financial needs over the
next twelve months, which needs consist solely of the type of expenses incurred
by any public company. The acquisition by Hannibal of USC will result in USC
being responsible for Hannibal's on-going public company type expenses. BIOF has
agreed to cause Hannibal to be debt-free at the closing with USC.
Management's discussion and analysis of USC's financial condition and results of
operations
Inception through March 31, 2000
USC was formed in December 1999 and is a development stage enterprise and
has not had significant sales. USC's operating activities since inception have
been related primarily to the design and development of our United Sourcing
Network(TM) and United Market(TM), building its corporate infrastructure,
establishing relationships with suppliers and customers and raising capital.
USC has generated only immaterial revenues to date and its ability to
generate significant revenues is uncertain. For the period from inception to
March 31, 2000, USC was in the start-up stage and had no assets and incurred
approximately $4,518 of liabilities. USC has incurred losses since inception
and, as of March 31, 2000, we had an accumulated deficit of approximately
$4,519. USC currently expects our losses to continue for the foreseeable future
and we cannot assure you that we will ever achieve or sustain profitability.
USC believes its success depends on completing and enhancing the features
and functionality of the United Sourcing Network(TM) and United Market(TM) and
enterprise purchasing exchange, establishing key strategic supplier and customer
relationships, and accelerating market awareness and demand for the United
Sourcing Network(TM) and United Market(TM). Accordingly, we intend to continue
to invest heavily in sales, marketing and development activities. USC has
limited operating history upon which to base an evaluation of our business and
we cannot assure you that our revenues will increase in future periods. USC's
business and prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in early stages of development,
particularly companies in new and rapidly evolving markets such as electronic
commerce.
From inception, USC has increased its level of spending to build its
infrastructure and to develop its United Market(TM). USC intends to continue to
increase its marketing, sales, research and development and administrative
activities and to increase other operating expenses as required to integrate the
operations and technologies of any future acquisitions. USC anticipates that its
expenses could significantly exceed any revenues generated by this increased
spending.
Liquidity and Capital Resources
Since inception, USC has funded its operations primarily through the
private sale of its
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preferred stock. Since March 31, 2000, it has raised net proceeds of
approximately $1.2 million through the private sale of our Series A Convertible
Preferred Stock (the "Series A Preferred"). USC sold 310,000 shares of Series A
Preferred at a price of $4.00 per share to four "accredited investors" as that
term is defined under Rule 501 of Securities and Exchange Regulation D. The
Series A Preferred is convertible at the option of the holder into common stock
at any time on a one share of common stock-for-one share of preferred stock
basis. In addition, until August 31, 2000, each holder of the Series A Preferred
has the option to double their investment in Series A Preferred, such that if
all holders exercised this option the number of shares of Series A Preferred
would increase to 600,000 shares.
USC currently anticipates that the net proceeds from this offering,
together with its current cash, cash equivalents, and equipment lease line, will
be sufficient to meet its anticipated cash needs for working capital and capital
expenditures for at least the next 12 months. However, USC may need to raise
additional funds in future periods through public or private financings, or
other arrangements to fund our operations and potential acquisitions, if any,
over a long-term basis until we achieve profitability, if ever. Any additional
financings, if needed, might not be available on reasonable terms or at all.
Failure to raise capital when needed could seriously harm our business and
results of operations. If additional funds are raised through the issuance of
equity securities, the percentage of ownership of our stockholders would be
reduced. Furthermore, these equity securities might have rights, preferences or
privileges senior to our common stock.
MANAGEMENT
Hannibal Management
Officers and directors
The following table sets forth the name, age and position of each director
and executive officer of Hannibal:
Name Age Position
- ---- --- --------
David R. Stith 70 President and Director
Herbert S. McDonald 62 Vice President and Director
Desiree L. Pierson 36 Treasurer, Secretary and Director
David R. Stith has served as the President and a Director of Hannibal since
its inception. In such capacity, Mr. Stith has been involved in the management
of Hannibal's litigation assets and reorganization into a Delaware corporation.
Mr. Stith was the Vice Chairman and a Director of BIOF from November 1991 to
October 5, 1998, and President of BIOF from November 15, 1996 to October 5,
1998. Mr. Stith founded Underwater Technics in 1967 and has served as its
Chairman and President since such date. Mr. Stith led the crew that cleaned up
the major oil spills from the tankers the "Elias," the "Melon," and the "Athos."
Mr. Stith was also involved in underwater testing for the National Aeronautics
and Space Administration, and led the crew that dove for sunken treasure on the
Spanish Gallon "San Jose" which sank off Columbia in 1708.
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Herbert S. McDonald has served as the Vice President and a Director of
Hannibal since its inception. Prior to such position, Mr. McDonald was a
Director of BIOF from December, 1995 to October 5, 1998. Mr. McDonald has, since
January 1993, been the President of the Fulcrum Group, a management consulting
firm specializing in the restructuring and merger/acquisition of corporate
clients. Mr. McDonald was the President and principal shareholder of European
Automotive Products, Inc., a major importer of imported cars specializing in
higher end German automotive parts, from August 1990 to January 1993. Prior
thereto, Mr. McDonald was the President and principal shareholder of Fulcrum
Investments, a firm making investments in manufacturing, leasing, automobile
dealerships and real estate.
Desiree L. Pierson has served as the Treasurer and Secretary and a Director
of Hannibal since its inception. Prior to such position, Ms. Pierson was the
Secretary of BIOF from January, 1996, to October 5, 1998. Ms. Pierson was an
employee of BIOF from 1991 until June 28, 1996. In her capacity as Secretary,
Ms. Pierson's duties included shareholder relations, matters involving the
Transfer Agent and corporate record keeping and did not include corporate
decision making or substantive matters involving BIOF. Upon the rescission of
the transaction between BIOF and LCC, Ms. Pierson again became the Secretary.
Executive compensation
No officer or director has received any remuneration from Hannibal.
Although there is no current plan in existence, it is possible that Hannibal
will adopt a plan to pay or accrue compensation to its officers and directors
for services related to the implementation of Hannibal's business plan. Hannibal
has no stock option, retirement, incentive, defined benefit, actuarial, pension
or profit-sharing programs for the benefit of its officers or directors, but the
Board of Directors may recommend adoption of one or more such programs in the
future. Hannibal has no employment contract or compensatory plan or arrangement
with any officer of Hannibal. The directors currently do not receive any cash
compensation from Hannibal for their service as a member of the board of
directors. There is no compensation committee and no compensation policies have
been adopted. Upon the closing of the transaction with USC, all of the Hannibal
directors and officers will resign and none of the possible benefits mentioned
in this paragraph will be implemented.
Pursuant to the terms of the Stock Exchange Agreement entered into between
Hannibal and USC, a condition of the closing of the acquisition of 100% of the
Common Stock of USC by Hannibal is that four of the five members of the Hannibal
Board of Directors be designated by USC. Such designation and election will
occur at the closing of the transaction, which closing is to occur
simultaneously with the closing date of the offering contemplated by the
registration statement of which this prospectus forms a part. The four designees
of USC to be elected as directors are identified by an asterisk (*) set forth
opposite their names in the table below.
The Hannibal designee to the Board to be elected at the closing of the USC
transaction is Lucille V. Corrier. Ms. Corrier is a founder of a marketing
communications consulting firm that helps companies market and sell their
products and services. Her services have been utilized
55
by foreign and domestic professional services firms, financial services
entities, government agencies, industry associations and not-for-profit groups.
Since 1990, her company has served such clients as ASA (until recently a
subsidiary of AT&T), Deloitte & Touche, Baker & McKenzie, Booz-Alan, the
Environmental Protection Agency, Rockefeller Financial Services and others.
Prior to 1990, Ms. Corrier was a director of marketing communications of
Deloitte & Touche and directed marketing communications for Mobil Oil in the
United States. Ms. Corrier has an MBA from Columbia University, is a past
president and current board member of the Financial Women's Association of New
York, is a board member of The International Alliance, and is a Conservator of
the New York Public Library.
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USC Management
Officers and directors
The following table sets forth the name, age and position of each director
and executive officer of USC:
Name Age Position
- ---- --- --------
*Ralph Bianculli 40 Chairman of the Board, President and Chief Executive Officer
*Ira Baer 58 Vice President and Secretary
Frank Musciano 47 Vice President of Operations
Frank Rule 56 Director of Information Systems and Technology
*Richard Goldstein Director
*Joseph McDonald 40 Director
Ralph Bianculli has served as Chairman of the Board and Chief Executive
Officer since November 1999. Ralph is a 16 year veteran in the Service
Management industry. Starting his career with Aramark Corp. as a Division
Manager responsible for $20 million in multi-unit food service operations. Until
November, 1999, Mr. Bianculli was the Vice President of the Food Services
Division for Spiro Wallach/Unisource. Unisource is a $7 billion logistics supply
company owned by Georgia Pacific Inc. He was the Chairperson for the Regional
Purchasing Council for Unisource. Mr. Biaculli has been honored with the
President's award for being an innovator in developing new sales concepts for
Unisource and in 1999 was honored as "Man of the Year" for his humanitarian work
throughout Long Island and the New York Metropolitan area. Mr. Biaculli is on
the Board of Directors of the National Beverage Products Association and a Board
Member of the Eastern Regional Office Services Group.
Ira Baer has served as Executive Vice President since January 2000. He is a
32 year veteran of the Service Management industry. After serving in the U.S.
army and attaining the rank of Sergeant, Mr. Baer started his career managing
Office Coffee service businesses in the New York tri-state metropolitan area
from 1966 to 1986. In 1987, he joined Aramark Services as the Sales manager of
the New York Metro Market Center in Refreshment Service Division. In 1989, he
was promoted to General Manager in Tampa, Florida to run the $14 million
southeast Florida Market Centers. In 1992, Mr. Baer was promoted to Regional
General Manager to run the $25 million Metro New York Market Centers. Mr. Baer
has become one of the industry leaders in the Service Management industry and
has been recognized for his sales and marketing efforts by his peers and
industry leaders through Executive Awards in his career. He has developed the
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"World Class Customer Service" program which has been implemented nationally for
Aramark Corp. He is a Board member of the Long Island and Metro New York
Association to Feed the Homeless.
Frank Musciano has served as Vice President of Operations since
November 1999. He started his career with Pillsbury Group in 1974 managing a
multi-unit food service operation. In 1980, he started a 17 year career with
Ararnark Corp, the largest service management company in the world. Mr. Musciano
held key management positions, and finished his career at Ararnark as Vice
President of the Northeast Division. In 1988, he joined Unisource/Spiro Wallach
Division as head of Sales and Marketing. Mr. Musciano is a member of the Board
of Directors of the United States Military Officers Clubs of America.
Frank Rule has served as Director of Information Systems and Technology
since May, 2000. Mr. Rule has spent 35 years in the field of computer science.
Mr. Rule started his career at the National Sugar Refinery Company in an entry
level position and advanced to Director of Data Processing. After 16 years, in
1981, he joined Aramark Corporation as a Senior Systems Analyst. Mr. Rule was
promoted to Director of Information Systems and Technology for the Refreshment
Services division of Aramark. Mr. Rule has designed and managed the
implementation of Business Systems throughout his career both for his employers
and their clients. Mr. Rule holds a BS in Business Management from St. Josephs
University in Philadelphia, PA.
Richard Goldstein graduated from the University of Hartford in 1994 with a
BBA in Business Administrations/Marketing. Mr. Goldstein began his
sales/marketing career as assistant to the National Sales Manager of Charmer
Industry, the leading distributor of liquor. He was head of promotions and
marketing. In 1995, Mr. Goldstein became an account executive for Spiro Wallach,
Inc. In 1997, he was promoted to Director of Major Accounts for Unisource. Mr.
Goldstein is presently Vice President of Sales for United Supply Systems. For
the past five years, Mr. Goldstein has been a Senior manager for national trade
shows and conventions. Mr. Goldstein has been on the advisory committee and
Chairman of the 1999 Testimonial Dinner for the FSD Foundation.
Joseph McDonald began his career with BT Office Products in 1995 as Sales
Manager based in their North Bergen facility. In 1997, Mr. McDonald was promoted
to the position of Vice President of Sales of the New York Division of BT. Upon
merger of Corporate Express and BT Office Products, Mr. McDonald was promoted to
Senior Vice President of Sales for the combined company and was asked to oversee
all sales in the New York metro area for the largest B2B office products company
in the world. On August 1, 2000, Mr. McDonald was appointed Managing Director of
Global Accounts. Mr. McDonald's responsibility will be to develop, implement,
and manage the entire global account program for Corporate Express. Mr. McDonald
is based in New York City.
Executive compensation
Stock option plan
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A total of 1,000,000 shares of Common Stock have been reserved for issuance
to employees, directors and consultants upon exercise of incentive and
non-statutory options granted under the USC 2000 Stock Option Plan. As of the
date hereof, no options to purchase shares of Common Stock have been issued
under the 2000 Stock Option Plan. Under the 2000 Stock Option Plan, options may
be granted to employees, directors and consultants. Only employees may receive
"incentive stock options," which are intended to qualify for certain tax
treatment; nonemployees receive nonstatutory stock options, which do not qualify
for such treatment. In the event of a change in control of USC, including a
merger or sale of substantially all of USC's assets, outstanding options shall
be assumed by any successor corporation unless the administrator of the 2000
Stock Option Plan elects to make some or all of such options exercisable and in
any event, one-half of the options then-outstanding and not otherwise
exercisable become exercisable upon a change of control. The exercise price of
incentive stock options under the 2000 Stock Options Plan must at least equal
the fair market value of the Common Stock on the date of grant. Options granted
to employees are subject to a four year vesting schedule and must be exercised
within approximately five years of grant. The board of directors may amend or
modify the 2000 Stock Options Plan at any time.
Employment agreements
USC entered into an employment agreement with each of its three senior
executive officers effective June 1, 2000. The employment agreements with Ralph
Bianculli, Frank Musciano and Ira Baer have an initial term of two years. Each
of the agreements will automatically renew for successive one year terms unless
the employee gives USC three months notice of his desire to resign or USC gives
the employee three months notice of our desire to not extend the employment
term. If USC terminates an employee without cause or if the employee resigns
after a change of control in our ownership, the employee is entitled to three
months of severance compensation and benefits. In addition, each employment
agreement prohibits the employee from competing with USC during the term of his
employment agreement and for one year thereafter.
Security Ownership of Certain
Beneficial Owners And Management
As of June 30, 2000, no person other than Hannibal's parent corporation
BIOF owned of record or beneficially any shares of Hannibal Common Stock. BIOF
held of record the one share of Hannibal Common Stock then issued and
outstanding. The distribution by Hannibal of an aggregate of 1,323,392 shares of
its Common Stock to the shareholders of BIOF on a one-for-four basis will result
in no one person owing beneficially more than five (5%) of Hannibal's Common
Stock. As a result of their ownership of BIOF Common Stock, Messers David R.
Stith and Herbert S. McDonald, directors of Hannibal until the closing with USC,
will receive, respectively, 22,000 shares and 17,000 shares of Hannibal Common
Stock upon the one-for-four distribution to the shareholders of BIOF.
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Giving effect to the consummation of the transaction with USC, and to
the aggregate of 22,000,000 shares that will then be issued and outstanding, the
following table sets forth the number of Hannibal shares of Common Stock to be
owned of record or beneficially by each executive officer and director of USC
and by each person who will own of record or has been identified by USC to
become a beneficial owner of more than five (5%) of Hannibal's issued and
outstanding shares of Common Stock, as well as the ownership of Hannibal Common
Stock by all executive officers and directors of USC as a group:
Number of
Position with Number of Number of Percentage of Shares Owned
Name the Company Shares Owned Shares Offered Shares Owned After Sale
- ---- ------------- ------------ ---------------- -------------- ------------
Ralph Bianculli Chairman and 14,787,000 --- 67.2% 14,787,000
Chief Executive
Officer
Ira Baer Vice President 1,200,000 --- .54% 1,200,000
Secretary
Frank Musciano Vice President 200,000 --- N/A 200,000
Frank Rule Director of 42,000 --- N/A 42,000
Information
Systems and
Technology
All directors and officers
as a group 16,229,000 73.77% 16,229,000
Description of securities
Hannibal
General
The following description of Hannibal's capital stock does not purport to
be complete and is subject to and qualified in its entirety by reference to
Hannibal's articles of incorporation and bylaws, which are included as exhibits
to the registration statement of which this prospectus forms a part, and by the
applicable provisions of Delaware law.
Hannibal authorized capital consists of 50,000,000 shares of Common Stock,
par value $.001 per share and 5,000,000 shares of Preferred Stock. Of the
50,000,000 authorized shares of Common Stock, an aggregate of 22,000,000 shares
are reserved for issuance upon the completion of the USC transaction.
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Each record holder of Common Stock is entitled to one vote for each share
held on all matters properly submitted to the shareholders for their vote. The
articles of incorporation do not permit cumulative voting for the election of
directors, and shareholders do not have preemptive rights to purchase shares in
any future issuance of Hannibal's Common Stock. Because the holders of shares of
Hannibal's Common Stock do not have cumulative voting rights, the holders of
more than 50% of Hannibal's outstanding shares, voting for the election of
directors, can elect all of the directors to be elected, if they so choose. In
such event, the holders of the remaining shares will not be able to elect any of
Hannibal's directors.
The holders of shares of Common Stock are entitled to dividends, out of
funds legally available for the distribution of dividends, when and as declared
by Hannibal's board of directors. The board has never declared dividends and
does not anticipate declaring a dividend in the future. In the event of
liquidation, dissolution or winding-up of the affairs of Hannibal, holders of
Hannibal's Common Stock are entitled to receive, ratably, the net assets of
Hannibal available to the shareholders after payment of all creditors.
Shares available for future sale
Prior to this offering, there has not been any public market for our Common
Stock and there can be no assurance that such a public market will be developed
or sustained after this offering.
Upon the completion of this offering, we will have outstanding 22,000,000
shares of Common Stock. Of such shares, 2,200,000 shares will be freely tradable
in the public market without restriction under the Securities Act, unless
purchased by our "affiliates" as defined in Rule 144 under the Securities Act,
as amended.
Hannibal will have 19,800,000 shares of its Common Stock issued and
outstanding that will be considered "restricted securities" under Rule 144 of
the Securities Act of 1932, as amended.
USC
Preferred Stock
USC's board of directors is authorized, subject to limitations prescribed
by Delaware law, to issue preferred stock in one or more series, to establish
from time to time the number of shares to be included in each series, to fix the
rights, preferences and privileges of the shares of each wholly unissued series
and to fix any of its qualifications, limitations or restrictions. The board can
also increase or decrease the number of shares of any series to no fewer than
the number of shares of that series then outstanding, without any further vote
or action by the shareholders. USC's board of directors may authorize the
issuance of preferred stock with voting or conversion rights that could
adversely affect the voting power or other rights of the holders of USC's common
stock. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, have the effect of delaying, deferring or preventing a change in
control of USC and may adversely affect the market
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price of USC's common stock and the voting and other rights of the holders of
USC's common stock.
Series A Preferred Stock
USC's Series A Preferred Stock shall remain outstanding after completion of this
offering. USC's Series A Preferred Stock have the rights, preferences and
privileges set forth below:
Dividends. The Series A Preferred Stock shall not bear a dividend,
provided, however, that no other series of preferred stock or common stock shall
have a dividend declared or paid during any fiscal year of USC unless the Board
of Directors shall have likewise declared and paid a dividend on the Series A
Preferred Stock at the same rate per share.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the affairs of USC, whether voluntary or involuntary, after
payment or provision for payment of the debts and other liabilities of USC, the
holders of the Series A Preferred Stock shall be entitled to receive, before the
holders of any of the common stock or other classes of preferred stock of USC
ranking junior thereto, out of the remaining net assets of USC, the amount of
$4.00 in cash or in kind for each share of Series A Preferred Stock (as adjusted
for any stock dividends, combinations or splits with respect to the shares of
Series A Preferred Stock) plus any declared and unpaid dividends on such shares.
After such payment shall have been made in full to the holders of the
outstanding Series A Preferred Stock, or funds or assets necessary for such
payment shall have been set aside in trust for the account of the holders of the
outstanding Series A Preferred Stock, so as to be and continue to be available
therefor, the holders of the outstanding Series A Preferred Stock shall be
entitled to no further participation in such distribution of the assets of USC.
In the event, after payment or provision for payment of the debts and other
liabilities of USC, the remaining net assets of USC are not sufficient to pay
the liquidation preference of the holders of the Series A Preferred Stock, no
such distribution shall be made on account of any shares of any other class or
series of capital stock of USC ranking on a parity with the shares of the Series
A Preferred Stock upon such liquidation unless proportionate distributive
amounts shall be paid on account of each share of the Series A Preferred Stock
ratably, in proportion to the full distributable amounts for which holders of
all such parity shares, including other shares of Series A Preferred Stock, are
respectively entitled upon such liquidation.
In the event that USC shall be reorganized with, consolidated with or
merged into any other corporation or entity in which the stockholders of USC
immediately prior to any such event do not own a majority of the outstanding
shares of the surviving corporation, or upon the sale of all or substantially
all of the common stock or assets of USC such event shall be treated as a
liquidation. At least ten (10) days prior written notice of such event shall be
given to the holders of the Series A Preferred Stock by USC, so that such
holders may avoid this treatment by converting to common stock prior to the
liquidation event.
Conversion of Preferred Stock into Common Stock. Each share of the Series A
Preferred Stock shall be under subparagraph (a) below convertible at the option
of the holder thereof and under sub paragraph (b) below automatically and
mandatorily converted upon the occurrence of the event described therein; in
either event, any such shares of Series A Preferred Stock shall be converted
into fully paid and non-assessable shares of USC'S common stock par value $.001
per share.
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(a) Elective Conversion. Subject to any other provision of this paragraph,
each holder of record of any share(s) of Series A Preferred Stock shall have the
right to convert such holder's share(s) of Series A Preferred Stock, in whole or
in part, including all accrued but unpaid dividends, if any, in accordance with
the Conversion Ratio (defined below), subject to the adjustments set forth
below, at his or her option, at any time and from time to time after the
issuance of such shares of Series A Preferred Stock.
Any holder of a share or shares of Series A Preferred Stock electing to
convert his or her Series A Preferred Stock into common stock shall surrender
the certificate(s) representing all of the share(s) of Series A Preferred Stock
so to be converted, duly endorsed to USC or in blank, at the principal office of
USC (or such other place as may be designated by USC), and shall give written
notice to USC at said office that he or she elects to convert the same and
therein set forth the name or names (what the address or addresses) in which the
shares of common stock are to be issued.
(b) Mandatory Conversion. Each share of the Series A Preferred Stock, and
all accrued but unpaid dividends, if any, shall automatically and mandatorily
convert, without the option of any holder of any share(s) of Series A Preferred
Stock or any action of USC, to shares of common stock in accordance with the
Conversion Ratio (defined below) on the date ("Automatic Conversion Date") (i)
on which an initial public offering in which the gross proceeds are at least
$10,000,000 ("Qualified Public Offering") is closed, or (ii) on which the
holders of the Series A Preferred Stock having a majority of the then
outstanding shares of Series A Preferred Stock consent in writing to such
conversion.
As soon as practicable after the Automatic Conversion Date, USC shall
provide each holder of record of Series A Preferred Stock with notice of the
automatic conversion and the Automatic Conversion Date and call upon the holders
to surrender to USC, in the manner and at the place designated, the
certificate(s) representing shares of the Series A Preferred Stock. Such notice
shall be by mail to each holder of the Series A Preferred Stock at the address
last shown on the records of USC for such holder or given by such holder to USC
for the holder or given by such holder or given by such holder to USC for the
holder for the purpose of notice or, if no such address appears or is given, at
the place where the principal executive office of USC is located.
Notwithstanding any failure by a holder to deliver the certificates representing
his or her shares of Series A Preferred Stock, after the Automatic Conversion
Date all such certificates of the Series A Preferred Stock shall be deemed to
represent the appropriate number of shares of common stock.
(c) Additional Provisions Applicable to All Conversions. Any conversion of
Series A Preferred Stock into common stock pursuant to this paragraph shall be
subject to the following additional terms and provisions:
(1) All shares of the Series A Preferred Stock and all accrued but
unpaid dividends, if any, shall be convertible (or, as the case may be,
automatically converted) into common stock at the rate of one (1) share of
common stock for each share of Series A Preferred Stock (the "Conversion
Ratio"), subject to the adjustments set forth in this paragraph below.
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(2) In the event that USC shall at any time subdivide or combine in a
greater or lesser number of shares of the outstanding shares of common
stock, the number of shares of common stock issuable upon conversion of any
shares of Series A Preferred Stock prior to the occurrence of such event
shall be proportionately increased in the case of subdivision or decreased
in the case of a combination, effective in either case at the close of
business on the date when such subdivision or combination shall become
effective.
(3) In the event that USC shall at any time pay to the holders of
common stock a dividend in common stock, the number of shares of common
stock of USC issuable upon any conversion of the Series A Preferred Stock
shall be proportionately increased, effective following the close of
business on the record date for determination of the holders of Common
Stock entitled to such dividend.
(4) The issuance of certificates for shares of Common Stock upon
conversion of any shares of the Series A Preferred Stock shall be made
without charge for any tax in respect of such issuance. However, if any
certificate is to be issued in a name other than that of the holder of
record as the Series A Preferred Stock so converted, the person or persons
requesting the issuance thereof shall pay to USC the amount of any tax
which may be payable in respect of any transfer involved in such issuance,
or shall establish to the satisfaction of USC that such tax has been paid
or is not due and payable.
(5) Until the common stock of the Company is listed on a national
securities exchange or quoted on a national quotation system, the
conversion ratio of the Series A Preferred Stock will be adjusted on a
customary broad-based weighted-average basis for subsequent issuances of
the Company's securities below the conversion price of the Series A
Preferred Stock other than the issuance of up to 1,000,000 shares of common
stock ("Excluded Transactions"): (i) to directors, officers, employees and
consultants pursuant to stock grants, option plans, stock purchase plans or
other employee stock incentive programs approved by the Board of Directors;
(ii) in connection with mergers or acquisitions (including technology or
asset acquisitions) by the Company; and (iii) to lenders, lessors,
licensors and other parties in non-equity financing transactions.
Voting Rights. Except as may be otherwise provided by law or by the
Certificate of Incorporation of USC, the Series A Preferred Stock shall vote
together with the Common Stock as a single class on all actions to be taken by
the stockholders of USC. Each share of Series A Preferred Stock shall entitle
the holder thereof to one (1) vote per share.
Registration Rights
The holders of 310,000 shares of common stock issuable upon conversion of
USC's Series A Preferred Stock have registration rights with respect to the
registration of their shares under the Securities Act. If USC subsequently
proposes to register any of its securities under the Securities Act, either for
its own account or for the account of other security holders, the holders of
USC's Series A Preferred Stock, or the common stock into which they are
convertible, are entitled to notice of the registration and are entitled to
include their shares of common stock in that registration statement.
Additionally, the holders are entitled to demand registration rights pursuant to
which they may require us to file a registration statement under the Securities
Act at USC's expense with respect to their shares of common stock, and USC is
required to use
64
commercially reasonable efforts to effect that registration. USC is not required
to effect more than two of these demand registrations and these rights do not
apply until _________________. In addition, the holders of those shares are
entitled to demand registration rights pursuant to which they may require us to
file a registration statement under the Securities Act on Form S-3 at USC's
expense with respect to their shares of common stock, and USC is required to use
commercially reasonable efforts to effect that registration. USC is not required
to effect more than one of these Form S-3 demand registrations in any 12-month
period. All of these registration rights are subject to conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares included in such registration and USC's right to delay any
registration if USC is in possession of material non-public information that USC
has a bona fide business purpose for preserving as confidential.
The holders of Series A Preferred Stock also have piggyback registration
rights with respect to their shares of common stock into which the Series A
Preferred Stock may be converted. If USC proposes to register any of its
securities under the Securities Act, either for USC's own account or for the
account of other security holders, the holders of Series A Preferred Stock, or
the shares of common stock into which they are convertible, are entitled to
notice of the registration and are entitled to include their shares of common
stock in that registration statement. This registration right is subject to
conditions and limitations, including the right of the underwriters of an
offering to limit the number of shares included in such registration and USC's
right to delay any registration if USC is in possession of material non-public
information that USC has a bona fide business purpose for preserving as
confidential.
Transfer agent and registrar for Hannibal Common Stock
The transfer agent and registrar for our Common Stock is American Stock
Transfer & Trust Company. The transfer agent's address is 40 Wall Street, New
York, New York 10005.
Legal matters
The validity of the Common Stock offered hereby will be passed upon for
Hannibal by Berlack, Israels & Liberman LLP, New York, New York. Attorneys from
Berlack, Israels & Liberman LLP do not own any shares of the Common Stock of
Hannibal.
Experts
Hannibal
Certain of the financial statements of the Company included in this
prospectus and elsewhere in the registration statement, to the extent and for
the periods indicated in their reports, have been audited by Asher & Company,
Ltd., independent certified public accountants, whose reports thereon appear
elsewhere herein and in the registration statement.
USC
Certain of the financial statements of USC included in this prospectus and
elsewhere in the registration statement, to the extent and for the periods
indicated in their reports, have been
65
audited by Kalmus, Siegel, Teitelbaum, Harris & Goldfarb, LLP, independent
certified public accountants, whose reports thereon appear elsewhere herein and
in the registration statement.
Disclosure of commission position on
indemnification for Securities Act liabilities
Hannibal's bylaws provide that we will indemnify our officers and directors
for costs and expenses incurred in connection with the defense of actions,
suits, or proceedings against them on account of their being or having been
directors or officers of Hannibal, absent a finding of negligence or misconduct
in the performance of their duties.
Insofar as indemnification for liabilities arising under the Securities
Act, may be permitted to directors, officers or persons controlling Hannibal
pursuant to the foregoing provisions, Hannibal has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is unenforceable.
66
HANNIBAL CAPITAL CORP.
INDEX TO FINANCIAL STATEMENTS
Page
----
Hannibal:
Unaudited Pro Forma Financial Information for the
Three Months Ended June 30, 2000.............................................................. F-2
Notes to Pro Forma Financial Information for the
Three Months Ended June 30, 2000 (unaudited).................................................. F-3
Pro Forma Balance Sheet as of June 30, 2000 (unaudited).......................................... F-5
Notes to Pro Forma Balance Sheet as of June 30, 2000 (unaudited)................................. F-6
Pro Forma Statement of Operations for the Three Months Ended
June 30, 2000 (unaudited)...................................................................... F-7
Notes to Pro Forma Statement of Operations for the Three
Months Ended June 30, 2000 (unaudited)......................................................... F-8
Pro Forma Statement of Operations, Period from Inception
of Operations to March 31, 2000 (unaudited).................................................... F-9
Notes to Pro Forma Statement of Operations, Period from Inception
of Operations to March 31, 2000 (unaudited).................................................... F-10
Hannibal:
Independent Auditors' Report..................................................................... F-11
Balance Sheets, June 30, 2000 and March 31, 2000................................................. F-12
Statements of Operations and Accumulated Deficit, Period from
May 1, 1999 (Inception of Operations) to March 31, 2000
and Three Months Ended June 30, 2000........................................................... F-13
Statements of Cash Flows, Period from May 1, 1999
(Inception of Operations) to March 31, 2000 and Three
Months Ended June 30, 2000..................................................................... F-14
Notes to Financial Statements.................................................................... F-15
USC:
Independent Auditors' Report..................................................................... F-18
Balance Sheets, March 31, 2000 and June 30, 2000................................................. F-19
Statements of Operations, Period from December 7, 1999
(Date of Inception) to March 31, 2000 and Three Months Ended
June 30, 2000.................................................................................. F-20
Statements of Stockholders' Equity, Period from December 7, 1999
(Date of Inception) to March 31, 2000 and Three Months Ended
June 30, 2000.................................................................................. F-21
Statements of Cash Flows, Period from December 7, 1999
(Date of Inception) to March 31, 2000 and Three Months Ended
June 30, 2000.................................................................................. F-22
Notes to Financial Statements.................................................................... F-23
F-1
HANNIBAL CAPITAL CORP.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
THREE MONTHS ENDED JUNE 30, 2000
The unaudited pro forma financial statements contained herein give pro forma
effect to (1) the acquisition of USC by Hannibal and (2) the consummation of our
initial public offering and the application of the net proceeds there from, as
described under "Recent Developments." The unaudited pro forma balance sheet as
of June 30, 2000 gives effect to the acquisition and our initial public offering
as if each had occurred on June 30, 2000. The unaudited pro forma statement of
operations for the three months ended June 30, 2000 gives effect to the
acquisition and our initial public offering as if each of these had occurred on
April 1, 2000. The unaudited pro forma statement of operations for the period
from inception to March 31, 2000 gives effect to the acquisition and initial
public offering as if each of these had occurred at inception. The accounting
policies used in preparing the unaudited pro forma financial information are
those disclosed in the Hannibal financial statements included in this
prospectus.
The unaudited pro forma financial information has been provided for information
purposes only and is not necessarily indicative of the results of operations or
financial condition that actually would have been achieved if the acquisition
and other transactions had been completed on the date indicated or that may be
reported in the future. The unaudited pro forma financial information does not
reflect expenses expected to be incurred to finalize the integration of the
acquired operations or potential cost savings or improvements in revenue that
Hannibal believes can be realized as a result of the acquisition. The pro forma
financial information should be read in conjunction with the financial
statements of Hannibal and the acquired operation, including the respective
notes, included elsewhere in this prospectus.
F-2
HANNIBAL CAPITAL CORP.
NOTES TO PRO FORMA FINANCIAL INFORMATION
THREE MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
1. Basis of presentation:
The unaudited pro forma financial information has been prepared in
accordance with generally accepted accounting principles. The pro forma
balance sheet and statement of operations give effect to the following
transactions:
(i) Hannibal's acquisition of all of the issued and outstanding common
shares of USC on the closing date of the initial public offering
for approximately $9,568 including acquisition costs. The purchase
consideration consists of 1,980,000 shares of common stock of
Hannibal The valuation of the Company's shares to be issued as
consideration is based on the fair value of the net assets of USC
as of June 30, 2000.
(ii) The initial public offering of common stock of the Company and
exchangeable shares of its subsidiary with the net proceeds used to
__________. (See "Recent Developments.")
The unaudited pro forma financial information for the three months
ended June 30, 2000 has been prepared by management of Hannibal
based on the unaudited financial information of Hannibal for the
three months ended June 30, 2000, and the unaudited financial
information of USC for the three months ended June 30, 2000.
The acquisition was accounted for by the purchase method. The total
purchase consideration will be allocated to the identifiable assets
acquired and liabilities assumed based on their respective fair
values as of the date of acquisition. The valuations and other
studies required to determine the fair values of identifiable
assets acquired and liabilities assumed have not been completed for
the USC acquisition. Accordingly, the preliminary allocation used
in preparation of the unaudited pro forma financial information is
expected to change upon further study and as more current
information becomes available.
Accounting policies used in the preparation of the unaudited pro
forma information are those disclosed in the Hannibal financial
statements as of and for the period ended June 30, 2000 presented
elsewhere in this prospectus. The unaudited pro forma information
should be read in conjunction with the separate historical audited
financial statements of Hannibal and USC.
F-3
HANNIBAL CAPITAL CORP.
NOTES TO PRO FORMA FINANCIAL INFORMATION (Continued)
THREE MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
1. Basis of presentation: (Continued)
The pro forma financial information is not necessarily indicative
of the actual results that would have occurred had the acquisition
occurred on the date indicated and is not necessarily indicative of
the results of operations or financial condition that actually
would have been achieved if the acquisition had been completed on
the date indicated, or that may be reported in the future. In
preparing pro forma information, no adjustments have been made to
reflect expenses expected to be incurred to finalize the
integration of the acquired operations or the full impact of the
operating synergies expected to result from combining the
operations of Hannibal and USC.
2. Significant assumptions and adjustments:
The unaudited pro forma balance sheet gives effect to the USC acquisition
and the initial public offering as if they had taken place June 30, 2000.
The unaudited pro forma statement of operations for the three months ended
June 30, 2000 gives effect to the acquisition and the initial public
offering as if these transactions had taken place on April 1, 2000.
The unaudited pro forma statement of operations for the period from
inception to March 31, 2000 gives effect to the acquisition and the initial
public offering as if these transactions had taken place at inception.
F-4
HANNIBAL CAPITAL CORP.
PRO FORMA BALANCE SHEET
JUNE 30, 2000 (UNAUDITED)
ASSETS
OFFERING AND
ACQUISITION PRO FORMA
HANNIBAL USC ADJUSTMENTS AS ADJUSTED
-------- ----------- ------------ ------------
CURRENT ASSETS
Cash $ - $ 798,942 $ 1,200,000 (b) $ 2,038,854
39,912 (c)
Accounts receivable - 32,212 - 32,212
-------- ----------- ------------ ------------
Total current assets - 831,154 1,239,912 2,071,066
Equipment - 27,090 - 27,090
Other assets - 6,400 - 6,400
-------- ----------- ------------ ------------
Total Assets $ - $ 864,644 $ 1,239,912 $ 2,104,556
======== =========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 15,589 $ 23,024 $ - $ 38,613
Advances from Stockholder - 1,081 - 1,081
Due to Biofarm, Inc. 47,504 - - 47,504
-------- ----------- ------------ ------------
Total current liabilities 63,093 24,105 - 87,198
STOCKHOLDERS' EQUITY
Common stock - 9,568 19,800 (a) 22,000
(9,568)(a)
800 (b)
27 (c)
50 (d)
1,323 (e)
Additional paid-in capital - - (10,232)(a) 1,228,803
1,199,200 (b)
39,885 (c)
(50)(d)
Preferred stock - 1,240,000 - 1,240,000
Accumulated deficit during development stage (63,093) (409,029) (1,323)(e) (473,445)
--------- ---------- ------------ ------------
Total Stockholders' equity (63,093) 840,539 1,239,912 2,017,358
--------- ---------- ------------ ------------
Total Liabilities and Stockholders' Equity $ - $ 864,644 $ 1,239,912 $ 2,104,556
========= ========== ============ ============
See accompanying notes to pro forma
financial information.
F-5
HANNIBAL CAPITAL CORP.
NOTES TO PRO FORMA BALANCE SHEET
JUNE 30, 2000 (UNAUDITED)
Pro Forma Adjustments:
(a) Reflects the preliminary allocation of the purchase consideration for the
pending acquisition of USC as follows:
Current assets $ 831,154
Capital assets 27,090
Other long-term assets 6,400
Liabilities assumed (24,105)
Preferred stock (1,240,000)
Accumulated deficit 409,029
------------
$ 9,568
============
The purchase price consists of an ascribed value of $9,568 in common stock
of Hannibal.
(b) Reflects the issuance, through a private placement, of 800,000 shares of
Hannibal common stock for an aggregate purchase price of $1,200,000.
(c) Reflects the issuance of 26,608 shares of common stock of Hannibal in the
initial public offering generating gross proceeds of $39,912.
(d) Reflects the issuance of 50,000 shares of common stock of Hannibal to the
finder associated with the initial public offering.
(e) Reflects the declaration of a stock dividend to the Shareholders of
Biofarm of 1,323,392 shares of common stock of Hannibal.
F-6
HANNIBAL CAPITAL CORP.
PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
OFFERING AND
ACQUISITION PRO FORMA
HANNIBAL USC ADJUSTMENTS AS ADJUSTED
------------ ------------ --------------- ------------
Revenue $ -- $ 32,212 $ -- $ 32,212
Expenses
General and administrative 5,350 439,265 -- 444,615
------------ ------------ --------------- ------------
Loss before other income (5,350) (407,053) -- (412,403)
Other income 670 2,543 -- 3,213
------------ ------------ --------------- ------------
Loss before income taxes (4,680) (404,510) -- (409,190)
Income taxes -- -- -- --
------------ ------------ --------------- ------------
NET LOSS $ (4,680) $ (404,510) $ -- $ (409,190)
============ ============ =============== ============
Basic loss per common share $ (4,680) $ $ (0.02)
============ ============ ============
Weighted average number of
common shares outstanding 1 22,000,000
============ ============ ============
See accompanying notes to pro forma
financial information.
F-7
HANNIBAL CAPITAL CORP.
NOTES TO PRO FORMA STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
Pro Forma Adjustments:
The pro forma statement of operations gives effect to the acquisition of USC as
if it had taken place on April 1, 2000. The following reflects the preliminary
allocation of the purchase consideration for the pending acquisition in
accordance with the purchase method of accounting.
Current assets $ 831,154
Capital assets 27,090
Other long-term assets 6,400
Liabilities assumed (24,105)
Preferred stock (1,240,000)
Accumulated deficit 409,029
------------
$ 9,568
============
Loss per share
Diluted loss per share has not been disclosed, as the effect of the potential
conversion of dilutive securities is anti-dilutive.
F-8
HANNIBAL CAPITAL CORP.
PRO FORMA STATEMENT OF OPERATIONS
PERIOD FROM INCEPTION OF OPERATIONS TO MARCH 31, 2000 (UNAUDITED)
OFFERING AND
ACQUISITION PRO FORMA
HANNIBAL USC ADJUSTMENTS AS ADJUSTED
------------ ------------ -------------- ------------
Revenue $ -- $ -- $ -- $ --
Expenses
General and administrative 58,503 4,519 -- 63,022
------------ ------------ -------------- ------------
Loss before other income (58,503) (4,519) -- (63,022)
Other income 670 -- -- 670
------------ ------------ -------------- ------------
Loss before income taxes (57,833) (4,519) -- (62,352)
Income taxes -- -- -- --
------------ ------------ -------------- ------------
NET LOSS $ (57,833) $ (4,519) $ -- $ (62,352)
============ ============ ============== ============
Basic loss per common share $ (57,833) $ (4,519) $ --
============ ============ ============
Weighted average number of
common shares outstanding 1 1 22,000,000
============ ============ ============
See accompanying notes to pro forma
financial information.
F-9
HANNIBAL CAPITAL CORP.
NOTES TO PRO FORMA STATEMENT OF OPERATIONS
PERIOD FROM INCEPTION OF OPERATIONS TO MARCH 31, 2000 (UNAUDITED)
Pro Forma Adjustments:
The pro forma statement of operations gives effect to the acquisition of USC as
if it had taken place at the beginning of the period. The following reflects the
allocation of the purchase consideration for the acquisition in accordance with
the purchase method of accounting.
Current assets $ 831,154
Capital assets 27,090
Other long-term assets 6,400
Liabilities assumed (24,105)
Preferred stock (1,240,000)
Accumulated deficit 409,029
------------
$ 9,568
============
Loss per share
Diluted loss per share has not been disclosed, as the effect of the potential
conversion of dilutive securities is anti-dilutive.
F-10
Independent Auditors' Report
The Shareholders and Board of Directors
Hannibal Capital Corp.
Linfield, Pennsylvania
We have audited the accompanying balance sheet of Hannibal Capital Corp. as
of March 31, 2000 and the related statements of operations and accumulated
deficit, changes in Stockholders' equity and cash flows for the period from May
1, 1999 (inception of operations) to March 31, 2000. The financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hannibal Capital Corp. as of
March 31, 2000 and the results of its operations and its cash flows for the
period from May 1, 1999 (inception of operations) to March 31, 2000 in
conformity with generally accepted accounting principles.
ASHER & COMPANY, Ltd.
Philadelphia, Pennsylvania
June 2, 2000, except Note D, as to
which the date is July 24, 2000
F-11
HANNIBAL CAPITAL CORP.
BALANCE SHEETS
MARCH 31 AND JUNE 30, 2000
ASSETS
March 31 June 30
-------- -----------
(Unaudited)
CURRENT ASSETS
Short-term investment $ 20,000 $ --
Accrued interest receivable 670 --
-------- --------
Total Current Assets $ 20,670 $ --
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 10,239 $ 15,589
Due to Biofarm, Inc. 68,264 47,504
-------- --------
Total current liabilities 78,503 63,093
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; 10,000,000
shares authorized; one share issued and outstanding -- --
Accumulated deficit during development stage (57,833) (63,093)
-------- --------
Total Stockholders' equity (57,833) (63,093)
-------- --------
Total Liabilities and Stockholders' Equity $ 20,670 $ --
======== ========
The accompanying notes are an integral part of these
financial statements.
F-12
HANNIBAL CAPITAL CORP.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
PERIOD FROM MAY 1, 1999 (INCEPTION OF OPERATIONS) TO
MARCH 31, 2000 AND THREE MONTHS ENDED JUNE 30, 2000
March 31 June 30
-------- -----------
(Unaudited)
Revenue $ -- $ --
Expenses
General and administrative 58,503 5,350
-------- --------
Loss before other income (58,503) (5,350)
Other income
Interest 670 90
-------- --------
Loss before income taxes (57,833) (5,260)
Income taxes -- --
-------- --------
NET LOSS (57,833) (5,260)
Accumulated deficit, beginning of period -- (57,833)
-------- --------
Accumulated deficit, end of period $(57,833) $(63,093)
======== ========
Loss per share $(57,833) $ (5,260)
======== ========
The accompanying notes are an integral part of these
financial statements.
F-13
HANNIBAL CAPITAL CORP.
STATEMENTS OF CASH FLOWS
PERIOD FROM MAY 1, 1999 (INCEPTION OF OPERATIONS) TO
MARCH 31, 2000 AND THREE MONTHS ENDED JUNE 30, 2000
March 31 June 30
-------- -----------
(Unaudited)
OPERATING ACTIVITIES
Net loss $(57,833) $ (5,260)
Adjustments to reconcile net loss to net cash
utilized by operating activities:
Changes in:
Accrued interest receivable (670) 670
Accounts payable 10,239 5,350
-------- --------
Net cash utilized by operating activities (48,264) 760
INVESTING ACTIVITIES
Redemption (purchase) of short-term investment (20,000) 20,000
-------- --------
Net cash provided (utilized) by investing activities (20,000) 20,000
FINANCING ACTIVITIES
Due to Biofarm, Inc. 68,264 (20,760)
-------- --------
Net cash provided (utilized) by financing activities 68,264 (20,760)
-------- --------
INCREASE IN CASH -- --
Cash, beginning of period -- --
-------- --------
Cash, end of period $ $ --
======== ========
The accompanying notes are an integral part of these
financial statements.
F-14
HANNIBAL CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND JUNE 30, 2000
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Description of business
Hannibal Capital Corp. (Hannibal) was organized as a Delaware corporation
on December 2, 1999, the successor entity to a tax-free reorganization with
Global Enterprises (Nevada), Inc. (a Nevada corporation) organized on
October 7, 1998. Hannibal is a wholly owned subsidiary of Biofarm, Inc.
Initially, Hannibal was organized to pursue certain securities litigation
matters and to take title to and receive the proceeds anticipated from such
litigation for the benefit of certain shareholders of Biofarm, Inc.
("BIOF"). BIOF's assignment of the litigation matters to Hannibal was
provided for in a certain Stock Purchase Agreement dated April, 1998
between Hannibal and Litchfield Continental, Ltd. ("Litchfield"). Hannibal
commenced operations on May 1, 1999.
The agreement between BIOF and Litchfield became effective on October 7,
1998, the date on which the amendment changing the name of Global Spill
Management, Inc. to Biofarm, Inc. became effective. Such name change, as
well as the election of Litchfield nominees to the BIOF Board of Directors,
was approved by the BIOF shareholders at a special meeting held on October
5, 1998. The BIOF-Litchfield agreement provided that the benefits, if any,
of the litigation instituted by BIOF would inure to the benefit of all BIOF
shareholders other than Litchfield. To insure that result, such benefits
were assigned by BIOF to Hannibal.
Effective October 31, 1999, the transaction between BIOF and Litchfield was
rescinded nunc pro tunc. Such rescission rendered unnecessary the
assignment of the benefits of the litigation to Hannibal. Accordingly, the
Boards of Directors of Hannibal and BIOF, at a joint meeting thereof duly
called and held on June 1, 2000, approved a resolution providing for the
reassignment of the proceeds, if any, of the litigation to BIOF.
In addition, the Board of Directors ratified, confirmed and approved the
execution and delivery, dated May 5, 2000, of a Letter of Intent executed
by and between BIOF and United Source Corporation (USC). Such Letter of
Intent provided for, subject to the terms and conditions thereof, the
acquisition by Hannibal of 100% of the capital stock of USC, the
distribution of 90% thereof to the shareholders of USC and 6.02% thereof
(1,323,392 shares) to the shareholders of BIOF, and the issuance of 3.5%
(76,608 shares) to compensate an intermediary and to discharge certain
costs of the necessary public offering. On July 24, 2000, BIOF and USC
executed a definitive stock purchase agreement. The June 1, 2000 joint
Board of Directors meeting also authorized the filing with the SEC of an
amended Registration Statement by Hannibal on Form SB-2, to include, inter
alta, a description of the USC business and required USC financial
statements.
F-15
HANNIBAL CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND JUNE 30, 2000
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Year end
Hannibal has elected a fiscal year end of March 31.
Loss per share
The Company utilizes SFAS No. 128 "Earnings Per Share" (EPS) to compute
earnings/loss per share. Basic EPS is computed by dividing net income/loss
by the weighted-average number of common shares outstanding for the period.
Unaudited financial information
The unaudited interim financial statements furnished herein reflect all
adjustments, consisting only of normal recurring accruals, which are, in
the opinion of management, necessary to present fairly the financial
position of the Company as of June 30, 2000 and the results of operations
and cash flows for the three months ended June 30, 2000. The unaudited
interim financial statements should be read in conjunction with the annual
financial statements and notes thereto included herein. Results for the
three months ended June 30, 2000 are not necessarily indicative of results
to be achieved for the year ending March 31, 2001.
NOTE B - SHORT-TERM INVESTMENT
Hannibal had a certificate of deposit in the amount of $20,000 which bore
interest at 5.8% and matured on April 28, 2000 in the amount of $20,760.
F-16
HANNIBAL CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND JUNE 30, 2000
NOTE C - INCOME TAXES
The tax effect of temporary differences results primarily from net
operating loss carryforwards of approximately $63,000. In accordance with
SFAS No. 109, Hannibal has provided a valuation allowance in the same
amount since realization is not reasonably assured at this time. Hannibal
will review the likelihood of realizing this asset and adjust the valuation
allowance as needed.
NOTE D - SUBSEQUENT EVENTS
On November 10, 1999, the Hannibal Board of Directors authorized management
to file a Registration Statement with the SEC to permit Hannibal to
register certain shares of its common stock for distribution to the
Shareholders of BIOF. (See Note A for an explanation of the reasons
prompting such distribution and filing).
The reason for such distribution and filing no longer being applicable, on
July 24, 2000, BIOF entered into a stock exchange agreement with United
Source Corporation (USC). Such stock exchange agreement provided for the
acquisition by Hannibal of 100% of the common stock of USC and the
distribution of 6.02% of the resulting entity to the shareholders of BIOF
on the basis of 1.98 Hannibal shares for each one USC share. The
shareholders of BIOF would receive their distribution as a stock dividend
and would not be required to surrender any of their BIOF shares to receive
such distribution. Management has informed its shareholders in the
Registration Statement filed with the SEC that such stock dividend would be
a taxable event. At the closing of such exchange, Hannibal will change its
name to "United Source Corporation".
F-17
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
of United Source Corporation
We have audited the accompanying balance sheet of United Source Corporation (a
development stage company) as of March 31, 2000, and the related statements of
operations, stockholder's equity, and cash flows for the period from December 7,
1999 (inception), to March 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Source Corporation as of
March 31, 2000, and the results of its operations and its cash flows for the
period from December 7, 1999 (inception) to March 31, 2000, in conformity with
generally accepted accounting principles.
Kalmus, Siegel, Teitelbaum, Harris & Goldfarb, LLP
Garden City, New York
June 26, 2000
F-18
UNITED SOURCE CORPORATION
(A Development Stage Company)
BALANCE SHEETS
March 31 and June 30, 2000
March 31 June 30
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ -- $ 798,942
Accounts receivable -- 32,212
----------- -----------
TOTAL CURRENT ASSETS -- 831,154
PROPERTY AND EQUIPMENT
Equipment -- 27,549
Accumulated depreciation -- 459
----------- -----------
NET PROPERTY AND EQUIPMENT -- 27,090
OTHER ASSETS
Security deposit -- 6,400
----------- -----------
TOTAL ASSETS $ -- $ 864,644
=========== ===========
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 3,438 $ 23,024
Advances from shareholder 1,080 1,081
----------- -----------
TOTAL LIABILITIES 4,518 24,105
EQUITY
Common stock (20 million shares .001 par value authorized,
9,567,600 shares issued and outstanding) 1 9,568
Preferred stock (2 million shares .001 par value authorized, 310,000
shares issued and outstanding) -- 1,240,000
Deficit accumulated during development stage (4,519) (409,029)
----------- -----------
TOTAL EQUITY (4,518) 840,539
----------- -----------
TOTAL LIABILITIES & EQUITY $ -- $ 864,644
=========== ===========
See accompanying notes and accountants' report.
F-19
UNITED SOURCE CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATONS
For the periods ended March 31 and June 30, 2000
December 7, 1999 April 1, 2000
to to
March 31, 2000 June 30,2000
-------------- -------------
(Unaudited)
REVENUES $ -- $ 32,212
EXPENSES
Salaries & compensation 58,969
Site license 334,000
Auto expenses 3,223
Insurance 1,846
Meetings expenses 271
Office and miscellaneous 627 7,954
Professional fees 3,892 3,854
Rent and utilities 13,795
Payroll taxes 5,156
Training 1,311
Travel and entertainment 8,427
Depreciation
459
---------
TOTAL EXPENSES 4,519 439,265
--------- ---------
NET OPERATING INCOME (LOSS) (4,519) (407,053)
OTHER INCOME -- 2,543
--------- ---------
NET INCOME (LOSS) $ ( 4,519) $(404,510)
========= ==========
NET INCOME (LOSS) PER SHARE (4519.00) (3.85)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 1 105,139
See accompanying notes and accountants' report.
F-20
UNITED SOURCE CORPORATION
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS EQUITY
For the periods from December 7, 1999 to March 31, 2000 and
April 1, 2000 to June 30, 2000
Common 1. Preferred Deficit accumulated during
Shares Amount Shares Amount the development stage
------ ------ ----------- ------ --------------------------
Balance at 12/7/99 - - - - -
Issuance of common stock 1 1 - -
Net loss $ (4,519)
---------
Balance at 3/31/00 1 1 - - (4,519)
- - - - ---------
Issuance of common stock 9,567,599 $ 9,567
Issuance of preferred stock 310,000 $ 1,240,000
Net loss $ (404,510)
----------
Balance at 6/30/00 9,567,600 $ 9,568 310,000 $ 1,240,000 $ (409,029)
========= ======= ======= =========== ==========
See accompanying notes and accountants' report.
F-21
UNITED SOURCE CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the periods December 7, 1999 to March 31, 2000 and
April 1, 2000 to June 30, 2000
December 7, 1999 April 1, 2000
to to
March 31, 2000 June 30, 2000
---------------- -------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (4,519) $ (404,510)
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation expense 459
Increase in accounts payable 3,438 19,586
Increase in accounts receivable (32,212)
Increase in security deposits (6,400)
----------- -----------
Net cash provided (used) by
operating activities (1,081) (423,077)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of stock 1 1,249,568
Loan advances from shareholder 1,080 --
----------- -----------
Net cash provided by financing activities 1,081 1,249,568
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment -- (27,549)
----------- -----------
Net increase in cash -- 798,942
Cash at beginning of period -- --
----------- -----------
Cash at end of period $ -- $ 798,942
=========== ===========
See accompanying report and accountants' report.
F-22
UNITED SOURCE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31 and June 30, 2000
NOTE A - Accounting Policies
Nature of Business
The company was incorporated December 7, 1999 in the state of Delaware. The
company is developing a market site for Business-to-Business E - Commerce for
its customers to procure goods and services over the internet. Revenue will come
from sublicensing its site (licensed from Commerce One) and transaction fees.
Statement of Cash Flows
For the purpose of the Statement of Cash Flows, the Company has defined cash
equivalents as highly liquid investments, with maturities of less than 90 days
that are not held for sale in the ordinary course of business.
Revenue Recognition
The company recognizes revenue from the installation of its software after the
system is installed at the customer's location. Maintenance income and
transaction charges are recognized when earned.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Property, Plant and Equipment
All property, plant and equipment is recorded at cost and depreciated over their
estimated useful lives, using the straight-line method. Upon sale or retirement,
the cost and related accumulated depreciation are eliminated from the respective
accounts, and the resulting gain or loss is included in the results of
operations.
Repairs and maintenance charges which do not increase the useful lives of the
assets are charged to operations as incurred.
F-23
Income Taxes
The tax effect of temporary differences results primarily from net operating
loss carryforwards amounting to approximately $139,708 as of June 30, 2000. In
accordance with SFAS No. 109, the United Source has provided a valuation
allowance in the same amount since realization is not reasonably assured at this
time. United Source will review the likelihood of realizing this asset and
adjust the valuation allowance as needed.
Unaudited Financial Information
The unaudited interim financial statements furnished herein reflect all
adjustments, consisting only of normal recurring accruals, which are, in the
opinion of management, necessary to present fairly the financial position of the
Company as of June 30, 2000 and the results of operations and cash flows for the
three months ended June 30, 2000. The unaudited interim financial statements
should be read in conjunction with the annual financial statements and notes
thereto included herein. Results for the three months ended June 30, 2000 are
not necessarily indicative of results to be achieved for the year ending March
31, 2001.
NOTE B - Capital Stock
As of March 31, 2000, the incorporating shareholder owned the only issued share
of stock. See the subsequent events note for more information.
NOTE C - Related Party Transactions
As of March 31, 2000, the sole shareholder had advanced $ 1,080 toward expenses
incurred by the company prior to the company's bank account being opened. For
the year prior to incorporating and the four months since, the executives and
founders of the company have spent significant time developing the business and
provided services to the business for which no consideration has been taken.
NOTE D -Commitments and Contingencies
The company entered into an employment agreement with each of its three senior
executive officers effective June 1, 2000. The employment agreements with Ralph
Bianculli, Frank Masciano and Ira Baer have an initial term of two years. Each
of the agreements will automatically renew for successive one year terms unless
the employee gives USC three months notice of his desire to resign or USC gives
the employee three months notice of our desire to not extend the employment
term. If USC terminates an employee without cause or if the employee resigns
after a change of control in our ownership, the employee is entitled to three
months of severance compensation and benefits. In addition, each employment
agreement prohibits the employee from competing with USC during the term of his
employment agreement and for one year thereafter.
F-24
The company did not have any obligations under operating leases as of March 31,
2000 or June 30, 2000.
The company has not been named as a defendant in any lawsuit and management is
unaware of any pending claims.
NOTE E - Subsequent Events
The company amended its certificate of Incorporation to authorize the issuance
of 20 million common shares at $ .001 per share par value. As of June 30, 2000
$9,957,600 common shares were issued and outstanding. The company was also
authorized to issue 2 million preferred shares at .001 per share par value. It
has allocated 500,000 shares to a Series A convertible preferred to be issued at
$ 4 per share convertible into an equal number of common shares. As of the June
30, 2000, the company had 310,000 shares of preferred stock issued and
outstanding. The company has reserved 1,000,000 common shares for future option
grants to attract and keep key personnel.
F-25
================================================================================
You should rely only on the information contained in this document. We have
not authorized anyone to provide you with information that is different. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.
Additional risks and uncertainties not presently known or that are
currently deemed immaterial may also impair our business operations. The risks
and uncertainties described in this document and other risks and uncertainties
which we may face in the future will have a greater impact on those who purchase
our common stock. These purchasers will purchase our common stock at the market
price or at a privately negotiated price and will run the risk of losing their
entire investment.
-----------------
Table of contents
----------------
Summary................................................................
Selected financial data................................................
Risk factors...........................................................
Use of proceeds........................................................
Dilution...............................................................
Concurrent offering....................................................
Plan of distribution...................................................
Our business...........................................................
Management's discussion of financial
condition and results of operations...............................
Management.............................................................
Security ownership of certain beneficial
owners and management.............................................
Description of securities..............................................
Legal matters..........................................................
Experts................................................................
Disclosure of Commission's position on
Indemnification for Securities
Act liabilities...................................................
Financial statements...................................................
================================================================================
================================================================================
HANNIBAL CAPITAL CORP.
2,200,000 shares of
Common Stock
----------------
PROSPECTUS
----------------
August 21, 2000
================================================================================
[Alternate page for Selling Securityholder prospectus]
PROSPECTUS
HANNIBAL CAPITAL CORP.
Offering of up to 50,000 Shares of
Common Stock
--------------------------
We are registering up to 50,000 shares of our Common Stock for sale by a
shareholder of our company identified in this prospectus. This shareholder is
referred to throughout this prospectus as "Selling Securityholder."
This individual who wishes to sell his shares of our Common Stock may offer
and sell his shares on a continuous or delayed basis in the future. These sales
may be conducted in the open market or in privately negotiated transactions and
at market prices, fixed prices or negotiated prices.
------------------------------
No public trading market for our Common Stock exists. We anticipate that
our Common Stock will initially be traded in the over-the-counter market after
this offering.
-----------------------------
Our Common Stock being offered by this prospectus involves a high
degree of risk. See "Risk Factors" beginning on page _.
-----------------------------
Neither the Securities and Exchange Commission or any state commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
Dated August 21, 2000
[Alternate page for Selling Securityholder prospectus]
The offering
Shares offered by Selling Securityholder............ 50,000 shares of Common Stock.
Plan of distribution................................ The offering of our shares of Common Stock
is being made by a shareholder of our
company who may wish to sell his shares.
Sales of our Common Stock may be made by
the Selling Securityholder in the open
market or in privately negotiated
transactions and at market prices, fixed
prices or negotiated prices.
Use of proceeds..................................... Hannibal will not receive any proceeds
from this offering.
Concurrent offering
Shares to be distributed by Hannibal to persons
owning BIOF shares.................................. 1,323,392 shares of Common Stock.
Shares to be sold by Hannibal for cash.............. 826,608 shares of Common Stock.
Shares to be sold by Selling Securityholder......... 50,000 shares of Common Stock.
Plan of distribution(2)............................. Hannibal will (a) issue one share of its
Common Stock for every four shares of BIOF
held of record on the distribution date
(with no consideration to be paid or BIOF
shares to be surrendered by the BIOF
owners), (b) itself offer and sell 826,608
shares for cash at the then prevailing
market price.
Use of proceeds..................................... Hannibal will not receive any proceeds
from the distribution of 1,323,392 shares
of its Common Stock to the shareholders of
BIOF. However, Hannibal will receive the
proceeds to be derived from the sale of an
aggregate of 826,608 shares of its Common
Stock.
- -----------
(2) The aggregate of 2,200,000 shares being registered and offered hereby is
exclusive of the 19,800,000 shares to be issued to the former shareholders
of USC and not being registered hereby
[Alternate page for Selling Securityholder prospectus]
Use of proceeds
This prospectus is part of a registration statement that permits the
shareholder of Hannibal who is identified in this prospectus to sell his shares
of Hannibal Common Stock in the open market or in privately negotiated
transactions. This shareholder is referred to throughout this prospectus as the
"Selling Securityholder". As such, Hannibal will not receive any proceeds from
this offering.
[Alternate page for Selling Securityholder prospectus]
Dilution
Net tangible book value per share consists of total assets minus intangible
assets and liabilities, divided by the total number of common shares issued and
outstanding. Hannibal has no warrants, options or convertible securities issued
and outstanding. USC has 1,000,000 shares of Preferred Stock issued and
outstanding (convertible into 1,000,000 shares of USC Common Stock) and
1,000,000 shares of Common Stock reserved for issuance pursuant to USC's 2000
Stock Incentive Plan.
a) At March 31, 2000, the date of the audited financial statements of Hannibal
and USC, Hannibal had a net tangible book value of $(57,833), or $(57,833)
per share and USC had a net tangible book value of $(4,518), or an
insignificant amount per common share;
b) At June 30, 2000, the date of the unaudited financial statements of
Hannibal and USC including the receipt by USC of the sum of $1,240,000 from
the sale of 310,000 shares of its Preferred Stock, Hannibal had a net
tangible book value of $63,093 or $63,093 per Common Share and USC had a
net tangible book value of $840,539 or $0.09 per Common share; and
c) Assuming the consummation of the transaction described herein (the issuance
of an aggregate of 22,000,000 shares to acquire USC (19,800,000 shares), to
be distributed to the BIOF shareholders (1,323,292 shares), to be sold for
cash (800,000 shares), and to be sold to defray the expenses hereof (26,708
shares) and to compensate a financial intermediary (50,000 shares)), and
further assuming that the 800,000 shares to be sold for cash result is net
proceeds of $1,200,000 and that all proceeds derived from the sale of the
26,708 shares do in fact discharge all of the costs of this offering), the
resulting combined entity will have a net tangible book value of
$2,017,358, or $0.09 per share.
Concurrent offering
The registration statement of which this prospectus is a part also includes
a prospectus with respect to (a) the distribution of 1,323,392 shares of
Hannibal Common Stock to the shareholders of BIOF and (b) the offering by
Hannibal for cash of 826,608 shares of Hannibal Stock. This distribution may
have a material adverse effect on the market price of the Common Stock offered
by the Selling Securityholder.
Plan of distribution
While the registration statement is effective, the Selling Securityholder
may sell his shares directly to the public, without the aid of a broker or
dealer, or he may sell his shares through a broker or dealer if the Hannibal
Common Stock is authorized for inclusion on the OTC Bulletin Board. The Selling
Securityholder has the option of selling his shares in the open market or in
privately negotiated transactions. Additionally, the Selling Securityholder may
sell his shares at market prices, fixed prices or negotiated prices. Any
commission, fee or other compensation of a broker or dealer would depend on the
brokers or dealers involved in the transaction and would be paid by the Selling
Securityholder.
[Alternate page for Selling Securityholder prospectus]
Selling Securityholder
All of the 50,000 shares of Hannibal Common Stock being offered by this
Selling Securityholder's prospectus are owned by and registered in the name of
Atlantis Fund, Ltd., a Bahamian corporation whose address is Fort Nassau Center,
Marlborough Street, P.O. Box N-4875, Nassau Bahamas. The sale of such 50,000
shares is subject to the provision of the Stock Exchange Agreement between
Hannibal and USC that permits the sale of only twenty percent (20%) of such
50,000 shares prior to the expiration of six months from the date of this
prospectus (unless a new date is agreed to between Hannibal and USC). Thereby,
only 10,000 of the 50,000 shares may be offered for sale immediately. The books
and records of BIOF do not indicate that Atlantis Fund, Ltd. is a shareholder of
BIOF; and no officer, director of affiliate of either of BIOF or Hannibal has
any interest, direct or indirect, in Atlantis Fund, Ltd.
[Alternative page for Selling Securityholder prospectus]
================================================================================
You should rely only on the information contained in this document. We have
not authorized anyone to provide you with information that is different. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document.
Additional risks and uncertainties not presently known or that are
currently deemed immaterial may also impair our business operations. The risks
and uncertainties described in this document and other risks and uncertainties
which we may face in the future will have a greater impact on those who purchase
our common stock from the Selling Securityholder. These purchasers will purchase
our common stock at the market price or at a privately negotiated price and will
run the risk of losing their entire investment.
-----------------
Table of contents
----------------
Summary...........................................................
Selected financial data...........................................
Risk factors......................................................
Use of proceeds...................................................
Dilution..........................................................
Concurrent offering...............................................
Plan of distribution..............................................
Our business......................................................
Management's discussion of financial
condition and results of operations..........................
Management........................................................
Security ownership of certain beneficial
owners and management........................................
Description of securities.........................................
Legal matters.....................................................
Experts...........................................................
Disclosure of Commission's position on
Indemnification for Securities
Act liabilities..............................................
Financial statements..............................................
================================================================================
================================================================================
HANNIBAL CAPITAL CORP.
50,000 shares of
common stock
----------------
PROSPECTUS
----------------
August 21, 2000
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Pursuant to Delaware law, a corporation may indemnify a person who is a
party or threatened to be made a party to any action, suit or proceeding by
reason of the fact the he or she is an officer, director, employee or agent of
the corporation, against such person's costs and expenses incurred in connection
with such action so long as he or she acted in good faith and in a manner which
he or she reasonably believed to be in, or not opposed to, the best interest of
the corporation, and, in the case of criminal actions, had no reasonable cause
to believe his or her conduct was unlawful. Delaware law requires a corporation
to indemnify any such person who is successful on the merits or defense of such
action against costs and expenses actually and reasonably incurred in connection
with the action.
The bylaws of Hannibal, filed as Exhibit 3.2, provide that Hannibal will
indemnify its officers and directors for costs and expenses incurred in
connection with the defense of actions, suits, or proceedings against them on
account of their being or having been directors or officers of Hannibal, absent
a finding of negligence or misconduct in office. Hannibal's Bylaws also permit
Hannibal to maintain insurance on behalf of its officers, directors, employees
and agents against any liability asserted against and incurred by that person
whether or not Hannibal has the power to indemnify such person against liability
for any of those acts.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by the
registrant in connection with the sale of the securities being registered. All
amounts are estimates except the SEC registration fee:
SEC registration fee.............................................. $ 6.70
Printing and engraving expenses................................... $ 5,000.00
Accounting fees and expenses...................................... $10,000.00
Attorneys' fees and expenses...................................... $20,000.00
Transfer agent's and registrant's fees and expenses............... $ 1,500.00
Miscellaneous..................................................... $ 2,505.30
Total $39,012.00
II-1
Item 26. Recent Sales of Unregistered Securities
There have been no recent sales of unregistered securities.
Item 27. Exhibits
Exhibit
Number Name
- ------ ----
2.1 Stock Exchange Agreement, dated July 24, 2000, by and among United
Source Corporation, Hannibal Capital Corp. and Biofarm, Inc.
2.2 Amendment No.1 to Stock Exchange Agreement, dated July 24, 2000, by and
among United Source Corporation, Hannibal Capital Corp. and Biofarm,
Inc.
3.1 Certificate of Incorporation of Hannibal Capital Corp.(1)
3.2 Bylaws of Hannibal Capital Corp.(1)
5.1 Opinion re: Legality (2)
23.1 Consent of Independent certified Public Accountants, ASHER & COMPANY,
Ltd.
23.2 Consent of Independent certified Public Accountants, Kalmus, Siegel,
Teitelbaum, Harris & Goldfarb, LLP.
23.3 Consent of Counsel (see Exhibit 5.1)
27.1 Financial Data Schedule of Hannibal Capital Corp.
99.1 Consent of Director Designee, Ralph Bianculli
99.2 Consent of Director Designee, Ira Baer
99.3 Consent of Director Designee, Richard Goldstein
99.4 Consent of Director Designee, Joe McDonald
- ---------------
(1) Previously filed.
(2) To be filed by Amendment.
Item 28. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of
Securities Act.
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be
II-2
reflected in the form of prospectus filed with the commission
pursuant to Rule 424(B) if, in the aggregate, the changes in volume
and price represent no more than 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Exchange Act that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of New York, State of New
York, on August 21, 2000.
HANNIBAL CAPITAL CORP.
By: /s/ David R. Stith
--------------------------------
David R. Stith, President
Pursuant to the requirements of the Securities Act, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
Name Title Date
- ---- ----- ----
/s/ David R. Stith President and Director August 21, 2000
- ----------------------------
David R. Stith
/s/ Herbert S. McDonald Vice President and Director August 21, 2000
- ----------------------------
Herbert S. McDonald
August 21, 2000
/s/ Desiree L. Pierson Treasurer, Secretary and Director
- ------------------------------------ (principal accounting officer)
Desiree L. Pierson
INDEX TO EXHIBITS
Exhibit
Number Name
- ------- ----
2.1 Stock Exchange Agreement, dated July 24, 2000, by and among United
Source Corporation, Hannibal Capital Corp. and Biofarm, Inc.
2.2 Amendment No. 1 to Stock Exchange Agreement, dated July 24, 2000,
by and among United Source Corporation, Hannibal Capital Corp. and
Biofarm, Inc.
3.1 Certificate of Incorporation of Hannibal Capital Corp.(1)
3.2 Bylaws of Hannibal Capital Corp.(1)
5.1 Opinion re: Legality (2)
23.1 Consent of Independent certified Public Accountants, ASHER &
COMPANY, Ltd.
23.2 Consent of Independent certified Public Accountants, Kalmus, Siegel,
Teitelbaum, Harris & Goldfard, LLP.
23.3 Consent of Counsel (see Exhibit 5.1)
27.1 Financial Data Schedule of Hannibal Capital Corp.
99.1 Consent of Director Designee, Ralph Bianculli
99.2 Consent of Director Designee, Ira Baer
99.3 Consent of Director Designee, Richard Goldstein
99.4 Consent of Director Designee, Joe McDonald
- ---------------
(1) Previously filed.
(2) To be filed by Amendment.