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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
[X] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_______________________to________________________
COMMISSION FILE NUMBER_____________________________________
OMNINET INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
OMNINET INTERNATIONAL LTD.
(Translation of Registrant's name into English)
BERMUDA
(Jurisdiction of incorporation or organization)
Richmond House,
5th Floor, 12
Par-la-Ville Road, Hamilton, Bermuda HM11
(Address of principal executive offices)
-------------------
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Name of each exchange on
Title of each class which registered
------------------- -----------------------
Common Stock, U.S. $0.001 Par Value None
Securities registered or to be registered pursuant to Section 12(g) of the
Act. None
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act. None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
Common Stock, U.S. $0.001 Par Value 1,123,851 Shares
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark which financial statement item the registrant has elected
to follow. Item 17 [ ] Item 18 [X]
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1. DESCRIPTION OF BUSINESS.
Omninet International Ltd. was originally organized under the laws of
Bermuda on March 24, 1998. We amended our memorandum of association on June 30,
1998, in order to increase the amount of our authorized common stock to
25,000,000 shares, par value $0.001. We are filing this Form 20-F on a voluntary
basis under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
in order to become eligible for quotation on the OTC Bulletin Board.
Omninet is a development stage company whose only operation is seeking
viable businesses to acquire. It is likely that we will need additional
financing or future profitability to continue as a going concern. We are not
presently engaged in any business. Since our formation, Omninet has explored
entering into certain businesses but commenced operations in only one business.
In particular:
- In the Spring of 1998, Omninet explored providing Internet
services to domestic and business users in the United Kingdom.
On June 23, 1998, we entered into an agreement to acquire
Colloquium Ltd., a Scotland based provider of connectivity and
value-added Internet services to the United Kingdom. On July 2,
1998, we exchanged 954,964 shares of our common stock for all of
the issued and outstanding shares of Colloquium. However, we
became dissatisfied with the management of Colloquium and on May
26, 1999, Omninet contributed $24,000 to the capital of
Colloquium and thereafter sold all of the issued and outstanding
shares of Colloquium to Brian McMillan and others in exchange
for 479,988 Omninet shares held by the purchasers.
- On September 8, 1998, Omninet entered into a Plan and Agreement
of Merger - Reorganization with E&M Management, Inc. whereby,
subject to numerous terms and conditions, E&M was to be merged
with and into Omninet, with Omninet being the surviving
corporation. E&M was a development stage company originally
incorporated in Nevada on November 2, 1992. E&M was not engaged
in any operations. However, trades in E&M's common stock were
quoted on the OTC Bulletin Board. As of October 15, 1999, E&M
had not obtained the requisite approval of the merger by its
shareholders as required by Nevada law and, on November 2, 1999,
the companies terminated the merger agreement by executing a
Mutual Termination Agreement and Release. We do not believe that
Omninet assumed any liabilities due to its termination of the
merger.
2. DESCRIPTION OF PROPERTY.
Omninet has no material assets except for cash in the amount of
$84,239. Omninet has no office facilities or real property holdings. We
currently occupy office space at Richmond House, 5th Floor, 12, Par-la-Ville
Road, Hamilton, Bermuda HM11 on a month-to-month, rent free basis. We believe
that our existing facilities are adequate to meet our current needs and do
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not anticipate any difficulty in finding other satisfactory space if existing
facilities become unavailable
3. LEGAL PROCEEDINGS.
Other than as described below, there are no pending legal proceedings
to which Omninet, our directors or officers are a party. Except as described in
this Item 3, no legal proceedings are known to us to be contemplated, or
threatened by or against Omninet, by any party including any governmental
authority.
Omninet has commenced litigation in Bermuda against Colloquium Ltd.,
Brian McMillan and Catherine Matherson (two former directors) in relation to the
withdrawal of $50,691 from Omninet's bank account and for the return of the
approximately $24,000 paid by Omninet to Colloquium as part of the May 26, 1999
agreement referred to in Item 1 above. We claimed that the withdrawal of funds
was unauthorized and that the $24,000 payment made to Colloquium under the May
26, 1999 agreement was made in error after a material default under that
agreement by Brian McMillan and Colloquium. A default judgment was obtained in
Bermuda against the defendants for $74,691, plus interest and costs and we have
initiated proceedings in Scotland seeking to enforce the default judgment.
Colloquium, Brian McMillan and/or Catherine Matherson have appealed the
judgment. There can be no assurance as to the outcome of the appeal or that the
judgment will be collectible, in whole or in part, from all or any of
Colloquium, Brian McMillan and Catherine Matherson.
4. CONTROL OF REGISTRANT.
(a) Omninet is not controlled or owned by another corporation or
foreign government.
(b) The following table sets forth certain information regarding the
ownership of Omninet's common stock as of December 1, 1999, by each shareholder
known by us to be the beneficial owner of more than 10% of Omninet's common
stock and all executive officers and directors as a group. Unless otherwise
indicated by footnote, each of the shareholders named in the table has sole
voting and investment power with respect to the shares of common stock
beneficially owned.
TITLE OF CLASS NAME AND ADDRESS NO. OF SHARES OWNED % OF CLASS
-------------- ---------------- ------------------- ----------
Common Eric Kohn 297,120 26.44
Chemin de Carabot, 10a
CH-1213 Onex
Switzerland
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TITLE OF CLASS NAME AND ADDRESS NO. OF SHARES OWNED % OF CLASS
-------------- ---------------- ------------------- ----------
Common Estate of Sir Ian MacGregor(*) 134,094 11.93
21 Mount Windham Drive
Hamilton, CR 04
Bermuda
Common Christopher Tilley 134,094 11.93
15 Chemin de la Praly
Case Postale 139
CH-1222 vesenaz
Switzerland
Common Valor Invest, SA 211,774 18.84
29 Quai des Bergues
CH-1201 Geneva
Switzerland
(*) Omninet has been advised that beneficial ownership of these
shares has been transferred to Value Invest Ltd. and will be
transferred on the company's books subject to receipt of approval from
the Bermuda Monetary Authority. ValueInvest's address is Letzigraben
89, Zurich CH 8040, Switzerland.
(c) No arrangements presently exist which would result in a change
in control of Omninet.
5. NATURE OF TRADING MARKET.
Omninet's common stock is not presently listed on any national or
foreign securities exchange. There is currently no established trading market
for Omninet's common stock and there is no assurance that a trading market will
develop or, if such a market develops, that it will continue. High and low sales
prices for Omninet's common stock are not available.
As of November 17, 1999, Omninet had no shareholders of record and no
shares of common stock located in the United States.
6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS.
Omninet does not believe there are any decrees or regulations under the
laws of Bermuda applicable to it restricting the import or export of capital or
affecting the remittance of dividends or other payments to nonresident holders
of our common stock.
There are no restrictions under Omninet's Bye-Laws or Memorandum of
Association or under Bermuda law as currently in effect that limit the right of
nonresident owners to hold or vote Omninet's Common Stock or to receive
dividends thereon. However, the permission of the Bermuda Monetary Authority is
required before shares of Omninet's Common Stock can be
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transferred or issued to any other person. Once Omninet is a reporting company
under the Exchange Act, we may seek a waiver of this requirement from the
Bermuda Monetary Authority.
The Company is organized under the laws of Bermuda. There is
uncertainty as to whether the Courts of Bermuda would (i) enforce judgments of
United States Courts obtained against Omninet or our directors and officers
predicated upon the civil liability provisions of the federal securities laws of
the United States or (ii) entertain original actions brought in Bermuda Courts
against Omninet or such persons predicated upon the federal securities laws of
the United States. There is no treaty in effect between the United States and
Bermuda providing for such enforcement.
7. TAXATION.
Omninet is organized under the laws of Bermuda. At present, there is no
Bermuda income on profits tax, withholding tax, capital gains tax, capital
transfer tax, estate duty or inheritance tax payable by our United States
shareholders, except shareholders ordinarily resident in Bermuda. There is
currently no reciprocal tax treaty between Bermuda and the United States
regarding withholding.
8. SELECTED FINANCIAL DATA.
The following table summarizes selected consolidated financial data and
operating information of Omninet.
The following selected consolidated financial data for the year ended
February 28, 1999 and the period from February 1, 1997 to February 28, 1998 has
been derived from Omninet's audited Consolidated Financial Statements included
elsewhere in this Registration Statement. The information should be read in
conjunction with the Consolidated Financial Statements and Notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Registration Statement.
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Omninet's Consolidated Financial Statements have been prepared in
accordance with accounting standards generally accepted in the United States.
Thirteen months
Year ended ended
February 28, February 28,
1999 1998
---- ----
Revenues $ 466,271 $ 364,720
Cost of revenues (315,023) (280,925)
------- -------
Gross profit 151,248 83,795
Selling, general and administrative expenses (423,511) (235,176)
------- -------
Operating loss (272,263) (151,381)
Interest expense (8,339) (9,042)
Other income - 13,287
------- -------
Net loss $ (280,602) $ (147,136)
======= =======
Net loss per share $ (0.32) $ (0.40)
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BALANCE SHEET DATA:
Working capital $ (205,660) $ (366,821)
Total assets $ 193,128 $ 194,915
Total liabilities $ 307,209 $ 469,883
Total Shareholders' Equity $ (206,567) $ (377,610)
Six months
ended August Pro-
31, 1999 Forma
-------- -----
Revenues $ 104,928 -
Cost of revenues (62,209) -
------- -------
Gross profit 42,719 -
Bad debt expense (50,691) (50,691)
Selling, general and administrative expenses (156,502) (112,932)
------- -------
Operating loss (164,474) (163,623)
Interest expense (2,660) (1,566)
------- -------
Net loss $ (167,134) $ (165,189)
======= =======
BALANCE SHEET DATA:
Working capital $ 61,463 $ 61,463
Total assets $ 85,988 $ 85,988
Total liabilities $ 24,525 $ 24,525
Total Shareholders' Equity $ 61,463 $ 61,463
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9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion is based on Omninet's audited consolidated
financial data for the year ended February 28, 1999 and the period from February
1, 1997 to February 28, 1998. During much of the periods covered by these
financial statements Omninet was engaged in the business of providing
connectivity and value added Internet services. We are not presently engaged in
that or any other business.
Omninet presently has no business operations. Our plan of operation is
to acquire viable operating companies. We anticipate that we can satisfy our
current cash requirements for a period of 12 months and do not anticipate that
we will have to raise additional funds in the next 12 months. If Omninet
requires additional capital in order to acquire an operating company, we plan to
raise such additional funds through a private placement of common stock. Omninet
will satisfy legal and accounting costs associated with filing reports under the
Exchange Act through our cash reserves.
Results of Operations - Year Ended February 28, 1999 As Compared to the
Period From February 1, 1997 to February 28, 1998.
REVENUES
Total revenues in the year ended February 28, 1999 were $466,271 as
compared to $364,720 in the period from February 1, 1997 to February 28, 1998.
All of Omninet's revenues from 1997 to 1999 were derived from our Internet
related business which we sold at the end of the first quarter of 1999.
COSTS
Total cost increased from $280,925 for the thirteen months ended
February 28, 1998 to $315,023 in the year ended February 28, 1999. The largest
components of these costs were technical staff salaries and telephone line costs
from our former Internet related business.
LIQUIDITY AND CAPITAL RESERVES
Total net proceeds from the sale of equity securities in the period
between our formation and August 31, 1999 amounted to approximately $375,000.
CASH FLOW
Operating activities used cash, predominately for our former Internet
related business, of $16,037 in the thirteen months ended February 28, 1998 and
$75,744 in the year ended February 28, 1999.
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Investing activities used cash of $25,886 from the period beginning
February 1, 1997 to February 28, 1998 and $44,305 in the year ended February 28,
1998. Cash used for investing activities was applied towards the purchase of
property and equipment for our former Internet related business.
Net Cash provided by financing activities was $43,108 from February 1,
1997 to February 28, 1998 and $128,488 in the year ended February 28, 1999.
WORKING CAPITAL
Omninet's working capital, defined as the excess of our current assets
over our current liabilities, was $(205,660) at February 28, 1999 compared to
($366,821) at February 28, 1998.
Omninet does not presently have any borrowing facility established with
a financial institution. We anticipate that our current cash reserves of $84,239
will be sufficient to fund our operations through December 31, 2000. If Omninet
requires additional capital to fund our operations, we anticipate raising such
additional capital through a private offering of Omninet's securities.
IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS
Omninet does not believe that inflation or currency fluctuations have
had a material adverse effect on revenues and results of operations. However,
demand for Omninet's services was for the periods indicated above, and likely
will be if an operating entity is acquired in the future, influenced by general
economic conditions, including inflation and currency fluctuations. Periods of
economic recession, high inflation or the devaluation of currencies in countries
in which Omninet operates could have a material adverse effect on our results of
operations.
FACTORS THAT COULD AFFECT OPERATING RESULTS
Forward Looking Statements. This Registration Statement on Form 20-F
contains forward-looking statements. Additional written and oral forward-looking
statements may be made by Omninet from time to time in SEC filings and
otherwise. Results predicted by forward-looking statements, including, without
limitation, those relating to our future business prospects, revenues, working
capital, liquidity, capital needs, interest costs, and income are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward-looking statements, due to the
following factors, among other risks and factors identified from time to time in
Omninet's filings with the SEC.
Omniet Has a History of Losses and Cannot Be Certain to Achieve
Positive Cash Flow. For the thirteen months ended February 28, 1998 and the year
ended February 28, 1999, Omninet had net losses and negative cash flows. For the
six months ended August 31, 1999, we had a net loss of $167,134. In addition, we
had an accumulated deficit of $824,474 as of August 31, 1999. Omninet presently
has no revenue producing operations and anticipates monthly operating expenses
of $1,000.00 excluding any litigation.
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Even if Omninet acquires an operating entity, we cannot be certain that
we will achieve or sustain positive cash flow or profitability from our
operations. Our net losses and negative cash flow are likely to continue even
longer than we currently anticipate if we do not acquire a viable operating
entity and if we do not attract and retain qualified personnel. Our ability to
achieve our objectives is subject to financial, competitive, regulatory, legal,
technical and other factors, many of which are beyond our control.
Omninet's Limited Operating History Makes it Difficult to Assess Past
Performance and Future Prospects. There is only limited historical operating and
financial information on which to base an evaluation of Omninet's performance
and prospects. We have acquired and disposed of one company since our inception
in March 1998. This limits the comparability of our operating and financial
information from period to period.
Omninet Is Subject to Risks As We Make Acquisitions and Engage in Strategic
Alliances. As part of Omninet's business strategy, we intend to acquire, make
investments in, or enter into strategic alliances with as yet unidentified
operating companies. Any such future acquisitions, investments or strategic
alliances would involve risks, such as:
- incorrect assessment of the value, strengths and weaknesses of
acquisition and investment opportunities;
- underestimating the difficulty of integrating the operations and
personnel of newly acquired companies;
- the potential disruption of any ongoing business, including
possible diversions of resources and management time; and
- the threat of impairing relationships with employees and customers
as a result of changes in management or ownership.
We cannot assure you that Omninet will be successful in overcoming
these risks. Moreover, we cannot be certain that any desired acquisition,
investment or strategic alliance could be made in a timely manner or on terms
and conditions acceptable to us. Neither can we assure you that Omninet will be
successful in identifying attractive acquisition candidates. Omninet expects
that competition for such acquisitions may be significant. We may compete with
others who have similar acquisition strategies, many of whom may be larger and
have greater financial and other resources than Omninet.
An additional risk associated with acquisitions is that many attractive
acquisition candidates do not have audited financial statements and have varying
degrees of internal controls. Although we may believe that the available
financial information for a particular business is reliable, we cannot guarantee
that a subsequent audit would not reveal matters of significance, including with
respect to liabilities, contingent or otherwise. We expect that, from time to
time in the future, we will enter into acquisition agreements, the pro forma
effect of which is not known and cannot be predicted.
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Omninet Does Not Expect to Pay Dividends. Omninet does not anticipate
paying cash dividends in the foreseeable future.
Risks Inherent in International Operations. A substantial portion of
Omninet's business may be conducted outside of the United States. As a result,
our operations could be subject to various risks such as the possibility of the
loss of revenue, property or equipment due to expropriation, nationalization,
war, insurrection, terrorism or civil disturbance, the instability of foreign
economies, currency fluctuations, and devaluations, adverse tax policies and
governmental activities that may limit or disrupt markets, restrict payments or
the movement of funds or result in the deprivation of contract rights.
Additionally, Omninet's ability to compete may be adversely affected by foreign
governmental regulations that encourage or mandate the hiring of local
contractors, or by regulations that require foreign contractors to employ
citizens of, or purchase supplies from vendors in, a particular jurisdiction.
Omninet may be subject to taxation in a number of jurisdictions, and the final
determination of our tax liabilities involves the interpretation of the statutes
and requirements of various domestic and foreign taxing authorities. Any of
these risks may have an adverse effect on Omninet.
Dependence on Key Employees. Omninet's growth and profitability are
dependent upon, among other things, the abilities and experience of Omninet's
management team including Mr. Eric F. Kohn, Omninet's Chairman and Director. If
the services of Mr. Kohn or Omninet's other directors or executive officers were
no longer available to the company, our business, financial condition and
results of operations could be adversely affected.
Rights of Shareholders Under Bermuda Law. Omninet is incorporated under
the laws of Bermuda. Principles of law relating to such matters as the validity
of corporate procedures, the fiduciary duties of Omninet's management and
directors and the rights of our shareholders, are governed by Bermuda law and
our Memorandum of Association and Bye-laws. Such principles of law may differ
from those that would apply if we were incorporated in a jurisdiction in the
United States. In addition, there is uncertainty as to whether the courts of
Bermuda would enforce (i) judgments of United States courts obtained against
Omninet or our officers and directors predicated upon the civil liability
provisions of the securities laws of the United States or any state or (ii) in
original actions brought in Bermuda, liabilities against Omninet or such persons
predicated upon the securities laws of the United States or any state.
9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable. Omninet is not presently engaged in business. The
company has no notes payable and is not subject to interest rate risk.
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10. DIRECTORS AND OFFICERS OF REGISTRANT.
The following sets forth Omninet's directors, executive officers and
key employees, positions and offices held by each such person, and the period
each such person has held such position.
Name Position Held and Term
- - ---- ----------------------
Eric F. Kohn Chairman and Director since March 24, 1998.
Marlin J. Horst Secretary and Director since March 24, 1998.
Jeffrey Conyers Director since May 20, 1999.
Michael R. Schroter Director since May 20, 1999.
Lynda Milligan-Whyte Director Since March 24, 1999.
(b) There are no family relationships among Omninet's directors and
executive officers.
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11. COMPENSATION OF DIRECTORS AND OFFICERS.
(a) During the fiscal year ended February 28, 1999, Colloquium, a
wholly-owned subsidiary of Omninet prior to its sale on May 26, 1999, paid
$43,743 to Brian McMillan and Catherine Matherson for services rendered as
directors of that company.
Except as described above, Omninet's officers and directors did not
receive compensation for services in any capacity during the fiscal year ended
February 28, 1999. Each of our directors and officers has elected to forego
further payments under this arrangement for an indefinite period of time so that
we can devote our cash resources to seeking and acquiring an operating business.
We expect that our directors and officers will begin to receive compensation for
their services in such capacities after we acquire an operating entity and are
generating revenues from operations. The directors and officers are not
presently accruing any compensation pursuant to any agreement with Omninet.
(b) We have not adopted any plan to provide pension, retirement or
similar benefits for our directors and officers.
12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
As of December 1, 1999, there were no outstanding warrants or options
to purchase shares of Omninet's common stock. There are no outstanding options
to purchase Omninet common stock.
13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
(a) On May 26, 1999, our Board of Directors voted unanimously to
divest Omninet of its wholly-owned subsidiary, Colloquium, due to concerns
regarding that company's operational performance and long-term viability. This
action was subsequently approved by Omninet's shareholders and an agreement was
struck between Omninet, Colloquium, Brian McMillan and Eric Kohn, whereby Brian
McMillan and certain other shareholders of Omninet were given the option to
exchange their shares of Omninet common stock for all of the shares of the
common stock of Colloquium. In addition, Omninet contributed $24,000 to the
capital of Colloquium. Six Omninet shareholders exchanged their shares in
Omninet for shares in Colloquium, including Brian McMillan who was a director of
Colloquium at the time of the exchange. The six shareholders participating in
the exchange tendered an aggregate of 479,988 shares of Omninet common stock,
which shares were returned to treasury.
In 1998 and 1999, Mr. Kohn, our Chairman and Director, loaned Omninet
$16,014 and $25,695, respectively. We used the proceeds of the loans from Mr.
Kohn to fund our business operations. The loans were non-interest bearing and
payable on demand. Omninet has repaid both loans in full.
(b) None of our directors, officers or associates of any such directors
or officers was indebted to Omninet or our subsidiaries at any time during the
last three years.
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PART II
14. DESCRIPTION OF SECURITIES TO BE REGISTERED
Our Memorandum of Association authorizes the issuance of 25,000,000
shares of Omninet common stock, par value $0.001 per share. There were 1,123,851
shares of Omninet's common stock outstanding as of December 1, 1999.
Omninet may sell shares of common stock as our Board of Directors
determines, including as fully paid and non-assessable, but subject to future
payment on agreed terms, or subject to future call. The Board may from time to
time make calls upon any shareholders purchasing subject to future call, and
such shareholders are liable for any moneys unpaid on their shares. If a
shareholder fails to pay a call when made, the Board may declare forfeit those
shares as to which payment is outstanding. Joint holders of shares may be held
jointly and severally liable for calls made with respect to those shares. In
addition, our Board of Directors can prevent the transfer of any shares that are
not fully paid.
All shares of Omninet's common stock are entitled to one vote at any
shareholders meeting or other authorized vote of the shareholders. All shares of
Omninet's common stock are equal to one another with respect to dividends and
liquidation rights. Holders of Omninet's common stock are entitled to receive
such dividends as may be declared by the Board of Directors out of funds legally
available for dividends, and upon liquidation, are entitled to participate
pro-rata in a distribution of assets available for such distribution to
shareholders. There are no conversion, preemptive, option, or subscription
privileges with respect to any shares. Omninet 's common stock does not have
cumulative voting rights which means that the holder of more than 50% of the
shares voting for the election of directors may elect all of the directors if
they choose to do so.
Reference is made to our Memorandum of Association, as amended, and
Bye-laws, as well as to the applicable statutes of Bermuda, for additional
details on the rights, privileges, and liabilities of holders of Omninet's
common stock.
PART III
15. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED SECURITIES AND
USE OF PROCEEDS.
Not Applicable.
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PART IV
17. FINANCIAL STATEMENTS.
Omninet has elected to furnish the financial statements specified by Item 18.
18. FINANCIAL STATEMENTS.
Financial statements which appear herein at the page indicated:
Report of Independent Auditors Public Accountants..............................F-1
Consolidated Statements of Operations for the year ended
February 28, 1999 and the period from February 1, 1997
to February 28, and 1998.......................................................F-2
Consolidated Balance Sheets as of
February 28, 1999 and 1998.....................................................F-3
Consolidated Statements of Cash Flows for the year ended
February 28, 1999 and the period from February 1, 1997
to February 28, 1998...........................................................F-4
Consolidated Statements of Stockholders' Equity................................F-5
Notes to the Consolidated Financial Statements as of and
for the year ended February 28, 1999 and the period
from February 1, 1997 to February 28, 1998.....................................F-6
Unaudited Consolidated Statements of Operations for the six months
ended August 31, 1999 and 1998................................................F-14
Unaudited Consolidated Balance Sheets as at August 31, 1999 and
February 28, 1999.............................................................F-15
Unaudited Consolidated Statements of Stockholders' equity for the
six months ended August 31, 1999..............................................F-16
Unaudited Consolidated Statements of Cash Flows for the six months
ended August 31, 1999 and 1998................................................F-17
Notes to the Unaudited Consolidated Financial Statements as at
August 31, 1999...............................................................F-18
Pro Forma Unaudited Statement of Operations for the year ended
February 28, 1999.............................................................F-20
Pro Forma Unaudited Statement of Operations for the six months
ended August 31, 1999.........................................................F-21
Pro Forma Unaudited Balance Sheet as at August 31, 1999.......................F-22
Notes to the Pro Forma Unaudited Financial Information as at
February 28, 1999 and August 31, 1999.........................................F-23
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19. FINANCIAL STATEMENTS AND EXHIBITS.
The financial statements listed in Item 18 are incorporated by reference to this
Item.
EXHIBIT NUMBER DESCRIPTION
- - -------------------------------------------------------------------
1.1 Memorandum of Association of Omninet
1.2 Bye-laws of Omninet
3.1 Agreement between Omninet and Nicholas
Boakes and Others dated June 23, 1998,
regarding Omninet's purchase of Colloquium
3.2 Agreement and Plan of Merger-Reorganization
dated September 8, 1998, between Omninet and
E&M Management, Inc.
3.3 Agreement dated May 26, 1999, between
Omninet and Colloquium Ltd., regarding the
sale of Colloquium.
3.4 Mutual Termination Agreement and Release
dated October 27, 1999, between Omninet and
E&M Management, Inc.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, we certify that we meet all of the requirements for filing on Form
20-F and have duly caused this Registration Statement to be signed on Omninet's
behalf by the undersigned duly authorized officer.
OMNINET INTERNATIONAL LTD.
Dated: December 16, 1999 By: /s/ Eric F. Kohn
-------------------------------
Eric F. Kohn
Chairman and Director
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OMNINET INTERNATIONAL LIMITED
REPORT AND
FINANCIAL STATEMENTS
YEAR ENDED FEBRUARY 28, 1999 AND
THE PERIOD FROM FEBRUARY 1, 1997 TO FEBRUARY 28, 1998
17
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Omninet International Limited
We have audited the accompanying consolidated balance sheets of Omninet
International Limited and subsidiary as of February 28, 1999 and 1998, and the
related consolidated statements of operations, and cash flows for the year ended
February 28, 1999 and the period from February 1, 1997 to February 28, 1998.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Omninet
International Limited as of February 28, 1999 and 1998 and the consolidated
results of their operations and their cash flows for the periods then ended, in
conformity with accounting principles generally accepted in the United States.
Moore Stephens
Chartered Accountants
St. Paul's House
London EC4P 4BN
December 19, 1999
F-1
18
OMNINET INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1999 AND THE
PERIOD FROM FEBRUARY 1, 1997 TO FEBRUARY 28, 1998
Thirteen months
Year ended ended
February 28, February 28,
1999 1998
---- ----
Revenues $ 466,271 $ 364,720
Cost of revenues (315,023) (280,925)
------- -------
Gross profit 151,248 83,795
Selling, general and administrative expenses (423,511) (235,176)
------- -------
Operating loss (272,263) (151,381)
Interest expense (8,339) (9,042)
Other income - 13,287
------- -------
Net loss $ (280,602) $ (147,136)
======= =======
Earnings per share -
Basic and Diluted $ (0.32) $ (0.40)
======= =======
The accompanying notes are an integral part of these
consolidated financial statements
F-2
19
OMNINET INTERNATIONAL LIMITED
CONSOLIDATED BALANCE SHEETS
AS OF FEBRUARY 28, 1999 AND 1998
1999 1998
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 5,040 $ -
Trade accounts receivable, net 49,979 35,206
Prepaids and other receivables 18,385 26,355
Inventories 10,416 10,694
------ ------
Total current assets 83,820 72,255
Property and Equipment, net 111,095 113,594
Other Assets - 7,279
------ ------
$ 194,915 $ 193,128
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 186,293 $ 102,406
Bank overdraft 32,944 28,004
Current portion of notes payable 10,828 8,311
Accrued and other liabilities 194,881 123,180
Advances from related parties 25,695 16,014
------ ------
Total current liabilities 450,641 277,915
Notes payable, net of current portion 19,242 29,294
------ ------
469,883 307,209
------ ------
Commitments and Contingencies - -
Redeemable preferred stock, 50,000 shares
issued and outstanding 102,642 92,486
------ ------
Stockholders' Equity:
Common stock, $.001 par value, 25,000,000
shares authorised; 1,003,002 and 740,592
shares issued and outstanding as of February
28, 1999 and 1998, respectively 1,003 740
Additional paid-in capital 310,270 238,061
Subscriptions receivable - (49,350)
Accumulated deficit (686,895) (396,137)
Accumulated other comprehensive income:
Cumulative translation adjustment (1,988) 119
------ ------
(377,610) (206,567)
------ ------
$ 194,915 $ 193,128
====== ======
The accompanying notes are an integral part of these
consolidated financial statements
F-3
20
OMNINET INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED FEBRUARY 28, 1999 AND THE
PERIOD FROM FEBRUARY 1, 1997 TO FEBRUARY 28, 1998
1999 1998
---- ----
Cash Flows from operating activities:
Net loss $ (280,602) $ (147,136)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortisation 47,164 49,672
Stock issued for consulting services - 6,499
Changes in operating assets and liabilities:
Accounts Receivable (14,773) 23,802
Prepaid and other 7,970 10,091
Inventories 278 (1,727)
Other assets 7,279 (194)
Accounts payable 83,887 (6,769)
Accrued liabilities 73,053 58,260
Other liabilities - (8,535)
------ ------
Net cash used in operating activities (75,744) (16,037)
------ ------
Cash flows from investing activities:
Purchase of property and equipment (44,305) (25,886)
------ ------
Net cash used in investing activities (44,305) (25,886)
------ ------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 72,052 51,041
Proceeds from collection of subscriptions receivable 49,350 -
Advances from related parties 9,681 968
Bank overdraft 4,940 (1,097)
Net borrowings (payments) of notes payable (7,535) (7,804)
------ ------
Net cash provided by financing activities 128,488 43,108
------ ------
Effect of exchange rate changes on cash (3,399) (1,185)
Net increase (decrease) in cash and cash equivalents 5,040 -
Cash and cash equivalents, beginning of period - -
------ ------
Cash and cash equivalents, end of period $ 5,040 $ -
====== ======
Supplemental cash flow disclosures:
Cash paid for interest $ 8,339 $ 9,042
====== ======
The accompanying notes are an integral part of these
consolidated financial statements
F-4
21
OMNINET INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Additional
------------ Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------ ---------- -------
$ $ $ $
Balance, February 1, 1997 400,324 400 131,511 - (236,949)
Issuance of additional
common stock 120,096 120 32,680
Issuance of additional
common stock 180,144 180 49,170 (49,350)
Issuance of common
stock for consulting
services 25,016 25 6,474
Exercise of stock option 15,012 15 19,665
Stock issuance costs (1,439)
Preferred stock dividends (7,106)
Accreted mandatory
redemption premium
of preferred stock (4,946)
Net loss (147,136)
Translation adjustment
------ ----- ------ ------ ------
Balance, February 28, 1998 740,592 740 238,061 (49,350) (396,137)
Issuance of additional
common stock 52,241 53 15,052 -
Exercise of stock
option 210,169 210 57,157
Collection of subscriptions
receivable 49,350
Preferred stock dividends (6,628)
Accreted mandatory
redemption premium
of preferred stock (3,528)
Net loss (280,602)
Translation adjustment
Comprehensive income
-------- ----- ------ ------ ------
Balance, February 28, 1999 1,003,002 1,003 310,270 - (686,895)
-------- ----- ------ ------ ------
Accumulated
Other Total
Comprehensive Comprehensive Stockholders'
Income Income Equity
------ ------ ------
$ $
Balance, February 1, 1997 2,212 (234,737) (102,826)
Issuance of additional
common stock 32,800
Issuance of additional
common stock -
Issuance of common
stock for consulting
services 6,499
Exercise of stock option 19,680
Stock issuance costs (1,439)
Preferred stock dividends (7,106)
Accreted mandatory
redemption premium
of preferred stock (4,946)
Net loss (147,136) (147,136)
Translation adjustment (2,093) (2,093) (2,093)
------ ------- ------
Balance, February 28, 1998 119 (383,966) (206,567)
Issuance of additional
common stock 15,105
Exercise of stock
option 57,367
Collection of subscriptions
receivable 49,350
Preferred stock dividends (6,628)
Accreted mandatory
redemption premium
of preferred stock (3,528)
Net loss (280,602) (280,602)
Translation adjustment (2,107) (2,107) (2,107)
-------
Comprehensive income (282,709)
------ ------- ------
Balance, February 28, 1999 (1,988) (666,675) (377,610)
------ ------- ------
The accompanying notes are an integral part of these
consolidated financial statements
F-5
22
OMNINET INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1998 AND 1999
1. ORGANISATION AND DESCRIPTION OF THE COMPANY
THE COMPANY
Omninet International Limited (the "Company") was incorporated in Bermuda on
March 24, 1998. After the initial issuance of stock, the Company acquired all of
the issued and outstanding shares of Colloquium Limited, an internet service
provider incorporated in 1995 under the laws of Scotland. The shareholders of
Colloquium Limited contributed all of the outstanding shares of Colloquium
Limited in consideration for 954,964 common shares of the Company. The
accompanying financial statements have been prepared as if the combination had
occurred at the beginning of the fiscal year ended January 31, 1997, using the
historical costs of each entity as if the business combination was a pooling of
interests. The pooling of interests method is used because the shareholders of
the combining entities have become shareholders in a combined entity.
In 1997, Colloquium Limited changed its statutory accounting reference date from
January 31 to February 28. The consolidated statement of operations is therefore
presented for the year ended February 28, 1999 and the thirteen months ended
February 28, 1998.
Subsequent to the balance sheet date, on May 26, 1999 the Company disposed of
all of the issued and outstanding shares of Colloquium Limited to, amongst
others, Brian Macmillan and Catherine Matheson, former directors of the Company.
The Company has no continuing trading activity and is seeking acquisition and
merger opportunities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of the Company and
its wholly owned subsidiary. All significant intercompany accounts and
transactions have been eliminated.
MANAGEMENT'S 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 revenues and expenses during the reporting period.
Actual results could differ from these estimates.
F-6
23
OMNINET INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1998 AND 1999
FOREIGN CURRENCY TRANSLATION
The Company's functional currency was Pounds Sterling as the majority of
revenues were received in Pounds Sterling and the majority of operating
expenditures were made in Pounds Sterling. Transactions during the year are
translated into United States Dollars at the rates of exchange in effect at the
date of transaction. Foreign currency monetary assets and liabilities are
re-converted using rates of exchange prevailing at the balance sheet date.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Assets are depreciated on the
straight-line or reducing balance methods over their estimated useful lives,
which range from 3 to 5 years.
RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Research and development costs are expensed as incurred. The Company accounts
for its software development costs in accordance with SFAS No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed".
The statement provides for capitalisation of certain software development costs
once technological feasibility is established by completion of a working model
and ending when a product is available for general release to customers. The
costs capitalised are then amortised on a straight-line basis over the estimated
product life (generally eighteen months to three years), or on the ratio of
current revenue to total projected product revenue, whichever is greater. To
date, completion of a working model of the Company's products and general
release have substantially coincided. Accordingly, the Company has not
capitalised any software development costs.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
initial maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION
The Company recognises revenues when services are provided. Services are
generally billed one month in advance. Advance billings and collections relating
to future access services are recorded as deferred revenue and recognised when
earned.
F-7
24
OMNINET INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1998 AND 1999
CREDIT RISK
The Company's accounts receivable potentially subjected the Company to credit
risk, as collateral was generally not required. The Company's risk of loss was
limited due to advance billings to customers for services, the use of
pre-approved charges to customer credit cards, and the ability to terminate
access on delinquent accounts. The concentration of credit risk was mitigated by
the large number of customers comprising the customer base. The carrying amount
of the Company's receivables approximates their fair value.
INVENTORY
Inventory consists of starter kits and purchased equipment for resale and is
stated at the lower of cost or market using a specific identification method.
Starter kits consist of diskettes, manuals and other printed material.
INCOME TAXES
Deferred income taxes are recorded using enacted tax laws and rates for the
years in which the taxes are expected to be paid. Deferred income taxes are
provided for items when there is a temporary difference in recording such items
for financial reporting and income tax reporting.
ISSUANCE OF STOCK FOR SERVICES
Shares of the Company's common stock issued for services are recorded in
accordance with SFAS No. 123, "Accounting for Stock-Based Compensation" at the
fair market value of the stock issued or the fair market value of the services
provided, whichever value is more clearly evident.
SOURCES OF SUPPLIES
The Company relied on local telephone companies and other companies to provide
data communications capacity. Although alternative telecommunications facilities
could be found in a timely manner, any disruption of these services could have
had an adverse effect on operating results.
F-8
25
OMNINET INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1998 AND 1999
SOURCES OF SUPPLIES (CONTINUED)
Although the Company attempted to maintain multiple vendors for each required
product, its modems, terminal savers, and high-performance routers, which were
important components of its network, were each acquired from only one source. In
addition, some of the Company's suppliers had limited resources and production
capacity. If the suppliers were unable to meet the Company's needs as it builds
out its network infrastructure, then delays and increased costs in the expansion
of the Company's network infrastructure could have resulted, which would have
affected operating results adversely.
3. EARNINGS PER SHARE
Thirteen
Year ended months ended
February 28, February 28,
1999 1998
---- ----
Net loss $ (280,602) $ (147,136)
Preferred stock dividends (6,628) (7,106)
Accreted mandatory redemption
premium of preferred stock (3,528) (4,946)
------- -------
Net income available to common
stockholders $ (290,758) $ (159,188)
------- -------
Average common shares issued
and outstanding 915,006 401,256
Earnings per share - basic and diluted $ (0.32) $(0.40)
======= =======
F-9
26
OMNINET INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1998 AND 1999
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
February 28, February 28,
1999 1998
---- ----
Computer equipment 238,483 200,068
Office equipment 25,951 21,770
Vehicles 7,416 10,693
------- -------
271,850 232,531
Less - accumulated depreciation (160,755) (118,937)
------- -------
$ 111,095 $ 113,594
======= =======
5. NOTES PAYABLE
Notes payable consist of the following:
February 28, February 28,
1999 1998
---- ----
Bank term loan 18,859 25,109
Renfrewshire Investment Fund Limited 11,211 12,496
------ ------
30,070 37,605
Less - current portion notes payable (10,828) (8,311)
------ ------
$ 19,242 $ 29,294
====== ======
Following are maturities of long-term debt for each of the next 4
years:
Amount
2000 10,828
2001 10,828
2002 6,154
2003 2,260
-----
$ 30,070
=====
F-10
27
OMNINET INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1998 AND 1999
5. NOTES PAYABLE (CONTINUED)
The bank term loan bears interest at the bank's base rate plus 4% per annum with
a minimum of 9% and is payable in monthly instalments of approximately $675
through October 2001. The loan is secured by a pledge over the assets of
Colloquium Limited and over the personal residence of Mr. Brian Macmillan.
The note payable to Renfrewshire Investment Fund Limited bears interest at 5%
per annum and is payable in monthly instalments of $226 through December 2002.
6. RELATED PARTIES TRANSACTIONS
Amounts payable to stockholders and related parties consist of advances made by
related parties and the stockholders of the Company to finance the development
of the Company's operations. The advances are non-interest bearing and are due
on demand.
Selling, general and administrative services costs in the year ended February
28, 1999 includes $26,723 paid to Eric Kohn, a director, in respect of
travelling costs and $4,835 in respect of disbursements paid to Barons Financial
Services (UK) Limited, a company connected with Mr. Kohn. Emoluments paid by
Colloquium Limited to Brian MacMillan and Catherine Matheson (formerly directors
of the Company) amounted to $43,743.
7. PREFERRED STOCK
On September 30, 1996, Colloquium Limited issued 50,000 shares of its Pound
Sterling 1 par value cumulative redeemable participating preferred stock to the
Renfrewshire Business Growth Fund Limited (the "Preferred Shareholder") in
exchange for total consideration of Pound Sterling 50,000 ($78,250 at date of
issuance).
The Preferred Shareholder is entitled to a cumulative dividend of 8% per annum
payable on January 31 and July 31. To date, no preferred stock dividends have
been declared by Colloquium Limited. The Preferred Shareholder is also entitled
to a participating dividend of up to 7.5% per annum of Colloquium's net income.
The Preferred Shareholder has been granted an option to be exercised at any time
on or before December 31, 2002 to purchase 10% of the share capital of
Colloquium Limited for Pound Sterling 1 per share.
The preferred shares are redeemable at Pound Sterling 1.20 per share, together
with all arrears and accruals of dividends on the following dates:
25,000 preferred shares on December 31, 2000
25,000 preferred shares on December 31, 2001
F-11
28
OMNINET INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1998 AND 1999
7. PREFERRED STOCK (CONTINUED)
Colloquium Limited is obligated to redeem immediately all of the preferred
shares at a price of Pound Sterling 1.20 per share on the date upon which either
1) its common stock is listed on a public exchange, or 2) a purchase of 50% or
more of its common stock is completed.
In the event of the liquidation of Colloquium Limited, whether voluntary or
involuntary, the Preferred Shareholder is entitled to receive a preferential
distribution of Pound Sterling 1.20 per share, plus any arrears or accruals of
dividends.
8. TAXATION
Under Bermuda law the company is not required to pay any taxes in Bermuda on
either income or capital gains. The company has received an undertaking from the
Minister of Finance in Bermuda that in the event of any such taxes being imposed
the company will be exempted from taxation until the year 2016.
Colloquium Limited is subject to United Kingdom corporation tax at rates of up
to 30 per cent. Colloquium Limited has net operating loss carry forwards, which
may be used to offset future taxable income.
9. OFFICE LEASE
Colloquium Limited leases office space in Paisley, Scotland under a lease
agreement which may not be cancelled, and which expires on March 31, 2001. The
commitment under this lease approximates $29,200 per year.
10. SUBSEQUENT EVENTS
Subsequent to the balance sheet date, on May 26, 1999 the Company disposed of
all of the issued and outstanding shares of Colloquium Limited to, amongst
others, Brian Macmillan and Catherine Matheson, former directors of the Company.
The Company has booked a net gain of $215,000 as a credit to paid in capital in
the subsequent period. The Company is seeking acquisition and merger
opportunities.
F-12
29
OMNINET INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FEBRUARY 28, 1998 AND 1999
10. SUBSEQUENT EVENTS (CONTINUED)
The Company has commenced litigation against Colloquium Limited, Brian Macmillan
and Catherine Matheson (two former directors) in relation to the withdrawal of
$50,691 from the Company's bank account. Management have booked an expense of
$50,691 in the six months ended August 31, 1999. A default judgement has been
obtained in Bermuda against Colloquium Limited, Brian Macmillan and Catherine
Matheson for the recovery of $50,691 and $24,000 paid to Colloquium Limited as
part of the divestiture settlement, plus interest and legal costs. Litigation is
continuing in Scotland.
Subsequent to the balance sheet date, Barons Financial Services (UK) Limited
were granted warrants for the issue of 14,938 common shares at $0.01 per share.
These warrants were exercised on November 3, 1999.
F-13
30
OMNINET INTERNATIONAL LIMITED
AUGUST 31, 1999
31
OMNINET INTERNATIONAL LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1999 AND 1998
Six months
ended
August 31, 1999
----------------
Revenues $ 104,928
Cost of revenues (62,209)
------
Gross profit 42,719
Bad Debt (50,691)
Selling, general and administrative expenses (156,502)
------
Operating loss (164,474)
Interest expense (2,660)
------
Net loss $ (167,134)
======
Earnings per share -
Basic and Diluted $(0.20)
======
The accompanying notes are an integral part of these
unaudited consolidated financial statements
F-14
32
OMNINET INTERNATIONAL LIMITED
UNAUDITED CONSOLIDATED BALANCE SHEETS
AS AT AUGUST 31, 1999
August 31,
1999
----
ASSETS
Current assets:
Cash and cash equivalents $ 84,239
Trade accounts receivable, net 1,749
Prepaids and other accounts receivables -
Inventories -
------
Total current assets 85,988
Property and Equipment, net -
------
$ 85,988
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,525
Bank overdraft -
Current portion of notes payable -
Accrued and other liabilities -
Advances from related parties -
------
Total current liabilities 24,525
Notes payable, net of current portion -
Other long-term liabilities -
------
24,525
------
Commitments and Contingencies -
Stockholders' Equity:
Common stock, $.001 par value, 25,000,000
shares authorised; 628,926 and 1,003,002
shares issued and outstanding as of May 31
1999 and February 28,1999 respectively 629
Additional paid-in capital 885,308
Accumulated deficit (824,474)
Cumulative translation adjustment -
------
61,463
------
$ 85,988
======
The accompanying notes are an integral part of these
unaudited consolidated financial statements
F-15
33
OMNINET INTERNATIONAL LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED AUGUST 31, 1999
Accumulated
Common Stock Additional Other Total
------------ Paid-In Accumulated Comprehensive Comprehensive Stockholders'
Shares Amount Capital Deficit Income Income Equity
$ $ $ $ $ $
Balance, February 28, 1999 1,003,002 1,003 310,270 (654,935) (3,739) (636,466) (347,401)
Issuance of additional common
stock 105,912 106 359,995 - - - 360,101
Cancellation of 479,988 shares (479,988) (480) - - - - (480)
Net loss - - - (167,134) - (167,134) (167,134)
Preferred stock dividends - - - (1,657) - - (1,657)
Accreted mandatory redemption
premium of preferred stock - - - (748) - - (748)
Translation adjustment - - - - 3,739 3,739 3,739
Gain on disposition of subsidiary - - 215,043 - - - 215,043
------ ----- ------ ------- ------ ------- ------
Balance, August 31, 1999 628,926 629 885,308 (824,474) - (799,861) 61,463
------ ----- ------ ------- ------ ------- ------
The accompanying notes are an integral part of these
unaudited consolidated financial statements
F-16
34
OMNINET INTERNATIONAL LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 31, 1999
Six months
ended August 31,
1999
----
Cash flows from operating activities:
Net loss $ (167,134)
Adjustments to reconcile net profit/(loss)
to net cash used in operating activities:
Depreciation and amortisation 9,409
Changes in operating assets and liabilities:
Trade accounts receivable, net (2,551)
Prepaid and other accounts receivable 7,119
Inventories (5)
Accounts payable (57,243)
Accrued liabilities (910)
-------
Net cash used in operating activities (211,315)
-------
Cash flows from investing activities:
Disposal of subsidiary (24,115)
Purchase of property and equipment (7,212)
_
-------
Net cash used in investing activities (31,327)
-------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 359,621
Proceeds from collection of subscriptions receivable -
Advances from related parties (25,695)
Bank overdraft 2,458
Net borrowings (payments) of notes payable (19,532)
-------
Net cash provided by financing activities 316,852
-------
Effect of exchange rate changes on cash 4,989
-------
Net increase (decrease) in cash and cash equivalents 79,199
Cash and cash equivalents, beginning of period 5,040
-------
Cash and cash equivalents, end of period $ 84,239
=======
Supplemental cash flow disclosures:
Cash paid for interest 2,660
=======
The accompanying notes are an integral part of these
unaudited consolidated financial statements
F-17
35
OMNINET INTERNATIONAL LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1999
1. INTERIM ACCOUNTING POLICY
In the opinion of management of Omninet International Limited (the "Company"),
the accompanying unaudited consolidated financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly in accordance with accounting principles generally accepted in
the US the financial position of the Company and the results of operations and
cash flows for the six months ended August 31, 1999. Although the Company
believes that the disclosure in these financial statements is adequate to make
the information presented not misleading, certain information and footnote
information normally included in interim financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Results of operations for the six months ended August 31, 1999 are
not necessarily indicative of what operating results may be for the full year.
In addition, these unaudited consolidated financial statements and notes thereto
should be read in conjunction with the audited consolidated financial statements
presented herein.
2. COMMITMENTS AND CONTINGENCIES
The Company has commenced litigation against Colloquium Limited, Brian Macmillan
and Catherine Matheson (two former directors) in relation to the withdrawal of
$50,691 from the Company's bank account. Management have booked an expense of
$50,691 in the six months ended August 31, 1999.
A Default Judgement has been obtained in Bermuda against Colloquium Limited,
Brian MacMillan and Catherine Matheson for the $50,691 and the $24,000 paid to
Colloquium Limited as part of the divestiture settlement, plus interest and
legal costs. Litigation is continuing in Scotland.
3. DISPOSITION OF SUBSIDIARY
On May 26, 1999 the Company agreed to transfer the issued shares of Colloquium
Limited to Brian Macmillan, Catherine Matheson and others in exchange for the
cancellation of their 478,988 shares in Omninet International Limited and a cash
payment by the Company of $24,000.
The assets and liabilities of Colloquium Limited at the date of disposition
were:
pound sterling $
ASSETS
Current assets
Cash and cash equivalents 72 115
Trade accounts receivable, net 31,679 50,781
Prepaids and other receivables 7,028 11,266
Inventories 6,501 10,421
------ ------
Total current assets 45,280 72,583
Property and equipment, net 67,934 108,898
------ ------
pound sterling 113,214 $ 181,481
====== ======
F-18
36
OMNINET INTERNATIONAL LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1999
3. DISPOSITION OF SUBSIDIARY (CONTINUED)
LIABILITIES
Current liabilities:
Accounts payable 65,206 104,525
Bank overdraft 22,085 35,402
Current portion of notes payable 1,695 2,717
Accrued and other liabilities 102,160 163,762
Advances from related parties - -
------ ------
Total current liabilities 191,146 306,406
Notes payable, net of current portion 4,879 7,821
------ ------
196,025 314,227
------ ------
Redeemable preferred stock, 50,000
shares issued and outstanding 66,311 106,297
------ ------
Equity stockholders' deficit pound sterling (149,122) $ 239,043)
====== ======
The gain on disposition of the subsidiary was:-
Equity Stockholders' deficit 239,043
Less: Cash payment 24,000
------
$ 215,043
------
The impact on cash flows was:-
Cash and cash equivalents on disposal 115
Add: Cash payment 24,000
------
Net cash outflow $ 24,115
------
4. SUBSEQUENT EVENTS
Subsequent to the balance sheet date, Barons Financial Services (UK) Limited
were granted warrants for the issue of 14,938 common shares at $0.01 per share.
These warrants were exercised on November 3, 1999.
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37
OMNINET INTERNATIONAL LIMITED
PRO-FORMA FINANCIAL INFORMATION
YEAR ENDED FEBRUARY 28, 1999
AND
SIX MONTHS ENDED AUGUST 31, 1999
38
OMNINET INTERNATIONAL LIMITED
PRO-FORMA UNAUDITED STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1999
Year ended
February 28, Adjustments Pro-
1999 (Note 2) Forma
---- -------- -----
Revenues 466,271 (466,271) -
Cost of revenues 315,023 (315,023) -
------- ------- ------
Gross profit 151,248 (151,248) -
Selling, general and
administrative expenses (423,511) (310,694) (112,817)
------- ------- ------
Operating loss (272,263) 159,446 (112,817)
Interest expense (8,339) 8,339 -
------- ------- ------
Net loss $ (280,602) $ 167,785 $ (112,817)
======= ======= =======
See accompanying notes to pro-forma unaudited financial statements
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39
OMNINET INTERNATIONAL LIMITED
PRO-FORMA UNAUDITED STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1999
Six months
ended August Adjustments Pro-
31, 1999 (Note 3) Forma
-------- -------- -----
Revenues $ 104,928 (104,928) -
Cost of revenues (62,209) (62,209) -
------- ------- -------
Gross profit 42,719 (42,719) -
Bad debt expense (50,691) - (50,691)
Selling, general and administrative expenses (156,502) (43,570) (112,932)
------- ------- -------
Operating loss (164,474) (851) (163,623)
Interest expense (2,660) (1,094) (1,566)
------- ------- -------
Net loss $ (167,134) $ 1,945 $ (165,189)
======= ======= =======
See accompanying notes to pro-forma unaudited financial statements
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40
OMNINET INTERNATIONAL LIMITED
PRO-FORMA UNAUDITED BALANCE SHEET
AS AT AUGUST 31, 1999
August 31, Pro-
1999 Adjustments Forma
---- ----------- -----
ASSETS
Current Assets:
Cash and cash equivalents $ 84,239 - $ 84,239
Accounts receivable, net 1,749 - 1,749
------- ------- -------
Total current assets $ 85,988 $ - $ 85,988
------- ------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,525 - $ 24,525
------- ------- -------
$ 24,525 $ - $ 24,525
------- ------- -------
Commitments and contingencies - - -
Stockholders' equity:
Common stock, $.001 par value, 25,000,000
shares authorised; 628,926 shares issued
and outstanding 629 - 629
Additional paid-in capital 885,308 - 885,308
Accumulated deficit (824,474) - (824,474)
------- ------- -------
61,463 $ - 61,463
======= ======= =======
See accompanying notes to pro-forma unaudited financial statements
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41
OMNINET INTERNATIONAL LIMITED
NOTES TO PRO-FORMA UNAUDITED FINANCIAL INFORMATION
FEBRUARY 28, 1999 AND AUGUST 31, 1999
1. BASIS OF PREPARATION
The unaudited pro-forma financial information has been prepared in
accordance with generally accepted accounting principles in United
States and gives effect to the disposition of Colloquium Limited.
On May 26, 1999 the Company agreed to transfer the issued shares of
Colloquium Limited to Brian MacMillan, Catherine Matheson and others in
exchange for the cancellation of their 479,988 shares in Omninet
International Limited.
The pro-forma statements of operations give effect to the disposition
as if it had occurred on March 1, 1998.
The pro-forma financial information does not purport to represent what
the Company's results of operations would have been had the disposition
been consummated at the beginning of fiscal 1999 nor do they project
the Company's results for any future period.
2. PRO-FORMA UNAUDITED STATEMENT OF OPERATIONS FOR THE YEAR ENDED FEBRUARY
28, 1999
The pro-forma unaudited statement of operations for the year ended
February 28, 1999 gives effect to the elimination of losses amounting
to $167,785 reported by Colloquium Limited.
3. PRO-FORMA UNAUDITED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
AUGUST 31, 1999
The pro-forma unaudited statement of operations for the six months
ended August 31, 1999 gives effect to the elimination of operating
losses amounting to $851 and interest expense amounting to $1,094
reported by Colloquium Limited.
4. CONTINGENT LIABILITIES
The Company has commenced litigation against Colloquium Limited, Brian
MacMillan and Catherine Matheson (two former directors) in relation to
the withdrawal of $50,691 from the Company's bank account. Management
have booked an expense of $50,691 in the six months ended August 31,
1999. A Default Judgement has been obtained in Bermuda against
Colloquium Limited, Brian MacMillan and Catherine Matheson for the
$50,691 and the $24,000 paid for the Colloquium Limited shares plus
interest and costs. Litigation is continuing in Scotland.
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