SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended FEBRUARY 28, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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)
22 Church Street,
3rd Floor - Washington Mall I,
Hamilton HM11, Bermuda
(Address of principal executive offices)
-------------------
Securities registered or to be registered pursuant to Section 12(b) of the Act.
None.
Securities registered or to be registered pursuant to Section 12(g) of the Act
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, OTC Bulletin Board
U.S. $0.000167 Par Value
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.
8,014,403 shares of common stock as of February 28, 2003.
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]
INTRODUCTION
The following paragraphs contain certain forward looking statements,
which are within the meaning of and made pursuant to the Safe Harbor provisions
of the Private Securities Litigation Reform Act of 1995. The forward looking
statements include, without limitation, those regarding the prospects for and
factors affecting future revenues and profitability, likelihood of additional
financing, marketing, and cash requirements for future operations. Readers are
cautioned that forward looking statements involve risks, uncertainties, and
factors that may affect the Company's business and prospects, including without
limitation those described below as well as the risks associated with the nature
of competition; technological developments; and effective marketing; all as
discussed in the Company's filings with the U.S. Securities and Exchange
Commission.
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT, AND ADVISORS
Not Applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable.
ITEM 3. KEY INFORMATION
A. SELECTED FINANCIAL DATA.
The following table summarizes our selected consolidated financial data
and operating information for the previous three years. Our financial statements
are stated in United States dollars.
The following selected consolidated financial data for the years ended
February 28, 2003, February 28, 2002, and February 28, 2001 has been derived
from our audited Consolidated Financial Statements included elsewhere in this
Annual Report. The information should be read in conjunction with the
Consolidated Financial Statements and Notes and management's discussion of
operations appearing elsewhere in this Annual Report.
Our Consolidated Financial Statements have been prepared in accordance
with United States generally accepted accounting principles.
YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
2003 2002 2001
---- ---- ----
Revenues $ -- $ -- $ --
Bad debt expense -- -- --
Selling, general and administrative expenses $ (97,006) $(138,255) $(339,712)
Operating loss from continuing operations $ (97,006) $(138,255) $(339,712)
Loss from discontinued operations -- -- --
--------- --------- ---------
Net loss $ (97,006) $(138,255) $(339,712)
========= ========= =========
Net loss per share
Continuing operations $ (0.01) $ (0.02) $ (0.05)
Discontinued operations -- -- --
Total - Basic and diluted $ (0.01) $ (0.02) $ (0.05)
========= ========= =========
BALANCE SHEET DATA:
Working capital $(289,955) $(206,449) $(185,388)
Total assets - continuing operations $ 7,019 $ 1,146 $ 6,212
Total liabilities - continuing operations $ 296,974 $ 207,595 $ 191,600
Total Shareholders' Equity $(289,955) $(206,449) $(185,388)
B. CAPITALIZATION AND INDEBTEDNESS.
Not applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS.
Not applicable.
D. RISK FACTORS.
THE COMPANY HAS IDENTIFIED THE FOLOWING RISK FACTORS AS SIGNIFICANT. THE ORDER
IN WHICH THEY APPEAR IS NOT INTENDED TO REFLECT OUR MANAGEMENT'S PRIORITIZING OF
SUCH RISKS.
FORWARD LOOKING STATEMENTS. This Annual Report on Form 20-F may contain
forward-looking statements. Additional written and oral forward-looking
statements may be made by us 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 our
filings with the SEC.
WE HAVE A HISTORY OF LOSSES AND CANNOT BE CERTAIN TO ACHIEVE POSITIVE
CASH FLOW. For the year ended February 28, 2003, we had a net loss of $97,006.
For the year ended February 28, 2002, we had a net loss of $138,255. And for the
year ended February 28, 2001, we had a net loss of $339,712. In addition, we had
an accumulated deficit of $1,446,735 through February 28, 2003. At present we do
not have any revenue producing operations and we anticipate monthly operating
expenses of approximately $2000, including administration, listing and audit
costs but excluding any litigation.
Even if we acquire 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.
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO ASSESS PAST
PERFORMANCE AND FUTURE PROSPECTS. There is only limited historical operating and
financial information on which to base an evaluation of our performance and
prospects. We have acquired and disposed of one company since our inception in
March 1998. Any company which we may acquire in the future may be in a
completely different business than the company that we previously owned. This
limits the comparability of our operating and financial information from period
to period.
WE ARE SUBJECT TO RISKS AS WE MAKE ACQUISITIONS AND ENGAGE IN STRATEGIC
ALLIANCES. As part of our 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 with other companies
we may acquire;
- the potential disruption of any ongoing business, including
possible diversions of resources and management time; and
- the threat of impairing relationships with employees and
customers as a result of changes in management or ownership.
We cannot assure you that we will be successful in overcoming these
risks. Moreover, we cannot be certain that any desired acquisition, investment
or strategic alliance could be made in a timely manner or on terms and
conditions acceptable to us. Neither can we assure you that we will be
successful in identifying attractive acquisition candidates. We expect that
competition for such acquisitions may be significant. We may compete with others
who have similar acquisition strategies, many of whom may be larger and have
greater financial and other resources than us.
An additional risk associated with acquisitions is that many attractive
acquisition candidates do not have audited financial statements and have varying
degrees of internal controls. Although we may believe that the available
financial information for a particular business is reliable, we cannot guarantee
that a subsequent audit would not reveal matters of significance, including with
respect to liabilities, contingent or otherwise. We expect that, from time to
time in the future, we will enter into acquisition agreements, the pro forma
effect of which is not known and cannot be predicted.
WE DO NOT EXPECT TO PAY DIVIDENDS. We do not anticipate paying cash
dividends in the foreseeable future.
RISKS INHERENT IN INTERNATIONAL OPERATIONS. We are not currently
conducting business. In the future, however, we may acquire an operating company
located outside of the United States. If we acquire a non-U.S. operating
company, it is possible that a substantial portion of our business may be
conducted outside of the United States. In this event, our operations could be
subject to various risks such as the possibility of the loss of revenue,
property or equipment due to expropriation, nationalization, war, insurrection,
terrorism or civil disturbance, the instability of foreign economies, currency
fluctuations, and devaluations, adverse tax policies and governmental activities
that may limit or disrupt markets, restrict payments or the movement of funds or
result in the deprivation of contract rights. Additionally, our ability to
compete could be adversely affected by foreign governmental regulations that
encourage or mandate the hiring of local contractors, or by regulations that
require foreign contractors to employ citizens of, or purchase supplies from
vendors in, a particular jurisdiction. We could also be subject to taxation in a
number of jurisdictions, and the final determination of our tax liabilities
might involve the interpretation of the statutes and requirements of various
domestic and foreign taxing authorities. Any of these risks could have an
adverse effect on our operations.
DEPENDENCE ON KEY EMPLOYEES. Our growth and profitability are dependent
upon, among other things, the abilities and experience of our management team
including Mr. Eric F. Kohn, our President, Treasurer, Chairman and Director. If
the services of Mr. Kohn or our other directors or executive officers became
unavailable, our business, financial condition and results of operations could
be adversely affected.
RIGHTS OF SHAREHOLDERS UNDER BERMUDA LAW. We are incorporated under the
laws of Bermuda. Principles of law relating to such matters as the validity of
corporate procedures, the fiduciary duties of our management and directors and
the rights of our shareholders, are governed by Bermuda law and our Memorandum
of Association and By-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 us or our officers and
directors predicated upon the civil liability provisions of the securities laws
of the United States or any state or (ii) in original actions brought in
Bermuda, liabilities against us or such persons predicated upon the securities
laws of the United States or any state.
ITEM 4. INFORMATION ON THE COMPANY.
A. HISTORY AND DEVELOPMENT OF THE COMPANY.
We were originally organized under the laws of Bermuda on March 24,
1998 under the legal name, "Omninet International Ltd." The term of the Company
is perpetual. We amended our memorandum of association on June 30, 1998 in order
to increase the amount of our authorized common stock to 25,000,000 shares, par
value $0.001. On April 10, 2000, we further amended our memorandum of
association to increase the amount of our authorized common stock to 150,000,000
shares, par value $.000167.
We are a Bermuda exempted company. A Bermuda exempted company is
legislatively exempt from Bermuda's usual requirement that Bermuda-formed
businesses be 60% owned by Bermuda citizens. A Bermuda exempted company may
reside in Bermuda, but must carry on its business transactions in other
countries. Bermuda exempted companies may not hold real estate in Bermuda. There
is no income tax, withholding tax, capital gains tax, capital transfer tax,
estate duty or inheritance tax payable by a Bermuda exempted company or its
shareholders, other than shareholders ordinarily resident in Bermuda.
A Bermuda exempted company is required to pay an annual fee to the
Bermuda Registrar by January 31 of each year. Annual fees are calculated based
upon the exempted company's assessable capital (authorized share capital plus
any share premiums) as of August 31 of the prior year. Exempted companies with
assessable capital of between $0 - $12,000, $12,001 - $120,000 and $120,001 -
$1,200,000 must pay fees of $1,780 , $3,635 and $5,610, respectively. Annual
fees continue to increase as the amount of assessable capital increases above
$1,200,000. As of August 31, 2001, we had assessable capital of $25,000
(150,000,000 authorized shares of common stock with par value of $.000167).
Accordingly, our annual fee for the Year 2002 was $3,635. If an exempted company
fails to timely pay its annual fee, the Bermuda Registrar will charge that
company $300 as a late fee in addition to the annual fee. In extreme cases, the
Bermuda Registrar may cause the exempted company's charter to be suspended or
revoked so that it is no longer permitted to operate in Bermuda.
In addition, a Bermuda exempted company may apply under the Exempted
undertakings Tax Protection Act, 1966 for an assurance from the Bermuda
government that any tax imposing legislation will not be applied to the company
until after March 2016. We were granted such tax assurance on March 30, 1998.
Except as described above, we are subject to the laws and regulations
applicable to Bermuda-based corporations. Although Bermuda law at present is
structured to encourage foreign investment, there can be no assurance that
future laws and regulations will not have a negative impact on our operations.
See also "Risks Inherent in International Operations" in Item 3.D. above. At
present, we are not aware of any special country risks, such as existing or
probable government regulations, that could materially affect our operations.
B. BUSINESS OVERVIEW.
We are a development stage company. We are not presently engaged in any
business. Our only plan of operation is seeking a viable business or businesses
to acquire. At present, we have not identified another business suitable for
acquisition. Over the next 12 months, we intend to continue our search to
acquire an operating entity.
In general, we intend to identify potential acquisitions through
research and referrals. Once identified, we will screen the target to determine
whether or not it might be suitable for acquisition. The initial screening will
consist of an evaluation of the candidate's potential, which may include factors
such as estimated future growth of the candidate's industry. If a company is
identified as a potential target, we will conduct a detailed analysis of the
cost of acquisition, the target's fair market value, the prospective rate of
return on an investment in the target and the likelihood of achieving such
return. The detailed analysis may vary for each target and include criteria such
as an evaluation of the target against comparable companies in the same
industry, scrutiny of the target's financial condition and future earnings
potential and discounted cash flow analysis. Target evaluations are conducted
without the use of outside experts or analysts. We are particularly interested
in identifying and acquiring an Internet-related business due to the recent
growth in that industry, however, a more detailed plan of operations is not
available because we are not engaged in any particular business and because we
have not identified a suitable acquisition target. If we decide that a company
is a suitable acquisition candidate, we anticipate that we will enter into an
agreement to acquire such target, subject to obtaining any financing and
approvals necessary to carryout the transaction.
We will need additional financing or future profitability to continue
as a going concern. We will also need additional capital in order to acquire an
operating company. We plan to raise such funds through a private placement of
common stock or by borrowing from a lending institution. There can be no
assurance that we will be able to raise such funds. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on page 8.
Since our formation, we have explored entering into certain businesses
but commenced operations in only one business. In particular:
- In the Spring of 1998, we explored providing Internet
services to users in the United Kingdom. On July 2, 1998, we
acquired all of the issued and outstanding shares (254,453
shares) of the common stock of Colloquium Ltd., a Scotland
based provider of connectivity and value-added Internet
services to the United Kingdom, in exchange for 954,964 shares
of our common stock.
- Colloquium generated net operating losses from the date of
its acquisition until May 26, 1999. As Colloquium's losses
increased, it became clear that additional financing would be
required in order to fund its operations, and we were not
certain when, if ever, Colloquium would achieve profitability.
These factors, among others, led to disagreement between our
management and that of Colloquium. In order to avoid
continuing liabilities our Board of Directors determined to
sell Colloquium even if that involved realizing a one-time
loss. On May 26, 1999, we contributed $24,000 to the capital
of Colloquium and thereafter sold all of the issued and
outstanding shares of Colloquium to Brian McMillan and others
in exchange for 479,988 of our shares held by them. We
incurred a loss upon the sale of Colloquium because
Colloquium's poor operating performance negatively impacted
the subsidiary's value.
- On September 8, 1998, we entered into a Plan and Agreement
of Merger - Reorganization with E&M Management, Inc. whereby,
subject to numerous terms and conditions, E&M was to be merged
with and into us and we would be the surviving corporation.
E&M was a development stage company originally incorporated in
Nevada on November 2, 1992. E&M was not engaged in any
operations; however, trades in E&M's common stock were quoted
on the OTC Bulletin Board. As of October 15, 1999, E&M had not
obtained the requisite approval of the merger by its
shareholders as required by Nevada law and, on November 2,
1999, the companies terminated the merger agreement by
executing a Mutual Termination Agreement and Release. We do
not believe that we incurred any liabilities as a result of
termination of the merger agreement.
- During the fiscal year ended February 28, 2002, we entered
into negotiations for the acquisition of an Australian
software company. Because basic terms could not be agreed upon
with that company's management, we terminated our negotiations
for such transaction before any letter of intent or other
agreements were prepared or executed.
During the fiscal year ended February 28, 2003, we explored the
acquisition of several companies, however, no formal negotiations or agreements
were entered into.
C. ORGANIZATIONAL STRUCTURE.
We are not a member of any group of companies. As of February 28, 2003,
no single shareholder was a majority owner. Following the issuance of additional
shares on September 30, 2003 as disclosed in Items 6.E. and 7.B below, 65.59% of
our issued and outstanding stock will be owned by our director and president,
Eric F. Kohn. We do not presently have any subsidiaries, although if we are
successful in implementing our plan of operation and identifying a company to
acquire, we may form or acquire one or more subsidiaries for such acquisition.
D. PROPERTY, PLANT, AND EQUIPMENT.
We do not own any material property, plant, or equipment. We have no
material assets except for cash in the amount of $3,740 and accounts receivable
of $3,279 as of February 28, 2003. We have no office facilities or real property
holdings. Our registered office is located at 22 Church Street, Third
Floor-Washington Mall I, Hamilton HM11, Bermuda. Our registered office address
is provided by Forum Fund Services Ltd., our corporate Secretary, in exchange
for an annual fee of $4,000. Forum Fund Services Ltd. can terminate this
arrangement for any reason. We believe that our existing arrangement is adequate
to meet our current needs.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. OPERATING RESULTS
The following discussion is based on our audited consolidated financial
data for the years ended February 28, 2003, February 28, 2002, and February 28,
2001. In the period between July 2, 1998 and May 26, 1999, we were engaged in
the business of providing connectivity and value added Internet services through
our subsidiary Colloquium. We discontinued our Internet-related operations on
May 26, 1999 when we sold Colloquium due to increasing net operating losses. We
are not presently engaged in that or any other business, and our sole activity
is seeking operating companies to acquire. We have not begun new operations
since selling Colloquium because we have not acquired another operating entity.
The Company's expenses are primarily administrative in nature and
include professional fees, management fees, legal fees, and transfer agent fees.
Our general and administrative expenses decreased from $138,255 in 2002 to
$97,006 in 2003 primarily due to our cessation of litigation against Colloquium
and its former directors. Similarly, our net loss for 2003 was $97,006 compared
to a net loss in 2002 of $138,255.
Operating activities absorbed cash of $752 in the year ended February
28, 2003, compared to $107,456 used in the year ended February 28, 2002. Net
Cash provided by financing activities was $3,346 in the year ended February 28,
2003, $104,360 in the year ended February 28, 2002, and $37,701 in the year
ended February 28, 2001.
Our working capital, defined as the excess of our current assets over
our current liabilities, was ($289,955) at February 28, 2003, compared with
($206,449) at February 28, 2002 and $(185,388) at February 28, 2001.
B. LIQUIDITY AND CAPITAL RESERVES
As of February 28, 2003, our total cash and cash equivalents was $3,740
and our total current assets were $7,019 and our current liabilities were
$296,974. At the prior year end of February 28, 2002, total cash and cash
equivalents was $1,146 and our current liabilities were $207,595. Total net
proceeds from the sale of equity securities in the period between our formation
and February 28, 2003 has amounted to approximately $633,444.
During fiscal year 2003, the Company derived most of its operating
capital from increasing indebtedness. We have no planned capital expenditure at
this time, however, the implementation of our business plan will require
additional capital.
We will require additional capital for future acquisitions and we plan
to raise such capital through private offerings of securities. There can be no
assurance that we will be able to raise such funds. Future private offerings may
not be successful.
We do not presently have any borrowing facility established with a
financial institution. We will require additional capital to fund our operations
in the future. We anticipate raising such additional capital through a private
offering of our securities or by borrowing from a lending institution.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
Not applicable.
D. TREND INFORMATION
Not applicable.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
The following sets forth the name of our directors, executive officers
and key employees, the positions and offices held by each such person, and the
period each such person has held such position.
Name Position Held and Term
- ---- ----------------------
Eric F. Kohn, TD President and Treasurer since May 12, 2000;
Chairman and Director since March 24, 1998.
Marlin J. Horst Director since March 24, 1998.
Jeffrey G. Conyers Director since May 20, 1999.
Michael R. Schroter Director since May 20, 1999.
Forum Fund Services Ltd. Secretary Since May 12, 2000.
The following is a description of the business experience and other
positions held by each of our directors and key employees.
Eric F. Kohn, TD - Mr. Kohn was born in 1945 and is a UK citizen. He obtained a
BSc in Natural Sciences from the University of Glasgow. He is a Fellow of the
British Institute of Management, the Chartered Institute of Marketing and the
Institute of Directors. He is the Managing Partner of Barons Financial Services,
an Investment Banking Advisory Firm based in Geneva and London which he founded
in 1987. He has had thirty years of experience in industrial marketing,
manufacturing and management in Europe and the US. He worked for Sulzer AG in
its medium-term planning department and subsequently became European Sales
Executive for a division of J Lucas (Germany) GmbH before founding his own group
of companies in 1972 in West Germany. In 1983 he sold his group of companies to
a US public company and remained Chairman until 1995. He then joined Bankers
Trust where he was responsible for Corporate Finance in Switzerland, Germany and
Italy. From November 1987 until November 1990, he served on the Board of Holmes
Protection Group, a Delaware corporation listed on the London Stock Exchange. In
September 1991, Mr. Kohn was elected Chief Executive Officer and Vice Chairman
of Holmes Protection Group, Inc., based in New York. He resigned as Chief
Executive Officer of Holmes Protection in May 1993 and remained a Director until
July 1994. In March 2000 he was elected Chairman and Chief Executive Officer of
OmniLabs Group Ltd., a leading private pathology company headquartered in
London, with operations in Stevenage, London, Dublin and Kuwait, which he helped
restructure and recapitalize. He relinquished the Chief Executive Officer of
OmniLabs Group in March 2001, and remained Chairman until December 2001, when
OmniLabs Ltd was sold to Medical Imaging Australasia Ltd., an Australian
publicly quoted company. Mr. Kohn served as a senior officer in the British
Reserve Army and was awarded a Territorial Decoration with three bars. In July
2003 Mr. Kohn was appointed Deputy Chairman of the Supervisory Board of dba, a
German airline.
Marlin J. Horst - Mr. Horst was born in 1961 and is a Canadian citizen. He
received his B.A. and LL.B from the University of Western Ontario in London,
Ontario, Canada and his LL.M from Cambridge University in Cambridge, England. He
was called to the Bar for the Province of Ontario in 1989 and Bermuda in 1997.
He has practiced law in Canada and Bermuda. He practices with the firm of
Chaitons LLP in Toronto, Ontario where he specializes in corporate finance,
commercial lending and restructuring. He sits on the board of Omninet
International Ltd. as well as several privately held corporations.
Michael R. Schroter FCA - Mr. Schroter was born in 1941 and is a UK citizen. He
is Executive Vice President and Secretary of First Bermuda Group Ltd. (formerly
First Bermuda Securities Limited). He is a 1963 graduate of the University of
Manchester, a Fellow of the Institute of Chartered Accountants in England and
Wales and an Associate Member of the Institute of Management Consultants (U.K.).
He began his professional career as a director of his family's international
group of companies within the apparel industry. Mr. Schroter subsequently formed
his own management consultancy firm, acting for numerous major organizations,
including 3i (E.S.), a subsidiary of the U.K.'s largest merchant bank and the
Arts Council of Great Britain. Mr. Schroter came to Bermuda in 1991 and serves
as a Director of several companies The following of which are listed on the
Bermuda Stock Exchange - Ashby Corporation Ltd., IRMA Envirotec Holdings Ltd.,
PVAXX Ltd., British Security Group Ltd., and Yachts of the Americas Ltd.
Jeffrey G. Conyers - Mr. Conyers is Chief Executive Officer of First Bermuda
Group Ltd. He is also a Director of Offshore Investment Fund. He is a 1975
graduate of Trinity College, University of Toronto. He began his professional
career as a stockbroker with McLeod, Young & Weir and MacDougall, MacDougall &
MacTier in Toronto. Returning to Bermuda in 1985, Mr. Conyers joined the Bank of
Bermuda as an Assistant Manager where his focus was investments and trusts. A
founding Executive Council Member and now a Deputy Chairman of the Bermuda Stock
Exchange, Mr. Conyers is also a Director of numerous other companies in Bermuda
the following of which are listed on the Bermuda Stock Exchange - Bermuda
Aviation Services Ltd., Macquarie Airports Holdings (Bermuda) Limited, Ashby
Corporation Ltd., and IRMA Envirotec Holdings Ltd. Mr. Conyers holds licenses
with the National Association of Securities Dealers, Inc. as General Securities
Principal, Financial & Operations Principal, and Registered Options Principal.
Forum Fund Services Ltd. - Forum Fund is a Bermuda corporation providing
professional services to other Bermuda corporations. Forum Fund Ltd. has served
as our corporate secretary since May 12, 2000. Mr. Conyers' wife, Ede Conyers,
is the general manager of that company.
B. COMPENSATION
During the year ended February 28, 2003, no cash compensation was paid
directly or distributed to our officers or directors in their capacity as
officers or directors. The Company paid $2,446 to Barons Financial Services, a
company controlled by our director and officer Eric F. Kohn TD, to reimburse
Barons Financial for accounting services and out of pocket expenses provided to
the Company.
On March 26, 2002 our shareholders approved the following issuances of
our common stock as compensation in lieu of certain amounts owed to our
directors:
(i) 20,000 shares to Michael R. Schroter;
(ii) 20,000 shares to Jeffrey G. Conyers
(iii) 20,000 shares to Marlin J. Horst; and
(iv) 30,000 shares to Eric F. Kohn, TD.
The above shares were calculated at an issuance price of $0.15 per
share, and issued in lieu of compensation authorized during fiscal year 2003 in
order to reimburse the directors for expenses as follows: $3,000 to Michael R.
Schroter; $3,000 to Jeffrey G. Conyers; $3,000 to Marlin J. Horst; and $4,500 to
Eric F. Kohn, TD.
We did not set aside any amounts during the last fiscal year to provide
pension, retirement or similar benefits for our directors and officers. On June
5, 2000, our shareholders approved our 2000 Outside Directors' Stock Option Plan
and set aside 100,000 shares of our common stock for issuance thereunder. Under
the terms of the Outside Directors' Plan, each non-employee director will
automatically be eligible to receive an option to purchase 5,000 shares of our
common stock for each year that he serves as our director. Our shareholders also
approved our 2000 Stock Incentive Plan and set aside 1,100,000 shares of our
common stock for issuance thereunder. The Stock Incentive Plan allows our Board
of Directors to grant certain of our key employees options to purchase our
common stock, and is intended to enhance our ability to attract and retain key
personnel. As of the date of this Annual Report, no options have been granted
pursuant to the Outside Directors' Plan or the Stock Incentive Plan.
C. BOARD PRACTICES
The Company's directors are elected by the shareholders at our annual
general meeting, and serve a term of one year or until their successors are
appointed and duly elected to office. Executive officers are appointed by our
Board of Directors and serve a term of one year or until their successors are
appointed.
We held our 2002 annual general meeting on November 6, 2002 in
Hamilton, Bermuda. Our next annual general meeting has been scheduled for
October 24, 2003.
The Company does not presently have a compensation committee and has
not yet appointed an audit committee. The Company's entire board of directors is
performing the functions of an audit committee. There are no director services
contracts that provide for benefits upon termination of service.
D. EMPLOYEES
We have no full time or part time employee, except for senior
management and the Board of Directors.
E. SHARE OWNERSHIP
The following table sets forth certain information regarding the
ownership of our common stock by senior management and directors of the Company
as of September 30, 2003. Each of the shareholders named in the table has sole
voting and investment power with respect to the shares of common stock
beneficially owned.
No. of
Name and Shares Percentage of
Address Owned Class (1)
------- ----- -----
Eric F. Kohn, TD 8,464,158 (2)(3) 65.59%
Michael R. Schroter 100,000 0.08%
Jeffrey G. Conyers 100,000 0.08%
Marlin J. Horst 40,000 0.03%
---------------------
(1) On April 14, 2000, our shareholders approved a 6-to-1 forward split of
our common stock. As of September 30, 2003, there were 12,904,258
shares of our common stock issued and outstanding.
(2) This number includes 89,628 shares that are held for Mr. Kohn by Dassu
Investments Ltd., in trust, for the benefit of his wife. Mr. Kohn
states that he does not possess beneficial ownership of such shares.
(3) As further described in Item 7.B. below, Mr. Kohn was issued 4,889,855
shares in exchange for his forgiveness of indebtness owed to him by the
Company totaling $244,492.75.
We did not set aside any amounts during the last fiscal year to provide
pension, retirement or similar benefits for our directors and officers. On June
5, 2000, our shareholders approved our 2000 Outside Directors' Stock Option Plan
and set aside 100,000 shares of our common stock for issuance thereunder. Under
the terms of the Outside Directors' Plan, each non-employee director will
automatically be eligible to receive an option to purchase 5,000 shares of our
common stock for each year that he serves as our director. Our shareholders also
approved our 2000 Stock Incentive Plan and set aside 1,100,000 shares of our
common stock for issuance thereunder. The Stock Incentive Plan allows our Board
of Directors to grant certain of our key employees options to purchase our
common stock, and is intended to enhance our ability to attract and retain key
personnel. As of the date of this Annual Report no options have been granted
pursuant to the Outside Directors' Plan or the Stock Incentive Plan.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTIES
A. MAJOR SHAREHOLDERS
To the best of our management's knowledge, the following individuals
are the only owners of more than 5% of the Company's issued and outstanding
common stock as at September 30, 2003.
No. of
Name and Shares Percentage of
Address Owned Class (1)
------- ----- -----
Eric F. Kohn, TD 8,464,158(1)(2) 65.59%
ValorInvest, SA 1,270,644 9.85%
Valuevest Ltd. 804,564 6.23%
(1) This number includes 89,628 shares that are held for Mr. Kohn by Dassu
Investments Ltd., in trust, for the benefit of his wife. Mr. Kohn states
that he does not possess beneficial ownership of such shares.
(2) As further described in Item 7.B. below, Mr. Kohn was issued 4,889,855
shares in exchange for his forgiveness of indebtness owed to him by the
Company totaling $244,492.75.
None of the above shareholders have different voting rights from other
shareholders of the Company. All of our common shares have equal voting rights.
B. RELATED PARTY TRANSACTIONS
During the year ended February 28, 2003, we paid $2,446 for services
rendered by Barons Financial Services, a company controlled by our officer and
director, Eric F. Kohn, TD. As of February 28, 2003 , another $7,928 was owed by
the Company to Barons Financial Services.
During the years ended February 28, 2003 and 2002, Mr. Kohn advanced
the Company $3,346 and $104,306, respectively. Amounts due to Mr. Kohn totaled
$28,213 and $39,117 as of February 28, 2003 and 2002, respectively. On September
30, 2003, Mr. Kohn was issued 4,889,855 shares in exchange for his forgiveness
of certain indebtness owed to him by the Company totaling $244,492.75
Legal fees in respect of services provided by Milligan-Whyte & Smith in
the years ended February 28, 2003, 2002 and 2001 amounted to $3,117, $39,091,
and $17,253, respectively. As of February 28, 2003 and 2002 fees payable to
Milligan-Whyte & Smith totalled $22,500 and $19,384, respectively. Our former
director, Lynda Milligan-Whyte, was a partner of Milligan-Whyte & Smith.
First Bermuda Group Ltd. was paid $17,500 in the year ended February
28, 2000 in consideration of services rendered in our private placement of
securities. Two of our directors, Jeffrey G. Conyers and Michael R. Schroter are
officers and shareholders of First Bermuda Group Ltd.
In exchange for its services as placement agent for our private
placements in 1999, Barons Financial Services received a warrant to purchase 8%
of the total number of shares sold in the previous offering (14,938 shares) at a
purchase price of $0.01 per share. These warrants were exercised in November
1999 and compensation expense was booked in the fiscal year ended February 29,
2000.
C. INTEREST OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
FINANCIAL STATEMENTS
The Company's audited financial statements for the three fiscal years
ended February 28, 2003, 2002, and 2001, together with the auditor's report, are
included in this Annual Report under Item 18 and incorporated herein by
reference. These financial statements were prepared in accordance with United
Stated generally accepted accounting principles.
LEGAL PROCEEDINGS
Except as described below, no legal proceedings are known to us to be
contemplated, or threatened by or against us, by any party including any
governmental authority.
In 1999, we commenced litigation in Bermuda against Colloquium Ltd.,
Brian McMillan and Catherine Matherson (two former directors) in relation to the
withdrawal of $50,691 from our bank account and seeking the return of the
approximately $24,000 paid by us into Colloquium's treasury as part of the May
26, 1999 Agreement for the sale of Colloquium, a copy of which was filed as
Exhibit 3.3 to our Form 20-F filed on December 16, 1999. We claimed that the
withdrawal of funds was unauthorized and that the $24,000 payment made to
Colloquium under the May 26, 1999 agreement was made in error after a material
default under that agreement by Brian McMillan and Colloquium. A default
judgment was obtained in Bermuda against the defendants for $74,691, plus
interest and costs. On June 29, 1999, we initiated an interdict proceeding in
the Court of Session in Scotland seeking an injunction to prevent the disposal
of assets and seeking the repayment of $50,691. We initiated the interdict
proceeding in Scotland because the defendants and their assets are located in
that country. The litigation in Scotland has presently ceased, and no additional
expenses for such matter are anticipated by Management.
Colloquium, Brian McMillan and Catherine Matherson have appealed the
judgment in Bermuda, seeking to set aside the default judgment on the grounds
that the defendants were improperly served notice of the Bermuda proceedings and
that the default judgment was obtained in error.
In April 2002, the Bermuda court overturned our previous judgment
against Colloquium, and held that Scotland was the appropriate jurisdiction for
such litigation. Our management is currently determining whether to proceed with
the action in Scotland. There can be no assurance as to whether amounts believed
to be owed will be collected, in whole or in part, from all or any of
Colloquium, Brian McMillan and Catherine Matherson.
DIVIDEND POLICY
The Company has not paid dividends in any of the last three fiscal
years and we have no plans to pay dividends in the foreseeable future.
B. SIGNIFICANT CHANGES
As detailed in Item 8.A. above, in April 2002, the Bermuda Court
vacated our Bermuda judgment entered against Colloquium, holding that Scotland
was the appropriate jurisdiction for such action.
ITEM 9. THE OFFER AND LISTING.
A. OFFER AND LISTING DETAILS
4. Disclosure regarding price history
Three Most Recent Years - Annual Highs and Lows(1)
Low High
--- ----
2001 0.475 0.475
2002 N/A N/A
2003 N/A N/A
-------------------------------------------------------
(1) Since the inception of the quoting of the Company's stock on the OTC
Bulletin Board, the only trade occurred on August 6, 2001 at a price of $0.475.
B. PLAN OF DISTRIBUTION
Not applicable.
C. MARKETS
Our common stock is quoted on the OTC Bulletin Board under the symbol "OMILE".
As of August 31, 2003, we had 26 stockholders of record, of which our
shareholder register indicates 3 have addresses in the United States. Our common
stock was first quoted on the OTC Bulletin Board on August 6, 2001. The last
quoted closing price of the common stock on the OTC Bulletin Board was $0.475
per share. There has been no trading activity in our stock other than the trade
on August 6, 2001.
ITEM 10. ADDITIONAL INFORMATION
A. SHARE CAPITAL
Not applicable.
B. MEMORANDUM OF ASSOCIATION AND BYE-LAWS
The information required by this section has been included in the Company's
previously filed registration statement on Form 20-F, as amended, which was
filed with the SEC on December 16, 1999.
C. MATERIAL CONTRACTS
None.
D. EXCHANGE CONTROLS
There are no governmental laws, decrees, or regulations in Bermuda that may
restrict the export of capital or the remittance of dividends, interest or other
payments to non-residents.
E. TAXATION
Generally, there is no income tax, withholding tax, capital gains tax, capital
transfer tax, estate duty or inheritance tax payable by a Bermuda exempted
company or its shareholders, other than shareholders ordinarily resident in
Bermuda.
F. DIVIDENDS AND PAYING AGENTS.
Not applicable.
G. STATEMENTS BY EXPERTS
Not applicable.
H. DOCUMENTS ON DISPLAY
All documents concerning the Company which are referred to in this Annual Report
are available for inspection at our registered office located at 22 Church
Street, 3rd Floor, Washington Mall I, Hamilton HM11, Bermuda.
I. SUBSIDIARY INFORMATION
Not applicable, the Company presently has no subsidiaries.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is a small business issuer as defined in Rule 405 of the
Securities Act of 1933, as amended, and Rule 12b-2 of the Securities Exchange
Act of 1934, as amended, and therefore, need not provide the information
requested by this item.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF THE SECURITY HOLDERS AND USE
OF PROCEEDS
None.
PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to furnish the financial statements specified by Item 18.
ITEM 18. FINANCIAL STATEMENTS
Reference is made to pages F-1 to F-9.
ITEM 19. EXHIBITS
(a) Financial Statements Reference is made to
Item 18.
(b) Exhibits
Exhibit Number Description
-------------- -----------
99.1 Memorandum of Association of Omninet, as
amended by that certain Certificate of Deposit
of Memorandum of Increase of Share Capital
dated June 30, 1998 (filed as Exhibit 1.1 to
Omninet's Form 20FR12G filed as of March 14,
2000, No. No. 001-15559, and incorporated
herein by reference).
31.1 Certification Pursuant to 18 U.S.C. Sec. 1350
As Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification Pursuant to 18 U.S.C. Sec. 1350
As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Bye-laws of Omninet (filed as Exhibit 1.2 to
Omninet's Form 20FR12G filed as of December 1,
1999, No. 001-15559, and incorporated herein
by reference).
99.3 Agreement dated May 26, 1999, between Omninet
and Colloquim Ltd., regarding the sale of
Colloquium (filed as Exhibit 3.3 to Omninet's
from 20FR12G filed as of December 16, 1999,
No. 001-15559, and incorporated herein by
reference).
99.4 Mutual Termination Agreement and Release dated
October 27, 1999, between Omninet and E&M
Management, Inc. (filed as Exhibit 3.4 to
Omninet's Form 20FR12G filed as of December
16, 1999, No. 001-15559, and incorporated
herein by reference).
[Signature page follows.]
SIGNATURES
----------
The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this Annual Report on its behalf.
OMNINET INTERNATIONAL LTD.
By: /s/ Eric F. Kohn
------------------------
Name: Eric F. Kohn,TD
Title: President, Treasurer, Chairman and Director
Dated: September 29, 2003
OMNINET INTERNATIONAL LIMITED
(A DEVELOPMENT STAGE COMPANY)
REPORT AND
FINANCIAL STATEMENTS
FEBRUARY 28, 2003
OMNINET INTERNATIONAL LIMITED
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
Pages
Auditors' report F-1
Balance Sheet F-2
Statements of Operations F-3
Statements of Stockholders Equity F-4
Statements of Cash Flows F-5
Notes to the financial statements F-6 to F-9
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Omninet International Limited
We have audited the accompanying balance sheets of Omninet International Limited
(a development stage company) as of February 28, 2003 and 2002, and the related
statements of operations, stockholders' equity and cash flows for the years
ended February 28, 2003, 2002 and 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Omninet International Limited
as of February 28, 2003 and 2002 and the results of its operations and cash
flows for the years ended February 28, 2003, 2002 and 2001 in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 9 to the
financial statements, the Company has no continuing trade. Management plans in
this regard are also disclosed in note 9. These conditions raise substantial
doubt about the ability of the Company to continue as a going concern. The
financial statements do not include any adjustments relating to the
recoverability of recorded assets, or the amounts of liabilities, that might
result from the outcome of this uncertainty.
Moore Stephens
Chartered Accountants
St. Paul's House
London EC4P 4BN August 28, 2003
(Except note 9, as of September 9, 2003)
F-1
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF FEBRUARY 28, 2003 AND 2002
2003 2002
---- ----
ASSETS
Cash and cash equivalents $ 3,740 $ 1,146
Accounts receivable 3,279 --
----------- -----------
Total current assets 7,019 1,146
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable 200,261 142,763
Accrued expenses 42,500 39,965
Advances from related parties 54,213 24,867
----------- -----------
Total current liabilities 296,974 207,595
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 6) -- --
=========== ===========
STOCKHOLDERS' DEFICIT
Common stock, $.000167 par value,150,000,000 shares
authorised, 7,924,403 (2003) and 7,834,403 (2002)
shares issued and outstanding 1,321 1,306
Additional paid-in capital 1,155,459 1,141,974
Accumulated deficit during the development stage (1,446,735) (1,349,729)
----------- -----------
Total stockholders' deficit (289,955) (206,449)
----------- -----------
Total liabilities and stockholders' deficit 7,019 1,146
=========== ===========
The accompanying notes are an integral part of these financial statements
F-2
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 28, 2003, 2002 AND 2001
Cumulative
during the Year ended Year ended Year ended
Development February 28, February 28, February 28,
Stage 2003 2002 2001
----- ---- ---- ----
Revenues $ -- $ -- $ -- $ --
General and
administrative expenses (885,046) (97,006) (138,255) (339,712)
----------- ----------- ----------- -----------
Losses from
continuing operations (885,046) (97,006) (138,255) (339,712)
Losses from discontinued
operations (no applicable
income taxes) (561,689) -- -- --
----------- ----------- ----------- -----------
Net loss (1,446,735) (97,006) (138,255) (339,712)
=========== =========== =========== ===========
Loss per share of continuing operations -
Basic and Diluted (0.01) (0.02) (0.05)
=========== =========== ===========
The accompanying notes are an integral part of these financial statements
F-3
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 28, 2003, 2002 AND 2001
Accumulated
Common Stock Additional Other Total
------------ Paid-in Accumulated Comprehensive Stockholders' Comprehensive
Shares Amount Capital Deficit Income Equity Income
------ ------ ------ ------- ------ ------ ------
At February 29, 2000 $ 1,123,852 $ 1,124 $ 894,962 $ (871,762) $ 24,324 $
Subdivision of shares (6:1) 5,619,260 -- -- -- -- -- --
Issuance of additional common
stock (May 12, 2000) 210,000 35 104,965 -- -- 105,000 --
Issuance of additional common
stock (November 10, 2000) 100,000 17 24,983 -- -- 25,000 --
Net loss -- -- -- (339,712) -- (339,712) (339,712)
-----------
Comprehensive income (339,712)
----------- ----------- ----------- ----------- ----------- ----------- -----------
At February 28, 2001 7,053,112 1,176 1,024,910 (1,211,474) -- (185,388) --
Issuance of additional common
Stock (January 8, 2002) 781,291 130 117,064 -- -- 117,194 --
Net loss -- -- -- (138,255) -- (138,255) (138,255)
-----------
Comprehensive income (138,255)
----------- ----------- ----------- ----------- ----------- ----------- ===========
At February 28, 2002 7,834,403 1,306 1,141,974 (1,349,729) -- (206,449)
Issuance of additional
common stock (March 26, 2002) 90,000 15 13,485 -- -- 13,500 --
Net loss -- -- -- (97,006) -- (97,006) (97,006)
----------
Comprehensive income (97,006)
----------- ----------- ----------- ----------- ----------- ----------- ===========
At February 28, 2003 7,924,403 1,321 1,155,459 (1,446,735) -- (289,955)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements
F-4
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28, 2003, 2002 AND 2001
Cumulative
during the Year ended Year ended Year ended
Development February, 28 February, 28 February, 28
Stage 2003 2002 2001
----- ---- ---- ----
Cash flows from operating activities:
Loss from continuing operations $(885,046) $ (97,006) $(138,255) $(339,712)
Non cash items:
Stock warrants 10,000 -- -- --
Issue of shares as compensation
to directors 118,500 13,500 -- 105,000
Issue of shares in lieu of cash
payment 25,000 -- -- 25,000
Changes in operating assets
and liabilities:
Accounts receivable (3,279) (3,279) 1,970 77,018
Accounts payable 200,261 57,498 (11,136) 67,693
Accrued expenses 42,500 2,535 39,965 --
Advances from related parties 26,000 26,000 -- --
--------- --------- --------- ---------
Net cash used in operating
activities (466,064) (752) (107,456) (65,001)
--------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of
common stock, net 372,750 -- -- --
Advances from shareholder 145,407 3,346 104,360 37,701
--------- --------- --------- ---------
Net cash provided by financing
activities 518,157 3,346 104,360 37,701
--------- --------- --------- ---------
Net cash (outflow)/inflow from
continuing segment 52,093 2,594 (3,096) (27,300)
Cash paid on disposal of subsidiary (24,115) -- -- --
Net cash (outflow)/inflow from
discontinued segment (24,238) -- -- --
--------- --------- --------- ---------
Net (decrease)/increase in
cash and cash equivalents 3,740 2,594 (3,096) (27,300)
Cash and cash equivalents,
beginning of period -- 1,146 4,242 31,542
--------- --------- --------- ---------
Cash and cash equivalents,
end of period 3,740 3,740 1,146 4,242
--------- --------- --------- ---------
Continuing operations 3,740 1,146 4,242
========= ========= =========
The accompanying notes are an integral part of these financial statements
F-5
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2003 AND 2002
1. ORGANISATION AND DESCRIPTION OF THE COMPANY
THE COMPANY
Omninet International Limited (the "Company") was incorporated in Bermuda on
March 24, 1998.
On May 26, 1999 the Company disposed of its subsidiary, Colloquium Limited, an
internet service provider incorporated in Scotland.
The Company has no continuing trading activity and is seeking acquisition and
merger opportunities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
DEVELOPMENT STAGE
The Company has been in the development stage since its formation on March 24,
1998. The Company has no continuing trading activity and is seeking acquisition
and merger opportunities.
FOREIGN CURRENCY TRANSLATION
The Company's functional currency is United States Dollars. 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. Transaction gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than the functional
currency are included in the Statement of Operations as incurred. There were no
material gains or losses during any of the periods presented.
F-6
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 2003 AND 2002
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
ISSUANCE OF STOCK FOR SERVICES
Shares of the Company's common stock issued for non-employee 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.
STOCK-BASED COMPENSATION
Stock-based compensation related to employees and non-employee directors is
recognised using the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees", and
thus there is no compensation expense for options granted with exercise prices
equal to the fair value of common stock on the date of grant.
3. EARNINGS PER SHARE
Year ended Year ended Year ended
February 28, February 28, February 28,
2003 2002 2001
---- ---- ----
Net loss available to
common stockholders $ (97,006) $ (138,255) $ (339,712)
Average common shares
issued and outstanding 7,924,403 7,834,403 6,942,098
----------- ----------- -----------
Loss per share -
basic and diluted $ (0.01) $ (0.02) $ (0.05)
=========== =========== ===========
F-7
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 2003 AND 2002
4. RELATED PARTY TRANSACTIONS
Selling, general and administrative services costs for the years ended February
28, 2003, 2002 and 2001 includes $2,446, $3,928 and $3,000 paid to Barons
Financial Services S.A. and Barons Financial Services (UK) Limited, in respect
of services and expense reimbursement. Both companies are connected with Mr.
Eric Kohn, a director, officer and shareholder of the Company. As of February
28, 2003 and 2002 amounts owed to these companies amounted to $7,928 and $6,928.
During the years ended February 28, 2003 and 2002, Mr. Kohn advanced the Company
$3,346 and $104,360, respectively. Amounts due to Mr. Kohn totalled $28,213 and
$39,117 as of February 28, 2003 and 2002, respectively.
Legal fees in respect of services provided by Milligan-Whyte & Smith in the
years ended February 28, 2003, 2002 and 2001 amounted to $3,117, $39,091 and
$17,253, respectively. As of February 28, 2003 and 2002 fees payable to
Milligan-Whyte & Smith totalled $22,500 and $19,384, respectively. Lynda
Milligan-Whyte, a former director of Omninet International Limited, is a partner
of Milligan-Whyte & Smith.
5. TAXATION
Under Bermuda law the Company is not required to pay any taxes in Bermuda on
either income or capital gains. The Company has received Tax Assurance from the
Minister of Finance in Bermuda indicating that in the event of any subsequent
legislation imposing such taxes, the Company will be exempted from resulting
taxation until the year 2016.
6. 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 booked a corresponding
expense of $50,691 in the year ended February 29, 2000.
A Default Judgement has been obtained in Bermuda against Colloquium Limited,
Brian Macmillan and Catherine Matheson for the $50,691 withdrawal and the
$24,000 paid to Colloquium Limited as part of the divestiture settlement, plus
interest and legal costs.
Litigation is continuing in Scotland. Management estimate that the company's
maximum liability (inclusive of costs) is $15,000. Management have booked a
corresponding expense in the current year.
F-8
OMNINET INTERNATIONAL LIMITED (A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 2003 AND 2002
7. SUPPLEMENTAL CASH FLOWS INFORMATION
No cash was paid for interest or taxes during the year.
Noncash investing and financing activities are as follows:
On March 26, 2002, the Company issued 90,000 common shares to Eric Kohn
(30,000), Jeffrey Conyers (20,000), Michael Schroter (20,000) and Marlin Horst
(20,000) as settlement for director's services during the previous year.
On January 8, 2002, the Company issued 781,291 common shares to Mr. Eric Kohn,
shareholder and director, in satisfaction of loans payable to Mr. Eric Kohn
totalling $117,194.
During the year ended February 28, 2001, 210,000 shares were granted to three
directors as compensation for services provided. Additionally, 100,000 shares
were issued on November 10, 2000 to a company in consideration for the provision
of consulting and financial services.
8. STOCK OPTION PLANS
At a special general meeting held on June 5, 2000, the shareholders approved the
2000 Outside Directors' Stock Option Plan and reserved 100,000 shares of common
stock for issuance thereunder, approved the 2000 Stock Incentive Plan and
reserved 1,100,000 shares of common stock for issuance thereunder and approved
compensation to certain directors for past services.
Outside Directors are eligible to receive options under the 2000 Outside
Directors' Stock Option Plan. The 2000 Stock Incentive Plan permits a committee
of the Board of Directors to make awards of a variety of equity-based incentives
to employees including stock awards, options to purchase shares of company
common stock, stock appreciation rights, phantom shares, dividend equivalent
rights and similar rights. No options have been issued or granted under either
of the above plans.
9. LIQUIDITY
As of February 28, 2003, the Company has accumulated net losses of $1,446,735.
During the year ended February 28, 2003 the Company incurred a net loss of
$97,006, with negative cash flows from operating activities of $752. Partially
because of these losses, the Company finds itself in an unfavourable financial
position. At February 28, 2003, the Company had negative working capital of
$289,955. In June and July 2003 a total of U.S.$216,280 was advanced by Eric
Kohn, a shareholder and director of the company. The funds were utilised to
settle external liabilities. His loan has subsequently been converted in to
equity.
Since the Company has no continuing trade, it is dependent upon additional
financing to continue as a going concern. Management plans to raise such funds
from shareholders. There can be no assurance that the Company will be able to
raise such funds.
The Company's financial statements have been presented on the basis that it is a
going concern. Accordingly, the financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities or any other
adjustments that might result should the Company be unable to continue as a
going concern.
F-9