As filed with the Securities and Exchange Commission on November 12, 2004
An Exhibit List can be found on page II-6.
Registration No. 333-__________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SATELLITE ENTERPRISES CORP.
(Name of small business issuer)
Nevada 2750 88-0390828
(State or other jurisdiction of incorporation) (Primary standard industrial (IRS identification number)
Employer code number)
205 Church Street, Suite 340
New Haven, CT 06510
(Address and telephone number of principal executive offices
and principal place of business)
Roy Piceni, Chief Executive Officer
SATELLITE ENTERPRISES CORP.
205 Church Street, Suite 340
New Haven, CT 06510
(203) 672-5912
(Name, address and telephone number of agent for service)
Copies to:
Marc Ross, Esq.
Stephen M. Fleming, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas, 21st Floor.
New York, New York 10018
(212) 930-9700 (212)
930-9725 (fax)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If any securities being registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
2
CALCULATION OF REGISTRATION FEE
- ------------------------------ ----------------- --------------------------- ---------------------------- --------------------------
Title of each class of Amount to be Proposed maximum offering Proposed maximum aggregate
securities to be registered registered(3) price per share offering price Amount of registration fee
- ------------------------------ ----------------- --------------------------- ---------------------------- --------------------------
Common stock 23,043,478 $ .27(1) $ 6,221,739.13 $ 788.29
- ------------------------------ ----------------- --------------------------- ---------------------------- --------------------------
Common stock issuable upon 3,260,870 $ .27(1) $ 880,434.78 $ 111.55
conversion of convertible
debentures
- ------------------------------ ----------------- --------------------------- ---------------------------- --------------------------
Common stock issuable upon 17,804,349 $1.50(2) $ 26,706,523.50 $ 3,383.72
exercise of common stock
purchase warrants
- ------------------------------ ----------------- --------------------------- ---------------------------- --------------------------
Total 44,108,697 $ 33,808,697.41 $ 4,283.56
- ------------------------------ ----------------- --------------------------- ---------------------------- --------------------------
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, using the average
of the high and low price as reported on the Over-The-Counter Bulletin Board on
November 5, 2004, which was $.27 per share. Includes a good faith estimate of
additional shares of common stock to account for antidilution and price
protection adjustments.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(g) under the Securities Act of 1933, using the exercise
price of $1.50. Includes a good faith estimate of additional shares of common
stock to account for antidilution and price protection adjustments.
(3) Pursuant to Rule 416 promulgated under the Securities Act of 1933, as
amended, there are also registered hereunder such indeterminate number of
additional shares as may be issued to the selling stockholders to prevent
dilution resulting from stock splits, stock dividends or similar transactions
pursuant to the terms of our common stock purchase warrants.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.
3
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED NOVEMBER12, 2004
SATELLITE ENTERPRISES CORP.
44,108,697 SHARES OF
COMMON STOCK
This prospectus relates to the resale by the selling stockholders of up to
44,108,697 shares of our common stock, including 23,043,478 shares of common
stock, up to 3,260,870 shares of common stock issuable upon conversion of
contertible debentures and up to 17,804,349 issuable upon the exercise of common
stock purchase warrants. The selling stockholders may sell common stock from
time to time in the principal market on which the stock is traded at the
prevailing market price or in negotiated transactions. The selling stockholders
may be deemed underwriters of the shares of common stock, which they are
offering. We will pay the expenses of registering these shares.
Our common stock is registered under Section 12(g) of the Securities Exchange
Act of 1934 and is listed on the Over-The-Counter Bulletin Board under the
symbol "SENR". The last reported sales price per share of our common stock as
reported by the Over-The-Counter Bulletin Board on November 5, 2004, was $.27.
Investing in these securities involves significant risks. See "Risk Factors"
beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is _______, 2004.
The information in this Prospectus is not complete and may be changed. This
Prospectus is included in the Registration Statement that was filed by Satellite
Enterprises Corp., with the Securities and Exchange Commission. The selling
stockholders may not sell these securities until the registration statement
becomes effective. This Prospectus is not an offer to sell these securities and
is not soliciting an offer to buy these securities in any state where the sale
is not permitted.
4
PROSPECTUS SUMMARY
The following summary highlights selected information contained in this
prospectus. This summary does not contain all the information you should
consider before investing in the securities. Before making an investment
decision, you should read the entire prospectus carefully, including the "risk
factors" section, the financial statements and the notes to the financial
statements.
Satellite Enterprises Corp.
We sell and lease electronic newsstands or Kiosks, which distribute electronic
newspapers, as well as provide sub-licensing agreements worldwide with strategic
partners whereby we license our partners to establish their Kiosks within their
territory. For the six months ended June 30, 2004, we generated net sales of
$663,638 and a net loss of $1,691,320. In addition, for the period from
inception to December 31, 2003, we generated net sales of $82,705 and incurred
losses in the amount of $2,007,354. As a result of recurring losses from
operations and a net deficit in both working capital and stockholders' equity,
our auditors, in their report dated August 27, 2004, have expressed substantial
doubt about our ability to continue as going concern.
Our principal offices are located at 205 Church Street, Suite 340 New Haven, CT
06510 and our telephone number is (203) 672-5912. We are a Nevada corporation.
- ----------------------------------------------------------------------------------------------------------
The Offering
- ----------------------------------------------------------------------------------------------------------
Common stock offered by selling 44,108,697 shares of common stock, including
stockholders............................ 23,043,478 shares of common stock; up to 3,260,870
shares of common stock issuable upon conversion of
convertible debentures and up to 17,804,349 shares
of common stock underlying common stock purchase
warrants. This number represents 19.02% of our
total number of shares outstanding, assuming the
exercise of all common stock purchase warrants
included in this prospectus.
- ----------------------------------------------------------------------------------------------------------
Common stock to be outstanding after the Up to 231,886,346 shares assuming the exercise of
offering........................ all common stock purchase warrants and the
conversion of all convertible debentures included
in this prospectus.
- ----------------------------------------------------------------------------------------------------------
Use of proceeds We will not receive any proceeds from the sale of
the common stock. However, we will receive the
exercise price for any shares of common stock
delivered in connection with the exercise of the
common stock purchase warrants. We expect to use
the proceeds received from the exercise of the
common stock purchase warrants, if any, for general
working capital purposes. We have received gross
proceeds in the amount of $2,500,000 from the sale
of common stock, convertible debentures and common
stock purchase warrants.
- ----------------------------------------------------------------------------------------------------------
OTCBB Symbol SENR
- ----------------------------------------------------------------------------------------------------------
The above information regarding common stock to be outstanding after the
offering is based on 217,842,867 shares of common stock outstanding as of
November 5, 2004 and assumes the exercise of warrants by our selling
stockholders.
To obtain funding for our ongoing operations, on May 19, 2004, pursuant to an
offering conducted under Rule 506 of Regulation D, as promulgated under the
Securities Act of 1933, we sold 10,869,565 shares of common stock to accredited
investors in a private offering. In connection with the offering, we sold
10,869,565 shares of common stock at a price of $.23 per share. In addition, we
also issued 10,869,565 common stock purchase warrants exercisable at $1.50 per
share. We raised an aggregate of $2,500,000 in connection with this offering. In
November 2004, we entered into an amendment of the Securities Purchase Agreement
whereby we cancelled 2,173,913 shares of common stock and issued to the
investors to the investors secured convertible debentures in the amount of
$500,000.
5
RISK FACTORS
This investment has a high degree of risk. Before you invest you should
carefully consider the risks and uncertainties described below and the other
information in this prospectus. If any of the following risks actually occur,
our business, operating results and financial condition could be harmed and the
value of our stock could go down. This means you could lose all or a part of
your investment.
RISKS RELATING TO OUR COMPANY
OUR COMPANY HAS A HISTORY OF LOSSES AND EXPECT TO INCUR LOSSES FOR THE
FORESEEABLE FUTURE.
We were founded on April 14, 1998. We are a development stage company. We have
incurred operating losses in every year of our existence. For the six months
ended June 30, 2004, we generated a net loss of $1,691,320. In addition, for the
period from inception to December 31, 2003, we incurred losses in the amount of
$2,007,354. These losses are continuing. We have not achieved profitability and
expect to continue to incur net losses as we develop our business line. The
extent of future losses and the time required to achieve profitability is highly
uncertain. In addition, as we are a development stage company, we do not expect
to generate revenues in the next few years.
IN ORDER TO EXECUTE OUR BUSINESS PLAN, WE MAY NEED TO RAISE ADDITIONAL CAPITAL.
IF WE ARE UNABLE TO RAISE ADDITIONAL CAPITAL, WE WILL NOT BE ABLE TO ACHIEVE OUR
BUSINESS PLAN AND YOU COULD LOSE YOUR INVESTMENT.
We may need to raise additional funds through public or private debt or equity
financings to fully execute our business plan. Any additional capital raised
through the sale of equity may dilute your ownership interest. We may not be
able to raise additional funds on favorable terms, or at all. If we are unable
to obtain additional funds, we will be unable to execute our business plan and
you could lose your investment.
THROUGH OUR WHOLLY OWNED SUBSIDIARY, WE HAVE ENTERED INTO A LICENSE AGREEMENT
WITH MEDIA FINANCE, FOR A TERM OF 20 YEARS, TO OBTAIN THE RIGHTS TO SELL AND
DISTRIBUTE OUR KIOSKS AND DELIVER CONTENT AND, IF THIS LICENSE WERE TO BE
TERMINATED FOR ANY REASON, INCLUDING FAILURE TO PAY THE REQUIRED MONTHLY FEE,
OUR RESULTS OF OPERATIONS MAY BE SEVERALLY IMPACTED AND WE MAY BE FORCED TO
CEASE OUR OPERATIONS.
The license agreement entered into between Media Finance and Swiss Satellite
Newspapers appoints Swiss Satellite Newspapers as the exclusive distributor to
promote sell and/or lease the Kiosks, content distribution applications and
derived content throughout the world. The license agreement expires in November
2023 and requires that Swiss Satellite Newspapers makes a monthly payment to
Media Finance of $25,000. In the event that Swiss Satellite Newspapers fails to
make the $25,000 payment for two consecutive months, then Media Finance may
terminate the license without notice to Swiss Satellite Newspapers.
If we are unable to make the above payments, then our license may be terminated
by Media Finance. If Media Finance elects to terminate our license our results
of operations may be negatively impacted and we may be forced to cease
operations.
THE CONTINUED GROWTH AND ACCEPTANCE OF INTERNET AS A MEANS TO OBTAIN NEWS
TOGETHER WITH THE GROWTH OF WIRELESS COMMUNICATIONS COULD NEGATIVELY IMPACT
DISTRIBUTION AND OUR RESULTS OF OPERATIONS
The readers use of the Internet to access their newspapers through the Internet
has been growing. This growth has been further stimulated with the development
of wireless telecommunications. The increase in consumers accessing their daily
newspapers through the Internet may reduce the number of customers utilizing our
Kiosks. A continued increased in the use and acceptance of the Internet for news
content could have a material adverse effect on our business, results of
operations and financial condition.
IF OUR COMPUTER NETWORK AND DATA CENTERS WERE TO SUFFER A SIGNIFICANT
INTERRUPTION, OUR BUSINESS AND CUSTOMER REPUTATION COULD BE ADVERSELY IMPACTED
AND RESULT IN A LOSS OF CUSTOMERS
Our ability to provide reliable service largely depends on the efficient and
uninterrupted operations of our computer network systems and data centers. Any
significant interruptions could severely harm our business and reputation and
result in a loss of customers. Our systems and operations could be exposed to
damage or interruption from fire, natural disaster, power loss,
telecommunications failure, unauthorized entry and computer viruses. Although we
have taken steps to prevent a system failure, we cannot be certain that our
measures will be successful and that we will not experience system failures.
6
WE DEPEND UPON KEY PERSONNEL, NEED ADDITIONAL PERSONNEL AND IF WE ARE UNABLE TO
MAINTAIN OUR CURRENT PERSONNEL OR OBTAIN NEW PERSONNEL OUR RESULTS OF OPERATIONS
WILL BE NEGATIVELY IMPACTED
Our success depends on the continuing services of our management team as well as
the continuing research of Roy Piseni, our Chief Executive Officer, and Niels
Reijers, our Chief Financial Officer. The loss of any of our employees could
have a material and adverse effect on our business operations. Additionally, the
success of our company will largely depend upon our ability to successfully
attract and maintain competent and qualified key management personnel. As with
any startup company, there can be no guaranty that we will be able to attract
such individuals or that the presence of such individuals will necessarily
translate into profitability for our company. Our inability to attract and
retain key personnel may materially and adversely affect our business
operations.
LACK OF PROVEN BUSINESS MODEL MAY NOT RESULT IN THE GENERATION OF A NET PROFIT
OR REVENUES
To date, we have generated limited revenue in the first quarter of 2004 from the
electronic newspaper line of business. We will need to raise funds to further
develop and market, through our license agreement with Media Finance, our
electronic newspaper Kiosks. There can be no assurance, however, that the
implementation of such a plan, or that implementation of the overall business
plan developed by management, will result in sales or that if it does result in
sales, that such sales will necessarily translate into profitability.
WE CANNOT ASSURE MARKET ACCEPTANCE OF OUR PRODUCTS, WHICH WILL HAVE A DIRECT
ADVERSE AFFECT ON OUR REVENUE AND PROFITABILITY
Our success and competitive position depends upon acceptance of our technology
by our end user or customers. If the end user accepts our technology, we cannot
assure our ability to achieve sufficient sales. An inability to achieve sales
volume or market acceptance of our products will materially and adversely affect
our business operations.
As we have only recently commenced marketing and selling newspapers through our
Kiosks, there can be no assurance that an interest will develop in the future.
Although we believe there is a demand for our products, there can be no
assurance that people will forego purchasing newspapers from traditional
newsstands or purchase newspapers from the Internet. In the event that we are
unable to garner interest in our products, there will be a direct adverse affect
on our earnings and profitability.
IF WE ARE REQUIRED FOR ANY REASON TO REPAY OUR OUTSTANDING CONVERTIBLE
DEBENTURES, WE WOULD BE REQUIRED TO DEPLETE OUR WORKING CAPITAL, IF AVAILABLE,
OR RAISE ADDITIONAL FUNDS. OUR FAILURE TO REPAY THE CONVERTIBLE DEBENTURES, IF
REQUIRED, COULD RESULT IN LEGAL ACTION AGAINST US, WHICH COULD REQUIRE THE SALE
OF SUBSTANTIAL ASSETS.
Our convertible debentures are due and payable two-years from the date of
issuance, unless sooner converted into shares of our common stock. In addition,
any event of default could require the early repayment of the convertible
debentures, including a default interest rate on the outstanding principal
balance of the debentures if the default is not cured with the specified grace
period. We anticipate that the full amount of the convertible debentures,
together with accrued interest, will be converted into shares of our common
stock, in accordance with the terms of the convertible debentures. If we are
required to repay the convertible debentures, we would be required to use our
limited working capital and raise additional funds. If we were unable to repay
the debentures when required, the debenture holders could commence legal action
against us and foreclose on all of our assets to recover the amounts due. Any
such action would require us to curtail or cease operations.
RISKS RELATED TO OUR STOCK
THE SUBSTANTIAL NUMBER OF SHARES THAT ARE OR WILL BE ELIGIBLE FOR SALE,
INCLUDING THE 44,108,697 SHARES OF COMMON STOCK BEING REGISTERED PURSUANT TO
THIS PROSPECTUS, WHICH, ASSUMING THE EXERCISE OF ALL OF WARRANTS AND THE
CONVERSION OF ALL CONVERTIBLE DEBENTURES BEING REGISTERED, WOULD REPRESENT
19.02% OF OUR TOTAL OUTSTANDING SHARES, COULD CAUSE OUR COMMON STOCK PRICE TO
DECLINE EVEN IF OUR BUSINESS OPERATIONS ARE SUCCESSFUL.
Sales of significant amounts of common stock in the public market, or the
perception that such sales may occur, could materially affect the market price
of our common stock. These sales might also make it more difficult for us to
sell equity or equity-related securities in the future at a time and price that
we deem appropriate. As of November 5, 2004, we have outstanding warrants to
purchase 11,869,566 shares and we are registering 44,108,697 shares of common
stock pursuant to our prospectus. Assuming the exercise of all of our warrants
and conversion of all of our debentures being registered herewith, the shares
being registered pursuant to this prospectus would represent 19.02% of our total
outstanding.
WE HAVE ANTI-TAKEOVER PROVISIONS, WHICH COULD INHIBIT POTENTIAL INVESTORS OR
DELAY OR PREVENT A CHANGE OF CONTROL THAT MAY FAVOR YOU.
Some of the provisions of our certificate of incorporation, our bylaws and
Nevada law could, together or separately, discourage potential acquisition
proposals or delay or prevent a change in control. In particular, our board of
directors is authorized to issue up to 5,000,000 shares of preferred stock (less
any outstanding shares of preferred stock) with rights and privileges that might
be senior to our common stock, without the consent of the holders of the common
stock.
7
OUR AUDITORS INCLUDED AN EXPLANATORY PARAGRAPH IN THEIR REPORT STATING THAT
THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN, AND
IF WE CANNOT OPERATE AS A GOING CONCERN, OUR STOCK PRICE WILL DECLINE AND YOU
MAY LOSE YOUR ENTIRE INVESTMENT.
As a result of recurring losses from operations and a net deficit in both
working capital and stockholders' equity, our auditors, in their report dated
August 27, 2004, have expressed substantial doubt about our ability to continue
as going concern. Our financial statements for the six months ended June 30,
2004 do not include any adjustments that might result from our inability to
continue as a going concern. These adjustments could include additional
liabilities and the impairment of certain assets. If we had adjusted our
financial statements for these uncertainties, our operating results and
financial condition would have been materially and adversely affected.
OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE
TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR
STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the definition of a "penny stock," for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require:
o that a broker or dealer approve a person's account for transactions in
penny stocks; and
o the broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to
be purchased.
In order to approve a person's account for transactions in penny stocks, the
broker or dealer must:
o obtain financial information and investment experience objectives of the
person; and
o make a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:
o sets forth the basis on which the broker or dealer made the suitability
determination; and
o that the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities
subject to the "penny stock" rules. This may make it more difficult for
investors to dispose of our common stock and cause a decline in the market value
of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading and about the commissions payable
to both the broker-dealer and the registered representative, current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
8
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be offered and
sold from time to time by the selling stockholders. We will not receive any
proceeds from the sale of shares of common stock in this offering. However, we
could receive funds upon exercise of the common stock purchase warrants held by
the selling stockholders. We expect to use the proceeds received from the
exercise of the common stock purchase warrants, if any, for general working
capital purposes.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock has been quoted on the OTC Bulletin Board since August 2002.
Our symbol is "SENR". For the periods indicated, the following table sets forth
the high and low bid prices per share of common stock. These prices represent
inter-dealer quotations without retail markup, markdown, or commission and may
not necessarily represent actual transactions.
- --------------------------------------------------------------------------------
High Low
- --------------------------------------------------------------------------------
2004
- --------------------------------------------------------------------------------
Fourth Quarter* $0.35 $0.26
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Third Quarter $0.77 $0.27
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Second Quarter $2.37 $0.32
- --------------------------------------------------------------------------------
First Quarter $4.15 $4.05
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2003
- --------------------------------------------------------------------------------
Fourth Quarter $1.47 $1.47
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Third Quarter $2.60 $1.25
- --------------------------------------------------------------------------------
Second Quarter $1.20 $0.07
- --------------------------------------------------------------------------------
First Quarter $0.75 $0.05
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2002
- --------------------------------------------------------------------------------
Fourth Quarter $0.30 $0.10
- --------------------------------------------------------------------------------
Third Quarter $0.25 $0.12
- --------------------------------------------------------------------------------
*Through November 5, 2004
As of November 5, 2004, there were 217,842,867 shares of common stock
outstanding.
As of November 5, 2004, there were approximately 625 stockholders of record of
our common stock. This does not reflect those shares held beneficially or those
shares held in "street" name.
We have not paid cash dividends in the past, nor do we expect to pay cash
dividends for the foreseeable future. We anticipate that earnings, if any, will
be retained for the development of our business.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
Some of the information in this Form SB-2 contains forward-looking statements
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue," or similar words. You should
read statements that contain these words carefully because they:
o discuss our future expectations;
o contain projections of our future results of operations or of our
financial condition; and
o state other "forward-looking" information.
We believe it is important to communicate our expectations. However, there may
be events in the future that we are not able to accurately predict or over which
we have no control. Our actual results and the timing of certain events could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth under "Risk Factors,"
"Business" and elsewhere in this prospectus. See "Risk Factors."
OVERVIEW
We receive, distribute and sell newspaper data on a daily basis through multiple
outlets or Kiosks. We produce and sell the Kiosks on an international basis. We
generate revenue as follows:
o we receive a fee for each Kiosk sold;
o we receive a user license fee per Kiosk per year; and
o the user printing at a Kiosk will pay a printing fee.
We distribute our content through the use of five satellite stations and three
uplink stations.
MANAGEMENTS' DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS - THREE AND SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO
THREE AND SIX MONTHS ENDED JUNE 30, 2003
NET SALES
Net sales generated during the three and six months ended June 30, 2004 were
$473,860 and 663,638, respectively, which was an increase as compared to $0 for
the three and six months ended June 30, 2003. This increase in net sales is a
result of our change in business operations to focus on the deployment of
electronic newspapers through our Kiosk system.
COST AND EXPENSES
Cost and expenses for the three and six months ended June 30, 2004 was
$1,544,057 and $2,398,512 as compared to $39,202 for the three and six months
ended June 30, 2003. Cost and expenses during the three and six months ended
June 30, 2004 included cost of services (three months: $342,021; six months:
$488,882), selling general and administrative (three months: $855,016; six
months: $1,324,166), research and development (three months: $198,690; six
months: $364,961), stock based compensation (three months: $50,000; six months:
$50,000), and depreciation and amortization (three months: $98,330; six months:
$170,503). This increase in cost and expenses is a result of our change in
business operations to focus on the deployment of electronic newspapers through
our Kiosk system.
As a result of the foregoing factors, we realized a net loss of $1,035,771 and
$1,691,320 for the three and six months ended June 30, 2004, respectively,
compared to a net loss of $40,121 for both the three and six months ended June
30, 2003.
10
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED
DECEMBER 31, 2002
NET SALES
We had net sales of $82,705 for the year ended December 31, 2003 and no net
sales for the year ended December 31, 2002. This increase in net sales is a
result of our change in business operations to focus on the deployment of
electronic newspapers through our Kiosk system.
COST AND EXPENSES
Cost and expenses for the year ended December 31, 2003 was $1,008,670 as
compared to $1,081,389 during the year ended December 31, 2003, which consisted
entirely of selling, general and administrative costs. Cost and expenses during
the year ended December 31, 2002 included cost of services ($3,320), selling
general and administrative ($746,373), stock based compensation ($244,692) and
depreciation and amortization ($14,285). This increase in cost and expenses is a
result of our change in business operations to focus on the deployment of
electronic newspapers through our Kiosk system.
As a result of the foregoing factors, we realized a net loss of $925,965 for the
year ended December 31, 2003 compared to a net loss of $1,081,389 for the year
ended December 31, 2002.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2004, we had a working capital of $971,330. However, at December 31,
2003 we had a working capital deficit of $73,170, as a result our auditors have
raised, in their current audit report, a substantial doubt about our ability to
continue as a going concern. We will be unable to continue as a going concern in
the event we are not able to raise capital in order to develop and implement our
business plan and continue operations. Until such time as sufficient capital is
raised, we intend to limit expenditures for capital assets and other expense
categories.
There is no assurance of financial viability for Swiss Satellite Newspapers. We
depend on the financial viability of Swiss Satellite Newspapers for our content
and satellite transmission. Swiss Satellite Newspapers has limited revenues to
date. Our business would be materially harmed if Swiss Satellite Newspapers is
unable to continue to provide us with its content, satellite transmission and
technical support.
On December 1, 2003, we entered into a consulting agreement with GCH Capital,
Ltd to provide assistance relating to business acquisition and general business
strategies. On April 16, 2004, we issued 5,000,000 shares of common stock to GCH
Capital Ltd. in consideration for services provided. There is also a monthly
consulting fee of $10,000 per month for 24 months payable from the above shares.
In connection with the May 2004 private placement, we paid GCH Capital, Ltd
$150,000 to terminate the consulting agreement.
We had unsecured loans to individuals in the amount of $745,197 at June 30,
2004. Of this amount, $726,892 is interest bearing with maturity dates between
July 4, 2003 and November 3, 2004. The interest rate is 6% under the terms of
agreement and no interest is due and payable, if the loans are repaid as of the
due date. As of the date hereof, we have not repaid these loans.
At June 30, 2004, Roy Piceni, our principal stockholder and an executive officer
and director, has advanced our company $1,146,017. There is no specific maturity
date and the loan is interest free. Inputed interest on the loan would
approximate $28,000 for the six months ended June 30, 2004 at an average rate of
5%.
To obtain funding for our ongoing operations, on May 19, 2004, pursuant to an
offering conducted under Rule 506 of Regulation D, as promulgated under the
Securities Act of 1933, we sold 10,869,565 shares of common stock to accredited
investors in a private offering. In connection with the offering, we sold
10,869,565 shares of common stock at a price of $.23 per share. In addition, we
also issued 10,869,565 common stock purchase warrants exercisable at $1.50 per
share. We raised an aggregate of $2,500,000 in connection with this offering. In
November 2004, we entered into an amendment of the Securities Purchase Agreement
whereby we cancelled 2,173,913 shares of common stock and issued to the
investors to the investors secured convertible debentures in the amount of
$500,000.
We believe we will still need additional investments in order to continue
operations to cash flow break even. Financing transactions may include the
issuance of equity or debt securities, obtaining credit facilities, or other
financing mechanisms. However, the trading price of our common stock and the
downturn in the U.S. stock and debt markets could make it more difficult to
obtain financing through the issuance of equity or debt securities. Even if we
are able to raise the funds required, it is possible that we could incur
unexpected costs and expenses, fail to collect significant amounts owed to us,
or experience unexpected cash requirements that would force us to seek
alternative financing. Further, if we issue additional equity or debt
securities, stockholders may experience additional dilution or the new equity
securities may have rights, preferences or privileges senior to those of
existing holders of our common stock. If additional financing is not available
or is not available on acceptable terms, we will have to curtail our operations
again.
11
CASH FLOWS
Net cash provided (used in) operating activities was $(1,755,298) for the six
months ended June 30, 2004 and $793,573 for the six months ended June 30, 2003.
This decrease was primarily due to the increase in the net loss.
Net cash provided by (used in) financing activities was $2,084,270 and
$(901,969) for the six months ended June 30, 2004 and 2003, respectively. The
net cash provided by financing activities for the six months ended June 30, 2004
consisted primarily of proceeds from sale of common stock and stock subscription
receipts and during the six months ended June 30, 2003 the net cash used in
financing activities consisted primarily of $1,042,686 from reduction in loans
payable.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future material effect on us.
12
BUSINESS
INTRODUCTION
SUMMARY
We receive, distribute and sell newspaper data on a daily basis through multiple
outlets or Kiosks. We produce and sell the Kiosks on an international basis. We
generate revenue as follows:
o we receive a fee for each Kiosk sold;
o we receive a user license fee per Kiosk per year; and
o the user printing at a Kiosk pays a printing fee.
We distribute our content through the use of five satellite stations and three
uplink stations.
HISTORY
We were formed as a Nevada corporation on April 14, 1998 to operate a specialty
retailer of fine jewelry. In its fiscal year ending June 30, 2000, we sold a
limited quantity of jewelry through direct mail and word of mouth advertising.
On July 29, 2000, subsequent to the close of our June 30, 2000 fiscal year, we
acquired 100% of the outstanding shares of GreenVolt Corp., an Ontario
Corporation, in a stock for stock exchange. GreenVolt Corp. was in the process
of developing fuel cell technologies for commercial and industrial use. In
connection with this transaction, our management changed, and we disposed of our
retail jewelry business in September 2000, by transfer of all jewelry assets and
liabilities to Larry Beck, a former director of our company. In connection with
such transaction, we changed our name from Beck & Co., Inc. to GreenVolt Corp.
On August 27, 2002, Satellite Holdings, Ltd., a corporation organized under the
laws of Turks & Caicos, acquired 13,783,740 shares of our common stock from
Thomas L. Faul, an officer and director of our company. Such shares represented
approximately 53% of our issued and outstanding common stock. Mr. Faul resigned
as our sole officer and director, after appointing Robert Hodge as our new
President and CEO, and as Chairman of the Board of Directors. In addition, in
exchange for the release by Faul of our company for various claims, we
transferred our wholly-owned subsidiary, GreenVolt Corp., to Faul.
On August 28, 2002, we changed our name to Satellite Enterprises Corp., and on
September 15, 2002, we completed a one-for-one-hundred reverse stock split of
our outstanding common stock. During fiscal year 2003, we concentrated our
efforts on maintaining our corporate status and seeking a merger candidate.
On June 20, 2003, we entered into a Rights Agreement with Satellite Newspapers
Worldwide NV, a corporation organized under the laws of the Netherlands
(hereinafter "Satellite Newspapers"). Under the Rights Agreement, Satellite
Newspapers appointed us as its irrevocable commercial exclusive distributor to
promote the sale and/or lease of its newspaper Kiosks (hereinafter "KiOSK") in
North, South and Central America. These rights include the exclusive rights to
use the trade names, logos and other trade designations, including, but not
limited to, all rights to the Satellite Newspapers derived content fed into the
territories granted to our company which include North, Central and South
America.
In October 2003, Satellite Newspapers sold their patents, software and
trademarks to Media Finance en Suisse GMBH, a Swiss corporation (hereinafter
"Media Finance"). Thereafter, Media Finance set up an operating subsidiary,
Satellite Newspapers Suisse GMBH, a Swiss corporation (hereinafter "Swiss
Satellite Newspapers"). Media Finance granted Swiss Satellite Newspapers a
twenty year exclusive license to distribute all satellite derived contents for
the purpose of commercializing their product under a revenue sharing arrangement
on a worldwide basis.
On November 26, 2003, we entered into a Stock Purchase Option Agreement dated
November 26, 2003 with Media Finance for the purchase of 100% of Swiss Satellite
Newspapers. This option agreement allowed us to acquire the right to purchase
100% of the shares of common stock of Swiss Satellite Newspapers. On February
15, 2004, we exercised the option and acquired 100% of Swiss Satellite
Newspapers in consideration for the issuance of 126,000,000 shares of common
stock.
THE BUSINESS AND ITS OBJECTIVES
The license agreement entered into between Media Finance and Swiss Satellite
Newspapers appoints Swiss Satellite Newspapers as the exclusive distributor to
promote sell and/or lease the Kiosks, content distribution applications and
derived content throughout the world. The license agreement expires in November
2023 and requires that Swiss Satellite Newspapers makes a monthly payment to
Media Finance of $25,000. In the event that Swiss Satellite Newspapers fails to
make the $25,000 payment for two consecutive months, then Media Finance may
terminate the license without notice to Swiss Satellite Newspapers.
13
Swiss Satellite Newspapers consists of two subsidiaries, Satellite Newspapers
Content BV a Dutch corporation that negotiates agreements with newspapers
throughout the world for the rights to distribute their content and Satellite
Newspapers Trading BV, which has the production rights to produce and sell the
KiOSKs.
Swiss Satellite Newspapers has entered into a sub-master license agreement of
its content for a licensing fee in Asia, the Middle East, Europe and Australia
together with the South Pacific. Each license agreement provides a monthly
minimum fee as well a percentage of revenue generated in each territory. In
connection with these licensing agreements, Swiss Satellite Newspapers has also
entered into a Sales Contract with each of the sub-distributors for the sale of
the Kiosks. Each sales contract provides that Swiss Satellite Newspapers, though
one of its wholly owned subsidiaries, will sell Kiosks to each sub-distributor
at a set price.
Swiss Satellite Newspapers entered into an agreement with Eurostar Facilities BV
("Eurostar") to outsource its delivery and transmission of its content
worldwide. In consideration of a monthly fee of $55,000 per month, Eurostar
provides an international transmission to and space segment current on various
satellites, the equipment needed to flow and store data, content management flow
and handling credit card clearing. In addition, Swiss Satellite Newspapers
entered into a production agreement with Stork Industrial Modules B.V. in for
the production of the Kiosks.
Our goal is to establish the Satellite Newspapers KiOSK name as the defacto
standard in remote electronic newspaper printing Kiosks. We intend to make
newspaper content available on demand to those in need of timely affordable
information. We have entered into copyright license agreements with over 170
newspapers throughout the world, which enables Swiss Satellite Newspapers to
deliver the content of each paper in exchange for a royalty fee.
We will facilitate the communications requirements of numerous users from
business travelers looking for up to date home information, to foreign nationals
who wish to stay in touch with their home country, to students studying foreign
cultures, to remote or isolated communities to anyone interested in news from
locations around the world.
We intend to create a new cost effective channel to market for hundreds of
global newspaper publishers and media organizations ensuring access to their
content anywhere in the world.
Our revenues will be derived from the following major areas:
o SALES OF SATELLITE NEWSPAPER KiOSKs - an automated newspaper stand
which prints-on-demand and delivers in two minutes a copy of any of
our syndicated newspapers.
o SALES OF MASTER SUB-LICENSES - we intend to set up master
sub-licensing agreements worldwide with strategic partners whereby
they sell the KiOSK distribution system within their territory on a
revenue sharing basis.
The KiOSK is a self-contained, fully automated newspaper-vending unit. The unit
is capable of receiving files, processing payments and on demand printing of
newspapers. The KiOSK continuously receives the latest editions of the
newspapers via multicast transmission through our satellite network.
We are focused at the business development and promotion of our digital KiOSK
remote newspaper concept by utilizing sub-master licensing agreements with major
regional strategic partners. Our primary objectives for the 2003-2007 time
periods will be to establishment of sub-master licensing agreements with major
regional strategic partners throughout the world.
MARKET INFORMATION AND ANALYSIS
When it comes to newspapers, travelers appreciate, but rarely get, the comfort
and convenience of reading news in their own languages and in their preferred
newspapers. If there are international versions, they usually arrive late.
Compounding the current problem, and supporting our view that there is a
significant market for print-on-demand newspapers, publishers spend large
amounts of money on air freight, and often deliver more copies overseas than
they actually sell. Moreover, readers are asked to pay much higher prices for
inferior international products--that is newspapers that come late and
consequently carry old news.
We strongly believe that the printed-paper model will continue to thrive despite
the growth of the Internet. Publishers today, appear reluctant to aggressively
promote the Internet delivery model because of the threat of the loss of
intellectual property and the inability to develop sustainable business
propositions that actually generate profitable revenues. By providing a single
global electronic distribution network system, our KiOSK system will provide
readers with reasonably priced, current editions of newspapers in a convenient
time frame and in a familiar format. The familiar format of the printed
newspaper has proved itself capable of surviving, despite the many dramatic
changes in the communications industry.
14
We believe our KiOSK system has another advantage. It provides international
distribution channels at much lower cost than might be the case with traditional
newspapers. Publishers will also be able to specify which sites will receive
their newspaper, in order to avoid competition with any conventional
distribution system. All together, we believe this will open new markets and
create realistic opportunities for publishers to expand regular circulation and
to provide a competitive advantage over other electronic media.
We intend to provide for the worldwide distribution of up-to-date, condensed
versions of daily newspapers, in a variety of languages, anywhere around the
globe.
THE INTERNATIONAL TRAVELER
Addressing the needs of the mobile traveler will dictate a strategy whereby our
KiOSKs are placed at key locations with high traffic. These locations will
include airports (including executive lounges), and hotels that cater to
international travelers. In addition, urban locations that have high
concentrations of immigrant ex- patriot populations (e.g. New York, Miami, San
Francisco, Los Angeles, Seattle, Montreal, Toronto, Vancouver, Sao Paolo,
etc...) will also be targeted by positioning Satellite Newspapers KiOSKs in key
locations with high traffic appeal to these demographics. These would include
upscale bookstores, cafe chains, malls with international appeal, and
newspaper/magazine retailers in ethnic neighborhoods.
THE DOMESTIC SINGLE-COPY BUYER
Single-copy buyers are mainly occasional and/or utility readers. They buy a
newspaper with a specific purpose in mind. They may be looking for local news
from back home, getting an international perspective of world happenings,
checking business and financial information or checking on international sports
scores. In addition to those who buy a newspaper for a specific purpose, there
are a substantial number of single-copy buyers who purchase newspapers on a
regular basis. Single-copy buyers are a distinct segment of the total newspaper
audience. Understanding the specific attributes of this market with respect to
international purchasing will be important to our creating successful, targeted
single-copy marketing and promotional plans. While we are targeting the purchase
of international publications, these buyers may also seek the convenient access
that our KiOSK provides, for domestic financial, sports and news information.
RURAL COMMUNITY DEVELOPMENT
In addition to the market potential created by the international traveler and
multi-cultural urban dwellers, we believe the rural market for low volume
readership can now be addressed in a very efficient manner. The distribution
costs to deliver newspapers to rural areas can now be dramatically decreased by
using the Satellite Newspapers KiOSK digital distribution model. This
print-on-demand model eliminates the waste associated with the typical newspaper
model. Today newspapers are printed based on a demand estimate which many times
results in either an under supply or over supply. When the over supply is not
sold, they are disposed of, resulting in needless cost expense and environmental
waste. In addition to delivery cost improvements, the rural market can now enjoy
the benefits of flexible access to many domestic and international newspapers,
otherwise either previously not accessible to them, or accessible only by
subscription and mail delivery.
THE PUBLISHERS MARKET
The traditional media publishers divide their distribution of daily newspapers
into two main streams: newsstands and deliveries. In most cases, these are
operated by the publisher via local carriers or by dedicated distributors.
Given a limited geographical range, this model allows a publication to reach its
readership within a few hours of being printed. Practically speaking, a
publication should be printed within less than a 500 miles radius to reach its
readership on time and with cost efficiently. Today, the vast majority of daily
publications is locally based and easily fit their readership within this
operational radius.
We intend to redefine these procedures for remote areas and traveling readers by
offering publishers cost efficient alternatives to these issues.
Our KiOSK gives us the flexibility to deliver on a daily basis all of our
affiliated newspapers in all of our locations worldwide. This service is
currently offered to the publisher at no cost. We intend to pay a commission on
sold issues.
By adopting a publisher-oriented approach, we aim to involve the content
generator in our success. This value proposition is beneficial to both parties
as publishers are able to dramatically reduce their remote distribution costs.
This will provide new publishers incentives not only to join the program, but
also to promote to their traveling readership.
COMPETITION
Our distribution model for Satellite Newspapers KiOSK digital printing KiOSK,
with its "PRINT-ON-DEMAND" technology, is a unique business proposition.
15
While there are several remote newspaper printing concepts on the market, they
predominantly rely on a "print and deliver" model which requires a dealer to
print newspapers remotely, in small quantities, at a centralized location,
potentially based on a pre-determined order or estimated requirements, and then
physically deliver these newspapers to the end user location.
It is also acknowledged that a number of end users may obtain their news
requirements from the Internet. However, there continues to be a compelling
demand for paper versions to suit the preferences of many end users who choose
the simplicity, versatility, portability and user-friendliness of a paper copy
of a newspaper.
There are several key competitors in the remote digital printing arena including
IBM, Xerox, Xeikon, NewspaperDirect and Oce. However, these competitors differ
from our KiOSK system in several areas. They are promoting a business model that
requires newspapers to be printed at a centralized location, using high-speed
printers. This results in newspapers that must be physically delivered to the
end-user. This business model is interesting in that it can also take advantage
of existing local printing and distribution enterprises, rather than trying to
set up new distribution points where none existed previously. Also significant
is that these companies aren't merely attempting to sell their printers for this
application; they are using their expertise in finding local resources and in
arranging the business deals among these partners and publishers.
However, this is not a true print on-demand model and there are additional
distribution costs to be absorbed due to the requirement for shipping of the
locally printed newspapers to the end-users. Our KiOSK model places the system
as close to the end-user as possible; printing only what is actually purchased
by the consumer, at the actual consumer location.
IBM, Xerox, Oce, NewspaperDirect and Xeikon have developed business models based
on a larger scale philosophy, as opposed to our KiOSKs more targeted approach
which focuses on hotels, airports, cruise ships, bookstores, etc. Our
competitors are searching for high-volume printing establishments and
large-scale distributors to increase the volume of business.
We believe that both business models can co-exist, with our KiOSK digital KiOSK
model aimed more specifically at the single copy buyer and the other competitor
models better suited to subscription based or volume international readership.
EMPLOYEES
We presently have five full time employees.
DESCRIPTION OF PROPERTY
We lease our office space on a rent free basis, which are located at the office
of our Secretary and General Counsel Jerry Gruenbaum at 205 Church Street, Suite
340, New Haven, Connecticut.
LEGAL PROCEEDINGS
From time to time, we are a party to litigation or other legal proceedings that
we consider to be a part of the ordinary course of our business. We are not
involved currently in legal proceedings that could reasonably be expected to
have a material adverse effect on our business, prospects, financial condition
or results of operations. We may become involved in material legal proceedings
in the future.
16
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors hold office until the annual meeting of shareholders next held
after their election. Our officers and directors as of April 21, 2004 are as
follows:
- ------------------------------------------------------------------------------------------------------------
NAME AGE POSITION
- ------------------------------------------------------------------------------------------------------------
Roy Piceni 37 President, Chief Executive
Officer and Director
- ------------------------------------------------------------------------------------------------------------
Leo P. F. van de Voort 46 Chief Financial Officer
- ------------------------------------------------------------------------------------------------------------
Steven Mannen 45 Director
- ------------------------------------------------------------------------------------------------------------
Henk Meijer 44 Director
- ------------------------------------------------------------------------------------------------------------
MR. ROY PICENI/PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
Mr. Piceni has served as Chief Executive Office of our company since December
19, 2003. Prior to joining our company, Mr. Piceni was the founder of Satellite
Newspapers Worldwide and was employed there since 2000. From 1995 to 2000, Mr.
Piceni was employed with Eurostar as CEO. Mr. Piceni provides 100% of his time
to our company.
MR. STEVE MANNEN/DIRECTOR
Mr. Mannen currently serves as a director of our company. Mr. Mannen served as
interim President and Chief Executive office from September 30, 2003 to December
19, 2003. Mr. Mannen has served as Chief Operating Officer of Satellite
Newspapers from May 2001 to December 19, 2003. For 15 years prior to joining
Satellite Newspapers, Mr. Mannen was founder and Chief Executive Officer of
International Business Consultants, a Netherlands Consulting company, which
focused on export management consulting. Mr. Mannen has a diploma from the NERG
organization and several certifications from the PBNA School in electronic
engineering in The Netherlands.
MR. LEO P. F. VAN DE VOORT/CHIEF FINANCIAL OFFICER
Prior to joining our company, Mr. van de Voort, age 46, served as the Chief
Financial Officer of Flex Group Nederland from 2001 to 2004. Mr. van de Voort's
experience prior to joining Flex Group Nederland includes serving as the
Director of Corporate Finance for Kempen & Co. from 1999 to 2001, the manager of
mergers and acquisitions for Twynstra from 1996 to 1999, a strategy consultant
for A.T. Kearney from 1994 to 1996 and manager of mergers and acquisitions for
KPMG Corporation Finance from 1989 through 1994. Mr. van de Voort studied Dutch
language and Dutch literature and Dutch law at Erasmus University where he
graduated in from 1983 and received his MBA from Rotterdam School of Management
in 1989.
MR. HENK MEIJER/DIRECTOR
Prior to joining our company, since 1999, Mr. Meijer served in various
capacities with companies that licensed our technology throughout the world
including serving as the general manager of Satellite Newspapers Europe and
Satellite Newspapers Asia. From 1992 though 1998, Mr. Meijer served as general
manager for Siextrans, a Russian export company. Mr. Meijer studied mathematics
and geography at the University of Amsterdam and graduated in 1983.
CODE OF ETHICS
Because we are an early-development stage company with limited resources, we
have not yet adopted a "code of ethics", as defined by the SEC, that applies to
the Company's Chief Executive Officer, Chief Financial Officer, principal
accounting officer or controller and persons performing similar functions. We
are in the process of drafting and adopting a Code of Ethics.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers, and persons who own more then 10 percent of our Common
Stock, to file with the SEC the initial reports of ownership and reports of
changes in ownership of common stock. Officers, directors and greater than 10
percent stockholders are required by SEC regulation to furnish us with copies of
all Section 16(a) forms they file.
Specific due dates for such reports have been established by the Commission and
we are required to disclose any failure to file reports by such dates during
fiscal 2003. Based solely on our review of the copies of such reports received
by us, or written representations from certain reporting persons that no Forms 5
were required for such persons, we believe that during the fiscal year ended
December 31, 2003, there was no failure to comply with Section 16(a) filing
requirements applicable to our officers, directors and ten percent stockholders.
17
EXECUTIVE COMPENSATION
The following table provides summary information for the years 2001, 2002 and
2003 concerning cash and noncash compensation paid or accrued by us to or on
behalf of the president and the only other employee(s) to receive compensation
in excess of $100,000.
SUMMARY COMPENSATION TABLE
Long Term Compensation:
------------------------------------------
Annual Compensation Awards Payouts
------------------------------ -------------------------------- --------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Annual Restricted Securities LTIP
Principle Salary Bonus Compensation Stock Award(s) Underlying Payouts All Other
Position Year ($) ($) ($) ($) Options/SARs (#) ($) Compensation ($)
- -------- ---- --- --- --- --- ---------------- --- ----------------
Roy Piceni 2003 0 0 0 0 1,825,000 0 0
at $0.20
2002 -- -- -- -- -- -- --
2001 -- -- -- -- -- -- --
Thomas Fahl 2003 -- -- -- -- -- -- --
2002 60,000 -- -- -- -- -- --
2001 -- -- -- -- -- -- --
EMPLOYMENT CONTRACTS
We entered into an employment agreement with Roy Piceni, our CEO. The employment
agreement commenced January 1, 2004 and the duration is infinite. The agreement
provides for a monthly salary of $10,000 per month plus reasonable travel
expenses. We do not currently have any other employment contracts with any
employees or consultants.
OPTION CONTRACTS
We implemented a 2003 Stock Option Plan in December 2003 for key employees and
consultants in Holland and Switzerland totaling 8,103,000 at $0.20 per share.
The following individuals are the recipients of the 2003 Stock Option Plan and
the amount of shares involved:
Roy Piceni 1,825,000
Robert Piceni 1,460,000
Ernst V Kranen 985,500
Anne Bogaardt 182,500
Sandy Hibma 700,800
Karin Frank 438,000
Ralph Vooys 292,000
Karina Tettero 292,000
Cees Jan Quirijns 14,600
Eurostar 1,912,600
-----------
8,103,000
* This is a non cash item and accounted for as donated capital in the financial
statements
** Mr. Rudelsheim resigned as President, Secretary and Director on September 18,
2003.
18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No director, executive officer or nominee for election as a director of our
company, and no owner of five percent or more of our outstanding shares or any
member of their immediate family has entered into or proposed any transaction in
which the amount involved exceeds $60,000 except as set forth below.
In October 2003, Satellite Newspapers sold their patents, software and
trademarks to Media Finance. Media Finance is 100% owned by Roy Piceni, a
director of our company and CEO. Thereafter, Media Finance set up an operating
subsidiary, Swiss Satellite Newspapers. Media Finance granted Swiss Satellite
Newspapers a twenty year exclusive license to distribute all satellite derived
contents for the purpose of commercializing their product under a revenue
sharing arrangement.
On November 26, 2003, we entered into a Stock Purchase Option Agreement with
Media Finance to acquire Swiss Satellite Newspaper. On February 15, 2004, we
issued 126,000,000 shares of common stock in connection with the acquisition of
Swiss Satellite Newspapers.
At June 30, 2004, Roy Piceni, our principal stockholder and an executive officer
and director, has advanced our company $1,146,617. There is no specific maturity
date and the loan is interest free. Inputed interest on the loan would
approximate $28,000 for the six months ended June 30, 2004 at an average rate of
5%.
19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of November 5, 2004
o by each person who is known by us to beneficially own more than 5%
of our common stock;
o by each of our officers and directors; and
o by all of our officers and directors as a group.
Unless otherwise indicated, the shareholders listed in the table have sole
voting and investment power with respect to the shares indicated.
Beneficial Percentage
Name and Address Ownership of Class(1)
---------------- --------- -----------
Roy Piceni* 126,000,000 58.6%
Alexanderstraat 18
2514 JM The Hague
The Netherlands
Steve Mannen* 0 0.00%
Alexanderstraat 18
2514 JM The Hague
The Netherlands
Henk Meijer* 0 0.00%
Alexanderstraat 18
2514 JM The Hague
The Netherlands
Leo P.F. van de Voort* 0 0.00%
Alexanderstraat 18
2514 JM The Hague
The Netherlands
Total 126,000,000 58.6%
* Executive officer and/or director.
(1) Unless otherwise indicated, each person has sole investment and voting power
with respect to the shares indicated. For purposes of this table, a person or
group of persons is deemed to have "beneficial ownership" of any shares which
such person has the right to acquire within 60 days as of November 5, 2004. For
purposes of computing the percentage of outstanding shares held by each person
or group of persons named above on November 5, 2004 any security which such
person or group of persons has the right to acquire within 60 days after such
date is deemed to be outstanding for the purpose of computing the percentage
ownership for such person or persons, but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person. As of
November 5, 2004, we had 217,842,867 shares of common stock outstanding.
20
DESCRIPTION OF SECURITIES TO BE REGISTERED
COMMON STOCK
We are authorized to issue up to 500,000,000 shares of common stock, par value
$.001. As of November 5, 2004, there were 217,842,867 shares of common stock
outstanding. Holders of the common stock are entitled to one vote per share on
all matters to be voted upon by the stockholders. Holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefore. Upon the
liquidation, dissolution, or winding up of our company, the holders of common
stock are entitled to share ratably in all of our assets which are legally
available for distribution after payment of all debts and other liabilities and
liquidation preference of any outstanding common stock. Holders of common stock
have no preemptive, subscription, redemption or conversion rights. The
outstanding shares of common stock are validly issued, fully paid and
nonassessable.
TRANSFER AGENT
Our transfer agent is Signature Stock Transfer, Inc. Their address is One
Preston Park, 2301 Ohio Drive, Plano, TX 75093 and their telephone number is
(972) 612-4120.
21
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Articles of Incorporation, as amended, provide to the fullest extent
permitted by Nevada law, our directors or officers shall not be personally
liable to us or our shareholders for damages for breach of such director's or
officer's fiduciary duty. The effect of this provision of our Articles of
Incorporation, as amended, is to eliminate our rights and our shareholders
(through shareholders' derivative suits on behalf of our company) to recover
damages against a director or officer for breach of the fiduciary duty of care
as a director or officer (including breaches resulting from negligent or grossly
negligent behavior), except under certain situations defined by statute. We
believe that the indemnification provisions in our Articles of Incorporation, as
amended, are necessary to attract and retain qualified persons as directors and
officers.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act" or "Securities Act") may be permitted to directors, officers or
persons controlling us pursuant to the foregoing provisions, or otherwise, we
have been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
PLAN OF DISTRIBUTION
The selling stockholders and any of their respective pledgees, donees, assignees
and other successors-in-interest may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The selling stockholders may use any one or more of
the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits the purchaser;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately-negotiated transactions;
o short sales that are not violations of the laws and regulations of any
state or the United States;
o broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;
o through the writing of options on the shares
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. The selling
stockholders shall have the sole and absolute discretion not to accept any
purchase offer or make any sale of shares if they deem the purchase price to be
unsatisfactory at any particular time.
The selling stockholders may also engage in short sales against the box, puts
and calls and other transactions in our securities or derivatives of our
securities and may sell or deliver shares in connection with these trades.
The selling stockholders or their respective pledgees, donees, transferees or
other successors in interest, may also sell the shares directly to market makers
acting as principals and/or broker-dealers acting as agents for themselves or
their customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholders cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholders. The selling
stockholders and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, may be deemed to be "underwriters" as
that term is defined under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, or the rules and regulations under
such acts. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the registration of the
shares, including fees and disbursements of counsel to the selling stockholders,
but excluding brokerage commissions or underwriter discounts.
22
The selling stockholders, alternatively, may sell all or any part of the shares
offered in this prospectus through an underwriter. No selling stockholder has
entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into.
The selling stockholders may pledge their shares to their brokers under the
margin provisions of customer agreements. If a selling stockholders defaults on
a margin loan, the broker may, from time to time, offer and sell the pledged
shares. The selling stockholders and any other persons participating in the sale
or distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations under
such act, including, without limitation, Regulation M. These provisions may
restrict certain activities of, and limit the timing of purchases and sales of
any of the shares by, the selling stockholders or any other such person. In the
event that the selling stockholders are deemed affiliated purchasers or
distribution participants within the meaning of Regulation M, then the selling
stockholders will not be permitted to engage in short sales of common stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior
to the commencement of such distributions, subject to specified exceptions or
exemptions. In regards to short sells, the selling stockholder can only cover
its short position with the securities they receive from us upon conversion. In
addition, if such short sale is deemed to be a stabilizing activity, then the
selling stockholder will not be permitted to engage in a short sale of our
common stock. All of these limitations may affect the marketability of the
shares.
We have agreed to indemnify the selling stockholders, or their transferees or
assignees, against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the selling
stockholders or their respective pledgees, donees, transferees or other
successors in interest, may be required to make in respect of such liabilities.
If the selling stockholders notify us that they have a material arrangement with
a broker-dealer for the resale of the common stock, then we would be required to
amend the registration statement of which this prospectus is a part, and file a
prospectus supplement to describe the agreements between the selling
stockholders and the broker-dealer.
23
SELLING STOCKHOLDERS
The following table sets forth the shares beneficially owned, as of November 12,
2004, by the selling stockholders prior to the offering contemplated by this
Prospectus, the number of shares each selling stockholder is offering by this
Prospectus and the number of shares which each would own beneficially if all
such offered shares are sold.
The table assumes that the selling stockholders will sell all of the shares.
Although we have assumed for purposes of the table below that the selling
stockholders will sell all of the shares offered by this prospectus, because the
selling stockholders may offer from time to time all or some of their shares
covered under this prospectus, or in another permitted manner, no assurances can
be given as to the actual number of shares that will be resold by the selling
stockholders or that will be held by the selling stockholders after completion
of the resales.
The selling stockholders acquired their beneficial interests in the shares being
offered hereby in private placements in which each such selling stockholder
advised us that it purchased the relevant securities solely for investment and
not with a view to or for resale or distribution of such securities. Beneficial
ownership is determined in accordance with SEC rules and includes voting or
investment power with respect to the securities. However, each of the selling
stockholders is subject to certain limitations on the conversion of its
convertible debentures and the exercise of its warrants. Each of them provides
that the conversion or exercise right is first available on the earlier of 65
days after the relevant debenture or warrant was originally issued or the
effective date of the registration statement of which this Prospectus is a part.
The other significant limitation is that such selling stockholder may not
convert its debentures or exercise its warrants, if such conversion or exercise
would cause such holder's beneficial ownership of our Common Stock (excluding
shares underlying any of their unconverted debentures or unexercised warrants)
to exceed 4.99% of the outstanding shares of Common Stock immediately after the
conversion or exercise.(If the holder subsequently disposes of some or all of
its holdings, it can again convert its debenture or exercise its warrant,
subject to the same limitation). Also, the table below also includes the number
of shares which might be issuable on the occurrence of certain events, which
have not yet occurred and may not occur. Therefore, although they are included
in the table below, the number of shares of Common Stock for some listed persons
may include shares that are not subject to purchase during the 60-day period.
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING(1) AFTER THE OFFERING(2)
------------------------ ---------------------
TOTAL
SHARES
NAME NUMBER PERCENT REGISTERED** NUMBER PERCENT
- -------------------------------------------------------------------------------------------------------------------------------
GREENWICH GROWTH FUND LIMITED (3) 869,566 * 1,304,349 -- --
WHALEHAVEN FUND LIMITED (4) 1,304,348 * 1,956,522 -- --
STONESTREET LP (5) 3,043,478 1.40% 4,565,217 -- --
AreiVIM Inc. (6) 434,782 * 652,173 -- --
ALPHA CAPITAL AG (7) 4,347,826 2.00% 6,521,739 -- --
24
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING(1) AFTER THE OFFERING(2)
------------------------ ---------------------
TOTAL
SHARES
NAME NUMBER PERCENT REGISTERED** NUMBER PERCENT
- -------------------------------------------------------------------------------------------------------------------------------
ZENNY TRADING LIMITED (8) 869,566 * 1,304,349 -- --
GAMMA OPPORTUNITY CAPITAL PARTNERS, LP 2,173,914 1.00% 3,260,871 -- --
(9)
LONGVIEW FUND, LP (10) 2,173,914 1.00% 3,260,780 -- --
LONGVIEW EQUITY FUND, LP (10A) 1,739,130 * 2,608,695 -- --
LONGVIEW INTERNATIONAL EQUITY FUND, LP (10B) 434,782 * 652,173 -- --
ELLIS INTERNATIONAL LIMITED INC. (11) 4,347,826 2.00% 6,521,739 -- --
FOX COMMUNICATIONS, INC.(11A) 5,000,000 2.30% 5,000,000 -- --
THE MORPHEUS TRUST (14) 2,000,000 * 2,000,000 -- --
DOJO INVESTMENTS LTD. (15) 3,000,000 1.40% 3,000,000 -- --
MARINA VENTURES, INC. (16) 300,000 * 450,000 -- --
Sol FINANCIAL, Inc. (17) 250,000 * 375,000 -- --
GRC Consultants, Inc. (18) 250,000 * 375,000 -- --
SOLOMON LAX (19) 150,000 * 225,000 -- --
JONAH ROSENBAUM (20) 50,000 * 75,000 -- --
44,108,697
* less than one percent
** The actual number of shares of common stock offered in this prospectus, and
included in the registration statement of which this prospectus is a part,
includes such additional number of shares of common stock as may be issued or
issuable upon conversion of the convertible debentures and exercise of the
related warrants by reason of any stock split, stock dividend or similar
transaction involving the common stock, in accordance with Rule 416 under the
Securities Act of 1933. The shares being registered on behalf of the investors
that participated in our May 2004 private placement, as amended, represents (a)
8,695,650 shares of our common stock issued to the investors, (b) up to
2,173,914 shares of our common stock issuable upon conversion of $500,000 in
aggregate principal amount of our convertible debentures at a per share
conversion price of $0.23 and (b) up to 10,869,565 shares of common stock
issuable upon exercise of the warrants issued to the investors. As required by
our registration rights agreement with these shareholders, we are also
registering an additional 10,869,564 shares of common stock, representing our
current good faith estimate of additional shares issuable to these selling
shareholders as liquidated damages under that agreement or as a result of
adjustments contemplated by certain provisions of our Securities Purchase
Agreement with those selling shareholders.
25
(1) The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholders has sole or shared voting power or investment power and
also any shares, which the selling stockholders has the right to acquire within
60 days.
(2) Assumes that all securities registered will be sold and that all shares of
common stock underlying the options and common stock purchase warrants will be
issued.
(3). Total shares being registered includes shares already issued, shares
issuable upon conversion of our convertible debentures, shares issuable upon
exercise of warrants and our current good faith estimate of additional shares
issuable to this selling stockholder as liquidated damages or as a result of
adjustments contemplated by the securities purchase agreement which represents
(i) 521,739 shares of common stock, (ii) 130,435 shares of common stock issuable
upon conversion of convertible debentures and (iii) warrants to purchase 652,175
shares of common stock.
(4) Total shares being registered includes shares already issued, shares
issuable upon conversion of our convertible debentures, shares issuable upon
exercise of warrants and our current good faith estimate of additional shares
issuable to this selling stockholder as liquidated damages or as a result of
adjustments contemplated by the securities purchase agreement which represents
(i) 782,809 shares of common stock, (ii) 195,652 shares of common stock issuable
upon conversion of convertible debentures and (iii) warrants to purchase 978,261
shares of common stock.
(5) Total shares being registered includes shares already issued, shares
issuable upon conversion of our convertible debentures, shares issuable upon
exercise of warrants and our current good faith estimate of additional shares
issuable to this selling stockholder as liquidated damages or as a result of
adjustments contemplated by the securities purchase agreement which represents
(i) 1,826,087 shares of common stock, (ii) 456,522 shares of common stock
issuable upon conversion of convertible debentures and (iii) warrants to
purchase 2,282,609 shares of common stock.
(6) Total shares being registered includes shares already issued, shares
issuable upon conversion of our convertible debentures, shares issuable upon
exercise of warrants and our current good faith estimate of additional shares
issuable to this selling stockholder as liquidated damages or as a result of
adjustments contemplated by the securities purchase agreement which represents
(i) 260,870 shares of common stock, (iii) 65,217 shares of common stock issuable
upon conversion of convertible debentures and (ii) warrants to purchase 326,087
shares of common stock.
(7) Total shares being registered includes shares already issued, shares
issuable upon conversion of our convertible debentures, shares issuable upon
exercise of warrants and our current good faith estimate of additional shares
issuable to this selling stockholder as liquidated damages or as a result of
adjustments contemplated by the securities purchase agreement which represents
(i) 2,608,696 shares of common stock, (ii) 652,174 shares of common stock
issuable upon conversion of convertible debentures and (iii) warrants to
purchase 3,260,870 shares of common stock.
(8) Total shares being registered includes shares already issued, shares
issuable upon conversion of our convertible debentures, shares issuable upon
exercise of warrants and our current good faith estimate of additional shares
issuable to this selling stockholder as liquidated damages or as a result of
adjustments contemplated by the securities purchase agreement whichrepresents
(i) 521,739 shares of common stock, (ii) 130,435 shares of common stock issuable
upon conversion of convertible debentures and (iii) warrants to purchase 652,175
shares of common stock.
(9) Total shares being registered includes shares already issued, shares
issuable upon conversion of our convertible debentures, shares issuable upon
exercise of warrants and our current good faith estimate of additional shares
issuable to this selling stockholder as liquidated damages or as a result of
adjustments contemplated by the securities purchase agreement which represents
(i) 1,304,348 shares of common stock, (ii) 326,087 shares of common stock
issuable upon conversion of convertible debentures and (ii) warrants to purchase
3,260,870 shares of common stock.
(10) Total shares being registered includes shares already issued, shares
issuable upon conversion of our convertible debentures, shares issuable upon
exercise of warrants and our current good faith estimate of additional shares
issuable to this selling stockholder as liquidated damages or as a result of
adjustments contemplated by the securities purchase agreement which represents
(i) 1,304,348 shares of common stock, (ii) 326,087 shares of common stock
issuable upon conversion of convertible debentures and (ii) warrants to purchase
1,630,436 shares of common stock.
26
(10A) Total shares being registered includes shares already issued, shares
issuable upon conversion of our convertible debentures, shares issuable upon
exercise of warrants and our current good faith estimate of additional shares
issuable to this selling stockholder as liquidated damages or as a result of
adjustments contemplated by the securities purchase agreement which represents
(i) 1,064,478 shares of common stock, (ii) 260,870 shares of common stock
issuable upon conversion of convertible debentures and (ii) warrants to purchase
1,304,478 shares of common stock.
(10B) Total shares being registered includes shares already issued, shares
issuable upon conversion of our convertible debentures, shares issuable upon
exercise of warrants and our current good faith estimate of additional shares
issuable to this selling stockholder as liquidated damages or as a result of
adjustments contemplated by the securities purchase agreement which represents
(i) 260,870 shares of common stock, (ii) 65,217 shares of common stock issuable
upon conversion of convertible debentures and (ii) warrants to purchase 326,087
shares of common stock.
(11) Total shares being registered includes shares already issued, shares
issuable upon conversion of our convertible debentures, shares issuable upon
exercise of warrants and our current good faith estimate of additional shares
issuable to this selling stockholder as liquidated damages or as a result of
adjustments contemplated by the securities purchase agreement which represents
(i) 2,608,696 shares of common stock, (ii) 652,174 shares of common stock
issuable upon conversion of convertible debentures and (ii) warrants to purchase
3,260,870 shares of common stock.
(11A) Total shares being registered represents 5,000,000 shares of common stock.
(12) Intentionally left blank.
(13) Intentionally left blank.
(14) Total shares being registered represents warrants to purchase 2,000,000
shares of common stock.
(15) Total shares being registered represents warrants to purchase 3,000,000
shares of common stock.
(16) Total shares being registered includes shares issuable upon exercise of
warrants and our current good faith estimate of additional shares issuable to
this selling stockholder as a result of adjustments contemplated by the warrants
which
represents warrants to purchase 450,000 shares of common stock.
(17) Total shares being registered includes shares issuable upon exercise of
warrants and our current good faith estimate of additional shares issuable to
this selling stockholder as a result of adjustments contemplated by the warrants
which represents warrants to purchase 375,000 shares of common stock.
(18) Total shares being registered includes shares issuable upon exercise of
warrants and our current good faith estimate of additional shares issuable to
this selling stockholder as a result of adjustments contemplated by the warrants
which represents warrants to purchase 375,000 shares of common stock.
(19) Total shares being registered includes shares issuable upon exercise of
warrants and our current good faith estimate of additional shares issuable to
this selling stockholder as a result of adjustments contemplated by the warrants
which represents warrants to purchase 225,000 shares of common stock.
(20) Total shares being registered includes shares issuable upon exercise of
warrants and our current good faith estimate of additional shares issuable to
this selling stockholder as a result of adjustments contemplated by the warrants
which represents warrants to purchase 75,000 shares of common stock.
27
LEGAL MATTERS
Sichenzia Ross Friedman Ference LLP, New York, New York will issue an opinion
with respect to the validity of the shares of common stock being offered hereby.
EXPERTS
Meyler & Company, LLC, have audited, as set forth in their report thereon
appearing elsewhere herein, Satellite Enterprises Corp.'s financial statements
at December 31, 2003 and 2002, and for the period then ended that appear in the
prospectus.
CHANGE IN ACCOUNTANTS
On October 22, 2003, Callahan, Johnston & Associates, LLC (hereinafter
"Callahan") resigned as the principal accountant engaged to audit our financial
statements. Callahan performed the audit of the Company's financial statements
for the fiscal year ended June 30, 2003 and June 30, 2002. During our two more
recent fiscal years and the subsequent interim period preceding the date of
their resignation, there were no disagreements with Callahan on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements if not resolved to Callaha's
satisfaction would have caused Callahan to make reference to this subject matter
of the disagreements in connection with Callahan's report, nor were there any
"reportable events" as such term is defined in Item 304(a)(1)(iv)of Regulation
S-K, promulgated under the Securities Exchange Act of 1934, as amended.
The audit reports of Callahan for the Company's fiscal year ended June 30, 2003
and June 30, 2002 did not contain an adverse opinion, a disclaimer of opinion,
or qualification or modification as to uncertainty, audit scope, or accounting
principles. In this connection, Callahan issued a going concern opinion in its
audit report dated October 21, 2003 on the our financial statements for the
years ended June 30, 2003 and June 30, 2002 included in the Form 10-KSB filed
with the Securities and Exchange on October 22, 2003.
Effective on November 25, 2003, we engaged Meyler & Company, LLC, our current
Certified Public Accountants to audit the our financial statements. Prior to its
engagement, we had not consulted with Meyler & Company, LLC with respect to: (i)
the application of accounting principles to a specified transaction, either
completed or proposed; (ii) the type of audit opinion that might be rendered on
our financial statements; or (iii) any matter that was either the subject or
disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a
reportable event (as described in Item 304(a)(1)(iv) of Regulation S-K.
AVAILABLE INFORMATION
We have filed a registration statement on Form SB-2 under the Securities Act of
1933, as amended, relating to the shares of common stock being offered by this
prospectus, and reference is made to such registration statement. This
prospectus constitutes the prospectus of Satellite Enterprises Corp., filed as
part of the registration statement, and it does not contain all information in
the registration statement, as certain portions have been omitted in accordance
with the rules and regulations of the Securities and Exchange Commission.
We are subject to the informational requirements of the Securities Exchange Act
of 1934 that require us to file reports, proxy statements and other information
with the Securities and Exchange Commission. Such reports, proxy statements and
other information may be inspected at public reference facilities of the SEC at
Judiciary Plaza, 450 Fifth Street N.W., Washington D.C. 20549. Copies of such
material can be obtained from the Public Reference Section of the SEC at
Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 at prescribed
rates. The public could obtain information on the operation of the public
reference room by calling the Securities and Exchange Commission at
1-800-SEC-0330 Because we file documents electronically with the SEC, you may
also obtain this information by visiting the SEC's Internet website at
http://www.sec.gov.
28
INDEX TO FINANCIAL STATEMENTS
SATELLITE ENTERPRISES CORP.
FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2004 (Unaudited) and the Year Ended December
31, 2003
Report of Registered Public Accounting Firm
Consolidated Balance Sheets, June 30, 2004 (unaudited) and December 31,
2003 (Restated)
Consolidated Statement of Operations Years Ended December 31, 2003 and
2002, Six Months Ended June 30, 2004 (unaudited) and 2003 (unaudited) and
the period January 2, 2002 (Inception) to June 30, 2004 (unaudited)
Consolidated Statement of Stockholders' Deficit
Consolidated Statement of Cash Flows Years Ended December 31, 2003 and
2002, Six Months Ended June 30, 2004 (unaudited) and 2003 (unaudited) and
the period January 2, 2002 (Inception) to June 30, 2004 (unaudited)
Notes to Financial Statements
29
SATELLITE ENTERPRISES CORP.
(A Development Stage Enterprise)
AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2003
CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm Page F 1
Consolidated Balance Sheets F 2
Consolidated Statements of Operations F 3
Consolidated Statement of Stockholders' Equity F 4
Consolidated Statements of Cash Flows F 6
Notes to Consolidated Financial Statements F 8
MEYLER & COMPANY, LLC
CERTIFIED PUBLIC ACCOUNTANTS
ONE ARIN PARK
1715 HIGHWAY 35
MIDDLETOWN, NJ 07748
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Satellite Enterprises Corp.
New Haven, CT
We have audited the accompanying consolidated balance sheet of Satellite
Enterprises Corp. and subsidiaries (a Development Stage Enterprise) as of
December 31, 2003 (restated) and the related consolidated statement of
operations, stockholders' deficit, and cash flows for each of the two years in
the period ended December 31, 2003. These consolidated 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 audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2003 (restated) and 2002, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 2003, in
conformity with U.S. generally accepted accounting principles..
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note A to the
consolidated financial statements, the Company has incurred cumulative losses of
$3,698,674 since inception, and there are existing uncertain conditions the
Company faces relative to its ability to obtain capital and operate
successfully. These conditions raise substantial doubt about its ability to
continue as a going concern. Management's plans regarding those matters are also
described in Note A. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
/s/ Meyler & Company, LLC
Middletown, NJ
August 27, 2004
F-1
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2004 2003
----------- -----------
(Unaudited) (Restated)
CURRENT ASSETS
Cash $ 541,282 $ 34,705
Accounts receivable 524,237 35,827
Prepaid consulting fee 248,572
Prepaid license fee 150,000
----------- -----------
Total Current Assets 1,464,091 70,532
EQUIPMENT, net of accumulated depreciation of
$14,285 and $184,788, respectively 1,281,280 1,602,561
INTANGIBLE ASSETS
Deposits 236
Technology rights 15,458 15,458
----------- -----------
15,458 15,694
----------- -----------
$ 2,760,829 $ 1,688,787
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 257,820 $ 33,048
Accrued expenses 121,932 56,525
Accrued salaries and related expenses 113,009 54,129
----------- -----------
Total Current Liabilities 492,761 143,702
LONG-TERM DEBT
Notes payable to related parties 1,146,017 1,186,159
Loans payable 745,197 873,926
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.001 authorized
5,000,000 shares, none issued and outstanding
Common stock authorized 500,000,000
shares; par value $0.001; issued
and outstanding 212,842,867 and 192,316,350 shares
at June 30, 2004 and December 31, 2003, respectively 212,843 192,316
Paid-in capital 3,880,258 1,524,202
Stock subscription receivable (180,000)
Accumulated deficit (3,698,674) (2,007,354)
Accumulated comprehensive loss (17,573) (44,164)
----------- -----------
376,854 (515,000)
----------- -----------
$ 2,760,829 $ 1,688,787
=========== ===========
See accompanying notes to financial statements.
F-2
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, JANUARY 2, 2002
------------------------------- ------------------------------- (INCEPTION) TO
2003 2002 2004 2003 JUNE 30, 2004
------------- ------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited)
NET SALES $ 82,705 $ 663,638 $ 746,343
COSTS AND EXPENSES
Cost of services 3,320 488,882 492,202
Selling, general and
administrative 746,373 $ 1,081,389 1,739,127 $ 32,239 3,566,889
Stock-based compen-
sation 244,692 244,692
Depreciation and
amortization 14,285 170,503 6,963 184,788
------------- ------------- ------------- ------------- -------------
Total Costs and Expenses 1,008,670 1,081,389 2,398,512 39,202 4,488,571
------------- ------------- ------------- ------------- -------------
NET OPERATING LOSS (925,965) (1,081,389) (1,734,874) (39,202) (3,742,228)
------------- ------------- ------------- ------------- -------------
OTHER INCOME (LOSS)
Currency gain (loss) 43,554 (919) 43,554
------------- ------------- ------------- ------------- -------------
Total Other Income 43,554 (919) 43,554
------------- ------------- ------------- ------------- -------------
NET LOSS $ (925,965) $ (1,081,389) $ (1,691,320) $ (40,121) $ (3,698,674)
============= ============= ============= ============= =============
NET LOSS PER COMMON
SHARE (BASIC AND
DILUTED) $ (0.02) $ (1.60) $ (0.01) $ (0.01) $ (0.18)
============= ============= ============= ============= =============
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING 59,797,182 675,000 171,401,780 58,992,000 21,007,568
============= ============= ============= ============= =============
See accompanying notes to financial statements.
F-3
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON STOCK ADDITIONAL
------------------------------- PAID IN SUBSCRIPTION
SHARES AMOUNT CAPITAL RECEIVABLE
------------- ------------- ------------- -------------
Issuance of shares to
original stockholders
for cash 30,000 $ 61,564-
Net loss for the year ended
December 31, 2002
------------- ------------- ------------- -------------
Balance December 31, 2002 30,000 61,564
Reverse merger (Note 1)
Exchange of Satellite
Newspapers en Suisse
GMBH common stock (30,000) (61,564) $ 61,564
Fair value of equipment
contributed 1,131,444
Issuance of common stock
to satellite Newspapers
en Suisse GMBH 126,000,000 126,000 (126,000)
Outstanding common stock
of Satellite Newspapers
Corp 58,992,000 58,992 (49,639)
Exercise of common stock
warrant @ $0.06, net of
commissions 3,000,000 3,000 177,000 $ (180,000)
Issuance of shares under private
placement @ $0.06, net of
commissions 1,324,350 1,324 78,141
Issuance of shares to invest-
ment bankers @$0.01
per share
3,000,000 3,000 7,000
TOTAL
ACCUMULATED COMPREHENSIVE STOCKHOLDERS
DEFICIT INCOME (LOSS) EQUITY
------------- ------------ --------------
Issuance of shares to
original stockholders
for cash $ 61,564
Net loss for the year ended
December 31, 2002 $ (1,081,389) $ 245,134 (836,255)
------------- ------------- --------------
Balance December 31, 2002 (1,081,389) 245,134 (774,691)
Reverse merger (Note 1)
Exchange of Satellite
Newspapers en Suisse
GMBH common stock
Fair value of equipment
contributed 1,131,444
Issuance of common stock
to satellite Newspapers
en Suisse GMBH
Outstanding common stock
of Satellite Newspapers
Corp 9,353
Exercise of common stock
warrant @ $0.06, net of
commissions
Issuance of shares under private
placement @ $0.06, net of
commissions 79,465
Issuance of shares to invest-
ment bankers @$0.01
per share 10,000
See accompanying notes to financial statements.
F-4
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
COMMON STOCK ADDITIONAL
-------------------------------- PAID IN SUBSCRIPTION
SHARES AMOUNT CAPITAL RECEIVABLE
------------- ------------ ------------ ------------
Stock based compensation 244,692
Net loss for the year ended
December 31, 2003
------------- ------------ ------------ ------------
Balance, December 31, 2003 192,316,350 192,316 1,524,202 (180,000)
Receipt of Stock
Subscription 180,000
Issuance of shares under
private placement @
$0.06per share net of
commission 6,830,864 6,831 402,612
Issuance of shares to
investment banker for
consulting agreement @
$0.06 per share 5,000,000 5,000 295,000
Issuance of shares under a
private placement @
$0.23 per share 8,695,653 8,696 1,658,444
Net loss for the six months
ended June 30, 2004
------------- ------------ ------------ ------------
Balance, June 30, 2004
(unaudited) 212,842,867 $ 212,843 $ 3,880,258
============= ============ ============ ============
TOTAL
ACCUMULATED COMPREHENSIVE STOCKHOLDERS
DEFICIT INCOME (LOSS) EQUITY
------------ ------------ ------------
Stock based compensation 244,692
Net loss for the year ended
December 31, 2003 (925,965) (289,298) (1,215,263)
------------ ------------ ------------
Balance, December 31, 2003 (2,007,354) (44,164) (515,000)
Receipt of Stock
Subscription 180,000
Issuance of shares under
private placement @
$0.06per share net of
commission 409,443
Issuance of shares to
investment banker for
consulting agreement @
$0.06 per share 300,000
Issuance of shares under a
private placement @
$0.23 per share 1,667,140
Net loss for the six months
ended June 30, 2004 (1,691,320) 26,591 (1,664,729)
------------ ------------ ------------
Balance, June 30, 2004
(unaudited) $ (3,698,674) $ (17,573) $ 376,854
============ ============ ============
See accompanying notes to financial statements.
F-5
SATELLITE ENTERPRISES CORP. AND
SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD
SIX MONTHS ENDED
JANUARY 2, 2002
YEAR ENDED DECEMBER 31, ENDED JUNE 30, (INCEPTION)
--------------------------- --------------------------- TO
2003 2002 2004 2003 JUNE 30,2004
----------- ----------- ----------- ----------- ------------
CASH FLOWS FROM OPERATING (Unaudited) (Unaudited) (Unaudited)
ACTIVITIES
Net loss $ (925,965) $(1,081,389) $(1,691,320) $ (40,121) $(3,698,674)
Adjustments to reconcile net loss to
cash flows used in operating activities:
Stock based compensation 244,692 244,692
Common stock issued for services 10,000 10,000
Depreciation 14,285 170,504 6,963 184,788
Accounts receivable (26,162) (9,665) (488,410) 9,661 (524,237)
Prepaid license fee (150,000) (150,000)
Amortization of prepaid consulting
fees 51,428 51,428
Accounts payable 29,606 228,214 814,085 257,820
Accrued expenses 48,165 8,360 65,407 2,985 121,932
Accrued compensation and benefits 54,129 58,880 113,009
----------- ----------- ----------- ----------- -----------
NET CASH FLOWS USED IN
OPERATING ACTIVITIES (551,250) (1,082,694) (1,755,298) 793,573 (3,389,242)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Cash paid for property and equipment (459,103) (33,881) (37,020) (935) (530,004)
Proceeds on disposition of property and
equipment 195,380 195,380
Deposits (236) 236
----------- ----------- ----------- ----------- -----------
NET CASH FLOWS USED IN
INVESTING ACTIVITIES (459,339) (33,881) 158,596 (935) (334,624)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Bank overdraft 3,442 (3,442)
Advances from notes payable to related
parties 694,238 22,495 109,965 716,733
Payments on notes payable to related
parties (40,142) (40,142)
Change in loans payable 263,907 1,079,445 (128,729) (1,042,686) 1,214,623
Proceeds from issuance of common stock 118,295 22,734 2,076,583 30,752 2,217,612
Proceeds from common stock subscrip-
tion receivable 180,000 180,000
----------- ----------- ----------- ----------- -----------
NET CASH FLOWS FROM
FINANCING ACTIVITIES 1,079,882 1,124,674 2,084,270 (901,969) 4,288,826
----------- ----------- ----------- ----------- -----------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH (42,687) 19,009 107,275 (23,678)
----------- ----------- ----------- ----------- -----------
INCREASE IN CASH 26,606 8,099 506,577 (2,056) 541,282
CASH, BEGINNING OF PERIOD 8,099 34,705 8,099
----------- ----------- ----------- ----------- -----------
CASH, END OF PERIOD $ 34,705 $ 8,099 $ 541,282 $ 6,043 $ 541,282
=========== =========== =========== =========== ===========
See accompanying notes to financial statements.
F-6
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE PERIOD
SIX MONTHS ENDED
JANUARY 2, 2002
YEAR ENDED DECEMBER 31, ENDED JUNE 30, (INCEPTION)
--------------------------- --------------------------- TO
2003 2002 2004 2003 JUNE 30, 2004
----------- ----------- ----------- ----------- --------------
CASH FLOWS FROM OPERATING (Unaudited) (Unaudited) (Unaudited)
ACTIVITIES
SUPPLEMENTAL CASH FLOW
INFORMATION
Increase in Paid-in-capital from
contribution of property and equipment $1,131,444 $1,131,444 $1,131,444
Recharacterization of loans payable to
notes payable to related parties 469,426 469,426
Common stock subscription receivable 180,000 $ 500,000 680,000
Outstanding common stock of Satellite
Newspapers Corp. at date of merger 9,353 9,353
Issuance of common stock for consulting
agreement 300,000 300,000
See accompanying notes to financial statements.
F-7
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003
(Unaudited June 30, 2004 and 2003)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Satellite Enterprises Corp., ("Company") through its wholly owned
subsidiary Satellite Newspapers en Suisse GMBH ("Suisse"), provides
newspaper publishers access to an advanced methodology of distribution for
national, international and local newspapers. The Company digitally
distributes, prints and sells publishers' newspapers through interactive
vending units placed in hotels, airports and cruise ships.
The Company merged with Suisse (formerly Media finance en Suisse GMBH)
under a stock purchase option agreement dated November 26, 2003 which was
exercised on February 15, 2004. Suisse has two wholly owned companies in
the Netherlands, Satellite Newspapers Content B.V. (incorporated on May
24, 2001) which negotiates agreements with the newspaper publishers and
Satellite Newspapers Trading, B.V. (incorporated on May 17, 2001) which
markets and sells the vending units known as Kiosks which are used to
distribute the digitized newspapers. Neither company had operations for
the year ended December 31, 2001.
On June 20, 2003, in conjunction with a change of control of the Company,
the Company entered into a Rights Agreement with Satellite Newspapers
Worldwide NV, a corporation organized under the laws of the Netherlands
("Satellite Newspapers"). Under this Agreement, Satellite Newspapers
appointed the Company as its irrevocable commercial non-exclusive
distributor to promote the sale and/or lease of its newspaper Kiosks and
the associated Satellite Newspaper content distribution technology which
Satellite Newspapers developed. Satellite Newspapers owns the patents,
engineering and technical design of this technology.
REVERSE MERGER
On February 15, 2004, the Company exercised its stock purchase agreement
to merge with Suisse and its wholly owned subsidiaries and acquired all of
Suisse's outstanding common stock by the issuance of 126,000,000 shares of
its $0.001 par value common stock (the "Merger"). In connection with the
Merger, Suisse became a wholly owned subsidiary of the Company. Prior to
the Merger, Satellite Enterprises Corp. was a non-operating "shell"
corporation. Pursuant to Securities and Exchange Commission rules, the
Merger of a private operating company into a non-operating public shell
corporation with nominal net assets is considered a capital transaction.
Accordingly, for accounting purposes, the Merger has been treated as an
acquisition of the Company by Suisse and a recapitalization of Suisse. For
financial statement presentation, the Merger has been reflected in the
financial statements as though it occurred on December 31, 2003. The
historical financial statements prior to December 31, 2003 are those of
Suisse. Since the Merger is a recapitalization and not a business
combination, proforma information is not presented.
Suisse was previously owned by Media Finance en Suisse Holding, GMBH, a
company wholly owned by the family of the President and Chief Executive
Officer of the Company. As part of the merger, an exclusive 20 year world
wide license was granted to the Company to market and distribute digital
newspapers. See also Note C Related Party Transactions-License Agreement.
F-8
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003
(Unaudited June 30, 2004 and 2003)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOING CONCERN
As shown in the accompanying financial statements, the Company has
incurred cumulative net operating losses of $3,698,674 since inception and
is considered a company in the development stage. Management's plans
include the raising of capital through the equity markets to fund future
operations and the generating of revenue through its business. Failure to
raise adequate capital and generate adequate sales revenues could result
in the Company having to curtail or cease operations. Additionally, even
if the Company does raise sufficient capital to support its operating
expenses and generate adequate revenues, there can be no assurances that
the revenue will be sufficient to enable it to develop business to a level
where it will generate profits and cash flows from operations. These
matters raise substantial doubt about the Company's ability to continue as
a going concern. However, the accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business.
These financial statements do not include any adjustments relating to the
recovery of the recorded assets or the classification of the liabilities
that might be necessary should the Company be unable to continue as a
going concern.
CHANGE OF YEAR END
In December 2003, the Company elected to change its accounting year end
from June 30 to December 31.
FOREIGN CURRENCY TRANSLATION
In 2003, the Company considered the Swiss Frank to be its functional
currency. Assets and liabilities were translated into US dollars at the
period-end exchange rates. Statement of operations amounts were translated
using the average rate during the year. Gains and losses resulting from
translating foreign currency financial statements were accumulated in
other comprehensive income (loss), a separate component of stockholders'
deficit.
CASH EQUIVALENTS
For purposes of reporting cash flows, cash equivalents include investment
instruments purchased with a maturity of three months or less. There were
no cash equivalents in 2003 or for the six months ended June 30, 2004.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
F-9
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003
(Unaudited June 30, 2004 and 2003)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT AND DEPRECIATION
Property and equipment is stated at cost and is depreciated using the
straight line method over the estimated useful lives of the respective
assets. Routine maintenance, repairs and replacement costs are expensed as
incurred and improvements that extend the useful life of the assets are
capitalized. When property and equipment is sold or otherwise disposed of,
the cost and related accumulated depreciation are eliminated from the
accounts and any resulting gain or loss is recognized in operations. The
Company depreciates the equipment (principally computer related equipment)
over 3 years.
NET LOSS PER COMMON SHARE
The Company computes per share amounts in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share".
SFAS No. 128 requires presentation of basic and diluted EPS. Basic EPS is
computed by dividing the income (loss) available to Common Stockholders by
the weighted-average number of common shares outstanding for the period.
Diluted EPS is based on the weighted-average number of shares of Common
Stock and Common Stock equivalents outstanding during the periods.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements include the Company and its wholly
owned subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation.
COMPREHENSIVE INCOME (LOSS)
SFAS No. 130 establishes standards for the reporting and disclosure of
comprehensive income and its components which will be presented in
association with a company's financial statements. Comprehensive income is
defined as the change in a business enterprise's equity during a period
arising from transactions, events or circumstances relating to non-owner
sources, such as foreign currency translation adjustments and unrealized
gains or losses on available-for-sale securities. It includes all changes
in equity during a period except those resulting from investments by or
distributions to owners. Comprehensive income is accumulated in
accumulated other comprehensive income (loss), a separate component of
stockholders' equity (deficit.)
STOCK-BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation" prescribes
accounting and reporting standards for all stock-based compensation plans,
including employee stock options, restricted stock, employee stock
purchase plans and stock appreciation rights. SFAS No. 123 requires
employee compensation expense to be recorded (1) using the fair value
method or (2) using the intrinsic value method as prescribed by accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB25") and related interpretations with pro forma disclosure
of what net income and earnings per share would have been if the Company
adopted the fair value method. The Company accounts for employee stock
based compensation in accordance with the provisions of APB 25. For
non-employee options and warrants, the company uses the fair value method
as prescribed in SFAS 123.
F-10
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003
(Unaudited June 30, 2004 and 2003)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BUSINESS COMBINATIONS AND GOODWILL
In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations". SFAS No. 141 requires the purchase
method of accounting for business combinations initiated after June 30,
2001 and eliminates the pooling-of-interests method.
In July 2001, the FASB issued SFAS NO. 142, "Goodwill and Other Intangible
Assets", which the Company adopted during 2003. SFAS No. 142 requires,
among other things, the discontinuance of goodwill amortization. In
addition, the standard includes provisions for the reclassification of
certain existing recognized intangibles as goodwill, reassessment of the
useful lives of existing recognized intangibles, reclassification of
certain intangibles out of previously reported goodwill and the
identification of reporting units for purposes of assessing potential
future impairment of goodwill.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 changes the
accounting for long-lived assets to be held and used by eliminating the
requirement to allocate goodwill to long-lived assets to be tested for
impairment, by providing a probability weighted cash flow estimation
approach to deal with situations in which alternative courses of action to
recover the carrying amount of possible future cash flows and by
establishing a primary-asset approach to determine the cash flow
estimation period for a group of assets and liabilities that represents
the unit of accounting for long-lived assets to be held and used. SFAS No.
144 changes the accounting for long-lived assets to be disposed of other
than by sale by requiring that the depreciable life of a long-lived asset
to be abandoned be revised to reflect a shortened useful life and by
requiring the impairment loss to be recognized at the date a long-lived
asset is exchanged for a similar productive asset or distributed to owners
in a spin-off if the carrying amount of the asset exceeds its fair value.
SFAS No 144 changes the accounting for long-lived assets to be disposed of
by sale by requiring that discontinued operations no longer be recognized
at a net realizable value basis (but at the lower of carrying amount or
fair value less costs to sell), by eliminating the recognition of future
operating losses of discontinued components before they occur, and by
broadening the presentation of discontinued operations in the income
statement to include a component of an entity rather than a segment of a
business. A component of an entity comprises operations and cash flows
that can be clearly distinguished operationally, and for financial
reporting purposes, from the rest of the entity.
NOTE B - LOANS PAYABLE
During the year ended December 31, 2003, four individuals made unsecured
loans to the company aggregating $873,926. The loans mature between July
and November 2004. The loans are interest free for the first year and
accrue interest at the rate of 6% commencing after the first anniversary
date of the loan. Included in the $873,926, is a loan from a relative of
the President and Chief Executive Officer of $184,212. The balance at June
30, 2004 was $745,197.
NOTE C - RELATED PARTY TRANSACTIONS
ADVANCES AND COMPANY LOANS PAYABLE
The President and Chief Executive Officer has advanced the Company and/or
assumed individual loans totaling $1,186,159 and $1,146,017 as of December
31, 2003 and June 30,2004, respectively. These loans
F-11
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003
(Unaudited June 30, 2004 and 2003)
NOTE C - RELATED PARTY TRANSACTIONS (CONTINUED)
ADVANCES AND COMPANY LOANS PAYABLE (CONTINUED)
are unsecured and bear interest at the rate of 10% per annum. The loans
have no stated maturity dates.
LICENSE AGREEMENT
In connection with the merger of the Company and Suisse, the former parent
company of Suisse granted the company a 20 year exclusive world wide
license to market and distribute newspapers digitally. The license
agreement also provides access to the patents and technology that transmit
the newspaper content digitally around the world and the technological
knowledge to produce the Kiosks. Media Finance en Suisse Holding GMBH, the
former parent of Suisse, is wholly owned and controlled 100% by the family
of the President and Chief Executive Officer of the Company. The license
agreement provides for a monthly payment of $25,000 per month to Media
Finance en Suisse Holding GMBH commencing November 3, 2003 and a royalty
of $0.10 for each newspaper sold.
DISTRIBUTION AGREEMENT
The Company has entered into a service agreement with Eurostar facilities,
BV ("Eurostar"). Under the terms of the service agreement Eurostar is to
provide all international transmissions and communications with the Kiosks
and provide administration and support services, including management
personnel, to the Company's wholly owned operating entity Suisse. The
agreement is for a minimum of 5 years commencing November 3, 2003 and
provides for a base monthly payment of $55,000 ($50,000 for transmission
service and $5,000 for rent of installed equipment). Additionally, it
provides for management personnel, technical staff and administrative
staff at separate hourly rates. During the six months ended June 30, 2004,
the Company has paid Eurostar approximately $975,000. Since inception,
Eurostar has been paid a total of $1,053,000.
All of the employees of the Company except the President work for Eurostar
and the same personnel who manage and operate Eurostar work for the
Company. Eurostar's billing to the Company is based on cost plus a profit
mark up. The mark up to Eurostar is estimated to approximate $200,000 per
year. The company plans to merge with Eurostar on October 1, 2004.
See also Note F - Operating Leases and Note G - Employment Contract for
further related party disclosures.
NOTE D - INCOME TAXES
The Company has adopted Financial Accounting Statement SFAS No. 109,
Accounting for Income Taxes. Under this method, the Company recognizes a
deferred tax liability or asset for temporary differences between the tax
basis of an asset or liability and the related amount reported on the
financial statements. The principal types of differences, which are
measured at the current tax rates, are net operating loss carry forwards.
At December 31, 2003 and June 30, 2004, these differences resulted in a
deferred tax asset of approximately $602,200 and $1,109,600, respectively.
SFAS No. 109 requires the establishment of a valuation allowance to
reflect the likelihood of realization of deferred tax assets. Since
realization is not assured, the Company has recorded a valuation allowance
for the entire deferred tax asset, and the
F-12
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003
(Unaudited June 30, 2004 and 2003)
NOTE D - INCOME TAXES (CONTINUED)
accompanying financial statements do not reflect any net asset for
deferred taxes at December 31, 2003 and June 30, 2004.
The Company's net operating loss carry forwards amounted to approximately
$2,007,350 and $3,698,674 at December 31, 2003 and June 30, 2004,
respectively, which will expire through 2018.
NOTE E - STOCKHOLDERS' EQUITY
PRIVATE PLACEMENT OFFERING - GCH CAPITAL
In November 2003, the Company entered into private placement agreements
with Hyde Investments, LTD., and Livingston Investments, LTD, British
Virgin Islands Corporations, whereby these entities would purchase
15,000,000 shares of the Company's common stock at $0.06 per share net of
10% for commissions with the right to purchase and sell an additional
15,000,000 shares once $1,000,000 has been paid to the Company. The intent
of the agreement is for the Company to receive approximately $200,000 per
month from the sale of its common stock. Through December 31, 2003, the
Company received $79,465 in net proceeds from the sale of 1,324,350 shares
of its common stock.
In connection with the private placement offering, a warrant was issued to
GCH Capital, LTD for 3,000,000 shares of the Company's common stock at an
exercise price of $0.06 per share. The warrant is fully vested and
exercisable as at the date of the agreement, November 26, 2003.
CONSULTING AGREEMENT - GCH CAPITAL, LTD
On December 1, 2003, the Company entered into a consulting agreement with
GCH Capital, LTD to provide assistance relating to business acquisition
and general business strategies. Under the terms of the agreement, the
Company was to issue 5,000,000 shares of the Company's common stock. None
of these shares were issued as of December 31, 2003. In March 2004, the
Company issued 5,000,000 shares. GCH Capital, LTD is also to receive a
monthly consulting fee of $10,000 per month for 36 months. The Company has
the right to buy back up to 1,000,000 shares of the common stock held in
escrow at $0.20 per share provided that such purchase right shall expire
as to 50,000 shares on the first day of each month, beginning January 1,
2004.
GCH Capital, LTD also received an additional warrant for 3,000,000 shares
of the company's common stock as part of a consulting agreement dated
December 31, 2003. The exercise price of the warrant is $0.06 per share,
and is fully vested and exercisable at the date of the agreement.
INCREASE IN AUTHORIZED SHARES
On March 11, 2004, the Directors and Shareholders of Satellite Enterprises
Corp. approved an increase in the authorized number of shares of common
stock from 200,000,000 to 500,000,000 and declared a 3-for-1 stock split
effective in the form of a 200% dividend payable on or about March 31,
2004 to shareholders of record as of March 22, 2004. All share data and
per share figures have been adjusted to give effect to the 3-for-1 split.
F-13
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003
(Unaudited June 30, 2004 and 2003)
NOTE E - STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTION AGREEMENT
On November 26, 2003, the shareholders approved a Stock Purchase Option
Agreement with Media Finance en Suisse Holding GMBH, a Swiss Corporation
("Media Finance"). Media Finance is wholly owned by the family of the
President and Chief Executive Officer of the Company. This option
agreement allowed the Company to acquire the right to purchase 100% of the
shares of common stock of Suisse and a 20 year exclusive license agreement
to distribute all satellite device content. The exercise of this option
agreement gave the Company worldwide rights to market and distribute its
products. Under the Option Agreement, Media Finance grants the Company the
right and option to acquire from it all of the shares of Suisse (20,000
shares) for the aggregate consideration of 126,000,000 shares of common
stock, par value $0.001 per share of the company.
OTHER STOCK ISSUANCES
During the first quarter of 2004, GCH Capital, as part of the private
placement, sold 6,830,864 shares for $409,443. The shares were sold at
$0.06 per share , net of commissions.
The company issued 5,000,000 shares of its common stock to GCH Capital
valued at $0.06 per share or $300,000 in connection with a 3 year
consulting agreement relating to investment banking commencing December 1,
2003.
In May 2004, the Company entered into a private placement arrangement with
a group of investment bankers as amended on October 29, 2004 to sell
8,695,653 shares of its common stock at a price of $0.23 per share and the
issuance of $500,000 5% convertible debentures due October 31, 2005. The
debentures are convertible into common stock at $0.23 per share. Interest
is payable to maturity. The Company will receive the proceeds of the
convertible debentures upon filing of a registration statement to register
the shares sold under the private placement. The net proceeds to the
Company is anticipated to be $2,167,140 after deducting $332,860 for
underwriting, legal and professional fees. Additionally, $150,000 was paid
to GCH Capital as a break-up fee under their investment banking
arrangement. Under the terms of the agreement, 20,000,000 shares of the
Company's common stock owned by Media Finance en Suisse GMBH was pledged
as collateral, 8,695,653 warrants were issued to acquire shares of the
Company's common stock at $1.50 per share and the Company has issued an
option to each of the investors to purchase an equivalent number of shares
within a four month period subsequent to the effective date of the
Registration Statement at $0.23 per share. At June 30, 2004, these shares
have not been issued. However, for financial statement presentation
purposes, the shares were reflected as issued and outstanding.
Under the terms of the securities Purchase Agreement, the company is
subject to penalties payable in cash or stock for non-compliance with
certain terms and conditions of the agreement.
STOCK OPTIONS
On December 1, 2003, the Company granted options to purchase 24,309,000
shares of the company's common stock to consultants with an exercise price
of $0.06 per share. These options vested immediately and will expire five
years from issuance date. The options issued to consultants had a fair
value of $244,692 based upon the Black-Scholes options pricing model. The
compensation associated with these options was expensed during the six
months ended December 31, 2003.
F-14
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003
(Unaudited June 30, 2004 and 2003)
NOTE E - STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTIONS (CONTINUED)
Transactions involving options are summarized as follows:
Balance - July 1, 2003 0 $0
Options granted December 1, 2003 24,309,000 $0.066
---------- ------
Balance December 31, 2003 and June 30, 2004 24,309,000 $0.066
========== ======
Pro forma information regarding net loss and net loss per share as
required by SFAS 123 has been determined as if the Company had accounted
for its employee stock options under the fair value method of SFAS 123.
The fair value of these options was estimated at the date of grant using
the Black-Scholes option-pricing model with weighted-average assumptions
for the year ended December 31, 2003 as follows:
ASSUMPTIONS
Risk-free rate 3.46%
Dividend yield N/A
Volatility factor of the expected market price of the
Company's common stock .10%
Average life 1 year
Interest rate 3.46%
For purposes of pro forma disclosures, the estimated fair value of the
options has been expensed in the current period. Accordingly, there is no
difference between actual and pro forma results during the six months
ended December 31, 2003.
The following table summarizes information concerning stock options
outstanding at December 31, 2003 and June 30, 2004.
REMAINING
PERIOD EXERCISE PRICE NUMBER OUTSTANDING CONTRACTUAL LIFE NUMBER EXERCISABLE
December 31, 2003 $0.20 24,309,000 5 years 24,309,000
June 30, 2004 4.5 years
STOCK WARRANTS
The Company has issued stock warrants to purchase an aggregate of
4,050,000 shares of the Company's common stock at $0.11 through June 2006
as part of a general release and settlement agreement entered into with
respect to previously issued convertible debentures. These warrants are
fully vested and 100% exercisable.
F-15
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003
(Unaudited June 30, 2004 and 2003)
NOTE E - STOCKHOLDERS' EQUITY (CONTINUED)
RESERVED SHARES
At December 31, 2003, the Company reserved 50,398,132 shares of its common
stock under existing agreements for private placements, options, warrant
agreements and consulting arrangements. At June 30, 2004, the Company
reserved 25,659,000 shares.
NOTE F - OPERATING LEASES
The Company has two operating leases for (1) a corporate home in
Switzerland and (2) an automobile for the President. The corporate home
lease commenced April 1, 2004 and has an unlimited duration which can be
cancelled upon three months written notice in advance. The monthly rent is
$1,620 per month. The auto lease is for a period of 48 months commencing
March 1, 2004 with a monthly payment of $1,556.
Additionally, the company pays Eurostar $12,000 per month for its
administrative and technical facility under a long-term lease expiring in
August 2006. Minimum annual rentals are as follows:
Six months ended December 31, 2004 $91,056
Year ended December 31, 2005 182,112
2006 134,112
2007 22,552
2008 19,440
Rent expense for the years ended December 31, 2003 and 2002 was $144,000
for each year. Rent expense for the six months ended June 30, 2004 and
2003 was $72,000 in each period.
NOTE G - EMPLOYMENT CONTRACT
The Company has entered into an employment contract with the President and
Chief Operating Officer of Suisse. The contract commenced January 1, 2004
and its duration is infinite. The agreement provides for a monthly salary
of approximately $10,000 per month plus reasonable travel expenses.
NOTE H - REVENUE RECOGNITION
The Company's policy is to recognize revenue at the time a transaction is
completed at a local interactive vending unit (Kiosk) located at various
sites around the world. To manage this global network, the Company has
divided the network into eight distinct regions with the intent to issue
each regional distributor rights to market and sell the Company's product.
To date, the Company has signed distribution agreements with four regions:
(1) Newsport pty Ltd (Australia), (2) Satellite Newspapers Asia Pacific,
LTY (Asia Pacific), (3) Satellite Newspapers Middle East (Middle East) and
(4) Satellite Newspapers Europe S.L.(Europe). The Company is currently
seeking distributors for the remaining four regions.
Each distribution agreement granted to date, requires a defined monthly
minimum fee. To the extent that revenues generated within the region
exceed the minimum, no minimum fee would be required and the Company,
based upon internally generated settlement reports would compensate the
distributors. Through June 30, 2004, the Company has recognized minimum
revenue on these distribution agreements totaling approximately $250,000
of which $50,000 has been received. No provision has been made to reduce
the
F-16
SATELLITE ENTERPRISES CORP. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003
(Unaudited June 30, 2004 and 2003)
NOTE H - REVENUE RECOGNITION (CONTINUED)
minimum revenues recognized since the Company believes that all amounts
will be collected. Subsequent to June 30, 2004, no minimum revenues will
be recorded under the agreement unless payments are received or
guaranteed.
NOTE I - COMMITMENTS AND CONTINGENCIES
The Company has employment contracts with two former employees who
resigned from the Company. Each contract involved salaries, stock options
and stock warrants commitments. The former employees are asserting claims
for salary settlements and Company stock and have brought suit against the
Company in fringe benefits and travel expenses. The complaint does not
specify any dollar amount. The Company believes the suit is without merit
and intends to contest the claim vigorously.
On August 27, 2002, before a change in control and the reverse merger
discussed in Note A, the Company transferred its former GreenVolt Corp.
subsidiaries and its fuel cell technology to its former Chief Executive
Officer as part of a general release and settlement agreement. As part of
this agreement, the liabilities of GreenVolt Corp. were included. It is
possible that creditors of GreenVolt Corp. could look to the Company for
payment. The Company and its legal counsel believe that these liabilities
remain with GreenVolt Corp. and that the Company has no further
obligation. Through June 30, 2004, no creditors of GreenVolt Corp. have
contacted the Company for settlement of liabilities of GreenVolt Corp.
Three Dutch companies in the Netherlands have commenced a legal procedure
against Satellite Newspapers Content B.V. claiming an amount due to them
of approximately $156,000. The parties have agreed to suspend legal action
until June 1, 2005 based upon a settlement reached in February 2004
whereby a shareholder of the Company will surrender a comparable number of
Company shares to offset the obligation.
Legal proceedings have been entered against the Company in the State of
Pennsylvania for violation of the Pennsylvania Unsolicited
Telecommunication Advertisement Act which will ultimately result in a
default judgment of $11,700 against the Company.
NOTE J - UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited interim financial statements at June 30, 2004 and 2003 have
been prepared in accordance with accounting principles generally accepted
in the United States of America and the rules of the U.S. Securities and
Exchange Commission, and should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31,
2003. In the opinion of management, all adjustments consisting of normal
recurring accruals, considered necessary for a fair presentation of
financial position and the results of operations for the six months ended
June 30, 2004 and 2003 have been included. Operative results for the six
months ended June 30, 2004 are not necessarily indicative of the results
that may be expected for the full year.
F-17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation, as amended, provide to the fullest extent
permitted by Nevada law, our directors or officers shall not be personally
liable to us or our shareholders for damages for breach of such director's or
officer's fiduciary duty. The effect of this provision of our Articles of
Incorporation, as amended, is to eliminate our right and our shareholders
(through shareholders' derivative suits on behalf of our company) to recover
damages against a director or officer for breach of the fiduciary duty of care
as a director or officer (including breaches resulting from negligent or grossly
negligent behavior), except under certain situations defined by statute. We
believe that the indemnification provisions in its Articles of Incorporation, as
amended, are necessary to attract and retain qualified persons as directors and
officers.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemization of all estimated expenses, all of
which we will pay, in connection with the issuance and distribution of the
securities being registered:
NATURE OF EXPENSE AMOUNT
SEC Registration fee $ 4,283.56
Accounting fees and expenses 15,000.00*
Legal fees and expenses 35,000.00*
Miscellaneous 5,000.00
-------------
TOTAL $ 59,283.56*
=============
* Estimated.
II-1
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The Company sold the following shares of common stock during the three fiscal
years ended December 31, 2003 (adjusted to reflect reverse stock splits and
share issuances through April 15, 2004) without registration based on Section
4(2) of the Securities Act of 1933, as amended. All of the offerings were
conducted solely by the Company, without the engagement of an underwriter.
- --------- --------- -------------------- ---------------- ---------------------
Date Shares Purchasers Total Price Exemption
- --------- --------- -------------------- ---------------- ---------------------
04/05/04 169,300 Foreigners $33,860(1) Regulation S
- --------- --------- -------------------- ---------------- ---------------------
03/03/04 67,791 Foreigners $13,558(1) Regulation S
- --------- --------- -------------------- ---------------- ---------------------
03/02/04 562,144 Foreigners $112,429(1) Regulation S
- --------- --------- -------------------- ---------------- ---------------------
02/15/04 215,920 Foreigners $43,184(1) Regulation S
- --------- --------- -------------------- ---------------- ---------------------
02/09/04 1,348,321 Foreigners $269,664(1) Regulation S
- --------- --------- ------------------- ---------------- ---------------------
12/19/03 388,050 Foreigners $77,610(1) Regulation S
- --------- --------- ------------------- ---------------- ---------------------
11/20/03 1,000,000 Foreigners $200,000(2) Regulation S
- --------- --------- ------------------- ---------------- ---------------------
11/01/03 1,000,000 Consultant $10,000(3) Section 4(2)
- --------- --------- ------------------- ---------------- ---------------------
09/01/03 2,000 Consultant $33,369(3) Section 4(2)
- --------- --------- -------------------- ---------------- ---------------------
03/02/03 35,000 Consultant $175,000(4)(6) Section 4(2)
- --------- --------- -------------------- ---------------- ---------------------
07/02/02 5,000 Consultant $85,000(4) Section 4(2)
- --------- --------- -------------------- ---------------- ---------------------
06/03/02 1,000,000 Satellite Newspapers $10,000(7) Section 4(2)
Worldwide NV
- --------- --------- -------------------- ---------------- ---------------------
06/03/02 17,000,000 Accredited Investors $261,800(4) Section 4(2)
- --------- --------- -------------------- ---------------- ---------------------
06/03/02 662,500 Accredited Investor $9,937.50(4) Section 4(2)
- --------- --------- -------------------- ---------------- ---------------------
06/03/02 662,500 Accredited Investor $9,937.50(4) Section 4(2)
- --------- --------- -------------------- ---------------- ---------------------
06/03/02 75,000 Consultant $1,125(4) Section 4(2)
- --------- --------- -------------------- ---------------- ---------------------
(1) Company paid a 10% commission to Bel Air Group, Inc. as finders fee.
(2) Company sold Livingston Investments, Ltd., a British Virgin Island Company
1,000,000 at $0.20 per share. $50,000 was paid in 2004 and the balance has not
been paid to dater.
(3) Company paid $10,000 consulting fee GCH Capital, Ltd. who in turn paid it
back to the Company in return for 1,000,000 shares
(4) These shares were issued in consideration of services rendered to the
Company and/or reimbursement of expenses or other indebtedness owed by the
Company.
(5) The offering price was paid in the form of the exchange and transfer to the
Company of 100% of the outstanding Capital Stock of GreenVolt Corp.
(6) The Company issued these shares under an exemption provided by Section 4(2)
of the Securities Act of 1933, as amended, however, the certificates
representing these shares were issued without legend in error. The shareholder
has been notified by the Company that the shares may only be sold in compliance
with Rule 144 or any other exemption from the registration requirements of the
Securities Act.
(7) The Company issued these shares as payment and in exchange for the transfer
of certain Rights to the Satellite Newspapers KiOSK product and content
distribution technology.
On November 26, 2003, we entered into a Stock Purchase Option Agreement dated
November 26, 2003 with Media Finance for the purchase of 100% of Swiss Satellite
Newspapers. This option agreement allowed us to acquire the right to purchase
100% of the shares of common stock of Swiss Satellite Newspapers. On February
15, 2004, we exercised the option and acquired 100% of Swiss Satellite
Newspapers in consideration for the issuance of 126,000,000 shares of common
stock.
II-2
During the six months ended June 30, 2004, 6,830,864 shares of common stock were
sold under a private placement agreement with GCH Capital, LTD. The total
aggregate proceeds received was $409,444.
In November 2003, the Company entered into private placement agreements with
Hyde Investments, LTD., and Livingston Investments, LTD, British Virgin Islands
Corporations, whereby these entities would purchase 15,000,000 shares of the
Company's common stock at $0.06 per share net of 10% for commissions with the
right to purchase and sell an additional 15,000,000 shares once $1,000,000 has
been paid to the Company. The intent of the agreement is for the Company to
receive approximately $200,000 per month from the sale of its common stock.
Through December 31, 2003, the Company received $79,465 in net proceeds from the
sale of 1,324,350 shares of its common stock.
In connection with the private placement offering, a warrant was issued to GCH
Capital, LTD for 3,000,000 shares of the Company's common stock at an exercise
price of $0.06 per share. The warrant is fully vested and exercisable as at the
date of the agreement, November 26, 2003.
On December 1, 2003, the Company entered into a consulting agreement with GCH
Capital, LTD to provide assistance relating to business acquisition and general
business strategies. Under the terms of the agreement, the Company was to issue
5,000,000 shares of the Company's common stock. None of these shares were issued
as of December 31, 2003. In March 2004, the 5,000,000 shares were issued. GCH
Capital, LTD is also to receive a monthly consulting fee of $10,000 per month
for 36 months. The Company has the right to buy back up to 1,000,000 shares of
the common stock held in escrow at $0.20 per share. This purchase right shall
expire as to 50,000 shares on the first day of each month, beginning January 1,
2004.
GCH Capital, LTD also received an additional warrant for 3,000,000 shares of the
company's common stock as part of a consulting agreement dated December 31,
2003. The exercise price of the warrant is $0.06 per share, and is fully vested
and exercisable at the date of the agreement.
On December 1, 2003, the Company granted options to purchase 24,309,000 shares
of the company's common stock to consultants with an exercise price of $0.06 per
share. These options vested immediately and will expire five years from issuance
date.
The Company has issued stock warrants to purchase an aggregate of 4,050,000
shares of the Company's common stock at $0.11 through June 2006 as part of a
general release and settlement agreement entered into with respect to previously
issued convertible debentures. These warrants are fully vested and 100%
exercisable.
During the six months ended June 30, 2004, $180,000 was received on the
outstanding stock subscription receivable.
On April 16, 2004, the Company issued to GCH Capital, LTD 5,000,000 shares of
its common stock valued at $0.01 per share as consideration under the investment
banking arrangement.
To obtain funding for our ongoing operations, on May 19, 2004, pursuant to an
offering conducted under Rule 506 of Regulation D, as promulgated under the
Securities Act of 1933, we sold 10,869,565 shares of common stock to accredited
investors in a private offering. In connection with the offering, we sold
10,869,565 shares of common stock at a price of $.23 per share. In addition, we
also issued 10,869,565 common stock purchase warrants exercisable at $1.50 per
share. We raised an aggregate of $2,500,000 in connection with this offering. In
November 2004, we entered into an amendment of the Securities Purchase Agreement
whereby we cancelled 2,173,913 shares of common stock and issued to the
investors to the investors secured convertible debentures in the amount of
$500,000.
II-3
ITEM 27. EXHIBITS.
The following exhibits are included as part of this Form SB-2. References to
"the Company" in this Exhibit List mean Satellite Enterprises Corp., a Nevada
corporation.
EXHIBIT
NO. DESCRIPTION
------- -----------
2.1 Rights Agreement between Satellite Newspapers Worldwide
NV, and Satellite Enterprises Corp. dated June 20, 2003,
incorporated by reference to the Company's Current
Report on Form 8-K filed with the Securities and
Exchange Commission on June 25, 2003.
2.2 Stock Purchase Option Agreement entered between the
Company and Media Finance en Suisse GMBH dated November
26, 2003 incorporated by reference to the Company's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on February 3, 2004.
3.1 Corporate Charter of Beck & Co. as filed with the Nevada
Secretary of State on April 6, 1998, incorporated by
reference to the Company's Registration Statement on
Form 10-SB filed with the Securities and Exchange
Commission on April 4, 2000.
3.2 Bylaws of Beck & Co., incorporated by reference to the
Company's Registration Statement on Form 10-SB filed
with with the Securities and Exchange Commission on July
6, 1999.
5.1 Sichenzia Ross Friedman Ference LLP Opinion and Consent
10.1 Securities Purchase Agreement, incorporated by reference
to the Company's Current Report on Form 8-K filed with
with the Securities and Exchange Commission on June 2,
2004.
10.2 Form of Warrant, incorporated by reference to the
Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on June 2, 2004.
10.3 Joint Escrow Instruction, incorporated by reference to
the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on June 2, 2004.
10.4 Registration Rights Agreement, incorporated by reference
to the Company's Current Report on Form 8-K filed with
the Securities and Exchange Commission on June 2, 2004.
10.5 Security Interest and Pledge Agreement, incorporated by
reference to the Company's Current Report on Form 8-K
filed with the Securities and Exchange Commission on
June 2, 2004.
10.6 Service Agreement entered between Eurostar Facilities BV
and Satellite Newspapers Suise GMBH
10.7 Exclusive Global Distribution Agreement between Media
Finance en Suise Holding GMHB and Satellite Newspapers
Suise GMBH
10.8 Amendment to the Securities Purchase Agreement dated
October 29, 2004
16.1 Letter from Callahan, Johnston & Associates, LLC, dated
October 22, 2003 and March 5, 2004. (Incorporated by
referenced to Form 8-K Current Report filed with the
Securities and Exchange Commission on March 5, 2004).
23.1 Consent of Meyler & Company, LLC
23.3 Consent of legal counsel (see Exhibit 5.1).
II-4
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes to:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of the securities offered would
not exceed that which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement, and
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) For purposes of determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
(5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-5
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, in the City of New
Haven, State of Connecticut, on November 12, 2004.
SATELLITE ENTERPRISES CORP.
By: /S/ ROY PICENI
Name: Roy Piceni
Title: CEO, President and Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
NAME TITLE DATE
---- ----- ----
/S/ ROY PICENI CEO, President and Director November 12, 2004
- ------------------------------- (Principal Executive Officer)
Roy Piceni
/S/ LEO P.F. VAN DE VOORT CFO (Principal Accounting/Financial November 12, 2004
- ------------------------------- Officer)
LEO P.F. VAN DE VOORT
/S/ STEVE MANNEN Director November 12, 2004
- -------------------------------
Steve Mannen
/S/HENK MEIJER Director November 12, 2004
- -------------------------------
HENK MEIJER
II-6