U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER: 0-20259
INTERNET BUSINESS'S INTERNATIONAL, INC.
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(Exact name of Company as specified in its charter)
Nevada 33-0845463
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(State or jurisdiction of incorporation I.R.S. Employer
or organization) Identification No.)
2250 E. Tropicana Ave. Suite 19-309, Las Vegas, Nevada 89119
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(Address of principal executive offices) (Zip Code)
Company's telephone number: (775) 588-2387
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was required to file such reports), and (2) been subject to such filing
requirements for the past 90 days. Yes X No.
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Company's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ]. Not Applicable.
Issuer's revenue for its most recent fiscal year: $778,784.
The aggregate market value of the voting stock held by non-affiliates of
the Company as of September 24, 2003: Common Stock, par value $0.001 per share
-- $178,274. As of September 24, 2003, the Company had 178,273,603 shares of
common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
PART I PAGE
ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 4. SUBMISSION TO MATTERS TO VOTE
OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY; PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT . 15
ITEM 10. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 13. EXHIBITS, REPORTS ON FORM 8-K, AND INDEX TO
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ITEM 14. CONTROL AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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PART I.
ITEM 1. BUSINESS.
INTRODUCTION
Internet Business's International, Inc. ("Company") was a broad based
Internet company that provided goods and services over the Internet to
businesses and consumers though two operating divisions: (1) ISP (Internet
Service Provider); and (2) Direct Marketing. At present the Company is not in
operation.
HISTORY OF THE BUSINESS
International Food and Beverage was listed for exchange on the Over The
Counter Bulletin Board in June 1988. This company operated in the food services
industry until late 1997, at which time it ceased operations. This firm
remained dormant until December of 1998. At that time new management was put in
place, and a decision was made to move the Company's focus to the Internet and
change the Company's name to Internet Business's International, Inc.
On January 1, 1999 the newly named company began to offer goods and
services over the Internet, starting with the development of an on-line B2C
(business to consumer) e-retail site, AuctionWinner.com, The site was launched
in April 1999. In July 1999, the Company expanded their service offerings by
acquiring an ISP (Internet Service Provider) by the name of LA Internet. The
Company changed its domicile from Delaware to Nevada in same year.
In January of 2002 the Company had entered into an agreement to issue a
Convertible Debenture in order to raise capital for the expansion of its
wireless Internet services and re-establish the mortgage loan division; this
Debenture was never completed due to the market price of the Company's stock.
In January 2003, the Company entered into a Collateral Loan Agreement (the
"Loan Agreement") with Mercatus Partners Limited, a UK corporation (Mercatus),
pursuant to which Mercatus has agreed to provide the Company with loans in an
amount of up to 20% of the Final Market Value (as such term is defined in the
Loan Agreement) of certain restricted shares of our preferred stock were issued
by the Company in the name of Mercatus to secure the obligations under the loans
(the "Stock"). The loans are payable to the Company within 10 days of delivery
of the Stock and related loan documents. Loans under the Loan Agreement are
evidenced by the promissory Notes payable to Mercatus and are secured by the
10,000 Shares of Series A Preferred Stock. The interest rate on the loans will
be set at 5.5%. Except as otherwise provided in the Loan Agreement, the Stock
shall be held as collateral by Mercatus at all times there remains principal or
interest owing to Mercatus under the promissory notes. Other than as
specifically set forth in the Loan Agreement, the Stock may not be sold,
hypothecated, assigned, transferred, or otherwise encumbered. In the event of a
default under the Loan Agreement, however, Mercatus may thereafter sell, assign,
hypothecate or otherwise dispose of the Stock. Under such circumstances,
Mercatus assumes no responsibility for the amount of proceeds it may receive
upon such disposition of the Stock. Any proceeds received by Mercatus in excess
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of the default amount plus reasonable attorney's fees, if any, and related costs
of disposition will be returned to the Company. In the event of a default by the
Company, the Company has further agreed to take all reasonable steps to register
the Stock for resale by Mercatus. A default by the Company under the Loan
Agreement can be expected to have a materially adverse effect on the price of
the Company's common stock. The initial term of the loan is 5 years, with
interest-only payments for the first year of the loan. Upon payment in full of
all interest and principal due under the loan, the Stock will be returned to us
for cancellation. During the term of the loan Mercatus will provide a voting
proxy with respect to the Stock to a person designated by the Company. In the
event of a default however, the proxy shall be deemed null and void.
In connection with the Loan Agreement, in February 2003 the Company delivered
10,000 shares of restricted preferred stock to Mercatus. The Company expects
delivery of the funds by February 28, 2003.
The maximum loan amount would be $9,000,000 with approximate net proceeds of
$7,900,000.
As of March 31, 2003 Mercatus has not funded this loan. The Company received
back the preferred stock, which was returned to Treasury. The Company signed a
new loan agreement that has a funding date of May 31, 2003. Pursuant to this
agreement the Company has issued a new 1,029,231 restricted preferred stock
certificate series A, as collateral for the loan.
After March 31, 2003 the Company entered into a loan agreement with Mercatus
wherein the Lender agrees to provide the Borrower a loan in the amount of Seven
Hundred Fifty Thousand United States Dollars [US$ 750,000.00] (the "Loan").
Lender will pay the proceeds of the Loan to Borrower [less payments and fees, as
set forth in the agreement, not sooner than five [5] business days after
Borrower has delivered the Collateral Stock. Lender may, at its option, pay the
Loan in more than one installment. Pursuant to this agreement the Company
issued a 10,000 restricted preferred stock certificate series B, as collateral
for the loan.
CURRENT OPERATIONS
The Company currently is not in operation:
PRIOR OPERATING DIVISION
(A) ISP.
The ISP division, which is currently not in operation, is being reorganized into
a web hosting business located in Las Vegas, Nevada. This will be the only
function for this division. All operations in California and Nevada ceased
during this quarter in April 2003. Currently there are no employees for this
operation.
(B) 2X WIRELESS
The wireless Internet division ceased operations in April 2003.
CORPORATE
LAS VEGAS, NEVADA
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The Company before the end of 2003 will open a new corporate and web
hosting office in Las Vegas, Nevada This will also house the web hosting
operations for the Company.
MARKET AND COMPETITION
The main revenue for the Company came from Internet services provide by the
Company. The Company competed with many companies that offered the same type of
Internet-only services we offered - such as Internet Service Providers and
related services.
The market for Internet products and services is highly competitive. Taking
into consideration the advances Internet technology and the ubiquity simple web
site provide, there are no substantial barriers to entry in this market, and
management expects that competition will continue to intensify. Negative
competitive developments could have a material adverse effect on the Company's
business and on the trading price of its stock.
During the past 36 months, there have been a number of business failures that
have negatively impacted the tech market. These occurrences have also impacted
the availabity of funds for the Company. The Company required capitol during
this last quarter to maintain its operations, which were not available,
therefore the Company ceased its divisions operations. It is all so noted that
competitors of the Company that were are significantly larger or better
established than the Company also failed.
Competitors to the Company that have access to financial markets and cutting
edge technical resources have remained viable for growth and expansion. These
and other competitors are expected to continue making substantial expenditures
to promote, expand and improve their on-line properties.
MARKETING PLANS
The Company competed with other on-line services, web site operators and
advertising networks, as well as traditional off-line media such as television,
radio and print to convey to the consumer the services and products that wee
offered by the Company. The Company has used Print, Radio, and Television to
inform the public and consumer of these products and services. Accordingly, the
Company faced increased pricing pressure for the purchase of advertisement
space. The Company therefore will have to developed alternative marketing plans
that uses direct marketing, cross promotion and bundling of services and
products to regain its client base
PROPRIETARY RIGHTS
Management cannot guarantee that the Company would be able to license
products and services that are proprietary services and products on reasonable
terms, which would provide the Company with a marketing advantage.
EMPLOYEES
As of the date of this filing, the Company has 4 employees. This is a
reduction from the same time last year when the company had more then 20
employees. The reduction of the employees was due to the closing down of its
operation to reduce cost and in order to maintain its corporate operations. The
5
Company's future success is substantially dependent on the performance of its
senior management and key technical personnel.
RISK FACTORS
In addition to the other information in this Report, the following
particular risk factors encountered in the operation of the Company under its
current business plan were:
(a) Limited Operating History.
The Company began operations as an Internet company in January 1, 1999.
Therefore, the Company had a limited operating history, and its prospects are
subject to the risks, expenses and uncertainties frequently encountered by young
companies that operate exclusively in the new and rapidly evolving markets for
Internet products and services.
The Company was not successful in implementing its growth plan or continuing to
operate its business as anticipated.
(b) Revenue Results Fluctuated.
The Company expected to derive the majority of its revenues from a variety
of revenue sources, which were difficult to forecast accurately. The Company's
revenues of sources were from services and products from its online media
properties and its direct marketing operations.
The results of the of limited operating history and revenue fluctuation
resulted in significant losses for the Company and creates the question as to
the continuation of the Company as a going concern. The Company has experienced
significant losses this fiscal year; As of June 30, 2003 the currently
liabilities exceed current assets by $1,301,232. As shown in the financial
statements, the Company incurred a net loss of $4,718,298 for the year then
ended.
The future success of the Company is likely dependent on its ability to
attain additional capital to develop its proposed products and ultimately, upon
its ability to attain future profitable operations. There can be no assurance
that the Company will be successful in obtaining such financing, or that it will
attain positive cash flow from operations.
ITEM 2. PROPERTIES.
The Company has over $900,000 in equipment and furniture that is in storage
in Las Vegas, Nevada until a new location for deployment can be established.
Internet Business's International, Inc.
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2250 E. Tropicana Ave. Suite 19-309 Las Vegas, Nevada 89119
*After June 2003 the Company consolidated its operations to its operations in to
Las Vegas, Nevada.
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ITEM 3. LEGAL PROCEEDINGS.
The Company has two lawsuits that are material to the Company; one has gone
to judgment against the company, which has been appealed. The other which is
currently in negotiations for a possible settlement and if it is not settled
then the case be go to trail before the end of 2003.
Globalist International received a judgment for approximately $350,000. The
courts decision and the judgment were appealed and the Company believes that it
will prevail in this matter.
The Company vs Ronald Friedman 1997 Grantor Retained Annuity Trust, for
rescission of the purchase of the PMCC stock and return of the $1,006,857. This
case is currently in negotiations for a possible settlement and if it is not
settled then the case will be go to trail before the end of 2003.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of the fiscal year covered by this report.
PART II.
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The common stock of the Company is traded on the Over the Counter Bulletin
Board under the symbol "IBII" and the range of closing bid prices shown below is
as reported by the this market place. The quotations shown reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
For the Fiscal Year Ended June 30, Per Share Common Stock Bid Prices by Quarter
2003 2002
High Low High Low
1st Quarter 09-30 0.010 0.002 0.009 0.008
2nd Quarter 12-31 0.004 0.001 0.014 0.008
3rd Quarter 03-31 0.002 0.001 0.007 0.007
4th Quarter 06-30 0.004 0.001 0.013 0.008
HOLDERS OF COMMON EQUITY
As of June 30, 2003 there were 607 shareholders of record of the Company's
Common Stock.
DIVIDENDS
The Company issued the following dividend during the fiscal year ended June
30, 2003:
7
On June 17, 2002, the Company announced the sale of Aces Optics to CRT
Corp. for 2,000,000 shares of CRT restricted stock valued at $1.00 a share, the
dividend was to be based on one share of CRT Corp. per 100 shares of post
reverse split shares of the Company. On July 8 the Company announced that the
record date of July 17, 2002 for the shareholders to receive the dividend. On
July 18, 2002 the Company announced the date of distribution to be August 30,
2002. By September 15, the Transfer agent was working with DTC to complete the
issuance of the divided CRT Corp. restricted to its shareholders.
EQUITY SECURITIES SOLD WITHOUT REGISTRATION
The Company made the following sales of unregistered securities during the
fiscal year ended June 30, 2003; 40,000,000 shares of restricted 144 common
stock were issued as per agreement to repurchase 149,283 shares of PMCC common
stock previously sold to an investor in July of 2000. The agreement also
provided for the issuance of 560,000 shares of DCM Enterprises.
No commissions or fees were paid in connection with these sales. All of
the above sales were undertaken pursuant to the limited offering exemption from
registration under the Securities Act of 1933 as provided under Rule 506 of
Regulation D by the fact that:
- the sales were made to sophisticated investors as defined in Rule 502;
- the information specified in paragraph (b)2(ii)(B) and paragraph
(b)(2)(ii)(C) of this section was provided to each investor;
- the Company gave each purchaser the opportunity to ask questions and
receive answers concerning the terms and conditions of the offering and to
obtain any additional information which the Company possessed or could acquire
without unreasonable effort or expense that is necessary to verify the accuracy
of information furnished;
- at a reasonable time prior to the sale of securities, the Company advised
the purchasers of the limitations on resale in the manner contained in paragraph
Rule 502(d)2 of this section;
- neither the Company nor any person acting on its behalf sold the
securities by any form of general solicitation or general advertising; and
- the company exercised reasonable care to assure that the purchasers of
the securities are not underwriters within the meaning of section 2(11) of the
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Securities Act of 1933 in compliance with Rule 502(d).
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
SELECTED FINANCIAL DATA
The selected financial data for the years ended June 30, 2003, 2002, 2001,
2000, and 1999, are derived from the audited financial statements of the Company
and should be read in conjunction with the audited financial statements included
herein. These are restated based upon the change in revenue recognition. See
Note 2 of the footnotes to the financial statements titled "Change in Revenue
8
Recognition". The change only impacted the stated "Revenues" and not the "Net
income".
STATEMENT OF OPERATIONS DATA:
(in thousands) Year End June 30
2003 2002 2001 2000 1999
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Revenues $ 779 $5,895 $7,206 $2,332 $ 141
Cost of revenue 45 37 307 1,098 2
Net operating income (loss) (3,815) (1,432) 107 (2,665) (82)
Net other income and expense ( 903) 1,005 687 44 2,250
Net income (loss) (4,718) ( 426) 794 (2,596) 2,168
Per common share net (.05) ( .01) nil nil 0.01
Weighted average 103,274 29,106 250,907 189,580 164,550
shares outstanding
BALANCE SHEET DATA:
(in thousands) Year End June 30
2003 2002 2001 2000 1999
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Current assets 1 375 7,661 4,826 395
Fixed assets 2,647 3,419 4,413 3,459 0
Total assets 2,648 5,795 12,074 8,932 4,015
Current liabilities 1,303 631 6,902 3,602 30
Long-term debt 976 576 1,168 204 0
Shareholders' equity (deficiency) 369 4,587 4,004 5,139 3,985
The Company paid a dividend in the 2nd Quarter of Fiscal 2003
The following discussion should be read in conjunction with the financial
statements of the Company and notes thereto contained elsewhere in this report.
RESULTS OF OPERATIONS
(A) COMPARISON OF YEAR TO YEAR
(1) FISCAL 2003 COMPARED TO FISCAL 2002
The Company's revenues for the twelve-month period ended June 30, 2003 of $
778,784 decreased approximately 132.1% when compared with revenues $5,895,586 of
in the prior year. The decrease in revenue is due to the following reasons; ISP
loss of revenue from the dial-up, due to attrition and the Company not actively
seeking additional dial-up accounts, hosting and web design account due to a
vast number of clients either going out of business and or reducing it's
expenditures for internet related activities. Due to these reasons the Company
closed these operations to reduce the losses. The mortgage loan division ceased
operation is December 2001 and therefore did not generate revenue during this
fiscal year. The direct marketing division continues to loss money and the
9
associated cost of corporate operations produced the net loss for the fiscal
year, therefore this operation was also closed. The only other source of revenue
for the Company was from the sale of a depreciated asset that occurred in the
second quarter of this fiscal year.
The resulting loss for the twelve-month period ended June 30, 2003 of
($4,718,298) was a significant increase when compared to the losses of
($426,221) reported for the year ended June 30, 2002. One major contributor to
the increased losses that have occurred was due to the closing down of
operations and the increase costs associated with those closures.
(2) FISCAL 2002 COMPARED TO FISCAL 2001
Revenues for the twelve-month period ended June 30, 2002 of $5,895,586
decreased approximately 18.2% when compared with revenues $7,206,667 of in the
prior year. This revenue decrease is due to the Company's ISP loss of revenue
for the following reasons; from the dial-up, due to attrition and the Company
not actively seeking additional dial-up accounts, hosting and web design account
due to a vast number of clients either going out of business and or reducing
it's expenditures for internet related activities. The mortgage loan
originations increased in revenue and reported a profit for the year even though
the mortgage lending division only operated through the end of December 2001.
Even with those factor both the ISP and the Mortgage division reported a profit
for those divisions. The direct marketing division continues to loss money and
the associated cost of corporate operations produced the net loss for the fiscal
year.
The resulting loss for the twelve-month period ended June 30, 2002 of ($426,221)
was a significant decrease when compared to the net income of $793,517 reported
for the year ended June 30, 2001. An additional $1,005,970 profit generate form
the sale of the e-commerce division which reduced the loss for the year and is
outside the norm of revenue sources for the Company and is not representative of
on going source of revenue for the Company.
(3) FISCAL 2001 COMPARED TO FISCAL 2000
Revenues for the twelve-month period ended June 30, 2001 of $7,206,667
increased approximately 308.7% when compared with revenues of $2,332,848 in the
prior year. This revenue increase is due to the Company's ISP and mortgage loan
originations increase in revenue. The ISP wireless division demand for services
and the increase in web hosting and design, along with low interest rates for
mortgage loans. The mortgage interest rates since March 2001 have remained in
the range of 6% to 7% though the beginning of September 2001 and it is expected
that rates will remain in this range throughout the end of 200. It must be noted
that prime interest rates are beyond the Company's control. It is widely
acknowledged that low rates encourage consumers to take out mortgages for the
purchase of homes and this condition has impacted our business favorably. Aside
from lower interest rates, several other factors contributed to the increase in
mortgage loans:
(A) The on-line lending division increased their amount of Internet marketing
over last year. This change contributed to a lower cost of sales and increased
the total audience that viewed their ads.
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(B) The online lending division incorporated new Loan Application Management
software to automate loan applications. The result was higher productivity per
customer sales representative and faster loan approval / decline times.
(C) The online lending division employed a Direct Underwriting System. The
division enjoyed quicker approval times due to this system.
Other factors that contributed to the increase in revenue include:
(A) The Company's subsidiary ISP division began operations of BeyonDSL (its
wireless Internet service provider) in April 2000. We began to reach a critical
mass of customers in this fiscal year's reporting period.
(B) LA Internet integrated an automated billing system into their operations.
This allowed us more timely and comprehensive statements.
(C) Our eCommerce division added a number of high-ticket products and sales were
better than expected.
(D) Our Direct marketing division began marketing an additional offer our long
distance savings product.
Selling, general and administrative expenses for the 2001 fiscal year of $
5.92 million were an increase 222% over the $3.1 million for the previous
fiscal year 2000. The Company invested in a number of infrastructure and systems
upgrades in order to automate key business functions. The upgrades came at
substantial costs but were off set by the increase in revenues.
The resulting profit for the twelve-month period ended June 30, 2001 of $106,908
was a significant increase when compared to the loss of ($2,596,444) reported
for the year ended June 30, 2000. An additional $686,608 profit generate form
the sale of a company investment in stock is outside the norm of revenue sources
for the Company and is not representative of on going source of revenue for the
Company.
(4) FISCAL 2000 COMPARED TO FISCAL 1999
Revenues for the twelve-month period ended June 30, 2000 of $2,332,848
increased approximately 1,658.7% when compared with revenues of $140,641 in the
prior year. This revenue increase is due to the acquisitions made by the
Company since the end of its last fiscal year.
General and administrative expenses for the 2000 fiscal year were
approximately 378% greater then those of fiscal year 1999 due to the increase of
operations of the Company.
The resulting net loss after taxes for the twelve-month period ended June
30, 2000 was $2,596,444 versus a reported loss for the year ended June 30, 1999
of $81,836. This loss primarily resulted from the acquisitions and investments
made in the fourth quarter of this fiscal year.
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(B) COMPARISON BY SEGMENT
In accordance with SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," management had determined that there were
three reportable segments, (all of which have ceased operations in the fourth
quarter for fiscal year ended June 2003), based on the customers served by each
segment: Full service internet service provider (ISP), mortgage banking business
(which ceased operation during the fiscal year ended June 2002), and
business-to-consumer ("B2C") provider primarily consisted direct marketing of
the Companies services and products. Such determination was based on the level
at which executive management reviews the results of operations in order to make
decisions regarding performance assessment and resource allocation.
Certain general expenses related to advertising and marketing, information
systems, finance and administrative groups are not allocated to the operating
segments and are included in "other" in the reconciliation of operating income
reported below. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies (see Note 1).
INFORMATION ON REPORTABLE SEGMENTS IS AS FOLLOWS:
FISCAL YEAR ENDED
JUNE 30, JUNE 30,
2002 2001
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FULL-SERVICE ISP
Net sales $ 657,096 $ 3,437,011
Operating income $(2,093,562) $ 290,448
MORTGAGE LOAN ORIGINATIONS HELD FOR RESALE
Net sales $ 0 $ 1,845,991
Operating income $ 0 $ 17,358
MARKETING (B-TO-B/C)
Net sales $ 1,688 $ 9,973
Operating income $ (71,355) $ (372,019)
OTHER
Net income $ 120,000 $ 602,611
Unallocated expense $(2,553,381) $ (362,008)
TOTAL
Net sales $ 778,784 $ 5,895,586
Operating income $(4,718,298) $ (426,221)
(1) ISP: The results for the ISP segment for the fiscal year ended June
2003 of $657,096 is a sharp decrease of approximately 191.2 % when compared to
the same period ended June of $3,437,011. The decrease is due to a loss of
customer base and other related factor that have been occurring during this
fiscal year and resulted in the closures of the ISP segment. The loss of
($2,093,562) for the same period a significant decrease for the same period of
the previous fiscal year, which reported profits of $ 290,448.
(2) MORTGAGE LOANS: Since this division is currently not doing business
there will be comparative analysis of the previous results.
(3) MARKETING: The results for the Marketing segment for the fiscal
year ended June 2003 was a non functioning segment and the losses reported of
($71,355) were due to the fixed expenses of its current location. The previous
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years losses of ($372,019) were significantly higher because of increased staff,
the fixed cost were constant during both periods. This segment was closed by the
fiscal year ended June 30, 2003.
(4) OTHER: During the previous fiscal year ended June 2002 revenues were
from service charges that were generated from marketing services provided by the
Company to clients. Due to economic conditions these services were no longer
requested and therefore no revenue was generated from those activities. The
revenue for the fiscal year ended June 2003 was from the sale of a depreciated
asset, the $120,000 was the net profit from that sale. The ($902,935) of the
losses reported were due to a stock dividend issued and the repurchase PMCC
stock sold to an investor in the first quarter of fiscal year ended 2001. The
major balance of the losses of the ($3,815,298) were due the closing down of
operations and relocation of offices and equipment of $348,535 are due to the
expenses incurred in maintaining its current offices located in Carson,
California.
INFLATION
The moderate rate of inflation over the past few years has had an
insignificant impact on the Company's sales and results of operations during the
period.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operation of $1,389 twelve-month period ended June
30, 2003 was a significant reduction in cash when compared to the cash balance
of $60,315 for the twelve-month period ended June 30, 2002. The Company is
currently seeking alternative sources of capital to so the Company can resume
operations which if are not available the Company may cease operations
completely.
CAPITAL EXPENDITURES
There were no capital expenditures during the 2003 fiscal year.
NET OPERATING LOSS CARRY FORWARDS
For the fiscal year ended June 30, 2003, the Company had net operating loss
carry forwards for federal and state purposes of approximately $4,718,298 and
$2,406,332 respectively. These carry forwards begin to expire in 2015and 2005
respectively.
FORWARD LOOKING STATEMENTS
The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations contains "forward looking statements" within the
meaning of Rule 175 under the Securities Act of 1933, as amended, and Rule 3b-6
under the Securities Act of 1934, as amended, including statements regarding,
among other items, the Company's business strategies, continued growth in the
Company's markets, projections, and anticipated trends in the Company's business
and the industry in which it operates. The words "believe," "expect,"
"anticipate," "intends," "forecast," "project," and similar expressions identify
forward-looking statements. These forward-looking statements are based largely
on the Company's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. The Company
13
cautions that these statements are further qualified by important factors that
could cause actual results to differ materially from those in the forward
looking statements, including, among others, the following: reduced or lack of
increase in demand for the Company's products, competitive pricing pressures,
changes in the market price of ingredients used in the Company's products and
the level of expenses incurred in the Company's operations. In light of these
risks and uncertainties, there can be no assurance that the forward-looking
information contained herein will in fact transpire or prove to be accurate.
The Company disclaims any intent or obligation to update "forward looking
statements."
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk generally represents the risk of loss that may result from the
potential change in the value of a financial instrument due to fluctuations in
interest rates. Market risk is inherent to both derivative and non-derivative
financial instruments, and accordingly, the scope of the Company's market risk
management includes all market risk sensitive financial instruments.
The Company uses several tools and risk management strategies to monitor
and address interest rate risk. Such tools allow the Company to monitor and
evaluate its exposure to these risks and to manage the risk profile of its
residual interest portfolio in response to changes in the market risk.
The Company measured the sensitivity of the current value of cost of funds
(Prime Rate plus 1.5%) to changes in the mortgage interest rate (bond market
plus 1.5%) that the Company charges on funded loans, which is reflected with
changes in interest rates. The difference in the cost of funds versus the rate
the Company funded the mortgage loans could have benefited the company because
the cost of funds was less the mortgage interest rate, or the Company could loss
money if the cost of funds was more than the mortgage interest rate.
The following table summarizes the sensitivity analysis of change in the fair
value of our cost of funds as compared to the residual interests as of June
30, 2002 and June 30, 2001:
CHANGE IN FAIR VALUE AS OF:
JUNE 30, JUNE 30,
2002 2001
Prime Rate. . . . . . . . 4.750% 6.750%
Our Cost of Funds . . . . 1.500% 1.500%
------ ---------
Total. . . . . . . . . . 6.250% 8.250%
Bond Market . . . . . . . 4.800% 5.331%
Consumer Cost of Funds. . 1.500% 1.500%
------ ---------
Total . . . . . . . . . . 6.300% 6.831%
Net Impact Benefit (Loss) 0.050% (1.419)%
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements as of and for the fiscal years ended June 30, 2003,
2002, and 2001 (restated) are presented in a separate section of this report
following Signatures.
14
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Directors and Executive Officers
The names, ages, and respective positions of the directors and executive
officers of the Company are set forth below. The Directors named below will
serve until the next annual meeting of the Company's stockholders or until their
successors are duly elected and have qualified. Directors are elected for a
one-year term at the annual stockholders' meeting. Officers will hold their
positions at the will of the board of directors, absent any employment
agreement, of which none currently exist or are contemplated. There are no
arrangements, agreements or understandings between non-management shareholders
and management under which non-management shareholders may directly or
indirectly participate in or influence the management of the Company's affairs.
There are no legal proceedings involving the officers and directors of the
Company.
(A) ALBERT R. REDA, CHIEF EXECUTIVE OFFICER/SECRETARY/DIRECTOR.
Mr. Reda, age 57, was appointed a Director, Chief Executive Officer, and
Secretary of the Company in November 1998. From 1996 to 1998, he was employed
with CRT Corporation as Vice President in charge of production for manufacturing
frozen food products. For the period of 1994 to 1995, Mr. Reda was
self-employed in the financial lending area, buying and selling loans between
individuals and institutions. Mr. Reda received his Bachelor of Science Degree
from California State University, Long Beach, with a major in engineering.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Section 16(a) of the Securities Exchange Act of 1934 does not apply to the
Company since it is a reporting company under Section 15(d) under that Act.
ITEM 10. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS PAYOUTS
NAME AND FISCAL SALARY BONUS OTHER RESTRICTED SECURITIES LTIP ALL OTHER
PRINCIPAL YEAR ($) ($) ANNUAL STOCK UNDERLYING PAYOUTS COMPENSATION
POSITION COMPENSATION AWARD(S) OPTIONS/ ($) ($)
($) (3) (4) (5) ($) SARS
(#)
Louis Cherry,. . . 2003 0 0 0 0 0 0 0
(President/. . . . 2002 $ 120,000 0 0 0 0 0 0
Treasurer (1). . . 2001 $ 240,000 0 $ 9,600 0 0 0 0
Albert Reda, . . . 2003 180,000 0 0 0 0 0 0
Chief Executive. . 2002 $ 120,000 0 0 0 0 0 0
Officer/Secretary. 2001 $ 240,000 0 $ 9,600 0 0 0 0
(2)
Wade Whitely,. . . 2003 0 0 0 0 0 0 0
Executive Vice . . 2002 $ 72,000 0 0 0 0 0 0
President (1). . . 2001 96,000 0 0 0 0 0 0
15
(1) In June of 2002 Mr. Whitley resigned as Director of the Corporation, in
July of 2002 Mr. Cherry resigned as Officer and Director.
(2) In July of 2002 the company issued a note to Mr. Reda for the wages due to
currently and for the fiscal year ended June 2003. A new note was executed
for the wages of fiscal years of June 2004. At present the note including
the end of Septembers 2003 is for $315,000. This covers January of 2002
through September 2003
(3) On April 4, 2000, the Company issued 10,000,000 shares of restricted common
stock of the Company each to Mr. Cherry and Mr. Reda. These shares are
intended to compensate these Directors for their services to the Company
for the period of November 1998 through October 1999, during which period
neither person received any compensation from the Company. Pursuant to Item
402(b)(2)(iii) of Regulation S-K, these shares are valued at the fair
market value at the end of each calendar month during that period when such
compensation was earned.
(4) On August 15, 2001, the Company issued 7,750,000 shares of restricted
common stock of the Company each to Mr. Cherry and Mr. Reda (these
issuances are not shown in the chart above since they occurred after the
end of the 2001 fiscal year). These shares are issued as part of their
employment contracts. These shares were valued at $131,750. Pursuant to
Item 402(b)(2)(iii) of Regulation SK, these shares were valued at the fair
market value at the time they were issued. These shares were canceled when
a change in revenue recognition occurred.
(5) Effective July 2000, Mr. Cherry and Mr. Reda receive car allowances of
$800.00 per month. The car allowance ceased effective June 30, 2001.
Other Compensation.
There are no annuity, pension or retirement benefits to be paid to
officers, directors, or employees of the Company in the event of retirement at
normal retirement date, as there is no existing plan provided for or contributed
to by the Company.
No remuneration is to be paid in the future directly or indirectly by the
Company to any officer or director since no existing plan that provides for such
payment, including a stock option plan.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding the beneficial ownership of
shares of the Company's common stock as of September 24, 2003, 178,273,603
shares were issued and outstanding, of which 42,839,607 are restricted by (i)
all stockholders known to the Company to be beneficial owners of more than 5% of
the outstanding Common Stock; (ii) each director; and (iii) all directors and
executive officers of the Company individually and as a group (each person has
16
sole voting power and sole dispositive power as to all of the shares shown as
beneficially owned by them):
TITLE OF CLASS NAME AND ADDRESS OF AMOUNT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
--------------------------------------------------------------------------------------------------------
National Cash (1)
Common Stock. . . . . . P.O. Box 6957 40,000,000 22.5%
Stateline, NV 89449
--------------------------------------------------------------------------------------------------------
Albert Reda Corp. (2)
Common Stock. . . . . . 3900 Birch St, Suite 103,
Newport Bch, Calif. 92660 1,000,000 .561%
--------------------------------------------------------------------------------------------------------
Albert R. Reda,
Common Stock. . . . . . 3900 Birch St, Suite 103,
Newport Bch, Calif. 92660 156,609 .009%
--------------------------------------------------------------------------------------------------------
Common Stock. . . . . . Shares of all directors and executive
officers as a group (1 persons) 1,156,609 .57%
(1) These restricted shares were issued as part of the stock repurchase of PMCC
stock. The voting rights remain with the directors.
(2) Albert Reda Corp. is a corporation controlled by Albert Reda, which holds
shares issued as compensation for services performed by Mr. Reda for the
Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Other than as set forth below, during the past two years, there have not
been any transaction that have occurred between the Company and its officers,
directors, and five percent or greater shareholders.
(a) On January 1, 2000, Mr. Reda entered into an employment agreement with
the Company for the position of Chief Executive Officer. The following are the
material terms of this agreement:
(1) A salary of $180,000.00, payable in semi-monthly installments in
accordance with the Company's practices, less normal payroll
deductions. On the anniversary date of each year through the fourth
year, the salary each is increased by $1,000 per month.
(2) This agreement was changed to the $180,000 per annum effective July
2002 retroactive to January 1, 2002. Based upon a note issued to Mr.
Reda to cover the amounts due per this employment agreement, the term
of the agreement was also extended till January 2007.
(3) In addition to this compensation, the Company will periodically review
Mr. Reda's performance and services rendered with a view to paying
discretionary bonuses based upon above-average or outstanding
performance for a prior period. Any such bonuses approved by the
Company will be paid to Mr. Reda within 30 days of the grant thereof.
The following performance milestones shall justify the particular
restricted stock bonuses, to be issued by the company, as set forth
below:
(A) At $2 million in sales, 500,000 shares of common stock.
17
(B) At $3 million in sales, 800,000 shares of common stock.
(C) At $5 million in sales, 1,000,000 shares of common stock.
(D) At $8 million in sales, 2,000,000 shares of common stock.
(E) At $10 million in sales, 2,500,000 shares of common stock.
(F) At $12 million in sales, 3,000,000 shares of restricted common
stock.
(4) In addition to the Salary and bonuses stated above, Mr. Reda will be
eligible to participate in a health insurance plan, including
dependent coverage, supplied by the Company. Mr. Reda will also be
entitled to participate in any and all group life, workers'
compensation, health plan or accidental insurance plans which are
adopted by the Company for the benefit of executive officers or
employees. Mr. Reda will also be entitled to such sick leave and paid
holidays and to such other perquisites of employment, as customarily
are extended by the Company to executive officers or employees. In
addition, Reda will also be entitled to vacation benefits.
ITEM 13. EXHIBITS, REPORTS ON FORM 8-K, AND INDEX TO FINANCIAL STATEMENTS.
EXHIBITS.
Exhibits included or incorporated by reference in this document are set forth in
the Exhibit Index.
REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the last quarter of the fiscal
year covered by this report.
INDEX TO FINANCIAL STATEMENTS
Page
--------------------------------------------------------------------------
Report of Independent Accountant. . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets as of
June 30, 2003 and June 30, 2002 . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Operations for the years ended
June 30, 2003, June 30, 2002, and June 30, 2001 . . . . . . . . . . F-3
Consolidated Statement of Stockholders' Equity
for the years ended June 30, 2003, June 30, 2002, and June 30, 2001 F-4
Consolidated Statements of Cash Flows for the years ended
June 30, 2003, June 30, 2002, and June 30, 2001 . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . F-6
18
ITEM 14. CONTROLS AND PROCEDURES.
(a) Evaluation of disclosure controls and procedures.
The Registrant carried out an evaluation of the effectiveness of the design and
operation of its disclosure controls and procedures pursuant to Rule 13a-14
under the Securities and Exchange Act of 1934 ("Exchange Act"). This evaluation
was done under the supervision and with the
participation of the Registrant's President and Chief Financial Officer. Based
upon that evaluation, they concluded that the Registrant's disclosure controls
and procedures are effective in gathering, analyzing and disclosing information
needed to satisfy the Registrant's disclosure obligations under the Exchange
Act.
(b) Changes in internal controls.
There were no significant changes in the Registrant's internal controls or in
its factors that could significantly affect those controls since the most recent
evaluation of such controls.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INTERNET BUSINESS'S INTERNATIONAL, INC.
/s/ Albert R. Reda
---------------------
Albert R. Reda
Chief Executive Officer, Secretary
Dated: October 8, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the date indicated.
/s/ Albert R. Reda
Albert R. Reda
Chief Executive Officer, Secretary, and Director
October 8, 2003
20
REPORT OF INDEPENDENT ACCOUNTANT
To the Board of Directors and Stockholders ofInternet Business's International,
Inc.
We have audited the accompanying consolidated balance sheets of Internet
Business's International, Inc. and Subsidiaries as of June 30, 2003 and 2002 and
the related consolidated statements of operations, shareholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Internet Business's
International, Inc. and Subsidiaries as of June 30, 2003 and 2002 and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 6 to the
financial statements, conditions exists which raise substantial doubt about the
Company's ability to continue as a going concern unless it is able to generate
sufficient cash flows to meet its obligations and sustain its operations. The
financial statements do not include and adjustments that might result from the
outcome of this uncertainty.
By: /s/ Henry Schiffer
-----------------------
Beverly Hills, California
Date: October 8, 2003
F-1
INTERNET BUSINESS'S INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND 2002
JUNE 30, JUNE 30,
2003 2002
------------ ------------
ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,389 $ 60,315
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . 0 166,866
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 57,468
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . 0 90,820
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,389 375,469
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . 940,930 1,957,822
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . 554,692 1,462,199
Investment in unconsolidated companies . . . . . . . . . . . . . . . . . . 1,151,332 2,000,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,648,343 $ 5,795,490
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 403,821 $ 496,790
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 783,370 56,624
Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . 115,430 23,960
Deferred revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 54,096
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 0 0
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 1,302,621 631,470
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 976,469 576,469
------------ ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,279,090 $ 1,207,939
Stockholders' equity (deficit):
Preferred stock, par value$.001(03) and $100.00 (02) per share;
10,000,000 (03) and 1,000,000 (02) shares; 0 authorized
and 0 issued and. outstanding at June 30, 2003 and 2002, respectively. . 0 0
Common stock, par value $0.01 per share; 349,000,000 shares authorized;
38,273,603 issued as of June 30 2002 Common stock par value $.001
per share; 2,000,000,000 authorized and 178,273,603 shares issued
and outstanding as of June 30, 2003. . . . . . . . . . . . . . . . . . . 178,274 382,736
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 6,918,576 6,214,114
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,727,597) (2,009,299)
------------ ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . 369,253 4,587,551
------------ ------------
Total liabilities and stockholders' equity . . . . . . . . . . . . $ 2,648,343 $ 5,795,490
============ ============
The accompanying notes are an integral part of these financial statements
F-2
INTERNET BUSINESS'S INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001
JUNE 30, JUNE 30, JUNE 30,
2003 2002 2001
------------- ------------ ------------
Revenues. . . . . . . . . . . . . . . . . $ 778,784 $ 5,895,586 $ 7,206,667
Costs and expenses:
Cost of revenues. . . . . . . . . . . . . 45,000 37,648 165,325
Selling, general and administration . . . 2,629,324 5,240,070 6,063,590
Depreciation and amortization . . . . . . 1,919,823 2,050,059 870,844
------------- ------------ ------------
Total costs and expenses. . . . . . . 4,594,147 7,327,777 7,099,759
------------- ------------ ------------
Loss from operations. . . . . . . . . . . (3,815,363) (1,432,191) 106,908
Other income (expense). . . . . . . . . . (902,935) 1,005,970 686,609
------------- ------------ ------------
Income (loss) before income taxes . . . . (4,718,298)
Income taxes (benefit). . . . . . . . . . 0 0 0
------------- ------------ ------------
Net income (loss) . . . . . . . . . . . . $ (4,718,298) $ (426,221) $ 793,517
============= ============ ============
Net loss (income) per common share. . . . (.05) (.01) nil
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . 103,273,603 29,106,936 250,907,333
The accompanying notes are an integral part of these financial statements
F-3
INTERNET BUSINESS'S INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001
JUNE 30, JUNE 30, JUNE 30,
2003 2002 2001
------------ ------------ ------------
Preferred stock:
Balance, beginning of year. . . . . . . . . $ 0 $ 0 $ 0
Preferred stock issued. . . . . . . . . . . 0 0 0
------------ ------------ ------------
Balance, end of year. . . . . . . . . . . . . 0 0 0
------------ ------------ ------------
Common stock:
Balance, beginning of year. . . . . . . . . . 382,736 2,672,360 2,211,151
Common stock issued . . . . . . . . . . . . . 400,000 155,000 461,209
Stock reverse 1 for 10. . . . . . . . . . . . 0 (2,544,624) 0
Par value change from $.01 to $.001 . . . . . (704,462) 0 0
Common stock issued post (PV change/ reverse) 100,000 100,000 0
------------ ------------ ------------
Balance, end of year. . . . . . . . . . . . . 178,274 382,736 2,672,360
------------ ------------ ------------
Additional paid-in capital:
Balance, beginning of year. . . . . . . . . . 6,214,114 3,669,490 3,669,490
Stock reverse . . . . . . . . . . . . . . . . 0 2,544,624 0
Par value change. . . . . . . . . . . . . . . 704,462 0 0
Balance, end of year. . . . . . . . . . . . . 6,918,576 6,214,114 3,669,490
------------ ------------ ------------
Retained earnings (deficit):
Balance, beginning of year. . . . . . . . . . (2,009,299) (2,337,662) (3,131,178)
Disposing of subsidiaries, net. . . . . . . . 0 754,584 0
Net (loss) income for the year. . . . . . . . (4,718,298) (426,221) 793,516
------------ ------------ ------------
Balance, end of year. . . . . . . . . . . . . (6,727,597) (2,009,299) (2,337,662)
------------ ------------ ------------
Total stockholders' equity. . . . . . . . . . $ 369,253 $ 4,587,551 $ 4,004,188
============ ============ ============
The accompanying notes are an integral part of these financial statements
F-4
INTERNET BUSINESS'S INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001
JUNE 30, JUNE 30, JUNE 30,
2003 2002 2001
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income. . . . . . . . . . . . . . . . $(4,718,298) $ (426,221) $ 793,516
Adjustment to reconcile net (loss) income to net
cash used by operating activities:
Depreciation and amortization. . . . . . . . . . 1,919,823 732,706 870,844
Reserve for loss on accounts and notes
receivable . . . . . . . . . . . . . . . . . . 0 0 119,372
Reserve for loss on mortgage loans receivable. . 0 0 100,000
Changes in operating assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . 0 (166,866) (200,968)
Inventories. . . . . . . . . . . . . . . . . . 0 (57,468) (166,307)
Mortgage loans receivable net. . . . . . . . . 0 0 (699,064)
Prepaid expenses and other . . . . . . . . . . 0 90,820 106,092
Accounts payable . . . . . . . . . . . . . 403,821 496,790 559,292
Accrued liabilities. . . . . . . . . . . . 783,370 56,624 40,963
Deferred revenues. . . . . . . . . . . . . . . 0 54,096 56,966
Other current liabilities. . . . . . . . . . . 0 (23,960) (14,048)
------------ ------------ ------------
Net cash used in operating activities. . . . . . . (1,611,284) 756,521 1,566,658
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment. . . . . . . 0 (88,041) (1,713,601)
Businesses sale or purchase transactions,
net of cash paid . . . . . . . . . . . . . . . 0 997,774 (26,250)
Purchases of stock/intangible assets . . . . . (194,068) 0 (85,506)
------------ ------------ ------------
Net cash used in investing activities. . . . . . . (194,068) 909,733 (1,825,357)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment of credit lines. . . . . . . . . . (92,969) 0 (125,116)
Repayment of short-term borrowings . . . . . . . 0 0 0
Net issuance of long-term debt . . . . . . . . . 400,000 0 964,792
Net increase (decrease) of notes payable . . . . 726,746 (591,984) (709,869)
Collection of notes receivable . . . . . . . . . 0 0 654,009
Preferred stock. . . . . . . . . . . . . . . . . 0 0 (2,390,000)
Common stock/ issuance-reverse net . . . . . . . 712,649 (1,271,974) 461,209
------------ ------------ ------------
Net cash provided by financing activities. . . . . 1,746,426 (1,863,958) (1,144,975)
------------ ------------ ------------
Net increase (decrease) in cash. . . . . . . . . . (58,926) (197,704) (1,403,674)
Cash, beginning of year. . . . . . . . . . . . . . 60,315 258,019 1,661,693
------------ ------------ ------------
Cash, end of year. . . . . . . . . . . . . . . . . $ 1,389 $ 60,315 $ 258,019
The accompanying notes are an integral part of these financial statements
F-5
INTERNET BUSINESS'S INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001
JUNE 30, JUNE 30, JUNE 30,
2003 2002 2001
------------ --------- ---------
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . 0 0 $142,406
Acquisition of Stock 2003/Businesses 2001:
Fair value of:
Stock 149,283 shares/Assets acquired . . . . . . . . . . . $ 194,068 0 $ 31,250
Price Paid per Share/Liabilities assumed . . . . . . . . . (560,000) 0 0
Stock issued . . . . . . . . . . . . . . . . . . . . . . . (54,267) 0 (5,000)
------------ ---------
Net cash paid for acquisitions . . . . . . . . . . . . . . . . (420,199) 0 $ 26,250
=========
Other Income/Expense
Disposition of Business
Sale of Depreciated Assets 2003/Atlas Capital Corporation 2002
Book balance/purchase price. . . . . . . . . . . . . . . $ 0 $ 30,000
Sales price/Purchase of Atlas equipment. . . . . . . . . . . 120,000 (25,000)
------------ ---------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 120,000 $ 5,000
Sale of Assets of Global To Ace Optics
Purchase of Equipment. . . . . . . . . . . . . . . . . . . . $ 246,000
Due Affiliates from Payment. . . . . . . . . . . . . . . . . $ (246,000)
---------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Sale of Ace Optics.
Ace Optics purchase price. . . . . . . . . . . . . . . . . . $2,000,000
Due from Affiliates Credit . . . . . . . . . . . . . . . . . $ (583,507)
---------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . $1,416,493
Other offset
Guarantee Capital Closing. . . . . . . . . . . . . . . . . . $ (418,719)
Other income net . . . . . . . . . . . . . . . . . . . . . . 3,196
---------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,005,970
Retained Earnings Adjustments
Atlas Capital Corporation. . . . . . . . . . . . . . . . . . $ 662,635
Global Buying Group. . . . . . . . . . . . . . . . . . . . . 51,796
Ace Optics . . . . . . . . . . . . . . . . . . . . . . . . . 40,153
---------
Net adjustment . . . . . . . . . . . . . . . . . . . . . . . . $ 754,584
Other Expense
Stock Dividend issued. . . . . . . . . . . . . . . . . . . $ (482,736)
The accompanying notes are an integral part of these financial statements
F-6
INTERNET BUSINESS'S INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND CHANGE IN CONTROL
Prior to December 31, 1997, Internet Business's International, Inc. (the
"Company") was in the food product manufacturing business formerly known as
"International Food and Beverage, Inc.". In November 1998, new stockholders
bought majority control from the previous Chief Executive Officer through a
private transaction. Immediately thereafter, the former CEO resigned and the
new stockholders assumed the executive management positions. In December 31,
1998, after new management was in place, a decision was made to change the
Company's principal line of business from a manufacturing business to a high
technology company. In connection with the change in business, the Company
changed its name from International Food & Beverage, Inc. to Internet Business's
International, Inc., and reincorporated the Company on December 8, 1998 in the
state of Nevada. The Company, after January 1, 1999 began plans to offer
Internet based e-commerce services. In April of 1999, the Company announce it's
first e-commerce site and was engaged in the development, operation and
marketing of a number of commercial The Company had two reporting divisions made
up of subsidiaries which were; wireless high speed Internet access in Las Vegas,
Nevada and Woodland, California, and direct Marketing until the end of June 2003
at which time all operations ceased. The Company had three division to fiscal
year end of June 2002 which were as follows: Lending on Line (which includes
real estate loans and equipment leasing), this division ceased operations in
June of 2002, Internet Service Provider (which includes a national Internet
access dial-up service, wireless high speed Internet access in Las Vegas, Nevada
and Woodland, California, and Internet web design and hosting), and Direct
Marketing. The Company has one office in the US and less then 5 employees. At
present the Company is not in business.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. Significant intercompany balances and
transactions are eliminated in consolidation. Affiliated companies in which the
Company does not have a controlling interest are accounted for using the equity
method.
The Company's consolidated financials included Global GPP subsidiary that the
Company owned 80% of, during the time it operated. From March of 2000 to March
of 2001, at which time Global GPP ceased operations. The financial information
were included in the E Commerce section, of the Companies financials, until the
----------
sale of Ace Optics in the fourth quarter of this fiscal year ended June 30,
2002, and that information is now included in the Other Income along with the
Companies Other activities.
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 disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
F-7
Significant estimates include allowances doubtful accounts and notes receivable
and for mortgage loans receivable. Actual results could differ from those
estimates.
CHANGE IN REVENUE RECOGNITION
Prior to July 1, 2001 the revenue for the Mortgage Division was booked as
follows: the mortgage loan amount funded by the Company was booked as revenue on
the date of funding. After that date, the net proceeds received from the sale of
the mortgage loan were booked as revenue upon receipt of those funds by the
Company. This has a significant impact on the revenue for the Company, but does
not impact the net income (loss) for the Company. The financial statements were
revised for June 30, 2001, and the companion figures for June 30, 2000 to
incorporate the changes of revenue recognition for the Mortgage Division.
RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been reclassified to
conform to the current year classification.
CASH AND CASH EQUIVALENTS
The Company considers all short-term, highly liquid investments with an original
maturity date of three months or less to be cash equivalents.
MORTGAGE LOANS HELD FOR SALE
Loans held for sale include originated mortgage loans intended for sale in the
secondary market. Loans held for sale are recorded at the lower of aggregate
cost or fair value.
Interest Accrual
Accrued interest ceases upon sale of the Mortgage Loan.
Allowance for Loan Losses
The allowance for loan losses represents management's estimate.
Balance Sheet will provide information as follows (if applicable):
Assets
Loans held for sale XXX
Allowance for loan losses XXX
SFAS 134 requires mortgage-banking enterprises to classify securities as
held-to-maturity, trading, or available-for-sale, depending on the entity's
intent and ability to hold the securities. If the mortgage banking enterprise
commits to sell a mortgage-backed security before or during the securitization
process, the entity must classify the security as trading.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated using the straight-line
method over the estimated useful life of the assets, which is generally three to
five years for computers and computer related equipment and five to seven years
for other non-computer furniture and equipment. Leasehold improvements are
amortized using the straight-line method over the shorter of their estimated
useful lives or the term of the lease, ranging from one to ten years.
F-8
INTANGIBLE ASSETS
Intangible assets consist primarily of acquired customer bases, long-term
marketing agreements, goodwill, and other items. Customer bases acquired
directly are valued at cost, which approximates fair value at the time of
purchase. When material intangible assets, such as customer bases and goodwill
are acquired in conjunction with the purchase of a company, IBII undertakes a
study by an independent third party to determine the allocation of the total
purchase price to the various assets acquired and the liabilities assumed. The
costs assigned to intangible assets are being amortized on a straight-line basis
over the estimated useful lives of the assets, which is 36 months for
substantially all remaining intangible assets as of June 30, 2003. Goodwill and
other intangible assets are periodically reviewed for impairment to ensure they
are appropriately valued. Conditions that may indicate an impairment issue
exists include an economic downturn, changes in the churn rate of subscribers or
a change in the assessment of future operation. In the event that a condition
is identified that may indicate an impairment issues exists, an assessment is
performed using a variety of methodologies, including cash flow analysis,
estimates of sales proceeds and independent appraisals.
ADDITIONAL PAID IN CAPITAL
In April of 2003 the par value for the Company stock was changed from $.01 per
shares to $.001 per share at that time there were, 78,273,603 shares issued with
a par value of $.01 which equals $782,736, the par value change to $.001 valued
those shares at $78,274 the net difference of $704,462 is included in paid in
capital.
In May of 2002 a 1 share for 10 shares reverse became effective. This was the
first part of a Securities Purchase Agreement in conjunction with a stock
registration. The Company received $120,000 as a loan to be paid with the
registration of stock during the fiscal year. Due to the price drop in the stock
after the reverse occurred the registration did not occur. The Loan proceeds
booked as long-term debt. The stock reverse difference of shares issued and
outstanding is stated as additional paid in capital in the amount of $2,544,624.
By the end of March 2000, the Company issued an additional 7,000,000 shares of
the Company's common stock, in a private placement to a qualified investor,
which provided to the Company $3,382,560.
REVENUE RECOGNITION
IBII recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable and
collectibility is probable.
For ISP services, these criteria are met monthly as our service is provided on a
month-to-month basis and collection for the service is generally made within 30
days of the service being provided. Narrowband access revenues consist of
monthly fees charged to customers for dial-up Internet access. Narrowband
access revenues also include monthly service fees; any associated equipment
revenues for the Internet appliance and wireless access services provided as
part of the company's marketing initiative and equipment fees. Broadband access
revenues consist of fees charged for high-speed, high-capacity access services
including DSL, fixed wireless, and dedicated circuit services, installation,
termination fees and fees for equipment. Web hosting revenues consist of fees
earned by leasing server space and providing web services to companies and
F-9
individuals wishing to present a web or e-commerce presence. Advertising,
content and electronic commerce revenues are recorded as earned.
For lending on line, revenue principally represents closed-loan fees paid by
Lenders that closed a loan for a consumer that originated through websites.
Closed-loan fees are recognized at the time the lender reports the closed loan
to us. This subsidiary was closed down in June 2002. Additional revenue is
derived from on line leasing, and is recognized as the services are performed.
Revenue from direct marketing - Fees are earned from products and or services
are sold are only recognized as revenue upon receipt of those funds
Source: SAB 101
ADVERTISING EXPENSE
All advertising costs are expensed when incurred.
CONCENTRATION OF CREDIT RISK
The Company is subject to credit risk through trade receivables. Monthly
Internet access fees and web hosting are generally billed to the customer's
credit card, thus reducing the credit risk. The Company routinely assesses the
financial strength of significant customers and this assessment, combined with
the large number and geographic diversity of its customers, limits the Company's
concentration of risk with respect to trade accounts receivable.
INCOME TAXES
The Company accounts for income taxes under the asset and liability approach
where deferred income tax assets and liabilities reflect the future tax
consequences, based on enacted tax laws, of the temporary differences between
financial and tax reporting at the balance sheet date.
EARNINGS PER SHARE
Basic earnings per share are computed by dividing net income (loss) by the
weighted average of common shares outstanding for the period. Diluted earnings
per share are computed by adjusting the weighted average number of shares
outstanding during the period for all potentially dilutive shares outstanding
during the period.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Investments and Hedging Activities. SFAS 133
establishes new model for accounting for derivatives and hedging activities and
supersedes several existing standards. SFAS 133, as mended by SFAS 137 and SFAS
138, is effective for all fiscal quarters of fiscal years beginning after June
15, 2000. The Company does not expect that the adoption of SFAS 133 will have a
material impact on its financial statements.
F-10
NOTE 2. BUSINESS COMBINATIONS
The Company's business combinations have been accounted for using the purchase
method, and, accordingly, the total purchase price of each acquired company was
allocated to the tangible assets and liabilities and identifiable intangible
assets based on their estimated fair values as of the closing date of the
acquisition. The excess purchase price over the fair values is recorded as
goodwill. Results of operations for the acquired companies are included
prospectively from the date of acquisition.
In June 2002 the Company announced the sale of Ace Optics to CRT Corporation for
$2,000,000 worth of CRT restricted stock
In June 2002 the Company announced that it plans to divest it self of the
Guarantee Capital Group subsidiary, and in anticipation of that occurrence
ceased operations of the on line mortgage lending group.
In February 2002 the Company announced that it plans to spin-off the Global
Construction Buying Group to its shareholders by the end of 2002.
In September 2001 the Company started Guarantee Capital Group, which acquired
the computer, furniture and processing equipment from the new owner of Atlas
Capital Corporation for $30,000. In November 2001 Guarantee Capital Group had
exceeded the capacity of its mortgage banking line. This prevented Guarantee
from funding the balance of its processed loans and subsequently in December
2001, 20 its 24 employees were laid off. The Company ceased the operation of
Guarantee before the end of June 2002.
In September 2001 the Company started a new marketing subsidiary 1st2 Market
Incorporation and ceased operating its predecessor Allstates Communications Inc.
The new subsidiary will only market the Company's products whereas Allstates
marketed cell phones for cellular phone companies.
In March 2001, IBII ceased to operate Global GPP Corporation and closed its
corresponding operation in Europe. The Company started a new corporation, which
is a wholly owned subsidiary, Global Construction Buying Group, whose main asset
is the equipment acquired from Global GPP Corporation.
In October 2000, IBII signed an acquisition agreement with Auction-Sales.Com.
The Company invested $180,000 in the Auction-Sales.Com and in December 2000
rescinded the acquisition due to undisclosed debts. The Company is currently
suing for the return of the funds and believes that if the Company prevails the
debt could be collected.
In October 2000, IBII acquired the auction web site operations of the Sonic
Auction Company for a purchase price of approximately $5,000. With this
acquisition, the Company acquired a database and a functioning web auction site.
The Company issued 500,000 shares of restricted common stock, to acquire Sonic
Auction Company. This site ceased operation in March of 2001.
F-11
During the quarter ended September 2000, the Company issued 4,113,871 of shares
of restricted common stock tock for service valued at $41,139.
In April 2000, IBII acquired the all the outstanding stock of Atlas Capital
Corporation, a mortgage-banking company, for 600,000 restricted common stock
valued at $6,000. In connection with the acquisition, the Company acquired
assets of approximately $3,183,000 and assumed liabilities of approximately
$3,179,000. The difference of $260,000 was recorded as intangible assets
related to acquisition of trade names, websites, workforce-in-place and is being
amortized over 5 years. By end of August 2001 the company sold Atlas Capital
Corporation with its assets and liabilities.
In March 2000, the Company acquired the assets and assumed certain liabilities
of Internet 2xtreme, an Internet Service Provider based in northern California.
The total purchase price was $735,000, which consisted of cash of $17,635 and
124,589 shares of restricted common stock valued at $186,88. In connection with
the acquisition, the Company recorded intangible assets of approximately
$666,000, which consisted of approximately 4,800 customer accounts, website and
workforce-in-place, which are being amortized over 5 years.
In March 2000, the Company acquired 80% of the outstanding shares of Global GPP
for $500,000. Global GPP owns a business-to-business website, equipment and its
strategic agreements with IBM Hungary to market business-to-business services in
Eastern Europe.
In February 2000, the Company acquired the assets and assumed certain
liabilities of Direct Communications, Inc., a wireless communications company.
In addition to assuming certain liabilities, the Company paid cash of $80,000
and issued 30,000 shares of restricted company stock at valued at $300.
Intangible assets purchased totaled $265,000, consisting of customers lists,
website and workforce-in-place and is being amortized over 5 years. These assets
and liabilities were transferred to the newly formed and wholly owned subsidiary
of the Company, Allstates Communications Inc.
In December 1999 the Company entered into a service agreement to market its
services on the Internet for 6,000,000 shares of common stock valued at $60,000.
In November 1999, the Company, acquired an E Commerce website Optical Brigade,
an on-line sunglass distribution website, for 5,050,) of restricted shares of
common stock valued at $50,500.
In August 1999, the Company acquired the website, Net 2 Loan, an on-line loan
processing website for 400,000 shares of restricted common stock valued at
$4,000.
In July 1999 the Company acquired MBM Capital Group for $72,000 and 112,667
shares of restricted common stock valued at $1,127. MBM was sold during the
fiscal year of acquisition for a $150,000 note. After the sale MBM ceased
operations and the Company considers the note valueless.
In June 1999, the Company acquired the assets of L.A. Internet, a southern
California-based Internet Service Provider, which included customer accounts,
trade name, websites, etc. for $545,000 in exchange for a reduction of the Note
Receivable from Iron Horse Holdings, Inc. (see Preferred Stock Note 8).
F-12
NOTE 3. CERTAIN FINANCIAL STATEMENT INFORMATION
JUNE 30, JUNE 30,
2003 2002
------------ ------------
ACCOUNTS RECEIVABLE:
Accounts receivable $ 0 $ 292,747
Less: allowance for doubtful accounts . . . . . . . . 0 (125,881)
------------ ------------
Accounts receivable, net $ 0 $ 166,866
============ ============
MORTGAGE LOANS HELD FOR SALE:
Mortgage loans held for sale $ 0 $ 0
Less: allowance for loan losses . . . . . . . . . . . 0 0
------------ ------------
Mortgage loans held for sale, net. . . . . . . . . . . $ 0 $ 0
============ ============
PROPERTY AND EQUIPMENT:
Office furniture and equipment $ 47,999 $ 47,999
Machinery and computer equipment . . . . . . . . . . . 3,136,393 3,136,393
Leasehold improvements . . . . . . . . . . . . . . . . 0 0
Less: accumulated depreciation. . . . . . . . . . . . (2,243,462) (1,226,570)
------------ ------------
Property and equipment, net $ 940,930 $ 1,957,822
============ ============
INTANGIBLE ASSETS:
Capitalized software costs, including websites $ 1,270,156 $ 1,270,156
Subscriber member bases. . . . . . . . . . . . . . . . 1,148,307 1,148,307
Others, including customer lists, existing technology,
trade names 423,386 423,386
Less: accumulated amortization. . . . . . . . . . . . (2,287,157) (1,379,650)
------------ ------------
Intangible assets, net $ 554,692 $ 1,462,199
============ ============
NOTE 4. REVOLVING LINES OF CREDIT
In January of 2002 the Company had a credit facility with PCFS for $3,000,000
under specified conditions to fund residential mortgages to customers. The
residential loans serve as collateral, and funds are advanced up to 98% of the
unpaid principal amount of the qualified mortgage loan granted to the customer.
The credit facility bears interest at the Prime Rate plus 1.0% for loans
outstanding for 60 days or less. The interest rate increases to Prime Rate plus
4.0% for loans outstanding between 60 and 120 days, and increases to Prime Rate
plus 6.0% for amounts outstanding over 120 days. By May of 2002 this line was
not used and the agreement terminated.
On February 1, 2000, the Company entered into a Master Repurchase Agreement that
provides the Company with a warehouse facility through IMPAC Warehouse Lending
Group ("IMPAC"). The IMPAC line provides the Company with an open warehouse
credit line (as set forth by IMPAC) for the Company's mortgage originations
only. Under the terms of the agreement, the Company must repay the funded amount
within 30 days of the date the funds were disbursed with interest at the Prime
Rate plus 1.0%. If the funds are not repaid within 30 days, the interest rate
increases to Prime Rate plus 3.0% until repaid, and IMPAC reserves the right to
sell the loan and any shortfall remains the liability of the Company. The IMPAC
line is secured by the mortgage loans funded with the proceeds of such
borrowings. The IMPAC line does not have a stated expiration date but is
F-13
terminable by either party upon written notice. This agreement was terminated
in December of 2001. Amounts outstanding under the IMPAC line at June 30, 2002
and 2001 were $0 and $6,183,228 respectively.
On March of 2001, the Company entered into a Master Repurchase Agreement that
provides the Company with a warehouse facility through Imperial Warehouse
Lending Group ("Imperial"). The Imperial line provides the Company with an open
warehouse credit line (as set forth by Imperial) for the Company's mortgage
originations only. Under the terms of the agreement, the Company must repay the
funded amount within 30 days of the date the funds were disbursed with interest
at the Prime Rate plus 1.0%. If the funds are not repaid within 30 days, the
interest rate increases to Prime Rate plus 3.0% until repaid, and Imperial
reserves the right to sell the loan and any shortfall remains the liability of
the Company. The Imperial line is secured by the mortgage loans funded with the
proceeds of such borrowings. The Imperial line does not have a stated
expiration date but is terminable by either party upon written notice. This
Line was terminated in July of 2001. Amounts outstanding under the IMPAC line at
June 30, 2002 and 2001 were $ 0 and $ 865,468 respectively.
The effective interest rate for the credit lines listed above were as follows
per quarter, the interest charge is deducted from the sale proceeds of the
funded loans and is booked as a cost of revenue;
Number of Loans
Quarter Prime Rate Impac** Imperial* Held over 30 Days
June 30, 2001. 6,75% 7.75% 7.75% 0
Sept. 30 2001. 6.00% 7.00% N/A 0
Dec. 31, 2001. 4.75% 5.75% N/A 0
March 31, 2002 4.75% N/A N/A 0
June 30, 2002. 4.75% N/A N/A 0
* Imperial line not in use after June 2001
** Impac line not in use after December 2001
In addition, the Company had a bank line of credit that provides for maximum
borrowings up to $125,000. The line of credit is personally secured by certain
officers of the Company, and currently bears interest at 11.5% at June 30, 2000
and is due on August 31, 2000. The outstanding balance against the line of
credit as of June 30, 2002 and 2001 were $ 0 and $ 0, respectively. The Company
paid off the line of credit line during the fiscal year ending June 30, 2001,
because it was no longer required.
All credit facilities and bank line of credit require the Company to maintain
certain financial ratios and adhere to specific non-financial requirements. At
June 30, 2002, the company was in compliance with the various covenants
contained in the above agreements.
F-14
NOTE 5. LONG-TERM DEBT
Long-term debt at June 30, 2003 consists of the following:
CURRENT PORTION LONG-TERM TOTAL
--------------- --------- -----
Certain of the notes payable are secured by certain
Company assets requiring monthly payments of interest
and principal with various interest rates and due dates. $ 115,430 $ 976,469 $1,091,899
=============== ========= ==========
During the fiscal year ended June 30, 2002 certain real estate loans defaulted.
The Companies subsidiary is making payment to the lender that purchased the
defaulted loans. These payments are made at the note rate for each loan. The
Company has filed claims with the Companies E&O Insurance carriers and until the
claims are either denied or paid the company lists these debts as long-term
debt. These notes total $844,933. Effective September 1, 2001 the Company sold
the subsidiary Atlas Capital and these liabilities are included in the sale.
NOTE 6. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
company as a going concern. The Company has experienced significant losses. As
of June 30, 2003 the currently liabilities exceed current assets by $1,301,232.
As shown in the financial statements, the Company incurred a net loss of
$4,718,298 for the year then ended.
The future success of the Company is likely dependent on its ability to attain
additional capital to develop its proposed products and ultimately, upon its
ability to attain future profitable operations. There can be no assurance that
the Company will be successful in obtaining such financing, or that it will
attain positive cash flow from operations.
NOTE 7. EXTRAORDINARY ITEM
The California Code of Civil Procedure Section 337 states; "Within 4 years
(four), an action upon any contract, obligation or liability founded upon a
written statement or written contract." The debts of company's (see Note 1)
identified were greater then 4 years old and not enforceable. Legal counsel
Edgar Scheck reviewed the debts and issued and opinion letter that the prior
company's debts were not collectable based upon this Code Section 337. The
Company then extinguished these debts and recognized amount of the debt as
extraordinary income. SFAS 125 list 2 sets of circumstance under which a
liability is not recognized (which is listed below). The second set of
circumstance states the GAAP basis for which the Company extinguished the debt
and recognized the debt amount as extraordinary income in the fiscal year ended
June 30, 1999.
Per SFAS 125, defeasance does not result in the extinguishments of a liability.
A liability is derecognized only if:
1. The creditor is paid and the debtor is relieved of the obligation.
2. The debtor is released legally either by the creditor or judicially
from being the primary obligor.
F-15
All gains and losses from extinguishments, if material in amount, receive
extraordinary item treatment.
NOTE 8. STOCKHOLDERS' EQUITY
AUTHORIZED SHARES
During April 2003 the board of directors amended the articles of incorporation
to increase the authorized to 2,000,000,000 shares of which 1,990,000,000 are
common shares and 10,000,000 are preferred.
During November 2000, the board of directors of the Company amended the articles
of incorporation to increase the number of authorized shares of common stock to
349,000,000 shares.
STOCK ISSUANCE
During the fourth quarter fiscal year ended June 30, 2003 the following stock
was issued.
40,000,000 shares of restricted common stock were issued as per agreement to
repurchase 149,283 shares of PMCC common stock previously sold to an investor in
July of 2000. The agreement also provided for the issuance of 560,000 shares of
DCM Enterprises.
60,000,000 shares of common stock were issued as payment to consultants in lieu
of cash for services provided pursuant to consulting agreements. The fair value
of the shares was recorded as prepaid professional services and amortized
ratably over the term of the contract. These shares were issued pursuant to a
Form S-8 registration statement
In April of 2003 the par value for the Company stock was changed from $.01 per
shares to $.001 per share at that time there were, 78,273,603 shares issued with
a par value of $.01 which equals $782,736, the par value change to $.001 valued
those shares at $78,274 the net difference of $704,462 is included in paid in
capital.
During the third quarter fiscal year ended June 30, 2003, IBII issued stock for
services.
20,000,000 shares of restricted common stock rule were issued as payment to
consultants in lieu of cash for services provided pursuant to consulting
agreements. The fair value of the shares was recorded as prepaid professional
services and amortized ratably over the term of the contract.
During the second quarter fiscal year ended June 30, 2003, IBII issued stock for
services.
10,000,000 shares of common stock were issued as payment to consultants in lieu
of cash for services provided pursuant to consulting agreements. The fair value
of the shares was recorded as prepaid professional services and amortized
ratably over the term of the contract. These shares were issued pursuant to a
Form S-8 registration statement
F-16
During the first quarter fiscal year ended June 30, 2003, IBII issued stock for
services.
10,000,000 shares of common stock were issued as payment to consultants in lieu
of cash for services provided pursuant to consulting agreements. The fair value
of the shares was recorded as prepaid professional services and amortized
ratably over the term of the contract. These shares were issued pursuant to a
Form S-8 registration statement.
During the fiscal year ended June 30, 2002 the following occurred:
Stock Reverse; In May of 2002 a 1 share for 10 shares reverse became effective.
This was the first part of a Securities Purchase Agreement in conjunction with a
stock registration. The Company received $120,000 as a loan to be paid with the
registration of stock during the fiscal year. Due to the price drop in the stock
after the reverse occurred the registration did not occur. The Loan proceeds
booked as long-term debt. The stock reverse difference of shares issued and
outstanding is stated as additional paid in capital in the amount of $2,544,624.
During Fiscal Year ended June 30, 2002 IBII issued stock for services.
Post-Stock reverse 10,000,000 shares of common stock were issued as payment to
consultants in lieu of cash for services provided pursuant to a consulting
agreements. The fair value of the shares was recorded as prepaid professional
services and amortized ratably over the term of the contract. These shares were
issued pursuant to a Form S-8 registration statement.
In September 2001 15,500,000 shares were issued as per employment contract,
bring the total number to 282,736,029 common snares issued and outstanding of
which 134,495,037 are restricted.
During Fiscal Year ended June 30, 2001 IBII did not issue stock for services.
During fiscal year ended June 30, 2000, IBII agreed to issue approximately 30.4
million shares of restricted common stock for development and advertising
services over a period of twelve months. Under the agreement, the shares were
issued as certain milestones were met, and the fair value of the shares was
recorded as prepaid advertising and amortized ratably over the term on the
contract.
During fiscal year ended June 30, 1999, IBII issued in December of 1998,
approximately 9.1million shares of restricted common stock to a consultant in
lieu of cash for services provided pursuant to a consulting agreement. The fair
value of the shares was recorded as prepaid professional services and amortized
ratably over the term of the contract. Under this agreement, IBII issued
additional 2.1 million shares of restricted common stock in January 1999.
The company complies with the provisions of Emerging Issues Task Force ("EITF")
Issue No. 96-18, Accounting for Equity Instruments Issued to Other Than
Employees for Acquiring, or in Conjunction with, Selling Goods or Services
("EITF 96-18"), with respect to stock issuances to such non-employees, whereby
the value of the services was determined as a reliable measurement of fair
value.
Stock Issuance for acquisitions see Note 3. Business Combination.
PREFERRED STOCK
During April 2003 the board of directors amended the articles of incorporation
to increase the authorized to 2,000,000,000 shares of which 1,990,000,000 are
common and 10,000,000 shares are preferred.
September 24, 2003; The following Preferred Stock was issued to Mercatus and
placed in escrow with stop on the Stock at the transferred agent if the Mercatus
loan funds the shares will be considered issued and outstanding and will be
included into the financial information. At this date the Company has decided to
F-17
request the return of share from the escrow, cancel the shares and return them
to the treasury at the end of October if the Mercatus does not fund by then.
In January of 2003 the Company entered into a Collateral Loan Agreement (the
"Loan Agreement") with Mercatus Partners Limited, a UK corporation (Mercatus),
pursuant to which Mercatus has agreed to provide the Company with loans in an
amount of up to 20% of the Final Market Value (as such term is defined in the
Loan Agreement) of certain restricted shares of our preferred stock were issued
by the Company in the name of Mercatus to secure the obligations under the loans
(the "Stock"). The loans are payable to the Company within 10 days of delivery
of the Stock and related loan documents.
Loans under the Loan Agreement are evidenced by the promissory Notes payable to
Mercatus and are secured by the 10,000 Shares of Series A Preferred Stock. The
interest rate on the loans will be set at 5.5%.
Except as otherwise provided in the Loan Agreement, the Stock shall be held as
collateral by Mercatus at all times there remains principal or interest owing to
Mercatus under the promissory notes. Other than as specifically set forth in the
Loan Agreement, the Stock may not be sold, hypothecated, assigned, transferred,
or otherwise encumbered. In the event of a default under the Loan Agreement,
however, Mercatus may thereafter sell, assign, hypothecate or otherwise dispose
of the Stock. Under such circumstances, Mercatus assumes no responsibility for
the amount of proceeds it may receive upon such disposition of the Stock. Any
proceeds received by Mercatus in excess of the default amount plus reasonable
attorney's fees, if any, and related costs of disposition will be returned to
the Company. In the event of a default by the Company, the Company has further
agreed to take all reasonable steps to register the Stock for resale by
Mercatus. A default by the Company under the Loan Agreement can be expected to
have a materially adverse effect on the price of the Company's common stock.
The initial term of the loan is 5 years, with interest-only payments for the
first year of the loan. Upon payment in full of all interest and principal due
under the loan, the Stock will be returned to us for cancellation. During the
term of the loan Mercatus will provide a voting proxy with respect to the Stock
to a person designated by the Company. In the event of a default however, the
proxy shall be deemed null and void.
In connection with the Loan Agreement, in February 2003 the Company delivered
10,000 shares of restricted preferred stock to Mercatus. The Company expects
delivery of the funds by February 28th, 2003.
The maximum loan amount would be $9,000,000 with approximate net proceeds of
$7,900,000.
As of March 31, 2003 Mercatus has not funded this loan. The Company received
back the preferred stock, which was returned to Treasury. The Company signed a
new loan agreement that has a funding date of May 31, 2003. Pursuant to this
agreement the Company has issued a new 1,029,231 restricted preferred stock
certificate series A, as collateral for the loan.
After March 31, 2003 the Company entered into the following loan agreement with
Mercatus:
F-18
Mercatus Loan. Subject to the terms and conditions set forth herein, the Lender
--------------
agrees to provide the Borrower a loan in the amount of Seven Hundred Fifty
Thousand United States Dollars [US$ 750,000.00] (the "Loan"). Lender will pay
the proceeds of the Loan to Borrower [less payments and fees, as set forth in
the agreement, not sooner than five [5] business days after Borrower has
delivered the Collateral Stock. Lender may, at its option, pay the Loan in more
than one installment.
Pursuant to this agreement the Company issued a 10,000 restricted preferred
stock certificate series B, as collateral for the loan.
In January of 2002 the Company had entered into an agreement to issue a
Convertible Debenture in order to raise capital for the expansion of its
wireless Internet services and re-establish the mortgage loan division; this
Debenture was never completed due to the market price of the Company's stock.
On December 15, 1998, the Company entered into an agreement with Iron Horse
Holdings, Inc. ("IHHI"), a privately held company that in which officers or
family members of the officers of the Company have minority stock ownership, for
IHHI to purchase 23,900 shares of the Company's preferred stock with a par value
of $100.00 per share, in exchange for a promissory note receivable from IHHI in
the amount of $2,500,000. The difference between the par value of the shares
and the purchase price is treated as additional paid-in-capital. Shares
purchased under the agreement are to be issued to IHHI or its designee. The
promissory note receivable bear interest at 9% per annum, and is secured by a
blanket security agreement executed by IHHI and perfected by filings as
specified by law. Until such note is paid in full, IHHI shall pay the 3% coupon
on such shares as are issued under the agreement directly to the shareholder(s)
of record at the time such payment is due. During the fiscal year ending June
30, 2001, the company-received payment in full on the note executed by IHHI,
also during this fiscal year IHHI converted the preferred into common stock.
There are no preferred shares issued and or outstanding as of this date.
The Company acquired 100% of LA Internet, Inc. in June of 1999 for $525,000 from
IHHI, which was credited towards the note that is owed by IHHI to the Company.
During Fiscal June 30, 2000 the Company received the following payments on the
note executed by IHHI,
Date Balance Payment Interest Paid Form of payment
-------------- ---------- ---------- ------------- ---------------
June 15, 1999. - $240,000 - Credit
June 15, 1999. - $525,000 - Credit - LA Internet
-------------- ---------- ---------- ------------- ---------------
Total. . . . . - $765,000 -
Date Balance Payment Interest Paid Form of payment
-------------- ---------- ---------- ------------- ---------------
June 30, 1999. $1,735,000 - - -
Sept. 30, 1999 $1,464,754 $ 270,246 $ 39,037 Cash
Dec. 31, 2000. $1,194,508 $ 270,246 $ 32,957 Cash
March 31, 2000 $ 924,262 $ 270,246 $ 26,876 Cash
June 30, 2000. $ 654,009 $ 270,253 $ 20,796 Cash
-------------- ---------- ---------- ------------- ---------------
Total. . . . . $ 654,009 $1,080,991 $119,666
F-19
During Fiscal June 30, 2001 the Company received the following payments on the
note executed by IHHI,
Date Balance Payment Interest Paid Form of payment
-------------- ---------- ---------- ------------- ---------------
June 30, 2000. $ 654,009 - - -
Sept. 30, 2000 $ 490,509 $ 163,500 $ 14,715 Cash
Dec. 31, 2000. $ 327,009 $ 163,500 $ 11,036 Cash
March 31, 2001 $ 163,509 $ 163,500 $ 7,357 Cash
June 30, 2001. $ 0 $ 163,509 $ 3,679 Cash
-------------- ---------- ---------- ------------- ---------------
Total. . . . . $ 0 $ 654,009 $ 36,787
NOTE 9. INCOME TAXES
The provision for income taxes for the years ended June 30, 2003 and 2002
consist of the following (there were no provision for income taxes on the
financials due to the net loss carry forward from the previous years
operations):
JUNE 30, JUNE 30,
2003 2002
--------- ---------
Current income tax expense:
Federal. . . . . . . . . . $ 0 $ 0
State. . . . . . . . . . . 0 0
--------- ---------
0 0
--------- ---------
Deferred income tax expense:
Federal. . . . . . . . . . $ 0 $ 0
State. . . . . . . . . . . 0 0
--------- ---------
0 0
--------- ---------
$ 0 $ 0
========= =========
Amounts for deferred income tax assets and liabilities as follows:
Assets . . . . . . . . . . . $ 0 $ 0
Valuation allowance . . . . 0 0
--------- ---------
0 0
Liabilities. . . . . . . . . 0 0
--------- ---------
Net tax asset or liability . $ 0 $ 0
========= =========
Deferred income tax assets consist primarily of net operating loss carry
forwards. The Company has provided for a full valuation allowance on the
deferred income tax assets as the realization of such benefits are uncertain.
Such carry forwards begin to expire beginning in 2004.
For the year ended June 30, 1999, the Company excluded the forgiveness of debt
income from taxable income pursuant to Internal Revenue Code Section
108(A)(1)(B) and 108(B).
10. COMMITMENTS
The Company rents its current office in Las Vegas, Nevada, and the Company has
vacated its prior offices.
2250 E. Tropicana Ave. Suite 19-309, Las Vegas, Nevada
89119
F-20
The Company has equipment at several co-location facilities that will be
relocated once the facilities are paid current.
NOTE 11. SEGMENT INFORMATION
In accordance with SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," management has determined that there are three reportable
segments based on the customers served by each segment: Full service internet
service provider (ISP), mortgage banking business (which ceased operation in
June 2002), and business-to-consumer ("B2C") provider. Such determination was
based on the level at which executive management reviews the results of
operations in order to make decisions regarding performance assessment and
resource allocation.
Full service Internet service provider serves customers requiring Internet
access in the western United States through dial-up, and high-speed wireless;
web hosting and web design. Mortgage banking business includes online mortgage
loan origination, processing, servicing and resales, (which ceased operations in
June 2002). Business-to-consumer provider primarily consists of cellular phone
service origination fees and sales.
Certain general expenses related to advertising and marketing, information
systems, finance and administrative groups are not allocated to the operating
segments and are included in "other" in he reconciliation of operating income
reported below. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies (see Note 2).
Information on reportable segments is as follows:
FISCAL YEAR ENDED
JUNE 30, JUNE 30,
2002 2001
------------- ------------
FULL-SERVICE ISP
Net sales . . . . . . . . . . . . . . . . . $ 657,096 $ 3,437,011
Operating income. . . . . . . . . . . . . . $ (2,093,562) $ 290,448
MORTGAGE LOAN ORIGINATIONS HELD FOR RESALE
Net sales. . . . . . . . . . . . . . . $ 0 $1 ,845,991
Operating income . . . . . . . . . . . $ 0 $ 17,358
MARKETING (B-TO-B/C)
Net sales . . . . . . . . . . . . . . . $ 1,688 $ 9,973
Operating income. . . . . . . . . . . . $ (71,355) $ (372,019)
OTHER
Net income . . . . . . . . . . . . . . $ 120,000 $ 602,611
Unallocated expense. . . . . . . . . . $ (2,553,381) $ (362,008)
TOTAL
Net sales. . . . . . . . . . . . . . . $ 778,784 $ 5,895,586
Operating income . . . . . . . . . . . $( 4,718,298) $ (426,221)
F-21
NOTE 12. OTHER EVENTS
A. DIVIDEND
On June 17 2002, the Company announced the sale of Aces Optics to CRT Corp. for
2,000,000 shares of CRT restricted stock valued at $1.00 a share, the dividend
was to be based on one share of CRT Corp. per 100 shares of post reverse shares
of the Company. On July 8 the Company announced that the record date of July
17, 2002 for the shares holders to receive the dividend. On July 18, 2002 the
Company announce the date of distributions to be August 30, 2002. By September
15, the Transfer agent was work with DTC to complete the issuance of the divided
CRT Corp. restricted to its shareholders.
B. RTRN
In June 2001 the Company announced that an agreement of merger and share
exchange was executed by and among Return Assured Incorporated, a Delaware
corporation ("RAI"), IBUI Acquisition Corp., a Nevada corporation (the "Merger
Subsidiary" and together with RAI, the "RAI Parties"), and Internet Business's
International, Inc., a Nevada corporation ("IBUI"). The merger was to be
completed before January of 2002. All parties to the agreement mutually canceled
failing the completions of merger the agreement within the time frame agreed to
the agreement.
C. PMCC
On August 2, 2000, the Company announced that it has entered into an agreement
whereby the Company would purchase 2,460,000 share of PMCC Financial Corp.
("PMCC"), a full-service mortgage banking company, common stock from PMCC's
former chairman of the board, Ronald Friedman, and The Ronald Friedman 1997
Grantor Retained Annuity Trust Ronald Friedman, which represents 66.36% of the
3,707,000 PMCC shares outstanding. The aggregate purchase price of $3,198,000
is to be paid in cash to the seller by the Company as follows: $700,000 at date
of closing; $306,857 for each of the seven installment payments to be paid on
the 30th, 60th, 90th, 120th, 150th, 180th and 210th days following the close;
$175,000 on each of the 240th and 270th day after the date of the closing.
Shares of PMCC, a listed AMEX company, were not trading at the time of the
agreement. In the event that three months after closing, if PMCC's shares are
not actively trading on the AMEX or NASDQ exchanges and the Company has not
merged PMCC with the Company or any of the Company's subsidiaries, the purchase
price shall be reduced by the amount of the final two $175,000 payments.
Also on July 28, 2000, in a separate transaction, the Company entered into a
stock purchase agreement with an unrelated individual whereby the Company would
sell up to 370,000 of PMCC shares that the Company either owns or will
eventually own, for total consideration of $1,387,500. Shares of PMCC stock
sold by the Company will be released to the buyer in proportion to payments
received.
The Company on March 2, 2001 filed an action against Ronald Friedman and The
Ronald Friedman 1997 Grantor Retained Annuity Trust in Federal Court, in Orange
County, California for rescission of the purchase of the PMCC stock agreement
and return of $1,006,857 paid by the Company. On August 16, 2001 Ronald
Friedman, Robert Friedman, and The Ronald Friedman 1997 Grantor Retained Annuity
Trust filed an action against the Company for the balance of the price under the
contract in the amount of $2,191,143. This action was filed in the U.S.
F-22
District Court for the Southern District of New York. In February 2002 the New
York case was transferred to California and consolidated with the case filed by
the Company in Orange County, CA. The Company feels that it will prevail in this
action.
As of December 31, 2000, the Company received payments of $559,812 and the
Company released 149,283 shares of PMCC stock that it owned. If PMCC is not
actively trading within six months of the agreement, the Company will issue to
the Buyer the equivalent number of shares of stock of the Company. PMCC has
been actively trading as of January 19, 2001, and the gain on the sale of the
PMCC stock of $410,529 has been included in revenues for the period ending
December 31,2000.
In January 2001, the PMCC was delisted from the American Stock Exchange and
began trading on the Pink Sheets under the symbol of "PMCF"; this met the
trading requirement as per the stock sale agreement the Company had entered into
with an unrelated individual during the first quarter of this fiscal year.
D. IBC
On August 11, 2000, the Company entered into an agreement to acquire all of the
outstanding shares of International Business Co., a software developer that
streamlines B2B e-commerce, in exchange for 2,000,000 shares of restricted
Company shares to be held in escrow. Between the periods from September 1, 2000
through March 1, 2001, the Company can unilaterally cancel the contract if
dissatisfied with the seller's performance. The Company canceled the purchase
during the cancellation period agreed in the escrow.
E. AUCTION-SALES.COM, INC.
On October 19, 2000, the Company entered into a Stock Purchase Agreement with
Auction-Sales.Com, Inc. and its majority shareholder, Zahid Rafiq (collectively,
"Seller"), for the purchase by the Registrant of 96.62% of the outstanding and
treasury shares of common stock of Auction-Sales.Com, Inc., a Delaware
corporation. In exchange for the shares, the Company was to pay, under the
terms of the agreement, 11,000,000 shares of Company's common stock to Seller
for all of Seller's Shares. After investing $180,000 for marketing the Company
discovered that Auction-Sales had undisclosed liabilities and that Auction-Sales
was not in compliance with California law regarding delivery of product paid for
but not delivered to customers.
This acquisition was rescinded in December 2000 and the necessary documents were
filed with the SEC. The site was retained until the funds invested into
Auction-Sales.Com are returned which at this time management has expectations of
occurring.
NOTE 13. OTHER AGREEMENTS
A. WASHINGTON STATE HOTEL AND MOTEL ASSOCIATION.
The agreement, entered into in the ordinary course of business, with the
Washington State Hotel and Motel Association, dated October 4, 2000, provides
the use of the GGPP reverse auction site as a platform for hotel association
members purchasing products needed for their different hotel properties. This
method of purchasing allows the suppliers of products the chance to sell
products to the buyers in competition with one another; the net effect is that
the buyers would select the supplier with the lowest per unit cost. This
reduces the cost of supplies and thereby should increase their potential of
F-23
profit. This agreement covers the modification of the GGPP website for use by
the Association, and does not involve any payment by the Company. By the end of
the fiscal year ended June 2002, this program generated no revenue and the
Company has ceased to offer this service.
B. JWC CONSTRUCTION
The agreement, entered into in the ordinary course of business, with the JWC
Construction Company of Poland, dated March 9, 2001 which will enable companies
to list their purchasing requirements on projects using the reverse auction
platform. This method of purchasing allows the suppliers of products the chance
to sell products to the buyers in competition with one another; the net effect
is that the buyers would select the supplier with the lowest per unit cost.
This reduces the cost of supplies and thereby should increase their potential of
profit. This agreement covers the modification of the Construction Buying Group
website for by the Construction industry, and does not involve any payment by
the Company. By the end of June 2002, the Company canceled this agreement due to
lack of activity of JWC.
F-24
EXHIBIT INDEX
Number Description
------ -----------
2.1 Agreement and Plan of Merger between the Company and Internet
Business's International, Inc., a Delaware corporation, dated July 1,
1999 (incorporated by reference to Exhibit 2 to the Form 8-K/A filed
on November 22, 1999)
2.2 Agreement and Plan of Merger and Share Exchange among the Company,
Return Assured Incorporated, and IBUI Acquisition Corporation, dated
June 4, 2001 (see below).
3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1
to the Form 10-Q filed on December 1, 1999).
3.2 Certificate of Amendment of Articles of Incorporation (incorporated
by reference to Exhibit 3.2 to the Form 10-Q filed on December 1,
1999).
3.3 Certificate of Amendment of Articles of Incorporation (incorporated
by reference to Exhibit 3.3 of the Form 10-Q filed on May 22, 2000).
3.4 Certificate of Amendment of Articles of Incorporation (incorporated
by reference to Exhibit 3.4 of the Form 10-Q filed on May 22, 2000).
3.5 Bylaws (incorporated by reference to Exhibit 3.3 to the Form 10-Q
filed on December 1, 1999).
4.1 Retainer Stock Plan for Non-Employee Directors and Consultants,
dated October 1, 1999 (incorporated by reference to Exhibit 4.1 to
Form S-8 filed on October 8, 1999)
4.2 Consulting Agreement between the Company and Mark Crist, dated October
5, 1999 (incorporated by reference to Exhibit 4.2 to Form S-8 filed on
October 8, 1999)
10.1 Purchase Agreement (LA Internet) between the Company and Iron
Horse Holdings, Incorporated, dated June 10, 1999 (incorporated by
reference to Exhibit 10.2 to the Form 10-Q filed on December 1, 1999).
10.2 Purchase Agreement between the Company and the Stockholders of MBM
Capital Group Inc., dated July 1, 1999 (incorporated by reference to
Exhibit 10.3 to the Form 10-Q filed on December 1, 1999).
10.3 Acquisition Agreement (Net 2 Loan) between the Company and Lifestyle
Mortgage Partners, dated September 15, 1999 (incorporated by reference
to Exhibit 10.4 to the Form 10-Q filed on February 22, 2000).
21
10.4 Purchase Agreement (license) between the Company and Stockholders of
California Land & Home Sale, Inc., dated October 1, 1999 (incorporated
by reference to Exhibit 10.5 to the Form 10-Q filed on February 22,
2000).
10.5 Acquisition Agreement (Optical Brigade) between the Company and Wade
Whitley, dated November 1, 1999 (incorporated by reference to Exhibit
10.6 to the Form 10-Q filed on February 22, 2000).
10.6 Employment Agreement between the Company and Al Reda, dated January 1,
2000 (see below).
10.7 Employment Agreement between the Company and Louis Charry, dated
January 1, 2000 (see below).
10.8 Agreement for Acquisition between the Company and Direct
Communications, Inc., dated February 25, 2000 (incorporated by
reference to Exhibit 10.6 of the Form 10-Q filed on May 22, 2000).
10.9 Agreement between the Company and Internet 2xtreme, dated March 6,
2000 (incorporated by reference to Exhibit 10.7 of the Form 10-Q filed
on May 22, 2000).
10.10 Agreement between the Company, Roanoke Technology Corp., and Global
GPP Corp., dated March 21, 2000 (incorporated by reference to Exhibit
10.8 of the Form 10-Q filed on May 22, 2000).
10.11 Agreement between GPP Hungary Kft and Haitec Magyarorazagi Kft, dated
March 30, 2000 (incorporated by reference to Exhibit 10.9 of the Form
10-Q filed on May 22, 2000).
10.12 Stock Purchase Agreement between the Company and Atlas Capital
Corporation, dated April 1, 2000 (incorporated by reference to Exhibit
10.10 to the Form 10-K filed on September 27, 2000).
10.13 Stock Purchase Agreement between the Company and Ronald Friedman,
Robert Friedman, and The Ronald Friedman 1997 Grantor Retained Annuity
Trust, dated July 28, 2000 (incorporated by reference to Exhibit 10.11
of the Form 10-Q filed on November 16, 2000).
10.14 Stock Sales Agreement between the Company and a buyer dated July 28,
2000 (incorporated by reference to Exhibit 10.12 of the Form 10-Q
filed on November 16, 2000).
10.15 Stock Purchase Agreement between the Company, International Business
Company, Dennis B. Ginther, Clifford J. Roebuck, Jadwiga L. Ginther,
and Bogumila E. Basu , dated August 19, 2000 (incorporated by
reference to Exhibit 10.13 of the Form 10-Q filed on November 16,
2000).
22
10.16 Stock Purchase Agreement between the Company, Sonic Auction.com, Inc.,
and Brian Pruett, dated October 5, 2000 (incorporated by reference to
Exhibit 10.14 of the Form 10-Q filed on February 15, 2001).
10.17 Stock Purchase Agreement between the Company, Auction-Sales.Com, Inc.,
and Zahid Rafiq, dated October 19, 2000 (incorporated by reference to
Exhibit 10.15 of the Form 10-Q filed on February 15, 2001).
21 Subsidiaries of the Company (incorporated by reference to Exhibit 21
of the Form 0-Q filed on February 15, 2001).
31 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 (filed herewith)
32 Certification Pursuant to 18 U.S. C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed
herewith)
23