-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OZgqHWdDZHcchdo8wc9g8QZyGSgLGIYExjVi57uAo5t1i6Ejpeocq1QmdCMhm2Ij RGLIGJnJdGeyLvmIEhLgYg== 0000891554-99-002329.txt : 19991215 0000891554-99-002329.hdr.sgml : 19991215 ACCESSION NUMBER: 0000891554-99-002329 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19991214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNET HOLDINGS INC CENTRAL INDEX KEY: 0001001601 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 133758042 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-26888 FILM NUMBER: 99774208 BUSINESS ADDRESS: STREET 1: C/O LAW OFFICE OF BECKMAN MILLMAN & SAND STREET 2: 116 JOHN STREET CITY: NEW YORK STATE: NY ZIP: 10038 BUSINESS PHONE: 2124064700 MAIL ADDRESS: STREET 1: C/O LAW OFFICE OF BECKMAN MILLMAN & SAND STREET 2: 116 JOHN STREET CITY: NEW YORKMELVILLE STATE: NY ZIP: 10038 FORMER COMPANY: FORMER CONFORMED NAME: CHINA BIOMEDICAL GROUP INC DATE OF NAME CHANGE: 19951003 10KSB 1 ANNUAL REPORT U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-KSB [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-26886 INTERNET HOLDINGS, INC. (Exact name of Company as specified in its charter) Utah 13-3758042 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) c/o Beckman, Millman & Sanders, LLP 116 John Street - Suite 1313 New York, New York 10038 (Address of principal executive offices) (Zip Code) Company's telephone number, including area code: (212) 406-4700 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: None Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) had been subject to such filing requirements for the past 90 days. Yes [_] No [X] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB [X] State issuer's revenue for its most recent fiscal year: $ 3,813 State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked price of such stock, as of a specified date within the past 60 days: $ 397,400 as of December 22, 1997 State the number of shares outstanding of each of the Registrant's classes of common equity as of the latest practicable date: 2,119,470 shares as of Common Stock as of December 31, 1997 PART I Item 1. Description of Business On May 22, 1997, Internet Holdings, Inc. (the "Company" or the "Registrant") acquired all the issued capital of Chiron Systems Ltd. ("CSL"). CSL was an English company engaged in the business of designing and developing Integrated Services Digital Network ("ISDN") related products. The Company's wholly owned subsidiary, CSL, was acquired in exchange for 2,640,313 restricted shares of the Company's common stock. The formation of CSL was as a result of a management buy-out from GEC-Plessey Telecommunications ("GPT") in 1993. Under the terms of the 1993 buyout, CSL was transferred the rights to certain technology developed by GPT. During 1997, the Company was engaged in the business of providing hardware and software products and services for Internet and ISDN applications. CSL has been one of the leading suppliers of ISDN converters (Anatel 4000 range) and ISDN termination points (SAT 100 range) in Europe. Since its launch in 1996, these products have been used by three European PTTs and have been placed on the bidding list for several more. CSL expected to confirm several substantial orders from Europe, the Far East and Africa during the last quarter of 1997 based upon a new range of products. These orders never materialized and the Malaysian joint venture partners subsequently alleged to the Company that the new range of products designed by CSL could not meet certain requirements. Following this, the Company undertook a major review of the management and products of CSL. During this period, CSL's management refused to allow the Company's auditors access to certain management and financial information concerning CSL. The management of CSL stated that they could complete the development of the new range of products but that this would require another $1 million, in addition to the funds already spent. Further, at this time CSL's bankers indicated that they required an unconditional guarantee from the Company to secure all of CSL's indebtedness of approximately $700,000. Continuing the sale of the existing products indefinitely was not an option as they would become uncompetitive and relied on chipsets which were to be discontinued. As a result of these events, the Company concluded that the only course of action open to it was to exercise its right to divest CSL under the terms of the acquisition agreement. Central to this decision was a belief that the new range of products under development by CSL would not now reach the market in a competitive time-scale and even then might require further substantial development work. Accordingly, the Company divested CSL with effect from December 19, 1997, pursuant to the acquisition agreement dated May 22, 1997 and the Agreement & Plan of Divestiture dated December 19, 1997. The structure of the divestiture was that the Company delivered to certain shareholders of the Company who had previously owned CSL all the outstanding shares in CSL. The CSL shareholders returned to the Company the shares held by them pursuant to the acquisition agreement. -1- On July 28, 1998, CSL's creditors placed CSL into liquidation. As a result of the collapse and insolvency of CSL, the Company was advised by its lawyers that any rights it may have had under the acquisition agreement against CSL were not worth pursuing because even if a judgment were obtained, there was no prospect of any payment being made to the Company. As a result of this divestiture and the failure of CSL, the Company was unable to deliver products and technology as contracted under agreements with its joint venture partners. This failure led to legal proceedings. The Company countercharged that the assets purchased by it from its joint venture partners had not been effectively transferred. During the period September 1997 to November 1999 the Company was unable to raise funds to develop its business, unable to settle the outstanding litigation relating to its joint ventures and had its indebtedness been demanded the Company would have been unable to repay. In November 1999, the Company finally settled these legal proceedings and entered into a comprehensive settlement agreement. The adjudication of this matter enabled the Company to move forward. By this agreement the Company agreed not to pursue claims against certain assets purchased from the joint venture partners, the joint venture partners agreed not to pursue claims against the Company for alleged negligence and breach of contract and the Company was released from debts totaling approximately $300,000. This resulted in a net write off to the Company of $1.9 million. Following the planned appointment of additional management and the settlement of the legal proceedings the Company can now proceed to rebuild its business. General For most of 1997 the Company operated its business through its wholly owned subsidiary CSL. CSL was founded in March 1993 with the acquisition of a set of ISDN products and technology from GEC Plessey Telecommunications ("GPT"). GPT is one of the largest telecommunications companies in the world. In 1993 GPT elected to move out of the ISDN peripherals market. All this technology, representing in excess of $7 million in research and development expenditure, was transferred through a management buyout to CSL. At the time of the acquisition of CSL by the Company the original range of products were selling well and had in the past been among the best technology on the market. However, technology markets move extremely fast and CSL had a new range of products under development to meet the advancing market requirements and the discontinuation of existing chip supplies thus meaning CSL could not continue indefinitely with the existing products. During negotiations for sub-contract manufacture with the Company's Malaysian joint venture partners it emerged that the new range of products might not meet the required specifications in terms of cost, performance and, time. This led to the review of CSL set out above and its subsequent divestiture. -2- Marketing CSL primarily sold its products to major telecommunications network operators such as British Telecom, Belgacom and the Netherlands PTT. These companies then sell the products to end-users. In order to expand the market for CSL's products the Company entered into joint ventures in Asia and Africa. Employees As of December 31, 1997, following the divestiture of CSL, the Company had one full time employee. Item 2. Description of Property During the period of ownership of CSL, the Company operated primarily from CSL's executive offices in Reading, England located in leased space of approximately 2,000 square feet in a multi-tenant office building. The lease is on an annual basis and commenced in 1993. Currently the Company maintains a facility for meetings at the offices of its corporate counsel Beckman, Millman & Sanders LLC. Item 3. Legal Proceedings During the period of the Company's ownership of CSL, in addition to other matters, the Company devoted considerable resources to expanding the market for CSL's products in Asia and Africa. Both these regions possess rapidly growing markets where there is substantial demand for new telephony technology. The efforts in these new markets were extremely successful with joint ventures being agreed in both Asia and Africa. However, the collapse of CSL and the consequent inability of the Company to supply products or technology to either joint venture left the Company exposed to allegations of breach of contract. The outstanding legal proceedings have prevented the Company from raising funds to continue its business. Item 4. Submission of Matters to a Vote of Security Holders None -3- PART II Item 5. Market for Common Equity and Related Stockholder Matters The Company's Common Stock has been traded on the Over-The-Counter Bulletin Board (OTC- Bulletin Board) since July 22, 1977 and is currently traded under the symbol "HTTP". The following are reported high and low quotations for the Company's Common Stock for the periods indicated and do not include dealer mark ups, mark downs or commissions nor do they represent actual sale prices: Low High First Quarter 1997 1/4 5/8 Second Quarter 1997 5 1/2 7 Third Quarter 1997 3 7 Fourth Quarter 1997 1/8 5 5/8 Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Sources of Capital As of December 31, 1997, the Registrant had current assets of $35,600 as compared to $ 0 as of December 31, 1996. On October 27, 1999 the Company filed a Form 8-K setting out a contingent acquisition which, if consummated, would provide the Company with $2,160,000 in cash and liquid securities. This agreement is conditional on the settlement of all outstanding litigation, the filing of outstanding periodic and annual reports under the Securities Exchange Act of 1934, as amended, and the maintenance of the Company's quotation on the OTC - Bulletin Board. Results of Operations On May 22, 1997, the Company acquired 100% of Chiron Systems Ltd. ("CSL") to exploit certain of the company's Internet related technologies. CSL was acquired by the Company in exchange for 2,640,313 shares of its restricted shares of common stock. With effect from December 19, 1999 the Company divested CSL pursuant to the acquisition agreement dated May 22, 1997 whereby the Company delivered to certain shareholders who had previously owned CSL all the outstanding shares in CSL. The CSL shareholders returned to the Company the shares held by them pursuant to the acquisition agreement. In the accompanying accounts the Company treats CSL as discontinued operations. -4- Item 7. Financial Statements Reference is made to the financial statements attached hereto. Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None -5- PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act Christopher J. Wilkes, aged 33, became a Director of the Company on September 30, 1996. Mr. Wilkes also holds the offices of Chairman and President of the Company. He holds these offices and positions until the next annual meeting of the Company. Mr. Wilkes is the Senior Partner of Levenworth Management, a management consulting company based in the United Kingdom, which he founded in 1992. He has advised on the restructuring and operations of companies in a number of different industries and has an international clientele. Lewis M. Klee, aged 44, became a Director of the Company on September 30, 1996. Mr. Klee also holds the office of Secretary of the Company. Mr. Klee is no longer a director of the Company. On August 1, 1996 Mr. Klee became the Managing Partner of the Law Office of Lewis M. Klee Esq., prior to this he was of counsel to the Law Office of Steven A. Sanders P.C. Item 10. Executive Compensation Mr. Wilkes was paid consultancy fees of $23,877 during 1997 and received Common Stock to the value of $59,697 in lieu of fees. Mr Klee received consultancy and legal fees of $19,000 during 1997 and received Common Stock to the value of $12,450 in lieu of fees. Item 11. Security Ownership of Certain Beneficial Owners and Management The following table sets forth information with respect to beneficial ownership of Common Stock by (i) each person known by the Company to own beneficially more than five percent (5%) of the outstanding Common Stock of the Company, (ii) each director of the Company, and (iii) all directors and officers of the Company as a group. Except as other wise indicated the named person has sole voting and investment power with respect to such person's shares. Number of Common shares Name Beneficially owned Percent Christopher J. Wilkes 253,304 11.9% President & Director 22 Parrotts Field Hoddesdon Hertfordshire EN11 OQU United Kingdom Lewis M. Klee 25,000 1.2% Secretary The Law Office of Lewis M. Klee, 40 Exchange Place, 8th Floor New York, NY 10005 All executive officers and directors As a group: 278,304 13.1% -6- Item 12. Certain Relationships and Related Transactions Item 13. Exhibits and Reports on Form 8-K a) Exhibit 1 - Agreement and Plan of Divestiture between Internet Holdings, Inc. and Chiron Systems Ltd. dated December 19, 1997. b) The Registrant did not file any reports on Form 8-K for events which occurred during the year ended December 31, 1997. -7- SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on behalf by the undersigned, thereunto duly authorized. Internet Holdings, Inc. Date: December 13, 1999 /s/ Christopher Wilkes ---------------------- Christopher J. Wilkes President -8- INTERNET HOLDINGS, INC. FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 and 1996 TOGETHER WITH AUDITORS' REPORT INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Internet Holdings, Inc.: We have audited the accompanying balance sheet of Internet Holdings, Inc. (the "Company"), as of December 31, 1997, and the related statements of operations, stockholders' equity and cash flows for the years ended December 31, 1997 and 1996. 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. Except as discussed in the following paragraph, 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. We were unable to audit the financial statements of Chiron Systems Ltd. (a former wholly-owned subsidiary of the Company in England, the "Subsidiary") for the period from May 22, 1997 to December 19, 1997. Furthermore, we were unable to audit certain joint venture transactions in Asia and Africa during the year ended December 31, 1997. The activities of the Subsidiary and joint ventures comprised substantially all of the Company's operations during the year ended December 31, 1997. Because of the significance of the operations of the Company's Subsidiary and joint ventures which we were unable to audit, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on the 1997 financial statements. In our opinion, with respect to the 1996 financial statements, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Internet Holdings, Inc. for the year ended December 31, 1996 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 discussed in Note 1 to the financial statements, the Company presently has no revenue producing operations or activities and has suffered recurring losses from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ CALLAGHAN NAWROCKI LLP ---------------------------- CALLAGHAN NAWROCKI LLP Melville, New York December 1, 1999 F-1 INTERNET HOLDINGS, INC. BALANCE SHEET DECEMBER 31, 1997 ASSETS CURRENT ASSETS: Cash $ 1,600 Other receivable 34,000 ----------- Total current assets 35,600 ----------- $ 35,600 =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 20,380 ----------- Total current liabilities 20,380 ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $.001 par value, 50,000,000 shares authorized, 2,119,470 shares issued and outstanding 2,119 Additional paid-in capital 5,723,560 Accumulated deficit (5,710,459) ----------- Total stockholders' equity 15,220 ----------- $ 35,600 =========== The accompanying notes to financial statements are an integral part of this statement. F-2 INTERNET HOLDINGS, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 ----------- ----------- REVENUES $ 3,813 $ -- EXPENSES 130,974 214,851 ----------- ----------- Loss from continuing operations (127,161) (214,851) LOSS FROM DISCONTINUED OPERATIONS (2,359,612) (161,241) ----------- ----------- Net loss $(2,486,773) $ (376,092) =========== =========== PER SHARE DATA: Loss from continuing operations $ (0.07) $ (0.16) =========== =========== Loss from discontinued operations $ (1.30) $ (0.13) =========== =========== Net loss $ (1.37) $ (0.29) =========== =========== Weighted average number of common shares outstanding 1,813,706 1,308,656 =========== =========== The accompanying notes to financial statements are an integral part of these statements. F-3 INTERNET HOLDINGS, INC. STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Accumulated Foreign Total Common Stock Additional Currency Stockholders' -------------------------- Paid-In Accumulated Translation Equity Shares Amount Capital Deficit Adjustment (Deficit) ------------ ---------- ----------- ----------- ---------- ----------- BALANCE, JANUARY 1, 1996 5,560,343 $ 5,560 $11,541,259 $(2,847,594) $ (84,049) $ 8,615,176 5 to 1 reverse stock split (4,447,479) (4,447) 4,447 -- -- -- Shares cancelled pursuant to divestiture (540,006) (540) (8,777,600) -- 84,049 (8,694,091) Shares issued in satisfaction of obligations 1,125,000 1,125 383,375 -- -- 384,500 Net loss for the year -- -- -- (376,092) -- (376,092) ------------ ---------- ----------- ----------- ---------- ----------- BALANCE, DECEMBER 31, 1996 1,697,858 1,698 3,151,481 (3,223,686) -- (70,507) 8 to 1 reverse stock split (1,484,603) (1,485) 1,485 -- -- -- Shares issued pursuant to acquisition 2,640,313 2,640 657,360 -- -- 660,000 Shares issued in satisfaction of obligations 150,000 150 37,350 -- -- 37,500 2 to 1 reverse stock split (1,501,180) (1,501) 1,501 -- -- -- Shares issued in private placement 1,483,935 1,484 2,373,516 -- -- 2,375,000 Shares issued pursuant to conversion of loan note 250,000 250 124,750 -- -- 125,000 Shares cancelled pursuant to divestiture (1,320,157) (1,320) (658,680) -- -- (660,000) Shares issued in satisfaction of obligations 203,304 203 34,797 -- -- 35,000 Net loss for the year -- -- -- (2,486,773) -- (2,486,773) ------------ ---------- ----------- ----------- ---------- ----------- BALANCE, DECEMBER 31, 1997 2,119,470 $ 2,119 $ 5,723,560 $(5,710,459) $ -- $ 15,220 ============ ========== =========== =========== ========== ===========
The accompanying notes to financial statements are an integral part of these statements. F-4 INTERNET HOLDINGS, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(2,486,773) $ (376,092) Adjustments to reconcile net loss to net cash used by operating activities: Loss from discontinued operations 2,359,612 161,241 Operating expenses satisfied by issuance of common stock -- 218,000 Increase in other receivable (34,000) -- Decrease in accounts payable, accrued expenses and other liabilities (87,239) (4,638) ----------- ----------- Net cash used by operating activities (248,400) (1,489) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Shares issued in private placement 2,375,000 -- Proceeds from convertible loan note 125,000 -- ----------- ----------- Net cash provided by financing activities 2,500,000 -- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in joint venture (2,250,000) -- ----------- ----------- Net cash used by investing activities (2,250,000) -- ----------- ----------- NET INCREASE (DECREASE) IN CASH 1,600 (1,489) CASH, BEGINNING OF YEAR -- 1,489 ----------- ----------- CASH, END OF YEAR $ 1,600 $ -- =========== =========== NON-CASH INVESTING AND FINANCING ACTIVITIES: Corporation acquired by issuance of common shares $ 660,000 $ -- Corporations divested by cancellation of common shares (660,000) (8,694,091) Shares issued in satisfaction of other obligations 72,500 384,500 Shares issued pursuant to conversion of loan note 125,000 --
The accompanying notes to financial statements are an integral part of these statements. F-5 INTERNET HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS (1) Business and organization Internet Holdings, Inc. (the "Company") was originally incorporated in the State of Utah on July 22, 1977, under the name of Western Corn Dog Factories. The Company has had a series of mergers with other companies, all accounted for as reverse acquisitions, with the Company in each case changing its name to that of or similar to the reverse acquiror. In this regard, the Company's previous names were: Resources West, Inc., Magma Resources, Inc., Cellular Telecommunications & Technologies, Inc. and China Biomedical Group, Inc. The name Internet Holdings, Inc. was adopted on July 12, 1996. In 1993, the Company acquired Cellular Payphones, Inc., ("CPI"), (a Delaware Corporation), whereby all of the issued and outstanding shares of CPI were exchanged for approximately 90% of the issued and outstanding stock of the Company. This transaction was accounted for as a reverse acquisition purchase, in which CPI was the acquiring corporation, and the Company was the acquired corporation. The Company accounted for this transaction as a recapitalization of CPI, with the issuance of 2,625,000 shares of common stock for the net assets of the Company. Following the 1993 acquisition, the Company was engaged in the business of (i) installation and servicing of cellular credit-card pay telephones in taxicabs, radio-cabs, limousines, rental cars, trains, ferries, hotels, and business conference centers, and (ii) the data processing and development of streamline software specializing in credit card authorization processing with real-time billing functions. The Company ceased such operations in October 1994 due to substantial losses. Effective April 3, 1995, the Company acquired C.B. Marketing and Investment Limited, a privately-held English corporation engaged in the business of medical market research and the manufacture of pharmaceuticals and contraceptives in the Peoples' Republic of China. On April 22, 1996, the Company entered into a divestiture agreement with respect to C.B. Marketing and Investment Limited. During 1996, the Company was reorganized to invest in internet and ISDN ("International Standard Digital Network") related technologies. On May 22, 1997, the Company acquired Chiron Systems Ltd. ("CSL"), a privately-held English Corporation engaged in the business of designing and developing ISDN related products. During 1997, the Company, through CSL provided hardware and software products and services for internet and ISDN applications. CSL had expected to confirm several substantial orders from the Far East during the last quarter of 1997 based upon a new range of products. However, these orders never materialized due to alleged specification failure, resulting in a need for additional funding. The Company decided not to make any further investment in CSL and, effective December 19, 1997, exercised its right to divest CSL under the terms of the acquisition agreement. CSL was subsequently placed into liquidation by its creditors. During its ownership of CSL, the Company invested in joint ventures in Asia and West Africa in connection with the delivery of products and services being developed by CSL. As a result of the failure of CSL to develop the requisite products and technology, and the corresponding divestiture of CSL, the Company became engaged in various legal proceedings with its joint venture partners which was finally settled in October 1999. F-6 The Company presently has no revenue producing operations or activities and has suffered recurring losses from operations. Management's plans include seeking an acquisition candidate in the internet and related technology fields. In connection with such a transaction, which, similar to the Company's previous mergers will actually be a reverse acquisition, the Company may seek to raise proceeds from the sale of its securities. On October 27, 1999 the Company filed a Form 8-K setting out a contingent acquisition which, if consummated, would provide the Company with $2,160,000 in cash and liquid securities. This agreement is conditional on the settlement of all outstanding litigation, the filing of outstanding reports and the maintenance of the Company's quotation on the OTC - Bulletin Board. (2) Summary of significant accounting policies: Foreign currency translation - Gains and losses from foreign currency transactions are reflected in current operating results. Exchange adjustments resulting from the translation of financial statements have been reflected as a separate component of stockholders' equity. The cumulative adjustment was eliminated upon the divestiture of foreign operations. Revenue and cost recognition - Revenues are generally recognized as earned and expenses are recognized when incurred under the accrual basis of accounting. Net loss per share - Net loss per share was computed by dividing net loss by the weighted average number of common shares issued and outstanding during the period. Income taxes - The Company has adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", to account for deferred income taxes. Deferred taxes are computed based on the tax liability or benefit in future years of the reversal of temporary differences in the recognition of income or deduction of expenses between financial and tax reporting purposes. The net difference, if any, between the provision for taxes and taxes currently payable is reflected in the balance sheet as deferred taxes. Deferred tax assets and/or liabilities, if any, are classified as current and noncurrent based on the classification of the related asset or liability for financial reporting purposes, or based on the expected reversal date for deferred taxes that are not related to an asset or liability. (3) Discontinued operations On December 19, 1997, the Company's Board of Directors approved a divestiture agreement whereby the Company delivered to certain shareholders who had previously owned Chiron Systems Ltd., ("CSL") all the outstanding shares in this corporation, which had been acquired by the Company on May 22, 1997. In return, the CSL shareholders transferred to the Company 1,320,157 shares (2,640,313 shares pre-reverse split) of the Company's common stock. In connection therewith, the Company recognized $361,641 of losses relating primarily to unrecoverable loans receivable from this divested corporation. F-7 In conjunction with its ownership of CSL, the Company entered into joint ventures in Asia and West Africa for the delivery of products and services being developed by CSL. During the year ended December 31, 1997, the Company invested $2,250,000 in certain assets purchased from joint venture partners. As a result of the failure of CSL to develop the requisite products and technology, and the corresponding divestiture of CSL, the Company became engaged in various legal proceedings with its joint venture partners. In October 1999, a comprehensive settlement agreement was reached by the Company with its joint venture partners. By this agreement, the Company agreed not to pursue claims against certain assets purchased from the joint venture partners, the joint venture partners agreed not to pursue claims against the Company relating to negligence and breach of contract and the Company was released from debts totalling $252,029. This resulted in a net write-off to the Company of $1,997,971, which is reflected as a loss from discontinued operations for the year ended December 31, 1997. On April 22, 1996, the Company's stockholders approved a divestiture agreement whereby the Company delivered to certain shareholders who had previously owned C.B. Marketing and Investment Limited (the "Subsidiary") all the outstanding shares in this corporation. In return, the C.B. Marketing and Investment Limited shareholders transferred to the Company 540,006 shares (2,700,000 shares pre-reverse split) of the Company's common stock. Accordingly, the assets and liabilities of the Subsidiary as of December 31, 1995 were restated as net assets of discontinued operations, and the operating results for the Subsidiary have been reflected as a loss from discontinued operations for all periods presented. (4) Accounts payable and accrued liabilities As of December 31, 1997, accounts payable and accrued liabilities consist primarily of obligations for legal and professional fees. (5) Stockholders' equity On January 27, 1996, the Board of Directors approved a 1-for-5 reverse stock split of the issued and outstanding shares of the Company's common stock. On April 22, 1996, the Company's stockholders approved a divestiture agreement whereby the Company delivered to certain stockholders who had previously owned C.B. Marketing and Investment Limited all the outstanding shares in this corporation. In return, the C.B. Marketing and Investment Limited shareholders transferred to the Company 540,006 shares (2,700,000 shares pre-reverse split) of the Company's common stock. Such shares were immediately canceled. On April 25, 1996, the Board of Directors approved the issuance of 59,000 shares of the Company's common stock in satisfaction of obligations in the amount of $118,000. On July 3, 1996, the Board of Directors approved the issuance of 1,066,000 shares of the Company's common stock in satisfaction of obligations in the amount of $266,500. On March 11, 1997, the Board of Directors approved a 1-for-8 reverse stock split of the issued and outstanding shares of the Company's common stock. F-8 On May 22, 1997, the Company acquired Chiron Systems Ltd., a privately-held English Corporation in a stock-for-stock exchange. As a result of such transaction, the Company issued 2,640,313 shares of its authorized but unissued common stock to the shareholders of Chiron Systems Ltd. On December 19, 1997 the Company exercised its right to divest Chiron Systems Ltd., under the terms of the acquisition agreement. Accordingly, 1,320,157 (post 1-for-2 reverse stock split) shares were returned to the Company and immediately cancelled. On May 22, 1997, the Board of Directors approved the issuance of 150,000 shares of the Company's common stock in satisfaction of obligations in the amount of $37,500. On June 9, 1997, the Board of Directors approved a 1-for-2 reverse stock split of the issued and outstanding shares of the Company's common stock. On June 20, 1997, the Company sold pursuant to a private placement under Regulation S, 1,483,935 shares of common stock for proceeds of $2,375,000. The proceeds are net of $147,689 of placement costs. On August 12, 1997, 250,000 shares of the Company's common stock were issued pursuant to the conversion of a loan note in the amount of $125,000. On December 19, 1997, the Board of Directors approved the issuance of 203,304 shares of the Company's common stock in satisfaction of obligations in the amount of $35,000. (6) Income taxes The income tax provision is summarized as follows for the years ended December 31, 1997 and 1996: Year Ended Year Ended December 31, 1997 December 31, 1996 ----------------- ----------------- Federal $ -- $ -- State and local -- -- ---------- ---------- Total $ -- $ -- ========== ========== Statutory rates of income tax 40% 43% Income tax effect related to the following items: Net operating losses (40) (43) ---------- ---------- Total -- -- ========== ========== Effective rate of income tax 0% 0% ========== ========== The Company has net operating loss carryforwards to offset future taxable income of approximately $5 million expiring in the years 2008 through 2012. As it is not more likely than not that the resulting deferred tax benefits will be realized, a valuation allowance has been recognized for such deferred tax assets. F-9 (7) Commitments and contingencies The Company has not filed federal nor state income tax returns for the past several years, and is currently working with the Internal Revenue Service and state taxing authorities to ensure filings of all requisite returns are made as soon as possible. In management's opinion, there are no material liabilities as a result of the delay in filing these returns. (8) Legal proceedings and subsequent events During the period subsequent to December 31, 1997, various legal proceedings were settled. Reference is made to Note 3 for details as to such resolution. F-10 EX-1 2 AGREEMENT AND PLAN OF DIVESTITURE AGREEMENT AND PLAN OF DIVESTITURE DECEMBER 19TH, 1997 Between INTERNET HOLDINGS, INC. A Utah Corporation And CHIRON SYSTEMS LTD A UK Limited Company Following a board meeting of Internet Holdings, Inc. it was resolved to divest Chiron Systems Ltd (a copy of which is attached as "annex a"). This Agreement and Plan of Divestiture is entered into this 19th day of December, 1997, by and between Internet Holdings, Inc., a Utah corporation, (hereinafter "Parent Company") and, Chiron Systems Ltd, a UK Limited Company (hereinafter "Subsidiary"); RECITALS WHEREAS, the Parent Company now desires to make a tax-free exchange of their shares in the Subsidiary solely for the shares held by the former shareholders of Subsidiary in the Parent Company; NOW, THEREFORE for the mutual consideration set out herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: ---------- Undertakings by the Parent Upon the given date of 19th day of December, 1997 the Parent Company irrevocably agrees to return to the Subsidiary the stock transfer forms signed by the original shareholders of the Subsidiary at the time of acquisition. Upon the given date of 19th day of December, 1997 the Parent Company irrevocably agrees to return to the Subsidiary any Licence or Royalty Agreements transferred to them at the time of acquisition. The Parent Company acknowledges that during the continuance of their Business relationship some US$350,000 ((pound)205,166.68) was invested into the Subsidiary as defined in "Exhibit E" paragraph three of the "Agreement and Plan of Reorganisation" The Parent Company hereby agrees that such monies as defined above, are to remain outstanding at the time of this divestiture and will not be recovered at any time by the Parent Company post divestiture. Upon the given date of 19th day of December, 97 any officers of the Parent Company currently serving as Directors of the Subsidiary irrevocably undertake to resign their positions with immediate effect. Further, they irrevocably undertake to resign their positions as signatories to any bank or other type of financial account where they may have access to the Subsidiaries money. Undertakings by the Subsidiary Upon the given date of 19th day of December, 1997, the former shareholders of Subsidiary irrevocably agree to return to the Parent Company any and all stock certificates issued to them at or after the signing of the "Agreement and Plan of Reorganisation" (reference "annex b"); thereby relinquishing any and all claims in the Parent Company. The Subsidiary acknowledges that during the continuance of their Business relationship some US$350,000 {(pound)205,166.68} was invested into the Subsidiary from the Parent Company as defined in "Exhibit E" paragraph three of the "Agreement and Plan of Reorganisation" The Subsidiary hereby acknowledges and agrees that such monies as defined in the paragraph above, are to remain outstanding at the time of this divestiture. As of the given date of 19th day of December 1997 such sums will not be re-paid to or, recovered by the Parent Company. Upon the given date of 19th day of December, 1997, the Subsidiary irrevocably agrees to return to the Parent Company any Licence or Royalty Agreement transferred to them at the time of acquisition. Upon the given date of 19th day of December, 1997 the Subsidiary and its shareholders, officers and directors irrevocably agree and undertake that it and they have no further interest in, claim on or, relationship with the Parent Company, its shareholders or, advisors. Upon the given date of 19th day of December, 1997 any Directors of the Subsidiary currently serving as officers of the Parent Company irrevocably undertake to resign their positions with immediate effect and without claim. The signing of this document is recognised as formal resignation. The Subsidiary and its officers and directors, hereby agree to indemnify and hold harmless the Parent Company from any and all acts and omissions, claims or counter claims which may be brought against the Parent Company as a result of actions taken by the Subsidiary or its officers or directors during the period that Subsidiary was a wholly owned subsidiary of the Parent Company. The Subsidiary, its officers and directors, recognise that upon the given date of l9th day of December, 1997 they are still required to furnish the Parent Company with accounting and other financial information; So allowing the Parent Company to complete its required SEC filings for the year ended December 31st 1997. Further, an audited P&L statement and balance sheet for the year-end December 31st 1997 is required. The Subsidiary, its officers, directors and, consultants hereby irrevocably undertake to assist any officer, employee or consultant working for or with the Parent Company with the preparation of the required accounting material for the periods specified. Further they will use their best efforts to ensure that such information is provided to the Parent Company by no later than the 16th day of March 1998. IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written. ATTEST: INTERNET HOLDINGS, INC. a Utah corporation By: /s/ Christopher Wilkes President ATTEST: CHIRON SYSTEMS LTD a UK Limited Company By: /s/ I.R. Tredinnick By: /s/ M. Kennedy By: /s/ P. Tredinnick By: /s/ B. Taylor For and on Behalf of the ORIGINAL STOCKHOLDERS (See "annex d" attached hereto in counterparts.) The signing of this page has been WITNESSED by: Name: /s/ [Witness] Signed: /s/ [Witness] Occupation: /s/ [Witness] "ANNEX A" COPY OF BOARD MINUTE Minutes of a meeting of the board of directors of Internet Holdings, Inc. at 40 Exchange Place, New York 10005 at 06:45pm on December, 17th 1997 Present: Lewis Klee Christopher Wilkes (by telephone) 1. It was resolved that the Company should make an immediate divestiture of its subsidiary Chiron Systems Ltd effective as of 19th December 1997. 2. It was resolved that the Company should treat the funds passed to the Subsidiary totalling (pound)205,166.68 Sterling as a loan in accordance with the previously signed "Agreement and Plan of Reorganisation" 3. It was resolved that the Company would write-off the aforementioned (pound)205,166.68 as the board members recognise that there is no chance of recovery from its subsidiary, Chiron Systems Ltd. 4. There being no further business the meeting was closed at 07:00 p.m. Attest COPY Christopher Wilkes President "ANNEX B" Name and Address Internet H. Inc. Internet H. Inc. of Stockholders Restricted Stock Restricted Stock - ---------------- to be Returned to be Returned ----------------- (Secondary Re-issue) --------------------- Lisa R Tredinnick 1,473,293 15,842 Little Poplars, Cold Ash Hill Cold Ash Nr Newbury Berkshire RG16 9PT Michael J Kennedy 506,940 15,824 Landfall Wych Hill Lane Woking GU22 0AB Mrs P Tredinnick 406,608 Little Poplars, Cold Ash Hill Cold Ash Nr Newbury Berkshire RG16 9PT Mrs B Taylor 126,736 15,842 25 Eden Way Nr Wokingham Reading Berks RGll 5PQ Mr C Wilkes 15,842 "Annex C" ____________________ of the Stock Transfer Certificates Signed by the Original Stockholders __________________ Chiron Ltd at the time of the signing of the "Agreement and Plan _____________________ Reorganisation." (Above table line for Registrar only) - -------------------------------------------------------------------------------- Certificate lodged with the Registrar Consideration Money ss ....... (For completion by the Registrar/Stock Exchange) - ------------------------------ ------------------------------------------------- Name of Under- taking. CHIRON SYSTEMS LTD - ------------------------------ ------------------------------------------------- Description of Security. ORIDINARY SHARES OF SS. 1 EACH - ------------------------------ ------------------------------------------------- Number or amount Words Figures of Shares, Stock or other security and, TWENTY NINE THOUSAND 29,000 in figures column only, number and (units of) denomination of units, if any. - ------------------------------ ------------------------------------------------- Name(s) of re- In the name(s) of gistered holder(s) should be given in IAN REGINALD TREDINNICK full: the address LITTLE POPLARS should be given COLD ASH HILL COPY where there is only COLD ASH one holder. NR. NEWBURY BERKSHIRE If the transfer is BG16 9PT not made by the registered holder(s) insert also the name(s) and capacity (e.g. Executor(s) of the person(s) making the transfer. - -------------------------------------------------------------------------------- I/We hereby transfer the above security Stamp of Selling Broker(s) or, for out of the name(s) aforesaid to the transactions which are not stock person(s) named below. exchange transactions of Agent(s). if any, acting for the Transferor(s) Signature(s) of transferor(s) 1. /s/ Ian Tredinnick --------------------------- 2. --------------------------- 3. --------------------------- 4. --------------------------- Date_______________________ Bodies corporate should execute under their common seal - -------------------------------------------------------------------------------- Full name(s) and full postal address(es) including County or, if applicable, Postal District INTERNET HOLDINGS, INC. number) of the person(s) to whom the security is transferred. c/o The Law Offices Of Lewis Mitchell Klee 40 Exchange Place, 8th Floor Please state title, if any, or New York whether Mr., Mrs., or Miss. New York 10005 USA Please complete in typewriting or in Block Capitals. - -------------------------------------------------------------------------------- I/We request that such entries be made in the register as are necessary to give effect to this transfer. - -------------------------------------------------------------------------------- Stamp of Buying Broker(s) (if any) Stamp or name and address of person lodging this form (if other than the Buying Broker(s)) - -------------------------------------------------------------------------------- (Above table line for Registrar only) - -------------------------------------------------------------------------------- Certificate lodged with the Registrar Consideration Money ss ....... (For completion by the Registrar/Stock Exchange) - ------------------------------ ------------------------------------------------- Name of Under- taking. CHIRON SYSTEMS LTD - ------------------------------ ------------------------------------------------- Description of Security. ORIDINARY SHARES OF SS. 1 EACH - ------------------------------ ------------------------------------------------- Number or amount Words Figures of Shares, Stock or other security and, TEN THOUSAND 10,000 in figures column only, number and (units of) denomination of units, if any. - ------------------------------ ------------------------------------------------- Name(s) of re- In the name(s) of gistered holder(s) should be given in MICHAEL JAMES KENNEDY full: the address LANDFALL should be given WYCH HILL LANE COPY where there is only WOXING one holder. SURREY GU22 OAB If the transfer is not made by the registered holder(s) insert also the name(s) and capacity (e.g. Executor(s) of the person(s) making the transfer. - -------------------------------------------------------------------------------- I/We hereby transfer the above security Stamp of Selling Broker(s) or, for out of the name(s) aforesaid to the transactions which are not stock person(s) named below. exchange transactions of Agent(s). if any, acting for the Transferor(s) Signature(s) of transferor(s) 1. /s/ M. Kennedy. --------------------------- 2. --------------------------- 3. --------------------------- 4. --------------------------- Date_______________________ Bodies corporate should execute under their common seal - -------------------------------------------------------------------------------- Full name(s) and full postal address(es) including County or, if applicable, Postal District INTERNET HOLDINGS, INC. number) of the person(s) to whom the security is transferred. c/o The Law Offices Of Lewis Mitchell Klee 40 Exchange Place, 8th Floor Please state title, if any, or New York whether Mr., Mrs., or Miss. New York 10005 USA Please complete in typewriting or in Block Capitals. - -------------------------------------------------------------------------------- I/We request that such entries be made in the register as are necessary to give effect to this transfer. - -------------------------------------------------------------------------------- Stamp of Buying Broker(s) (if any) Stamp or name and address of person lodging this form (if other than the Buying Broker(s)) - -------------------------------------------------------------------------------- (Above table line for Registrar only) - -------------------------------------------------------------------------------- Certificate lodged with the Registrar Consideration Money ss ....... (For completion by the Registrar/Stock Exchange) - ------------------------------ ------------------------------------------------- Name of Under- taking. CHIRON SYSTEMS LTD - ------------------------------ ------------------------------------------------- Description of Security. ORIDINARY SHARES OF SS. 1 EACH - ------------------------------ ------------------------------------------------- Number or amount Words Figures of Shares, Stock or other security and, EIGHT THOUSAND 8,000 in figures column only, number and (units of) denomination of units, if any. - ------------------------------ ------------------------------------------------- Name(s) of re- In the name(s) of gistered holder(s) should be given in PATRICIA TREDINNICK full: the address LITTLE POPLARS should be given COLD ASH HILL COPY where there is only COLD ASH one holder. NR- NEWBURY BERKSHIRE If the transfer is RG16 9PT not made by the registered holder(s) insert also the name(s) and capacity (e.g. Executor(s) of the person(s) making the transfer. - -------------------------------------------------------------------------------- I/We hereby transfer the above security Stamp of Selling Broker(s) or, for out of the name(s) aforesaid to the transactions which are not stock person(s) named below. exchange transactions of Agent(s). if any, acting for the Transferor(s) Signature(s) of transferor(s) 1. /s/ P. Tredinnick --------------------------- 2. --------------------------- 3. --------------------------- 4. --------------------------- Date_______________________ Bodies corporate should execute under their common seal - -------------------------------------------------------------------------------- Full name(s) and full postal address(es) including County or, if applicable, Postal District INTERNET HOLDINGS, INC. number) of the person(s) to whom the security is transferred. c/o The Law Offices Of Lewis Mitchell Klee 40 Exchange Place, 8th Floor Please state title, if any, or New York whether Mr., Mrs., or Miss. New York 10005 USA Please complete in typewriting or in Block Capitals. - -------------------------------------------------------------------------------- I/We request that such entries be made in the register as are necessary to give effect to this transfer. - -------------------------------------------------------------------------------- Stamp of Buying Broker(s) (if any) Stamp or name and address of person lodging this form (if other than the Buying Broker(s)) - -------------------------------------------------------------------------------- (Above table line for Registrar only) - -------------------------------------------------------------------------------- Certificate lodged with the Registrar Consideration Money ss ....... (For completion by the Registrar/Stock Exchange) - ------------------------------ ------------------------------------------------- Name of Under- taking. CHIRON SYSTEMS LTD - ------------------------------ ------------------------------------------------- Description of Security. ORIDINARY SHARES OF SS. 1 EACH - ------------------------------ ------------------------------------------------- Number or amount Words Figures of Shares, Stock or other security and, TWO THOUSAND FIVE HUNDRED 2,500 in figures column only, number and (units of) denomination of units, if any. - ------------------------------ ------------------------------------------------- Name(s) of re- In the name(s) of gistered holder(s) should be given in BRENDA TAYLOR full: the address 25 EDEN WAY should be given WINNERSH COPY where there is only NR. WOKINGHAM one holder. BERKSHIRE RG11 5PQ If the transfer is not made by the registered holder(s) insert also the name(s) and capacity (e.g. Executor(s) of the person(s) making the transfer. - -------------------------------------------------------------------------------- I/We hereby transfer the above security Stamp of Selling Broker(s) or, for out of the name(s) aforesaid to the transactions which are not stock person(s) named below. exchange transactions of Agent(s). if any, acting for the Transferor(s) Signature(s) of transferor(s) 1. /s/ Brenda Taylor --------------------------- 2. --------------------------- 3. --------------------------- 4. --------------------------- Date_______________________ Bodies corporate should execute under their common seal - -------------------------------------------------------------------------------- Full name(s) and full postal address(es) including County or, if applicable, Postal District INTERNET HOLDINGS, INC. number) of the person(s) to whom the security is transferred. c/o The Law Offices Of Lewis Mitchell Klee 40 Exchange Place, 8th Floor Please state title, if any, or New York whether Mr., Mrs., or Miss. New York 10005 USA Please complete in typewriting or in Block Capitals. - -------------------------------------------------------------------------------- I/We request that such entries be made in the register as are necessary to give effect to this transfer. - -------------------------------------------------------------------------------- Stamp of Buying Broker(s) (if any) Stamp or name and address of person lodging this form (if other than the Buying Broker(s)) - -------------------------------------------------------------------------------- (Above table line for Registrar only) - -------------------------------------------------------------------------------- Certificate lodged with the Registrar Consideration Money ss ....... (For completion by the Registrar/Stock Exchange) - ------------------------------ ------------------------------------------------- Name of Under- taking. CHIRON SYSTEMS LTD - ------------------------------ ------------------------------------------------- Description of Security. ORIDINARY SHARES OF SS. 1 EACH - ------------------------------ ------------------------------------------------- Number or amount Words Figures of Shares, Stock or other security and, TWO THOUSAND FIVE HUNDRED 2,500 in figures column only, number and (units of) denomination of units, If any. - ------------------------------ ------------------------------------------------- Name(s) of re- In the name(s) of gistered holder(s) should be given in A SYKES full: the address ROCK COTTAGE should be given COLD HATLON COPY where there is only NR. WELLINGTON one holder. N. SHROPS TF6 6AU If the transfer is not made by the registered holder(s) insert also the name(s) and capacity (e.g. Executor(s) of the person(s) making the transfer. - -------------------------------------------------------------------------------- I/We hereby transfer the above security Stamp of Selling Broker(s) or, for out of the name(s) aforesaid to the transactions which are not stock person(s) named below. exchange transactions of Agent(s). if any, acting for the Transferor(s) Signature(s) of transferor(s) 1. /s/ [SIGNATORY] --------------------------- 2. --------------------------- 3. --------------------------- 4. --------------------------- Date_______________________ Bodies corporate should execute under their common seal - -------------------------------------------------------------------------------- Full name(s) and full postal address(es) including County or, if applicable, Postal District INTERNET HOLDINGS, INC. number) of the person(s) to whom the security is transferred. c/o The Law Offices Of Lewis Mitchell Klee 40 Exchange Place, 8th Floor Please state title, if any, or New York whether Mr., Mrs., or Miss. New York 10005 USA Please complete in typewriting or in Block Capitals. - -------------------------------------------------------------------------------- I/We request that such entries be made in the register as are necessary to give effect to this transfer. - -------------------------------------------------------------------------------- Stamp of Buying Broker(s) (if any) Stamp or name and address of person lodging this form (if other than the Buying Broker(s)) - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----