-----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, DbRii12nPZjAZHoY/u6fb1bo2zpu+QCEEdoN14bEtxpvyLCKrtpJdwxlpjLuo3eZ sW9uQTsAyBQ8hXrsTZeOPg== /in/edgar/work/0001116502-00-500095/0001116502-00-500095.txt : 20001115 0001116502-00-500095.hdr.sgml : 20001115 ACCESSION NUMBER: 0001116502-00-500095 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIZAR ENERGY CO CENTRAL INDEX KEY: 0001042463 STANDARD INDUSTRIAL CLASSIFICATION: [1382 ] IRS NUMBER: 841365443 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24977 FILM NUMBER: 763894 BUSINESS ADDRESS: STREET 1: 2400 E COMMERCIAL BLVD STREET 2: SUITE 1100 CITY: FT LAUDERDALE STATE: FL ZIP: 33308 BUSINESS PHONE: 3039329998 MAIL ADDRESS: STREET 1: 2400 E COMMERCIAL BLVD STREET 2: SUITE 1100 CITY: FT LAUDERDALE STATE: FL ZIP: 33308 10QSB 1 0001.txt QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2000 [ ] 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: 0-13118 MIZAR ENERGY COMPANY -------------------- (Exact name of registrant as specified in its charter) Colorado 33-0231238 ------------------------------ ----------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 2400 E. Commercial Blvd., Suite 221 Ft. Lauderdale, FL 33308 (Address of principal executive offices, including zip code) (954) 938-8010 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days. YES [X] NO [ ] The number of issued and outstanding shares of the Registrant's Common Stock, $0.001 par value, as of September 30, 2000 was 10,050,000. MIZAR ENERGY COMPANY PART I - FINANCIAL INFORMATION
PAGE Item 1. Financial Statements: Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999..............................3 Consolidated Statements of Operations - For the Three Months and Nine Months Ended September 30, 2000 and 1999 and For the Period from December 11, 1996 (Inception) through September 30, 2000 (Unaudited)..............................................................................................5 Consolidated Statements of Changes in Shareholders' Equity - For the Period from December 11, 1996 (Date of Inception) to September 30, 2000 (Unaudited).....................................................................................6 Consolidated Statements of Cash Flows for the Three Months and Nine Months Ended September 30, 2000 and 1999 and For the Period from December 11, 1996 (Inception) through September 30, 2000 (unaudited).....................................8 Notes to Consolidated Financial Statements............................................................9-13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................................14-23 PART II - OTHER INFORMATION Item 1. Legal Proceedings..............................................................................24 Item 2. Changes in Securities..........................................................................24 Item 3. Defaults Upon Senior Securities................................................................24 Item 4. Submission of Matters to a Vote of Security Holders............................................24 Item 5. Other Information..............................................................................24 Item 6. Exhibits and Reports on Form 8-K...............................................................24 Signatures.......................................................................................................25
MIZAR ENERGY COMPANY AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED FINANCIAL STATEMENTS QUARTER ENDED SEPTEMBER 30, 2000 MIZAR ENERGY COMPANY AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS September 30, December 31, 2000 1999 (Unaudited) (Audited) ---------- ---------- Assets Current assets Cash $ 719,602 $ 3,842 Accounts receivable 832 Other receivables 7,080 Prepaid expenses 67,994 ---------- ---------- Total current assets 795,508 3,842 Fixed assets (net of accumulated depreciation of $ 2,730 and $1,191) 70,361 5290 Intangible assets net of accumulated amortization of $ 309 and $126) 170,812 2102 Other assets Deposits 7,980 470 Due from related parties 6,923 (22,892) Investments -- 75,000 ---------- ---------- 14,903 52,578 ---------- ---------- $1,051,584 $ 63,812 ========== ========== See notes to financial statements. 3 MIZAR ENERGY COMPANY AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS September 30, December 31, 2000 1999 (Unaudited) (Audited) ----------- ----------- Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 83,786 $ 34,190 ----------- ----------- Total current liabilities 83,786 34,190 Shareholders' equity Common stock, $0.001 par value, 25,000,000 shares authorized; 10,050,000 shares issued and outstanding 10,050 100,000 Additional paid in capital 2,272,395 354,159 Deficit accumulation during the development stage (1,314,647) (424,537) ----------- ----------- 967,798 29,622 ----------- ----------- $ 1,051,584 $ 63,812 =========== =========== See notes to financial statements. 4 MIZAR ENERGY COMPANY AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS
For the period from December 11, 1996 (Date of inception) to For the period ended September 30, 2000 September 30, 2000 Three months Nine months (Unaudited) ----------- ----------- ----------- Income Sales net of returns $ 1,636 $ 4,191 $ 13,292 Management fees -- 11,778 Cost of sales (1,048) (1,379) (5,423) ----------- ----------- ----------- Gross profit 588 2,812 19,647 Expenses Salaries 106,272 216,998 323,869 Consulting 43,500 204,109 285,676 Professional fees 36,484 63,568 93,158 Marketing and advertising 9,748 27,354 65,685 Loss web site design -- 24,128 49,317 Rent 30,038 60,620 67,463 Other general and administrative expenses 91,192 180,235 305,861 Impairment of oil and gas properties -- -- 17,876 Lease operating costs -- -- 8,162 Loss on purchase option (Note 9) 139,255 139,255 139,255 Depreciation and amortization 5,338 7,060 8,377 ----------- ----------- ----------- 461,827 923,327 1,364,699 Other income (expenses) Interest income 13,283 30,405 30,405 ----------- ----------- ----------- Net loss $ (447,956) $ (890,110) $(1,314,647) =========== =========== =========== Earnings per share Net loss per common share $ (0.08) $ (0.16) $ (0.24) ----------- ----------- -----------
See notes to financial statements. 5 MIZAR ENERGY COMPANY AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD FROM DECEMBER 11, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 2000 (Unaudited)
Common Stock Additional Shares Amount Paid in Capital ----------- ----------- ----------- Issuance of common stock to founders for the period ended December 1996, in exchange for $30,000 in cash 1,400,000 $ 30,000 $ -- Issuance of common stock according to the private offering in effect, through December 1997 ($ 1 per share) 4,100 4,100 Net loss for the year ----------- ----------- ----------- Balance - December 31, 1997 1,404,100 $ 34,100 $ -- Issuance of common stock according to the private offering in effect, through December 1998 net of offering cost of $ 15,831. ($1 per share) 26,600 10,769 Net loss for the year ----------- ----------- ----------- Balance - December 31, 1998 1,430,700 $ 44,869 $ -- Net loss for the year ----------- ----------- ----------- Balance - December 31, 1999 (Audited) 1,430,700 $ 44,869 $ -- Issuance of shares of common stock in connection with the merger of Ingenu Incorporated and HBOA Com, Inc., on May 24, 2000 8,569,300 2,161,576 ----------- ----------- ----------- Sub-total 10,000,000 $ 2,206,445 $ --
[RESTUBBED]
Deficit Accumulated Through the Development Stage TOTAL ----------------- ----------- Issuance of common stock to founders for the period ended December 1996, in exchange for $30,000 in cash $ -- $ 30,000 Issuance of common stock according to the private offering in effect, through December 1997 ($ 1 per share) 4,100 Net loss for the year (24,278) (24,278) ----------- ----------- Balance - December 31, 1997 $ (24,278) $ 9,822 Issuance of common stock according to the private offering in effect, through December 1998 net of offering cost of $ 15,831. ($1 per share) 10,769 Net loss for the year (14,263) (14,263) ----------- ----------- Balance - December 31, 1998 $ (38,541) $ 6,328 Net loss for the year (5,818) (5,818) ----------- ----------- Balance - December 31, 1999 (Audited) $ (44,359) $ 510 Issuance of shares of common stock in connection with the merger of Ingenu Incorporated and HBOA Com, Inc., on May 24, 2000 (380,178) 1,781,398 ----------- ----------- Sub-total $ (424,537) $ 1,781,908
See notes to financial statements. 6 MIZAR ENERGY COMPANY AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD FROM DECEMBER 11, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 2000 (Unaudited)
Deficit Accumulated Common Stock Additional Through the Shares Amount Paid in Capital Development Stage TOTAL ---------- ----------- ----------- ---------------- ---------- Sub-total 10,000,000 $ 2,206,445 $ -- $ (424,537) $ 1,781,908 On June 5, 2000, 50,000 shares of common stock were issued to an office as signing bonus shares. 50,000 11,000 11,000 Additional capital paid in from shareholders 65,000 65,000 Par value of common stock at $ 0.001 (2,207,395) 2,207,395 -- Net loss for the nine months ended September 30, 2000 (890,110) (890,110) ---------- ----------- ----------- ----------- ----------- Balance - September 30, 2000 (Unaudited) 10,050,000 $ 10,050 $ 2,272,395 $(1,314,647) $ 967,798 ========== =========== =========== =========== ===========
See notes to financial statements. 7 MIZAR ENERGY COMPANY AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS
For the period from December 11, 1996 (Date of inception) For the nine to months ended September 30, 2000 September 30, 2000 (Unadited) ------------------ -------------------- Cash flows from operating activities Net Loss $ (890,110) $(1,314,647) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 7,060 8,377 Loss on investments 139,255 139,255 (Increase) decrease in loans to/from affiliates (29,815) (6,923) (Increase) decrease in deposits and advances (7,510) (7,980) (Increase) decrease in accounts receivables (832) (832) (Increase) decrease in other receivables (7,405) (7,080) (Increase) decrease in prepaid expenses (67,993) (67,994) Increase (decrease) in accounts payable 49,596 83,788 ----------- ----------- Total adjustments 82,356 140,611 ----------- ----------- Net cash used by operating activities (807,754) (1,174,036) ----------- ----------- Cash flow from investing activities: Cash payments for the purchase of investments (63,930) (139,255) Cash payments for the purchase of property (240,843) (249,550) ----------- ----------- Net cash used by investing activities (304,773) (388,805) Cash flow from financing activities: Proceeds from issuance of common stock 1,828,287 2,282,443 ----------- ----------- Net cash provided by financing activities 1,828,287 2,282,443 ----------- ----------- Net increase in cash and cash equivalents 715,760 719,602 Cash and cash equivalents, beginning of the period 3,842 -- ----------- ----------- Cash and cash equivalents, end of the period $ 719,602 $ 719,602
See notes to financial statements. 8 MIZAR ENERGY COMPANY AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS QUARTER ENDED SEPTEMBER 30, 2000 NOTE 1 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 310(b) of Regulation SB. Accordingly, they do not include all of the information and footnote disclosures normally included in complete consolidated financial statements prepared in accordance with generally accepted accounting principles. For further information, such as significant accounting policies followed by the Company, refer to the notes to the Company's audited consolidated financial statements. In the opinion of management, the unaudited consolidated financial statements include all necessary adjustments (consisting of normal, recurring accruals) for a fair presentation of the financial position, results of operations and cash flow for the interim periods presented. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and revenue and expenses. Actual results may differ from these estimates. Interim results are not necessarily indicative of results for a full year. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Description -------------------- Mizar Energy Company (the Company) was incorporated in the state of Colorado on December 11, 1996, and had no previous operations. From its inception through December 28, 1999, the Company was involved in the business of acquiring, developing and operating oil and gas properties. On December 28, 1999, the Company's founders sold 59% of the Company's issued and outstanding common stock to HBOA.Com, Inc., a District of Columbia corporation. Pursuant to this stock sale, there was a change in the Company's business and management team. The Company will now be focusing on developing the premier Internet portal through which home based business owners obtain the products, services and information necessary to start, expand and profitably run their businesses. On May 24, 2000, Ingenu Incorporated was incorporated under the laws of the state of Florida. Ingenu Incorporated was formed to engage in the business of Internet services. On May 24, 2000, the Company approved the merger of HBOA.Com, Inc. with and into its wholly owned subsidiary, Ingenu Incorporated, which took place May 31, 2000. The surviving corporation changed its name to HBOA.Com, Inc. The Company is considered to be in the development stage and the accompanying financials represent those of a development stage company. 9 MIZAR ENERGY COMPANY AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS QUARTER ENDED SEPTEMBER 30, 2000 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Principles of Consolidation --------------------------- The consolidated financial statements of the Company include those accounts of Mizar Energy Company, a development stage company, and HBOA.Com, Inc., a wholly owned subsidiary. All significant intercompany transactions and balances have been eliminated in the consolidation. Cash and Cash Equivalents ------------------------- For purposes of the statement of cash flows, the Company treats all short-term investments with maturities of three months or less at acquisition to be cash equivalents. Use of Estimates ---------------- The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition ------------------- Revenues of HBOA.Com, Inc. are recognized at the time the services are rendered to customers. Services are rendered when the Company's representatives receive the customers' requests and complete the customers' orders. Property and Equipment ---------------------- Property and equipment are stated at cost. Depreciation of depreciable assets is computed using the straight-line method of depreciation over the estimated useful lives of the assets. The estimated useful life is 5-10 years. Amortization ------------ Amortization of trademarks and copyrights is determined utilizing the straight-line method based generally on the estimated useful lives of the intangibles as follows: Trademarks 15 years Internet Website 3 years Advertising Costs ----------------- Advertising and marketing costs are expensed as incurred. During the nine months ended September 30, 2000, advertising cost expenses totaled $27,354. 10 MIZAR ENERGY COMPANY AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS QUARTER ENDED SEPTEMBER 30, 2000 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Basic Loss Per Share and Diluted Loss Per Share ----------------------------------------------- In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS No. 128), which specifies the computation, presentation and disclosure requirements for earnings per share. SFAS No. 128 supercedes Accounting Principle Board Opinion No. 15 entitled Earnings Per Share. Basic earnings per share are computing by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares (the denominator) for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued. The numerator in calculating basic earnings per share is reported net loss. The denominator is based on the following weighted-average number of common shares: Basic 5,501,358 Concentration of Risk --------------------- Financial instruments that potentially subject the Company to credit risk include cash on deposit with three financial institutions amounting to $719,602 at September 30, 2000. Each financial institution insures its depositors for up to $100,000 through the U.S. Federal Deposit Insurance Corporation. NOTE 3 CAPITAL STOCK TRANSACTIONS Common Stock ------------ Authorized 25,000,00 shares of common stock, $0.001 par value per share. Issued and outstanding 10,050,000 shares of common stock at September 30, 2000. Preferred Stock --------------- Authorized 10,000,000 shares of preferred stock, no par value per share. None issued as of September 30, 2000. NOTE 4 INCOME TAXES At September 30, 2000, the Company had a net operating loss carryforward for income tax purposes of approximately $1,175,392 available to offset future income taxes, expiring through 2020. 11 MIZAR ENERGY COMPANY AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS QUARTER ENDED SEPTEMBER 30, 2000 NOTE 5 OTHER FINANCING ARRANGEMENTS On November 10, 1999, the Company, with the approval of the board of directors, granted the option to convert 100% of the current loan payable to Dundas Systems, Inc. for shares of common stock at a price of $1.00 per share. At June 30, 2000, 223,149 shares have been exchanged for $223,149 in loans payable. NOTE 6 RELATED PARTY TRANSACTIONS The Company is provided with office space on a rent-free basis from HBOA.Com, Inc. (see Note 8). The Company has receivables/payables from related third party companies at September 30, 2000 as follows: Due from Dundas Systems, Inc. $ 6,923 Such loans occurred during the ordinary course of business, bearing no interest, and due on demand. These loans, in the opinion of management, do not involve more than normal credit risk or other unfavorable areas of concern. NOTE 7 GOING CONCERN The Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has no current source of revenue. Without realization of additional capital it would be unlikely for the Company to continue as a going concern. It is Management's plan to seek additional capital through a merger with an existing operating company (see Note 8). NOTE 8 MERGER On May 24, 2000 the Company approved the merger of HBOA.Com, Inc., a District of Columbia corporation, with and into HBOA.Com, Inc., a Florida corporation, (f/k/a Ingenu Incorporated), its wholly owned subsidiary. The surviving company was HBOA.Com, Inc, a Florida corporation, (f/k/a Ingenu Incorporated), and the name of the combined foundation is HBOA.Com, Inc. The combination was accounted for as a pooling of interest under which net assets of both foundations were combined at book value and neither entity recognized a gain or loss. The merger shall qualify as a transaction in securities exempt from registration or qualification under the Securities Act of 1933, as amended ("the Securities Act"), and under applicable state securities law, and the merger shall qualify as a tax-free reorganization under Section 386(a)(1)(A) of the Internal Revenue Code of 1986, as amended ("the code"). 12 MIZAR ENERGY COMPANY AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS QUARTER ENDED SEPTEMBER 30, 2000 NOTE 8 MERGER (continued) The shareholders of HBOA.Com, Inc. received 8,569,300 shares of Mizar Energy Company common stock in exchange for 100% shares of the Company. After the merger, Mizar Energy Company retained 10,000,000 shares of its common stock. The operations of HBOA.Com, Inc. have been consolidated into Mizar Energy Company. NOTE 9 CONTINGENCIES On June 8, 2000, the Company entered into an option to purchase 510 shares of Song 1, Inc. by August 15, 2000. The Company did not exercise the option for various reasons. The total amount paid at September 30, 2000 was $139,255. The Company is currently in litigation to recover this initial deposit of $139,255. The ultimate outcome of this litigation is unknown at this time. While management believes that they will prevail in litigation, to be conservative the investment asset in Song 1, Inc. has been reduced by $139,255. NOTE 10 SUBSEQUENT EVENT Equity Compensation Plan ------------------------- On October 10, 2000, the board of directors approved an Equity Compensation Plan, authorizing up to 2,700,000 shares of common stock in the form of incentive stock options, non-qualifying stock options, and restricted stock grants for its employees, board members, key personnel and consultants under certain terms and conditions set forth in the plan. On the same day the board of directors approved grants of incentive stock options for 1,250,000 shares at a price of $1.50 per share. The vesting period commences after one year of service, and participants are fully vested after three years. Other Financing Arrangements ---------------------------- The Company, with the approval of the board of directors, granted the option to convert certain future expenses for shares of common stock at a price of $0.10 per share. The total amount of common stock included in the option was 900,000 shares. 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following "Management's Discussion and Analysis of Financial Condition and Results of Operations" includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform act of 1995. This Act provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements other than statements of historical fact we make in this Form 10-QSB are forward- looking. In particular, the statements herein regarding industry prospects and our future results of operations or financial position are forward-looking statements. Forward-looking statements reflect our current expectations and are inherently uncertain. Our actual results may differ significantly from our expectation. The section entitled "Additional Factors That May Affect Future Results" describes some, but not all, of the factors that could cause these differences. Overview Mizar Energy Company, a Colorado company (the "Company") was incorporated in the state of Colorado on December 11, 1996. From our inception through December 28, 1999, the Company was involved in the business of acquiring, developing and operating oil and gas properties. On December 28, 1999, the Company's founders sold 60% of the Company's issued and outstanding common stock to HBOA.Com, Inc., a District of Columbia corporation, which engaged in the sale of products and services to the owners of home based businesses through its Internet web site ("HBOA-DC"). Pursuant to this stock sale, there was a change in the Company's business and management team. The Company is now focusing on developing its web site into the premier Internet portal through which home based business owners obtain the products, services and information necessary to start, expand and profitably run their businesses. On May 31, 2000, HBOA-DC was merged with and into HBOA.Com, Inc., a wholly-owned subsidiary of the Company ("HBOA-FL"). In the aggregate, the HBOA-DC shareholders received 8,569,300 shares of the Company's common stock. As a result of the merger, HBOA-DC's operations were consolidated into the Company's business and the Company has 10,050,000 shares of its common stock issued and outstanding as of September 30, 2000. The Company's common stock was listed for trading on the OTC Bulletin Board in October 2000. At a meeting of the Company's shareholders held on November 10, 2000, the shareholders approved a proposal to reincorporate the company from Colorado to Florida and to change the company's name to HBOA Holdings, Inc. The reincorporation will be effectuated by merging the Company into HBOA Holdings, Inc., a wholly-owned Florida subsidiary of the Company. The Company expects that all of this paperwork to formalize the reincorporation and name change proposal will be processed by the Florida Secretary of State and the Colorado Secretary of State by November 14, 2000. Except where the context indicates otherwise, the term "Company" shall refer to Mizar Energy Company, whose name will be changed to HBOA Holdings, Inc. and HBOA-FL, a wholly- owned subsidiary of HBOA Holdings, Inc. 14 Results of Operations The merger of HBOA-DC with and into the Company's wholly owned subsidiary, HBOA-FL, was accounted for as a pooling of interest transaction. As a result of the pooling of interest accounting, the Company's historical financial statements from the previous periods have been restated to include the operations of HBOA-DC. Prior to the merger, the Company's revenues and expenses were nominal. The majority of the changes in the Company's results of operations, liquidity and capital resources are due to the merger of HBOA-DC with and into the Company on May 31, 2000 and the accounting treatment of the merger as a pooling of interest. Sales, net of returns, were $1,636 during the three month period ended September 30, 2000 and $4,191 during the nine month period ended September 30, 2000. These revenues were generated from the sale of memberships on HBOA's web site. During the almost 5 year period since incorporation of the Company on December 11, 1996, sales, net of returns, have totaled $13,292. HBOA-DC realized management fees of $11,778 during the period from its inception through September 30, 2000. As a result of the foregoing, the Company's total revenues were $25,070 for the period from inception through September 30, 2000. HBOA-DC's operations, are reflected in the Company's financial statements due to the accounting treatment of the merger as a pooling of interest. Costs of sales was $1,048 during the three month period ended September 30, 2000 and $1,379 during the nine month period ended September 30, 2000. During the almost 5 year period since inception of the Company, cost of sales has totaled $5,423. These increases in cost of sales are from HBOA-DC's operations, which are reflected in the Company's financial statements due to the accounting treatment of the merger as a pooling of interest. As a result of the forgoing, gross profit was $588 during the three month period ended September 30, 2000 and $2,812 during the nine month period ended September 30, 1999. During the almost 5 year period since incorporation of the Company, gross profit has totaled $19,647. Operating expenses totaled $461,827 during the three month period ended September 30, 2000 and $923,327 during the nine month period ended September 30, 2000. During the almost 5 year period since incorporation of the Company, operating expenses have totaled $1,364,699. The Company's operating expenses consist of (1) salaries, (2) consulting fees, (3) professional fees, (4) marketing and advertising expenses, (5) web site design, (6) rent, (7) other general and administrative expenses, (8) impairment of oil and gas properties, (9) lease operating costs, (10) a loss on a purchase option and (11) depreciation and amortization. During the nine month period ended September 30, 2000, the most significant operating expenses were (1) a loss on a purchase option relating to the Company's proposed acquisition of Song 1, Inc. ($139,225), (2) salaries (equal to $110,726) and (3) other general and administrative expenses ($91,192). The increases in operating expenses are primarily from HBOA-DC's operations, which are reflected in the Company's financial statements due to the accounting treatment of the merger as a pooling of interest. Interest income totaled $13,283 during the three month period ended September 30, 2000 and $30,405 during the nine month period ended September 30, 2000. During the almost 5 year period since incorporation of the Company, interest income has totaled $30,405. As a result of the forgoing, the Company's net loss was $447,956 during the three month period ended September 30, 2000 and $890,110 during the nine month period ended September 30, 2000. During the almost 5 year period since incorporation of the Company, the Company's net loss has totaled $1,314,647. 15 Plan of Operations At the present time, the Company is primarily focused on the operations of HBOA.Com, Inc., its wholly-owned Florida subsidiary. HBOA is an Internet-based membership organization which acts as a resource center, educator and advocate for home-based business owners. The Company has focused on developing HBOA's web site (www.hboa.com) into the premier Internet portal through which home based business owners can obtain the products, services and information necessary to start, expand and profitably run their businesses. HBOA expects to generate revenues from three sources: (1) the sale of products and services from its Internet web site, (2) advertising revenues and (3) fees to be a member of the HBOA web site. In order to develop these sources of revenues, HBOA plans on taking the following actions: *HBOA intends to increase the scope of products and services that it offers on its web site. HBOA currently has nine categories of products and services, which are as follows (1) Advice, (2) Advocacy, (3) Reference, (4) Products, (5) Services, (6) Insurance, (7) Shipping, (8) Communications and (9) Business Mall. * HBOA intends to enter into co-branding and vendor agreements with a wide variety of companies. *HBOA plans on increasing its membership base. HBOA currently has three levels of membership: (1) Free (no cost), (2) Executive Level ($50 annually) and (3) Board Level ($125 annually.) * HBOA plans on increasing the quality and scope of its content on its web site by (1) retaining outside content providers, (2) entering into strategic relationships with content providers and (3) developing content in-house. *HBOA intends to hire a team of senior managers who have experience with Internet companies. The Company is also exploring strategic relationships and joint ventures with other companies. Liquidity and Capital Resources As of September 30, 2000, the Company had cash on hand of $1,051,584 compared with cash on hand of $63,812 on December 31, 1999. The Company's cash on hand increased as a result of the merger of HBOA-DC with and into the Company on May 31, 2000. The Company expects that this cash on hand will allow it to continue operations for approximately 9 months. During the next twelve months, the Company expects to make significant expenditures on developing its web site, marketing and advertising expenses and may hire additional employees. As of September 30, 2000, the Company's total assets were $795,508 compared with total assets of $3,842 on December 31, 1999. Total liabilities were $83,786 on September 30, 2000 compared with total liabilities of $34,190 on December 31, 1999. Working capital was $711.722 on September 30, 2000 compared with negative working capital on $30,700 on December 31, 1999. The significant increase in liquidity is primarily from HBOA-DC's operations, which are reflected in the Company's financial statements due to the accounting treatment of the merger as a pooling of interest transaction. 16 Cash flows used in operating activities were $890,110 during the nine month period ended September 30, 2000. Cash flows used in investing activities were $304,773 during the nine month period ended September 30, 2000, which included a $240,843 purchase of property and $63,930 for the purchase of an investment. Cash flows from financing activities were $1,828,287 during the nine month period ended September 30, 2000, which resulted from HBOA's sale of common stock in a private offering. Again, these changes in cash flows are primarily from HBOA-DC's operations, which are reflected in the Company's financial statements due to the accounting treatment of the merger as a pooling of interest transaction. Additional Factors that May Affect Operating Results In evaluating the Company, the following risk factors should be considered: The Company has a limited operating history Mr. Davis and Mr. Lee's sale of 850,000 shares of the Company's common stock to HBOA on December 28, 1999 resulted in a change in control of the Company and a change in the Company's management. At this time, the Company began to focus on HBOA's internet operations. Accordingly, you have a relatively short operating history upon which you can evaluate the Company's business and prospects. You should consider our prospects in light of the risks, expenses and difficulties frequently encountered by early-stage Internet companies. As an early-stage company, the Company has an evolving and unpredictable business model, the Company faces intense competition and must effectively manage its growth and respond quickly to rapid changes in customer demands and industry standards. The Company may not succeed in addressing these challenges and risks. The Company has a history of operating losses and expectation of future losses For the period from inception through September 30, 2000, the Company has a net loss of $1,314,647. The Company does not anticipate that it will earn a profit during the 2000 fiscal year. Although the Company has been developing its HBOA web site and seeking strategic alliances or acquisitions, there can be no assurances that the Company will be able to finalize any definitive agreements with any third parties. There can be no assurances that the Company's plans will ever be achieved or that any of the assumption made in its favor will prove to be correct. Even if the assumptions in the Company's business plan prove to be correct, there can be no assurance that the Company will not incur substantial operating losses. Furthermore, there can be no assurances that the combined business strategy of the Company and HBOA will enable the combined companies to achieve profitable operations in the future. Risks of Entering New Business Areas, Strategic Alliances and Acquisitions The Company intends to expand its operations by expanding its product and service offerings, entering into strategic alliances with other companies and/or by making acquisitions of other companies. This will require significant additional expense and could strain our management, financial and operational resources. The process of expanding our product and service offerings, 17 entering into strategic alliances or integrating an acquired business into the Company may result in the unforeseen operating difficulties and expenditures and may absorb significant management attention that would otherwise be available for ongoing development of the Company's business. Moreover, there can be no assurances that the anticipated benefits of any acquisition will be realized. Further, strategic alliances of acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and or amortization expenses related to goodwill and other intangible assets, which could materially adversely affect the Company's business, technologies, services or products and might require the Company to obtain additional equity or debt financing, which might not be available on terms favorable to the Company, or at all, and such financing, if available, might be dilutive. Need for Additional Capital As of September 30, 2000, the Company had cash on hand of $719,602. Management expect that the cash on hand will last approximately 9 months. In the event the Company plans change or its assumptions prove to be inaccurate (due to unanticipated expenses, difficulties, delays or otherwise) the Company could be required to seek additional financing. There can be no assurances that any additional financing will be available to the Company and HBOA when needed, on commercially reasonable terms, or at all. Any inability to obtain additional financing when needed would have a material adverse effect on the Company and HBOA's business, financial operations and results of operations. Our Methods of Generating Revenue are Relatively New and Largely Untested The Company intends to generate revenue through (1) membership fees, (2) the facilitation of electronic commerce and (3) advertising revenues. These methods of revenues generation are relatively new and largely untested. In addition, the Company is also exploring strategic alliances and potential acquisitions or business combinations. A portion of HBOA revenues for the foreseeable future are expected to be derived from the use of electronic commerce transactions. HBOA will facility electronic commerce by directing users who ask a shopping question to electronic commerce merchants, some of who will compensate HBOA for the referral. The market for Internet products and services has only recently begun to develop and is rapidly changing. Therefore, the success of the business of HBOA and the Company depends upon the adoption of the Internet as a medium for commerce for a broad base of customers. If this market fails to develop or develops more slowly than expected, or if electronic commerce services to not achieve market acceptance, the combined operations of HBOA and the Company could suffer. Substantial Competition The industry in which HBOA competes is highly competitive and highly fragmented. The industry is characterized by the frequent introduction of new web sites often accompanied by major advertising and promotional programs. HBOA's primary competition at the present time is various associations' sites, which generally have been formed to promote such things as books/tapes, speaking engagements or selling business opportunities. These include the American Association of Home Based Businesses, American Home Business Association, Fran Tarkenton Small Business Network, Home Business Institute and the Home Office Association of America. None of the existing sites have the level of content anticipated to be provided by HBOA. Additionally, HBOA faces competition from a number of small businesses sites currently on the web or in various states 18 of development. New entrants to this market include Staples, Office Depot and Onvia further validating the marketplace. While many of these competitors have significantly greater financial, technical and marketing resources than HBOA, none focuses on the home business owner. HBOA offers a "single source" vertically integrated portal for home based businesses which gives it a distinct competitive advantage. HBOA believe providing a user friendly technically rich and product/service complete site will attract and retain home business owners. HBOA, however, always faces the risk that competitors will introduce better services and resources. This could also affect HBOA's ability to keep existing customers or acquire new customers and could result in lower net revenue and/or profits. The Company's historical results may not be indicative of future performance The Company's historical results of operations are not useful as a basis for predicting future operating results of the Company. The merger of HBOA-DC with and into the Company's wholly owned subsidiary, HBOA-FL, was accounted for as a pooling of interest transaction. As a result of the pooling of interest accounting, the Company's historical financial statements from the previous periods have been restated to include the operations of HBOA-DC. Prior to the merger, the Company's revenues and expenses were nominal. The majority of the changes in the Company's results of operations, liquidity and capital resources are due to the merger of HBOA-DC with and into the Company on May 31, 2000 and the accounting treatment of the merger as a pooling of interest. Security Risks A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in HBOA's Internet operations. HBOA may be required to expend significant capital and resources to protect against the threat of such security breaches or to alleviate problems caused by such breaches. Consumer concern over Internet security has been, and could continue to be, a barrier to commercial activities requiring consumers to send their credit card information over the Internet. Computer viruses, break-ins, or other security problems could lead to misappropriation of proprietary information and interruptions, delays, or cessation in service to HBOA's customers. Moreover, until more comprehensive security technologies are developed, the security and privacy concerns of existing and potential customers may inhibit the growth of the Internet as a merchandising medium. Governmental Regulation and Legal Uncertainties HBOA is not currently subject to direct federal, state, or local regulation, and laws or regulations applicable to access to or commerce on the Internet, other than regulations applicable to businesses generally. However, due to the increasing popularity and use of the Internet and other online services, it is possible that a number of laws and regulations may be adopted with respect to the Internet or other online services covering issues such as user privacy, "indecent" materials, freedom of expression, pricing, content and quality of products and services, taxation, advertising, intellectual property rights and information security. The adoption of any such laws or regulations might also decrease the rate of growth of Internet use, which in turn could decrease the demand for HBOA's products and services or increase the cost of doing business or in some other manner have a material adverse effect on HBOA's business, results of operations, and financial condition. In addition, applicability to the Internet of existing laws governing issues such as property ownership, copyrights and other intellectual property issues, taxation, libel, obscenity, and personal privacy is uncertain. The vast majority of such laws were adopted prior to the advent of the Internet and related 19 technologies and, as a result, do not contemplate or address the unique issues of the Internet and related technologies. HBOA does not believe that such regulations, which were adopted prior to the advent of the Internet, govern the operations of HBOA's business nor have any claims been filed by any state implying that HBOA is subject to such legislation. There can be no assurance, however, that a state will not attempt to impose these regulations upon HBOA in the future or that such imposition will not have a material adverse effect on HBOA's business, results of operations, and financial condition. Several states have also proposed legislation that would limit the uses of personal user information gathered online or require online services to establish privacy policies. The Federal Trade Commission has also initiated action against at least one online service regarding the manner in which personal information is collected from users and provided to third parties. Changes to existing laws or the passage of new laws intended to address these issues, including some recently proposed changes, could create uncertainty in the marketplace that could reduce demand for the services of HBOA or increase the cost of doing business as a result of litigation costs or increased service delivery costs, or could in some other manner have a material adverse effect on the HBOA's business, results of operations, and financial condition. In addition, because HBOA's services are accessible worldwide, and HBOA facilitates sales of goods to users worldwide, other jurisdictions may claim that HBOA is required to qualify to do business as a foreign corporation in a particular state or foreign country. HBOA is qualified to do business in Florida, and failure by the HBOA to qualify as a foreign corporation in a jurisdiction where it is required to do so could subject the HBOA to taxes and penalties for the failure to quality and could result in the inability of the HBOA to enforce contracts in such jurisdictions. Any such new legislation or regulation, or the application of laws or regulations from jurisdictions whose laws do not currently apply to HBOA's business, could have a material adverse effect on HBOA's business, results of operations, and financial condition. Potential Liability for Sales and Other Taxes HBOA does not currently collect sales or other similar taxes in respect of the delivery of its products into states other than California where HBOA collects sales taxes for sales of tangible products. New state tax regulations may subject HBOA to the assessment of sales and income taxes in additional states. Although the Internet Tax Freedom Act precludes for a period of three years the imposition of state and local taxes that discriminate against or single out the Internet, it does not impact currently existing taxes. Tax authorities in a number of states are currently reviewing the appropriate tax treatment of companies engaged in Internet retailing and are currently considering an agreement with certain of these companies regarding the assessment and collection of sales taxes. HBOA is not a party to any such discussions. Rapid Technological Change The market in which HBOA competes is characterized by frequent new product introductions, rapidly changing technology, and the emergence of new industry standards. The rapid development of new technologies increases the risk that current or new competitors will develop products or services that reduce the competitiveness and are superior to HBOA's products and services. HBOA's future success will depend to a substantial degree upon its ability to develop and introduce in a timely fashion new products and services and enhancements to its existing products and services that meet changing customer requirements and emerging industry standards. The development of new, technologically advanced products and services is a complex and uncertain process requiring high levels of innovation, as well as the accurate anticipation of technological and 20 market trends. There is a potential for product development delay due to the need to comply with new or modified standards. There can be no assurance that HBOA will be able to identify, develop, market, support, or manage the transition to new or enhanced products or services successfully or on a timely basis, that new products or services will be responsible to technological changes or will gain market acceptance, or that HBOA will be able to respond effectively to announcements by competitors, technological changes, or emerging industry standards. HBOA's business, results of operations, and financial condition would be materially and adversely affected if HBOA were to be unsuccessful, or to incur significant delays in developing and introducing new products, services, or enhancements. Dependence on Continued Growth In Use of the Internet Our market is new and rapidly evolving. Our business would be adversely affected if Internet usage does not continue to grow, particularly usage by home business owners. A number of factors may inhibit Internet usage, including inadequate network infrastructure, security concerns, inconsistent quality of service, and lack of availability of cost-effective, high-speed service. If Internet usage grows, the Internet infrastructure may not be able to support the demands placed on it by this growth and its performance and reliability may decline. In addition, web sites have experienced interruptions in their service as a result of outages and other delays occurring throughout the Internet network infrastructure. If these outages or delays frequently occur in the future, Internet usage, as well as the usage of our web sites, could grow more slowly or decline. Our Liability for Information Retrieved from the Web Because users of HBOA's web site may distribute our content to others, third parties might sue HBOA for defamation, negligence, copyright or trademark infringement, personal injury or other matters. These types of claims have been brought, sometimes successfully, against online services in the past. Others could also sue HBOA for the content that is accessible from our web site through links to other web sites or through content and materials that may be posed by members in chat rooms or bulletin boards. HBOA also intends to offer e-mail services, which may subject the HBOA to potential risks, such as liabilities or claims resulting from unsolicited e-mail (spamming), lost or misdirected messages, illegal or fraudulent use of e-mail or interruptions or delays in e-mail service. HBOA also may enter into agreements with commerce partners and sponsors that entitle the HBOA to receive a share of any revenue from the purchase of goods and services through direct links from HBOA's web sites to their web sites. Such arrangements may subject HBOA to additional claims, including potential liabilities to consumers of such products and services, because HBOA provide access to such products or services, even if HBOA does not provide such products or services itself. While HBOA's agreements with these parties often provide that HBOA will be indemnified against such liabilities, such indemnification, if available, may not be adequate. HBOA's insurance may not adequately protect the Company against these types of claims. E-Commerce and Potential Product Liability HBOA plans to develop a range of products targeted specifically at home business owners. HBOA also may foster relationships with manufacturers or companies to offer such products directly on its web site. Such a strategy involves numerous risks and uncertainties. HBOA has very limited experience in the sale of products online and the development of relationships with manufacturers or suppliers of such products. Consumers may sue HBOA if any of the products that it sells are defective, fail to perform properly or injure the user. HBOA's agreements with manufacturers will 21 typically contain provisions intended to limit HBOA's exposure to liability claims. These limitations may not however prevent all potential claims. Liability claims could require HBOA to spend significant time and money in litigation or to pay significant damages. As a result, any such claims, whether or not successful, could seriously damage our reputation and our business. Reliability of Web Site and Technology; Risk of Capacity Constraints The performance, reliability and availability of HBOA's web site, systems and network infrastructure will be critical to HBOA's business and its ability to promote the business of the HBOA. HBOA's web site is hosted by a server owned and operated by a third party, limiting the extent to which HBOA will have control over, or the ability to cure, technical problems, which may arise. Any systems problems that result in the unavailability of HBOA's web site or interruption of information or access of information to members through the web site would diminish its effectiveness as a means of promoting HBOA's business. If the volume of traffic on HBOA's web site is greater than anticipated, HBOA will be required to expand and upgrade its web site and related infrastructure. Although HBOA intends that its systems will be designed for scalability, the can be no assurance that the systems will be fully scalable. Any inability to add additional software and hardware to accommodate increased usage may cause unanticipated systems disruptions and degradation in levels of service to customers. There can be no assurance that HBOA will be able to effectively upgrade and expand its web site in a timely manner or to integrate smoothly any newly developed or purchased technology with its existing systems. Any inability to do so would have a material adverse effect on HBOA's business, prospects, financial condition and results of operations. Dependence on Key Personnel The Company and HBOA will be dependent upon the services of the executive officers and principal employees and consultants of the Company (particularly Gary Verdier and Edward Saludes) for management of the Company and HBOA and implementation of its business strategy. The loss of services of Gary Verdier and Edward Saludes could have a material adverse effect on the business operations, financial conditions and results of operations of the Company or HBOA. If its operations expand, the Company and HBOA will also be dependent upon its ability to attract and retain additional qualified employees and consultants. There is significant competition for qualified personnel, and there can be no assurances that the Company and HBOA will be successful in recruiting, retaining or training the management personnel it requires. No Private or Public Market for Shares There is currently no private or public market for the Company's common stock. To date, there has not been an active market in the Company's stock. The Company cannot predict the extent to which investor interest in the Company will lead to the development of a trading market or how liquid that trading market might become. If a trading market does not develop or is not sustained, it may be difficult for investors to sell shares of the Company's common stock at a price that is attractive. As a result, an investment in the Company's common stock may be totally illiquid and investors may not be able to liquidate their investment readily or at all when he/she desires to sell. First Level Capital, Inc., a NASD registered broker-dealer, filed a Form 15c-211 application to have the Company's shares of common stock listed on the OTC Bulletin Board. However, there can be no assurances, that the NASD will approve the Company's Form 15c-211 application. 22 Dilution. The Company's Articles of Incorporation authorizes the issuance of 25 million shares of common stock and 10 million shares of preferred stock. As of September 30, 2000, the Company had 10,050,000 shares of its common stock issued and outstanding. This issuance of any additional shares of common stock or preferred stock may result in a reduction of the book value or market price, if any of the outstanding common or preferred shares. Issuance of additional common stock and preferred stock will reduce the proportionate ownership and voting power of the then existing shareholders. Anti-Takeover Provisions. The foregoing provision in the Company's Articles of Incorporation (namely the ability, without further shareholder approval) to issue additional shares of common stock could be used as anti-takeover measures. These provisions could prevent or discourage or delay a non-negotiated change in control and result in shareholders receiving less for their common stock than they otherwise might in the event of a takeover attempt. No Dividends The Company anticipates that all future, earnings, if any, will be retained for the development of its business and will not be distributed to shareholders as cash dividends. The declaration and payment of cash dividends, if any, at some future time will depend upon the Company's results of operations, financial condition, cash requirements, future prospects, limitations imposed by credit agreements or senior securities and any other factors deemed relevant by the Company's Board of Directors. The declaration and payment of cash dividends, if at all, by the Company will be at the discretion of the Board of Directors. 23 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. A. Exhibits 27.1 Financial Data Schedule B. Reports on Form 8-K None 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 13, 2000 MIZAR ENERGY COMPANY By /s/ Edward Saludes ----------------------- Edward Saludes President and Chief Executive Officer 25 EX-27 2 0002.txt FDS --
5 This Schedule contains summary financial information extracted from Balance Sheet, Statement of Operations, Statements of Cash Flows and Notes thereto incorporated in Part I, Item 1 of this Form 10-QSB and is qualified in its entirety by reference to such financial statements. 6-MOS MAR-31-2001 APR-01-2000 SEP-30-2000 496,276 0 4,129,180 0 6,747,298 12,412,322 277,066 59,213 13,101,730 7,015,632 0 0 0 42,549 6,043,549 13,101,730 17,855,298 17,855,298 13,031,470 2,546,117 29,337 0 203,192 2,045,182 388,848 1,656,334 0 0 0 1,656,334 0.40 0.33
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