8-K/A 1 pointgrou8ka2051203.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): October 31, 2002 POINT GROUP HOLDINGS, INCORPORATED (formerly Syconet.com, Inc.) (Exact name of registrant as specified in its charter) Nevada (State or jurisdiction of incorporation or organization) 0-29113 (Commission File Number) 54-1838089 (I.R.S. Employer Identification Number) 2240 Shelter Island Drive, Suite 202 San Diego, California 92106 (Address of principal executive offices) (Zip Code) Registrant's telephone number: (619) 269-8692 (Former name or former address, if changed since last report) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On October 31, 2002, the Registrant entered into an acquisition agreement with the shareholders of Naturally Safe Technologies, Inc., a privately held Nevada corporation. Under the terms of this agreement, on the closing date, the parties exchanged common stock on a 1-for-1 basis, with Naturally Safe exchanging with the Registrant all of its issued and outstanding shares representing in the aggregate 28,139,801 shares and the Registrant exchanging with Naturally Safe 28,139,801 shares of its restricted common stock. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. Financial Statements. The Registrant has determined that this acquisition must comply with Rule 3.05(b)(1)(iii) of Regulation S-X, and therefore financial statements are being furnished for Naturally Safe for the two most recent fiscal years prior to the acquisition. Pro forma financial information is also being furnished in connection with this acquisition pursuant to Article 11 of Regulation S-X. Exhibits. Exhibits included are set forth in the Exhibit Index pursuant to Item 601 of Regulation S-B. SIGNATURE Pursuant to the requirements of Section 13 or 15(d) 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. Point Group Holdings, Incorporated Dated: May 9, 2003 By: /s/ John Fleming John Fleming, President EXHIBIT INDEX Number Description 2 Acquisition Agreement between the Registrant and shareholders of Naturally Safe Technologies, Inc., dated October 31, 2002 (incorporated by reference to Exhibit 2 of the Form 8-K filed on November 13, 2002). REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders Naturally Safe Technologies, Inc. San Diego, California We have audited the accompanying balance sheet of Naturally Safe Technologies, Inc. as of December 31, 2001 and the related statement of operations, stockholders' deficit and cash flows for the year ended December 31, 2001 and the period from February 10, 2000 (date of inception) through December 31, 2000. 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Naturally Safe Technologies, Inc. as of December 31, 2001, and the results of its operations and cash flows for the year ended December 31, 2001 and the period from February 10, 2000 (date of inception) through December 31, 2000 in conformity with accounting principles generally accepted in the United States. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 10 to the financial statements, the Company has suffered losses from operations, current liabilities exceed current assets and has a net stockholders' deficiency, all of which raise substantial doubt about its ability to continue as a going concern. Management's plans in regards to these matters are also described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ L.L. Bradford & Company, LLC L.L. Bradford & Company, LLC June 28, 2002 Las Vegas, Nevada NATURALLY SAFE TECHNOLOGIES, INC. BALANCE SHEET DECEMBER 31, 2001 ASSETS Current assets Cash $ 3,537 Total current assets 3,537 Fixed assets, net 5,917 Intangible asset, net 11,608 Total assets 21,062 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Accounts payable 145,415 Accrued liabilities 339,926 Due to consultants 137,079 Notes payable 246,967 Total current liabilities 869,387 Commitments and contingencies - Stockholders' deficit Common stock - $.001 par value, 20,000,000 shares authorized, 13,196,775 shares issued and outstanding 13,197 Additional paid-in capital 1,954,726 Accumulated deficit (2,816,248) Total stockholders' deficit (848,325) Total liabilities and stockholders' deficit 21,062 See Accompanying Notes to Financial Statements NATURALLY SAFE TECHNOLOGIES, INC. STATEMENTS OF OPERATIONS Period from February 10, 2000 (Date of inception) Year Ended through December 31, 2001 December 31, 2000 Revenues Product sales $ 2,242 $ 73,500 License revenues 44,084 - Total revenues 46,326 73,500 Cost of sales 38 30,922 Gross profit 46,288 42,578 Operating expenses Wages 287,529 106,050 Professional fees 45,347 181,984 Consulting fees 208,959 38,134 Consulting services related to issuance of common stock 939,184 362,324 Other general and administrative expenses 104,397 137,407 Total operating expenses 1,585,416 825,899 Net loss from operations (1,539,128) (783,321) Other income (expense) Interest expense (374,787) (18,405) Inventory obsolescence (100,355) - Total other income (expense) (475,142) (18,405) Net loss before provision for income taxes (2,014,270) (801,726) Provisions for income taxes (252) - Net loss (2,014,522) (801,726) Basic and diluted loss per common share (0.16) (0.08) Basic and diluted weighted average common shares outstanding 12,480,482 10,114,034 See Accompanying Notes to Financial Statements NATURALLY SAFE TECHNOLOGIES, INC. STATEMENT OF STOCKHOLDERS' DEFICIT
Prepaid Consulting Services Common Stock Additional Related to Total Number Paid In Issuance of Accumulated Stockholders' of Shares Amount Capital Common Stock Deficit Deficit Balance, February 10 2000 (Date of Inception) - $ - $ - $ - $ - $ - Common stock issued to founders for cash $.001 per share 8,000,000 8,000 - - - 8,000 Common stock issued as Company's President signing bonus, $.347 per share 100,000 100 34,600 - - 34,700 Common stock issued for prepaid consulting services,$.347 per share 2,960,000 2,960 1,024,160 (1,027,120) - - Common stock issued to consultants for services,$.50 per share 154,025 154 76,859 - - 77,013 Common stock issued through private placement offering, $.38 per share 643,533 644 243,899 - - 244,543 Current period recognition of consulting services related to issuance of common stock - - - 285,311 - 285,311 Net loss - - - - (801,726) (801,726) Balance, December 31 2000 11,857,558 11,858 1,379,518 (741,809) (801,726) (152,159) Common stock issued during private placement offering $.38 per share 24,467 24 9,273 - - 9,297 Common stock issued to CEO for compensation, $.38 per share 400,000 400 151,600 - - 152,000 Common stock issued to CEO for accrued bonus 50,000 50 17,300 - - 17,350 Common stock issued to consultants for services, $.38 per share 514,750 515 196,860 - - 197,375 Common stock issued for interest, $.38 per share 350,000 350 132,650 - - 133,000 Current period recognition of consulting services related to issuance of common stock - - - 741,809 - 741,809 Forgiveness of debt by related party - - 67,525 - - 67,525 Net los - - - - (2,014,522) (2,014,522) Balance, December 31 2001 13,196,775 13,197 1,954,726 - (2,816,248) (848,325)
See Accompanying Notes to Financial Statements NATURALLY SAFE TECHNOLOGIES, INC. STATEMENTS OF CASH FLOWS Period from February 10, 2000 (Date of inception) Year Ended through December 31, 2001 December 31, 2000 Cash flows from operating activities: Net loss $ (2,014,522) $ (801,726) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 4,394 1,602 Issuance of common stock as Company President's signing bonus - 34,700 Issuance of common stock to CEO for Compensation 152,000 Issuance of common stock to consultants for Services 197,375 77,013 Issuance of common stock for interest 133,000 Decrease in prepaid consulting services related to issuance of common stock 741,809 285,311 Forgiveness of debt by related party 67,525 Changes in operating assets and liabilities: Change in accounts receivable 47,380 (47,380) Change in prepaid expenses 4,188 (4,188) Change in other current assets 15,170 (15,170) Change in inventory 100,486 (100,486) Change in accounts payable and accrued Liabilities 466,774 172,996 Net cash used by operating activities (84,421) (397,328) Cash flows from investing activities: Investment in intangible asset - (14,354) Purchase of fixed assets - (9,167) Net cash used by investing activities - (23,521) Cash flows from financing activities: Proceeds from issuance of notes payable 71,967 280,261 Principal payments on notes payable (3,500) (101,761) Proceeds from issuance of common stock 9,297 252,543 Net cash provided by financing activities 77,764 431,043 Net change in cash (6,657) 10,194 Cash, beginning of period 10,194 - Cash, end of period 3,537 10,194 Supplementary cash flow information: Cash payments for income taxes - - Cash payments for interest - - Schedule of non-cash financing activities: 2,960,000 common shares issued for prepaid consulting services - 1,024,160 50,000 common shares issued for accrued CEO Bonus 17,350 - See Accompanying Notes to Financial Statements NATURALLY SAFE TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization - Naturally Safe Technologies, Inc. (hereinafter referred to as the "Company" or "Naturally Safe") is a company that produces a product containing a patented moisture enhancing compound, called "Seasons Greenings", for use on live, cut Christmas trees to preserve them and reduce the risk of fire throughout the holiday season. The Company was incorporated in the state of Nevada in February 2000 and is currently developing its products in Southern California. Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Inventory - Inventory consists solely of finished goods, the Seasons Greenings product. All inventory items are stated at the lower of cost (first-in, first out) or market value. Fixed assets - Fixed assets are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight- line method over the estimated useful lives of the assets, which are generally 3 to 5 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense). The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability. Intangible asset - Intangible asset is stated at cost less accumulated amortization. Amortization is provided principally on the straight-line method over the estimated useful life of the asset, which is 15 years. Earnings (loss) per share - Basic earnings (loss) per share excludes any dilutive effects of options, warrants and convertible securities. Basic earnings (loss) per share is computed using the weighted- average number of outstanding common shares during the applicable period. Diluted earnings (loss) per share is computed using the weighted average number of common and common stock equivalent shares outstanding during the period. Common equivalent shares are excluded from the computation if their effect is antidilutive. Comprehensive income - The Company has no components of other comprehensive income. Accordingly, net income equals comprehensive income for all periods. Advertising costs - The Company recognizes advertising expenses in accordance with Statement of Position 93-7, "Reporting on Advertising Costs." As such, the Company expenses the costs of producing advertisements at the time production occurs, and expenses the costs of communicating advertising in the period in which the advertising space or airtime is used. Advertising costs totaled approximately $23,800 and $800 for the year ended December 31, 2001 and the period from February 10, 2000 (date of inception) through December 31, 2000, respectively. Start-up activities - The Company recognizes start-up activity expenses, including organization costs, in accordance with Statement of Position 98-5, "Reporting on the Costs of Start-up Activities". As such, the Company expenses the costs of start-up activities as they are incurred. Revenue and expense recognition - The Company recognizes revenue from product sales, net of any promotional gift certificates, when the products are shipped to customers, which is also when title passes to customers. The Company recognizes expense as they are incurred. Stock-based compensation - The Company accounts for stock-based employee compensation arrangements in accordance with provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and complies with the disclosure provisions of Statements of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Under APB No. 25, compensation expense is based on the difference, if any, on the date of the grant, between the fair value of the Company's stock and the exercise price. The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123 and the Emerging Issues Task Force ("EITF") Issue No. 96-18. Fair values of financial instruments - The carrying amounts of cash, accounts payable, accrued liabilities, and notes payable approximate fair value because of the short-term maturity of these instruments. Prepaid consulting services related to issuance of stock - The Company accounts for prepaid consulting services related to issuance of common stock in accordance with Staff Accounting Bulletin Topic 4E, "Receivables from Sale of Stock". As such, deferred compensation arising from transactions involving the Company's stock should be presented as deductions from stockholder's deficit and not as assets. Income taxes - The Company accounts for its income taxes in accordance with SFAS No. 109, which requires recognition of deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Impairment of long-lived assets to be disposed - The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed are reported at the lower of the carrying amount or the fair value less costs to sell. New accounting pronouncements - In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations" ("SFAS 141"), and SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). They also issued SFAS No. 143, "Accounting for Obligations Associated with the Retirement of Long- Lived Assets" ("SFAS 143"), and SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), in August and October 2001, respectively. SFAS 141 requires all business combinations initiated after June 30, 2001 be accounted for under the purchase method. SFAS 141 supersedes APB Opinion No. 16, "Business Combinations", and SFAS No. 38, "Accounting for Pre-acquisition Contingencies of Purchased Enterprises", and is effective for all business combinations initiated after June 30, 2001. SFAS 142 addresses the financial accounting and reporting for acquired goodwill and other intangible assets. Under the new rules, the Company is no longer required to amortize goodwill and other intangible assets with indefinite lives, but will be subject to periodic testing for impairment. SFAS 142 supersedes APB Opinion No. 17, Intangible Assets. Effective January 1, 2002, the Company will adopt SFAS 142 and is evaluating the effect that such adoption may have on its results of operations and financial position. The Company expects that the provisions of SFAS 142 will not have a material impact on its results of operations and financial position upon adoption. SFAS 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS 143 is effective in fiscal years beginning after June 15, 2002, with early adoption permitted. The Company expects that the provisions of SFAS 143 will not have a material impact on its results of operations and financial position upon adoption. The Company plans to adopt SFAS 143 effective January 1, 2002. SFAS 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS 144 superseded SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"), and APB Opinion No. 30, "Reporting the Results of Operations- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." The provisions of SFAS 144 are effective in fiscal years beginning after December 15, 2001, with early adoption permitted, and in general are to be applied prospectively. The Company plans to adopt SFAS 144 effective January 1, 2002 and does not expect that the adoption will have a material impact on its results of operations and financial position. 2. PREPAID CONSULTING SERVICES RELATED TO ISSUANCE OF COMMON STOCK In March 2000, the Company entered into an agreement for services with AFI Capital, Inc. ("AFI") whereby AFI agreed to provide certain services such as assistance with corporate financing through debt or equity in exchange for 702,500 shares of the Company's common stock as well as $5,000 monthly fees for a total of 36 months. The Company recorded prepaid consulting services totaling $243,767 as a result of the 2000 stock issuance, with the balance totaling $176,054 as of December 31, 2000. As further discussed in Note 6, AFI forgave accrued fees totaling $67,525 and terminated the agreement. Accordingly, the Company expensed the entire $176,054 outstanding prepaid balance for the year ended December 31, 2001. In March 2000, the Company entered into an agreement with D. Anderson Consulting, Inc. ("D. Anderson") whereby D. Anderson agreed to provide business and consulting services for a period of 36 months beginning in March 2000. As consideration for these services D. Anderson received 715,000 shares of common stock in the Company recorded as prepaid consulting services totaling $248,105 with the balance as of December 31, 2000 totaling $179,187. Management evaluated the services of D. Anderson and determined that there was no future value in the services. Accordingly, the Company expensed the entire $179,187 outstanding prepaid balance for the year ended December 31, 2001. In March 2000, the Company entered into an agreement with P.O. Consulting, Inc. ("P.O. Consulting") whereby P.O. Consulting agreed to provide public relations consulting services for a period of 36 months. As consideration for these services P.O. Consulting received 702,500 shares of common stock in the Company recorded as prepaid consulting services totaling $243,768 with the balance as of December 31, 2000 totaling $176,054. Management evaluated the services of P.O. Consulting and determined that there was no future value in the services. Accordingly, the Company expensed the entire $176,054 outstanding prepaid balance for the year ended December 31, 2001. In March 2000, the Company entered into an agreement with The Worldwide Money Company, Inc. ("WMC") whereby WMC agreed to provide public offering consulting services for a period of 36 months. As consideration for these services WMC received 715,000 shares of common stock in the Company recorded as prepaid consulting services totaling $248,105 with the balance as of December 31, 2000 totaling $179,187. Management evaluated the services of WMC and determined that there was no future value in the services. Accordingly, the Company expensed the entire $179,187 outstanding prepaid balance for the year ended December 31, 2001. In March 2000, the Company entered into an agreement with The Northwest Capital Partners, LLC. ("Northwest") whereby Northwest agreed to provide financial advisory consulting services for a period of 36 months. As consideration for these services Northwest received 100,000 shares of common stock in the Company recorded as prepaid consulting services totaling $34,700 with the balance as of December 31, 2000 totaling $25,062. Management evaluated the services of Northwest and determined that there was no future value in the services. Accordingly, the Company expensed the entire $25,062 outstanding prepaid balance for the year ended December 31, 2001. In March 2000, the Company entered into an agreement with The Venture Consulting, Inc. ("Venture") whereby Venture agreed to provide public offering consulting services for a period of 36 months. As consideration for these services Venture received 25,000 shares of common stock in the Company recorded as prepaid consulting services totaling $8,675 with the balance as of December 31, 2000 totaling $6,265. Management evaluated the services of Venture and determined that there was no future value in the services. Accordingly, the Company expensed the entire $6,265 outstanding prepaid balance for the year ended December 31, 2001. 3. FIXED ASSETS Fixed assets consist of the following as of December 31, 2001: Computers and equipment $ 9,167 Less: accumulated depreciation 3,250 5,917 4. INTANGIBLE ASSET Intangible asset consists of costs related to obtaining a patent on the Season's Greenings product as of December 31, 2001: Patent $ 14,354 Less: accumulated amortization 2,746 11,608 5. NOTES PAYABLE On March 10, 2000 the Company entered into an agreement with an investor whereby the Company received a loan of $175,000 with a maturity date no later than 12 months from the date of the note. The note is secured by assets of the Company. As of December 31, 2001, the Company was in default on the note. As further discussed in Note 11, the Company entered into a Forbearance Agreement with the investor to defer payment until 2003. As of December 31, 2001, the Company had a note payable to an investor totaling $25,000. The note is unsecured, bears an interest rate of 10%, and matures February 2002. As of December 31, 2001, the Company had a note payable to a former director of the Company totaling $12,000. The note is unsecured, bears an interest rate of 5%, and is due on demand. As of December 31, 2001, the Company had a note payable to an investor totaling $4,000. The note is unsecured, bears an interest rate of 5%, and is due on demand. As of December 31, 2001, the Company had a note payable to a former director of the Company totaling $1,315. The note is unsecured, bears an interest rate of 5%, and is due on demand. As of December 31, 2001, the Company had a note payable to a former director of the Company totaling $1,000. The note is unsecured, bears an interest rate of 5%, and is due on demand. As of December 31, 2001, the Company had a note payable to a former CEO of the Company totaling $500. The note is unsecured, bears no interest, and is due on demand. As of December 31, 2001, the Company had a note payable to a former CEO of the Company totaling $380. The note is unsecured, bears an interest rate of 5%, and is due on demand. As of December 31, 2001, the Company had a note payable to an individual totaling $130. The note is unsecured, bears no interest, and is due on demand. 6. RELATED PARTY Due to related party - As of December 31, 2001, the Company had a note payable in the amount of $27,642 from an entity significantly controlled by John Fleming, CEO of the Company. This note is uncollateralized, due on demand, and bearing no interest. Forgiveness of debt - As discussed in Note 2, AFI, an entity controlled by the CEO of the Company, forgave accrued fees for services totaling $67,525. The Company recorded the forgiveness as contributed capital. 7. STOCK OPTIONS Employee stock options - During the year ended December 31, 2001, the Company granted 250,000 stock options for its common stock as incentives to the CEO and CFO. The following table summarizes activity relating to outstanding options from February 10, 2000 (date of inception) to December 31, 2001: Weighted Average Options Exercise Outstanding Price Balance February 10, 2000 (date of inception) - $ - Granted - - Balance December 31, 2000 - - Granted 250,000 1.90 Exercised - - Forfeited - - Balance December 31, 2001 250,000 1.90 The weighted average fair value of options granted during 2001 and 2000 was $0.38 and $0.00, respectively. The following table summarizes information about options outstanding at December 31, 2001: Weighted Number Average Number Outstanding Remaining Exercisable Exercise as of Contractual as of Price 12/31/01 Life 12/31/01 $ 1.50 150,000 1.2 years 150,000 2.50 100,000 1.3 years 100,000 250,000 250,000 The following table summarizes information about options granted during the year ended December 31, 2001: Exercise Price Equals, Exceeds or is Number of Less Than Options Mkt. Price of Weighted Range of Weighted Granted Stock on Average Exercise Average Fair During 2001 Grant Date Exercise Price Prices Value - Equals $ - $ - $ - 250,000 Exceeds 1.90 1.50 - 2.50 0.38 - Less Than - - - 250,000 1.90 0.38 The Company recorded no compensation expense under APB Opinion No. 25 relating to these stock options for the year ended December 31, 2001. 8. INCOME TAXES The Company did not record any current or deferred income tax provision or benefit for any of the periods presented due to continuing net losses and nominal differences. The Company has provided a full valuation allowance on the deferred tax asset, consisting primarily of net operating losses, because of uncertainty regarding its realizability. As of December 31, 2001, the Company had a net operating loss carry forward of approximately $2,826,000. Utilization of the net operating loss, which begins to expire at various times starting in 2020, may be subject to certain limitations under Section 382 of the Internal Revenue Code of 1986, as amended, and other limitations under state and foreign tax laws. To the extent that net operating losses, when realized, relate to expenses related to issuance of commons stock for services of approximately $1,639,000, the resulting benefits will be credited to the stockholders. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets as of December 31, 2001 are approximately as follows: Period from February 10, 2000 (Date of inception) through December 31, 2001 December 31, 2000 Net operating loss $ (1,215,200) $ (170,700) Depreciation - - Total deferred tax assets (1,215,200) (170,700) Valuation allowance for deferred tax assets 1,215,200 170,700 Net deferred tax assets -- - 9. EMPLOYMENT AGREEMENTS In April 2000, the Company entered into an employment agreement with a key officer to act as Chief Executive Officer ("CEO"). The agreement generally continues for a period of three years or until terminated by the Company with cause. The agreement provides the officer with a base salary, benefits, bonuses and stock options. The agreement also contains a covenant against competition with the Company, which extends for one year after termination. Notwithstanding, by April 20, 2001, if the employment term is not terminated by the Company for cause, the officer will receive 400,000 shares of common stock, options to purchase 100,000 shares of common stock at $1.50 per share which expire on April 20, 2002 and options to purchase 100,000 shares of common stock at $2.50 per share which expire on April 20, 2003. If the employment term is terminated after April 20, 2001 by the Company for reasons other than cause, the employee will retain the right to exercise any unused portion of the options. As discussed in Note 12, the employment agreement was terminated by the Company in March 2002. The option to purchase 100,000 shares of common stock at $1.50 expired April 20, 2002 while the employee still retains the options to purchase 100,000 shares of common stock at $2.50 until April 20, 2003. As of December 31, 2001, the Company had accrued salaries to the officer totaling $81,594. As discussed in Note 12, the accrued wages were satisfied by 543,960 shares of the Company's common stock, subsequent to the termination of the employment agreement. In January 2001, the Company entered into an employment agreement with a key officer to act as Chief Financial Officer. The agreement provided the officer with a base salary, benefits, bonuses and stock options. During March 2001, the officer resigned. As of December 31, 2001, there are no unpaid salaries, bonuses, or benefits. The officer retained options to purchase 50,000 shares of common stock at $1.50 per share which expire on December 31, 2002. 10. INVENTORY OBSOLESCENCE As of December 31, 2001, management evaluated inventory and determined the product had become obsolete due to age and outdated packaging. Accordingly, the Company expensed the entire inventory totaling $100,355. 11. GOING CONCERN The Company incurred a net loss of approximately $2,025,000 and $802,000 for the years ended December 31, 2001 and 2000, respectively. Further, current liabilities exceed current assets by approximately $876,000. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company's management has developed a plan to market its current product and to complete the development of other products to generate future revenues. Furthermore, the Company will seek additional sources of capital through an equity offering, but there can be no assurance that the Company will be successful in accomplishing its objectives. The ability of the Company to continue as a going concern is dependent on additional sources of capital and the success of the Company's plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. 12. SUBSEQUENT EVENTS Forbearance Agreement - As discussed in Note 5, in April 2002, the Company entered into a Forbearance Agreement ("Forbearance") with an investor in which the investor agreed to forbear collection on a note of $175,000 plus accrued interest until March 2003. Under the Forbearance, the Company agreed to issue 1,633,333 shares of its common stock for interest (700,000 shares from March 2001 through March 2002 and 933,333 shares from March 2002 through 2003). Further, the Forbearance calls for an additional $35,000 of interest to be paid in cash due on maturity. From the date of the Forbearance, all monies collected by the Company are to be set aside in a trust for payment of the note. The Company has accrued interest through December 31, 2001 totaling $245,875, for both the stock and cash interest. During 2002, the Company has issued 583,333 shares of its common stock in relation to this agreement. Stock issued for due to consultants - In February and April 2002, the Company issued 736,500 shares of the Company's common stock in satisfaction of due to consultants. Directors mutual release agreements - In March 2002, the Company entered into separate Mutual Release Agreements ("Agreements") with five directors of the Company whereby the directors resigned. The Agreements called for the return of the directors' shares of the Company's common stock totaling 7,475,000 shares collectively. As incentive for the directors to enter into the Agreements, the Company entered into consulting agreements with each director whereby the directors would provide advisory services through March 2003 in exchange for 250,000 shares each of the Company's common stock. Termination of CEO - In March 2002, the Company terminated the employment agreement with the CEO. In April 2002, the Company issued 543,960 shares of common stock in satisfaction of accrued salaries totaling $81,594. Prima International, LLC - In May 2002, the Company entered into an LLC Membership Interest Purchase Agreement whereby the Company purchased 100% of Prima International, LLC ("PRIMA"), a California limited liability company, in exchange for 5,000,000 shares of the Company's common stock. PRIMA is a developer and distributor of consumer products. The acquisition was accounted using the purchase method under SFAS 141 and will be operated as a wholly owned subsidiary. Additionally, the Company entered into consulting agreements with former members of PRIMA whereby the members agreed to manage PRIMA. In exchange for the management services, one member will receive $5,000 monthly for a period of two years beginning June 2002, and the second member will receive $9,000 monthly for a period of five years beginning June 2002. 2 for 1 forward stock split - In June 2002, the Company authorized a 2 for 1 forward stock split. UNAUDITED PRO FORMA FINANCIAL INFORMATION The Unaudited Pro Forma Financial Information reflects financial information, which gives effect to the acquisition of all of the outstanding common shares of Naturally Safe Technologies, Inc., a Nevada corporation ("NSTI"), in exchange for 27,889,000 shares of common stock of Point Group Holdings, Inc. (formerly Syconet.com, Inc.), a Nevada corporation ("PGHI"). The Pro Forma Statements included herein reflect the use of the purchase method of accounting for the above transaction. The acquisition of NSTI, which closed on September 13, 2002 was accounted for as a reverse acquisition as the former stockholders of NSTI controlled the voting common shares of the Company immediately after the acquisition. Such financial information has been prepared from, and should be read in conjunction with, the historical unaudited financial statements of NSTI and PGHI included in this memorandum. The Pro Forma Balance Sheet gives effect to the transaction as if it had occurred on December 31, 2001. The Pro Forma Statement of Operations gives effect to the transaction as if it had occurred at the beginning of the earliest period presented, combining the results of PGHI for the nine months ended September 30, 2002 and NSTI for the nine months ended September 30, 2002. POINT GROUP HOLDINGS, INC. (formerly Syconet.com, Inc.) PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2001 ASSETS
Point Group Naturally Pro forma (Unaudited) Holdings, Inc. Safe Adjustments Pro forma Technologies Inc. Current assets: Cash and cash equivalents $ - $ 3,537 - $ 3,537 Total current assets - 3,537 3,537 Property and equipment, net - 5,917 5,917 Intangible assets, net - 11,608 11,608 Total non-current assets - 17,525 17,525 Total assets - 21,062 $ 21,062 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 848,781 145,415 994,196 Accrued liabilities - 349,926 349,926 Due to consultants - 137,079 137,079 Due to related party - 27,642 27,642 Notes payable - 219,325 219,325 Stock subscription refund payable 18,700 - 18,700 Current portion of long-term debt 44,041 - 44,041 Total current liabilities 911,522 879,387 1,790,909 Other Long Term Liabilities - - - Total liabilities 911,522 879,387 1,790,909 Shareholders' equity Common stock, $0.001 par value 82,417 13,197 (13,197) (1) 27,889 (1) 110,306 Additional paid in capital - 1,954,726 (1,954,726) (1) - Treasury stock - - - Accumulated (deficit) (993,939) (2,826,248) 1,940,034 (1) (1,880,153) Total shareholders' equity (deficit) (911,522) (858,325) (1,769,847) Total liabilities and shareholders' equity - 21,062 - 21,062
See Accompanying Notes to Pro Forma Financial Statements POINT GROUP HOLDINGS, INC. (formerly Syconet.com, Inc.) PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
Point Group Naturally Pro forma (Unaudited) Holdings, Inc. Safe Adjustments Pro forma Technologies Inc. Sales $ - $ - $ - Cost of sales - 1,000 1,000 Gross Profit - (1,000) (1,000) Expenses: Selling general and administrative expenses 50,076 221,918 271,994 Operating loss (50,076) (222,918) - (272,994) Other income (expense) Interest expense - (35,000) (35,000) - (35,000) (35,000) Net loss (50,076) (257,918) - (272,994) Basic and diluted (loss) per common share (0.00) (0.02) (0.00) Weighted average number of common shares outstanding 51,449,436 13,196,775 153,631,648
See Accompanying Notes to Pro Forma Financial Statements POINT GROUP HOLDINGS, INC. (formerly Syconet.com, Inc.) NOTES TO PRO FORMA FINANCIAL STATEMENTS NOTE 1 To reflect the recapitalization of Point Group Holdings, Inc. ("PGHI") with the book value of net assets of Naturally Safe Technologies, Inc. ("NSTI") at the acquisition date. Because the acquisition was accounted for as a reverse acquisition, there was neither goodwill recognized nor any adjustments to the book value of the net assets of PGHI that would affect the pro forma statement of operations.