U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED: SEPTEMBER 30, 2002
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to______________
Commission file number 333-73004
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HOSTING SITE NETWORK INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 13-4122844
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
32 Poplar Place, Fanwood, NJ 07023
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (973) 652-6333
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Securities registered under Section 12(b) of the Exchange Act: None
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Name of each Exchange on Which Registered: None
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Securities registered under Section 12(g) of the Exchange Act: None
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No ___
-
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. None
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity as of
a specified date within the past 60 days.
As of December 20, 2002 there were 4,253,500 issued and outstanding shares
of our common stock, $.001 par value, held by non-affiliates. The aggregate
value of the securities held by non-affiliates on December 20, 2002 was $95,704
based on the average closing bid and asked price of our common stock on December
20, 2002, which was $.0225 per share.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 7,273,500 shares as of
December 23, 2002.
Transitional Small Business Disclosure Format (check one):
Yes No X
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DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable
TABLE OF CONTENTS
ITEM NUMBER AND CAPTION PAGE
----------------------- ----
Forward-Looking Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PART I
Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Description of Property. . . . . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . 5
PART II
Item 5. Market for Common Equity and Related Stockholder Matters . . . . . 5
Item 6. Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 7. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 9
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure. . . . . . . . . . . . . . . . . . . . . 24
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act. . . . . . . . 24
Item 10. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . 26
Item 11. Security Ownership of Certain Beneficial Owners and Management. . 27
Item 12. Certain Relationships and Related Transactions. . . . . . . . . . 29
Item 13. Exhibits, List and Reports on Form 8-K. . . . . . . . . . . . . . 30
Item 14. Controls and Procedures. . . . . . . . . . . . . . . . . . . . . . 31
2
FORWARD-LOOKING STATEMENTS
EXCEPT FOR HISTORICAL INFORMATION, THIS REPORT CONTAINS FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934. SUCH FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES,
INCLUDING, AMONG OTHER THINGS, STATEMENTS REGARDING OUR BUSINESS STRATEGY,
FUTURE REVENUES AND ANTICIPATED COSTS AND EXPENSES. SUCH FORWARD-LOOKING
STATEMENTS INCLUDE, AMONG OTHERS, THOSE STATEMENTS INCLUDING THE WORDS
"EXPECTS," "ANTICIPATES," "INTENDS," "BELIEVES" AND SIMILAR LANGUAGE. OUR
ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THE SECTIONS
"PLAN OF OPERATION" AND "BUSINESS-RISK FACTORS". YOU ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON THE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE
DATE OF THIS REPORT. WE UNDERTAKE NO OBLIGATION TO PUBLICLY RELEASE ANY
REVISIONS TO THE FORWARD-LOOKING STATEMENTS OR REFLECT EVENTS OR CIRCUMSTANCES
TAKING PLACE AFTER THE DATE OF THIS DOCUMENT.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
We were incorporated on May 31, 2000 in the state of Delaware to provide
businesses with a variety of Internet services including web hosting, web
consulting and electronic mail services. Due to the changing business
environment for companies providing these types of services we never commenced
our intended operations. We have had no revenues and no material operations of
any kind to date. Our inactive wholly owned subsidiary HSN (NJ), Inc. was
incorporated on August 20, 2001 in the state of New Jersey.
On September 14, 2000, we concluded an asset purchase agreement with
Nicklas Weich (our former president, CEO, CFO and Chairman of the Board),
through which our then wholly owned subsidiary, CreativeSites.com, Inc. acquired
all of the assets of CreativeSites.com for 4,000,000 shares of our common stock.
CreativeSites.com was a sole proprietorship owned by Nick Weich, formed for the
purpose of designing and hosting web sites. On April 30, 2001 we sold
CreativeSites.com, Inc. to Nicklas Weich in exchange for his 4,000,000 shares of
our common stock. At that time Nicklas Weich resigned as president, CEO, CFO and
Chairman of the Board and Scott Ventura and John McVeigh resigned as directors.
On the same date, Scott Vicari, Matthew Sebal and Ralph Brown were appointed
directors, Mr. Vicari was appointed as president, chief executive and financial
officer, treasurer, controller, and chairman of the board and Mr. Sebal was
appointed as secretary.
Our management is presently searching for ventures of merit for corporate
participation to enhance shareholder value. These ventures may involve sales of
our debt or equity securities in merger or acquisition transactions. In
connection therewith, on July 11, 2002 we entered into a Letter of Intent with 2
Chansis, Inc. ("2 Chansis"), a California corporation and the two shareholders
3
of 2 Chansis. The Letter of Intent provided for our acquisition of 2 Chansis in
exchange for shares of our common stock pursuant to a definitive acquisition
agreement. The acquisition agreement was drafted but the parties were unable to
reach final agreement on the terms thereof. Accordingly, the Letter of Intent
was terminated, by its terms, on August 10, 2002. On July 12, 2002 we also
entered into a Loan Agreement with 2 Chansis and its two shareholders. Pursuant
thereto, we loaned 2 Chansis $200,000 as represented by a July 17, 2002
promissory note issued by 2 Chansis to us, payment on which was guaranteed by
the two shareholders. The note became due on September 2, 2002 and when 2
Chansis and the guarantors failed to make payment thereon we were forced to
commence legal action against them. See Item 3. Legal Proceedings.
PATENTS, TRADEMARKS AND LICENSES, FRANCHISES,
CONCESSIONS, ROYALTY AGREEMENTS OR LABOR CONTRACTS
We presently utilize no patents, licenses, franchises, concessions, royalty
agreements or labor contracts in connection with our business.
RESEARCH AND DEVELOPMENT
During the fiscal years ended September 30, 2002 and September 30, 2001 we
made no expenditures on research and development.
EMPLOYEES
As of December, 2002 our only employees are our two executive officers.
EQUITY OFFERINGS
In August, 2002 we completed a private placement offering to seven persons
all of whom are accredited investors and reside outside the United States. The
offering consisted of the sale of 1,250,000 units at $.40 per unit or $500,000
on an aggregate basis, each unit consisting of one share of our common stock,
$.001 par value, and one common stock purchase warrant, each of which, as
amended, provides for the purchase of one additional share of our common stock
at a price of $1.20 per share any time during the four year period commencing
one year from issuance. The sale of the units was made in reliance on Rule 506
of Regulation D under the General Rules and Regulations of the Securities Act of
1933, as amended.
ITEM 2. DESCRIPTION OF PROPERTY
We do not own any real property, plant or material equipment. Our
president provides us with the use of approximately 250 square feet of office
space in Fanwood, New Jersey on a rent free basis.
4
ITEM 3. LEGAL PROCEEDINGS
On November 15, 2002 we filed a Summons and Complaint in the Supreme Court
of the State of New York, County of New York (Index No. 02604182) against 2
Chansis Inc., Ray Grimm Jr., and Alfred Hanser (collectively the "Defendants").
The suit seeks $200,000 together with interest, attorneys fees, and such other
relief as the court deems proper. The action is based upon a July 12, 2002 Loan
Agreement between us, 2 Chansis Inc., and Messrs. Grimm and Hanser pursuant to
which we loaned 2 Chansis Inc. $200,000 and a related $200,000 promissory note
(the "Note") dated July 17, 2002 issued to us by 2 Chansis Inc. and personally
guaranteed by Messrs. Grimm and Hanser. The Note became due and payable on
September 2, 2002 and, after several requests for payment thereon were ignored,
the present action was instituted. In December 2002 we entered into a
Settlement Agreement with Defendants whereby Defendants agreed to pay us the sum
of $210,864. This amount includes interest and attorney's fees. The Settlement
Agreement provides for the payment to us of $25,000 on or before December 31,
2002, which payment has been made, and the payment to us of $185,864 on or
before March 15, 2003. Subject to and upon timely receipt of the entire
settlement sum, there shall be filed with the court, a Stipulation of
Discontinuance with prejudice dismissing the action.
No other legal proceedings are pending or threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders.
PART II
ITEM 5. MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION.
Our common stock has been quoted on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. (the "NASD") under the symbol "HSNI"
since June 20, 2002. The following table sets forth, for the fiscal quarters
indicated, the high and low closing bid prices per share of our common stock, as
derived from quotations provided by Pink Sheets, LLC. Such quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.
5
QUARTER ENDED HIGH BID LOW BID
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June 30, 2002 $0.00 $0.00
September 30, 2002 $0.06 $0.03
December 31, 2002 (1) $0.05 $0.04
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(1) Through December 20, 2002
HOLDERS
As of December 23, 2002, there were approximately 20 record holders of our
common stock.
DIVIDENDS
We have never declared any cash dividends with respect to our common stock.
Future payment of dividends is within the discretion of our board of directors
and will depend on our earnings, capital requirements, financial condition and
other relevant factors. Although there are no material restrictions limiting,
or that are likely to limit, our ability to pay dividends on our common stock,
we presently intend to retain future earnings, if any, for use in our business
and have no present intention to pay cash dividends on our common stock.
RECENT SALES OF UNREGISTERED SECURITIES
In August 2002, we completed a private offering a 1,250,000 units at a
price of $.40 per unit or $500,000 on an aggregate basis. Each unit consisted
of one share of our common stock and one common stock purchase warrant, each of
which, as amended, is exercisable for the purchase of one share of our common
stock at any time during a period of four years commencing one year from
issuance at a price of $1.20 per share. The units were sold pursuant to rule
506 or Regulation D of the General Rules and Regulations under the Securities
Act of 1933, as amended.
6
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY CORPORATION PLANS
EQUITY COMPENSATION PLAN INFORMATION
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NUMBER OF NUMBER OF SECURITIES
SECURITIES TO BE REMAINING AVAILABLE FOR FUTURE
ISSUED UPON EXERCISE WEIGHTED-AVERAGE ISSUANCE UNDER EQUITY
OF OUTSTANDING EXERCISE PRICE OF COMPENSATION PLANS
OPTIONS, WARRANTS OUTSTANDING (EXCLUDING SECURITIES REFLECTED
AND RIGHTS (A) OPTIONS, WARRANTS IN COLUMN (A)) (C)
AND RIGHTS (B)
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Equity compensation plans
approved by security holders N/A N/A N/A
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Equity compensation plans not
approved by security holders 0 N/A 1,000,000
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Total 0 N/A 1,000,000
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In December 2002 we terminated the Hosting Site Network, Inc. 2001 Stock
Option Plan (the "2001 Plan") and adopted the Hosting Site Network, Inc. 2002
Non-Statutory Stock Option Plan (the "Plan"). No options were ever issued under
the 2001 Plan. The Plan is intended to advance our interests by inducing
individuals, and eligible entities of outstanding ability and potential to join,
remain with, or provide consulting or advisory services to us, by encouraging
and enabling eligible employees, non-employee directors, consultants and
advisors to acquire proprietary interests in us, and by providing the
participating employees, non-employee directors, consultants and advisors with
an additional incentive to promote our success. This is accomplished by
providing for the granting of non-statutory stock options (the "Options") to
employees, non-employee directors, consultants and advisors. The Plan is
presently administered by our board of directors but may be subsequently
administered by a board committee designated by our board of directors.
The stock subject to Options granted under the Plan is shares of our common
stock, par value $.001 per share, whether authorized but unissued or held in our
treasury. The maximum number of shares of common stock which may be issued
pursuant to Options granted under the Plan shall not exceed in the aggregate one
million (1,000,000) shares, subject to adjustment in accordance with the
provisions of Section 11 of the Plan. In the event that our outstanding common
stock is subsequently changed by reason of combination of shares, reverse split,
stock dividend or the like, an appropriate adjustment will be made by the Plan
administrator in the aggregate number of shares available under the Plan, and in
the number of shares and option price per share subject to outstanding Options.
If we are reorganized, consolidated, or merged with another corporation, the
holder of an Option shall be entitled to receive upon the exercise of his Option
the same number and kind of shares of stock or the same amount of property, cash
or securities as he would have been entitled to receive upon the happening of
any such corporate event as if he has been, immediately prior to such event, the
holder of the number of shares covered by his Option.
7
The class of individual or entity that is eligible to receive Options under
the Plan is all employees (including officers) and non-employee directors of, or
consultants and advisors to either us or any subsidiary corporation of ours;
provided, however, that Options shall not be granted to any consultants and
advisors unless (i) bona fide services have been or are to be rendered by the
consultant or advisor and (ii) the services are not in connection with the offer
or sale of securities in a capital raising transaction. The Plan administrator,
in its sole discretion, but subject to the provisions of the Plan, determines
the employees and non-employee directors of, and the consultants and advisors
to, us and our subsidiary corporations to whom Options may be granted, and the
number of shares to be covered by each Option, taking into account the nature of
the employment or services rendered by the individuals or entities being
considered, their annual compensation, their present and potential contributions
to our success and such other factors as the Plan administrator may deem
relevant.
No Option granted under the Plan is transferable by the individual or
entity to whom it was granted otherwise than by will or laws of decent and
distribution, and, during the lifetime of such individual, is not exercisable by
any other person, but only by him.
ITEM 6. PLAN OF OPERATION
We were incorporated on May 31, 2000 to provide businesses with a variety
of Internet services including web hosting, web consulting and electronic mail
services. Given the current Internet business environment, we have not
commenced material business operations, have not had any operating revenues, and
have concluded that our business model is not presently valid. Although we may
determine to engage in our intended Internet operations at a later date, we have
decided to look at other ventures of merit for corporate participation as a
means of enhancing shareholder value. This may involve sales of our equity or
debt securities in merger or acquisition transactions.
We have minimal operating costs and expenses at the present time due to our
limited business activities. Accordingly, absent changed circumstances, we will
not be required to raise additional capital over the next twelve months,
although we may do so in connection with or in anticipation of possible
acquisition transactions. We do not currently engage in any product research
and development and have no plans to do so in the foreseeable future. We have
no present plans to purchase or sell any plant or significant equipment. We
also have no present plans to add employees although we may do so in the future
if we engage in any merger or acquisition transactions.
8
ITEM 7. FINANCIAL STATEMENTS
Index to Financial Statements
Page
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Independent Auditor's Report - Rogoff & Company, P.C. . . . . . . . . . . . . . . 10
Consolidated Balance Sheet as at September 30, 2002 . . . . . . . . . . . . . . . 11
Consolidated Statement of Operations for the years ended September 30, 2002 and
September 30, 2001 and for the period from May 31, 2001
(date of inception) through September 30, 2002. . . . . . . . . . . . . . .. 12
Statement of Stockholders' Equity - September 30, 2002. . . . . . . . . . . . . . 13
Consolidated Statement of Cash Flows for the years ended September 30, 2002 and
September 30, 2001 and for the period from May 31, 2001 (date of inception)
through September 30, 2002. . . . . . . . . . . . . . . . . . . . . . . . .. 14
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . 15
9
Independent Auditors' Report
------------------------------
To the Board of Directors and
Stockholders of Hosting Site Network, Inc.
We have audited the accompanying consolidated balance sheet of Hosting Site
Network, Inc. and Subsidiary (a developmental stage entity) as of September 30,
2002, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the two years ended September 30, 2002 and the
period from May 31, 2000 (date of inception) through September 30, 2002. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Hosting Site
Network, Inc. and Subsidiary at September 30, 2002, and the consolidated results
of their operations and their cash flows for each of the two years ended
September 30, 2002 and the period from May 31, 2000 (date of inception) through
September 30, 2002 in conformity with accounting principles generally accepted
in the United States of America.
/S/Rogoff & Company, P.C.
New York, New York
December 23, 2002, except for the last paragraph of
Note 3, as to which the date is December 31, 2002
10
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE ENTITY)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2002
ASSETS
------
Current Assets:
Cash $ 281,547
Loan receivable 200,000
Accrued interest receivable 3,333
----------
Total current assets 484,880
Computers and equipment, net of accumulated
depreciation of $5,667 22,669
----------
$ 507,549
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable and accrued liabilities $ 9,163
----------
Total current liabilities 9,163
----------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.0001 par value, 5,000,000 shares
authorized; none outstanding -
Common stock, $.001 par value; 100,000,000 shares
authorized; 7,273,500 shares issued and outstanding 7,273
Additional paid in capital 758,259
Deferred stock based compensation (92,387)
Deficit accumulated during the development stage (174,759)
----------
Total stockholders' equity 498,386
----------
$ 507,549
==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
11
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE ENTITY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30,
Period from
May 31, 2000
(date of inception)
through
September 30,
2002 2001 2002
----------- ------------ ------------
Net sales $ - $ - $ -
----------- ------------ ------------
Operating expenses:
General and administrative 108,453 70,884 179,932
----------- ------------ ------------
Total operating expenses 108,453 70,884 179,932
----------- ------------ ------------
Other income:
Interest income 3,709 1,464 5,173
----------- ------------ ------------
Total other income 3,709 1,464 5,173
----------- ------------ ------------
Net loss $ (104,744) $ (69,420) $ (174,759)
=========== ============ ============
Earnings per share
(Basic and diluted) $ (0.02) $ (0.01) $ (0.05)
=========== ============ ============
Weighted average common shares
outstanding (Basic and diluted) 6,228,979 4,978,125 3,801,828
=========== ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
12
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE ENTITY)
STATEMENT OF STOCKHOLDERS' EQUITY
SEPTEMBER 30, 2002
DEFICIT
ACCUMULATED
DURING THE DEFERRED TOTAL
COMMON PAID IN DEVELOPMENT SUBSCRIPTION STOCK BASED STOCKHOLDERS'
SHARES STOCK CAPITAL STAGE RECEIVABLE COMPENSATION EQUITY
----------- -------- --------- ------------ ------------ -------------- ----------
Issuance of common stock for subscription
receivable in September 2000 600,000 $ 600 $ - $ - $ (600) $ - $ -
Purchase of Creativesites.com assets
and contracts in September 2000 4,000,000 4,000 2,295 - - - 6,295
Issuance of common stock for legal
fees in September 2000 400,000 400 19,600 - - - 20,000
Net loss - 2000 - - - (595) - - (595)
----------- -------- --------- ------------ ------------ -------------- ----------
Balance, September 30, 2000 5,000,000 5,000 21,895 (595) (600) - 25,700
Reversal of common stock for legal
fees in April 2001 (200,000) (200) (9,800) - - - (10,000)
Cancellation of common stock issued for
purchase of Creativesites.com
in April 2001 (4,000,000) (4,000) (1,652) - - - (5,652)
Cancellation of common stock issued for
subscription receivable in April 2001 (600,000) (600) - - 600 - -
Issuance of common stock to the
president for services in April 2001 3,000,000 3,000 147,000 - - - 150,000
Amortization of deferred stock based
compensation in 2001 - - - - - (133,434) (133,434)
Issuance of common stock at $.05 per
share November to May 2001 2,803,500 2,803 101,086 - - - 103,889
Issuance of common stock at $.05 per
share to Directors in March 2002 20,000 20 980 - - - 1,000
Net loss - 2001 - - - (69,420) - - (69,420)
----------- -------- --------- ------------ ------------ -------------- ----------
Balance, September 30, 2001 6,023,500 6,023 259,509 (70,015) - (133,434) 62,083
Issuance of common stock relating to a
subscription agreement in August 2002 1,250,000 1,250 498,750 - - - 500,000
Vesting of deferred stock based
compensation in 2002 - - - - - 41,047 41,047
Net loss - 2002 - - - (104,744) - - (104,744)
----------- -------- --------- ------------ ------------ -------------- ----------
Balance, September 30, 2002 7,273,500 $ 7,273 $758,259 $ (174,759) $ - $ (92,387) $ 498,386
=========== ======== ========= ============ ============ ============== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
13
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE ENTITY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30,
Period from
May 31, 2000
(date of inception)
through
September 30,
2002 2001 2002
---------- --------- ----------
Cash flows from operating activities:
Net loss $(104,744) $(69,420) $(174,759)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation 5,667 - 5,667
Stock based compensation 41,047 16,566 57,613
Common stock issued for services - 10,000 10,000
Change in operating assets
and liabilities:
Accrued interest receivable (3,333) - (3,333)
Accounts payable and accrued
expenses 7,865 703 9,163
---------- --------- ----------
Net cash used in operating
activities ( 53,498) (42,151) (95,649)
---------- --------- ----------
Cash flows from investing activities:
Loan receivable (200,000) - (200,000)
Purchase of computers and equipment - (28,336) (28,336)
---------- --------- ----------
Net cash used in investing activities (200,000) (28,336) (228,336)
---------- --------- ----------
Cash flow from financing activities:
Proceeds from private placement 500,000 105,532 605,532
---------- --------- ----------
Increase (decrease) in cash 246,502 35,045 281,547
Cash, beginning of period 35,045 - -
---------- --------- ----------
Cash, end of period $281,547 $35,045 $281,547
========== ========= ==========
SEE NOTES CONSOLIDATED FINANCIAL STATEMENTS.
14
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A Developmental Stage Entity)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE 1 - DESCRIPTION OF BUSINESS,ACQUISITION AND CONTINUING OPERATIONS
Hosting Site Network, Inc. (the "Company") was incorporated under the laws
of the State of Delaware on May 31, 2000. The Company operates through its
wholly owned subsidiary HSN, Inc. which was incorporated in the State of
New Jersey on August 21, 2001. HSN, Inc. will provide businesses with
opportunities to generate revenues by supplying those businesses with
internet technology solutions and services. The Company intends to provide
the computer software, network technology and systems management necessary
to offer its customers comprehensive outsourced website and application
hosting solutions. The principal products and services that the Company and
its subsidiary plan to offer are; Website hosting, e-mail and related
services such as conference and bulletin board facilities and mailing list
management capabilities. Due to the changing business environment for
entity's providing these types of services the Company never commenced
operations and is currently searching for other business opportunities.
From inception through September 30, 2002, the Company has been in the
developmental stage. There have been no operations or revenues since
inception. The Company has incurred net losses of $174,759 and $104,744 for
the period from May 31, 2000 (date of inception) through September 30, 2002
and the year ended September 30, 2002, respectively. The Company has a
deficit accumulated during the development stage of $174,759 as of
September 30, 2002. In addition, the Company has negative cash flow from
operations of $95,649 and $53,498 for the period from May 31, 2000 (date of
inception) through September 30, 2002 and the year ended September 30,
2002, respectively.
Management is currently in the process of changing its business model as
described above. Additional funding is still required. There can be no
assurance that management will be successful in implementing a business
plan or that the successful implementation of such business plan will
actually improve the Company's operating results.
15
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A Developmental Stage Entity)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE 1 - DESCRIPTION OF BUSINESS,ACQUISITION AND CONTINUING OPERATIONS
- continued
On September 14, 2000, the Company concluded an asset purchase agreement
with Nicklas Weich, through which the Company's wholly owned subsidiary,
CreativeSites.com, Inc. acquired all of the assets of CreativeSites.com for
4,000,000 shares of the Company's common stock. In the absence of any other
basis to estimate the fair market value of the stock transferred to Nicklas
Weich, the Company took the position that the fair market value of the
stock equaled the fair market value of the assets and contracts acquired
from CreativeSites.com. On April 30, 2001 the Company's wholly owned
subsidiary CreativeSites.com, Inc. was sold to Nicklas Weich in exchange
for his 4,000,000 shares of the Company's common stock.
The accompanying consolidated financial statements include the accounts of
Hosting Site Network, Inc. and its wholly owned subsidiaries,
CreativeSites.com, Inc. for the period from September 14, 2000 through
April 30, 2001 and HSN, Inc. for the period from August 21, 2001 through
September 30, 2002. All material intercompany accounts and transactions
have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Computer Equipment
Computer equipment is stated at cost less accumulated depreciation.
Depreciation is provided for in amounts sufficient to charge the cost of
depreciable assets to operations over their estimated service lives on a
straight line basis over five years. The Company uses an accelerated method
of depreciating computer equipment for tax purposes. The difference between
the methods is not significant. Routine maintenance and repairs and minor
replacement costs are charged to expense as incurred, while expenditures
that extend the life of these assets are capitalized. Upon the sale or
retirement of computer equipment, the cost and related accumulated
depreciation will be removed from the accounts and resulting profit or loss
will be reflected in the statement of income.
16
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A Developmental Stage Entity)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Income Taxes
The Company uses the liability method for income taxes as required by
Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting
for Income Taxes." Under this method, deferred tax assets and liabilities
are determined based on differences between financial reporting and tax
basis of assets and liabilities. Deferred tax assets and liabilities are
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized.
Earnings Per Share
The Company presents basic earnings (loss) per share and, if appropriate,
diluted earnings per share in accordance with the provisions of SFAS No.
128 "Earnings per Share" ("SFAS 128").
Under SFAS 128 basic net earnings (loss) per share is computed by dividing
the net earnings (loss) for the period by the weighted average number of
shares outstanding during the period. Diluted net earnings per share is
computed by dividing the net earnings for the period by the weighted
average number of common share equivalents during the period. Common stock
equivalents would arise from the exercise of stock options. Through
September 30, 2002 the Company has not issued any stock options.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever circumstances
and situations change such that there is an indication that the carrying
amounts may not be recovered. In such circumstances, the Company will
estimate the future cash flows expected to result from the use of the asset
and its eventual disposition. Future cash flows are the future cash inflows
expected to be generated by an asset less the future outflows expected to
be necessary to obtain those inflows. If the sum of the expected future
cash flows (undiscounted and without interest charges) is less than the
carrying amount of the asset, the Company will recognize an impairment loss
to adjust to the fair value of the asset. At September 30, 2002, the
Company believes that there has been no impairment of its long-lived
assets.
17
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A Developmental Stage Entity)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
In August 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets". This statement is effective for fiscal years beginning after
December 15, 2001. This supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of,"
while retaining many of the requirements of such statement. The Company has
adopted this Statement as of October 1, 2002.
Financial Instruments
The carrying amounts of financial instruments, including cash, loan
receivable and accounts payable and accrued expenses approximate fair value
at September 30, 2002 because of the relatively short maturity of the
instruments.
Use of Estimates
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Reclassification
Certain reclassifications have been made to the prior year financial
statements in order to conform to the current year.
New Accounting Pronouncements
In July 2001 the FASB issued SFAS No. 141, "Business Combinations" ("SFAS
141"). SFAS 141 requires the purchase method of accounting for all business
combinations initiated after June 30, 2001 and eliminates the
pooling-of-interest method. SFAS 141 further clarifies the criteria for
recognition of intangible assets separately from goodwill.
18
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A Developmental Stage Entity)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
New Accounting Pronouncements
In July 2001 the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," ("SFAS 142"). SFAS 142 eliminates the amortization of goodwill and
indefinite lived intangible assets and initiates an annual review for
impairment. Identifiable intangible assets with determinable useful lives
will continue to be amortized. The Company adopted this Statement as of
October 1, 2002 and management does not believe that this Statement will
have a material impact on the financial statements.
In June 2001 the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," which addresses the financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets
and the associated asset retirement costs. The Company adopted this
Statement effective October 1, 2002 and management does not believe that
this Statement will have a material impact on the financial statements.
In June 2002 the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," ("SFAS 146"). SFAS 146 is effective for
exit and disposal activities that are initiated after December 31, 2002 and
requires these costs to be recognized when the liability is incurred and
not at project initiation. The Company does not expect this Statement to
have a material impact on the financial statements.
Management does not believe that recently issued, but not yet effective
accounting pronouncements if currently adopted would have a material effect
on the accompanying financial statements.
NOTE 3 - LOAN RECEIVABLE
On July 17, 2002 the Company entered into a promissory note (the "Note")
for $200,000 with an unrelated third party, with interest accruing at 8%
per annum. This Note was in conjunction with a letter of intent dated July
11, 2002 pursuant to which the parties expected to enter into an
acquisition agreement where the Company would acquire the unrelated entity.
The Note required repayment fifteen days after termination of the letter of
intent, which occurred on August 10, 2002. On November 15, 2002 the Company
brought an action in the Supreme Court of the State of New York against the
unrelated third party (the "Defendant") for all principal and interest due.
19
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A Developmental Stage Entity)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE 3 - LOAN RECEIVABLE - continued
During December 2002 the parties entered into a Stipulation of Settlement
that requires the Defendant to repay a total of $210,864 including
principal, interest and attorney fees. The Defendant paid an initial
$25,000 on December 31, 2002 and a certified check of $185,864 is due on or
before March 15, 2003.
NOTE 4 - INCOME TAX
The Company has not recorded a tax liability for either federal or state
income taxes because the Company has a net loss for the year ended
September 30, 2002. The Company has a net operating loss carryforwards of
approximately $110,000 that begin to expire in 2020. The deferred tax
assets consist of timing differences relating to depreciation, the
expensing of common stock granted to the president as compensation and net
operating loss carryforwards. Because of the likelihood that it is more
likely than not that the deferred tax asset will not be realized a 100%
valuation allowance has been recorded against the deferred tax asset.
The components of the net deferred tax asset are as follows:
Deferred tax assets:
Accumulated depreciation $ 850
Stock based compensation costs 8,640
Net operating Loss 16,500
---------
25,990
Valuation allowance (25,990)
---------
$ -
=========
NOTE 5 - EQUITY TRANSACTIONS
During August 2002, the Board of Directors of the Company authorized a
private placement offering to a limited number of sophisticated investors
the opportunity to purchase 1,250,000 units, consisting one share of common
stock and one common stock purchase warrant that entitles the warrant
holder to purchase one share of common stock with an exercise price of
$1.20 per share for a period of four years commencing one year from the
date of issuance. The Company completed the sale of 1,250,000 units during
August 2002, resulting in cash proceeds of $500,000.
20
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A Developmental Stage Entity)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE 5 - EQUITY TRANSACTIONS - continued
On March 6, 2002 the Board of Directors of the Company approved a plan, and
amended its certificate of incorporation, to increase the Company's
authorized capital. The new capitalization plan calls for an increase in
authorized common stock from 20,000,000 shares to 100,000,000 shares and
for an increase in authorized preferred stock from 1,000,000 shares to
5,000,000 shares.
On April 30, 2001 the Company sold CreativeSites.com back to Mr. Weich in
exchange for his 4,000,000 shares of the Company's common stock. At that
time Mr. Weich resigned from all his duties with the Company. In addition
both Scott Ventura and John McVeigh each returned their 300,000 shares of
common stock since they failed to pay the purchase price and subsequently
resigned as directors of the Company.
On April 30, 2001 the Company issued 10,000 shares of the Company's common
stock to each of its newly appointed directors, Ralph Brown and Matthew
Sebal, valued at $.05 per share. These directors' fees are for their
services during the fiscal year ended September 31, 2001.
During the fiscal year ended September 30, 2001 the Company and KGL
Investments, the corporate counsel, amended their original agreement to
provide $20,000 in legal fees in exchange for 400,000 shares of the
Company's common stock to 200,000 shares of the Company's common stock for
$10,000 worth of legal fees. These services have been valued at $.05 per
share.
During September 2000, the Board of Directors of the Company authorized a
private placement offering to a limited number of sophisticated investors
of the Company's common stock, at a price of $.05 per share. From November
2000 to May 2001 the Company completed the private placement of 2,803,000
shares of common stock, resulting in cash proceeds of $140,150. The
offering expenses totaled $36,261 and were charged against the proceeds of
this offering.
21
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A Developmental Stage Entity)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE 6 - STOCK OPTION PLAN
The Company terminated its 2001 Stock Option Plan during December 2002 and
adopted the 2002 Non-Statutory Stock Option Plan (the "Plan"). The Company
granted no stock options under the 2001 Stock Option Plan. The Plan
provides for the granting of options non-statutory stock options. The total
number of shares of the Company's common stock reserved for issuance under
the Plan is 1,000,000, subject to adjustment by the Board of Directors in
the event of a stock split, stock dividend, recapitalization or similar
capital change. Options may be granted to employees (including officers)
and directors of the Company and certain of the Company's consultants and
advisors.
The Plan is presently administered by the Company's Board of directors,
which selects the eligible individuals for whom options will be granted,
determines the number of common shares subject to each option, the exercise
price thereof and the period during which option is exercisable. The Board
of Directors also interprets the provisions of the Plan and, subject to
certain limitations, may amend the Plan. Each option granted under the Plan
will be evidenced by a written agreement between the Company and the
optionee. As of December 23, 2002 no options were granted under this Plan.
NOTE 7- RELATED PARTIES
On April 30, 2001 the Company signed an executive employment agreement (the
"Agreement") with the Company's new president Mr. Scott Vicari. Under the
agreement Mr. Vicari was granted 3,000,000 shares of common stock as
compensation for his services to the Company. If Mr. Vicari's employment
with the Company is terminated prior to December 31, 2002 he will forfeit
the entire 3,000,000 shares of the Company's stock. If his employment is
terminated prior to December 31, 2003 he forfeits 2,000,000 shares and if
he is terminated prior to December 31, 2004 he forfeits the remaining
1,000,000 shares of the Company's stock. The stock compensation issued to
Mr. Vicari was valued at $.05, based upon the private placement offering at
the time of issue. The amount is being amortized over the forty-four months
of the employment contract period. Compensation expense of $16,566 was
charged to expense for the year ended September 30, 2001 and $41,047 was
charged to expense for the year ended September 30, 2002.
22
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
(A Developmental Stage Entity)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE 7- RELATED PARTIES - continued
On December 2, 2002 the Company amended the Agreement to change the
forfeiture periods from December 31, 2002, 2003 and 2004 to December 31,
2003, 2004 and 2005, respectively.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information, as of December 23,
2002, with respect to our directors and executive officers.
Directors serve until the next annual meeting of the stockholders;
until their successors are elected or appointed and qualified, or until their
prior resignation or removal. Officers serve for such terms as determined by our
board of directors. Each officer holds office until such officer's successor is
elected or appointed and qualified or until such officer's earlier resignation
or removal. No family relationships exist between any of our present directors
and officers.
Date of Election
or Appointment
Name Positions Held Age as Director
---- -------------- --- -------------
Scott Vicari Chairman of the Board, President, 30 April 30, 2001
Treasurer, CEO, CFO, Controller
Matthew Sebal Secretary, Director 33 April 30, 2001
Ralph Brown Director 69 April 30, 2001
The following is a brief account of the business experience of each of our
directors and executive officers during the past five years or more.
Scott Vicari has served as our President, Treasurer, CEO, CFO, Controller
and Chairman of the Board since April 30, 2001. Mr. Vicari is responsible, among
other things, for our accounting and financial reporting. Mr. Vicari has worked
in the computer network hardware/software industry since 1991. Mr. Vicari is a
co-owner of Accounteks, LLC, which provides computer consulting to help clients
maintain and operate their accounting and billing computer systems. This takes
about two weeks a month of his time. Mr. Vicari also is employed part time with
our attorneys, Kaplan Gottbetter & Levenson, LLP, working one day a week as
24
Manager of Information Services, and part time two days a week as Manager of
Information Services for Adams International, Inc., a software company based in
Cider Grove, New Jersey. From 1991 to 1996 he was the manager of Information
Systems for Clinton Industries Incorporated, an industrial sewing machine
manufacturer. From 1997 to 2001 he was a network consultant with e-partners,
Inc., an accounting software consultant. During that period he was trained and
certified on numerous industry standard software/hardware including Microsoft,
Novel, Cisco, Citrix and Sage. He currently holds Microsoft MCSE, Cisco CCNA and
Sage certifications. He has worked as an IT administrator and IT consultant
implementing a variety of network software/hardware and Internet projects for
numerous clients. Mr. Vicari graduated from Bergen Community College in New
Jersey with an A.S. degree in Business Management in 1994.
Matthew Sebal has served as our Secretary and Director since April 30,
2001. Since September 2002, Mr. Sebal has served as a Director of BHC, Inc., a
Delaware corporation engaged as a provider of branded online marketing and
distribution of travel products and services for leisure and small business
travelers. Mr. Sebal also serves as the Executive VP Strategy and Marketing and
Chairman of the Board of Directors of NES Worldwide, Inc., a Delaware
corporation, engaged in the filing of EDGAR reports on behalf of public
companies with the United States Securities and Exchange Commission. Since June
2000, Mr. Sebal has been an officer and director of Return Assured Incorporated,
a U.S. public company engaged in the business of providing private and corporate
aviation services. He has also been a director of Mindfuleye Systems, Inc., a
U.S. public company, that is in the business of sentiment analysis, since 2001.
From 1999 to 2000, Mr. Sebal was a Principal in IBM's e-business Services Group
for British Columbia, Canada. From 1997 to 1998, he was Director of Business
Development for Communicate.com, a company engaged in the business of e-commerce
consulting and web site design, and from 1995 to 1997, he was Senior Strategist
for Emerge Online, Inc., a company also engaged in the business of e-commerce
consulting and web site design. Mr. Sebal was also President of Sebal
Enterprises, an import-export business from 1990 to 1995. He holds a
baccalaureate degree in Political Science from the University of Western
Ontario.
Ralph Brown has served as one of our directors since April 30, 2001. He has
practiced law in Toronto, Canada since 1959. He is also Secretary and a
director of the Canadian Film Centre, the Chairman of Feature Film Project, and
a director of the Norman Jewison Charitable Foundation. From October 1991 to
July 1999, he was a partner in the law firm of Miller Thomson. Since August of
1999 to the present time, Mr. Brown has been a sole proprietor in Canada. Mr.
Brown's practice concentrates on corporate, commercial and entertainment law.
He acts for a diverse range of clients in private and public companies, varying
in size from small owner-operated businesses to large, diversified corporations.
Mr. Brown received his LL.B. from Osgood Hall Law School, York University
in 1959, his B.A. from University of Toronto in 1955. He was called to the
Ontario Bar in 1959 and was appointed Queen's Counsel in 1975. He is a member of
the Canadian Bar Association.
25
BOARD OF DIRECTORS
Except for Ralph Brown, who receives $333 per month for serving as a
director, none of our directors receive any remuneration for acting as such.
Directors may however be reimbursed their expenses, if any, for attendance at
meetings of the Board of Directors. Our Board of Directors may designate from
among its members an executive committee and one or more other committees. No
such committees have been appointed to date.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Our common stock is not registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, our
officers, directors and principal shareholders are not subject to the beneficial
ownership reporting requirements of Section 16(a) of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information concerning the total
compensation paid or accrued by us during the three fiscal years ended September
30, 2002 to (i) all individuals that served as our chief executive officer or
acted in a similar capacity for us at any time during the fiscal year ended
September 30, 2002 and (ii) all individuals that served as executive officers of
ours at any time during the fiscal year ended September 30, 2002 that received
annual compensation during the fiscal year ended September 30, 2002 in excess of
$100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------- ----------------------
Fiscal Year
Name and Ended Other Options/ Restricted LTIP All Other
Principal Position September 30, Salary Bonus Compensation SARs Stock Awards Payouts Compensation
------------------ ------------- ------ ----- ------------ -------- ------------ ------- ------------
Scott Vicari, 2002 0 0 0 0 0 0 0
Chief Executive 2001 0 0 0 (1) 0 0 0 0
Officer, President 2000 0 0 0 0 0 0 0
----------------------
(1) On or about April 30, 2001 we issued 3,000,000 restricted shares of our
common stock to Mr. Vicari pursuant to Mr. Vicari's three year employment
agreement with us dated April 30, 2001. These Shares are subject to
forfeiture based upon the term of his employment with us. Due to the
inactivity of the Company in December 2002 we revised Mr. Vicari's
employment agreement to revise the vesting periods on the 3,000,000 shares
issued in the employment agreement. As the result of the amendment, if Mr.
Vicari is not employed by us at December 31, 2003 he forfeits all of the
shares. If Mr. Vicari is employed by us at December 31, 2003 but not
employed by us at December 31, 2004 he forfeits 2,000,000 of the shares. If
Mr. Vicari is employed by us at December 31, 2004 but not employed by us at
December 31, 2005 he forfeits 1,000,000 of the shares.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No stock options or stock appreciation rights were granted to the named
executive during the fiscal year ended September 30, 2002.
26
STOCK OPTION PLANS
The named executive did not participate in any Company stock option plans
during the fiscal year ended September 30, 2002.
AGGREGATE OPTION/SAR EXERCISES AND FISCAL YEAR END OPTION/SAR VALUES
During the fiscal year ended September 30, 2002 there were no exercises of
stock options by the named executive. As at September 30, 2002 the named
executive owned no stock options. The named executive has never received stock
appreciation rights.
LONG TERM INCENTIVE PLAN AWARDS
We made no long-term incentive plan awards to the named executive officer
during the fiscal year ended September 30, 2002.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT,
AND CHANGE-IN-CONTROL ARRANGEMENTS
During the fiscal year ended September 30, 2002 we had no employment
agreements, compensation plans or arrangements with respect to the named
executive officer which would in any way result in payments being made to such
executive officer because of his resignation, retirement or other termination of
employment with us or our subsidiaries, or because of any change in control or a
change in such executive officer's responsibilities following a change in
control.
COMPENSATION OF DIRECTORS
Except for Ralph Brown, who receives $333 per month for serving as a
director, our directors receive no compensation for serving as such, for serving
on committees of the board of directors or for special assignments. During the
fiscal year ended September 30, 2002 there were no other arrangements between us
and our directors that resulted in our making payments to any of our directors
for any services provided to us by them as directors.
REPORT ON REPRICING OF OPTIONS/SARS
During the fiscal year ended September 30, 2002 we did not adjust or amend
the exercise price of stock options or SARs previously awarded to the named
executive
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of our common stock known by us as of December 23, 2002 by (i) each
person or entity known by us to be the beneficial owner of more than 5% of our
common stock, (ii) each of our directors, (iii) each of our executive officers,
and (iv) all of our directors and executive officers as a group. The
percentages in the table have been calculated on the basis of treating as
outstanding for a particular person, all shares of our common stock outstanding
27
on such date and all shares of our common stock issuable to such holder in the
event of exercise of outstanding options, warrants, rights or conversion
privileges owned by such person at said date which are exercisable within 60
days of such date. Except as otherwise indicated, the persons listed below have
sole voting and investment power with respect to all shares of our common stock
owned by them, except to the extent such power may be shared with a spouse.
Shares of
Name and Address Common Stock Percentage
of Beneficial Owner Beneficially Owned Ownership (2)
------------------- ------------------ ---------
Scott Vicari 3,000,000 (1) 41.2%
262 Gettysburg Way
Lincoln Park, NJ 07035
Matthew Sebal 10,000 (3)
938 Howe Street, Suite 402
Vancouver, British Columbia V6Z 1N9
Canada
Ralph Brown 10,000 (3)
112 St. Claire Avenue West, Suite 400
Toronto, Ontario M4V 2Y3
Canada
All directors and executive officers 3,020,000 41.5%
as a group (3 persons)
--------------------------
(1) Pursuant to the terms of Mr. Vicari's employment agreement, as amended, if
he is no longer employed with us prior to December 31, 2003 he forfeits all
3,000,000 shares. If he is employed by us at December 31, 2003 but no
longer employed with us at December 31, 2004 he forfeits 2,000,000 of these
shares. If he is employed by us at December 31, 2004 but no longer employed
with us at December 31, 2005 he forfeits 1,000,000 of these shares.
(2) Based upon 7,273,500 shares issued and outstanding as at December 23, 2002.
(3) Less than 1%
CHANGES IN CONTROL
Not Applicable.
28
ITEM 12. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
In April, 2001 we issued 3,000,000 shares of our common stock to our
president Scott Vicari in consideration of his engagement as our president.
These shares are subject to forfeiture based upon the term of his employment.
Pursuant to the terms of our employment contract with Mr. Vicari, as amended, if
he is no longer employed with us prior to December 31, 2003 he forfeits all
3,000,000 of these shares. If he is employed by us at December 31, 2003 but no
longer employed with us prior to December 31, 2004 he forfeits 2,000,000 of
these shares. If he is employed by us at December 31, 2004 but no longer
employed with us prior to December 31, 2005 he forfeits 1,000,000 of these
shares. These shares were valued at $.05 per share.
In April, 2001 we issued 10,000 shares of common stock to director Ralph
Brown. These shares were valued at $.05 pre share for a total of $500.
In April, 2001 we issued 10,000 shares of common stock to director Matthew
Sebal. These shares were valued at $.05 per share for a total of $500.
In October, 2000 we issued 200,000 shares of our common stock to KGL
Investments, Ltd, the beneficial owner of which is Kaplan Gottbetter & Levenson,
LLP, our legal counsel in exchange for legal services rendered, valued at
$10,000. These shares were valued at $.05 per share.
On September 14, 2000, we concluded an asset purchase agreement with
Nicklas Weich (our former president CEO, CFO and Chairman of the Board), through
which our then wholly owned subsidiary, CreativeSites.com, Inc. acquired all of
the assets of CreativeSites.com (Nicklas Weich's sole proprietorship) for
4,000,000 shares of our common stock issued to Nicklas Weich. On April 30, 2001
we sold CreativeSites.com, Inc. to Nicklas Weich in exchange for the return of
his 4,000,000 shares of our common stock. At that time, Nicklas Weich resigned
as our president CEO, CFO and Chairman of the Board. At that time Scott Ventura
and John McVeigh also resigned as directors.
On September 14, 2000 we issued 300,000 shares of our common stock to each
of our then directors Scott Ventura and John McVeigh in exchange for $300 from
each of them. Mr. Ventura and Mr. McVeigh failed to pay the purchase price of
$300, and subsequently resigned as directors. In connection therewith, they both
returned their 300,000 shares of common stock.
Ralph Brown is paid $333 per month for serving as a director.
We believe that the terms of the above transactions are commercially
reasonable and no less favorable to us than we could have obtained from an
unaffiliated third party on an arm's length basis. To the extent we may enter
into any agreements with related parties in the future, the board of directors
has determined that such agreements must be on similar terms.
29
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
REPORTS ON FORM 8-K
None.
EXHIBITS
The following Exhibits are being filed with this Annual Report on Form
10-KSB:
Exhibit SEC Report
No. Reference Number Description
------- ----------------- ------------------------------------------
3.1 3.1 Certificate of Incorporation of Registrant
filed May 31, 2000.(1)
3.2 3.2 Certificate of Amendment to Certificate of
Incorporation of Registrant filed March 6,
2002. (4)
3.3 3.2 By-Laws of Registrant. (1)
3.4 3.3 Amended By-Laws of Registrant. (3)
10.1 10.1 Registrant's 2001 Stock Option Plan adopted
April 30, 2001. (1)
10.2 10.2 Executive Employment Agreement dated April 30,
2001 between Registrant and Scott Vicari. (2)
10.3 Registrant's 2002 Non-Statutory Stock Option
Plan
10.4 Amendment dated December 2, 2002 to Executive
Employment Agreement dated April 30, 2001
between Registrant and Scott Vicari
10.5 Loan Agreement dated as of July 12, 2002 by
and among Registrant, 2 Chansis, Inc., Ray
Grimm and Alfred Hanser
99.1 Certificate of Chief Executive and Financial
Officer
----------------------------
(1) Filed with the Securities and Exchange Commission on August 11, 2001 as an
exhibit, numbered as indicated above, to the Registrant's registration
statement (SEC File No. 333-73004) on Form SB-2, which exhibit is
incorporated herein by reference.
(2) Filed with the Securities and Exchange Commission on January 11, 2002, as
an exhibit, numbered as indicated above, to the Registrant's registration
statement (SEC File No. 333-73004) on Form SB-2 (Amendment No. 2), which
exhibit is incorporated herein by reference.
30
(3) Filed with the Securities and Exchange Commission on February 8, 2002 as an
exhibit, numbered as indicated above, to the Registrant's registration
statement (SEC File No. 333-73004) on Form SB-2 (Post-Effective Amendment
No. 1), which exhibit is incorporated herein by reference.
(4) Filed with the Securities and Exchange Commission on April 11, 2002, as an
exhibit, numbered as indicated above, to the Registrant's registration
statement (SEC File No. 333-73004) on Form SB-2 (Post Effective Amendment
No. 3), which exhibit is incorporated herein by reference.
ITEM 14. CONTROLS AND PROCEDURES
Our principal executive officer and principal financial officer evaluated
the effectiveness of our disclosure controls and procedures as of a date within
90 days prior to the filing of this report. Based on this evaluation, our
principal executive officer and principal financial officer have concluded that
our controls and procedures are effective in providing reasonable assurance that
the information required to be disclosed in this report is accurate and complete
and has been recorded, processed, summarized and reported within the time period
required for the filing of this report. Subsequent to the date of this
evaluation, there have not been any significant changes in our internal controls
or, to our knowledge, in other factors that could significantly affect our
internal controls.
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date: January 13, 2003 HOSTING SITE NETWORK INC.
By: /s/ Scott Vicari
-------------------------------------
Scott Vicari,
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
------------------------- -------------------------------- ----------------
/s/ Scott Vicari President, Treasurer Chief January 13, 2003
----------------
Scott Vicari Executive Officer, Chief Financial
and Accounting Officer
Board of Directors
/s/ Scott Vicari Director January 13, 2003
------------------------
Scott Vicari
/s/ Matt Sebal Director January 13, 2003
------------------------
Matthew Sebal
/s/ Ralph Brown Director January 13, 2003
------------------------
Ralph Brown
32
CERTIFICATIONS
I, Scott Vicari, certify that:
1. I have reviewed this annual report on Form 10-KSB of Hosting Site Network
Inc.
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
(a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made know to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
(c) Presented in this annual report my conclusions about the effectiveness
of the disclosure controls and procedures based on my evaluation as of
the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. I have indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: January 13, 2003 /s/ Scott Vicari
-----------------------------
Scott Vicari
Principal Executive and Financial Officer
33
HOSTING SITE NETWORK INC.
EXHIBIT INDEX
Exhibit Number Item Page
-------------- ---- ----
Exhibit
Number Description Page
-------------- ----------------------------------------------------- ----
3.1 Certificate of Incorporation of Registrant filed May
31, 2000. (1)
3.2 Certificate of Amendment to Certificate of Incorporation
of Registrant filed March 6, 2002. (4)
3.3 By-Laws of Registrant. (1)
3.4 Amended By-Laws of Registrant. (3)
10.1 Registrant's 2001 Stock Option Plan adopted April 30,
2001. (1)
10.2 Executive Employment Agreement dated April 30, 2001
between Registrant and Scott Vicari. (2)
10.3 Registrant's 2002 Non-Statutory Stock Option Plan 35
10.4 Amendment dated December 2, 2002 to Executive Employment
Agreement dated April 30, 2001 between Registrant and
Scott Vicari 41
10.5 Loan Agreement dated as of July 12, 2002 by and among
Registrant, 2 Chansis, Inc., Ray Grimm and Alfred Hanser 43
99.1 Certificate of Chief Executive and Financial Officer 49
-------------------
(1) Filed with the Securities and Exchange Commission on August 11, 2001 as
an exhibit, numbered as indicated above, to the Registrant's registration
statement (SEC File No. 333-73004) on Form SB-2, which exhibit is incorporated
herein by reference.
(2) Filed with the Securities and Exchange Commission on January 11, 2002, as
an exhibit, numbered as indicated above, to the Registrant's registration
statement (SEC File No. 333-73004) on Form SB-2 (Amendment No. 2), which
exhibit is incorporated herein by reference.
(3) Filed with the Securities and Exchange Commission on February 8, 2002 as an
exhibit, numbered as indicated above, to the Registrant's registration
statement (SEC File No. 333-73004) on Form SB-2 (Post-Effective Amendment
No. 1), which exhibit is incorporated herein by reference.
(4) Filed with the Securities and Exchange Commission on April 11, 2002, as an
exhibit, numbered as indicated above, to the Registrant's registration
statement (SEC File No. 333-73004) on Form SB-2 (Post Effective Amendment
No. 3), which exhibit is incorporated herein by reference.
34