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, 2003
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
HOSTING SITE NETWORK INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 13-4122844
--------------------------------- -------------------
(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
Securities registered under Section 12(b) of the Exchange Act: None
Name of each Exchange on Which Registered: None
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the 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 24, 2003 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 24, 2003 was $42,535
based on the average closing bid and asked price of our common stock on December
23, 2003, which was $.01 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 24, 2003.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable
TABLE OF CONTENTS
Item Number and Caption Page
----------------------- ----
Forward Looking Statements.................................................. 3
PART 1
Item 1. Description of Business........................................ 3
Item 2: Description of Property........................................ 4
Item 3. Legal Proceedings.............................................. 4
Item 4. Submission of Matters to Vote of Security Holders.............. 4
PART II
Item 5. Market for Common Equity and Related Stockholders.............. 4
Item 6. Plan of Operation.............................................. 6
Item 7. Financial Statements........................................... 7
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ........................................ 21
Item 8A. Controls and Procedure......................................... 21
PART III
Item 9. Directors, Executive Officers, Promoters and Control Person;
Compliance with Section 16(a) of the Exchange Act............ 22
Item 10. Executive Compensation......................................... 24
Item 11. Security Ownership of Certain Beneficial Owners and Management. 25
Item 12. Certain Relationships and Related Transactions................. 27
Item 13. Exhibits, List and Reports on Form 8-K......................... 28
Item 14. Principal Accountant Fees and Services......................... 29
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". 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.
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.
3
Research and Development
During the fiscal years ended September 30, 2003 and September 30, 2002 we
made no expenditures on research and development.
Employees
As of December 22, 2003 our only employees are our two executive officers.
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.
ITEM 3. LEGAL PROCEEDINGS
No legal proceedings are presently 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.
Quarter Ended High Bid Low Bid
------------- -------- -------
June 30, 2002 $0.00 $0.00
September 30, 2002 $0.06 $0.03
December 31, 2002 $0.05 $0.04
March 31, 2003 $0.04 $0.02
June 30, 2003 $0.02 $0.02
September 30, 2003 $0.02 $0.02
4
Holders
As of December 22, 2003, 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.
Securities Authorized For Issuance Under Equity Corporation Plans
Equity Compensation Plan Information
--------------------------------------------------------------------------------------------------------------------
Number of Securities
to be issued upon Weighted-average Number of securities remaining
exercise of exercise price of available for future issuance
outstanding options, outstanding under equity compensation plans
warrants and rights options, warrants (excluding securities reflected
(a) and rights (b) in column (a)) (c)
--------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved N/A N/A N/A
by security holders
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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.
5
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.
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.
6
ITEM 7. FINANCIAL STATEMENTS
Index to Consolidated Financial Statements
Page
----
Independent Accountants' Report - 2003....................................... 8
Independent Accountants' Report - 2002....................................... 9
Consolidated Balance Sheet as at September 30, 2003 ......................... 10
Consolidated Statements of Operations for the years ended September 30,
2003 and September 30, 2002 ............................................... 11
Consolidated Statement of Stockholders' Equity for the years ended
September 30, 2003 and September 30, 2002 ................................. 12
Consolidated Statements of Cash Flows for the years ended
September 30, 2003 and September 30, 2002 ................................. 13
Notes to Consolidated Financial Statements................................ 14-20
7
Report of Independent Accountants
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 as of September 30, 2003 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year ended September 30, 2003. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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 consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Hosting Site Network, Inc. and Subsidiary as of September 30, 2003, and the
consolidated results of their operations and their consolidated cash flows for
the year ended September 30, 2003 in conformity with accounting principles
generally accepted in the United States.
/s/ Most & Company, LLP
----------------------------------------
Most & Company, LLP
New York, New York
December 22, 2003
8
Independent Accountants' Report
To the Board of Directors and
Stockholders of Hosting Site Network, Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Hosting Site Network, Inc. and Subsidiary
for the year ended 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 audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of their operations and cash
flows of Hosting Site Network, Inc. and Subsidiary for the year ended September
30, 2002 in conformity with accounting principles generally accepted in the
United States of America.
/s/ Rogoff & Company, P. C.
----------------------------------------
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
9
Hosting Site Network, Inc. and Subsidiary
Consolidated Balance Sheet
September 30, 2003
Assets
Current Asset
Cash $ 410,440
Computers and equipment, net of
accumulated depreciation of $11,335 17,001
---------
Total Assets $ 427,441
=========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities $ 3,847
---------
Shareholders 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 compensation (51,168)
Accumulated deficit (290,770)
---------
Total Shareholders Equity 423,594
---------
$ 427,441
=========
See Notes to Consolidated Financial Statements.
10
Hosting Site Network, Inc. and Subsidiary
Consolidated Statements of Operations
Years Ended September 30,
-------------------------------
2003 2002
----------- -----------
General and administrative expenses $ (122,200) $ (108,453)
Interest income 6,189 3,709
----------- -----------
Net loss $ (116,011) $ (104,744)
=========== ===========
Basic loss per share $ (0.02) $ (0.02)
=========== ===========
Basic weighted average
shares outstanding 7,273,500 6,228,979
=========== ===========
See Notes to Consolidated Financial Statements.
11
Hosting Site Network, Corp
Statement of Stockholders' Equity
Common Stock Additional
---------------------- Paid-in Accumulated Deferred
Shares Amount Capital Deficit Compensation Total
--------- ------- -------- --------- ------------ ---------
Balance, October 1, 2001 6,023,500 $ 6,023 $259,509 $ (70,015) $(133,434) $ 62,083
Issuance of common stock and warrants
relating to a subscription agreement in
August 2002 1,250,000 1,250 498,750 500,000
Amortization of deferred compensation 41,047 41,047
Net loss (104,744) (104,744)
--------- ------- -------- --------- --------- ---------
Balance, September 30, 2002 7,273,500 7,273 758,259 (174,759) (92,387) 498,386
Amortization of deferred compensation 41,219 41,219
Net loss (116,011) (116,011)
--------- ------- -------- --------- --------- ---------
Balance, September 30, 2003 7,273,500 $ 7,273 $758,259 $(290,770) $ (51,168) $ 423,594
========= ======= ======== ========= ========= =========
12
Hosting Site Network, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended September 30,
-------------------------
2003 2002
--------- ---------
Cash flows from operating activities
Net loss $(116,011) $(104,744)
Adjustments to reconcile net loss
to cash used in operating activities
Depreciation 5,668 5,667
Stock based compensation 41,219 41,047
Changes in assets and liabilities
Accrued interest receivable 3,333 (3,333)
Accounts payable and accrued liabilities (5,316) 7,865
--------- ---------
Cash used in operating activities (71,107) (53,498)
--------- ---------
Cash flows from investing activities
Collection (advance) of loan receivable 200,000 (200,000)
--------- ---------
Cash flows from financing activities
Proceeds of private placement 500,000
--------- ---------
Increase in cash 128,893 246,502
Cash, beginning of period 281,547 35,045
--------- ---------
Cash, end of period 410,440 $ 281,547
========= =========
See Notes to Consolidated Financial Statements.
13
HOSTING SITE NETWORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS
Hosting Site Network, Inc. (Company) was incorporated in Delaware on May
31, 2000 and HSN, Inc. (HSN), its wholly owned subsidiary, was incorporated in
New Jersey on August 21, 2001. The Company is inactive and is currently
searching for business opportunities
From inception through September 30, 2002, the Company was in the
developmental stage.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and HSN. All material intercompany balances and transactions have been
eliminated.
Computers and Equipment
Computers and equipment are stated at cost less accumulated depreciation.
Depreciation is provided for on a straight-line basis over five years. 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 disposal or retirement, the asset cost and related
accumulated depreciation will be eliminated from the respective accounts and the
resulting gain or loss, if any, will be included in the results of operations.
The carrying value of fixed assets is evaluated whenever changes in
circumstances indicate the carrying amount of such assets may not be
recoverable. If necessary, the Company recognizes an impairment loss for the
difference between the carrying amount of the assets and their estimated fair
value. Fair value is based on current and anticipated future undiscounted cash
flows.
Income Taxes
Deferred income taxes have been provided for temporary differences between
financial statement and income tax reporting under the liability method, using
expected tax rates and laws that are expected to be in effect when the
differences are expected to reverse. A valuation allowance is provided when
realization is not considered more likely than not.
Stock Based Compensation
Compensation costs for stock, stock options, etc., issued to employees and
non-employees are based on the fair value method.
14
Basic Net Loss Per Share
Basic net loss per share was computed by dividing net loss for the year by
the basic weighted average number of shares outstanding during the year. Diluted
net loss per share was not presented as they are anti-dilutive.
Financial Instruments
The carrying amounts of financial instruments, including cash and accounts
payable and accrued liabilities, approximate their fair values because of their
relatively short maturity.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management 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.
15
New Accounting Pronouncements
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 SFAS 146 to have a material
impact on the financial statements.
In December 2002 the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and disclosure," (SFAS 148). SFAS 148 is effective for
fiscal years ending after December 15, 2002 and provides guidance and related
disclosure for the voluntary adoption of the fair value method of valuing stock
based compensation. The Company does not expect this SFAS 148 to have a material
impact on the financial statements, as the Company had previously adopted the
fair value method.
3. LOAN RECEIVABLE
On July 17, 2002 the Company entered into a promissory note (Note) for
$200,000 with an unrelated third party, with interest accruing at 8%, per annum.
The Note was in conjunction with a letter of intent dated July 11, 2002 pursuant
to 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 a collection action against the unrelated third party for all principal
and interest due.
During December 2002, the parties settled the matter and the unrelated
party agreed to repay a total of $210,864, including principal, interest and
fees, and such amount was collected.
16
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 years ended September
30, 2003 and 2002. At September 30, 2003 the Company has a net operating loss
carryforward of approximately $189,000 to reduce future Federal taxable income
through 2023. Deferred tax assets have been offset by an allowance because it is
more likely than not, that the deferred tax asset will not be realized
As of September 30, 2003, components of deferred tax assets were as
follows:
Net operating loss $ 76,000
Deferred compensation 40,000
Depreciation (5,000)
---------
111,000
Valuation allowance (111,000)
---------
None
=========
For the years ended September 30, 2003 and 2002, deferred income tax
expense consisted of the following:
2003 2002
---- ----
Net operating loss $ 32,000 $ 29,000
Deferred compensation 17,000 17,000
Depreciation (3,000)
-------- --------
46,000 46,000
Valuation allowance (46,000) (46,000)
-------- --------
None None
======== ========
17
For the years ended September 30, 2003 and 2002, the following is a
reconciliation of expected income tax benefit utilizing the statutory Federal
tax rate to the income tax benefit reported on the statement of operations:
2003 2002
-------- --------
Expected income tax benefit ($38,000) ($39,000)
State taxes (8,000) (7,000)
Change in valuation allowance 46,000 46,000
-------- --------
NONE NONE
======== ========
5. EQUITY
During August 2002, the Company completed the sale under a private
placement of 1,250,000 shares and 1,250,000 warrants for $500,000. Each warrant
entitles the holder to purchase one share of common stock exercisable at $1.20,
per share, through August 2007.
On March 6, 2002, the Board of Directors of the Company approved a plan to
increase the Company's authorized common stock from 20,000,000 shares to
100,000,000 shares and the authorized preferred stock from 1,000,000 shares to
5,000,000 shares.
18
Reserved Shares
As of September 30, 2003, the Company has reserved shares of common stock,
as follows:
Warrants 1,250,000
Options 1,000,000
---------
2,250,000
=========
6. STOCK OPTION PLAN
In December 2002, the Company terminated its 2001 Stock Option Plan and
adopted the 2002 Non-Statutory Stock Option Plan (Plan). The Company had granted
no options under the 2001 Stock Option Plan.
The Plan provides for the granting of non-statutory stock options, through
2012, to purchase up to 1,000,000 shares of common stock, subject to adjustment
for 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 administered by the Company's Board of Directors, which
determines the grantee, number of shares and exercise price and period. The
Board of Directors also interprets the provisions of the Plan and, subject to
certain limitations, may amend the Plan. As of December 22, 2003, no options
have been granted.
19
7. RELATED PARTIES
The Company is committed under an employment agreement (Agreement), as
amended, to the Company's president for employment through April 30, 2004. Under
the agreement, the Company previously issued 3,000,000 shares of common stock in
exchange for compensation. If employment with the Company is terminated under
certain conditions, prior to December 31, 2004, the officer will forfeit the
entire 3,000,000 shares, if prior to December 31, 2005, 2,000,000 shares and if
prior to December 31, 2006, the remaining 1,000,000 shares. The compensation had
been amortized over the employment term through December 2002 and thereafter,
over the balance of the forfeit period. For the years ended September 30, 2003
and 2002, compensation expense was $41,219 and $41,047, respectively.
20
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Rogoff & Company, P.C. was our independent certifying accountant for the
fiscal years ended September 30, 2002 and September 30, 2001. On December 10,
2003, they were dismissed by us and we subsequently engaged Most & Company, LLP,
275 Madison Avenue, New York, NY 10016, as our certifying accountant for the
fiscal year ended September 30, 2003. The dismissal of Rogoff & Company, P.C.
and appointment of Most & Company, LLP was approved by our board of directors.
The reports of Rogoff & Company, P.C. on our financial statements for each
of the fiscal years ended September 30, 2002 and September 30, 2001 contained no
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope or accounting principle.
In connection with the audits for the fiscal years ended September 30,
2002 and September 30, 2001 and during the subsequent interim period through
December 10, 2003, there were no disagreements between us and Rogoff & Company,
P.C. on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements, if not
resolved to their satisfaction, would have caused Rogoff & Company, P.C. to make
reference to the subject matter of the disagreement in connection with their
reports.
In connection with the audits of the fiscal years ended September 30, 2002
and September 30, 2001 and during the subsequent interim period through December
10, 2003, Rogoff & Company, P.C. did not advise us that:
o internal controls necessary for us to develop reliable financial
statements did not exist;
o information had come to their attention that led them to no longer
be able to rely on our management's representations or made them
unwilling to be associated with the financial statements prepared by
our management;
o there was a need to expand significantly the scope of their audit,
or that information had come to their attention during such time
periods that if further investigated might materially impact the
fairness or reliability of either a previously issued audit report
or the underlying financial statement; or the financial statements
issued or to be issued covering the fiscal periods subsequent to the
date of the most recent financial statements covered by an audit
report;
o information had come to their attention that they had concluded
materially impacted the fairness or reliability of either (i) a
previously issued audit report or the underlying financial
statements, or (ii) the financial statements issued or to be issued
covering the fiscal periods subsequent to the date of the most
recent financial statements covered by an audit report.
ITEM 8A. CONTROLS AND PROCEDURES
Our principal executive and 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 and
financial officer 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
21
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.
Consistent with Section 10A(i)(2) of the Securities Exchange Act of 1934,
as added by Section 202 of the Sarbanes-Oxley Act of 2002, we are responsible
for listing the non-audit services approved by our Board of Directors to be
performed by Most & Company, LLP., our external auditor. Non-audit services are
defined as services other than those provided in connection with an audit or a
review of our financial statements. Our Board of Directors currently has not
approved Most & Company, LLP. to perform any non-audit services.
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 22,
2003, 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, 31 April 30, 2001
Treasurer, CEO, CFO, Controller
Matthew Sebal Secretary, Director 33 April 30, 2001
Ralph Brown Director 70 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
22
maintain and operate their accounting and billing computer systems. 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 Best Software 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. From January 2002 to the present Mr. Sebal has served as President and as
a Director of 51st State Systems, Inc. a privately held company. 51st State
Systems develops web sites and web-based applications for small-to-medium
organizations in industry, government, and education. From May 2002 to present
Mr. Sebal has served as President and as a Director of DCM Enterprises, Inc., a
publicly reporting management and investment holding company. From July 2002 to
present Mr. Sebal has served as Chairman of the Board of Directors of NES
Worldwide, Inc., a Delaware corporation, engaged in the filing of EDGAR(R)
reports on behalf of public companies with the United States Securities and
Exchange Commission. From September 2002 to present, 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. From the period between June 2000 to January 2003,
Mr. Sebal held one or more of the following the positions: Secretary, President,
Chairman and CEO, and Director, of Return Assured Incorporated. Return Assured
Incorporated had been a publicly reporting company involved in enabling e-retail
transactions. As of January, 2003 Return Assured Incorporated is no longer a
publicly reporting company. Return Assured Incorporated has had no operations
since 2001. From November 2000 to October 2003 Mr. Sebal served as a Director of
Mindfuleye, Inc., a publicly reporting company that developed software for
licensing to the investment community. The software delivered proprietary
content directly to users by web, desktop, wireless, and e-mail interfaces. As
of October, 2003 Mindfuleye, Inc. is no longer a publicly reporting company.
Mindfuleye, Inc has had no operations since 2001. From December 1998 to June
2000, Mr. Sebal was a Principal in IBM's e-business Services Group for Canada.
From 1997 to 1998, Mr. Sebal was Director of Business Development for
Communicate.com (formerly IMEDIAT Digital). From 1995 to 1997, Mr. Sebal was a
Senior Account Manager for Emerge Online, Inc. a web site design and development
firm. Mr. Sebal holds a baccalaureate degree in Political Science from the
University of Western Ontario, Canada. Mr. Sebal works approximately 30 hours
per week for NES Worldwide.
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.
23
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, 2003 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, 2003 and (ii) all individuals that served as executive officers of
ours at any time during the fiscal year ended September 30, 2003 that received
annual compensation during the fiscal year ended September 30, 2003 in excess of
$100,000.
Summary Compensation Table
Long-Term Compensation
Annual Compensation ------------------------------------
Fiscal Year ----------------------------- Restricted
Name and Ended Other Options/ Stock LTIP All Other
Principal Position September 30, Salary Bonus Compensation SARs Awards Payouts Compensation
------------------ ------------- ------ ----- ------------ -------- ----------- ------- ------------
Scott Vicari, 2003 0 0 0 0 0 0 0
Chief Executive 2002 0 0 0 0 0 0 0
Officer, President 2001 0 0 $150,000(1) 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 2003 we revised Mr. Vicari's
employment agreement to extend 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, 2004 he forfeits all 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 2,000,000 of the shares.
If Mr. Vicari is employed by us at December 31, 2005 but not employed by
us at December 31, 2006 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, 2003.
Stock Option Plans
The named executive did not participate in any Company stock option plans
during the fiscal year ended September 30, 2003.
24
Aggregate Option/SAR Exercises and Fiscal Year End Option/SAR Values
During the fiscal year ended September 30, 2003 there were no exercises of
stock options by the named executive. As at September 30, 2003 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, 2003.
Employment Contracts, Termination of Employment, and Change-in-Control
Arrangements
During the fiscal year ended September 30, 2003 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
Ralph Brown is paid $333 per month for serving as a director. None of our
other directors receive any 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, 2003 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, 2003 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 22, 2003 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 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.
25
Name and Address Shares of Common Stock Percentage
of Beneficial Owner Beneficially Owned Ownership (1)
------------------- ------------------ -------------
Seloz Gestion & Finance SA (2) 700,000(3) 9.2%
1, Rue Hugo-de-Senger
1211 Geneva 4
Switzerland
CCD Consulting Commerce Distribution AG (4) 700,000(3) 9.2%
Glockengasse 4
4001 Basel
Switzerland
Scott Vicari 3,000,000(5) 41.2%
262 Gettysburg Way
Lincoln Park, NJ 07035
Matthew Sebal 10,000 (6)
938 Howe Street, Suite 402
Vancouver, British Columbia V6Z 1N9
Canada
Ralph Brown 10,000 (6)
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) Based upon 7,273,500 shares issued and outstanding as at December 22,
2003.
(2) The beneficial owner of Seloz Gestion & Finance SA is Rene Belser.
(3) Includes 350,000 shares underlying presently exercisable warrants.
(4) The beneficial owner of CCD Consulting Commerce Distribution AG is Fred
Dukas.
(5) Pursuant to the terms of Mr. Vicari's employment agreement, as amended, if
he is no longer employed with us prior to December 31, 2004 he forfeits
all 3,000,000 shares. If he is employed by us at December 31, 2004 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, 2005 but no longer
employed with us at December 31, 2006 he forfeits 1,000,000 of these
shares.
(6) Less than 1%
Changes in Control
Not Applicable.
26
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, 2004 he forfeits all
3,000,000 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 2,000,000 of
these shares. If he is employed by us at December 31, 2005 but no longer
employed with us prior to December 31, 2006 he forfeits 1,000,000 of these
shares. These shares were valued at $.05 per share.
Ralph Brown is paid $333 per month for serving as a director.
27
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 10.3 Registrant's 2002 Non-Statutory Stock Option Plan
10.4 10.4 Amendment dated December 2, 2002 to Executive Employment Agreement dated
April 30, 2001 between Registrant and Scott Vicari(5)
10.5 10.5 Loan Agreement dated as of July 12, 2002 by and among Registrant, 2
Chansis, Inc., Ray Grimm and Alfred Hanser(5)
10.6 Amendment dated December 10, 2003 to
Executive Employment Agreement dated
April 30, 2001 between Registrant and
Scott Vicari(6)
21 List of Subsidiaries of Registrant(6)
31.1/31.2 Rule 13(a) - 14(a)/15(d) - 14(a) Certification of Principal Executive and
Financial Officer(6)
32.1/32.2 Rule 1350 Certification of Chief Executive and Financial Officer(6)
28
(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.
(5) Filed with the Securities and Exchange Commission on January 14, 2003 as
an exhibit, numbered as indicated above, to the Registrant's Annual Report
on Form 10KSB for the fiscal year ended September 30, 2002.
(6) Filed herewith.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees.
Our former principal accountant, Rogoff & Company, P.C. billed us for
aggregate fees in the amount of approximately $10,760 and $12,000 during the
fiscal years ended September 30, 2003 and 2002, respectively. These amounts were
billed for professional services that Rogoff & Company, P.C. provided for the
audit of our annual financial statements, review of the financial statements
included in our reports on Form 10-QSB and other services typically provided by
an accountant in connection with statutory and regulatory filings or engagements
for those fiscal years. Of these amounts, $4,000 was directly attributable to
audit fees for each of the fiscal years ended September 30, 2003 and September
30, 2002.
Audit-Related Fees.
Rogoff & Company, P.C. billed us for aggregate fees in the amount of
$6,000 and $7,100 during the fiscal years ended September 30, 2003 and 2002,
respectively, for audit related services.
Tax Fees.
Rogoff & Company, P.C. billed us for aggregate fees in the approximate
amount of $760 and $900 during the fiscal years ended September 30, 2003 and
2002, respectively, for tax compliance, tax advice, and tax preparation.
All Other Fees.
Rogoff & Company, P.C. billed us for aggregate fees in the amount of $-0-
for the fiscal years ended September 30, 2003 and 2002 for other fees.
29
Audit Committee's Pre-Approval Practice.
Insomuch as we do not have an audit committee, our board of directors
performs the functions of an audit committee. Section 10A(i) of the Securities
Exchange Act of 1934 prohibits our auditors from performing audit services for
us as well as any services not considered to be "audit services" unless such
services are pre-approved by the board of directors (in lieu of the audit
committee) or unless the services meet certain de minimis standards.
The percentage of the fees for audit, audit-related, tax and other
services were as set forth in the following table:
--------------------------------------------------------------------------------
Percentage of total fees paid to Rogoff & Company, P.C.
--------------------------------------------------------------------------------
Fiscal Year 2003 Fiscal Year 2002
--------------------------------------------------------------------------------
Audit fees 37.17% 33.33%
--------------------------------------------------------------------------------
Audit-related fees 55.76% 59.17%
--------------------------------------------------------------------------------
Tax fees 7.06% 7.5%
--------------------------------------------------------------------------------
All other fees 0% 0%
--------------------------------------------------------------------------------
Supplemental information to be furnished with reports filed pursuant to
Section 15(d) of the Exchange Act by non-reporting issuers:
The issuer has not yet sent, nor does it intend to send subsequent to the
filing of this report, an annual report or proxy material to its shareholders
covering its last fiscal year.
30
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: December 30, 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 Executive December 30, 2003
----------------------------------- Officer, Chief Financial and Accounting
Scott Vicari Officer
Board of Directors
/s/ Scott Vicari Director December 30, 2003
-----------------------------------
Scott Vicari
/s/ Matthew Sebal Director December 30, 2003
-----------------------------------
Matthew Sebal
/s/ Ralph Brown Director December 30, 2003
-----------------------------------
Ralph Brown
31