UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C.
Form
10-SB
General
Form for Registration of Securities of Small
Business
Issuers under Section 12(b) or (g) of the
Securities
Exchange Act of 1934
DIBZ
INTERNATIONAL, INC.
(Exact
Name of Small Business Issuer in its Charter)
|
Nevada
|
|
71-0874685
|
|
(State
of Incorporation)
|
(Primary
Standard Classification Code)
|
(IRS
Employer ID No.)
|
9595
Six
Pines
Bldg
8
Level 2 Suite 8210
The
Woodlands, TX 77380
(Address
of Registrant's Principal Executive Offices) (Zip Code)
Mark
Wood
9595
Six
Pines
Bldg
8
Lvl 2 Suite 8210
The
Woodlands, TX 77380
832-631-6103
(Name,
Address and Telephone Issuer's telephone number)
Securities
to be Registered Under Section 12(b) of the Act: None
Securities
to be Registered Under Section 12(g) of the Act:
Common
Stock
$.001
Par
Value
(Title
of
Class)
PART
I
ITEM
1. MERGER
On
January 27, 2007, the Haystar Services & Technology, Inc. (“Haystar”),
(Dibz-Nevada), a company formed under the laws of Nevada currently traded on
the
pink sheets, entered into a Share Exchange Agreement (“Agreement:” or“Merger”)
with Dibz International, Inc. (“Dibz-Delaware”), a private operating company
formed under the laws of Delaware. As a result of the Merger, there
was a change in control of the pink sheet entity. In accordance with SFAS No.
141,(Dibz-Nevada) was the acquiring entity. While the transaction is accounted
for using the purchased method of accounting in substancethe Agreement is a
recapitalization of Haystar's capital structure.
For
accounting purposes, Dibz-Nevada accounted for the transaction as a reverse
merger with Dibz-Delaware being the“accounting acquirer”. Dibz-Delaware did not
recognize goodwill or any intangible assets in connection with thetransaction.
Prior to the Agreement, Dibz-Delaware was a newly formed corporation with no
significant assets and liabilities.
Immediately
prior to the merger, Dibz-Delaware had 100 shares of common stock
outstanding. All of these common shares were held by Mark Wood,
Dibz-Nevada’s Chairmand of the Board and CEO. Effective with the
Agreement, Dibz-Nevada acquired 100% of Dibz-Delaware common shares
in consideration for the issuance of 39,474 shares of Series A Preferred Stock
of Dibz-Nevada (“Series A Preferred”). Under the Agreement and prior
to such conversion, each share of Series A Preferred will have the voting
rights equal to 5,783 shares of common stock and vote together with the shares
of common stock on all matters. The Series A Preferred is convertible at the
option of the holder into common stock at the rate of five hundred seventy
eight
(578) shares of common for every one share of Series A Preferred at
the option of the holder. The Agreement was entered for the business
purpose of enhancing shareholder value. Under the terms of the Agreement, the
Dibz-Nevada shareholders retained 1,622,000 shares of common stock (held by
24
holders of record) after the cancellation of 3,000,000 shares of common stock
by
certain Dibz-Nevada shareholders to facilitate the Agreement. As a
result, Mark Wood the former sole shareholder of Dibz-Delaware became the
controlling shareholder of Dibz-Nevada by holding 39,474 shares of Series A
Preferred, which represented voting rights equal to 228,278,142 shares of common
stock of Dibz-Nevada. Pursuant to the Agreement Dibz-Delaware became
a wholly owned subsidiary of Dibz-Nevada and Dibz-Nevada changed its name to
Dibz International, Inc.
BUSINESS
Dibz-Delaware
was incorporated on December 28, 2006 under the laws of the State of Delaware
to
provide a simple, easy to use all-in-one Communications Platform to users of
viral social networks allowing the easy distribution, capturing, cataloging
and
review of personal content utilized on the viral social network
sites.
Members
of Social Networks create amazingly innovative personal profiles in an effort
to
share information about themselves andcreate new friends. With this
in mind most users of social networks also communicate through text messages
-
usually withoutaccess to the social networks from their cell
phones. And they cannot sort and search those messages or multimedia
files as thereare no content management systems available.
Dramatic
increases in on-line advertisement budgets have occurred over the past several
years. There has been an explosion of web traffic through Web 2.0
business models. Dibz-Delaware will offer social networks and web 2.0
companies an innovative and easy touse communications platform that will enhance
their users experience on their site.
Market
Opportunity
Social
Networks are among the most visited sites on the web. Myspace.com and
Facebook.com have proven the
common interest
of people to socialize and
connect online has deep roots. Dibz will provide a simple, easy to
use all-in-one Communications Platform to users of viral social networks
allowing the easy distribution, capturing, cataloging and review of personal
contentutilized on the viral social network sites.
"Personal
Content", in terms of social network members, consists of information of some
sort. This information can be visual, audible, or textual. Comments,
photographs, movies, music, blogs and podcasts are all forms of
content. Through Dibzs all-in-one communications platform personal
content will be distributed to cell phones, PDA's, social networks and
emailaddresses - whatever a Dibz member chooses to register with the
company. The information is then cataloged and stored forsafekeeping
and future use and reference of the Dibz member.
We
believe a large portion of our users will utilize text messaging as their
primary means of communication. The US Wireless Forecast, 2006 to
2011 report from Jupiter Research reports 52% of the US cell phone users
utilized text messaging in2006. According to Jupiter Research text
messaging is primarily utilized as a communications medium, with the top two
uses oftext messaging cited as “make plans with friends” and “communicating with
friends and family”. Textmessaging revenues in the U.S. should
approach $9.5 billion by 2011. We believe that Dibz all-in-one
communications platform will greatly simplify the “technology obstacle” for the
adoption of cell phones as an accepted interface to
socialnetworks. Combining text messaging, multi-media messaging,
email and video into a single platform will attract users to theplatform for
the
simplicity, ease of use and wireless connections to social
networks.
The
social network market can be divided into two segments: the consumer, or home
user, market and the business, or corporate, market. Our initial products target
the consumer market. Both the consumer and the business markets are serviced
by
many of the same popular social networks such as MySpace.Com, Youtube.com,
Linkedin.com and Facebook.com. Our second generation of products will not only
enhance the consumer market but add business functionality for the corporate
market as well.
The
Dibz Solution
In
order
to be viable, our systems must function as a simple and effective means of
communication. In addition, we believe that many in the consumer or
home user market are seeking an entertaining experience and a way to express
their creativity andindividual personalities. We believe that consumer users
are
ready to accept a simple, all-in-one product that offer users a customizable
and
entertaining experience together with security and opt-in/out
features.
We
employ
an innovative approach to enhancing our users' social network experience. Our
Dibz Platform provide the following benefits:
–
Variety
and Amount of Personal Content. Our product offer users access to an extensive
and continually growing pool of user customized content that we believe may
become one of the largest collections of creative and diverse graphics, sound
and multimedia content available created by each individual user for each
individual user.
–
Creative
Technology. Our proprietary technology, which is based on advanced software
development standards, is designed to produce robust quality products that
provide the functionality packaged in a friendly, less technologically-oriented
and entertaining environment.
–
Customization.
The easy to use platform enables our users to customize and personalize the
delivery of and access to their content easily and quickly.
–
Flexibility
and Ease of Use for Both Sender and Recipient. We strive to offer a
simple and intuitive user interface that enables our users to create different
experiences depending on the nature or recipient of the specific content. Users
can easily change one or more features for a specific communication. Further,
recipients of Dibz users messages can easily open them using most available
web
browsers and can see all the features without the need for special
software.
Our
Strategy
Our
objective is to become the market leader in communication and content management
systems for social networks and small business markets. We believe
that our platform is the only one of it's kind providing an entertaining and
creative system, and ourstrategy will include building on its first to market
advantage and seeking to convert free users to paying customers. The keyelements
of our strategy are to:
–
Expand
product offerings and increase user sales. We plan to stimulate growth of our
sales and enhance our cross-sale capabilities by expanding our existing product
and service offering and developing new ones. We will continue to seek to
convert free users into paying customers by marketing the paid products and
services to our large user base and to cross-sell additional products and
services to paying users.
–
Avoid
offensive market tools. We design our products and services to address users'
aversion to spam, spyware and other perceived offensive Internet marketing
tools, which we believe encourages more use of them and increases user
loyalty.
–
Acquire
complementary products, technologies or companies. We seek to enhance our
technology, grow our userbase, and diversify our product lines and services
by
exploiting strategic acquisition opportunities. We intend to supplement our
research and development efforts by acquiring complementary technologies and
other assets that enhance the features, functionality and performance of our
products and services. We may also seek to increase our user base or enhance
our
sales and marketing capabilities by acquiring companies in our or similar
markets.
–
Maintain
and grow our user community. We believe viral marketing has resulted in millions
of registered users who spread the word about products and services at
relatively low marketing costs. For that reason, we expect a significant part
of
our products and services offering will remain free. In order
to strengthen awareness and increase the size of our user base, we intend to
expand our marketing methods beyond viral marketing to include advertisements,
media buying, public relations activities and additional co-branding
arrangements on a limited and targeted basis.
–
Strengthen
our advertising revenues. We intend to increase our revenues from monetizing
visitor traffic to our website by selling paid advertising and sponsored links.
In addition, we believe our user base can generate significant revenues through
keyword search advertising. We believe that our user base should be attractive
to potential advertisers. We also intend to continue to develop our advertising
infrastructure so that we can offer our advertisers a more effective method
to
reach their target audiences and thereby increase our advertising rates. We
plan
to continue and further increase our advertising force by expanding our sales
and business development teams, participating in trade shows, and strengthening
our brand through other online and offline marketing activities.
–
Continue
to focus on the online user. The Internet allows us to reach potential users
quickly and easily as well as reduces the costs associated with sales and
distribution of our products and services.
Our
Products
Today
personal content on web sites such as Myspace.com, Youtube.com and facebook.com
is stored on web site servers owned by the website. These websites
provide amazing content distribution channels but provide little to no
management services for the users content. For instance comments
posted to a MySpace website are simply displayed. The page owner
cannot search, sort, store, rank, etc. his or her comments. DIBZ
allows the storage, capturing, cataloging, manipulation and review of personal
content published on or to the web. The content can then be sorted,
stored, distributed via wireless and viewed easily. The individual
components are:
VoiceComments. Users
can record, post, play and store voice comments. The comments may be
made public or kept private, depending upon the user's personal
preferences.
Text
Messaging. Users will receive and reply to text messages generated by
other users. These messages will be stored for future retrieval by
the user and may be posted to social networks on the users behalf if so
requested.
Multimedia
Messaging. Users will receive and reply to multimedia messages,
including picture and video options. The multimedia messages are
stored for future retrieval by the user and may be posted to social networks
on
the users behalf if sorequested.
Phone
Services. We plan to offer innovative phone services that allow the
use of wired and wireless phones to access users social networks and leave
comments through simply dialing a phone number.
Email
services. Users will have the ability to generate and reply to email
messages. The email messages are stored for futureretrieval by the
user and may be posted to social networks on the users behalf if so
requested.
Calendar
Functions. Users will have the ability to automatically schedule
events such as reminders and notices. These events will automatically
be sent via text messaging, multimedia messages, emails or a combination of
all
based on the users settings for each individual recipient of the
message.
Content
Management. All communication sent or received through the Dibz
platform is stored and organized for easy retrieval by the user.
Friend
Management. The user creates an on-line friends contact book that the
user may group and sort easily. The user then uses these groups,
lists and friends in a innovative and fun way to communicate with their
friends.
Premium
Services. Paid services offered by the company further discussed in
our revenue model.
Partner
Programs. Programs designed by the company to allow other websites to
partner and participate in our business model.
Our
Revenue Model
The
business model generates revenue from the first day of web site operations.
Through the distribution of a
free
version of the Dibz-Delaware
platform, we capitalize on the viral nature of our free services to capture
premium service revenue. Additionally with the viral nature and
expected popularity of our free services, advertisement revenue will offset
the
cost of corporate operations. We believe offering the platform free will
accomplish several objectives. They are:
1)
Accelerated growth of the DIBZ platform
2)
Exponential growth of our own convergent content network
3)
The
development of a valuable consumer database;
4)
Empower the company to promote paid subscriber services
5)
Provide near unlimited source of leads from viral Social Networks for conversion
to paying customers.
Based
on
our objectives we expect to generate revenue from the following
services:
1.
Advertising from Basic Free Services
Advertising
revenues will be generated from day one through online contracts with companies
like Google and Yahoo. Each time a user views, captures, stores,
edits, etc. their content advertising opportunities and revenue are created
through the display of banner advertising on each page. We estimate
that each of our free customers minimally will view one ad per day.
2.
Paid Voice Comments
Revenue
is generated through paid monthly subscription for a personal phone number
that
is accessible by all phones worldwide allowing the posting and review of voice
comments to Social Networking sites. This allows paying users to receive
messages as comments and links on social websites. These voice
comments then will be available for all members of DIBZ to hear, even if posted
on MySpace or Facebook. This will bring an entire new meaning to the
term voice comment.
DIBZ
will
be the service provider for this service, however DIBZ has selected GlobalNet
to
be its VoIP technology Partner. DIBZ will private label these
services from GlobalNet and pay on an “as used” basis.
3.Enhanced
Platform Features
Once
users are “hooked” on our platform, we will offer a low cost monthly
subscription to add additional content management services to our
users. These enhanced services will make DIBZ platform even more user
friendly and provide the user with innovative and useful tools to better manage
their personal content.
4.
Innovative Click to Call Services
Users
will have the opportunity to provide the ability to call each other anonymously
through the DIBZ platform. Users will simply post a link as a comment
or link requesting the desired party to click on the link and enter their phone
number. This allows a user to talk without giving any personal
information. We believe that sites like MySpace, Match.Com, Yahoo
Personals, etc. can benefit greatly from this service. DIBZ will be
the service provider for this service, however DIBZ has selected GlobalNet
to be
its VoIP technology Partner. DIBZ will private label these services
from GlobalNet and pay on an “asused” basis.
5.
International Calling
DIBZ
is
exploring the opportunity to offer low cost international calling services
to
it's registered users. Users will be able toaccess this service
through their home, office or cell phone utilizing caller-id technologies to
automatically identify and authorizethe user on our network. We are
exploring the opportunities to add the ability to connect these calls through
social networks anddating sites as well. B DIBZ will be the service provider
for
this service, however DIBZ has selected GlobalNet to be its VoIPtechnology
Partner. DIBZ will private label these services from GlobalNet and
pay on an “as used” basis.
6.
US VoIP Residential Services
DIBZ
is
exploring the opportunity offer VoIP services to its registered
users. Users will be able to connect this service to their MySpace
and other websites, adding additional value and distinguishing our service
from
Vonage and other providers. DIBZ will be the service provider for
this service, however DIBZ has selected GlobalNet to be its VoIP technology
Partner. DIBZ will private label these services from GlobalNet and
pay on an “as used” basis.
7.
A Priceless Database
The
next
generation of Permission Based Databases: our Members want to be kept informed
of their own personal content as it is posted and/or changed. They value the
relationship and understand the value of instant communications. This provides
the platform to create close, long-term relationships with our users. By
listening carefully to their needs, a new method of marketing is established.
This is not traditional selling so much as it is providing solutions for deeply
seated needs. As noted in the recent publication,
Trillion Dollar Moms
,
`viral explosions' in marketing are created as people naturally wish to spread
good news to other people. The "emotional gratification" of being heard, being
first, and making a tangible impact on another is what drives word-of-mouth
messages and marketing.
RISK
FACTORS
Our
business is subject to numerous risk factors, including the
following:
An
investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below andthe other information in this
prospectus before investing in our common stock. If any of the following risks
occur, our business, operating results and financial condition could be
seriously harmed. Please note that throughout this prospectus, the words“we”,
“our” or “us” refer to the Company and not to the selling
stockholders.
WE
HAVE A
LIMITED OPERATING HISTORY THAT YOU CAN USE TO EVALUATE US, AND THE LIKELIHOOD
OF
OUR SUCCESS MUST BE CONSIDERED IN LIGHT OF THE PROBLEMS, EXPENSES,
DIFFICULTIES,COMPLICATIONS AND DELAYS FREQUENTLY ENCOUNTERED BY A SMALL
DEVELOPING COMPANY.
We
were
incorporated in Delaware on December 28, 2006. We have a limited
amount of assets or financial resources. The likelihood of our success must
be
considered in light of the expenses and difficulties in marketing our website,
recruiting and keeping clients and obtaining financing to meet the needs of
our
plan of operations. Since we have a limited operating history ofmarketing our
services to the public over the Internet, we may not be profitable and we may
not be able to generate sufficient revenues to meet our expenses and support
our
anticipated activities.
WE
ARE
DEVELOPING OUR PRODUCT IN A HIGHLY COMPETITIVE MARKET AND WE ARE UNSURE AS
TO
WHETHER OR NOT THERE WILL BE ANY CONSUMER DEMAND FOR OUR PRODUCT.
Some
of
our competitors are much larger and better capitalized than we are. It may
be
that our competitors will better address the same market opportunities that
we
are addressing. These competitors, either alone or with collaborative partners,
may succeed in developing business models that are more effective or have
greater market success than our own. The Company is especially susceptible
to
larger competitors that invest more money in marketing. Moreover, the
market for our products is large but highly competitive. There is
little or no hard data that substantiates the demand for our products or how
this demand will be segmented. It is possible that there will be low
consumer demand for our products, or that interest in our products could decline
or die out, which would cause us to be unable to sustain our
operations.
WE
WILL
REQUIRE FINANCING TO ACHIEVE OUR CURRENT BUSINESS STRATEGY AND OUR INABILITY
TOOBTAIN SUCH FINANCING COULD PROHIBIT US FROM EXECUTING OUR BUSINESS PLAN
AND
CAUSE US TOSLOW DOWN OUR EXPANSION OF OPERATIONS.
We
will
need to raise additional funds through public or private debt or sale of
equity
to achieve our current plan of operations. Such financing may not be available
when needed. Even if such financing is available, it may be on terms that
are
materially adverse to your interests with respect to dilution of book value,
dividend preferences, liquidation preferences, or other terms. Our capital
requirements to implement our business strategy will be significant. We will
need a minimum of $720,000 to continue operations over the next twelve months,
which we do not currently have in our cash reserve. We will also require
additional funds in order to significantly expand our business as set forth
in
our plan of operations. These funds may not be available or, if available,
will
be on commercially reasonable terms satisfactory to us. We may not be able
to
obtain financing if and when it is needed on terms we deem
acceptable.
If
we are
unable to obtain financing on reasonable terms, we could be forced to delay
or
scale back our plans for expansion. In addition, such inability to obtain
financing on reasonable terms may delay the implementation of an upgrade of
our
website, launching of new online-dating related features and the execution
of
our marketing plan o increase our member base.
WE
WILL
REQUIRE ADDITIONAL FINANCING WHICH MAY REQUIRE THE ISSUANCE OF ADDITIONAL SHARES
WHICH WOULD DILUTE THE OWNERSHIP HELD BY OUR SHAREHOLDERS
We
will
need to raise funds through either debt or sale of our shares in order to
achieve our business goals. Although there areno present plans, agreements,
commitments or undertakings with respect to the sale of additional shares or
securities convertible into any such shares by us, any shares issued would
further dilute the percentage ownership held by the stockholders.
OUR
FUTURE SUCCESS IS DEPENDENT, IN PART, ON THE PERFORMANCE AND CONTINUED SERVICE
OF MARK WOOD, OUR SOLE OFFICER AND DIRECTOR. WITHOUT HIS CONTINUED SERVICE,
WE
MAY BE FORCED TO INTERRUPT OR EVENTUALLY CEASE OUR OPERATIONS.
We
are
presently dependent to a great extent upon the experience, abilities and
continued services of Mark Wood, our sole officer and director. We currently
do
not have an employment agreement with Mr. Wood. The loss of his services
would delayour business operations substantially.
MARK
WOOD’S CONTROL MAY PREVENT YOU FROM CAUSING A CHANGE IN THE COURSE OF OUR
OPERATIONS AND MAY AFFECT THE PRICE OF OUR COMMON STOCK.
Mark
Wood
beneficially owns approximately 80% of our outstanding Series A Preferred
Stock.
Accordingly, for as long as Mr. Wood continues to own more than 50% of our
Series A Preferred Stock, he will be able to elect our entire board of
directors, control all matters that require a stockholder vote (such as mergers,
acquisitions and other business combinations) and exercise a significant
amount
of influence over our management and operations. Therefore, regardless of
the
number of our common shares sold, your ability to cause a change in the course
of our operations is eliminated. As such, the value attributable to the right
to
vote is limited.
This
concentration of ownership could result in a reduction in value to the common
shares you own because of the ineffectivevoting power, and could have the effect
of preventing us from undergoing a change of control in the future.
OUR
SUCCESS DEPENDS UPON OUR ABILITY TO ATTRACT AND HIRE KEY PERSONNEL. OUR
INABILITY TO HIRE QUALIFIED INDIVIDUALS WILL NEGATIVELY AFFECT OUR BUSINESS,
AND
WE WILL NOT BE ABLE TO IMPLEMENT OR EXPAND OUR BUSINESS PLAN.
Our
business is greatly dependent on our ability to attract key personnel. We will
need to attract, develop, motivate and retainhighly skilled technical employees.
Competition for qualified personnel is intense and we may not be able to hire
or
retainqualified personnel. Our management has limited experience in recruiting
key personnel which may hurt our ability to recruitqualified individuals. If
we
are unable to retain such employees, we will not be able to implement or expand
our business plan.
OUR
MARKET IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE, AND IF WE FAIL TO DEVELOP
AND MARKET NEW TECHNOLOGIES RAPIDLY, WE MAY NOT BECOME PROFITABLE IN THE
FUTURE.
The
internet and the online commerce industry are characterized by rapid
technological change that could render our existing website obsolete. The
development of our web site entails significant technical and business risks.
We
may not be able tosuccessfully use new technologies effectively or adapt our
web
site to customer requirements or needs. If our management isunable, for
technical, legal, financial, or other reasons, to adapt in a timely manner
in
response to changing market conditions orcustomer requirements, we may never
become profitable which may result in the loss of all or part of your
investment.
IF
WE ARE
UNABLE TO PROTECT EFFECTIVELY OUR INTELLECTUAL PROPERTY, THIRD PARTIES
MAY
USE
OUR TECHNOLOGY, WHICH COULD IMPAIR OUR ABILITY TO COMPETE IN OUR
MARKETS.
Our
success will depend on our ability to obtain and protect patents on our
technology (specifically “iDialDirect”) and to protect our trade
secrets. Others may challenge our patents and, as a result, our
patents could be narrowed, invalidated or unenforceable. In addition, our
current and future patent applications may not result in the issuance of patents
in the United States or foreign countries. Competitors might develop products
similar to ours that do not infringe on our patents. In order to protect or
enforce our patent rights, we may initiate interference proceedings,
oppositions, or patent litigation against third parties, such as infringement
suits. These lawsuits could be expensive, take significant time and divert
management's attention from other business concerns. The patent position of
technology firms generally is highly uncertain, involves complex legal and
factual questions, and has recently been the subject of much litigation. No
consistent policy has emerged from the U.S. Patent and Trademark Office or
the
courts regarding the breadth of claims allowed or the degree of protection
afforded under technology patents. In addition, there is a substantial backlog
of applications at the U.S. Patent and Trademark Office, and the approval or
rejection of patent applications may take several years.
We
cannot
guarantee that our management and others associated with us will not improperly
use our patents, trademarks and trade secrets. Further, others may gain access
to our trade secrets or independently develop substantially equivalent
proprietary information and techniques.
WE
DO NOT
EXPECT TO PAY DIVIDENDS AND INVESTORS SHOULD NOT BUY OUR COMMON STOCKEXPECTING
TO RECEIVE DIVIDENDS
We
have
not paid any dividends on our common stock in the past, and do not anticipate
that we will declare or pay any dividends in the foreseeable future.
Consequently, you will only realize an economic gain on your investment in
our
common stock if the price appreciates. You should not purchase our common stock
expecting to receive cash dividends. Since we do not pay dividends, and if
we
are not successful in having our shares listed or quoted on any exchange or
quotation system, then you may not have any manner to liquidate or receive
any
payment on your investment. Therefore our failure to pay dividends may cause
you
to not see any return on your investment even if we are successful in our
business operations. In addition, because we do not pay dividends we may have
trouble raising additional funds which could affect our ability to expand out
business operations.
THE
CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR CONVERTIBLE
DEBENTURES
COULD REQUIRE US TO ISSUE A SUBSTANTIALLY GREATER NUMBER OF SHARES TO
THE
HOLDERS, WHICH WILL CAUSE DILUTION TO OUR EXISTING STOCKHOLDERS.
Our
obligation to issue shares upon conversion of our convertible securities under
the January 2007 agreements is essentially limitless. The following
table shows the effect on the number of shares issuable upon full conversion
($450,000 aggregate principal)(without taking into account the 4.99% limitation
or any interest, penalties, events of default or other amounts under the notes),
in event our common stock price declines by 25%, 50% and 75% from the trading
price at January 25, 2007.
|
|
PRICE
DECREASES BY
|
|
|
1/25/07
|
25%
|
50%
|
75%
|
|
Common
Stock Price (1)
|
0.05
|
0.0375
|
0.025
|
0.0125
|
|
|
|
|
|
|
|
Conversion
Price (2)
|
0.025
|
0.01875
|
0.0125
|
0.00625
|
|
|
|
|
|
|
|
100%
Conversion Shares
|
18,000,000
|
24,000,000
|
36,000,000
|
72,000,000
|
(1)
Represents the average of the lowest three (3) trading prices for the common
stock during the twenty (20) trading day period prior to January 25, 2007 as
calculated pursuant to the agreements (2) Assuming 50% applicable
percentage
The
issuance of shares upon conversion of the convertible debentures and exercise
of
warrants may result in substantial dilution to the interests of other
stockholders since the holders of such securities may ultimately convert and
sell the full amount issuable on conversion. Although the holders of our
convertible debentures and warrants may not convert and/or exercise such
securities if such conversion or exercise would cause them to own more than
4.99% of our outstanding common stock, this restriction does not prevent them
from converting and/or exercising some of their holdings, selling the stock
and
then converting the rest of their holdings. In this way, the holders of our
convertible debentures, and warrants could sell more than this limit while
never
holding more than this limit. There is no upper limit on the number of shares
that may be issued which will have the effect of further diluting the
proportionate equity interest and voting power of all holders of our common
stock. In addition, the number of shares of common stock issuable upon
conversion
of the outstanding convertible debentures may increase if the market price
of
our stock declines. The sale of these shares may adversely affect the market
price of our common stock.
OUR
COMMON STOCK COULD BE DILUTED IN THE FUTURE AS A RESULT OF OUR ASSET
PURCHASE AGREEMENT WITH GLOBALNET.
On
January 5, 2007, the Company entered into an Asset Purchase Agreement with
GlobalNet, a Nevada corporation. The Company assumed the $3,000,000 Callable
Secured Convertible Note (the “Note”) from GlobalNet to a third party investor
in exchange for its iDialDirect technology and the right to receive up to
$50,000 worth of services from GlobalNet per month for a period of three
years. Management has expensed the cost of the assumed debt of
$3,000,000 as an acquisition expense due to the uncertainty of the Company’s
ability to realize the future value of these assets. The Note bears
interest at 15% per year and is due on December 29, 2009. The Note is
convertible into the Company’s common stock only after that stock is listed or
quoted on a nationally recognized stock exchange or the OTCBB. The
Note is convertible into common shares at the lesser of (i) 20% of the average
of the lowest three trading prices of the common stock during the twenty trading
day period prior to conversion and (ii) $0.10. The Company has an option to
prepay the Notes in the event that no event of default exists, there are a
sufficient number of shares available for conversion of the Notes and the market
price is at or below $.10 per share. Exercise of this option will stay all
conversions for the following month. The full principal amount of the Notes
is
due upon default under the terms of Notes.
OUR
COMMON STOCK IS CONSIDERED A PENNY STOCK, WHICH IS SUBJECT TO RESTRICTIONS
ON
MARKETABILITY, SO YOU MAY NOT BE ABLE TO SELL YOUR SHARES.
If
our
common stock becomes tradable in the secondary market, we will be subject to
the
penny stock rules adopted by the Securities and Exchange Commission that require
brokers to provide extensive disclosure to their customers prior to executing
trades in penny stocks. These disclosure requirements may cause a reduction
in
the trading activity of our common stock, which in all likelihood would make
it
difficult for our shareholders to sell their securities.
WE
MAY
NOT BE ABLE TO IMPLEMENT SECTION 404 OF THE SARBANES OXLEY ACT OF 2002 ON
A TIMELY BASIS
The
SEC,
as directed by Section 404 of the Sarbanes-Oxley Act, adopted rules
generally requiring each public company to include a report of management on
the
company's internal controls over financial reporting in its annual report on
Form 10-KSBthat contains an assessment by management of the effectiveness of
the
company's internal controls over financial reporting. This requirement will
first apply to our annual report on Form 10-KSB for the fiscal year ending
December 31, 2007. In addition, commencing with our annual report for the
fiscal year ending December 31, 2008 our independent registered accounting
firm must attest to and report on management's assessment of the effectiveness
of our internal controls over financial reporting.
We
have
not yet developed a Section 404 implementation plan. We have in the past
discovered, and may in the future discover, areas of our internal controls
that
need improvement. How companies should be implementing these new requirements
including internal control reforms to comply with Section 404's
requirements and how independent auditors will apply these requirements and
test
companies' internal controls, is still reasonably uncertain.
We
expect
that we will need to hire and/or engage additional personnel and incur
incremental costs in order to complete the work required by Section 404. We
can not assure you that we will be able to complete a Section 404 plan on a
timely basis. Additionally, upon completion of a Section 404 plan, we
may not be able to conclude that our internal controls are effective, or in
the
event that we conclude that our internal controls are effective, our independent
accountants may disagree with our assessment and may issue a report that is
qualified. Any failure to implement required new or improved controls, or
difficulties encountered in their implementation, could negatively affect our
operating results or cause us to fail to meet our reporting
obligations
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OFOPERATIONS
The
following discussion and analysis of our plan of operations should be read
in
conjunction with our financial statements and related notes appearing elsewhere
in this prospectus. This discussion and analysis contain
forward-looking statements that involve risks, uncertainties and
assumptions. Actual results may differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including, but not limited to, those presented under the heading of “Risk
Factors” and elsewhere in this prospectus.
Overview
Plan
of Operations
We
were
incorporated in Delaware in December of 2006 as DIBZ International,
Inc. We are developing a social networking platform which will
provide a simple, easy to use, all-in-one communications platform to users
of
social networks. We expect to have our product ready to be marketed
in Q4 2007.
Cash
on
hand as of June 30, 2007 is adequate to fund operations through October
2007. During October 2007 we received an additional $200,000 of
funding under the 6% Convertible Debentures. We expect to receive an
additional $2,000,000 of funding in December under substantially the same terms
as the existing 6% Convertible Debentures. We are currently using
cash at a rate of $60,000 per month, for a total use of cash in the next twelve
months of approximately $720,000.
Dibz-Delaware
will virally market our all-in-one communications platform to users of social
networks such as MySpace.Com andYouTube.Com. Currently we anticipate
to generate revenues from i) advertising agreements with search engines,
ii)advertisement revenues generated by our own direct sales efforts, iii)
premium service offerings iv) new service offerings, and v)potential mergers
or
acquisitions.
Milestones
Milestones
thru September 31, 2008:
In
November 2007 we will the release version 1.0 of the DIBZ PCMS. This will
be the
free version and will be available to users in November. The Company
is currently beta testing the software live on our website located at
www.dibz.com. In October 2007, the Company received an additional
$200,000 from our investors, under the same terms of the previous three rounds
of financing. These funds are earmarked as follows:
|
·
|
Launch
of our viral marketing campaign on different social network
sites.
|
|
·
|
Complete
the development of version 1.1 of PCMS, the Enhanced Version available
for
a monthly fee of $4.95. Release date is scheduled for February
1,
2008.
|
|
·
|
Launch
of our corporate website.
|
The
Company anticipates hiring a VP of Marketing and a VP of Sales for a total
of
three employees and three contractors (2 development and product support)
in
November 2007. Primary business development will focus on potential
advertisers for our website.
December 2007
New
product development will be focused on business applications for the PCMS.
The
applications include:
|
·
|
A
centralized location for assembling, storing and retrieving all
forms of
messaging modalities that a subscriber normally
uses.
|
|
·
|
A
hub that interconnects and allows for easy access of different
types of
web and telecom enabled messaging systems that a subscriber routinely
uses.
|
The
Company anticipates a total of 10,600 unique visitors to our website, with
805
of those visitors signing up for the free service and 1% of those users
converting to Enhanced Services. Revenues projected are $3,100 for this time
frame. During this time the Company plans to begin to seek an additional
funding
of $2,000,000 (two million dollars) which will fund the Company until we
“crossover” to profitability anticipated in August of 2008.
January
1 – March 31, 2008
In
March, 2008 the Company projects
hiring a Chief Technology Officer (CTO), an sales representative and one
administrative assistant. In conjunction with the increased in staffing,
the
Company plans on moving to a larger facility.
During
this timeframe business
development will continue to focus on garnering new advertisers for the Company
website, and developing and identifying events for a direct marketing to
our
target market audience, users of social networks. This will include concerts,
conventions and similar venues.
During
this timeframe the Company
anticipates a total of 95,000 unique visitors to our website, with 10,115
of
visitors signing up for free service and a 1% conversion rate to Enhanced
Services. Revenue projection for this time frame is $105,093.
April
1, 2008 – June 30, 2008
New
business development will focus on identified verticals for the PCMS business
applications, as well as a reseller program for the PCMS business product.
During this timeframe the Company anticipates a total of 300,000 unique visitors
to our website, with 30,115 of visitors signing up for free service and a
1%
conversion rate to Enhanced Services. Revenue projection for this time frame
is
$573,140.
July
1 – September 30, 2008
In
August, 2008 the Company projects crossover to profitability. No additional
staffing is anticipated during this time. During this timeframe the
Company anticipates a total of 900,000 unique visitors to our website, with
335,465 of visitors signing up for free service and a 1% conversion rate
to
Enhanced Services. Revenue projection for this time frame is
$1,180,640.
Results
of Operations
Dibz-Delaware
is in the development stage and to date has not generated any revenues. The
risks specifically discussed are not the only factors that could affect future
performance and results. This report contains forward-looking statements
concerning us, our business and our operations. Such forward-looking statements
are necessarily speculative and there are certain risks and uncertainties that
could cause actual events or results to differ materially from those referred
to
in such forward-looking statements. We do not have a policy of updating or
revising forward-looking statements and thus it should not be assumed that
silence by our management over time means that actual events or results are
occurring as estimated in the forward-looking statements herein.
As
a
development stage company, we have yet to earn revenues from operations. We
may
experience fluctuations in operating results in future periods due to a variety
of factors, including our ability to obtain additional financing in a timely
manner and on terms favorable to us, our ability to successfully develop our
business model, the amount and timing of operating costs and capital
expenditures relating to the expansion of our business, operations and
infrastructure and the implementation of marketing programs, key agreements,
and
strategic alliances, and general economic conditions specific to our
industry.
As
a
result of limited capital resources and no revenues from operations from its
inception, the Dibz-Delaware has relied on the issuance of equity securities
to
employees and non-employees in exchange for services. Dibz-Delaware's management
enters into equity compensation agreements with non-employees if it is in the
best interest of the Dibz-Delaware under terms and conditions consistent with
the requirements of Financial Accounting Standards No. 123 R, "Share-Based
Compensation." In order to conserve its limited operating capital resources,
the
Dibz-Delaware anticipates continuing to compensate non-employees for services
during the next twelve months. This policy may have a material effect on
Dibz-Delaware's results of operations during the next twelve
months.
Costs
and Expenses
From
our
inception through June 30, 2007, Dibz-Delaware has not generated any revenues
and has incurred cumulative losses of$4,499,746. In addition, a significant
part
of the overall remaining costs are associated principally with equity-based
compensation to employees and consultants, asset impairment costs and
professional services rendered.
Product
Research and Development
We
do not
anticipate undertaking or incurring any additional material product
research and development activities other than the required Research and
development required to complete our DIBZ technology suite during the next
twelvemonths.
Acquisition
of Plant and Equipment and Other Assets
We
do not
anticipate the sale of any material property, plant or equipment during the
next
12 months. We do not anticipate the acquisition of any material
property, plant or equipment during the next 12 months.
Number
of Employees
From
our
inception through the period ended June 30, 2007, we have principally relied
on
the services of outside consultants and at-will consultants for
services. We currently have no full time employees and no part-time
employees. In order for us to attract and retain quality personnel,
we anticipate we will have to offer competitive salaries to future
employees. We anticipate that it may become desirable to add full and
or part time employees to discharge certain critical functions during the next
12months. This projected increase in personnel is dependent upon our
ability to generate revenues and obtain sources of financing. There
is no guarantee that we will be successful in raising the funds required or
generating revenues sufficient to fund the projected increase in the number
of
employees. As we continue to expand, we will incur additional cost
for personnel.
Liquidity
and Capital Resources
As
of
June 30, 2007, the Company's current liabilities exceeded its current assets
by
$1,482,653. From the Company's inception to June 30, 2007 the Company has
incurred an operating cash flow deficit of $33,689, which has been principally
financed through the issuance of $850,000 of 6% Convertible Debentures in
the
first half of 2007. The Debentures bear interest at 6% and mature in
the first and second quarters of 2010. The Debentures are convertible into
common shares at the lesser of (i) the Variable Conversion Price and (ii)
the
Fixed Conversion price. The “Variable Conversion Price” shall mean the
Applicable Percentage multiplied by the average of the lowest three (3) trading
prices during the twenty (20) Trading Day period prior to conversion. The
“Applicable Percentage” means 60% and the “Fixed Conversion Price”
means$0.10.
Our
cash
requirements to fund the operations of the Company and to continue the
development of our product are approximately $60,000 per month. Cash
on hand as of June 30, 2007 is adequate to fund operations through October
2007. We will need a minimum of $720,000 to continue operations over
the next twelve months, which we do not currently have in our cash
reserve. We expect to continue to incur additional losses and
negative cash flows from operating activities until the third quarter of
2008.
During
October 2007, we issued an additional $200,000 in 6% Convertible
Debentures. We expect to receive an additional $2,000,000 in
additional financing under substantially the same terms as those previously
issued; although we do not have a contractual commitment from the lender
to
provide this funding.
We
began
beta testing our software in October 2007. We expect to begin
marketing our product in November 2007 and to generate revenues beginning
in
December 2007. Through the distribution of a free version of the DIBZ
platform, we will capitalize on the viral nature of our free services to
capture
premium service revenue.
We
have
also assumed a $3,000,000 Callable Secured Convertible Note from GlobalNet
Corporation (“GlobalNet”) in exchange for its iDialDirect technology and the
right to receive up to $50,000 of telecommunication services from GlobalNet
per
month for a period of three years ending in January 2010. This
contract will allow us to receive these valuable services without expending
additional cash. The Note bears interest at 15% per year and is due on
December 29, 2009. The Note is convertible into our common stock only
after that stock is listed or quoted on a nationally recognized stock exchange
or the OTCBB. The Note is convertible into common shares at the
lesser of (i) 20% of the average of the lowest three trading prices of the
common stock during the twenty trading day period prior to conversion and
(ii)
$0.10. We have an option to prepay the Notes in the event that no event of
default exists, there are a sufficient number of shares available for conversion
of the Notes and the market price is at or below $.10 per share. Mark
Wood, our Chairman of the Board and Chief Executive Officer, was the CEO
of
GlobalNet until August 2006 and is currently a shareholder of
GlobalNet.
If
we are
unable to obtain any additional funding, we believe that by adjusting our
operations and development to the level of capitalization, we believe we
have
sufficient capital resources to meet projected cash flow deficits. However,
if during that period or thereafter, we are not successful in generating
sufficient liquidity from operations or in raising sufficient capital resources,
on terms acceptable to us, this could have a material adverse effect on our
business, results of operations liquidity and financial condition.
Our
independent registered public accounting firm has stated in their report
on the
Company's June 30, 2007 financial statements that the Company has had
difficulty in generating sufficient cash flow to meet its obligations
and sustain its operations which raises substantial doubts about the
Company's ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.
Off-Balance
Sheet Arrangements
We
have
not entered into any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes
in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources and would be considered material
to
investors.
Inflation
It
is the
opinion of the Company that inflation has not had a material effect on its
operations.
Critical
Accounting Policies and Estimates
The
discussion and analysis of our plan of operations is based upon our consolidated
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation
of our consolidated financial statements requires us to make estimates and
assumptions that affect our reported results of operations and the amount of
reported assets, liabilities and proved oil and gas reserves.
Some
accounting policies involve judgments and uncertainties to such an extent that
there is reasonable likelihood that materially different amounts could have
been
reported under different conditions, or if different assumptions had been used.
Actual results may differ from the estimates and assumptions used in the
preparation of our consolidated financial statements. Described below are the
most significant policies we apply, or intend to apply , in preparing our
consolidated financial statements, some of which are subject to alternative
treatments under accounting principles generally accepted in the United States
of America. We also describe the most significant estimates and assumptions
we
make in applying these policies.
Product
Development Costs
Research
and development costs are charged to expense as incurred. However, we
account for development costs related to software products to be sold, leased,
or otherwise marketed in accordance with FASB Statement of Financial Accounting
Standards No. 86,
Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed
. Software development costs are expensed as
incurred until technological feasibility has been established, at which time
such costs are capitalized until the product is available for general release
to
customers. To date, technological feasibility has not been established for
our
products, and, accordingly, no development costs have been
capitalized.
Website
Development Costs
The
Company recognizes website development costs in accordance with Emerging Issue
Task Force ("EITF") No. 00-02,"Accounting for Website Development Costs." As
such, the Company expenses all costs incurred that relate to the planning and
post implementation phases of development of its website. Direct costs incurred
in the development phase are capitalized and recognized over the estimated
useful life. Costs associated with repair or maintenance for the website are
included in cost of net revenues in the current period expenses. During the
period ended from December 28, 2006 through June 30, 2007, the Company did
not
capitalize any costs associated with the website development.
Revenue
Recognition
We
will
recognize revenue when persuasive evidence of an arrangement exists, services
have been rendered, the sales price is fixed or determinable, and collectibility
is reasonable assured. As of June 30, 2007, we did not have any
sales.
Recently
Issued Accounting Standards Not Yet Adopted
Fair
Value Measurements.
In September 2006, the FASB issued
SFAS No. 157, “Fair Value Measurements” which defines fair value, establishes a
framework for measuring fair value in generally accepted accounting
principles(“GAAP”), and expands disclosures about fair value measurements. Prior
to this Statement, there were different definitions of fair value and limited
guidance for applying those definitions in GAAP. This Statement provides the
definition to increase consistency and comparability in fair value measurements
and for expanded disclosures about fair value measurements. The
Statement emphasizes that fair value is a market-based measurement, not an
entity-specific measurement. The Statement clarifies that market participant
assumptions include assumptions about risk, i.e. the risk inherent in a
particular valuation technique used to measure fair value and/or the risk
inherent in the inputs to the valuation technique. The Statement expands
disclosures about the use of fair value to measure assets and liabilities in
interim and annual periods subsequent to initial recognition. The disclosures
focus on the inputs used to measure fair value and for recurring fair value
measurements using significant unobservable inputs, the effect of the
measurements on earnings for the period. The Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Earlier application is
encouraged, provided that the reporting entity has not yet issued financial
statements for that fiscal year, including the financial statements for an
interim period within that fiscal year. The Company does not expect adoption
of
this standard will have a material impact on its financial position, operations
or cash flows.
Accounting
for Registration Payment Arrangements.
In December 2006, the FASB
issued FSP EITF 00-19-2, Accounting for Registration Payment Arrangements
("FSP 00-19-2") which addresses accounting for registration payment
arrangements. FSP00-19-2 specifies that the contingent obligation to make
future payments or otherwise transfer consideration under a registration
payment arrangement, whether issued as a separate agreement or included as
a provision of a financial instrument or other agreement, should be
separately recognized and measured in accordance with FASB Statement No. 5,
Accounting for Contingencies. FSP 00-19-2 further clarifies that a
financial instrument subject to a registration payment arrangement should
be accounted for in accordance with other applicable generally accepted
accounting principles without regard to the contingent obligation to
transfer consideration pursuant to the registration
payment arrangement. For registration payment arrangements and
financial instruments subject to those arrangements that were entered into
prior
to the issuance of EITF 00-19-2, this guidance shall be effective for
financial statements issued for fiscal years beginning after December 15, 2006
and interim periods within those fiscal years. The Company has not yet
determined the impact that the adoption of FSP 00-19-2 will have on
its financial statements.
The
Fair Value Option for Financial Assets and Financial
Liabilities.
In February 2007, the FASB issued SFAS No.
159,“The Fair Value Option for Financial Assets and Financial
Liabilities--including an amendment of FASB Statement No.115”, permitting
entities to choose to measure many financial instruments and certain other
items
at fair value. The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply
complex hedge accounting measurement. The statement applies to all
entities, including not-for profit organizations. Most of the provisions of
this
Statement apply only to entities that elect the fair value option. However,
the
amendment to SFAS No. 115, “Accounting for Certain Investments in Debt and
Equity Securities”, applies to all entities with available-for-sale and trading
securities. The Company does not expect adoption of this standard will have
a
material impact on its financial position, operations or cash
flows.
ITEM
3. DESCRIPTION OF PROPERTY
Dibz-Delaware
has no properties and at this time has no agreements to acquire any properties.
Dibz-Delaware currently uses the offices of management at no cost to the
Company. Management has agreed to continue this arrangement until the
Dibz-Delawarecompletes an acquisition or merger.
ITEM
4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The
following table sets forth each person known by us to be the beneficial owner
of
five percent or more of the Company's voting Stock, all directors individually
and all directors and officers of the Company as a group as of June 30, 2007.
Except as noted, each person has sole voting and investment power with respect
to the shares shown.
|
Name
and Address of Beneficial Owner
|
Amount
of Beneficial Ownership
|
|
Percentage
of Class
|
|
|
|
|
|
|
Mark
Wood, Chairman of the Board and Chief Executive Officer
|
39,473 shares
of Series A Preferred Stock (1)
|
|
78.95%
|
|
9595
Six Pines
|
|
|
|
|
Bldg
8 Level 2 Suite 8210
|
|
|
|
|
The
Woodlands, TX 77380
|
|
|
|
|
|
|
|
|
|
Ocean
Avenue Advisors
Ira
Miller, Principal
|
5,263
shares of Series A Preferred Stock
|
|
10.53%
(2)
|
|
2361
Campus Drive, Suite 101
Irvine,
CA 92612
|
|
|
|
|
Fairhills
Capital
Edward
Bronson, Principal
1275
Fairhills Drive
Ossining,
NY 10562
|
2,632
shares of Series A Preferred Stock
|
|
5.26%
(3)
|
|
|
|
|
|
|
Danny
Wainstein
Marjorie
Group
2875
Oceanside Road
Oceanside,
NY 10021
|
2,632
shares of Series A PreferredStock
|
|
5.26%
(4)
|
|
Star
Associates LLC
Andrew
Glashow
1224
W 61
st
Street
Kansas
City, MO 64113
|
600,000
shares of common stock
|
|
37.0%
(5)
|
|
David
Hungerford
10715
Potspring Road
Cockysville,
MD 21030
|
200,000
shares of common stock
|
|
12.3%
(6)
|
|
Steve
Starke
12740
Old Plank Road
Jacksonville,
FL 32220
|
173,500
shares of common stock
|
|
10.7%
(7)
|
|
(1)
|
On
January 27, 2007, the Company designated 50,000 of its shares of
Preferred
Stock as Series A Preferred Shares, par value $ .001 per share (“Series A
Preferred”). The Series A Preferred are convertible at the option of the
holder into common stock at the rate of five hundred seventy eight
(578)
shares of common for every one share of Series A Preferred at the
option
of the holder. Except as otherwise expressly required by law,
each holder of Series A Preferred shall be entitled to vote on all
matters
submitted to shareholders of the Corporation and shall be entitled
to Five
Thousand Seven Hundred and Eighty Three (5,783) votes of Series A
Preferred Stock owned at the record date for the determination of
shareholders entitled to vote on such matter or, if no such record
date is established, at the date such vote is taken or any written
consent
of shareholders is solicited. Based upon same, Mark Wood is deemed
the
majority shareholder of the Company since he can vote 228,272,359
shares
which would represent over 78.50% of the voting shares of the Company
assuming all preferred shares were converted to common
stock.
|
|
(2)
|
Ocean
Avenue Advisors is the owner of 5,263 Series A Preferred
Shares. Such shares are entitled to vote at the rate of5,783
common shares for each Preferred Share owned. Based upon same,
Ocean Advisors is the owner of a total of 30,435,929 voting shares of
the Company or 10.46% of the outstanding voting shares of the
Company.
|
|
(3)
|
Fairhills
Capital is the owner of 2,632 Series A Preferred Shares. Such
shares are entitled to vote at the rate of 5,783 common shares for
each
Preferred Share owned. Based upon same, Fairhills Capital is
the owner of a total of 15,220,856 voting shares of the Company or
5.23%
of the outstanding voting shares of the
Company.
|
|
(4)
|
Danny
Weinstein is the owner of 2,632 Series A Preferred Shares. Such
shares are entitled to vote at the rate of 5,783common shares for
each
Preferred Share owned. Based upon same, Danny Weinstein is the
owner of a total of 15,220,856 voting shares of the Company or 5.23%
of the outstanding voting shares of the
Company.
|
|
(5)
|
Star
Associates LLC is the owner of 600,000 shares of common
stock. The holders of the 50,000 Series A Preferred Shares are
entitled to vote at the rate of 5,783 common shares for each Preferred
Share owned. Based upon same, Star Associates LLC is the owner
of 0.0021% of the outstanding voting shares of the
Company.
|
|
(6)
|
David
Hungerford is the owner of 200,000 shares of common stock. The
holders of the 50,000 Series A Preferred Shares are entitled to vote
at
the rate of 5,783 common shares for each Preferred Share
owned. Based upon same, David Hungerford is the owner of
0.0007% of the outstanding voting shares of the
Company.
|
|
(7)
|
Steve
Starke is the owner of 173,500 shares of common stock. The
holders of the 50,000 Series A Preferred Shares are entitled to vote
at
the rate of 5,783 common shares for each Preferred Share
owned. Based upon same, Steve Starke is the owner of 0.0006% of
the outstanding voting shares of the
Company.
|
ITEM
5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.
We
have
one Director and Officer as follows:
|
Name
|
Age
|
Positions
and Offices Held
|
|
|
|
|
|
Mark
Wood
|
48
|
Chairman
of the Board and Chief Executive
Officer
|
There
are
no agreements or understandings for the officer or director to resign at
the
request of another person and the above-named officer and director is not
acting
on behalf of nor will act at the direction of any other person.
Set
forth
below is the name of our director and officer, all positions and offices with
the Company held, the period during whichhe has served as such, and the business
experience during at least the last five years:
Mark
Wood
founded Dibz International, Inc. in December 2006 and serves as our Chairman
of
the Board and Chief Executive Officer. Prior to founding Dibz International,
Inc. Mr. Wood was the Chairman and Chief Executive Officer of GlobalNet
Corporation, a publicly traded telecommunications company recognized as one
of
the top ten telecommunications providers to Latin America. Mr. Wood
founded iDial Networks, Inc. in 1997 and served as Chairman and Chief Executive
Officer from its inception until its merger with GlobalNet in September
2003. During his tenure with iDial Networks the Company received the
prestigious Fast 500 Company Award by Deloitte & Touche in 2003 recognizing
iDial Networks as one of the 500 fastest growing small companies in the
country. Mr. Wood served as Chairman and Chief Executive Officer of
GlobalNet from September 2003 until August 2006, leading the development of
Voice over Internet Protocol technologies and winning two consecutive
telecommunications industry “Best of Show” awards. Mr. Wood has
previously held positions with Apple, Inc., LIN Broadcasting and Intellicall,
Inc.
EMPLOYMENT
AGREEMENT
At
this time, there is no employment agreement with Mr. Wood.
ITEM
6. EXECUTIVE COMPENSATION
.
The
following table sets forth compensation paid to Mark Wood, Chairman of the
Board
and Chief Executive Officer, and our other executive officer during the period
from December 28, 2006 (inception) through June 30, 2007.
SUMMARY
COMPENSATION TABLE
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
All
Other Compensation
($)
|
|
Total
($)
|
|
Mark
Wood
Chairman
of the Board and Chief Executive Officer
|
|
2007
|
|
$ 50,000
|
|
$ -
|
|
$ 100
|
|
$ -
|
|
$ 50,100
|
|
Klaus
Scholz
Chief
Operating Officer
|
|
2007
|
|
$ 80,000
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ 80,000
|
No
retirement, pension, profit sharing, stock option or insurance programs or
other
similar programs have been adopted by us for the benefit of our
employees.
ITEM
7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Dibz-Delaware
has no properties and at this time has no agreements to acquire any properties.
Dibz-Delaware currently uses the offices of management at no cost to the
Company. Management has agreed to continue this arrangement until the
Company completes an acquisition or merger.
We
have
entered into a consulting agreement with Star Associates which is a shareholder
of the Company and is controlled by Andrew Glashow, our former officer and
director. Pursuant to the Agreement, we have paid Star Associates a
total of $30,000for consulting services rendered to date. An
additional $30,000 and 1,000,000 shares of restricted stock will be owed to
Star
Associates when the Company reaches certain milestones.
ITEM
8. DESCRIPTION OF SECURITIES.
Our
authorized capital stock consists of 50,000,000 shares of Common Stock, par
value $.001 per share, and 1,000,000 shares of Preferred
Stock, par value per share $.001. The Company's Preferred Stock may be divided
into such series as may be established by the Board of Directors.
The
following statements relating to the capital stock set forth the material terms
of our securities; however, reference is made to the more detailed provisions
of, and such statements are qualified in their entirety by reference to, the
Certificate of Incorporation, amendment to the Certificate of Incorporation
and
the By-laws, copies of which are filed as exhibits to this registration
statement.
COMMON
STOCK
Holders
of shares of common stock are entitled to one vote for each share on all
matters
to be voted on by the stockholders. Holders of common stock do not
have cumulative voting rights. Holders of common stock are entitled to
share
ratably in dividends, if any, as may be declared from time to time by the
Board
of Directors in its discretion from funds legally available therefore.
In the
event of a liquidation, dissolution or winding up of the Company, the holders
of
common stock are entitled to share pro rata all assets remaining after
payment
in full of all liabilities. All of the outstanding shares of common stock
are
fully paid and non-assessable. Holders of common stock have no preemptive
rights
to purchase our common stock. There are no conversion or redemption rights
or
sinking fund provisions with respect to the common stock.
The
Board
of Directors does not at present intend to seek stockholder approval prior
to
any issuance of currently authorized stock, unless otherwise required by
law or
stock exchange rules.
As
of
August 30, 2007 we have 1,622,000 shares of common stock issued and
outstanding.
PREFERRED
STOCK
Preferred
Stock
On
January 27, 2007, the Company designated 50,000 of its shares of Preferred
Stock
as Series A Preferred Shares, par value $.001 per share (“Series A Preferred”).
The Series A Preferred is convertible at the option of the holder into common
stock at the rate of five hundred seventy eight (578) shares of common for
every
one share of Series A Preferred at the option of the holder.
Except
as
otherwise expressly required by law, each holder of Series A
Preferred shall be entitled to vote on all matters submitted to
shareholders of the Corporation and shall be entitled to Five Thousand Seven
Hundred and Eighty Three (5,783)votes of Series A Preferred Stock owned at
the
record date for the determination of shareholders entitled to vote on such
matter or, if no such record date is established, at the date such vote is
taken
or any written consent of shareholders is solicited. Except as
otherwise required by law, the holders of shares of Series A Preferred Stock
shall vote together with the holders of Common Stock on all matters and shall
not vote as a separate class.
The
holders of Series A Preferred Stock shall not be entitled to receive any
preference upon liquidation, dissolution or winding up of the business of the
Corporation, whether voluntary or involuntary, each holder of Series A Preferred
Stock shall share ratably with the holders of the common stock of the
Corporation.
As
of
August 30, 2007 we have 50,000 shares of Series A Preferred issued and
outstanding.
DIVIDENDS
Dividends,
if any, will be contingent upon our revenues and earnings, if any, capital
requirements and financial conditions. Thepayment of dividends, if any, will
be
within the discretion of our Board of Directors. We presently intend to retain
all earnings,if any, for use in its business operations and accordingly, the
Board of Directors does not anticipate declaring any dividends.
TRANSFER
AGENT
Colonial
Stock Transfer Company, Inc, 66 Exchange Place, Suite 100, Salt Lake City,
Utah
84111_ is the transfer agent for our common stock.
GLOSSARY
Exchange
Act
The
Securities Exchange Act of 1934, as amended.
"Penny
Stock" Security
As
defined in Rule 3a51-1 of the Exchange Act, a "penny stock" security is any
equity security other than a security (i)that is a reported security (ii) that
is issued by an investment company (iii)that is a put or call issued by the
Option Clearing Corporation (iv) that has a price of $5.00 or more (except
for
purposes of Rule 419 of the Securities Act) (v)that is registered on a national
securities exchange (vi) that is authorized for quotation on the NASDAQ Stock
Market, unless other provisions of Rule 3a51-1 are not satisfied, or (vii)
that
is issued by an issuer with (a) net tangible assets in excess of $2,000,000,
if
in continuous operation for more than three years or $5,000,000 if in operation
for less than three years or (b) average revenue of at least $6,000,000 for
the
last three years.
Securities
Act
The
Securities Act of 1933, as amended.
PART
II
ITEM
1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(A)
MARKET PRICE. Our common stock is currently quoted on the Pink Sheets
under the symbol “HYSR”. Based on our name change we intend to apply
for a new symbol. Our common stock is reported on the over the
counter market in the Pink Sheets as maintained by Pink Sheets, LLC as $.05
but
there is currently no market for our stock. The quotations for the
common stock traded in the Pink Sheets may reflect inter-dealer prices, without
retail mark-up, markdown or commission and may not necessary represent actual
transactions.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the
definition of a "penny stock," for purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.
For
any transaction involving a penny stock, unless exempt, the rules require:
(i)
that a broker or dealer approve a person's account for transactions in penny
stocks and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must (i) obtain financial
information and investment experience and objectives of the person; and (ii)
make a reasonable determination that the transactions in penny stocks are
suitable for that person and that person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions
in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating
to
the penny stock market, which, in highlight form, (i) sets forth the basis
on
which the broker or dealer made the suitability determination and (ii) that
the
broker or dealer received a signed, written agreement from the investor prior
to
the transaction. Disclosure also has to be made about the risks of investing
in
penny stocks in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available
to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny
stocks.
Rule
144
Shares
In
general, under Rule 144 as currently in effect, a person who has beneficially
owned shares of a company’s common stock for at least one year is entitled to
sell within any three month period a number of shares that does not exceed
1% of
the number of shares of the company’s common stock then outstanding which, in
our case, would equal approximately 16,220 shares of our common stock as
of the
date of this prospectus.
Sales
under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about
the
company. Under Rule 144(k), a person who is not one of the company’s affiliates
at any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled
to sell
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Series
A
Preferred Shares
On
January 27, 2007, the Company designated 50,000 of its shares of Preferred
Stock
as Series A Preferred Shares, par value $.001 per share (“Series A Preferred”).
The Series A Preferred is convertible at the option of the holder into commons
tock at the rate of five hundred seventy eight (578) shares of common for
every
one share of Series A Preferred at the option of the holder.
Except
as
otherwise expressly required by law, each holder of Series A
Preferred shall be entitled to vote on all matters submitted to
shareholders of the Corporation and shall be entitled to Five Thousand Seven
Hundred and Eighty Three (5,783)votes of Series A Preferred Stock owned at
the
record date for the determination of shareholders entitled to vote on such
matter or, if no such record date is established, at the date such vote is
taken
or any written consent of shareholders is solicited. Except as
otherwise required by law, the holders of shares of Series A Preferred Stock
shall vote together with the holders of Common Stock on all matters and shall
not vote as a separate class.
As
of
August 30, 2007 we have 50,000 shares of Series A Preferred issued and
outstanding.
Stock
Option Grants
To
date,
we have not granted any stock options.
(B)
HOLDERS. HOLDERS. There are 26 holders of our Common
Stock. The issued and outstanding shares of our Common Stock were issued in
accordance with the exemptions from registration afforded by Section 4(2) of
the
Securities Act of 1933.
(C)
DIVIDENDS. We have not paid any dividends to date, and has no plans to do so
in
the immediate future.
ITEM
2. LEGAL PROCEEDINGS.
There
is
no litigation pending or threatened by or against us.
ITEM
3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIALDISCLOSURE.
We
have
not changed accountants since its formation and there are no disagreements
with
the findings of its accountants.
ITEM
4. RECENT SALES OF UNREGISTERED SECURITIES.
We
have
sold securities which were not registered as follows:
On
October 25, 2005, we issued a total of 319,520 shares of our common stock to
the
following shareholders for the following:
|
NAME
|
SHARES
|
|
Frank
Alvarez
|
2,000
|
|
Ronald
Bassett
|
1,000
|
|
R
Scott Beebe
|
800
|
|
Anna
Brannon
|
5,000
|
|
Bob
Ciri
|
7,500
|
|
Donald
M Corliss
|
355
|
|
Arthur
Dehart
|
5,000
|
|
David
Floor
|
2,000
|
|
Tyler
Floor
|
1,000
|
|
Keith
D Freadhoff
|
37,865
|
|
Robert
Frojen
|
10,000
|
|
Andrew
Glashow
|
7,500
|
|
James
Hayes
|
73,500
|
|
Kenneth
Kirshner
|
4,500
|
|
Joanne
Ludwig
|
5,000
|
|
David
Novak
|
7,000
|
|
Paula
Pool
|
5,000
|
|
Joe
Py
|
20,000
|
|
Thelma
Ramos
|
10,000
|
|
Mark
Schneider
|
31,000
|
|
Steve
Starke
|
73,500
|
|
Dennis
Young
|
10,000
|
|
TOTAL
|
319,520
|
Such
shares were valued at $0.001, and issued in reliance on the exemption under
Section 4(2) of the Securities Act of 1933, as amended
(the“Act”). These shares of our common stock qualified for exemption
under Section 4(2) of the Securities Act of 1933since the issuance shares
by us
did not involve a public offering. The offering was not a “public offering” as
defined in Section 4(2) due to the insubstantial number of persons involved
in
the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number
of
shares to a high number of investors. In addition, these shareholders had
the
necessary investment intent as required by Section 4(2) since they agreed
to and
received share certificates bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933Securities Act. This restriction
ensures that these shares would not be immediately redistributed into the
market
and therefore not be part of a “public offering.” Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for this transaction.
On
May 4,
2006, we issued 38,500 shares of our common stock to Ed Hines for the
acquisition of Haystar Florida. Such shares were valued at $0.001, and issued
in
reliance on the exemption under Section 4(2) of the Securities Act of 1933,
as
amended (the “Act”).These shares of our common stock qualified for exemption
under Section 4(2) of the Securities Act of 1933 since the issuance shares
by us
did not involve a public offering. The offering was not a “public offering” as
defined in Section 4(2) due to the insubstantial number of persons involved
in
the deal, size of the offering, manner of the offering and number of shares
offered. We did not undertake an offering in which we sold a high number
of
shares to a high number of investors. In addition, this shareholder had the
necessary investment intent as required by Section 4(2) since they agreed
to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction
ensures that these shares would not be immediately redistributed into the
market
and therefore not be part of a “public offering.” Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section4(2) of the Securities Act of 1933 for this transaction.
On
May
11, 2006, we issued 100,000 shares to Steve Starke for services performed
on the
company's behalf. Such shares were valued at $0.001, and issued in reliance
on
the exemption under Section 4(2) of the Securities Act of 1933, as amended
(the
“Act”). These shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance shares by us did not
involve a public offering. The offering was not a “public offering” as defined
in Section 4(2) due to the insubstantial number of persons involved in the
deal,
size of the offering, manner of the offering and number of shares offered.
We
did not undertake an offering in which we sold a high number of shares to
a high
number of investors. In addition, this shareholder had the necessary investment
intent as required by Section 4(2) since they agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant
to
Rule 144 of the 1933 Securities Act. This restriction ensures that these
shares
would not be immediately redistributed into the market and therefore not
be part
of a “public offering.” Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for this transaction.
On
December 28, 2006, we issued 200,000 shares of our common stock to David
Hungerford for the conversion of a secured promissory note to equity and to
cancel certain stock purchase warrants. Such shares were issued in
reliance on the exemption under Section 4(2) of the Securities Act of 1933,
as
amended (the “Act”). These shares of our common stock qualified for exemption
under Section 4(2) of the Securities Act of 1933 since the issuance shares
by us
did not involve a public offering.
The
offering was not a “public offering” as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, this shareholder had the necessary investment intent as required
by
Section 4(2) since they agreed to and received a share certificate bearing
a
legend stating that such shares are restricted pursuant to Rule 144 of the
1933
Securities Act. This restriction ensures that these shares would not be
immediately redistributed into the market and therefore not be part of a “public
offering.” Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities
Act
of 1933 for this transaction.
On
January 4, 2007, we issued 600,000 shares of our common stock to Star Associates
for acquisition related expenses and the conversion of promissory notes to
equity. Such shares were issued in reliance on the exemption under Section
4(2)
of the Securities Act of 1933, as amended (the “Act”). These shares of our
common stock qualified for exemption under Section 4(2) of the Securities
Act of
1933 since the issuance shares by us did not involve a public offering. The
offering was not a “public offering” as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake
an
offering in which we sold a high number of shares to a high number of investors.
In addition, this shareholder had the necessary investment intent as required
by
Section 4(2) since they agreed to and received a share certificate bearing
a
legend stating that such shares are restricted pursuant to Rule 144 of the
1933
Securities Act. This restriction ensures that these shares would not be
immediately redistributed into the market and therefore not be part of a
“public
offering.” Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities
Act
of 1933 for this transaction.
On
January 29, 2007, we issued 39,473 shares of Series A Preferred Stock to Mark
Wood pursuant to a share exchange agreement between Haystar and Dibz. On such
dated we also issued 5,263 shares of Series A Preferred Stock to Ocean Avenue
Advisors, 2,632 shares of Series A Preferred Stock to Fairhill Capital and
2,632
shares of Series A Preferred Stock to Danny Weinstein for services rendered
to
the Company. Such shares were issued in reliance on the exemption under Section
4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance shares by us did not involve a public offering. The offering
was not a “public offering” as defined in Section 4(2) due to the insubstantial
number of persons involved in the deal, size of the offering, manner of the
offering and number of shares offered. We did not undertake an offering in
which
we sold a high number of shares to a high number of investors. In addition,
this
shareholder had the necessary investment intent as required by Section 4(2)
since they agreed to and received a share certificate bearing a legend stating
that such shares are restricted pursuant to Rule 144 of the 1933 Securities
Act.
This restriction ensures that these shares would not be immediately
redistributed into the market and therefore not be part of a “public offering.”
Based on an analysis of the above factors, we have met the requirements to
qualify for exemption under Section 4(2) of the Securities Act of 1933 for
this
transaction.
We
have
never utilized an underwriter for an offering of our securities. Other than
the
securities mentioned above, we have not issued or sold any
securities.
With
respect to the issuance of all of the shares set forth above, the Company relied
upon Section 4(2) of the Securities Act of1933, as amended for an exemption
from
registration.
ITEM
5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our
directors and officers are indemnified as provided by the Delaware Statutes
and
our Bylaws. We have been advised that in the opinion of the Securities and
Exchange Commission indemnification for liabilities arising under the Securities
Act is against public policy as expressed in the Securities Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless
in
the opinion of our legal counsel the matter has been settled by controlling
precedent, submit the question of whether such indemnification is against public
policy to a court of appropriate jurisdiction. We will then be governed by
the
court's decision.
We
have
agreed to indemnify each of our directors and certain officers against certain
liabilities, including liabilities under the Securities Act of 1933. Insofar
as
indemnification for liabilities arising under the Securities Act of 1933 may
be
permitted to our directors, officers and controlling persons pursuant to the
provisions described above, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than our payment of expenses incurred or paid by our
director, officer or controlling person in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
INSOFAR
AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933,
ASAMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANYPURSUANT TO THE FOREGOING PROVISIONS, IT IS THE OPINION OF THE SECURITIES
AND EXCHANGECOMMISSION THAT SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS
EXPRESSED IN THE ACT AND ISTHEREFORE UNENFORCEABLE.
DIBZ
INTERNATIONAL, INC.
(A
Development Stage Company)
Consolidated
Financial Statements
June
30, 2007
C
O N T E N T S
|
|
|
|
|
|
|
Description
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
|
|
|
Consolidated
Balance Sheet as of June 30, 2007
|
F-3
|
|
|
|
|
Consolidated
Statement of Loss for the period from inception (December 28,
2006) through June 30,2007
|
F-4
|
|
|
|
|
Consolidated
Statement of Deficiency In Stockholders' Equity for the period
from inception (December28, 2006) through June 30, 2007
|
F-5
|
|
|
|
|
Consolidated
Statement of Cash Flows for the period from inception (December 28,
2006)
through June30, 2007
|
F-6
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
F-7
|
|
|
|
RBSM
LLP
Certified
Public Accountants
Report
of
Independent Registered Public Accounting Firm
Board
of
Directors
DIBZ
International, Inc.
The
Woodlands, Texas
We
have audited the accompanying consolidated balance sheet of DIBZ International,
Inc. ( a development stage company) as of June 30, 2007, and the related
consolidated statements of loss, deficiency in stockholder's equity and cash
flows for period December 28, 2006 (date of inception) through June 30, 2007.
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
have conducted our audit in accordance with auditing standards of the Public
Company Accounting Oversight Board (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 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 financial position of DIBZ International
Inc. (a development stage company) at June 30, 2007 and the results
of its operations and its cash flows for the period December 28, 2006 (date
of
inception) through June 30, 2007 in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As discussed in Note C
to the Company's financial statements , as of June 30, 2007, the
Company had an accumulated deficit of $4,499,746 and a working
capital deficit of $1,482,653 which raises substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
this
matter are described in Note C. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/
RBSM LLP
Mclean,
Virginia
August
27, 2007
|
DIBZ
INTERNATIONAL, INC.
|
|
|
(A
DEVELOPMENT STAGE COMPANY)
|
|
|
CONSOLIDATED
BALANCE SHEET
|
|
|
|
|
June
30,
|
|
|
|
|
2007
|
|
|
ASSETS
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
Cash
|
|
$
|
238,346
|
|
|
Total
Current Assets
|
|
|
238,346
|
|
|
FIXED
ASSETS
|
|
|
|
|
|
Fixed
Assets, net of accumulated depreciation of $852
|
|
|
5,380
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
Deferred
Financing Costs, net of accumulated amortization of
$59,532
|
|
|
362,200
|
|
|
TOTAL
ASSETS
|
|
$
|
605,926
|
|
|
|
|
|
|
|
|
LIABILITIES
AND DEFICIENCY IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
Accrued
Liabilities
|
|
$
|
239,790
|
|
|
Warrant
Liability
|
|
|
146,539
|
|
|
Derivative
Liability
|
|
|
1,334,670
|
|
|
Total
Current Liabilities
|
|
|
1,720,999
|
|
|
|
|
|
|
|
|
LONG
TERM LIABILITIES
|
|
|
|
|
|
Note
Payable- NIR
|
|
|
3,000,000
|
|
|
Convertible
Debentures 6%, net of discount of $771,279
|
|
|
78,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Long Term Liabilities
|
|
|
3,078,721
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
4,799,720
|
|
|
|
|
|
|
|
|
DEFICIENCY
IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Preferred
Stock, $0.001 par value per share, 1,000,000 shares authorized, 50,000
shares issued and outstanding
|
|
|
50
|
|
|
Common
Stock, $0.001 par value per share; 50,000,000 shares authorized;
1,622,000 shares issued and outstanding
|
|
|
1,622
|
|
|
Additional
Paid-In Capital
|
|
|
304,280
|
|
|
Deficit
Accumulated During Development Stage
|
|
|
(4,499,746
|
)
|
|
TOTAL
DEFICIENCY IN STOCKHOLDERS' EQUITY
|
|
|
(4,193,794
|
)
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
|
|
$
|
605,926
|
|
See Summary of Significant Accounting Policies and Notes to Consolidated
Financial Statements
|
DIBZ
INTERNATIONAL, INC.
|
|
|
(A
DEVELOPMENT STAGE COMPANY)
|
|
|
CONSOLIDATED
STATEMENT OF LOSS
|
|
|
FOR
THE PERIOD FROM DECEMBER 28, 2006 (INCEPTION) THROUGH JUNE 30,
2007
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
Depreciation
and amortization
|
|
$
|
852
|
|
|
Impairment loss
|
|
|
3,000,000
|
|
|
General
and administrative
|
|
|
549,407
|
|
|
Total
operating expense
|
|
|
3,550,259
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(3,550,259
|
)
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
Interest
income
|
|
|
231
|
|
|
Interest
expense and loan discount fee
|
|
|
(318,508
|
)
|
|
Gain/(Loss)
on derivative liability
|
|
|
(631,210
|
)
|
|
Total
other income (expenses)
|
|
|
(949,487
|
)
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(4,499,746
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
PER SHARE - Basic and fully-diluted
|
|
$
|
(3.20
|
)
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING - Basic and fully
diluted
|
|
|
1,405,733
|
|
See
Summary of Significant Accounting Policies and Notes to Consolidated Financial
Statements
|
DIBZ
INTERNATIONAL, INC.
|
|
|
(A
DEVELOPMENT STAGE COMPANY)
|
|
|
CONSOLIDATED
STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY
|
|
|
FOR
THE PERIOD FROM DECEMBER 28, 2006 (INCEPTION) THROUGH JUNE 30,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Preferred
Stock
|
|
|
Additional
|
|
|
Deficit
Accumulated
During
Development
|
|
|
Total
Deficiency in Stockholders
|
|
|
Description
|
|
Shares
|
|
|
Shares
|
|
|
Balance
|
|
|
Balance
|
|
|
Paid
in Capital
|
|
|
Stage
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
asof December 28,2006
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of preferred stock to Founders in exchange for
services -December 28, 2006 at $0.003per
share
|
|
|
-
|
|
|
|
39,473
|
|
|
|
-
|
|
|
|
39
|
|
|
|
61
|
|
|
|
-
|
|
|
|
100
|
|
|
Issuance
of preferred stock for services -
January
25, 2007at
$ 28.90 per share
|
|
|
-
|
|
|
|
10,527
|
|
|
|
-
|
|
|
|
11
|
|
|
|
304,219
|
|
|
|
-
|
|
|
|
304,230
|
|
|
Issuance
ofcommon stock in connection with merger and
recapitalization -January 27, 2007 at $0.001per share
|
|
|
1,622,000
|
|
|
|
-
|
|
|
|
1,622
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
1,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,499,746
|
)
|
|
|
(4,499,746
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30,2007
|
|
|
1,622,000
|
|
|
|
50,000
|
|
|
$
|
1,622
|
|
|
$
|
50
|
|
|
$
|
304,280
|
|
|
$
|
(4,499,746
|
)
|
|
$
|
(4,193,794
|
)
|
See
Summary of Significant Accounting Policies and Notes to Consolidated Financial
Statements
|
DIBZ
INTERNATIONAL, INC.
|
|
|
(A
DEVELOPMENT STAGE COMPANY)
|
|
|
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
|
|
FOR
THE PERIOD FROM DECEMBER 28, 2006 (INCEPTION) THROUGH JUNE 30,
2007
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITES
|
|
|
|
|
Net
loss
|
|
$
|
(4,499,746
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
used
in operating activities
|
|
|
|
|
|
Depreciation
and amortization expense
|
|
|
852
|
|
|
Shares
issued for services
|
|
|
304,330
|
|
|
Acquisition
costs
|
|
|
151,622
|
|
|
Loss
on derivative
|
|
|
631,209
|
|
|
Asset
impairment
|
|
|
3,000,000
|
|
|
Amortization
of beneficial feature discount
|
|
|
78,721
|
|
|
Amortization
of deferred financing costs
|
|
|
59,533
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
Accrued
liabilities
|
|
|
239,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(33,689
|
)
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
Capital
expenditures
|
|
|
(6,231
|
)
|
|
Net
cash used in investing activities
|
|
|
(6,231
|
)
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
Payments
relating to merger
|
|
|
(150,000)
|
|
|
Costs
of issuance of debt
|
|
|
(421,732)
|
|
|
Proceeds
from issuance of new debt
|
|
|
850,000
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
278,268
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH
|
|
|
238,346
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
-
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
238,346
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
-
|
|
|
Cash
paid for taxes
|
|
$
|
-
|
|
|
|
|
|
|
|
|
NON
CASH INVESTING AND FINANCING
|
|
|
|
|
|
Issuance
of preferred stock for services
|
|
|
304,230
|
|
|
Discount
on convertible debt
|
|
|
850,000
|
|
|
Derivative
Liability
|
|
|
773,323
|
|
|
Warrant
Liability
|
|
|
76,677
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
Liabilities
assumed
|
|
$
|
3,000,000
|
|
|
|
|
|
|
|
|
Assets
acquired
|
|
$
|
-
|
|
|
Cash
paid
|
|
$
|
(150,000
|
)
|
|
Shares
issued/retained
|
|
$
|
1,622
|
|
|
Acquisition
costs
|
|
$
|
151,622
|
|
|
Assets
impairment
|
|
$
|
3,000,000
|
|
See
Summary of Significant Accounting Policies and Notes to Consolidated Financial
Statements
DIBZ
International, Inc.
Notes
to Consolidated Financial Statements
(A
Development Stage Company)
June
30, 2007
NOTE
A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
and Business
DIBZ
International, Inc. (the Company) was incorporated in the state of Delaware
on
December 28, 2006. It is intended to be used in a reverse merger with Haystar
Services and Technology, Inc. The merger was completed on January 27,
2007.
The
Company is currently in the development stage. All activities of the Company
to
date relate to its organization, initial funding and share
issuance.
The
consolidated financial statements include the accounts of the Company and its
wholly and majority-owned subsidiary, Haystar Services and Technology Inc.
All
significant inter company balances and transactions have been eliminated in
consolidation.
In
the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year.
Merger
and Corporate Restructure
On
January 27, 2007, the Company entered into a Share Exchange Agreement
(“Agreement:” or“Merger”) with Haystar Services and Technology, Inc (“Haystar”),
a public shell company formed under the laws of Nevada currently traded on
the
pink sheets. As a result of the Merger, there was a change in control of the
public entity. In accordance with SFAS No. 141, Haystar was the acquiring
entity. While the transaction is accounted for using the purchased method of
accounting in substance the Agreement is a recapitalization of Haystar's capital
structure.
For
accounting purposes, the Company accounted for the transaction as a reverse
merger with DIBZ International being the “accounting acquirer”. Haystar had no
assets or liabilities at the date of the merger. The Company paid
$150,000 to acquire the shell corporation and expensed this amount as
acquisition costs. The Company did not recognize goodwill or any
intangible assets in connection with the transaction. Prior to the Agreement,
the Company was a newly formed corporation with no significant assets and
liabilities.
Effective
with the Agreement, Haystar acquired 100% of the Company's common shares in
consideration for the issuance of39,473 shares of Series A Preferred Stock
of
Haystar. Each Preferred Share is convertible into 578 shares of common stock
of
Haystar at the option of the holders. Under the Agreement, prior to such
conversion, each preferred share will have the voting rights equal to 5,783
shares of common stock and vote together with the shares of common stock on
all
matters.
Cash
and Cash Equivalents
The
Company considers all short term deposits with an original maturity of three
months or less to be cash equivalents. Cash equivalents are carried at cost,
which approximates market value.
Fixed
Assets
Fixed
assets are recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets which range
from five to seven years. The costs of major improvements are
capitalized. Expenditures for maintenance, repairs and minor
improvements that do not extend the useful life are expensed as
incurred. When fixed assets are sold or retired, the cost and related
accumulated depreciation are removed and the resulting gain or loss is included
in results of operations.
Website
Development Costs
The
Company recognizes website development costs in accordance with Emerging Issue
Task Force ("EITF") No. 00-02,"Accounting for Website Development Costs." As
such, the Company expenses all costs incurred that relate to the planning and
post implementation phases of development of its website. Direct costs incurred
in the development phase are capitalized and recognized over the estimated
useful life. Costs associated with repair or maintenance for the website are
included in cost of net revenues in the current period expenses. During the
period ended from December 28, 2006 through June 30, 2007, the Company did
not
capitalize any costs associated with the website development.
Product
Development Costs
Research
and development costs are charged to expense as incurred. However, we
account for development costs related to software products to be sold, leased,
or otherwise marketed in accordance with FASB Statement of Financial Accounting
Standards No. 86,
Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed
. Software development costs are expensed as
incurred until technological feasibility has been established, at which time
such costs are capitalized until the product is available for general release
to
customers. To date, technological feasibility has not been established for
our
products, and, accordingly, no development costs have been
capitalized.
Derivative
Valuation
The
Company evaluated the convertible debentures and the warrants under SFAS 133
"Accounting for Derivatives" and EITF00-19 "Accounting for Derivative Financial
Instruments Indexed to and Potentially Settled in a Company's Own Stock". The
Company determined the convertible debentures contained an embedded derivative
for the conversion option. The conversion option allows for an indeterminate
number of shares to potentially be issued upon conversion. This results in
the
Company being unable to determine with certainty they will have enough shares
available to settle any and all outstanding common stock equivalent instruments.
The Company would be required to obtain shareholder approval to increase the
number of authorized shares needed to share settle those contracts. Because
increasing the number of shares authorized is outside of the Company's control,
this results in these instruments being classified as liabilities under EITF
00-19 and derivatives under SFAS 133. The market value of the derivative
liabilities are estimated using Black-Scholes method.
Income
Taxes
The
financial statements are prepared in conformity with the liability method of
accounting for income taxes whereby deferred income tax assets and liabilities
are determined based on the differences between the financial reporting and
tax
bases of assets and liabilities and are measured using the enacted tax laws
and
rates that will be in effect when the differences are expected to
reverse. A valuation allowance is provided, if necessary, to reduce
deferred income tax assets to their estimated realizable value.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of
the consolidated financial statements and the reported amounts of revenues
and
expenses during the reporting period. Actual results could differ
from those estimates.
Recent
Accounting Pronouncements
Fair
Value Measurements.
In September 2006, the FASB issued
SFAS No. 157, “Fair Value Measurements”, which defines fair value, establishes a
framework for measuring fair value in generally accepted accounting
principles(“GAAP”), and expands disclosures about fair value measurements. Prior
to this Statement, there were different definitions of fair value and limited
guidance for applying those definitions in GAAP. This Statement provides the
definition to increase consistency and comparability in fair value measurements
and for expanded disclosures about fair value measurements. The
Statement emphasizes that fair value is a market-based measurement, not an
entity-specific measurement. The Statement clarifies that market participant
assumptions include assumptions about risk, i.e. the risk inherent in a
particular valuation technique used to measure fair value and/or the risk
inherent in the inputs to the valuation technique. The Statement expands
disclosures about the use of fair value to measure assets and liabilities in
interim and annual periods subsequent to initial recognition. The disclosures
focus on the inputs used to measure fair value and for recurring fair value
measurements using significant unobservable inputs, the effect of the
measurements on earnings for the period. The Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Earlier application is
encouraged, provided that the reporting entity has not yet issued financial
statements for that fiscal year, including the financial statements for an
interim period within that fiscal year. The Company does not expect adoption
of
this standard will have a material impact on its financial position, operations
or cash flows.
Accounting
for Registration Payment Arrangements.
In December 2006, the FASB
issued FSP EITF 00-19-2, Accounting for Registration Payment Arrangements
("FSP 00-19-2") which addresses accounting for registration payment
arrangements. FSP00-19-2 specifies that the contingent obligation to make
future payments or otherwise transfer consideration under a registration
payment arrangement, whether issued as a separate agreement or included as
a provision of a financial instrument or other agreement, should be
separately recognized and measured in accordance with FASB Statement No. 5,
Accounting for Contingencies. FSP 00-19-2 further clarifies that a
financial instrument subject to a registration payment arrangement should
be accounted for in accordance with other applicable generally accepted
accounting principles without regard to the contingent obligation to
transfer consideration pursuant to the registration
payment arrangement. For registration payment arrangements and
financial instruments subject to those arrangements that were entered into
prior
to the issuance of EITF 00-19-2, this guidance shall be effective for
financial statements issued for fiscal years beginning after December 15, 2006
and interim periods within those fiscal years. The Company has not yet
determined the impact that the adoption of FSP 00-19-2 will have on
its financial statements.
The
Fair Value Option for Financial Assets and Financial
Liabilities
In February 2007, the FASB issued SFAS No.
159,“The Fair Value Option for Financial Assets and Financial
Liabilities--including an amendment of FASB Statement No.115”, permitting
entities to choose to measure many financial instruments and certain other
items
at fair value. The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply
complex hedge accounting measurement. The statement applies to all
entities, including not-for profit organizations. Most of the provisions of
this
Statement apply only to entities that elect the fair value option. However,
the
amendment to SFAS No. 115, “Accounting for Certain Investments in Debt and
Equity Securities”, applies to all entities with available-for-sale and trading
securities. The Company does not expect adoption of this standard will have
a
material impact on its financial position, operations or cash
flows.
NOTE
B - NOTES TO FINANCIAL STATEMENTS
(1)
Acquisition Expense
On
January 5, 2007, the Company entered into an Asset Purchase Agreement (the
“Agreement”) with GlobalNet,Inc. The Company's majority stockholder
is the former CEO of GlobalNet. According to the Agreement, the
Company assumed$3 million of GlobalNet debt and in return is entitled to use
up
to $50,000 worth of services each month provided by GlobalNetfor the next three
years, on non-cumulative basis. In addition the Company received the
“iDialDirect” domain and software which will be used to integrate the technology
in the Company's website. The Company is applying for a patent directly related
to this technology. The lender of the assumed $3,000,000
debt is the same as the lender of the convertible debentures entered into by
DIBZ.
Due
to
the uncertainty of the Company's ability to realize the future value of these
assets, the Company's management believes that more likely than not
the fair value of the acquired intangible asset and the pre-paid services
agreement is below its carrying value. As a result, management
has recorded a non-cash impairment charge of $3,000,000, net of
tax, to reduce the carrying value of the acquired assets to its
estimated value of $0 as of June 30, 2007.
Considerable
management judgment is necessary to estimate fair value. Accordingly, actual
results could vary significantly from managements' estimates.
(2)
Fixed assets, net
Fixed
assets as of June 30, 2007 consisted of the following:
|
Description
|
|
Life
|
|
|
2007
|
|
|
Equipment
|
|
|
3
|
|
|
$
|
6,232
|
|
|
Less: Accumulated
depreciation
|
|
|
|
|
|
|
(852
|
)
|
|
Fixed
assets, net
|
|
|
|
|
|
$
|
5,380
|
|
(4)
Liquidity
As
shown
in the accompanying consolidated financial statements, the company incurred
a
net loss from continuing operations of$4,499,746 for the period from inception
through June 30, 2007.
(5) Accrued
Expenses
Accrued
expenses as of June 30, 2007 consisted of the following:
|
Description
|
|
Amount
|
|
|
Accrued
interest payable
|
|
$
|
239,790
|
|
(6)
Note Payable
On
January 5, 2007, the Company entered into an Asset Purchase Agreement with
GlobalNet, a Nevada corporation. The Company assumed the $3,000,000 Callable
Secured Convertible Note (the “Note”) from GlobalNet to a third party investor
in exchange for its iDialDirect technology and the right to receive up to
$50,000 worth of services from GlobalNet per month for a period of three
years. Management has expensed the cost of the assumed debt of
$3,000,000 as an acquisition expense due to the uncertainty of the Company's
ability to realize the future value of these assets.
The
Note
bears interest at 15% per year and is due on December 29, 2009. The
Note is convertible into the Company's common stock only after that stock is
listed or quoted on a nationally recognized stock exchange or the
OTCBB. The Note is convertible into common shares at the lesser of
(i) 20% of the average of the lowest three trading prices of the common stock
during the twenty trading day period prior to conversion and (ii) $0.10. The
Company has an option to prepay the Notes in the event that no event of default
exists, there are a sufficient number of shares available for conversion of
the
Notes and the market price is at or below $.10 per share. Exercise of this
option will stay all conversions for the following month. The full principal
amount of the Notes is due upon default under the terms of Notes.
The
Company evaluated the Note under SFAS 133 "Accounting for Derivatives" and
EITF
00-19 "Accounting for Derivative Financial Instruments Indexed to and
Potentially Settled in a Company's Own Stock". The Company determined the Note
contained an embedded derivative for the conversion option. The conversion
option allows for an indeterminate number of shares to potentially be issued
upon conversion. This results in the Company being unable to determine with
certainty they will have enough shares available to settle any and all
outstanding common stock equivalent instruments. The Company would be required
to obtain shareholder approval to increase the number of authorized shares
needed to share settle those contracts.
Because
increasing the number of shares authorized is outside of the Company's control,
this results in these instruments being classified as liabilities under EITF
00-19 and derivatives under SFAS 133.
In
accordance with EITF 00-27, no discount has been recorded for the conversion
feature due to the contingency for being listed on an exchange or the
OTCBB. In the event that the Company becomes listed, the Company will
value the conversion feature and record any debt discount and amortize such
costs as interest expense over the life of the debt in accordance with
EITF00-27. Upon resolution of this contingency, the maximum amount of such
discount is $3,000,000.
(7)
Convertible Debentures
On
January 25, 2007, the Company entered into a Securities Purchase Agreement
(the
“Securities Purchase Agreement”) with New Millennium Capital Partners II, LLC,
AJW Qualified Partners, LLC, AJW Offshore, Ltd and AJ EPartners, LLC
(collectively, the “Investors”). Under the terms of the Securities Purchase
Agreement, the Investors purchased an aggregate of (1) $450,000 in callable
convertible secured notes (the “Notes”) and (II) warrants to purchase 4,500,000
shares of the common stock (the “Warrants”).
The
Notes
bear interest of 6% and mature on January 25, 2010. The notes are convertible
into common shares at the lesser of (i)the Variable Conversion Price and (ii)
the Fixed Conversion price. The “Variable Conversion Price” shall mean the
Applicable Percentage multiplied by the average of the lowest three (3) trading
prices during the twenty (20) Trading Day period prior to conversion. The
“Applicable Percentage” means 60% and the “Fixed Conversion Price”
means$0.10.
The
Company has an option to prepay the Notes in the event that no event of default
exists, there are a sufficient number of shares available for conversion of
the
Notes and the market price is at or below $.10 per share. Exercise of this
option will stay all conversions for the following month. The full principal
amount of the Notes is due upon default under the terms of Notes.
The
Company simultaneously issued to the Investors warrants to purchase 4,500,000
shares of common stock at an exercise price of $0.10 for a period of five
years.
The
Investors have contractually agreed to restrict their ability to convert the
Notes and exercise the Warrants and receive shares of the Company's common
stock
such that the number of shares of the Company's common stock held by them and
their affiliates after such conversion or exercise does not exceed 4.90% of
the
then issued and outstanding shares of the Company's common stock.
In
connection with the issuance of the convertible debentures, the Company paid
fees to third parties in order to obtain the financing of $267,000 in cash
and
issued 10,527 shares of Series A preferred stock. The preferred stock
was valued at $304,230 on the date of issuance. The financing cost of
$421,732 was capitalized and is being amortized over the three-year life of
the
associated debt. . The Series A Preferred Shares were valued using
the quoted market price of the underlying 578 shares of common stock which
each
share of preferred shares could be converted into.
On
April
19, 2007, the Company entered into a Securities Purchase Agreement (the
“Securities Purchase Agreement”) with New Millennium Capital Partners II, LLC,
AJW Qualified Partners, LLC, AJW Offshore, Ltd and AJE Partners, LLC
(collectively, the “Investors”). Under the terms of the Securities Purchase
Agreement, the Investors purchased an aggregate of (1) $200,000 in callable
convertible secured notes (the “Notes”).
The
Notes
bear interest of 6% and mature on April 19, 2010. The notes are convertible
into
common shares at the lesser of (i)the Variable Conversion Price and (ii) the
Fixed Conversion price. The “Variable Conversion Price” shall mean the
Applicable Percentage multiplied by the average of the lowest three (3) trading
prices during the twenty (20) Trading Day period prior to conversion. The
“Applicable Percentage” means 60% and the “Fixed Conversion Price” means
$0.10.
On
June
22, 2007, the Company entered into a Securities Purchase Agreement (the
“Securities Purchase Agreement”) with New Millennium Capital Partners II, LLC,
AJW Master Fund, Ltd and AJE Partners, LLC (collectively, the “Investors”).
Under the terms of the Securities Purchase Agreement, the Investors purchased
an
aggregate of (1) $200,000 in callable convertible secured notes (the
“Notes”).
The
Notes
bear interest of 6% and mature on June 22, 2010. The notes are convertible
into
common shares at the lesser of (i) the Variable Conversion Price and (ii) the
Fixed Conversion price. The “Variable Conversion Price” shall mean the
Applicable Percentage multiplied by the average of the lowest three (3) trading
prices during the twenty (20) Trading Day period prior to conversion. The
“Applicable Percentage” means 60% and the “Fixed Conversion Price” means
$0.10.
The
Company evaluated the convertible debentures and the warrants under SFAS 133
"Accounting for Derivatives" and EITF00-19 "Accounting for Derivative Financial
Instruments Indexed to and Potentially Settled in a Company's Own Stock". The
Company determined the convertible debentures contained an embedded derivative
for the conversion option and the warrants qualified as free standing
derivatives. The conversion option allows for an indeterminate number of shares
to potentially be issued upon conversion. This results the Company being unable
to determine with certainty they will have enough shares available to settle
any
and all outstanding common stock equivalent instruments. The Company would
be
required to obtain shareholder approval to increase the number of authorized
shares needed to share settle those contracts. Because increasing the number
of
shares authorized is outside of the Company's control, this results in these
instruments being classified as liabilities under EITF00-19 and derivatives
under SFAS 133.
The
carrying value of the note at June 30, 2007 was determined as
follows:
|
Face
value of notes
|
|
$
|
850,000
|
|
|
Less:
Discount for fair value of derivatives
|
|
|
771,279
|
|
|
Carrying
value at June 30, 2007
|
|
$
|
78,721
|
|
The
fair
values and changes in the derivative liabilities are as follows:
|
|
|
Inception
|
|
|
June
30,2007
|
|
|
Gain/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Embedded
derivative
|
|
$
|
850,000
|
|
|
$
|
1,481,209
|
|
|
$
|
631,209
|
|
The
warrants were valued using the Black Scholes pricing model. The variables used
in the valuation of these warrants were as follows:
|
Volatility
|
101.31%
|
|
Discount
Rate
|
4.89%
|
|
Term
in years
|
3
years
|
|
Warrant
date
|
Jan
25, 2007
|
|
Exercise
Price
|
$0.10
|
|
Stock
price
|
$0.05
|
(8)
Capital Stock
Preferred
Stock
The
Board
of Directors has authorized 1,000,000 shares of its preferred stock with a
par
value of $0.001 per share.
The
Board
of Directors has designated 50,000 shares of Series A Preferred stock. Each
share of the Series A Preferred stock shall be entitled to Five Thousand Seven
Hundred and Eighty Three (5,783) votes on all matters submitted to shareholders
for a vote together with the holders of Common Stock as a single class. There
were 50,000 shares of Series A Preferred issued and outstanding. Each share
of
the Series A Preferred stock is convertible into 578 shares of common stock
at
the holder's discretion.
Common
Stock
The
Company is authorized to issue stock from 50,000,000 shares of common stock
with
a par value of $0.001 per share. As of June 30, 2007, there were 1,622,000
shares of common stock issued and outstanding.
(9)
Warrants
As
of
June 30, 2007, there were 4,500,000 outstanding and exercisable warrants to
purchase the Company's common stock. The warrants were issued on
January 25, 2007, have an exercise price of $0.10 and expire five years from
the
date of issuance. No warrants were exercised, canceled or expired
during the period from December 28, 2006 (inception) through June 30,
2007.
(10) Income
Taxes
The
Company has adopted Financial Accounting Standard No. 109 which requires the
recognition of deferred tax liabilities and assets for the expected future
tax
consequences of events that have been included in the financial statement or
tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between financial statements and tax bases of assets
and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Temporary differences between taxable
income reported for financial reporting purposes and income tax purposes are
insignificant.
At
June
30, 2007, the Company has available for federal income tax purposes a net
operating loss carry forward of approximately$ 4,500,000 expiring in the year
2027 that may be used to offset future taxable income. The Company has provided
a valuation reserve against the full amount of the net operating loss benefit,
since in the opinion of management based upon the earnings history of the
Company; it is more likely than not that the benefits will not be realized.
Due
to significant changes in the Company's ownership, the future use of its
existing net operating losses may be limited. Components of deferred tax assets
as of June 30, 2007 are as follows:
|
Non
current:
|
|
|
|
|
Net
operating loss carry forward
|
|
$
|
1,750,000
|
|
|
Valuation
allowance
|
|
|
(1,750,000
|
)
|
|
Net
deferred tax asset
|
|
$
|
--
|
|
NOTE
C - GOING CONCERN
The
accompanying statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities
in
the normal course of business. As shown in the accompanying financial
statements, as of June 30,2007, the Company had an accumulated deficit of
$4,499,746 and a working capital deficit of $1,482,653. These factors
among others raise significant doubt about the Company's ability to continue
as
a going concern for a reasonable period of time.
The
Company's existence is dependent upon management's ability to develop profitable
operations and resolve its liquidity problems. Management anticipates
that the Company will attain profitable status and improve its liquidity through
the continued development, marketing and selling of its products and additional
capital raising efforts. The accompanying financial statements do not
include any adjustments that might result should the Company be unable to
continue as a going concern.
PART
III
ITEM
1. INDEX TO EXHIBITS
3.1
Certificate of Incorporation and Amendments for Dibz International, Inc., a
Nevada corporation
3.2
Bylaws
3.3 Certificate
of Incorporation for Dibz International, Inc., a Delaware
corporation
3.4 Certificate
Of Designation Series A Preferred Stock
10.1 Share
Exchange Agreement between the Company and Dibz International, Inc.
10.2
Callable
Secured Convertible Note
10.3 Securities
Purchase Agreement
10.4 Callable
Secured Convertible Note
10.5 Callable
Secured Convertible Note
10.6 Callable
Secured Convertible Note
10.7 Callable
Secured Convertible Note
10.8 Stock
Purchase Warrant
10.9 Stock
Purchase Warrant
10.10 Stock
Purchase Warrant
10.11 Stock
Purchase Warrant
SIGNATURES
In
accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this amendment to registration statement to be signed on
its
behalf by the undersigned, thereunto duly authorized.
By: /
s/
Mark Wood
Mark
Wood
Title:
President/CEO
Dated:
November 13, 2007
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