United States
Securities and Exchange Commission
Washington, D.C. 20549
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
INTERACTIVE BUYERS NETWORK INTERNATIONAL, LTD.
(Name of Small Business Issuer in its charter)
Nevada 95-3538903
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5740 Ralston Street, Suite 110
Ventura, CA 93003
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(Address of principal executive office) Zip Code
Issuer's telephone number: (805) 677-6720
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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 $.01 Par Value
(Title of class)
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PART I
Item 1. DESCRIPTION OF BUSINESS
GENERAL
Interactive Buyers Network International, Ltd. ("Interactive Buyers") operates
the Virtual Source Network, a server-based computer system for conducting
electronic commerce over the Internet. Interactive Buyers also offers Virtual
Source Publisher, a do-it-yourself Internet web site builder.
Virtual Source Network
In return for a small initial fee, between $1,000 and $3,000, plus transaction
fees of $1.00, or less, per electronic purchase, clients may obtain access to
Virtual Source Network and use it for corporate purchasing via the Internet.
By accessing a Virtual Source Network web site, the client, or buyer, uses its
customized version of Virtual Source Network to initiate a request for quotation
which is electronically distributed to vendors via the Internet. Vendors
respond, via the Internet, with price quotations for the items requested. At
that point, the buyer may select one of the vendor quotations and send an
electronic purchase order, or the buyer may communicate electronically with the
vendor regarding counter-proposals or to request additional information. This
Internet version of Virtual Source Network has just recently been made available
for use by clients. Currently four Virtual Source Network clients are
operational, but at insignificant volume levels. Interactive Buyers expects
volume usage to become significant in the future.
During 1997 and early 1998, Interactive Buyers offered an earlier version of
Virtual Source Network, which was a software application that needed to be
installed on client computers. In return for access to the network, clients paid
annual subscription fees of $980. Several clients (such as Terry Lumber,
McKesson Water Products, Delta Microwave, Great Western Malting division of
ConAgra, Industrial Metal Supply, Sargent Fletcher, AML Communications, Empire
Oil, Timco-Standard-Tandem, Stone Container, WEA Manufacturing division of Time
Warner, Xircom, Neiman-Reed Lumber, Regal Plastics, Mole-Richardson, Ernest
Paper Products, Motion Industries, TubeSales, J.C.Carter, Kelly Paper,
B.F.Goodrich, Warner Brothers Studios, CBS-Television City, Technicolor,
Georgia-Pacific, Parsons Airgas, Castle Metals, Monogram Aerospace Fasteners,
Earle M. Jorgensen Company, Manfred Industries, and others) used that earlier
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version, and experienced savings averaging as much as 15% of the cost of goods
purchased through Virtual Source Network. These savings are based on analyses
done by Interactive Buyers, and by certain of those clients. These savings
resulted not from any special arrangements between Virtual Source Network and
the vendors, but from the fact that a wider range of vendors received the
requests for quotations, and submitted competitive proposals, thus allowing
Virtual Source Network clients the opportunity to select lower prices. Using
their previous procedures, these lower prices may never have come to their
attention. In addition to these savings, there are administrative savings
resulting from other procedural improvements including elimination of paper
requests for quotations, the speed and precision of electronic communication and
establishing better audit trails. Management believes that similar savings will
be realized by clients using the new Internet version of Virtual Source Network.
Virtual Source Network is sold through direct contact by sales people employed
by Virtual Source, Inc., a 100% owned subsidiary of Interactive Buyers. The
number of sales people has varied during recent months, and currently there are
two of these employees. Interactive Buyers' President also spends a significant
amount of his time on sales efforts. In addition, Virtual Source has two
independent sales representatives working on a commission-only basis. In March
of 1999, Interactive Buyers established a strategic partnership with Analytics,
Inc. of Madison, Connecticut.
Virtual Source Publisher
In addition to Virtual Source Network, Interactive Buyers also offers Virtual
Source Publisher, a do-it-yourself web site builder that allows a user to
establish their own Internet web site. Use of Virtual Source Publisher requires
no special technical skills, no additional software, and does not require the
services of a consultant. These sites are offered over the Internet, and are
marketed through a variety of distributor arrangements. In addition Interactive
Buyers has provided free sites to approximately one thousand high schools and
colleges, and is offering free sites to churches and other community groups.
Once established, these sites will offer other goods and services to group
members, including students, church members, and others, through
commission-sharing affiliate agreements with Internet retailers. There are
existing affiliate agreements with Beyond.com, Varsity Books, and TheGift.com.
Other affiliate programs will be added in the future. Interactive Buyers will
receive a portion of the commission earned from such arrangements, and plans to
offer these sites as a medium for Internet advertisers. Advertising revenue
would be shared with the schools, churches, or community groups who agree to
participate.
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Interactive Buyers has an arrangement with Group IV, Inc. to distribute Virtual
Source Publisher web sites to its national subscriber base of approximately
500,000 small businesses. Group IV will also be providing that subscriber base
with information about Virtual Source Network.
Interactive Buyers also offers potential users the ability to set up their
Virtual Source Publisher web site by directly accessing one of Interactive
Buyers' web sites. Those sites are: http://www.vsource.net or
http://www.fillintheblanks.com. At this point there are approximately 1,500
Virtual Source Publisher web sites up and running in total, although many of the
users have not progressed to a point where their sites are functioning as fully
operational businesses. Interactive Buyers, or its various distributors, charge
Virtual Source Publisher users between $24.95 and $29.95 per month, per site,
depending on whether the sites are commerce-ready or not. The monthly charge per
site is shared between the distributor and Interactive Buyers, with
approximately 40% going to the distributor, although specific arrangements vary
from distributor to distributor. The programming necessary to automatically
charge credit card accounts has not yet been completed, so the revenue obtained
from these sites has been minimal. After users' credit cards start to be
charged, which is expected to happen late in 1999, Interactive Buyers believes
that a significant number of users may discontinue their Virtual Source
Publisher web sites rather than paying the monthly charges.
Virtual Source Publisher is sold directly by Interactive Buyers and through
distributors. There are approximately fifteen Virtual Source Publisher
distributors at this point, although most of them have not sold any Virtual
Source Publisher web sites. Since Interactive Buyers' primary service is Virtual
Source Network, not much effort is made to sell Virtual Source Publisher, or to
encourage Virtual Source Publisher distributors.
DX3, Inc. is a corporation formed by and owned by the former shareholders of
Wpg.Net, Inc., a wholly-owned subsidiary of Interactive Buyers, and was
established to receive the consideration paid by Interactive Buyers for the
acquisition of Wpg.Net in June of 1998. See "History". DX3, Inc. will receive a
royalty equal to 50% of all Virtual Source Publisher revenue received by
Interactive Buyers, from Virtual Source Publisher sites sold by the DX3, Inc.
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owners while they are employees of Interactive Buyers. All other Virtual Source
Publisher revenue will be subject to a 25% royalty, also payable to DX3, Inc. To
date, no Virtual Source Publisher revenue has been received, and no royalties
have been earned.
Other Information: Government Approvals, Dependence on Suppliers, Trademarks,
Employees and Independent Contractors
While there are no governmental approvals required specifically related to the
licensing or use of Virtual Source Network or Virtual Source Publisher, and no
direct governmental regulation, that could change. In those circumstances,
competitors with larger administrative staffs and more financial resources will
be in a better position to comply with this regulation and obtain any necessary
approvals. However, management is not aware of any pending or anticipated
government regulations that will negatively impact Interactive Buyers in a
material way.
Interactive Buyers is not dependent on suppliers of raw materials, although it
is dependent on the Internet, including the ability to communicate with its
remote servers. Interactive Buyers' clients are also dependent on the Internet
for this communication, without which clients would be unable to use any of the
Internet-based services provided by Interactive Buyers.
Virtual Source Network is listed on the Supplemental Register of Trademarks
maintained by the U. S. Patent Office. Interactive Buyers has no other
trademarks or patents.
As of June 25, 1999, Interactive Buyers had eleven full time employees, two part
time employees, and one active independent sales representative working on a
commission-only basis. There are two other independent sales representatives
that may be re-activated in the future. In addition, Interactive Buyers has
engaged fifteen independent contractors who are working on a variety of
technical systems and programming projects.
HISTORY
Interactive Buyers was incorporated in the state of Nevada on October 22, 1980
as Cinema-Star Corporation, and in September 1989 was re-named Dyna-Seal
Corporation, which subsequently changed its name several times prior to becoming
inactive. In July 1995, the Interactive Buyers name was established. Prior to
becoming Interactive Buyers, the entity were a dormant corporation with no
significant business, assets or liabilities although it did have
several hundred public shareholders.
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In July 1995, Interactive Buyers acquired all the shares of Buyer/Seller
Interactive Software, Inc., incorporated July 11, 1995 in the state of Nevada.
The acquisition was accounted for as a purchase. Buyer/Seller Interactive was a
software development company, working on an interactive system that would allow
corporate buyers and sellers to conduct business electronically. At that time
Interactive Buyers changed its name to Interactive Buyers Network International,
Ltd. in order to properly reflect the nature of its newly acquired business
operation. In December of 1996, control of Interactive Buyers was acquired by
Joseph E. Thomure and Samuel E. Bradt through the exchange of $305,000 in
convertible notes for 3,028,900 new shares of Interactive Buyers common stock.
Mr. Thomure then became Chairman, President and Chief Executive Officer, and Mr.
Bradt became Chief Financial Officer. In early 1997, Interactive Buyers raised
additional capital by issuing common stock, with the result that no one
individual or group of shareholders retained voting control of Interactive
Buyers.
In May of 1997, Robert C. "Jay" McShirley, founder of Buyer/Seller Interactive
and originator of the Virtual Source Network concept, replaced Mr. Thomure as
President and CEO of Interactive Buyers. Mr. Thomure became inactive in the
business at that point, and did not stand for re-election to the board. Mr.
Bradt continued as Chief Financial Officer, and replaced Mr. Thomure as Chairman
of the Board. In July of 1997, Buyer/Seller Interactive changed its name to
Virtual Source, Inc.
On June 1, 1998, Interactive Buyers acquired Wpg.Net, Inc. for a purchase price
including 500,000 shares of Interactive Buyers common stock, and an option to
purchase another 500,000 shares at $0.59 per share. The consideration for this
acquisition was paid to DX3, Inc., a corporation established by the former
owners of Wpg.Net, Inc. for that purpose. This acquisition was accounted for as
a purchase. Wpg.Net brought with it key technical personnel, as well as a
partially completed web-based system that ultimately became Virtual Source
Publisher. As a part of the acquisition transaction, Interactive Buyers agreed
that DX3, Inc. would receive royalties, at various levels, based on revenue
received from the sale of Virtual Source Publisher web sites. Interactive Buyers
also agreed that if Interactive Buyers were sold, all Virtual Source Publisher
royalties to DX3, Inc. would cease to accrue, in return for an agreement that
DX3, Inc. would receive a one time payment of $3,000,000, its stock options
would immediately vest, and Interactive Buyers would guarantee a minimum stock
price of $7.00 for each of the Interactive Buyers shares held by DX3, Inc.,
regardless of the actual transaction price.
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In June of 1999, Mr. McShirley became Chairman of Interactive Buyers, with Mr.
Bradt continuing as Chief Financial Officer. Also, Interactive Buyers approved
the transfer of all assets, liabilities and operations of Wpg.Net into Virtual
Source, to be followed by the dissolution of the Wpg.Net corporate entity.
Following that action, Interactive Buyers will function as a holding company
with Virtual Source as its only operating subsidiary.
RISK FACTORS
Need for Additional Capital
In April of 1999, Interactive Buyers completed an offering of common stock under
Rule 504 of Regulation D, where it raised $1,000,000, net of offering costs of
approximately $5,000. Interactive Buyers expects the proceeds of this offering
to fund operations through September or October of 1999, and since Interactive
Buyers has not yet earned any significant revenues, additional funds will be
needed in the near future. Since Interactive Buyers' financial position does not
support bank financing or other conventional debt financing, additional common
shares will likely be issued, thus resulting in further shareholder dilution.
Even after that, Interactive Buyers may need to raise additional funds and it
cannot be certain that additional financing will be available on favorable
terms, if at all.
Limited Operating History; Risks of Early Stage Company
Virtual Source Network, Interactive Buyers' primary service offering, began
operations in October 1996 when the earlier version of Virtual Source Network, a
software application for personal computers, rather than an Internet
application, was successfully installed and used at a private company in
southern California. Interactive Buyers has had a limited operating history
since then, although it did successfully install the earlier Virtual Source
Network version (personal computer application) for several clients, and was
paid the annual subscription rate then in effect. This limited history makes an
evaluation of Interactive Buyers' future prospects very difficult. The new
Internet version of Virtual Source Network has been installed for use by four
different companies, although none are actively using the system today. Certain
additional systems projects must be completed, either at client companies, or
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with respect to Virtual Source Network modifications requested by clients,
before Virtual Source Network becomes fully operational for those clients. One
other client is now in the process of installing the Internet version of Virtual
Source Network without the need for modifications, but there can be no assurance
that any client will ever produce substantial revenues for Interactive Buyers.
Interactive Buyers will encounter the risks and difficulties often encountered
by early-stage companies in new and rapidly evolving markets. These risks are
described in more detail in the following section.
New, Rapidly Changing Market; Need to Attract Large Corporations
The market for Internet applications and services is at an early stage, and
changing rapidly. Interactive Buyers' initial success will depend upon
attracting several large corporations to use Virtual Source Network, and their
favorable results from this usage. Subsequent success will depend on Interactive
Buyers' ability to communicate these early successes to the marketplace, thus
attracting significant numbers of other businesses and buying organizations.
Complex Implementation and Integration of Virtual Source Network May Impede
Market Penetration
The installation of Virtual Source Network, and integration with a client's
systems currently in use is a complex, time consuming and expensive process. As
a result, Virtual Source Network may not achieve significant market penetration
in the near future, or ever.
Large Operating Losses Expected to Continue
Interactive Buyers has incurred net losses of $3.8 million through April 30,
1999, the end of the first quarter of fiscal 2000. Since inception, Interactive
Buyers has not had material revenues, and has recognized no revenues at all from
the Internet version of Virtual Source Network. Interactive Buyers expects to
derive the majority of its revenues in the foreseeable future from Virtual
Source Network fees. In addition, Interactive Buyers expects to spend
significant amounts on sales, marketing, systems development, and administrative
expenses in the near future.
Stock Market Price Volatility
Period-to-period comparisons of Interactive Buyers reported results will be
difficult to interpret, and actual results may fall well below the expectations
of securities analysts or investors in future quarters. Failure to meet
expectations may affect the market price of Interactive Buyers common stock in
unpredictable ways, including substantial drops in the market value of investor
holdings from time to time.
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Other Market Factors Affecting Operating Results
Interactive Buyers' operating results may vary depending on a number of other
market factors, including:
- - Demand for and usage of Virtual Source Network and Virtual Source
Publisher;
- - Actions taken by our competitors, including new product introductions and
enhancements;
- - Delays in the implementation of new systems by clients as they attempt to
reduce the risk of computer system problems associated with the Year
2000;
- - Ability to develop, introduce and market new enhancements to our existing
services on a timely basis;
- - Changes in pricing by Virtual Source Network competitors;
- - Ability to expand sales and marketing programs;
- - Success in maintaining and enhancing existing relationships, and
developing new relationships with strategic partners, including systems
integrators and other implementation partners;
- - Ability to control costs;
- - Technological changes;
- - Changes in client budgets; and
- - Other factors, including changes in the U.S. economy.
Increased Operating Expenses Effect on Operations and Price of Common Stock
Interactive Buyers plans to increase operating expenses to expand its sales and
marketing operations, establish new strategic relationships, fund additional
systems development, and increase our business and professional staff internal
business systems. These planned expenses will increase operating losses during
reporting periods before significant revenues develop. This could lead to drops
in the market price of Interactive Buyers shares.
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Substantial Costs of any Securities Litigation
In the past, securities class action litigation has often been brought against a
company following periods of volatility in the market price of its securities.
Interactive Buyers could become a target of similar securities litigation.
Litigation of this type could result in substantial costs and divert
management's attention and resources.
Dependence on Virtual Source Network Anticipated Revenues
Interactive Buyers expects that when revenues do develop, substantially all of
those revenues will come from Virtual Source Network clients. Although Virtual
Source Network fees are substantially below those currently charged for
competitive systems and services, future reductions in competitive prices, to
meet Virtual Source Network pricing, could negatively impact the demand for, or
usage of, Virtual Source Network. These changes may impede Virtual Source
Network's ability to achieve broad market acceptance, thus negatively impacting
Interactive Buyers' opportunity to eventually become profitable. Broad and
timely acceptance of Virtual Source Network, which is critical to Interactive
Buyers' future success, is subject to a number of significant risks. These risks
include:
- - Internet procurement is a new market. Its rate of growth and change is
unpredictable, as is the nature of this change;
- - Interactive Buyers' ability to support its strategic partners, in pursuit
of large numbers of buyers and suppliers, is yet to be proven; and
- - Interactive Buyers' ability to continually enhance the features of Virtual
Source Network, in response to client's widely differing needs, is yet
to be proven.
Competitive "business-to-business" Internet Commerce market; Effect on Market
Share and Business
The market for Virtual Source Network is intensely competitive, evolving and
subject to rapid technological change. Intensity of competition is likely to
increase in the future. Increased competition from new competitors is likely to
result in loss of market share, which could negatively impact Interactive
Buyers' business. Competitors vary in size, and in the scope and breadth of the
products and services offered. Virtual Source Network will encounter competition
from Ariba, Captura Software, Clarus, Commerce One, Concur Technologies,
Extensity, GE Information Services, Intelysis, Netscape Communications and
TRADE'ex Electronic Commerce Systems. Virtual Source Network may also encounter
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competition from several major enterprise software developers, such as Oracle,
PeopleSoft and SAP who are not presently considered to be direct competitors. In
addition, because there are relatively low barriers to entry in this market,
additional competition from other established and emerging companies may
develop.
Many current and potential competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources than
Interactive Buyers, significantly greater name recognition, and a larger
installed base of customers. In addition, many of the competitors have
well-established relationships with Interactive Buyers' clients and potential
clients, and have extensive knowledge of the industry. Current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to increase the ability of their products to
address customer needs. Accordingly, it is possible that new competitors, or
alliances among competitors, may emerge and rapidly acquire significant market
share.
Virtual Source Network Revenues Expected from a Limited Number of Clients and
Increased Impact of Customer Loss
Interactive Buyers expects that Virtual Source Network revenues, if any, during
the current fiscal year will come from a small number of clients, perhaps as few
as four. The loss of any single customer could have a substantial negative
impact on the business Interactive Buyers. However, most businesses currently
expressing interest in using Virtual Source Network are Fortune 500 companies
with the potential for generating several hundred thousand dollars of annual fee
revenue for Interactive Buyers.
Third Parties Implement/Integrate Virtual Source Network; Negative Impact Upon
Revenue Goals if Third Parties Do Not Produce
Interactive Buyers expects to rely, almost exclusively, on a number of third
parties to propose and explain Virtual Source Network to prospective clients, to
implement Virtual Source Network, and to integrate Virtual Source Network with
clients' existing systems. If Interactive Buyers is unable to establish and
maintain effective, long-term relationships with these third parties, or if
these third parties are unable to meet the needs and expectations of Virtual
Source Network clients, Interactive Buyers would have difficulty achieving its
revenue goals. This strategy will also require that we develop new relationships
with third party implementors/integrators as the number of Virtual Source
Network users increases.
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A number of potential competitors, including Oracle, SAP and PeopleSoft, have
significantly more well-established relationships with these third parties and,
as a result, these third parties may be more likely to recommend competitors'
products and services.
Vendors are Essential to Success of Virtual Source Network; Negative Impact of
Vendors' Failure to Join the Network
In order to operate, Virtual Source Network requires that vendors be able to
access the network. Currently, vendors can access Virtual Source Network even if
they have not joined the network, but it is far more efficient if a vendor does
join the network. It is necessary that a client's key vendors join the network
in order to achieve the full benefits of the system, and Interactive Buyers does
expect that vendors will join. Network membership is now free for any vendor,
and clients joining Virtual Source Network make direct requests of their key
vendors that they join. When a large corporation requests that its vendors adapt
to a new purchasing process, and that change is free, there is a strong tendency
on the part of those vendors to make that change, and to protect their customer
relationships. To date there has been no significant vendor resistance to
joining the new Internet version of Virtual Source Network, although previously
there was significant resistance to paying the annual subscription fee, and
joining the earlier personal computer version of Virtual Source Network. Should
new vendor resistance develop, that could slow adoption of Virtual Source
Network by clients, and negatively impact potential Interactive Buyers'
revenues.
Substantial Costs of Any Product Liability Claims
Errors, defects or other performance problems with Virtual Source Network could
result in financial or other damages to our clients. A product liability claim,
even if not successful, would likely be time consuming and costly and could
seriously harm Interactive Buyers. Although the terms and conditions in Virtual
Source Network user agreements contain provisions designed to limit exposure to
these claims, existing or future laws, or unfavorable judicial decisions, could
weaken or negate these provisions.
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Success Depends on Key Personnel; No "Key Man" Life Insurance
Future performance depends on the continued service of key personnel, and the
ability to attract, train, and retain additional technical, marketing, customer
support, and management personnel. The loss of one or more key employees could
negatively impact Interactive Buyers, and there is no "key man" life insurance
in force at this time. However, Interactive Buyers does plan to obtain this
insurance. Competition for qualified personnel is intense, and there can be no
assurance that Interactive Buyers will retain key employees, or attract and
retain other needed personnel.
Protection of Intellectual Property; Lack of Patents; Potential Pirating
Interactive Buyers' success depends to a large extent on its exclusive
technology, and relies on a combination of contractual provisions,
confidentiality procedures, trade secrets, copyrights and trademark protections.
Interactive Buyers has no patents at this point, and Interactive Buyers'
technologies may not be patentable. Despite efforts to protect its exclusive
rights, unauthorized parties may attempt to copy aspects of that technology, or
to obtain and use our exclusive information. Policing unauthorized use of this
technology is difficult, and while Interactive Buyers is unable to determine the
extent to which piracy of Interactive Buyers' software may exist, software
piracy can be expected to be a persistent problem. Further, competitors may
independently develop similar technology, or duplicate Interactive Buyers'
services without violating intellectual property rights.
At present, Interactive Buyers' technologies are owned outright by Interactive
Buyers. However, Interactive Buyers may in the future have to license or
otherwise obtain access to intellectual property of third parties.
Substantial Costs of Any Intellectual Property Infringement Claims
There has been a substantial amount of litigation in the software industry and
the Internet industry regarding intellectual property rights. It is possible
that in the future, third parties may claim that Interactive Buyers' technology
may infringe their intellectual property. It is expected that software product
developers and providers of electronic commerce solutions will increasingly be
subject to infringement claims as the number of products and competitors grows
and the functionality of products in different industry segments overlaps. Any
claims, with or without merit, could be time-consuming, resulting in costly
litigation.
Need to Manage Growth and Expansion
Interactive Buyers anticipates a period of significant expansion and growth,
which most likely will place significant strain upon management, systems, and
resources. Failure to properly manage that growth and expansion will jeopardize
the future of the business.
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Year 2000 Risk
Although management believes that its internally developed systems and
technology are Year 2000 compliant, certain other technologies nevertheless
could be substantially impaired, or cease to operate, due to Year 2000 problems.
Interactive Buyers relies on information technology supplied by third parties as
well, and strategic partners may also be dependent on information technologies
not Year 2000 compliant, and on their own third-party vendor systems that may be
at risk. These Year 2000 problems could adversely affect Interactive Buyers.
Further, the Internet itself could face serious disruptions arising from Year
2000 problems.
Many potential Virtual Source Network clients have implemented policies that
prohibit or strongly discourage making changes or additions to their internal
computer systems until after January 1, 2000. Further, some technology budgets
have been diverted from other projects to deal with Year 2000 issues.
Interactive Buyers has already experienced delays in the new client
decision-making process for this reason, and expects that to continue through
December 31, 1999.
Risks Related to the Internet
The use of Virtual Source Network and Virtual Source Publisher depends on the
increased acceptance and use of the Internet as a medium of commerce and
communication. While management believes that acceptance and use of the Internet
will continue to increase at very rapid rates, it is not guaranteed. If that
growth does not continue, clients may not adopt or use these new Internet
technologies at the rates management has assumed, and Interactive Buyers may not
be as successful as originally thought. Further, even if acceptance and use of
the Internet does increase rapidly, but the technology underlying the Internet
and other online services does not effectively support that growth, Interactive
Buyers' future would be negatively impacted.
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Internet Security Concerns
A significant barrier to electronic commerce and communications is the secure
transmission of confidential information over public networks. Advances in
computer capabilities, new discoveries in the field of cryptography or other
events or developments could result in compromises or breaches of Interactive
Buyers' security systems or those of other web sites to protect our exclusive
information. If any well-publicized compromises of security were to occur, it
could have the effect of substantially reducing the use of the web for commerce
and communications. Anyone who circumvents Interactive Buyers' security measures
could misappropriate our exclusive information or cause interruptions in
services or operations. The Internet is a public network, and data is sent over
this network from many sources. In the past, computer viruses, software programs
that disable or impair computers, have been distributed and have rapidly spread
over the Internet. Computer viruses could theoretically be introduced into
Interactive Buyers' systems, or those of our clients or vendors, which could
disrupt Virtual Source Network or Virtual Source Publisher, or make it
inaccessible to clients or vendors. Interactive Buyers may be required to expend
significant capital and other resources to protect against the threat of
security breaches or to alleviate problems caused by breaches. To the extent
that Interactive Buyers' activities may involve the storage and transmission of
exclusive information, such as credit card numbers, security breaches could
expose Interactive Buyers to a risk of loss or litigation and possible
liability. Interactive Buyers' security measures may be inadequate to prevent
security breaches, and business would be seriously impacted if they are not
prevented.
Government Regulation
As Internet commerce continues to grow, the risk that federal, state or foreign
agencies will adopt regulations covering issues such as user privacy, pricing,
content and quality of products and services, increases. It is possible that
legislation could expose companies involved in electronic commerce to liability,
which could limit the growth of electronic commerce generally. Legislation could
dampen the growth in Internet usage and decrease its acceptance as a
communications and commercial medium. If enacted, these laws, rules or
regulations could limit the market for Interactive Buyers' services.
One or more states may seek to impose sales tax collection obligations on
out-of-state companies like Interactive Buyers that engage in or facilitate
electronic commerce throughout numerous states. These proposals, if adopted,
could substantially impair the growth of electronic commerce and could adversely
affect our opportunity to derive financial benefit from these activities.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this document constitute forward-looking statements.
These statements involve known and unknown risks, uncertainties, and other
factors that may cause actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.
Although management believes that the expectations reflected in the
forward-looking statements are reasonable, there is no guarantee that future
results, levels of activity, performance or achievements will be attained.
Moreover, neither management nor any other person assumes responsibility for the
accuracy and completeness of these statements. Management is under no duty to
update any of the forward-looking statements to conform these statements to
actual results.
INDUSTRY OVERVIEW
The Internet has emerged as the fastest growing communication medium in history.
With over 97 million users at the end of 1998, growing to 320 million users by
2002, as estimated by International Data Corporation, a well known technology
research and consulting firm, the Internet is dramatically changing how
businesses and individuals communicate and share information. The Internet has
created new opportunities for conducting commerce, such as business-to-consumer
and person-to-person electronic commerce. Recently, the widespread adoption of
intranets and the acceptance of the Internet as a business communications
platform has created a foundation for business-to-business electronic commerce
that will enable organizations to streamline complex processes, lower costs and
improve productivity.
With this foundation, Internet-based, business-to-business electronic commerce
is poised for rapid growth and is expected to represent a significantly larger
opportunity than business-to-consumer or person-to-person electronic commerce.
According to Forrester Research, another well recognized technology research
firm, business-to-business electronic commerce is expected to grow from $43
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billion in 1998 to $109 billion in 1999, and $1.3 trillion in 2003, accounting
for more than 90% of the dollar value of electronic commerce in the United
States. This is a representation of the volume of business expected to be
conducted through Virtual Source Network, and other similar systems, not the
revenue expected to be received by Interactive Buyers and its competitors. This
market is expected to create a substantial demand for Internet-based electronic
commerce applications. According to International Data Corporation, the
worldwide market for Internet-based electronic commerce procurement and order
management applications is expected to experience tremendous growth, with
revenues increasing from $187 million in 1998 to $8.5 billion in 2003. These are
the revenues expected to be received by Interactive Buyers and its competitors,
in return for use of Virtual Source Network and similar systems.
Today, most organizations buy goods and services through paper-based or
semi-automated processes. These processes are costly, time consuming and complex
and often include the re-keying of information, lengthy approval cycles and
significant involvement of financial and administrative personnel. Various
experts estimate that the cost per procurement transaction ranges from $75 to
$175, often exceeding the cost of the items being purchased. In addition, these
time-consuming processes often result in fulfillment delays to end-users,
leading to productivity losses. Beyond the time and expense associated with
manual processing costs, organizations suffer even greater costs when they
cannot fully exploit procurement economies of scale. Most organizations lack the
systems that enable them to monitor purchases and compile data necessary to
negotiate better volume discounts with preferred suppliers. In addition, most
organizations suffer from a problem known as "maverick buying," which occurs
when personnel do not follow internal guidelines as to which suppliers to use
for operating resource purchases. When preferred suppliers are not used,
organizations pay a premium. Experts estimate that maverick buying accounts for
one-third of operating resource expenditures, costing organizations a 15% to 27%
premium on those purchases. Traditional procurement processes also result in
missed revenue opportunities and additional costs to suppliers. When buyers are
unable to channel purchases to preferred suppliers, these suppliers lose
revenue. Suppliers also suffer from inefficient, error-prone and
manually-intensive order fulfillment processes. Many suppliers dedicate
significant resources to the manual entry of information from faxed or phoned-in
purchase orders and the manual processing of paper checks, invoices and ship
notices. Suppliers also spend significant resources on customer acquisition and
sales costs, including the production and distribution of paper catalogs.
Without fully automated and integrated electronic commerce technologies, both
buyers and suppliers incur substantial extraneous costs in conducting commerce.
<PAGE>
Over the past 30 years, information technologies have brought automation to
departmental operations such as manufacturing resource planning, financial
management, sales force automation and human resource management. However, the
information technology platforms that made departmental automation possible did
not provide enterprise-wide connectivity within organizations, or between
organizations. Thus, the processes linking end-users to approvers and
organizations to suppliers for operating resources are today largely
paper-based. With the widespread implementation of intranets and the adoption of
the Internet as a business communication platform, organizations can now
automate enterprise-wide and inter-organizational commerce activities. The
availability of this technology creates a significant market opportunity for
Internet-based business-to-business electronic commerce solutions for operating
resources.
COMPETITION
The market for Virtual Source Network is intensely competitive, evolving and
subject to rapid technological change, and the intensity of competition is
expected to increase in the future. Increased competition is likely to result in
price reductions, to some extent caused by Virtual Source Network pricing which
is substantially below current industry averages.
Competitors vary in size and in the scope and breadth of the products and
services offered. Competitors include Ariba, Captura Software, Clarus, Commerce
One, Concur Technologies, Extensity, GE Information Services, Intelysis,
Netscape Communications and TRADE'ex Electronic Commerce Systems. Several major
enterprise software developers, such as Oracle, PeopleSoft and SAP are likely to
become competitors. In addition, because there are relatively low barriers to
entry, it is expected that additional competition will come from other
established and emerging companies.
Management believes the principal competitive factors include:
1. overall cost of licensing, implementing, and integrating the system;
2. a significant base of satisfied clients, breadth and depth of the
system;
3. a critical mass of buyers and suppliers;
4. product quality and performance;
<PAGE>
5. customer service;
6. core technology;
7. product features; and
8. ability to implement and integrate with enterprise systems.
Although management believes that Virtual Source Network compares favorably with
respect to most of these factors, and very favorably with respect to overall
cost, Virtual Source Network does not yet have a large referral base, nor a
critical mass of buyers and sellers, and its quality and performance have yet to
be proven with regard to the new Internet version of Virtual Source Network. As
a result, it is yet to be seen whether Virtual Source Network can compete
successfully.
Many competitors and potential competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
significantly greater name recognition and a larger installed base of customers.
In addition, many have well-established relationships with potential Virtual
Source Network clients and have extensive knowledge of the industry.
Accordingly, it is possible that new competitors, or alliances among
competitors, may emerge and rapidly acquire significant market share.
Competition will increase as a result of industry consolidations.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - FISCAL YEAR ENDED JANUARY 31, 1999 COMPARED TO FISCAL YEAR ENDED
JANUARY 31, 1998:
Interactive Buyers's business is at an early stage, and is in transition from a
firm primarily engaged in technology development and refinement, to a firm that
is marketing and selling its services. During the last two fiscal years,
expenditures have been made primarily for the purpose of developing, testing and
improving Interactive Buyers' two Internet applications, Virtual Source Network
and Virtual Source Publisher. A modest amount of revenue has been received from
Virtual Source Network users paying annual subscription fees, but that revenue
ceased when efforts turned to the development of the Internet version of Virtual
Source Network, and a decision was made to charge transaction fees for usage of
Virtual Source Network rather than subscription fees. Substantially all the cash
<PAGE>
required for operations during fiscal years ended January 31, 1998 and 1999 has
come from investors. Other than convertible demand notes of $857,000 at January
31, 1999, and normal accounts payable, Interactive Buyers has no outstanding
debts.
Revenue
Revenue in the fiscal year ended January 31, 1999 was very small, and somewhat
lower than the prior year. Both figures consisted primarily of subscription
revenues and, as stated above, Interactive Buyers' policy of charging
subscription fees has been discontinued, so revenues from this source will
cease.
General and Administrative Expenses
Expenses in the fiscal year ended January 31, 1999 exceeded those of the prior
year by $365,000, primarily due to the added payroll and operating expenses
associated with Wpg.Net, Inc., which was acquired in June of 1998. The Company,
from time to time, issues shares of its common stock to employees as bonuses and
to outside consultants in lieu of fees. 403,722 shares were issued for the
fiscal year ended January 31, 1998, at an expense of $92,706 to the Company.
318,500 shares were issued for the fiscal year ended January 31, 1999 at an
expense of $67,363.
Net Loss from Operations
Net loss from operations in fiscal year ended January 31, 1999 exceeded the
prior year by $376,000, because of the increase in general and administrative
expense noted above.
Loss on Abandonment of Equipment
In the fiscal year ended January 31, 1998, laptop computers valued at $28,000
were written off. There was no similar write-off in fiscal 1999. The laptops in
question were provided to an eighteen person sales force in early 1997. The
sales approach used at that time proved particularly unsuccessful, and was
terminated. By that time, the laptop computers had become partially obsolete and
their value had decreased significantly. Interactive Buyers elected not to
upgrade them, nor to attempt collection from the terminated sales people.
<PAGE>
Litigation Settlement
During fiscal 1999, a mutual compromise settlement between Interactive Buyers
and its landlord resulted in a $30,000 cash payment to Interactive Buyers and
free rent for one year beginning December 1, 1998. The $91,000 settlement
included that cash payment, the free rent, and reimbursement of legal fees and
costs associated with the move. There was no similar litigation or settlement in
the prior year.
Net Loss
The largest factor contributing to the $257,000 increase in fiscal 1999 net
loss, compared to the prior year, was the increased payroll and operating
expense associated with the June 1998 acquisition of Wpg.Net, Inc.
Accounts Receivable
The $24,000 decrease in accounts receivable from year to year is a direct result
of Interactive Buyers' change in pricing structure of the new Internet version
of Virtual Source Network from a subscription basis to a transaction usage fee
basis. During the transition period the subscription fees were discontinued and
the transactional fees had not yet developed.
Property and Equipment, Net
The year to year reduction of $22,000 is the result of a comparable increase in
accumulated depreciation. There was no other change.
Prepaid Rent
The $37,500 of prepaid rent at January 31, 1999 represents the remaining ten
months of free rent available to Interactive Buyers as a result of the
litigation settlement discussed earlier. There was no similar settlement in
effect at January 31, 1998.
Employee Receivable
At January 31, 1999 employee receivables were $68,000, approximately $9,000 more
than the prior year. This increase was primarily due to expense advances.
Intangible Assets
$434,000 at January 31, 1999, represents the unamortized portion of the
goodwill, or excess of price paid over book value of assets acquired, booked as
a result of the Wpg.Net, Inc. acquisition in June 1998. There was no comparable
item at January 31, 1998.
<PAGE>
Accounts Payable
Accounts payable increased $17,000 from year to year. This increase represents
increases in normal business activity.
Accrued Liabilities
Accrued liabilities increased $48,000, mostly as a result of interest expense
accrued on Interactive Buyers' $857,000 of convertible demand notes outstanding
at January 31, 1999. This interest is payable in cash at the option of
Interactive Buyers. If not paid in cash, the holders have the right to convert
any of this accrued interest into Interactive Buyers common stock.
Convertible Notes Payable - Related Parties
At January 31, 1999, notes payable totaled $857,000, an increase of $659,000
over the $198,000 outstanding at January 31, 1998. This represents $825,000 of
new notes issued, less $166,000 principal amount of notes converted during the
same period. Funds raised in this manner were used to fund Interactive Buyers'
operations.
Deferred Revenue
Deferred revenue decreased approximately $25,000 to just over $3,000 at January
31, 1999. This deferred revenue originated from subscription fees received but
not fully earned in the preceding accounting period. These deferrals are
recognized as revenues in subsequent accounting periods. Since Interactive
Buyers no longer charges subscription fees, no new amounts have been added to
deferred revenue recently. During the coming fiscal year, the remaining balance
will be recognized as revenue.
Common Stock & Paid-in-Capital & Options to Purchase Common Shares
The $841,000 increase during the fiscal year ended January 31, 1999, represents
the value of 779,000 common shares issued upon conversion of notes, the 500,000
common shares issued and the $80,000 fair value assigned to the option to
acquire another 500,000 common shares, which were issued and granted in the
acquisition of Wpg.Net, Inc., as well as 318,000 shares issued for services
rendered, less 1,000,000 shares surrendered by certain shareholders.
Accumulated Deficit
The accumulated deficit increased $1,101,000 during the fiscal year ended
January 31, 1999 as a result of the net loss for the year.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - THREE MONTHS ENDED APRIL 30, 1999, COMPARED TO THE THREE MONTHS
ENDED APRIL 30, 1998:
Revenue
Revenue for the three months ended April 30, 1999 was $4,000, down $21,000 from
the prior year quarter. This results from the discontinuation in early 1998 of
the annual subscription fee program relative to the personal computer version of
Virtual Source Network, and the fact that the new Internet version of Virtual
Source Network has not begun to generate revenue.
General and Administrative Expenses
Expenses of $338,000 for the three months ended April 30, 1999 exceeded the
prior year period by $113,000 primarily due to added payroll and operating
expense associated with Wpg.Net, Inc. which was acquired in 1998, but after the
close of the three months ended April 30, 1998.
Net Loss
Net loss for the quarter was $333,000, which exceeded the prior year quarter by
$133,000. This reflects the combined impact of revenue reductions and expense
increases discussed above.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION -COMPARISON OF APRIL
30, 1999 BALANCE SHEET ITEMS TO JANUARY 31, 1999 BALANCE SHEET ITEMS
Current Assets
Current assets of $785,000 at April 30, 1999 exceeded the January 31, 1999
amount by $721,000. This increase reflects the $1,000,000 net proceeds from
737,493 Interactive Buyers common shares sold during the three months ended
April 30, 1999, less funds used for operations during the quarter.
Property and Equipment, Net
Property and equipment, net, at April 30, 1999, of $47,000, exceeded the January
31, 1999 amount by $25,000. This increase results from $30,000 of computer
hardware and software purchased during the quarter, less $5,000 of depreciation
during the same quarter.
<PAGE>
Prepaid Rent
Prepaid rent has declined by exactly $11,250, which represents three months rent
at $3,750 per month. The prepaid rent account was established at January 31,
1999, representing the unused amount of free rent agreed to in Interactive
Buyers' litigation settlement with its landlord in late 1998.
Employee Receivables
Employee receivables have increased $35,000 since January 31, 1999, due to
expense advances, plus funds advanced to certain key employees for personal
reasons. Interactive Buyers felt that these key employees were, and still are,
important to the success of the business, and that limited financial assistance
represented a good investment of company funds.
Intangible Assets
Intangible assets declined $8,000 during the three months ended April 30, 1999,
due to normal amortization of the goodwill which was recorded as a result of the
Wpg.Net, Inc. acquisition in June of 1998.
Accounts Payable
Accounts payable increased $3,000 to $52,000 at April 30, 1999. This increase
results from a normal increase in business activity.
Accrued Liabilities
Accrued liabilities increased $20,000 during the quarter, to $98,000 at April
30, 1999. This increase represents the interest accrued on outstanding
convertible demand notes during the quarter.
Convertible Demand Notes Payable - Related Parties
The outstanding balance of these notes, due primarily to various share-holders,
declined $55,000 to $802,000 at April 30, 1999. This change represents $85,000
principal amount converted into Interactive Buyers common stock, net of $30,000
received from purchasers of new notes issued during the quarter.
Common Stock & Capital in Excess of Par
These amounts, combined, increased $1,128,000 during the three months ended
April 30, 1999, to a total of $4,243,000. This increase includes $1,000,000
proceeds, net of issuance costs, from the private placement of 737,493 new
Interactive Buyers common shares under Rule 504 of Regulation D. It also
includes $86,000 from the conversion of principal and interest due under certain
Convertible Demand Notes into 91,932 Interactive Buyers common shares, and
$42,000 representing the issuance of 44,000 Interactive Buyers common shares in
return for services rendered.
<PAGE>
Accumulated Deficit
The accumulated deficit increased $334,000 during the three months ended April
30, 1999, to $3,808,000. This increase is a result of the net loss recorded
during the quarter.
LIQUIDITY AND CAPITAL RESOURCES
Interactive Buyers has no revenue at this time, other than small amounts of
interest income, and certain non-recurring items. While Interactive Buyers
expects to generate significant amounts of revenue in the future, it is entirely
dependent on investor funds at this point in time. At April 30, 1999,
Interactive Buyers had cash balances totaling $785,000, as a result of its
private placement of common stock during the quarter then ended. Management
expects those funds to last until September or October of 1999. Interactive
Buyers is having conversations with several funding sources but, at this time,
no firm commitments have been received, and there can be no assurances that
funding commitments will result from these discussions.
The Consolidated Statements of Cash Flows for fiscal years ended January 31,
1999 and 1998 show that net losses ($1,101,100 and $844,400 respectively)
represent the primary use of funds in each fiscal year. In fiscal 1999, $153,000
of convertible notes were issued for services, expense reimbursements, and
accrual of interest, thus reducing the extent to which cash was required to
cover those obligations. Common stock valued at $67,000 was issued for services,
similarly reducing the requirement for cash. The $825,000 proceeds from
convertible note issuance during the fiscal year provided almost all of the cash
required to support the remaining operational expenditures.
The Consolidated Statements of Cash Flows for the three months ended April 30,
1999, and three months ended April 30, 1998, show a similar pattern. Net losses
were $334,000 and $200,000, respectively, with the issuance of stock ($42,000)
in the 1999 quarter, and notes ($31,000) in the 1998 quarter, partially
offsetting the cash requirement. However, the $1,000,000 (net of issuance costs
of approximately $5,000) proceeds from sale of stock in the 1999 quarter,
increased the cash balance by $725,000 to a total of $785,000 at April 30, 1999.
<PAGE>
Year 2000 Issues
Interactive Buyers' internally used computers are all "Y2K" compliant. Virtual
Source Network and Virtual Source Publisher were developed to be Y2K compliant,
and do not represent a risk for users. Interactive Buyers' servers are housed in
a facility especially designed for mission-critical computers, and the managers
of that facility have assured Interactive Buyers that all systems and services
under the control of the facility managers are Y2K compliant. Interactive Buyers
cannot be sure that all outside organizations, beyond its control, which impact
or may impact Interactive Buyers' operations, will be Y2K compliant by December
31, 1999.
Need for Additional Financing
The Company believes that its existing capital will be sufficient to meet the
Company's cash needs, including the costs of compliance with the continuing
reporting requirements of the Securities Exchange Act of 1934, as amended, for a
period of approximately four months. Since Interactive Buyers' financial
position does not support bank financing, or other conventional debt financing,
additional common shares will likely be issued, thus resulting in further
shareholder dilution. It cannot be certain that additional financing will be
available on favorable terms, if at all.
No commitments to provide additional funds have been made by management or other
stockholders, and the Company has no plans, proposals, arrangements or
understandings with respect to the sale or issuance of additional securities.
Accordingly, there can be no assurance that any additional funds will be
available to the Company to allow it to cover its expenses. In the event the
Company does elect to raise additional capital it expects to do so through the
private placement of restricted securities rather than through a public
offering. The Company does not currently contemplate making a Regulation S
offering.
Item 3. DESCRIPTION OF PROPERTY
Interactive Buyers leases approximately 2,500 square feet of standard office
space at its principal location in Ventura, California. This space is rent free,
as a result of the litigation settlement discussed earlier, until the November
30, 1999 end of the lease term. Interactive Buyers' subsidiary, Wpg.Net, Inc.,
rents approximately 1,000 square feet of standard office space near Seattle
Washington, at a current rate of $2,300 per month. The lease agreement expires
<PAGE>
on May 31, 2002. Interactive Buyers' main servers are housed in a Seattle
facility especially designed for mission-critical computers. The cost is $2,200
per month, and is available on a month-to-month basis. This facility maintains
back-up electrical power, fire protection, and other security features. Data
communications connections available within this facility provide direct access
to the Internet, without the need to connect through T-1, T-2, or T-3 high
volume telephone lines.
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 31, 1999, information regarding
ownership of Interactive Buyers' common stock, by each person known by
Interactive Buyers to be the beneficial owner of more than 5% of its outstanding
common stock, by each director, by certain related shareholders, and by all
executive officers and directors of Interactive Buyers as a group. All persons
named below have sole voting and investment power over their shares except as
otherwise noted. Interactive Buyers common stock is the only class of voting
securities outstanding. There are no existing arrangements which may, or are
expected to, result in a change in control of Interactive Buyers.
<TABLE>
<CAPTION>
Name & Address Number of Shares Percent
- ----------------------------- ----------------- ----------
<S> <C> <C>
Robert C. McShirley (a) 880,055 14.1%
4536 Falkirk Bay
Oxnard, CA 93035
Joseph E. Thomure (a) 871,412 (included
13006 Mason Estates Ct. in 14.1%
St. Louis, MO 63141 above)
Richard S. McShirley (b) 801,418 6.4%
794 Hot Springs Road
Santa Barbara, CA 93108
Samuel E. Bradt (c) 688,050 5.5%
6925 N. Wildwood Point
Chenequa, WI 53029
<PAGE>
Jawsh Corporation 622,987 5.0%
258 Lansbrooke Drive
Chesterfield, MO 63005
Dennis W. McQuilliams (d) 500,000 4.0%
16623 N.E. 145th Street
Woodinville, WA 98072
P. Scott Turner 29,408 **%
30452 Winchester Road
Castaic, CA 91384
Scott T. Behan 10,000 **%
P.O.Box 1244
Somis, CA 93066
Robert N. Schwartz 19,647 **%
Hughes Research Laboratories
3011 Malibu Canyon Road
Malibu, CA 90265
All Officers and Directors 2,928,578 23.5%
As a Group (seven indiviuals)
Total shares outstanding 12,453,658
as of May 31, 1999
<FN>
**% Less than 1% of outstanding shares.
(a) Under an August 1998 agreement, Mr. Thomure has given Robert C. McShirley a
continuing proxy to vote shares held by Mr. Thomure, until August 2000. The
percentages above reflect this proxy. In addition to common shares held or voted
by Mr. McShirley, he owns $95,600 principal amount of Convertible Demand Notes,
convertible into 198,143 common shares. Mr. McShirley also has an unvested
option to purchase 100,000 additional shares at $0.75 per share.
(b) Richard McShirley owns $33,100 principal amount of Convertible Demand Notes
which are convertible into 148,143 common shares, and has an unvested option to
purchase 50,000 additional shares at $0.75 per share.
<PAGE>
(c) Samuel E. Bradt has an unvested option to purchase 25,000 additional common
shares at $0.75 per share.
(d) Dennis W. McQuilliams has a 37.6% interest in DX3, Inc. and is the Chief
Executive Officer of DX3, Inc., which owns 500,000 common shares of Interactive
Buyers as well as an option to purchase another 500,000 shares at $0.59 per
share. In addition, Mr. McQuilliams has an unvested option to purchase 75,000
common shares at $0.75 per share.
</TABLE>
<PAGE>
Item 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors are elected at each annual shareholder meeting, to serve until his or
her successor is qualified, elected, and begins to serve a new term. Officers
are elected at each annual board of directors meeting, to serve until his or her
successor is qualified, elected and begins to serve, unless the board takes
other action relative to the officer.
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------- --- --------------------------
<S> <C> <C>
Robert C. McShirley 44 President, CEO
Director since Jan. 1998
and Chairman since Jan. 1999
Samuel E. Bradt 61 Chief Financial Officer,
Secretary, Treasurer
Director since Dec. 1996
P. Scott Turner 45 Director since Jan. 1998
Scott T. Behan 37 Director since Jan. 1998
Robert N. Schwartz 59 Director since Jan. 1998
Richard S. McShirley 43 Vice President, Sales &
Marketing
Dennis W. McQuilliams 58 Vice President & Chief
Technical Officer
David K. Brazier 49 Network Technical
Manager
Daniel J. Jinguji 43 Vice President
Jill Ann Kossow 49 Strategic Business Account
Manager
</TABLE>
BUSINESS EXPERIENCE OF KEY MANAGEMENT PERSONNEL
Robert C. "Jay" McShirley, Chairman, President, and Chief Executive Officer -
Mr. McShirley originated the Virtual Source concept in 1994, and began
development work on the system at that time. In 1995, when Interactive Buyers
acquired Buyer/Seller Interactive, which was subsequently re-named Virtual
Source, Inc., and began to commercialize the concept, Mr. McShirley became
inactive. Prior to rejoining Interactive Buyers in May of 1997, he worked as a
manufacturing consultant with his most recent assignment being with AML
Communications, Inc., a communications products company. While on assignment
<PAGE>
with AML, he reorganized their manufacturing processes, and moved operations to
a new, more efficient facility, thus allowing production to expand and allowing
revenues to increase from approximately $2 million annual rate to a $14 million
annual rate. This was accomplished in a one-year period. Prior to 1995, Mr.
McShirley was employed in several manufacturing positions. Prior to that, he
worked with McShirley Products, Inc., a manufacturing firm established by his
father. Robert C. McShirley and Richard S. McShirley are brothers.
Samuel E. Bradt, Chief Financial Officer, Corporate Secretary, Treasurer,
Director - Since 1984, Mr. Bradt has worked with a number of successful
entrepreneurial businesses as an officer, director and shareholder. He is
currently a director of six private companies, two public companies, Lunar
Corporation of Madison, Wisconsin, and Interactive Buyers, and one private
foundation. He serves as an officer in all but two of those organizations. Prior
to 1984, Mr. Bradt served as a financial officer with Abbott Laboratories, and
with Federal Signal Corporation, and was a commercial lending officer with the
American National Bank in Chicago. Mr. Bradt received his B.S. at Stanford
University, and MBA at the University of Chicago Graduate School of Business.
Richard S. McShirley, Vice President, Sales and Marketing - Richard McShirley
has more than fifteen years experience developing and implementing marketing and
sales programs. He worked closely with the creators of King World Productions,
and the creators of the successful television series "Wild America". He led the
development of a complete merchandising and licensing program related to that
television series. Prior to that, he worked with McShirley Products, Inc., a
manufacturing business established by his father. Robert C. McShirley and
Richard S. McShirley are brothers.
Dennis W. McQuilliams, Vice President and Chief Technology Officer -
Mr. McQuilliams has a background in finance, and over fifteen years experience
in design, development and implementation of business application software for
mini and microcomputers. He has developed multi-user programs for municipal
entities, and the vision health industry, as well as accounting systems, payroll
systems and other custom applications.
<PAGE>
David K. Brazier, Network Technical Manager - Mr. Brazier has over thirty years
of experience as a professional systems analyst, systems integrator,
communications analyst, and communications integrator. He started working in
mainframe computing, moving to microcomputers in 1977. He has served as chief
technology officer for several start-up computer ventures, including leading the
development effort for desktop database publishing software. He has been the
owner or senior officer in companies in a variety of areas, including retailing,
publishing, computer and communications consulting, broadcasting, industrial
photography, and the Internet.
Daniel J. Jinguji, Vice President, Product Development - Mr. Jinguji spent
fifteen years with Microsoft, where he co-authored "Learn Microsoft Visual J++
6.0" to help explain the Microsoft version of the Java programming language. He
attended the University of Washington in Seattle where he received his B.A. in
mathematics, B.S. in biology and M.S. in computer science.
Jill Ann Kossow, Strategic Business Account Manager - Ms. Kossow spent eleven
years as a Strategic Business Account Manager for Apple Computer, where she
received several awards for outstanding performance in her work with several
major corporations. Prior to Apple, she worked as Sales Manager for Encore,
Inc., as well as seven years as a Business Development Manager with Digital
Equipment. She attended Manatee Community College in Florida, California State
University in Los Angeles, and the Harvard University Graduate Business School -
Advanced Management Program.
Item 6. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Name Position Annual Other
Salary Compensation
<S> <C> <C> <C>
Robert C. McShirley Chmn., Pres., $ 114,000 (a)
& CEO
Richard S. McShirley Vice Pres.,Sales $ 114,000 (b)
& Marketing
Dennis W. McQuilliams Vice Pres.,Chief $ 74,500 (c)
Technical Officer
David Brazier Network $ 74,500 none
Tech. Mgr.
Samuel E. Bradt CFO, Secy, $ 60,000 (d)
Treas, Director
<PAGE>
Daniel J. Jinguji Vice Pres., $ 60,000 (e)
Product Development
Jill Ann Kossow Strategic Business $ 36,000 (f)
Acct. Mgr.
P. Scott Turner Director none (g)
Scott T. Behan Director none (g)
Robert. N. Schwartz Director none (g)
<FN>
(a) Stock options for 80,000 shares @ $0.625/share (exercised), 100,000 shares @
$0.18/share (exercised), and 100,000 shares @$0.75/share with two year vesting.
(b) Stock options for 35,000 shares @ $0.625/share (exercised), 100,000 shares @
$0.18/share (exercised), 306,100 shares @ $0.20/share (exercised), and 50,000 shares @
$0.75/share with two year vesting.
(c) Stock option for 75,000 shares @ $0.75/share with two year vesting.
(d) Stock options for 15,000 shares @ $0.625/share (exercised), and 25,000 shares @
$0.75/share with two year vesting. Mr. Bradt also received a $50,000 convertible
demand note in return for an eighteen month time period, during 1996, 1997 and 1998,
when he worked without compensation.
(e) Stock option for 50,000 shares @ $0.75 per share, of which 5,000
shares vested 4/16/99, 20,000 shares vest 7/16/99, and the balance vest 12/16/99.
(f) Stock option for 25,000 shares @ $0.75/share with two year vesting.
(g) Outside directors each received a grant of 10,000 shares.
</TABLE>
Options Granted
The following table sets forth, information for the fiscal year ended January
31, 1999, regarding the granting of options to purchase Interactive Buyers'
common stock. All persons named below have sole exercise, voting and investment
power over the options and the underlying shares except as otherwise noted.
<TABLE>
<CAPTION>
OPTIONS GRANTED DURING FISCAL YEAR ENDED JANUARY 31, 1999:
NAME SHARES EXPIRATION PERCENT
- -------------------- ------- ----------- --------
<S> <C> <C> <C> <C>
Robert C. McShirley 80,000 8-4-2008 (a) 12.7%
Richard S. McShirley 35,000 8-4-2008 (a) 5.6%
Samuel E. Bradt 15,000 8-4-2008 (a) 2.4%
DX3, Inc. 500,000 6-10-2008 (b) 79.4%
------- --------
Total 630,000 100.0%
------- --------
<FN>
(a) These options were subsequently amended to provide for immediate vesting
and adjustment in exercise price, if employee agreed to exercise the option. All
these options were exercised 5-15-99.
(b) DX3, Inc. was established to receive proceeds of sale of Wpg.Net, Inc.
to Interactive Buyers, rather than having the proceeds go directly to the former
owners, who are all now employees of Interactive Buyers: Dennis W. McQuilliams;
David K. Brazier; Donald P. Britton.
</TABLE>
<PAGE>
Options Exercised
The following table sets forth, information for the fiscal year ended January
31, 1999, regarding the exercise of options to purchase Interactive Buyers'
common stock and the value of unexercised options. All persons named below have
sole exercise, voting and investment power over the options and the underlying
shares except as otherwise noted.
<TABLE>
<CAPTION>
OPTIONS EXERCISED DURING FISCAL YEAR ENDED January 31, 1999:
OPTION
SHARES VALUE OF
SHARES UNEXERCISED EXERCISE PER SHARE UNEXERCISED
NAME ACQUIRED AT YEAREND PRICE VALUE OPTIONS
- -------------------- -------- ------------ --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Robert C. McShirley 0 100,000 $ 0.18 $ 1.10 $ 91,836
80,000 $ 1.25 n/a n/a
Richard S. McShirley 0 306,100 $ 0.20 $ 1.10 $ 275,490
100,000 $ 0.18 $ 1.10 $ 91,836
35,000 $ 1.25 n/a n/a
Samuel E. Bradt 0 15,000 $ 1.25 n/a n/a
DX3, Inc. 0 500,000 $ 0.59 $ 1.10 $ 255,000
<FN>
Value is based on closing price at 1-31-99 of $2.00 per share for unrestricted
shares. A discount is used to value restricted shares, resulting in a year-end
value of $1.10 per share. As a result, the options with $1.25 exercise prices
are not "in the money" and therefore no value is indicated.
</TABLE>
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Interactive Buyers has issued convertible demand notes, from time to time, each
in a private transaction. The proceeds of these notes have been used to fund
operations. At April 30, 1999 there were $802,206 principal amount of these
notes outstanding, payable to twenty-two different investors, most of whom are
also Interactive Buyers shareholders. Among the note holders is Jawsh
Corporation, with $55,000 principal amount, which is also one of Interactive
Buyers' largest shareholders with 622,987 shares. William Rosenbaum holds
$52,206 principal amount of the notes, as well as an unknown number of
Interactive Buyers common shares. Mr. Rosenbaum is an investor in Jawsh
Corporation. Also, Robert C. McShirley owns $95,600 principal amount of the
notes, and Richard S. McShirley owns $33,100 principal amount of the notes.
<PAGE>
Malcolm Powell and his family, through various trusts, are beneficial owners of
$55,000 principal amount of the notes. Dr. Powell also owns 200,000 shares of
Interactive Buyers common stock, and is Mr. Bradt's first cousin. The largest
principal amount of the Notes held by any one holder, are held by Daniel Bunn
who owns $266,000 principal amount. Mr. Bunn is a business associate of Robert
C. McShirley. Each remaining note holders has less than $50,000 principal amount
of the notes.
Item 8. DESCRIPTION OF SECURITIES
COMMON STOCK.
Interactive Buyers has 50 million shares of its $0.01 par common stock
authorized. As of May 31, 1999 there were 12,453,658 shares outstanding. Each
share is entitled to one vote. There are no pre-emptive rights, and the company
has never paid a cash dividend. There are approximately 1,000 shareholders of
record. CEDE & Co. is listed as one shareholder "of record", with 6,169,712
shares, but represents shares held in numerous brokerage accounts, for an even
larger number of beneficial holders, and is otherwise known as "street name"
stock.
PREFERRED STOCK
Interactive Buyers has 5 million shares of $0.01 preferred stock authorized, but
none outstanding. Interactive Buyers has no plans to issue preferred shares.
DEBT SECURITIES
At January 31, 1999 there were $857,200 principal amount of convertible demand
notes outstanding. At April 30, 1999 there were $802,206 principal amount
outstanding held by twenty-two different investors. All these notes accrue
interest at 10% per annum, and are payable on demand after various dates, but
none later than December 31, 1999. Interest is payable in cash at the option of
Interactive Buyers. Interest accrued but not paid may, at the option of the
holder, be converted into Interactive Buyers common shares at the conversion
rate specified in each note, whether on not the principal is also converted. The
notes are convertible at various rates ranging from $0.20 per share to $1.25 per
share. There are no sinking fund provisions. After December 31, 1999,
Interactive Buyers may, at its option force conversion of the entire principal
amount, or repay the principal amount, with ninety days advance notice. During
the ninety-day notice period, the note holders may convert into Interactive
Buyers common stock, but if they fail to do so they may be prevented from ever
doing so. The terms of the notes do not provide for trustees or other persons or
entities to act on behalf of note holders.
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
Interactive Buyers' common stock is currently traded on the National Association
of Securities Dealers Inc. Automated Quotation System's Bulletin Board, using
the stock symbol "IBNL". Only a limited public trading market exists for
Interactive Buyers outstanding stock, and there can be no assurance that an
active public market will develop. The highest and lowest prices for Interactive
Buyers common stock during the calendar quarter preceding the dates below, and
the closing bid price on each the date, are as follows:
Quarters ended:
<TABLE>
<CAPTION>
1997 High Low Close
- ------------------ ------ ------ --------
<S> <C> <C> <C>
March 31, 1997 $0.875 $0.250 $ 0.313
June 30, 1997 $0.500 $0.188 $ 0.260
September 30, 1997 $0.320 $0.160 $ 0.313
December 31, 1997 $1.063 $0.290 $ 0.438
1998
- ------------------
March 31, 1998 $0.813 $0.313 $ 0.688
June 30, 1998 $3.250 $0.400 $ 1.563
September 30, 1998 $1.625 $0.625 $ 0.875
December 31, 1998 $2.875 $0.688 $ 1.625
<PAGE>
1999
- ------------------
March 31, 1999 $3.000 $1.500 $ 1.688
June 30, 1999 $2.000 $1.375 $ 1.875
<FN>
* Source: National Association of Securities Dealers, Inc. Automated
Quotation System, OTC Bulletin Board.
</TABLE>
DIVIDEND POLICY
Interactive Buyers has not paid any cash dividends on its common stock and does
not anticipate paying any cash dividends in the foreseeable future. Interactive
Buyers currently intends to retain future earnings, if any, to fund the
development and growth of its business. Any future determination to pay cash
dividends will be at the discretion of the board of directors and will be
dependent upon Interactive Buyers' financial condition, operating results,
capital requirements, applicable contractual restrictions and other factors as
the board of directors deems relevant.
VOLATILITY AND LIMITED MARKET
The market price of Interactive Buyers common stock has in the past been highly
volatile and is expected to continue to be subject to significant price and
volume fluctuations in the future based on a number of factors, including market
uncertainty about Interactive Buyers' financial condition or business prospects;
shortfalls in the revenues or results of operations expected by securities
analysts; analyst's reports or recommendations; quarterly fluctuations in
Interactive Buyers' financial results or in the results of other similar
companies, including competitors of Interactive Buyers; the introduction of new
services or enhancements by Interactive Buyers or its competitors; general
conditions in the industry; changes in prices for Interactive Buyers' or
competitors' products or services; and changes in general economic conditions.
In addition, the stock market may from time to time experience extreme price and
volume fluctuations, which particularly affect the market for the securities of
many Internet-related companies and which have often been unrelated to the
operating performance of the specific companies. There can be no assurance that
the market price of Interactive Buyers common stock will not experience
significant fluctuations in the future.
<PAGE>
Item 2. LEGAL PROCEEDINGS
There are currently no legal proceedings involving Interactive Buyers, and none
threatened. However, because of the rapidly changing environment surrounding the
Internet, and the rapid pace with which new businesses enter or attempt to enter
Internet related businesses, it is possible that disagreements will develop
regarding business names, relationships, markets, technologies, and other
subjects. Any future disagreement could lead to legal action.
Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There are and have been no substantive disagreements with Interactive Buyers'
outside accounting firm, and there have been no changes in accounting firms
during the last three years.
Item 4. RECENT SALES OF UNREGISTERED SECURITIES
During January and February of 1997, Interactive Buyers sold 2,918,653 shares of
restricted common stock and received proceeds of $583,731 before expenses. Since
no underwriters were used and no commissions were paid, expenses were limited to
legal fees approximating $10,000. This offering was a private placement, and in
the opinion of legal counsel for Interactive Buyers, was exempt from
registration under Section 4(2) of the Securities Exchange Act of 1934. The
recipients of these shares were primarily existing Interactive Buyers investors,
or friends, relatives and business associates of Interactive Buyers officers,
directors or investors. They represented their intention to acquire the shares
for investment purposes only, and not with a view to resale or distribution, and
appropriate restrictive legends were placed on each stock certificate issued
pursuant to this offering.
From August through November of 1997, Interactive Buyers sold 1,487,763 shares
of unrestricted common stock, and received $346,721 before offering costs. As
before, no underwriters were used, and no commissions paid. Offering costs were
limited to approximately $4,000 for legal fees. This offering was a private
placement and in the opinion of legal counsel for Interactive Buyers, was exempt
from registration under the Exchange Act. Further, Interactive Buyers was
<PAGE>
eligible under Securities and Exchange Commission Rule 504, which allowed the
shares sold in this private placement to be issued without restrictive legend.
The recipients of these shares, primarily being existing Interactive Buyers
investors, or friends, relatives and business associates of Interactive Buyers
officers, directors and investors, represented their intention to acquire the
shares for investment purposes only, and not with a view to resale or
distribution.
During March and April of 1999, Interactive Buyers sold 737,493 shares of
unrestricted common stock, and received $999,942 net of offering costs. As
before, no underwriters were used and no commissions were paid. Legal fees
approximated $5,000. This offering was a private placement and, in the opinion
of counsel, was exempt from registration under the Exchange Act. Interactive
Buyers was again eligible under Securities and Exchange Commission Rule 504,
which allowed the shares sold in this private placement to be issued without
restrictive legend. Because Rule 504 was changed effective April 7, 1999, the
last sale of shares under this offering was made on April 6, 1999. The
recipients of these shares, primarily being existing Interactive Buyers
investors, or friends, relatives and business associates of Interactive Buyers
officers, directors and investors, represented their intention to acquire the
shares for investment purposes only, and not with a view to resale or
distribution.
Item 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Officers and directors of Interactive Buyers, and officers and directors of its
100% owned subsidiary, Virtual Source, Inc., are indemnified to the greatest
extent allowed by Nevada law.
PART F/S
FINANCIAL STATEMENTS AND EXHIBITS
Interactive Buyers' financial statements are presented in the following
exhibits.
*****
<PAGE>
Interactive Buyers Network International Ltd.
and Subsidiaries
FINANCIAL STATEMENTS
January 31, 1999
(with Independent Auditors' Report Thereon)
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
Pages
-----
<S> <C>
Independent Auditors' Report F-1
Consolidated Balance Sheet F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Stockholders' Equity (Deficit) F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Interactive Buyers Network International Ltd.
and Subsidiaries
Ventura, California
We have audited the accompanying consolidated balance sheet of Interactive
Buyers Network International Ltd. and subsidiaries as of January 31, 1999 and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the years ended January 31, 1999 and 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Interactive Buyers
Network International Ltd. and subsidiaries as of January 31, 1999 and the
results of its operations, and its cash flows for the years ended January 31,
1999 and 1998 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the financial
statements, the Company incurred a net loss of $1,101,062 during the year ended
January 31, 1999, and as of that date, had a working capital deficiency of
$920,680 and stockholders' deficit of $360,305. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters are described in Note 8. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/S/ LUCAS, HORSFALL, MURPHY & PINDROH, LLP
Pasadena, California
May 15, 1999, except for Note 9 to the financial statements
which is as of June 25, 1999.
F-1
<PAGE>
<TABLE>
<CAPTION>
Interactive Buyers Network International Ltd. and subsidiaries
CONSOLIDATED BALANCE SHEET
INFORMATION AS OF APRIL 30, 1999 IS UNAUDITED
ASSETS
JANUARY 31, APRIL 30,
1999 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,937 $ 784,808
Accounts Receivable. . . . . . . . . . . . . . . . . . . . 3,590 -
----------- ------------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . 63,527 784,808
----------- ------------
PROPERTY AND EQUIPMENT
Furniture and fixtures . . . . . . . . . . . . . . . . . . 64,588 94,228
Software . . . . . . . . . . . . . . . . . . . . . . . . . 8,899 8,899
----------- ------------
73,487 103,127
Less: accumulated depreciation . . . . . . . . . . . . . . 50,920 56,335
----------- ------------
PROPERTY AND EQUIPMENT, NET. . . . . . . . . . . . . . . 22,567 46,792
----------- ------------
OTHER ASSETS
Prepaid rent . . . . . . . . . . . . . . . . . . . . . . . 37,500 26,250
Employee receivables . . . . . . . . . . . . . . . . . . . 68,027 103,097
Intangible assets, net of accumulated amortization . . . . 433,774 426,215
Other assets . . . . . . . . . . . . . . . . . . . . . . . 1,757 1,538
----------- ------------
TOTAL OTHER ASSETS . . . . . . . . . . . . . . . . . . . 541,058 557,100
----------- ------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $ 627,152 $ 1,388,700
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . $ 49,222 $ 52,128
Accrued liabilities. . . . . . . . . . . . . . . . . . . . 77,785 97,980
Notes payable - related parties. . . . . . . . . . . . . . 857,200 802,206
----------- ------------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . . . 984,207 952,314
DEFERRED REVENUE . . . . . . . . . . . . . . . . . . . . . . 3,250 1,866
----------- ------------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . 987,457 954,180
----------- ------------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.01 par value
5,000,000 shares authorized,
- 0 - shares issued and outstanding. . . . . . . . . . . - -
Common stock, $.01 par value,
50,000,000 shares authorized,
11,401,451 issued and outstanding on Jan. 31, 1999
and 12,274,876 issued and outstanding on April 30, 1999. 114,014 122,749
Additional paid-in capital . . . . . . . . . . . . . . . . 3,000,203 4,119,880
Accumulated deficit. . . . . . . . . . . . . . . . . . . . (3,474,522) (3,808,109)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) . . . . . . . . . . (360,305) 434,520
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) . . . . $ 627,152 $ 1,388,700
=========== ============
</TABLE>
The Accompanying notes are an integral part of these statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
Interactive Buyers Network International Ltd. and subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
INFORMATION FOR THE PERIODS ENDED APRIL 30, 1998 AND 1999 IS UNAUDITED
FOR THE YEAR FOR THE YEAR FOR THE THREE FOR THE THREE
ENDED ENDED MONTHS ENDED MONTHS ENDED
JANUARY 31, JANUARY 31, APRIL 30, APRIL 30,
1998 1999 1998 1999
(UNAUDITED) (UNAUDITED)
-------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . $ 72,015 $ 61,387 $ 24,590 $ 4,060
General and administrative expenses. . 888,528 1,253,559 224,855 337,647
-------------- -------------- -------------- ----------------
Loss from operations . . . . . . . . . (816,513) (1,192,172) (200,265) (333,587)
-------------- -------------- -------------- ----------------
Other income (expenses):
Loss on abandonment of equipment . . (27,856) - - -
Income from litigation settlement. . - 91,110 - -
-------------- -------------- -------------- ----------------
Total other income (expenses) (27,856) 91,110 - -
-------------- -------------- -------------- ----------------
Net loss . . . . . . . . . . . . . . . (844,369) (1,101,062) (200,265) (333,587)
============== ============== ============== ================
Basic weighted average number of
common shares outstanding. . . . . . 9,192,811 10,529,147 10,804,295 11,838,164
============== ============== ============== ================
Net loss per common share
Basic. . . . . . . . . . . . . . . . $ (0.09) $ (0.10) $ (0.02) $ (0.03)
============== ============== ============== ================
</TABLE>
The Accompanying notes are an integral part of these statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Interactive Buyers Network International Ltd. and subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
INFORMATION FOR THE PERIODS ENDED APRIL 30, 1998 AND 1999 IS UNAUDITED
Common Stock Total
------------------------ Additional Stockholders'
No. of Paid-in- Accumulated Equity
Shares Amount Capital (Deficit) (Deficit)
----------- ----------- ------------ --------------- -----------------
<S> <C> <C> <C> <C> <C>
Balances at January 31, 1997 . . . . . . . . . . 6,042,880 $ 60,429 $ 1,198,110 $ (1,529,091) $ (270,552)
Issuance of common stock - private placements
net of $4,000 issuance cost . . . . . . . . . 3,882,693 38,827 787,775 - 826,602
Issuance of common stock upon
conversion of demand notes . . . . . . . . . . 475,000 4,750 90,250 - 95,000
Issuance of common stock for services. . . . . . 403,722 4,037 88,669 - 92,706
Net loss . . . . . . . . . . . . . . . . . . . . - - - (844,369) (844,369)
----------- ----------- ------------ --------------- -----------------
Balances at January 31, 1998 . . . . . . . . . . 10,804,295 108,043 2,164,804 (2,373,460) (100,613)
Common stock surrendered . . . . . . . . . . . . (1,000,000) (10,000) 10,000 - -
Issuance of common stock -
Acquisition of WPG.Net, Inc. . . . . . . . . . 500,000 5,000 450,000 - 455,000
Issuance of common stock upon
conversion of demand notes . . . . . . . . . . 778,656 7,786 311,221 - 319,007
Issuance of common stock for services. . . . . . 318,500 3,185 64,178 - 67,363
Net loss . . . . . . . . . . . . . . . . . . . . - - - (1,101,062) (1,101,062)
----------- ----------- ------------ --------------- -----------------
Balances at January 31, 1999 . . . . . . . . . . 11,401,451 114,014 3,000,203 (3,474,522) (360,305)
Unaudited:
Issuance of common stock - private placements
net of $5,000 issuance costs . . . . . . . . 737,493 7,375 992,567 - 999,942
Issuance of common stock upon
conversion of demand notes . . . . . . . . . 91,932 920 85,200 - 86,120
Issuance of common stock for services. . . . . 44,000 440 41,910 - 42,350
Net loss - - - (333,587) (333,587)
----------- ----------- ------------ --------------- -----------------
Balances at April 30, 1999 (unaudited) . . . . . 12,274,876 $ 122,749 $ 4,119,880 $ (3,808,109) $ 434,520
=========== =========== ============ =============== =================
</TABLE>
The Accompanying notes are an integral part of these statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Interactive Buyers Network International Ltd. and subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
INFORMATION FOR THE PERIODS ENDED APRIL 30, 1998 AND 1999 IS UNAUDITED
FOR THE YEAR FOR THE YEAR FOR THE THREE FOR THE THREE
ENDED ENDED MONTHS ENDED MONTHS ENDED
JANUARY 31, JANUARY 31, APRIL 30, APRIL 30,
1998 1999 1998 1999
(UNAUDITED) (UNAUDITED)
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM (TO) OPERATING ACTIVITIES
Net loss . . . . . . . . . . . . . . . . . . . . . $ (844,369) $ (1,101,062) $ (200,265) $ (333,587)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation & amortization . . . . . . . . . . . 21,753 41,441 5,634 13,194
Loss on abandonment of equipment. . . . . . . . . 27,856 - - -
Issuance of stock and debt for services, expense
reimbursements and accrued interest. . . . . . 92,706 220,735 31,250 43,775
(Increase) decrease in accounts receivable . . . . - (3,590) - 3,590
(Increase) decrease in prepaid expenses. . . . . . (22,317) 27,562 - -
(Increase) decrease in prepaid rent. . . . . . . . - (37,500) 7,875 11,250
(Increase) decrease in other assets. . . . . . . . (49,376) 877 - -
Increase (decrease) in accounts payable . . . . . (119,898) 16,735 2,940 2,906
Increase (decrease) in deferred revenue . . . . . 19,351 (25,469) 2 (1,384)
Increase (decrease) in accrued liabilities. . . . 17,222 49,042 (7,415) 20,195
-------------- -------------- --------------- ---------------
NET CASH USED BY OPERATING ACTIVITIES. . . . . . (857,072) (811,229) (159,979) (240,061)
CASH FLOWS FROM (TO) INVESTING ACTIVITIES
Advances to employees. . . . . . . . . . . . . . . - (9,400) 151 (35,070)
Purchase of equipment. . . . . . . . . . . . . . . (1,355) - - (29,640)
-------------- -------------- --------------- ---------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (1,355) (9,400) 151 (64,710)
-------------- -------------- --------------- ---------------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES
Proceeds from issuance of common stock . . . . . . 826,602 - - 999,942
Proceeds from borrowings . . . . . . . . . . . . . 62,675 825,160 108,500 29,700
-------------- -------------- --------------- ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . 889,277 825,160 108,500 1,029,642
-------------- -------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH. . . . . . . . . . . 30,850 4,531 (51,328) 724,871
CASH, BEGINNING OF PERIOD. . . . . . . . . . . . . . 24,556 55,406 55,406 59,937
-------------- -------------- --------------- ---------------
CASH, END OF PERIOD. . . . . . . . . . . . . . . . . $ 55,406 $ 59,937 $ 4,078 $ 784,808
============== ============== =============== ===============
<FN>
See Note 1 for supplemental disclosure.
</TABLE>
The Accompanying notes are an integral part of these statements.
F-5
<PAGE>
Interactive Buyers Network International Ltd.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION FOR THE PERIODS ENDED APRIL 30, 1998 AND 1999 IS UNAUDITED
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Organization and business
- ---------------------------
Interactive Buyers Network International Ltd. and Subsidiaries ("IBNL" or the
Company) offers two unique Internet applications. Virtual Source Network is an
Internet based electronic procurement system, used by businesses to improve
efficiencies and reduce costs associated with their purchasing activities, as
well as goods and services they purchase. Virtual Source Publisher is a user
friendly, do-it-yourself, web site builder that requires no technical expertise,
no special software, and no consultants.
IBNL was incorporated in the State of Nevada on October 22, 1980 as Cinema-Star
Corporation, and in September 1989, was renamed Dyna-Seal Corporation. Prior to
February 1, 1995, the Company's name was changed several times, and its former
line of business (manufacturing, packaging and distribution of coatings,
sealants and adhesive for use in aircraft and marine industries) was completely
discontinued.
In July 1995 the Company changed its name to Interactive Buyers Network
International, Ltd., and acquired all of the outstanding shares of Buyer/Seller
Interactive Software, Inc. a corporation who's name subsequently changed to
Virtual Source, Inc., ("VSI") (incorporated in the State of Nevada on July 11,
1995). On June 1, 1998, the Company acquired all of the assets of WPG.NET. See
Note 2.
Principles of Consolidation
- -----------------------------
The consolidated financial statements include the accounts of Interactive Buyers
Network International, Ltd. and its wholly owned subsidiaries Virtual Source,
Inc. and WPG.NET, Inc. Significant intercompany accounts have been eliminated.
Revenue Recognition
- --------------------
Under the Company's early version of Virtual Source Network (VSN) which was used
for the first few months of 1999, in return for access to the network, clients
paid a subscription fee of $980. These fees were initially included as deferred
revenues, and amortized over the term of the subscription. Subsequent to the
first few months of 1999, the Company stopped offering the VSN and thus had
revenues from amortization of the previously deferred subscription fees. The new
Internet version of the software was not operational during 1999. When the
Internet software becomes fully operational, clients will be charged an initial
setup fee for VSI, which will be recognized as income at the time of the setup
of the software on the customer's computer or network. In addition to the
initial setup fee, there is transaction fee for every transaction initiated by
the customer. This fee will be recognized as income at the time the transaction
occurs.
Under WPG.NET's Virtual Source Publisher, a monthly fee will be charged to
clients after an initial free introductory period has lapsed. The monthly
charge will be recognized as income in the period in which the fee is charged.
The Company did not recognize any revenue on Virtual Source Publisher in 1999.
Year 2000 Issues
- ------------------
Many computers and other equipment with embedded chips or microprocessors may
not be able to appropriately interpret dates after December 31, 1999, because
such systems use only two digits to indicate a year in the date field rather
than four digits. If not corrected, many computers and computer applications
could fail or create miscalculations, causing disruptions to the Company's
operations. In addition, the failure of customer and supplier computer systems
could result in interruption of sales and deliveries of key supplies or
utilities. Because of the complexity of the issues and the number of parties
involved, the Company cannot reasonable predict with certainty the nature of
likelihood of such impacts.
F-6
<PAGE>
Interactive Buyers Network International Ltd.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION FOR THE PERIODS ENDED APRIL 30, 1998 AND 1999 IS UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)
The Company is actively addressing this situation and anticipates that it will
not experience a material adverse impact to its operations, liquidity or
financial condition related to systems under control. The Company is addressing
the Year 2000 issue in four overlapping phases: (i) identification and
assessment of all critical software systems and equipment requiring modification
or replacement prior to 2000; (ii) assessment of critical business relationships
requiring modification prior to 2000; (iii) corrective action and testing of
critical systems; (iv) development of contingency and business continuation
plans to mitigate any disruption to the Company's operations arising from the
Year 2000 issue.
The Company is in the process of implementing a plan to obtain information from
its external service providers, significant suppliers and customers, and
financial institutions to confirm their plans and readiness to become Year 2000
compliant, in order to better understand and evaluate how their Year 2000 issues
may affect the Company's operations. The Company currently is not in a position
to assess this aspect of the Year 2000 issues; however, the Company plans to
take the necessary steps to provide itself with reasonable assurance that its
service providers, customers and financial institutions are Year 2000 compliant.
The Company is developing contingency plans to identify and mitigate potential
problems and disruptions to the Company's operations arising from the Year 2000
issue. The total cost to achieve Year 2000 compliance is not expected to be
material. Amounts spent to date have not been material.
While the Company believes that its own internal assessment and planning efforts
with respect to its external service providers, suppliers, customers and
financial institutions are and will be adequate to address its Year 2000
concerns, there can be no assurance that these efforts will be successful or
will not have a material adverse effect on the Company's operations.
Recently Issued Accounting Pronouncements
- --------------------------------------------
In 1997, the Financial Accounting Standards Board (FASB) issued Statements No.
130, "Reporting Comprehensive Income", and No. 131, "Disclosures about Segments
of an Enterprise and Related Information". The Company's adoption of these
statements had no material impact on the accompanying financial statements.
Property and Equipment
- ------------------------
Property and equipment are stated at cost. The assets are being depreciated
using the straight-line method over their estimated useful lives of five years.
Carrying values are reviewed periodically for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.
F-7
<PAGE>
Interactive Buyers Network International Ltd.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION FOR THE PERIODS ENDED APRIL 30, 1998 AND 1999 IS UNAUDITED
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
(Continued)
It is the policy of the Company to capitalize significant improvements and to
expense repairs and maintenance.
Depreciation expense for the years ended January 31, 1998 and 1999 was $20,877
and $21,661, respectively. Depreciation expense for the three months ended April
30, 1998 and 1999 was $5,415 and $5,415, respectively.
Impairment of Long Lived Assets
- -----------------------------------
The Company evaluates its long lived assets by measuring the carrying amount of
the asset against the estimated undiscounted future cash flows associated with
them. At the time such evaluations indicate that the future undiscounted cash
flows of certain long lived assets are not sufficient to recover the carrying
value of such assets, the assets are adjusted to their fair values.
No adjustment to the carrying value of the assets has been made.
Intangible Assets
- ------------------
Intangible assets, principally goodwill, are amortized on the straight-line
method over a period of 15 years. The carrying amounts of intangible assets are
assessed for impairment when operating profit from the related business
indicates the carrying amounts of the assets may not be recoverable. Carrying
values are reviewed periodically for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Amortization for the years ended January 31, 1998 and 1999 was
$876 and $19,780, respectively. Amortization for the quarter ended April 30,
1998 and 1999 was $219 and $7,779, respectively.
Stock Based Compensation
- --------------------------
The Company accounts for stock-based compensation as prescribed by Statement of
Financial Accounting Standard (SFAS) Number 123 Accounting for Stock-Based
Compensation, and has adopted its disclosure provisions. The Company has chosen
under the provisions of SFAS 123 to continue using the intrinsic-value method of
accounting for employee stock-based compensation in accordance with Accounting
Principles Board Opinion No. 25 Accounting for Stocks Issued to Employees (APB
25).
Loss Per Share
- ----------------
Loss per share of common stock is computed using the weighted average number of
common shares outstanding during the period shown. Common stock equivalents are
not included in the determination of the weighted average number of shares
outstanding, as they would be antidilutive.
Statement of Cash Flows
- --------------------------
For the purpose of the statement of cash flows, cash includes amounts "on-hand"
and amounts deposited with financial institutions.
F-8
<PAGE>
Interactive Buyers Network International Ltd.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION FOR THE PERIODS ENDED APRIL 30, 1998 AND 1999 IS UNAUDITED
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
(continued)
Supplemental disclosure of cash flow information is as follows:
Cash paid during the periods for:
<TABLE>
<CAPTION>
For the For the For the three For the three
year ended year ended Months months
January 31, January 31, ended April ended April
1998 1999 30, 1998 30, 1999
------------ ------------ -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Interest $ - $ - $ - $ -
Income taxes $ 1,600 $ 1,600 $ - $ 1,600
</TABLE>
Supplemental schedule of non-cash investing and financing transactions:
Issuance of common stock in connection with the following transactions:
<TABLE>
<CAPTION>
For the For the For the three For the three
year ended year ended months months
January 31, January 31, ended April ended April
1998 1999 30, 1998 30, 1999
------------ ------------ -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Conversion of notes payable $ 95,000 $ 319,007 $ - $ 86,120
Purchase of WPG.NET, Inc. $ - $ 455,000 $ - $ -
</TABLE>
Use of Estimates
- ------------------
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities at the
date of the financial statements, and revenues and expenses during the reporting
period. Actual result could differ from estimates and assumptions made.
Unaudited Interim Financial Statements
- -----------------------------------------
In the opinion of management, the unaudited interim financial statements for the
three months periods ending April 30, 1998 and 1999 are presented on a basis
consistent with the audited financial statements and reflect all adjustments,
consisting only of normal recurring accruals, necessary for fair presentation of
the results of such periods.
2. ACQUISITION OF WPG.NET INC.
On June 1, 1998, the Company acquired all of the assets of WPG.NET, Inc for an
aggregate purchase price of $455,000. IBNL issued 500,000 shares of common
stock with a fair value of $375,000 (75 cents per share), plus stock options on
500,000 shares with a fair value of $80,000. The options vest ratably, on a
monthly basis, over the 3 years subsequent to the purchase. If WPG.NET, Inc.
division revenues reach $500,000 before the 3 years vesting period has expired,
the additional 500,000 options vest immediately. The former shareholders of
WPG.NET, Inc. (WPG.NET, Inc. Shareholders) are entitled to a commission of 50%
of WPG.NET, Inc. revenue generated by the WPG.NET, Inc. division. If the
revenue is generated by the VirtualSource division sales force, WPG.NET, Inc.
Shareholders are entitled to a commission of 25% of the revenue. In the event
that IBNL is sold, the WPG.NET, Inc. Shareholders are entitled to a one-time
payment of $3,000,000, the options vest immediately, and all commission
obligations cease to accrue at that time. IBNL guaranteed a minimum stock price
of $7.00 per share for stock held by the WPG.NET, Inc. shareholders upon the
sale of the Company.
F-9
<PAGE>
Interactive Buyers Network International Ltd.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION FOR THE PERIODS ENDED APRIL 30, 1998 AND 1999 IS UNAUDITED
2. ACQUISITION OF WPG.NET INC. (Continued)
The acquisition was accounted for as a purchase and was included with the
combined operations from June 1, 1998 through January 31, 1999. As a result of
the acquisition, goodwill was recorded in the amount of $453,555. In
conjunction with the acquisition of WPG.NET, three of WPG.NET's executives
signed one-year employment agreements with the Company. The contracts
guaranteed the WPG.NET executives salaries ranging from $49,500 to $77,250 per
year.
3. CONVERTIBLE NOTES PAYABLE - RELATED PARTIES
The following table summarizes information about Convertible Notes Payable
outstanding at January 31, and April 30, 1999:
<TABLE>
<CAPTION>
Amount
Range of of
Approximate conversion Notes
Maturity dates Interest rate shares if converted rates Convertible
-------------- -------------- ------------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
On demand--
January 31, 1999 Dec. 31, 1999 10% 2,042,946 $0.20 - $1.25 $ 857,200
On demand-
April 30, 1999 Dec. 31, 1999 10% 1,789,443 $0.20 - $1.25 $ 802,206
</TABLE>
At January 31, and April 30, 1999, on an as converted basis, the related party
notes were convertible to approximately 2,042,946 and 1,789,443 shares of IBNL
common stock, respectively.
At January 31, and April 30, 1999, accrued interest on the convertible notes
payable in the amount of approximately $48,000 and $67,000, respectively, is
included in accrued liabilities on the consolidated balance sheet.
4. STOCK OPTIONS
Under various plans, the Company may grant stock options to key executive,
management and other employees at exercise prices equal to or exceeding the
market price at the date of grant. In general, options become exercisable from
2 to 10 year periods from the grant date. Stock reserved for current or future
option exercise at January 31, and April 30, 1999, totaled 1.5 million,
inclusive of the 1,136,100 shares related to options previously granted.
On June 10, 1998, the Board of Directors granted options to shareholders' of
WPG.NET, Inc., to purchase 500,000 shares of the Company's restricted common
stock at an exercise price of $0.59 per share. The options vest monthly over a
three-year period and have term ending June 2008.
F-10
<PAGE>
Interactive Buyers Network International Ltd.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION FOR THE PERIODS ENDED APRIL 30, 1998 AND 1999 IS UNAUDITED
4. STOCK OPTIONS (Continued)
The following table summarizes information about stock option transactions for
the year ended January 31, 1999 and quarter ended April 30, 1999:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
--------- ---------
<S> <C> <C>
Outstanding at beginning
of year 506,100 $ 0.18
Awards:
Granted for the year ended
January 31, 1999 630,000 0.59
Exercised - -
Forfeited - -
Outstanding at January 31, and
--------- ---------
April 30, 1999 1,136,100 $ 0.42
========= =========
Exercisable at January 31, 1999 268,343 $ 0.29
========= =========
Exercisable at April 30, 1999 424,193 $ 0.38
========= =========
</TABLE>
The following table summarizes information about stock options outstanding at
January 31, and at April 30, 1999:
<TABLE>
<CAPTION>
Weighted
Average Exercisable
Remaining Weighted Weighted
Number of Years of Average Number of Average
Range of options Contractual Exercise Options Exercise
exercise prices outstanding life Price Exercisable Price
---------------- ----------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
January 31, 1999 $ 0.18 - 0.63 1,136,100 2.42 $ 0.42 268,343 $ 0.29
April 30, 1999 (UNAUDITED) $ 0.18 - 0.63 1,136,100 2.21 0.42 424,193 0.38
</TABLE>
During the fiscal 1997, the Company adopted SFAS 123 and under the provisions of
the new standard has elected to continue using the intrinsic-value method of
accounting for stock-based awards granted to employees in accordance with APB
25. Accordingly, the Company has not recognized compensation expense for its
stock-based awards to employees.
F-11
<PAGE>
Interactive Buyers Network International Ltd.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION FOR THE PERIODS ENDED APRIL 30, 1998 AND 1999 IS UNAUDITED
4. STOCK OPTIONS (Continued)
The following table reflects pro forma net income and earnings per share had the
Company elected to adopt the fair value approach of SFAS 123 for the years ended
January 31, 1998 and 1999 and the three months ended April 30, 1998 and 1999:
<TABLE>
<CAPTION>
January 31, January 31, April 30, April 30,
1998 1999 1998 1999
- --------------- ------------- ------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net loss:
As reported $ (844,369) $ (1,101,062) $ (200,265) $ (333,587)
Pro forma (847,624) (1,214,914) (207,205) (378,597)
Loss per share:
As reported $ (0.09) $ (0.10) $ (0.02) $ (0.03)
Pro forma (0.09) (0.12) (0.02) (0.03)
</TABLE>
The estimated fair value of each option granted is calculated using the
Black-Scholes option-pricing model with a weighted average risk free rate of
6.4%, volatility of 177% and expected life of 3 years.
5. INCOME TAXES
Income taxes are provided pursuant to SFAS No. 109 Accounting for Income Taxes.
The statement requires the use of an asset and liability approach for financial
reporting for income taxes. If it is more likely than not that some portion or
all of a deferred tax asset will not be realized, a valuation allowance is
recognized. Accordingly, as the realization and use of the net operating loss
carryforward is not probable at January 31, 1999 and April 30, 1999 the tax
benefit of the loss carryforward has been offset by a valuation allowance of the
same amount.
The composition of deferred tax assets is as follows:
<TABLE>
<CAPTION>
January 31, April 30,
1999 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
Total deferred tax assets $ 779,000 866,000
Total valuation allowance (779,000) (866,000)
------------- ------------
Total deferred tax assets $ -- $ --
============= ============
</TABLE>
The tax effects of temporary differences and carryforwards that give rise to
deferred assets are as follows:
<TABLE>
<CAPTION>
January 31, April 30,
1999 1999
------------- ------------
Deferred tax assets: (UNAUDITED)
<S> <C> <C>
Net operating loss carryforwards $ 779,000 $ 866,000
------------- ------------
Gross deferred tax assets 779,000 866,000
Valuation allowance (779,000) (866,000)
------------- ------------
Net deferred tax assets $ -- $ --
============= ============
</TABLE>
No provision for income taxes has been recorded for the periods ended January
31, 1999 and 1997 and for the periods ended April 30, 1999 and 1998 as the
Company has incurred losses during these periods.
The Company had approximately $3,400,000 of federal and state loss carryforwards
available to reduce future federal and state tax liability through the year 2018
for the federal loss carryforward and 2003 for the state loss carryforward.
F-12
<PAGE>
Interactive Buyers Network International Ltd.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
INFORMATION FOR THE PERIODS ENDED APRIL 30, 1998 AND 1999 IS UNAUDITED
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has used market information for similar instruments and applied
judgment to estimate fair values of financial instruments. At January 31, 1999,
and April 30, 1999, the fair values of cash, accounts receivable, employee
receivables, notes payable and accounts payable approximated carrying values
because of the short-term nature of these instruments.
7. COMMITMENTS AND CONTINGENCIES
Leases
- ------
The Company leases its main office facilities under a noncancellable operating
lease agreement expiring December 31, 1999 with the option to extend the lease
for one additional year. The future expense that will be incurred under the
lease for the year ended January 31, 2000 is $37,500, which is reflected as
prepaid rent at January 31, 1999. See Litigation Settlement discussion below.
Rent expense for the years ended January 31, 1998 and 1999 was $94,067 and
$35,063 respectively. Rent expense for the quarters ended April 30, 1998 and
1999 was $7,875 and $11,250, respectively.
Litigation Settlement
- ----------------------
On August 28, 1998, the Company filed a complaint against the owner of the
building complex in which its main office is maintained in Ventura, California.
The complaint arose out of a dispute between the parties regarding the exercise
by the Company of an option to extend the term of the current lease, and
concerning the actions of the parties in connection with the negotiation of a
potential new lease. The Company, in its complaint, sought specific
performance, declaratory relief, injunctive relief, and damages.
In a mutual compromise settlement reached in October 1998, the Company agreed to
accept the following in settlement of the complaint: an amount of $30,000 in
cash; payment of attorney fees incurred in the amount of $7,500; payment of
out-of-pocket expenses it incurred in a move to a new office space, up to a
maximum of $10,000; and new office space in an adjacent building with
"free-rent" for a one year period commencing December 1, 1998, with a monthly
lease fair value of $3,750. The total settlement amount of $91,110 is reflected
as income from litigation settlement in the consolidated statement of operations
for the year ended January 31, 1999. The remaining months of abated rent are
reflected as prepaid rent on the consolidated statement of financial position in
the amount of $37,500 and $26,250 at January 31, 1999 and April 30, 1999,
respectively.
8. GOING CONCERN
The Company, has not had significant revenues and has experienced operating
losses since inception primarily caused by its continued development and
marketing costs. As shown in the accompanying financial statements, the Company
incurred a net loss of $1,101,062 during the year ended January 31, 1999, and as
of that date, the Company's current liabilities exceeded its current assets by
$920,680. At January 31, 1999, the Company's shareholders' deficit was
$360,305. Those factors create an uncertainty about the Company's ability to
continue as a going concern. The management of the Company intends to pursue
various means of obtaining additional capital. The financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern. Continuation of the Company as a going concern is
dependent on the Company continuing to raise capital, developing significant
revenues and ultimately attaining profitable operations.
9. SUBSEQUENT EVENTS
On or about May 15, 1999, the Board of Directors of the Company decided to
accelerate the vesting provisions on all outstanding stock options so that all
shares represented by said grants become fully vested immediately.
In June 1999, the Board of Directors approved the transfer of all assets,
liabilities and operations of WPG.NET into the VSI subsidiary, to be followed by
the dissolution of the WPG.NET corporate entity. Following that action, IBNL
will function as a holding company with VSI as its only operating subsidiary.
F-13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
INTERACTIVE BUYERS NETWORK INTERNATIONAL, LTD.
By: /s/ Robert C. McShirley
-----------------------------------------------
Robert C. McShirley
President, Chief Executive Officer and Director
Date: ________________, 1999
<PAGE>
PART III
Item 1. INDEX TO EXHIBITS
The Exhibits listed below are filed as part of this Registration
Statement.
Exhibit
No. Document
- ------- ---------------------------------------------
2.1 Articles of Incorporation
2.2 Bylaws
3.1 Specimen Stock Certificate
10.1 Stock Purchase and Exchange Agreement
10.2 Option to Purchase Common Stock
17 Computation of Earnings/Loss Per Common Share
23 Consent of Independent Certified Public Accountants
27 Financial Data Schedule
<PAGE>
ARTICLES OF INCORPORATION
OF
CINEMASTAR CORPORATION
* * * * *
FIRST. That the name of the corporation is CINEMASTAR CORPORATION
SECOND. Its principal office in the State of Nevada is located at One East
First Street, Reno, Washoe County, Nevada 89501. The name and address of its
resident agent is The Corporation Trust Company of Nevada, One East First
Street, Reno, Nevada 89501.
THIRD. The nature of the business, or objects or purposes proposed to be
transacted, promoted or carried on are:
To engage in any lawful act or activity.
FOURTH. The amount of the total authorized capital stock of the
corporation is Twenty Five Thousand Dollars ($25,000.00) consisting of two
million five hundred thousand (2,500,000) shares of stock of the par value of
($.01) each.
FIFTH. The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the by-laws of this
corporation, provided that the number of directors shall not be reduced to less
than three (3), except that in cases where all the shares of the corporation are
owned beneficially and of record by either one or two stockholders, the number
of directors may be less than three (3) but not less than the number of
stockholders.
The name and post-office address of the first board of directors, which
shall be three (3) in number, are as follows:
<PAGE>
NAME POST-OFFICE ADDRESS
---- --------------------------
Joseph Mazin 735 East Gayo Avenue
Los Angeles, CA 90001
Leonard Rothstein 5720 Wilshire Blvd.
Beverly Hills, CA 90211
Bruce Stuart 6380 Wilshire Blvd.
Los Angeles, CA 90048
SIXTH. The capital stock, after the amount of the subscription price,
or par value, has been paid in shall not be subject to assessment to pay the
debts of the corporation.
SEVENTH. The name and post-office address of each of the incorporators
Signing the articles of incorporation are as follows:
NAME POST-OFFICE ADDRESS
---- --------------------------
M. A. Shelton 700 S. Flower St., Ste. 1010
Los Angeles, CA 90017
S. C. Becker 700 S. Flower St., Ste. 1010
Los Angeles, CA 90017
Y. Mansfield 700 S. Flower St., Ste. 1010
Los Angeles, CA 90017
EIGHT. The corporation is to have perpetual existence.
NINTH. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:
Subject to the by-laws, if any, adopted by the stockholders, to make, alter
or amend the by-laws of the corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in, to authorize and cause to be executed mortgages and liens
upon the real and personal property of this corporation.
<PAGE>
By resolution passed by a majority of the whole board, to designate
one (1) or more committees, each committee to consist of one (1) or more of the
directors of the corporation, which, to the extent provided in the resolution or
in the by-laws of the corporation, shall have and may exercise the powers of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be stated in the by-laws of the corporation or as may be
determined from time to time by resolution adopted by the board of directors.
When and as authorized by the affirmative vote of stockholders holding
stock entitling them to exercise at least a majority of the voting power given
at a stockholders= meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock issued
and outstanding, the board of directors shall have power and authority at any
meeting to sell, lease or exchange all of the property and assets of the
corporation, including its good will and its corporate franchises, upon such
terms and conditions as its board of directors deem expedient and for the best
interests of the corporation.
TENTH. Meetings of stockholders may be held outside the State of Nevada,
if the by-laws so provide. The books of the corporation may be kept (subject to
any provision contained in the statutes) outside the State of Nevada at such
place or places as may be designated from time to time by the board of directors
or in the by-laws of the corporation.
ELEVENTH. This corporation reserves the right to amend, alter, change or
repeal any provision contained in the articles of incorporation, in the manner
now or hereafter prescribed by statute, or by the articles of incorporation, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
<PAGE>
TWELFTH. At all elections of directors of the corporation each holder of
stock possessing voting power is entitled to as many votes as equal the number
of his shares of stock multiplied by the number of directors to be elected, and
he may cast all such votes for a single director or may distribute them among
the number to be voted for or any two or more of them, as he may see fit.
THIRTEENTH. No stockholder of this corporation shall by reason of his
holding shares of any class have any pre-emptive or preferential right to
purchase or subscribe to any shares of any class of this corporation, now or
hereafter to be authorized, or any notes, debentures, bonds, or other securities
convertible into or carrying options or warrants to purchase shares of any
class, now or hereafter to be authorized, whether or not the issuance of any
such shares, or such notes, debentures, bonds or other securities, would
adversely affect the dividend or voting rights of such stockholder, other than
such rights, if any, as the board of directors, in its discretion from time to
time may grant, and at such price as the board of directors in its discretion
may fix; and the board of directors may issue shares of any class of this
corporation, or any notes, debentures, bonds, or other securities convertible
into or carrying options or warrants to purchase shares of any class, without
offering any such shares of any class, either in whole or in part, to the
existing stockholders of any class.
<PAGE>
FOURTEENTH. The corporation shall indemnify any and all of its directors
or officers or former director or officers or any person who may have served at
its request as a director or officer of another corporation in which it owns
shares of capital stock or of which it is a creditor against expenses actually
and necessarily incurred by them in connection with the defense of any action,
suit or proceeding in which they, or any of them, are made parties, or a party,
by reason of being or having been directors or officers or a director or officer
of the corporation, or of such other corporation, except in relation to matters
as to which any such director or officer or former director or officer or person
shall be adjudged in such action, suit or proceeding to be liable for negligence
or misconduct in the performance of duty. Such indemnification shall not be
deemed exclusive of any other rights to which those indemnified may be entitled,
under any by-law, agreement, vote of stockholders, or otherwise.
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
CINEMASTAR CORPORATION
BY
INCORPORATORS BEFORE PAYMENT
OF ANY PART OF THE CAPITAL
We, the undersigned, being two-thirds of the original incorporators of
CINEMASTAR CORPORATION, a corporation organized under and existing by virtue of
the Laws of the State of Nevada, having filed its Articles of Incorporation with
the Secretary of State of Nevada on the 22nd day of October, 1980, and a copy
thereof, certified by the Secretary of State of Nevada, having been filed in the
office of the Clerk of the County of Washoe, Nevada, on the 24th day of October,
1980, desire to amend said Articles of Incorporation in the manner hereinafter
set forth, and do hereby certify that, to the date of this certificate, no part
of the capital of said corporation has been paid, and that said Articles of
Incorporation are amended in the manner following:
Article First of said Articles of Incorporation, reading as follows:
"FIRST: The name of this corporation is CINEMASTAR CORPORATION"
is hereby amended to read as follows:
"FIRST: The name of this corporation is CINEMA-STAR CORPORATION".
<PAGE>
IN WITNESS WHEREOF we have hereunto set our hands and seals, and executed
these presents, this 15th day of November, 1980.
/s/ M. A. Shelton, Incorporator
------------------------------ (SEAL)
M. A. Shelton, Incorporator
/s/ S. C. Becker, Incorporator
------------------------------ (SEAL)
S. C. Becker, Incorporator
STATE OF CALIFORNIA )
) ss:
COUNTY OF LOS ANGELES )
On November 15, 1980 personally appeared before me, a Notary Public, M. A.
Shelton and S. C. Becker, who acknowledged that they executed the above
instrument.
____________________________________
Notary Public
Ramona E. Moza
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
CINEMASTAR CORPORATION
We, the undersigned, being the President and Secretary of CINEMASTAR
CORPORATION, a corporation organized under and existing by virtue of the laws of
the State of Nevada, having filed its Articles of Incorporation with the
Secretary of State of Nevada on the 22nd day of October, 1980, and a copy
thereof, certified by the Secretary of State of Nevada, having been filed in the
Office of the Clerk of the County of Washoe, Nevada, on the 24th day of October,
1980, desire to amend said Articles of Incorporation in the manner hereinafter
set forth, and that said Articles of Incorporation are amended in the manner
following:
Article First of said Articles of Incorporation, reading as follows:
"FIRST: The name of this corporation is CINEMASTAR CORPORATION"
is hereby amended to read as follows:
"FIRST: The name of this corporation is IMPACT RESOURCES, INC."
Said resolution has been approved by a majority of the outstanding shares.
<PAGE>
IN WITNESS WHEREOF we have hereunto set our hands and seals, and
executed these presents, this 20th day of December, 1983.
/s/ JOE MAZIN
------------------------------ (SEAL)
JOE MAZIN, President and Chairman
/s/ BRUCE D. STUART
------------------------------ (SEAL)
BRUCE D. STUART, Secretary,
Treasurer, and Director
STATE OF CALIFORNIA )
) ss:
COUNTY OF LOS ANGELES )
On December 20, 1983 personally appeared before me, a Notary Public, JOE
MAZIN and BRUCE D. STUART, who acknowledged that they executed the above
instrument.
/S/ Diane Pedrin
____________________________________
NOTARY PUBLIC
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
IMPACT RESOURCES, INC.
IMPACT RESOURCES, INC., a Nevada Corporation, under its corporate seal, and
the hands of its duly elected and acting President and Secretary does hereby
certify:
1. That at a special meeting of the Board of Directors of this
corporation regularly convened in Los Angeles, California, on the 11th day of
September, 1989, at which meeting there was at all times present and acting a
quorum, certain resolutions were regularly adopted setting for the amendment
herein, and declaring its advisability and signing a special resolution of the
stockholders entitled to vote for the consideration thereof, to wit:
ARESOLVED, that it is deemed advisable, in the judgment of this Board of
Directors, that Articles I, II and IV of the Articles of Incorporation be
deleted and amended to read in their entirety as follows:
I: The name of this corporation is "DYNA-SEAL CORPORATION."
II: The Corporation shall effectuate a twenty-eight to one (28-1) reverse split.
IV: The amount of the total authorized capital stock of the corporation is FIVE
MILLION (5,000,000), all of said shares shall be of one class, without series or
other distinction and shall be designated as "common stock," the par value of
$.01 per share shall remain the same.
"RESOLVED, that stockholders entitled to exercise a majority of the voting power
shall consent in writing to the amendment, then the corporation shall make,
under its corporate seal, and the hands of its President or Vice President, and
Secretary, or Assistant Secretary, and shall acknowledge and file, the
certificate required by NRS 78.390, and do all things necessary to effect the
amendment."
<PAGE>
IN WITNESS WHEREOF we have hereunto set our hands and seals, and executed
these presents, this 31st day of March, 1981.
/s/ M. A. Shelton, Incorporator
------------------------------ (SEAL)
M. A. Shelton, Incorporator
/s/ S. C. Becker, Incorporator
------------------------------ (SEAL)
S. C. Becker, Incorporator
STATE OF CALIFORNIA )
) ss:
COUNTY OF LOS ANGELES )
On March 31, 1981, personally appeared before me, a Notary Public, M. A.
Shelton and S. C. Becker, who acknowledged that they executed the above
instrument.
/s/ Ramona E. Moza
____________________________________
Notary Public
Ramona E. Moza
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
CINEMA-STAR CORPORATION
BY
INCORPORATORS BEFORE PAYMENT
OF ANY PART OF THE CAPITAL
We, the undersigned, being two-thirds of the original incorporation of
CINEMA-STAR CORPORATION, a corporation organized under and existing by virtue of
the Laws of the State of Nevada, having filed its Articles of Incorporation with
the Secretary of State of Nevada on the 22nd day of October, 1980, and a copy
thereof, certified by the Secretary of State of Nevada, having been filed in the
office of the Clerk of the County of Washoe, Nevada, on the 24th day of October,
1980, desire to amend said Articles of Incorporation in the manner hereinafter
set forth, and do hereby certify that, to the date of this certificate, no part
of the capital of said corporation has been paid, and that said Articles of
Incorporation are amended in the manner following:
Article FOURTH of said Articles of Incorporation reading as follows:
FOURTH. The amount of the total authorized capital stock of the
corporation is Twenty Five Thousand Dollars ($25,000.00) consisting of two
million five hundred thousand (2,500,000) shares of stock of the par value of
($.01) each.
is hereby amended to read as follows:
FOURTH. The amount of the total authorized capital stock of the
corporation is Twenty Five Thousand Dollars ($25,000.00) consisting of twenty
five million (25,000,000) shares of stock of the par value of ($.001) each.
<PAGE>
2. That there was issued and outstanding the following number of
shares of the authorized capital stock of the corporation entitled to vote at
the meeting:
2,500,000 shares of issued and outstanding stock.
3. That the resolution of the Board of Directors above referred to
was duly considered at the meeting, and upon motion regularly made and seconded,
the proposed amendment was approved by the following resolution:
"RESOLVED, that the Amendment of Articles I, II and IV of the Articles of
Incorporation proposed to the stockholders by Resolution of the Board of
Directors regularly adopted by them on the 11th day of September, 1989, be and
the same hereby is adopted and approved."
This resolution was adopted by the following vote of the holders of the
stock of all classes having voting power, present in person or by proxy at the
meeting:
2,500,000 shares were voted for the adoption of the resolution, and 0 shares
were voted against the adoption of the resolution, there being only one class of
stock.
The shares voting for the adoption of the resolution constituted at least a
majority of the joint power.
4. That pursuant to the resolution, and as required by NRS 78.390,
notice of the meeting thus called was given to, or has been duly waived in
writing by, all stockholders of records of the corporation having voting power;
and there having been secured the written consent to the proposed amendment of a
majority of such voting power.
5. That this form of written consent of the stockholders to the
amendment is filed herewith and made a part hereof.
6. That there were issued and outstanding the following number of
shares of authorized capital stock of the corporation entitled to consent to the
proposed amendment:
2,500,000 shares of common stock.
<PAGE>
7. That the following number of shares, which number represented a
majority of the voting power entitled to vote, consented to and authorized and
adopted the amendment:
2,500,000 shares of common stock.
DATED: September 11, 1989
IMPACT RESOURCES, INC.,
A Nevada Corporation
By /s/ JOSEPH MAZIN
--------------------------------
JOSEPH MAZIN, President
By /s/ BRUCE D. STUART
--------------------------------
BRUCE D. STUART,
Vice-President/Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
DYNA-SEAL CORPORATION
DYNA-SEAL CORPORATION, A Nevada Corporation, under its corporate seal,
and the hands of its duly elected and acting President and Secretary does hereby
certify:
1. That at a special meeting of the Board of Directors of this
corporation regularly convened in Sun Valley, California, on the 31st day of
January, 1995, at which meeting there was at all times present and acting a
quorum, certain resolutions were regularly adopted setting forth the amendment
herein, and declaring its advisability and signing a special resolution of the
stockholders entitled to vote for the consideration thereof, to wit:
"RESOLVED, that it is deemed advisable, in the judgment of this Board of
Directors, that Articles I, IV and V of the Articles of Incorporation be deleted
and amended to read in their entirety as follows:
I: The name of this corporation is "COMPUTER X-RAY SYSTEMS, INC."
IV: That the total amount of authorized capital stock of the
Corporation shall be increased from the present Five Million Shares (5,000,000)
to Fifty Million (50,000,000) Shares.
V: That a Class "A" Preferred Stock shall be authorized in the amount
of 5,000,000 (Five Million) having a par value of $.01/share, with the terms,
conditions, description and issuance to be determined by the Board of Directors.
"RESOLVED, that stockholders entitled to exercise a majority of the voting power
shall consent in writing to the amendment, then the corporation shall make,
under its corporate seal, and the hands of its President or Vice President, and
Secretary, or Assistant Secretary, and shall acknowledge and file, the
certificate required by NRS 78.390, and do all things necessary to effect the
amendment."
<PAGE>
2. That there was issued and outstanding the following number of
shares of the authorized capital stock of the corporation entitled to vote at
the meeting:
892,626 shares of issued and outstanding stock.
3. That the resolution of the Board of Directors above referenced
to was duly considered at the meeting, and upon motion regularly made and
seconded, the proposed amendment was approved by the following resolution:
"RESOLVED, that the amendment of Articles I, IV and V of the Articles of
Incorporation proposed to the stockholders by Resolution of the Board of
Directors regularly adopted by them on the 31st day of January, 1995, be and the
same hereby is adopted and approved."
The resolution was adopted by the following vote of the holders of the
stock of all classes having voting power, present in person or by proxy at the
meeting:
892,626 shares were voted for the adoption of the resolution and 0 shares were
voted against the adoption of the resolution, there being only one class of
stock.
The shares voting for the adoption of the resolution constituted at least a
majority of the joint power.
4. That pursuant to the resolution, and as required by NRS 78.390,
notice of the meeting thus called was given to, or has been duly waived in
writing by all stockholders of records of the corporation having voting power;
and there having been secured the written consent to the proposed amendment of a
majority of such voting power.
5. That this form of written consent of the stockholders to the
amendment is filed herewith and made a part hereof.
6. That there were issued and outstanding the following number of
shares of authorized capital stock of the corporation entitled to consent to the
proposed amendment:
892,626 shares of common stock.
7. That the following number of shares, which number represented a
majority of the voting power entitled to vote, consented to and authorized and
adopted the amendment:
892,626 shares of common stock.
DATED: January 31, 1995
DYNA-SEAL CORPORATION,
A Nevada Corporation
By /s/ JOSEPH MAZIN
----------------------------------
JOSEPH MAZIN, President
By /s/ BRUCE D. STUART
----------------------------------
BRUCE D. STUART, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
COMPUTER X-RAY SYSTEMS, INC.
We the undersigned President and Assistant Secretary of COMPUTER X-RAY
SYSTEMS, INC., a Nevada corporation, do hereby certify:
1. That the Board of Directors of this corporation at a meeting duly
convened on the 26th day of June, 1995, adopted a resolution to amend the
Articles of Incorporation as follows:
Article I is hereby amended to read as follows:
The name of this corporation is INTERACTIVE NETWORK INTERNATIONAL LTD.
2. The number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 892,828; that the said
change and amendment has been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
DATED: July 18, 1995
COMPUTER X-RAY, INC.
By /s/ Phillip Oakes
----------------------------------
Phillip Oakes, President
By /s/ Edward Mimides
----------------------------------
Edward Mimides,
Assistant Secretary
<PAGE>
CINEMASTAR CORPORATION
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of Reno,
County of Washoe, State of Nevada.
Section 2. The corporation may also have offices at such other places
both within and without the State of Nevada as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All annual meetings and special meetings of the
stockholders may be held at such time and place within or without the State of
Nevada as shall be stated in the notice of the meeting, or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the
year 1981, shall be held on the first day of October, if not a legal holiday,
and if a legal holiday, then on the next secular day following, at 3:00 P. M.,
at which they shall elect by a plurality vote a board of directors, and transact
such other business as may properly be brought before the meeting.
<PAGE>
Section 3. Special meetings of the stockholders, for any purpose
or purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 4. Notices of meetings shall be in writing and signed by the
president or a vice president, or the secretary, or an assistant secretary, or
by such other person or persons as the directors shall designate. Such notice
shall state the purpose or purposes for which the meeting is called and the time
when, and the place, which may be within or without this state, where it is to
be held. A copy of such notice shall be either delivered personally to or shall
be mailed, postage prepaid, to each stockholder of record entitled to vote at
such meeting not less than ten nor more than sixty days before such meeting. If
mailed, it shall be directed to a stockholder at his address as it appears upon
the records of the corporation and upon such mailing of any such notice, the
service thereof shall be complete, and the time of the notice shall begin to run
from the date upon which such notice is deposited in the mail for transmission
to such stockholder. Personal delivery of any such notice to any officer of a
corporation or association, or to any member of a partnership shall constitute
delivery of such notice to such corporation, association or partnership. In the
event of the transfer of stock after delivery or mailing of the notice of and
prior to the holding of the meeting it shall not be necessary to deliver or mail
notice of the meeting to the transferee.
<PAGE>
Section 5. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 6. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
articles of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 7. When a quorum is present or represented at any meeting,
the vote of the holders of a majority of the stock having voting power present
in person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which be express provision of the
statutes or of the articles of incorporation a different vote is required in
which case such express provision shall govern and control the decision of such
question.
<PAGE>
Section 8. Except as hereinafter provided, every stockholder of record
of the corporation shall be entitled at each meeting of stockholders to one vote
for each share of stock standing in his name on the books of the corporation.
At all elections of directors each holder of stock possessing voting power shall
be entitled to as many votes as shall equal the number of his shares of stock
multiplied by the number of directors to be elected, and he may cast all of such
votes for a single director or may distribute them among the number to be voted
for or any two or more of them, as he may see fit.
Section 9. At any meeting of the stockholders, any stockholder may
be represented and vote by a proxy or proxies appointed by an instrument in
writing. In the event that any such instrument in writing shall designate two
or more persons to act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such written instrument upon all of the
persons so designated unless the instrument shall otherwise provide. No such
proxy shall be valid after the expiration of six months from the date of its
execution, unless coupled with an interest, or unless the person executing it
specifies therein the length of time for which it is to continue in force, which
in no case shall exceed seven years from the date of its execution. Subject to
the above, any proxy duly executed is not revoked and continues in full force
and effect until an instrument revoking it or a duly executed proxy bearing a
later date is filed with the secretary of the corporation.
Section 10. Any action which may be taken by the vote of the
stockholders at a meeting, may be taken without a meeting if authorized by the
written consent of stockholders holding at least a majority of the voting power,
unless the provisions of the statutes or of the articles of incorporation
require a greater proportion of voting power to authorize such action in which
case such greater proportion of written consents shall be required.
<PAGE>
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the
whole board shall be five (5), all of whom shall be at least 18 years of age.
The number of directors may from time to time be increased to not more than nine
(9) or decreased to not less than three by amending this section of the by-laws.
Section 2. Vacancies, including those caused by an increase in the
number of directors, may be filled by a majority of the remaining directors
though less than a quorum. When one or more directors shall give notice of his
or their resignation to the board, effective at a future date, the board shall
have power to fill such vacancy or vacancies to take effect when such
resignation or resignations shall become effective, each director so appointed
to hold office during the remainder of the term of office of the resigning
director or directors.
Section 3. The business of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the articles of
incorporation or by these by-laws directed or required to be exercised
or done by the stockholders.
<PAGE>
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Nevada.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and place as shall from time to time be determined
by the board.
<PAGE>
Section 7. Special meetings of the board of directors may be called
by the president or secretary on the written request of two directors. Written
notice of special meetings of the board of directors shall be given to each
director at least forty eight (48) hours before the date of the meeting.
Section 8. A majority of the board of directors, at a meeting duly
assembled, shall be necessary to constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the articles of
incorporation. Any action required or permitted to be taken at a meeting of the
directors may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by all of the directors entitled to vote
with respect to the subject matter thereof.
COMMITTEES OF DIRECTORS
Section 9. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the board
of directors in the management of the business and affairs of the corporation,
and may have power to authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
board of directors.
<PAGE>
Section 10. The committee shall keep regular minutes of their
proceedings and report the same to the board when required.
COMPENSATION OF DIRECTORS
Section 11. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payments shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICE
Section 1. Notices to directors and stockholders shall be in
writing and delivered personally or mailed to the directors or stockholders at
their addresses appearing on the books of the corporation. Notice by mail shall
be deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram.
<PAGE>
Section 2. Whenever all parties entitled to vote at any meeting,
whether of directors or stockholders, consent, either by a writing on the
records of the meeting or filed with the secretary, or by presence at such
meeting and oral consent entered on the minutes, or by taking part in the
deliberations at such meeting without objection, the doings of such meeting
shall be as valid as if had at a meeting regularly called and noticed, and at
such meeting any business may be transacted which is not excepted from the
written consent or to the consideration of which no objection for want of notice
is made at the time, and if any meeting be irregular for want of notice or of
such consent, provided a quorum was present at such meeting, the proceedings of
said meeting may be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all parties having
the right to vote at such meetings; and such consent or approval of stockholders
may be by proxy or attorney, but all such proxies and powers of attorney must be
in writing.
Section 3. Whenever any notice whatever is required to be given
under the provisions of the statutes, of the articles of incorporation or of
these by-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
board of directors and shall be a president,
a vice president, a secretary and a treasurer. Any person may hold two or more
offices.
<PAGE>
Section 2 The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, a vice president, a secretary
and a treasurer, none of whom need be a member of the board.
Section 3. The board of directors may appoint additional vice
presidents, and assistant secretaries and assistant treasurers and such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. The salaries of all officers and agents of the corporations
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officers elected or appointed by
the board of directors maybe removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise shall be filled by the
board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the board of
directors are carried into effect.
<PAGE>
Section 7. He shall execute bonds, mortgage and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE PRESIDENT
Section 8. The vice president shall, in the absence or disability of
the president, perform the duties and exercise the powers of the president and
shall perform such other duties as the board of directors may from time to time
prescribe.
THE SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall keep in safe his death,
resignation, retirement or removal from office, of all books, papers, voucher,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.
<PAGE>
ARTICLE VI
CERTIFIVATES OF STOCK
Section 1. Every stockholder shall be entitled to have a certificate,
signed by the president or a vice president and the treasurer or an assistant
treasurer, or the secretary or a assistant secretary of the corporation,
certifying the number of shares owned by him in the corporation. When the
corporation is authorized to issue shares of more than one class or more than
one series of any class, there shall be set forth upon the face or back of the
certificate, or the certificate shall have a statement that the corporation will
furnish to any stockholders upon request and without charge, a full or summary
statement of the designations, preferences and relative, participation, options
or other special rights of the various classes of stock or series thereof and
the qualifications, limitations or restrictions of such rights, and, if the
corporation shall be authorized to issue only special stock, such certificate
shall set forth in full or summarize the rights of the holders of such stock.
Section 2. Whenever any certificate is counter signed or otherwise or
otherwise authenticated by a transfer agent or trans-custody the seal of the
corporation and, when authorized by the board of directors, affix the same to
any instrument requiring it and, when, so affixed, it shall be attested by his
signature or by the signature of the treasurer or an assistant secretary.
<PAGE>
THE TREASURER
Section 10. The treasure shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 11. He shall disburse the funds of the corporation as may be
ordered by the board of directors taking proper voucher for such disbursements,
and shall render to the president and the board of directors, at the regular
meetings of the board, or when the board of director so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
<PAGE>
Section 12 If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties no shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of
for clerk, and by register, than a facsimile of the signatures of the officers
or agents of the corporation may be printed or lithographed upon such
certificates in lieu of the actual signatures. In case any officer or officers
who shall have signed, or whose facsimile signature or signatures shall have
been used on, any such certificate or certificates shall cease to be such
officer or officers of the corporation, whether because of death, resignation or
otherwise, before such certificate or certificates shall have been delivered by
the corporation, such certificate or certificates may nevertheless be adopted by
the corporation and be issued and delivered as though the person or persons who
signed such certificate or certificates, or whose facsimile signature or
signatures shall have been used thereon, had not ceased to be the officer or
officers of such corporation.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates therefore
issued by the corporation alleged to have been lost or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost or destroyed. When authorizing such issue of a new certificate
or certificates, the board of directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or give the corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost or destroyed.
<PAGE>
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
Section 5. The directors may prescribe a period not exceeding sixty
days prior to any meeting of the stockholders during which no transfer of stock
on the books of the corporation may be made, or may fix a day not more than
sixty days prior to the holding of any such meeting as the day as of which
stockholders entitled to notice of and to vote at such meeting shall be
determined, and only stockholders of record on such day shall be entitled to
notice or to vote at such meeting.
<PAGE>
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Nevada.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the articles of incorporation, if any, may be declared by
the board of directors at any regular or special meeting pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the articles of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserves in the
manner in which it was created.
<PAGE>
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
SEAL
Section 4. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its incorporation and the words "Corporate Seal,
Nevada."
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any regular
meeting of the stockholders or of the board of directors, at any special meeting
of the stockholders or of the board of directors if notice of such alteration or
repeal be obtained in the notice of such special meeting.
<PAGE>
I, THE UNDERSIGNED, being the secretary of CINEMASTER CORPORATION DO HEREBY
CERTIFY the foregoing to be the by-laws of said corporation, as adopted at a
meeting of the directors held on the 4 day of Nov. 1998.
/s/ BRUCE D. STUART
-------------------
Secretary
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
COMMON STOCK COMMON STOCK
INTERACTIVE BUYERS NETWORK INTERNATIONAL LTD.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
AB 3483
CUSIP 45837B SEE REVERSE FOR
- ----------------------------------------------------------------------------------------------------------------------------------
This Certifies that: SPECIMEN
Is the registered holder of
SHARES OF THE COMMON STOCK OF $.01 PAR VALUE, 50,000,000 SHARES AUTHORIZED
Hereinafter called "Corporation" transferable only on the books of the Corporation by the holder thereof in person or by duly
authorized attorney, upon the surrender of this certificate properly endorsed. This certificate is not valid until countersigned
by the Transfer Agent and registered by the Registrar.
Witness the facsimile corporate seal of said Corporation and the facsimile signatures of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
U.S. STOCK TRANSFER CORPORATION
(Glendale, California)
Transfer Agent and Registrar
By
Authorized Officer
</TABLE>
STOCK PURCHASE AND EXCHANGE AGREEMENT
THIS STOCK PURCHASE AND EXCHANGE AGREEMENT (this "Agreement") is made and
entered into as of the tenth day of June 1998, by and among Interactive Buyers
Network International, Ltd., a Nevada corporation ("IBNL", and/or "Optionor"),
Dennis W. McQuilliams ("McQuilliams"), Donald E. Britton ("Britton") and David
K. Brazier ("Brazier"). McQuilliams, Britton and Brazier are hereinafter
collectively referred to as the "WPG Shareholders", DX3,Inc. a corporation of
the State of Washington, that is wholly owned by the WPG Shareholders,
hereinafter referred to as "DX3".
A. Wpg.net, Inc. ("WPG") is incorporated under the laws of the State of
Washington.
B. As of the date hereof, there are an aggregate of 1,000,000 shares of
WPG's Common Stock no par value (the "WPG Common Stock"), issued and
outstanding. There are no options or warrants or other rights outstanding to
purchase shares of WPG Common Stock or any other ownership interest in WPG.
C. All of the issued and outstanding shares of WPG Common Stock are
owned, beneficially and of record, by the WPG Shareholders, who together own an
aggregate of 1,000,000 shares of WPG Common Stock in the respective numbers of
shares set forth opposite the name of each on the signature page of this
Agreement.
D. The WPG Shareholders desire to sell to IBNL, and IBNL desires to
purchase and acquire from the WPG Shareholders, all of the shares of WPG's
Common Stock, in consideration of the exchange therefor of 500,000 shares of the
common stock of IBNL, on the terms and subject to the conditions set forth
herein; and an option to purchase an additional 500,000 shares of the common
stock of IBNL subject to the terms and conditions set forth in the "Option to
Purchase Common Stock of Interactive Buyers Network International, Ltd. "
agreement incorporated herein by this reference; and the Royalties as set forth
in paragraph "F" of this agreement.
E. The parties hereto intend that the issuance of the shares of IBNL's
Common Stock in exchange for all of the WPG Common Stock shall qualify as a
"tax-free" reorganization as contemplated by the provisions of Section
368(a)(1)(B) of the Internal Revenue Code of 1954, as amended.
F. 1 ROYALTY. DX3, Inc. shall be paid a royalty based upon gross
sales or use, as defined in F,3, of Base Publisher ("BP"), a product now under
development by WPG with release expected by July 1998. The royalty will be
continually and perpetually paid on a quarterly basis at the rate of fifty
percent (50%) of all gross revenue, less returns, credit losses and cash
discounts, received by Optionor, from the sale or use of BP based upon financial
records of Optionor, subject to adjustment annually upon audit by Optionor's
independent auditors.
F.2. Base Publisher ("BP"), a product now under development by WPG is
to include, but not be limited to, all evolutions, revisions, enhancements,
upgrades, additions, tools, defined if F.4, and/or new versions or similar
products and to include any name changes in the product.
F.3 The term "use" as relating to the BP product as used herein is
defined as any use of the BP product, as defined, whether or not revenue is
derived from the use or sale of the BP product. If the BP is sold or marketed
without a minimum of Five dollars ($5.00) per site specific revenue or is sold
or marketed as part of a package of products or services, then IBNL will
negotiate with DX3 and agree to a fair value being assigned as revenue to the BP
sales for purposes of this agreement. If IBNL and DX3 cannot agree to a fair
value then a minimum value of Five dollars ($5.00) or Fifty percent (50%) of the
package of products, whichever is greater, per site shall be assigned as BP
revenue.
F.4 The term "Tools" shall mean any products developed in support or
the BP product or to be used in conduction with the BP product or as an add on
to the BP product. The term "ToolBox" in inclusive with the term "Tools". This
clause shall not apply to the Virtual Source product or any enhancements or
improvements to the Virtual Source product.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants, agreements, representations and warranties contained herein, the
parties hereto agree as follows:
ARTICLE 1
1.1 At the Closing to be held in accordance with the provisions of
Section 2 below, IBNL agrees to sell, and each of the WPG Shareholders agrees,
jointly and severally, to purchase from IBNL an aggregate of 500,000 of
authorized and newly issued shares of IBNL's Common Stock. The 500,000 shares
shall be issued in the name of DX3, Inc., a corporation of the State of
Washington that is wholly owned by the WPG Shareholders. In consideration for
the issuance and sale of IBNL's Common Stock to the WPG Shareholders, and as
payment in full of the purchase price for IBNL's Common Stock to be issued and
sold to, and purchased by, each of them pursuant to the provisions of this
Agreement, at the Closing each WPG Shareholder shall deliver to IBNL the
certificates evidencing that respective number of shares of WPG Stock owned by
each which is set forth opposite his name on the signature page hereof.
ARTICLE 2
CLOSING AND POST-CLOSING
2.1 The consummation of the sale to and purchase by the WPG
Shareholders of IBNL's Common Stock contemplated hereby (the "Closing") shall be
effective upon final execution and delivery by all of the parties of this
Agreement and each of the agreements and certificates specified in this Section
2.1 (the "Closing Date"). If the Closing fails to occur by June 30, 1998, or by
such later date to which the Closing may be extended as provided hereinabove,
this Agreement shall automatically terminate, all parties shall pay their own
expenses incurred in connection herewith, and no party hereto shall have any
further obligations hereunder; provided, however, that no such termination shall
constitute a waiver by any party or parties which is not in default of any of
its or their respective representations, warranties or covenants herein, of any
rights or remedies it or they might have at law if any other party or parties is
in default of any of its or their respective representations, warranties or
covenants under this Agreement. At the Closing, as conditions thereto,
(a) IBNL shall deliver, or cause to be delivered, to the WPG
Shareholders:
(i) Certificates for the 500,000 shares of IBNL's Common Stock
issued in the name of DX3, Inc., in form and substance reasonably satisfactory
to the WPG Shareholders (these certificates will be delivered after the
Closing);
(ii) Employment Agreements between IBNL and Messrs. McQuilliams, Britton and
Brazier specified in Section 6.3(b) below; and
(iii) Option Agreement between IBNL and DX3, Inc. specified in Section
6.3(c) below.
(iv) UBC filing or other security filing in favor of DX3 to protect the
terms in Clause 2.3 contained herein.
(b) The WPG Shareholders shall deliver, or cause to be delivered, to
IBNL:
(i) A stock certificate or certificates evidencing the ownership of each WPG
Shareholder of all shares of WPG Stock owned by them, duly endorsed for transfer
to IBNL (these certificates will be delivered after the Closing);
(ii) The Employment Agreements referred to in Section 6.3(b) below; and
(iii) Resignations of WPG's officers and directors specified in Section
6.4(c) below.
2.2 Following the Closing, WPG will become a wholly owned subsidiary of
IBNL. Subject to the terms and conditions of the Employment Agreements referred
to in Section 6.3(b) below, McQuilliams will be the chief executive of WPG.
Britton and Brazier will report to McQuilliams.
2.3 In the event that IBNL ceases to operate, for any reason, including
without limitation the filing of a voluntary bankruptcy petition, making an
assignment for the benefit of creditors or ceasing all business operations, or
if IBNL is sold without WPG or the BP product as defined herein, and/or ceases
to actively sell, market, promote and/or utilize the BP product as defined
herein, the intellectual property rights to Base Publisher that are owned by
IBNL at that time, including improvements made to Base Publisher prior to such
cessation or sale, and other products developed by WPG prior to the date of this
Agreement, except for any such rights related to products of IBNL or its
subsidiary, Virtual SOURCE, Inc., a Nevada corporation, shall be transferred to
DX3, Inc.
ARTICLE 3
IBNL hereby represents and warrants to the WPG Shareholders, and each of
them, as follows (it being acknowledged that the WPG Shareholders are entering
into this Agreement in material reliance upon each of the following
representations and warranties, and that the truth and accuracy of each of which
constitutes a condition precedent to the obligations of the WPG Shareholders
hereunder):
3.1 IBNL is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, and is duly qualified and in
good standing to do business as a foreign corporation in each jurisdiction in
which such qualification is required and where the failure to be so qualified
would have a materially adverse effect upon IBNL. IBNL has all requisite
corporate power and authority to conduct its business as now being conducted and
to own and lease the properties which it now owns and leases. The Articles of
Incorporation as amended to date and the Bylaws of IBNL as amended to date,
certified by the President and the Secretary of IBNL, which have been made
available to the WPG Shareholders prior to the execution hereof are true and
complete copies thereof as in effect as of the date hereof.
3.2 IBNL has full power, legal capacity and authority to enter into
this Agreement, to execute all attendant documents and instruments necessary to
consummate the transactions herein contemplated, and to issue and sell IBNL's
Common Stock to the WPG Shareholders and to perform all of its obligations
hereunder. This Agreement and all other agreements, documents and instruments to
be executed in connection herewith have been effectively authorized by all
necessary action, corporate or otherwise, on the part of IBNL, which
authorizations remain in full force and effect, have been duly executed and
delivered by IBNL, and no other corporate proceedings on the part of IBNL are
required to authorize this Agreement and the transactions contemplated hereby.
This Agreement constitutes the legal, valid and binding obligation of IBNL and
is enforceable with respect to IBNL in accordance with its terms, except as
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
priority or other laws or court decisions relating to or affecting generally the
enforcement of creditors' rights or affecting generally the availability of
equitable remedies. Neither the execution and delivery of this Agreement, nor
the consummation by IBNL of any of the transactions contemplated hereby, or
compliance with any of the provisions hereof, will (i) conflict with or result
in a breach of, violation of, or default under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, lease, credit
agreement or other agreement, document, instrument or obligation (including,
without limitation, any of its charter documents) to which IBNL is a party or by
which IBNL or any of its assets or properties may be bound, or (ii) violate any
judgment, order, injunction, decree, statute, rule or regulation applicable to
IBNL or any of the assets or properties of IBNL. No authorization, consent or
approval of any public body or authority is necessary for the consummation by
IBNL of the transactions contemplated by this Agreement.
3.3 The authorized capital stock of IBNL consists of 50,000,000 shares
of Common Stock, $.01 par value (defined above as the "IBNL's Common Stock"),
and 5,000,000 shares of Preferred Stock, $.01 par value. As of June 1, 1998
there are 10,054,336 shares of IBNL's Common Stock issued and outstanding (not
including outstanding warrants, options, calls, commitments or other rights to
subscribe for or to purchase from IBNL any capital stock of IBNL or any
securities convertible into or exchangeable for any shares of capital stock of
IBNL, or any other securities or agreement pursuant to which IBNL is or may
become obligated to issue any shares of its capital stock) and no shares of
Preferred Stock are outstanding. All of the outstanding shares of IBNL's Common
Stock have been, and all of IBNL's Common Stock to be issued and sold to the WPG
Shareholders pursuant to this Agreement will be, duly authorized, validly
issued, fully paid and nonassessable. There currently are no rights, agreements
or commitments of any character obligating IBNL, contingently or otherwise, to
register any shares of its capital stock under any applicable federal or state
securities laws.
3.4 True and complete copies of IBNL's financial statements for the
fiscal year ended January 31, 1997, which contains the audited financial
statements of IBNL for the year ended, have been made available to the WPG
Shareholders. Such financial statements (and the notes related thereto) are
herein sometimes collectively referred to as the "IBNL Financial Statements,"
and IBNL's balance sheet as of January 31, 1997 included therein is hereinafter
sometimes referred to as the "Balance Sheet." IBNL Financial Statements (i) are
derived from the books and records of IBNL, which books and records have been
consistently maintained in a manner which reflects, and such books and records
do fairly and accurately reflect, the assets and liabilities of IBNL, (ii)
fairly and accurately present the financial condition of IBNL on the respective
dates of such statements and the results of its operations for the periods
indicated, except as may be disclosed in the notes thereto, and (iii) have been
prepared in all material respects in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
(except as otherwise disclosed in the notes thereto). True and complete copies
of IBNL's preliminary financial statements for the year ended January 31, 1998,
have been made available to the WPG Shareholders.
3.5 IBNL has no subsidiaries and no investments, directly or
indirectly, or other financial interest in any other corporation or business
organization, joint venture or partnership of any kind whatsoever except as
reflected in IBNL Financial Statements.
3.6 Except as and to the extent reflected or reserved against in the
Balance Sheet or other financial statements described in Section 3.4 above, IBNL
has no liability(s) or obligation(s) (whether accrued, to become due, contingent
or otherwise) which individually or in the aggregate could have a materially
adverse effect on the business, assets, properties, condition (financial or
otherwise) or prospects of IBNL.
3.7 Since January 31, 1998, except as disclosed in Exhibit B there has
been no materially adverse change in the condition (financial or otherwise) of
the Company or in its assets, liabilities, properties, business, operations or
prospects.
3.8 There are no actions, suits or proceedings pending or, to the best
of IBNL's knowledge, threatened against or affecting IBNL (including actions,
suits or proceedings where liabilities may be adequately covered by insurance)
at law or in equity or before or by any federal, state, municipal or other
governmental department, commission, court, board, bureau, agency or
instrumentality, domestic or foreign, or affecting any of the officers or
directors of IBNL in connection with the business, operations or affairs of
IBNL, which might result in any adverse change in the business, properties or
assets, or in the condition (financial or otherwise) of IBNL, or which might
prevent the sale of the Shares pursuant to this Agreement. IBNL is not subject
to any voluntary or involuntary proceeding under the United States Bankruptcy
Code and has not made an assignment for the benefit of creditors.
3.9 IBNL has no obligation to any person or entity for brokerage
commissions, finder's fees or similar compensation in connection with the
transactions contemplated by this Agreement, and IBNL shall indemnify and hold
the WPG Shareholders harmless against any liability or expenses arising out of
any such claim, asserted against either the WPG Shareholders or IBNL by any
party.
3.10 IBNL, through its current officers and directors, has the
knowledge and experience in business and financial matters to meaningfully
evaluate the merits and risks of the issuance of IBNL's Common Stock in exchange
and consideration for the WPG Stock as contemplated hereby. IBNL understands and
acknowledges that the WPG Stock was originally issued to the WPG Shareholders,
and will be sold and transferred to IBNL, without registration or qualification
under the Securities Act of 1933, as amended, or any applicable state securities
or "Blue Sky" law, in reliance upon specific exemptions therefrom, and in
furtherance thereof IBNL represents that the WPG Stock will be taken and
received by IBNL for its own account for investment, with no present intention
of a distribution or disposition thereof to others. IBNL further acknowledges
and agrees that the certificate(s) representing the WPG Stock transferred to
IBNL shall bear a restrictive legend, in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), ARE "RESTRICTED
SECURITIES," AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, IS NOT REQUIRED TO BE REGISTERED
UNDER THE ACT."
3.11 Neither this Agreement, nor any certificate, exhibit, or other
written document or statement, furnished to the WPG Shareholders by IBNL in
connection with the transactions contemplated by this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to be stated in order to make the statements contained
herein or therein not misleading.
ARTICLE 4
Each of the WPG Shareholders hereby represents and warrants to IBNL as
follows (it being acknowledged that IBNL is entering into this Agreement in
material reliance upon each of the following representations and warranties,
that the truth and accuracy of each of which constitutes a condition precedent
to the obligations of IBNL hereunder):
4.1 Each of the WPG Shareholders has full power, legal capacity and
authority to enter into this Agreement, to execute all attendant documents and
instruments necessary to consummate the transactions herein contemplated, and to
perform all of the obligations to be performed by them hereunder. This
Agreement and all other agreements, documents and instruments to be executed by
the WPG Shareholders in connection herewith have been duly executed and
delivered and constitute the legal, valid and binding obligations of the WPG
Shareholders executing and delivering the same, and are enforceable with respect
to such WPG Shareholders in accordance with their terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, priority or
other laws or court decisions relating to or affecting generally the enforcement
of creditors' rights or affecting generally the availability of equitable
remedies. Neither the execution and delivery of this Agreement, nor the
consummation by any of the WPG Shareholders of any of the transactions
contemplated hereby, or compliance with any of the provisions hereof, will (i)
conflict with or result in a breach of, violation of, or default under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, lease, credit agreement or other agreement, document, instrument or
obligation to which a WPG Shareholder is a party or by which a WPG Shareholder
or any of his assets or properties may be bound, or (ii) violate any judgment,
order, injunction, decree, statute, rule or regulation applicable to WPG
Shareholder or any of the assets or properties of a WPG Shareholder. No
authorization, consent or approval of any public body or authority is necessary
for the consummation by the WPG Shareholders of the transactions contemplated
hereby.
4.2 The WPG Shareholders together collectively own an aggregate of
1,000,000 shares of WPG Stock, constituting all of the issued and outstanding
shares of capital stock of WPG, free and clear of (i) any lien, charge,
mortgage, pledge, conditional sale agreement, or other encumbrance of any kind
or nature whatsoever, and (ii) any claim as to ownership thereof or any rights,
powers or interest therein by any third party, whether legal or beneficial, and
whether based on contract, proxy or other document or otherwise. All of the
shares of WPG Stock have been duly authorized and validly issued and are fully
paid and nonassessable. At of the date hereof there are 1,000,000 shares of
WPG's Common Stock issued and outstanding, with no shares of WPG's Common Stock
held in its treasury, and no shares of Preferred Stock are outstanding. All of
the outstanding shares of WPG's Common Stock have been, and all of WPG's Common
Stock to be sold to IBNL pursuant to this Agreement will be, duly authorized,
validly issued, fully paid and nonassessable. Except as set forth above in this
Section 4.2, there are no warrants, options, calls, commitments or other rights
to subscribe for or to purchase from WPG any capital stock of WPG or any
securities convertible into or exchangeable for any shares of capital stock of
WPG, or any other securities or agreement pursuant to which WPG is or may become
obligated to issue any shares of its capital stock, nor is there outstanding any
commitment, obligation or agreement on the part of WPG to repurchase, redeem or
otherwise acquire any outstanding shares of WPG's Common Stock. There currently
are no rights, agreements or commitments of any character obligating WPG,
contingently or otherwise, to register any shares of its capital stock under any
applicable federal or state securities laws.
4.3 WPG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington, WPG has all requisite
corporate power and authority to conduct its business as now being conducted and
to own and lease the properties which it now owns and leases. The Articles of
Incorporation of WPG as amended to date and the Bylaws of WPG as amended to
date, certified by the President and the Secretary of WPG, which have been
delivered to IBNL prior to the execution hereof are true and complete copies
thereof as in effect as of the date hereof.
4.4 WPG was incorporated on October 23, 1996. True and complete copies
of WPG's financial statements for the period ended May 31, 1998, which contains
the unaudited financial statements of WPG, have been made available to the IBNL.
Such financial statements (and the notes related thereto) are herein sometimes
collectively referred to as the "WPG Financial Statements," and WPG's balance
sheet as of May 31, 1998, included therein is hereinafter sometimes referred to
as the "WPG Balance Sheet." WPG Financial Statements (i) are derived from the
books and records of WPG, which books and records have been consistently
maintained in a manner which reflects, and such books and records do fairly and
accurately reflect, the assets and liabilities of WPG, (ii) fairly and
accurately present the financial condition of WPG on the respective dates of
such statements and the results of its operations for the periods indicated,
except as may be disclosed in the notes thereto, and (iii) have been prepared in
all material respects in accordance with generally accepted accounting
principles consistently applied throughout the periods involved (except as
otherwise disclosed in the notes thereto)Effective upon the Closing, all
proprietary systems and programs, computer technology, and other intellectual
property developed or in development by WPG, or by others for WPG's benefit
(hereinafter collectively referred to as the "WPG Properties"), shall become the
property of IBNL whether now owned by WPG or the WPG Shareholders. A complete
list of the WPG Properties is described in Exhibit C attached hereto.
4.5 WPG has no subsidiaries and no investments, directly or indirectly,
or other financial interest in any other corporation or business organization,
joint venture or partnership of any kind whatsoever except as reflected in WPG's
Financial Statements.
4.6 WPG has no liability(s) or obligation(s) (whether accrued, to
become due, contingent or otherwise) which individually or in the aggregate
could have a materially adverse effect on the business, assets, properties,
condition (financial or otherwise) or prospects of WPG.
4.7 Since May 31, 1998, there has been no materially adverse change in
the condition (financial or otherwise) of WPG or in its assets, liabilities,
properties, business, operations or prospects.
4.8 There are no actions, suits or proceedings pending or, to the best
of the WPG Shareholders' knowledge, threatened against or affecting any of the
WPG Shareholders or WPG (including actions, suits or proceedings where
liabilities may be adequately covered by insurance) at law or in equity or
before any federal, state, municipal or other governmental department,
commission, court, board, bureau, agency or instrumentality, domestic or
foreign, or affecting any of the officers or directors of WPG in connection with
the business, operations or affairs of WPG which might result in any material
adverse change in the business, properties or assets, or in the condition
(financial or otherwise) of WPG, or which might prevent the purchase of IBNL's
Common Stock by the WPG Shareholders or the transfer to IBNL of the WPG Stock by
the WPG Shareholders pursuant to this Agreement or the performance by the WPG
Shareholders of any of the obligations to be performed by the WPG Shareholders
under this Agreement. Neither WPG nor any of the WPG Shareholders is subject to
any voluntary or involuntary proceeding under the United States Bankruptcy Code,
nor have any of them made an assignment for the benefit of creditors.
4.9 The WPG Shareholders have no obligation to any person or entity for
brokerage commissions, finder's fees or similar compensation in connection with
the transactions contemplated by this Agreement, and the WPG Shareholders shall
each individually indemnify and hold IBNL harmless against any liability or
expenses arising out of any such claim asserted against IBNL but only to the
extent where said individual had prior knowledge or responsibility for
circumstances leading to such claims.
4.10 Each WPG Shareholder has the knowledge and experience in business
and financial matters to meaningfully evaluate the merits and risks of the
purchase and acquisition of IBNL's Common Stock in exchange and consideration
for the shares of WPG Stock owned by him as contemplated hereby. Each WPG
Shareholder acknowledges that the shares of IBNL's Common Stock to be issued to
DX3 in the transactions contemplated hereby will be issued by IBNL without
registration or qualification or other filings being made under the Federal
Securities Act of 1933, as amended, or the securities or "Blue Sky" laws of any
state, in reliance upon specific exemptions therefrom, and in furtherance
thereof each WPG Shareholder represents that the shares of IBNL's Common Stock
to be received by DX3 will be taken for DX3's account for investment, with no
present intention of a distribution or disposition thereof to others. Each WPG
Shareholder agrees that the certificate(s) representing the shares of IBNL's
Common Stock issued to DX3 shall be subject to a stop-transfer order and shall
bear a restrictive legend, in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), ARE "RESTRICTED
SECURITIES," AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, IS NOT REQUIRED TO BE REGISTERED
UNDER THE ACT."
4.11 Neither this Agreement, nor any certificate, exhibit, or other
written document or statement, furnished to IBNL by the WPG Shareholders in
connection with the transactions contemplated by this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to be stated in order to make the statements contained
herein or therein not misleading.
ARTICLE 5
IBNL and the WPG Shareholders hereby covenant to and agree with the other
that between the date hereof and the Closing:
5.1 IBNL and the WPG Shareholders shall each give to other and
authorized representatives thereof full access, during reasonable business
hours, in such a manner as not unduly to disrupt normal business activities, to
any and all of the premises, properties, contracts, books, records and affairs
of IBNL or WPG, as the case may be, and will cause the officers of IBNL or WPG,
as the case may be, to furnish any and all data and information pertaining to
its business that the other may from time to time reasonably require. Unless and
until the transactions contemplated by this Agreement have been consummated,
each party and its representatives shall hold in confidence all information so
obtained and if the transactions contemplated hereby are not consummated will
return all documents hereinabove referred to and obtained therefrom. Such
obligation of confidentiality shall not extend to any information which is shown
to have been previously (i) known to the party receiving it (ii) generally known
to others engaged in the trade or business of IBNL or WPG, as the case may be,
(iii) part of public knowledge or literature, or (iv) lawfully received from a
third party.
5.2 The current officers and directors of IBNL and the WPG Shareholders
shall each take all necessary actions to cause IBNL and WPG, respectively, to
maintain in full force and effect its corporate existence, rights, franchises
and good standing, and shall not cause or permit to be made any change in the
Articles or Bylaws of IBNL or WPG, as the case may be.
5.3 The WPG Shareholders shall take all necessary actions to cause WPG
to conduct its business diligently in the ordinary course of business as an
ongoing concern and to maintain the books, accounts and records of WPG in the
usual, regular and ordinary manner.
ARTICLE 6
The respective obligations of the parties hereto to consummate the
transactions contemplated hereby shall be subject to the fulfillment, at or
prior to the Closing, of the following conditions:
6.1 There shall have been obtained any and all permits, approvals and
qualifications of, and there shall have been made or completed all filings,
proceedings and waiting periods, required by any governmental body, agency or
regulatory authority which, in the reasonable opinion of counsel to the WPG
Shareholders and to IBNL, are required for the consummation of the transactions
contemplated hereby.
6.2 No claim, action, suit, investigation or other proceeding shall be
pending or threatened before any court or governmental agency which presents a
substantial risk of the restraint or prohibition of the transactions
contemplated by this Agreement or the obtaining of material damages or other
relief in connection therewith.
6.3 The obligation of the WPG Shareholders hereunder to consummate the
transactions contemplated by this Agreement are expressly subject to the
satisfaction of each of the further conditions set forth below, any or all of
which may be waived by the WPG Shareholders in whole or in part without prior
notice; provided, however, that no such waiver of a condition shall constitute a
waiver by the WPG Shareholders of any other condition or of any of their rights
or remedies, at law or in equity, if IBNL shall be in default or breach of any
of its representations, warranties or covenants under this Agreement:
(a) IBNL shall have performed the agreements and covenants required to
be performed by them under this Agreement prior to the Closing, there shall have
been no material adverse change in the condition (financial or otherwise),
assets, liabilities, earnings or business of IBNL since the date hereof, and the
representations and warranties of IBNL contained herein shall, except as
contemplated or permitted by this Agreement, be true in all material respects on
and as of the date of Closing as if made on and as of such date;
(b) IBNL shall have executed and delivered an Employment Agreement to
each of Messrs. McQuilliams, Britton and Brazier, dated as of June 16, 1998, in
the forms thereof attached hereto as Exhibits C-1, C-2 and C-3, respectively;
and
(c) IBNL shall have executed and delivered an Option Agreement between
IBNL and DX3, Inc. to the WPG Shareholders, dated as of June 10, 1998, in the
forms thereof attached hereto as Exhibit D.
6.4 The obligation of IBNL to consummate the transactions contemplated
by this Agreement is expressly subject to the further conditions set forth
below:
(a) The WPG Shareholders and WPG shall have performed the agreements
and covenants required to be performed by them under this Agreement prior to the
Closing, there shall have been no material adverse change in the condition
(financial or otherwise), assets, liabilities, earnings or business of the WPG
since the date hereof, and the representations and warranties of the WPG
Shareholders contained herein shall, except as contemplated or permitted by this
Agreement, be true in all material respects on and as of the date of Closing as
if made on and as of such date;
(b) Each of the current officers and directors of WPG, except
McQuilliams, shall have resigned all of their respective offices of WPG,
effective as of the Closing Date, electing the following individuals to the
Board of Directors of WPG:
Robert C. McShirley
Samuel E. Bradt
Dennis W. McQuilliams
ARTICLE 7
7.1 IBNL and the WPG Shareholders shall each pay all of their own
respective taxes, attorneys' fees and other costs and expenses payable in
connection with or as a result of the transactions contemplated hereby and the
performance and compliance with all agreements and conditions contained in this
Agreement respectively to be performed or observed by each of them.
7.2 The respective representations and warranties contained herein and
in any other document or instrument delivered by or on behalf of IBNL and the
WPG Shareholders shall survive the Closing. Nothing contained in this Section
7.2 shall in any way affect any obligations of any party under this Agreement
that are to be performed, in whole or in part, at any time after the Closing,
nor shall it prevent or preclude any party from pursuing any and all available
remedies at law or in equity for actual fraud in the event that, prior to the
Closing, any other party had actual knowledge of any material breach of any of
its representations and warranties herein but failed to disclose to or actively
concealed such knowledge prior to the Closing from the other party(s) to whom
the representations and warranties were made.
ARTICLE 8
8.1 Each of the parties hereto shall execute and deliver such other and
further documents and instruments, and take such other and further actions, as
may be reasonably requested of them for the implementation and consummation of
this Agreement and the transactions herein contemplated.
8.2 This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and the heirs, personal representatives, successors and
assigns of all of them, but shall not confer, expressly or by implication, any
rights or remedies upon any other party.
8.3 This Agreement is made and shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
California.
8.4 All notices, requests or demands and other communications hereunder
must be in writing and shall be deemed to have been duly made if personally
delivered or sent by registered or certified mail, return receipt requested
(first-class, postage prepaid), to the parties as follows:
(a) If to IBNL, to:
Interactive Buyers Network International, Ltd.
5720 Ralston Street
Suite 312
Ventura, CA 93003
With copies to :
Robert M. Kern, Esq.
Law Offices of Robert M. Kern
23676 Blythe Street
West Hills, CA 91304
(b) If to any of the WPG Shareholders, to:
Dennis W. McQuilliams
P.O. Box 2347
Woodinville, WA 98072-2347
Any party hereto may change its address by written notice to the other
party given in accordance with this Section 8.4.
8.5 This Agreement and the exhibits attached hereto contain the entire
agreement between the parties and supersede all prior agreements, understandings
and writings between the parties with respect to the subject matter hereof and
thereof. Each party hereto acknowledges that no representations, inducements,
promises or agreements, oral or otherwise, have been made by any party, or
anyone acting with authority on behalf of any party, which are not embodied
herein or in an exhibit hereto, and that no other agreement, statement or
promise may be relied upon or shall be valid or binding. Neither this Agreement
nor any term hereof may be changed, waived, discharged or terminated orally.
This Agreement may be amended or any term hereof may be changed, waived,
discharged or terminated by an agreement in writing signed by all parties
hereto. The parties understand and agree that further and mutual revisions to
this agreement are contemplated and the final version of this agreement will
incorporate the changes made herein and will supercede this agreement and will
be effective as the date of this agreement.
8.6 Prior to the Closing, neither the execution of this Agreement nor
the performance of any provision contained herein shall cause any party hereto
to be or become liable in any respect for the operations of the business of any
other party, or the condition of property owned by any other party, for
compliance with any applicable laws, requirements, or regulations of, or taxes,
assessments or other charges now or hereafter due to any governmental authority,
or for any other charges or expenses whatsoever pertaining to the conduct of the
business or the ownership, title, possession, use, or occupancy of any other
party.
8.7 The captions and headings used herein are for convenience only and
shall not be construed as a part of this Agreement.
8.8 In the event of any litigation between the parties hereto, the
non-prevailing party shall pay the reasonable expenses, including the attorneys'
fees, of the prevailing party in connection therewith.
8.9 This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which taken together shall
constitute but one and the same document. For purposes of executing this
Agreement, a document signed and transmitted by facsimile machine or telecopier
is to be treated as an original document.
8.10 If any term or provision of this Agreement shall to any extent be
invalid or unenforceable, the remainder of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
8.11 Each party has participated fully in the review and revision of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
INTERACTIVE BUYERS NETWORK
INTERNATIONAL, LTD.
By: /S/ Robert C. McShirley
------------------------
Robert C. McShirley, President
"WPG Shareholders"
/S/ Dennis W. McQuilliams /S/ Donald Britton
- ------------------------------ ------------------------------
Dennis W. McQuilliams Donald Britton
375,000 shares of WPG Stock 250,000 shares of WPG Stock
/S/ David K. Brazier
- ------------------------------
David K. Brazier
375,000 shares of WPG Stock
<PAGE>
EXHIBIT A
IBNL'S MATERIAL ADVERSE CHANGES
For the four months ended May 31, 1998, the Company has lost approximately
$400,000 and the Notes payable by the Company have increased by approximately
the same amount
Full dilution at time of closing if all options, warrants and convertible
notes are exercised is approximately an additional Two Million Four Hundred
Thousand (2,400,000) shares.
<PAGE>
EXHIBIT B
WPG's PROPERTIES
All proprietary systems and programs, computer technology, or other
intellectual property developed or in development by WPG, or by others for its
benefit, shall become the property of IBNL whether now owned by WPG or the WPG
Shareholders. Any intellectual property relating to work done by WPG, or others
under WPG direction, for Virtual Source, Inc. or Interactive Buyers Network
International, Ltd., and all intellectual property relating to Base Publisher or
other products developed for commercialization by WPG, or needed for support, or
for WPG business infrastructure, or work in progress for other clients are also
included.
Due to the timeliness of this contract all cash in the WPG corporate checking
account balance as of June 12, 1998 shall be transferred to DX3, Inc. and are
not part of this stock transfer Stock holdings in the Prudential Securities
accounts shall be transferred in their entirety to DX3, Inc. as soon as
possible and is not part of this stock transfer. A new computer purchased and
installed on behalf of WPG is not part of this stock transfer and will be
reimbursed by IBNL to DX3 These three foregoing items are not to be construed
as part of WPG assets or deemed to be part of this contract.
<PAGE>
Resignations From WPG.NET, INC. of Donald Britton and David K. Brazier
Election of Robert C. McShirley and Samuel E. Bradt
I, Donald E. Britton, effective immediately, hereby resign from all of my
offices and as a director of Wpg.net, Inc.
- ------------------------- Dated:__________________
Donald E. Britton
I, David K. Brazier, effective immediately, hereby resign from all of my
offices and as a director of Wpg.net, Inc.
- ------------------------- Dated:__________________
David K. Brazier
I, Dennis W. McQuilliams, as the sole officer and director of Wpg.net,
Inc., do hereby accept the resignations of David K. Brazier and Donald Britton
and elect as their replacements on the Board of Directors, the following
persons:
Samuel E. Bradt
Robert C. McShirley
- ------------------------- Dated:__________________
Dennis W. McQuilliams
<PAGE>
OPTION TO PURCHASE COMMON STOCK
OF
INTERACTIVE BUYERS NETWORK INTERNATIONAL, LTD.
For and in consideration of good and valuable consideration received
from Dennis W. McQuilliams ("McQuilliams"), Donald E. Britton ("Britton") and
David K. Brazier ("Brazier") (McQuilliams, Britton and Brazier are hereinafter
collectively referred to as the "WPG Shareholders.") and as an incentive to the
WPG Shareholders to generate revenue for the company, Interactive Buyers Network
International, Ltd., a Nevada corporation, hereby agrees to grant to DX3, Inc.,
a corporation of the State of Washington and owned by the WPG Shareholders
("Optionee"), an option to purchase Five Hundred Thousand (500,000) shares of
restricted common stock of Interactive Buyers Network International, Ltd.in
accordance with the following terms and conditions:
1. GRANT OF OPTION. Interactive Buyers Network International, Ltd., a
-----------------
corporation having an address at 5720 Ralston Street, Suite 312, Ventura, CA
93003 (hereinafter referred to as "Optionor"), subject to the terms and
conditions of this Option hereby grants to Optionee, having an address at P.O.
Box 2347, Woodinville, WA 98072, an option to purchase Five Hundred Thousand
(500,000) shares of the restricted common stock of Interactive Buyers Network
International, Ltd. (hereinafter referred to as the "Common Stock") at any time
within ten years following the date of this Option (hereinafter referred to as
the "Option"). After such date, the Option shall be canceled.
2. EXERCISE PRICE. The exercise price for all options granted
---------------
hereunder shall be Fifty Nine Cents ($ 0.59 ) per share of the Common Stock.
3. VESTING OF OPTION. The right of Optionee to exercise the Option and
-----------------
purchase the Common Stock shall be subject to the following additional terms and
conditions:
(a) All of the Option shall be restricted from exercise by Optionee in
accordance with the provisions hereof until such restrictions (the
"Restrictions") are terminated as provided in subparagraph 3(b) below.
(b) The Restrictions on the right to exercise the Option by Optionee
shall terminate as to two and three-quarters percent (2 3/4%) of the shares of
Common Stock subject to the Option upon the expiration of each full month, from
the date of this option, until such time, if any, as the Restrictions shall have
lapsed as to all of the Common Stock (as an example, after three months the
Option will be exercisable for 41,250 shares of Common Stock (3 times .0275
times 500,000). In addition, the Restrictions on the right to exercise the
Option shall terminate after Optionor has received total gross revenue totaling
$500,000 from sales or use of Base Publisher, as defined in paragraph "F" of the
"Stock Purchase and Exchange Agreement" herein made a part of this agreement,
("BP"), a product now under development by WPG with release expected by July
1998. The total gross revenue will be calculated quarterly based upon financial
records of Optionor, subject to adjustment annually upon audit by Optionor's
independent auditors.
(c) Until the termination of the Restrictions as provided in
subparagraph 3(b) hereof, none of the unexercised Option may be assigned,
transferred, pledged or hypothecated in any way, except to Optionor, nor shall
any of such Option be assignable by operation of law, or be subject to
execution, attachment or similar process. Any attempt at assignment, transfer,
pledge, hypothecation or other disposition contrary to the provisions of this
Option, and the levy of any execution, attachment or similar process upon or
against this Option shall be null and void and without effect.
(d) In the event of a change in control or ownership of Optionor, the
Unvested Option shall vest in its entirety simultaneously with the change in
control.
4. PROCEDURE FOR EXERCISE OF OPTION. Except as provided herein, upon
------------------------------------
delivery of a copy of this Option with the Exercise Form annexed hereto, duly
executed, together with payment of the exercise price of the shares of Common
Stock being purchased, Optionor will deliver the shares of Common Stock to
Optionee at such address as Optionee may designate. This Option shall be deemed
to have been exercised immediately prior to the close of business on the day
after which the duly executed Exercise Form and payment of the exercise price is
received by Optionor.
5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
---------------------------------------------
warranties set forth in this Agreement shall survive the exercise of this
Option.
6. ADJUSTMENTS IN EXERCISE PRICE AND COMMON STOCK. If the outstanding
---------------------------------------------------
shares of Optionor's Common Stock at any time shall be changed or exchanged by
declaration of a stock dividend, stock split, combination of shares, the Common
Stock then subject to this Option, and the price at which Optionee shall be
entitled to purchase such Common Stock as provided in paragraph 2 above, shall
be proportionately and equitably adjusted.
7. REPRESENTATIONS BY OPTIONOR. In order to induce the WPG Shareholders
-----------------------------
and Optionee to enter into this agreement, Optionor unconditionally warrants,
represents and guarantees that:
(a) Upon exercise of the Option by Optionee pursuant to this agreement,
Optionee will thereby acquire good, absolute marketable title to the Common
Stock, which will be free and clear of all liens, encumbrances and restrictions
(excluding securities law restrictions) of any nature whatsoever.
(b) The Common Stock, when issued, will be fully paid and
non-assessable.
(c) All corporate and other proceedings required to be taken by
Optionor in order to enter into and to carry out this agreement have been duly
and properly taken. This agreement has been duly executed by Optionor and
constitutes its valid and binding obligation. The execution and delivery of
this agreement and the carrying out of its purposes will not result in the
breach of any of the terms or conditions of, or constitute a default under or
violate, Optionor's Certificate of Incorporation or By-Laws, or any agreement,
lease, mortgage, bond, indenture, license or other document or undertaking, oral
or written, to which Optionor is a party or is bound or may be affected, nor
will such execution, delivery and carrying out violate any order, writ,
injunction, decree, law, rule or regulation of any court, regulatory agency or
other governmental body.
(d) When duly executed and delivered, this Agreement is legal, valid,
and enforceable by Optionee according to its terms.
8. REPRESENTATIONS BY OPTIONEE AND THE WPG SHAREHOLDERS. In order to
----------------------------------------------------------
induce Optionor to enter into this agreement, Optionee and the WPG Shareholders
each individually and unconditionally warrant, represent and guarantee that:
(a) The Option is being acquired and will be taken and received for
DX3's private, personal investment for it's own account, with no present
intention of distributing any of the Option or underlying shares to others.
(b) DX3 has no contract, undertaking, agreement or arrangement with
any person or persons to sell, transfer or otherwise distribute to such persons
or to have any such person sell, transfer or otherwise distribute for DX3 any
of the Option or any interest therein, and DX3 is presently not engaged, nor
does DX3 plan to engage within the presently foreseeable future, in any
discussions with any person relative to such sale, transfer or other
distribution of any of the Option or any interest therein.
(c) DX3 has no present obligation, indebtedness or commitment
pending, nor is any circumstance in existence which will compel it to secure
funds by the sale, transfer or other distribution of any of the Option or any
interest therein, nor is DX3 a party to any plan or undertaking requiring funds
which can be consummated only by the sale, transfer or other distribution of any
of the Option or any interest therein.
<PAGE>
(d) DX3 fully comprehends that you are relying to a material degree on
the representations, warranties and covenants contained herein, and with such
realization authorize you to act as you may see fit in reliance thereon,
including without limitation the placement of the following legend on any stock
certificate issued, in addition to any other legends that may be imposed
thereon, and to the imposition of stop transfer orders against DX3's Option or
the underlying shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), ARE "RESTRICTED
SECURITIES," AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, IS NOT REQUIRED TO BE REGISTERED
UNDER THE ACT."
(e) DX3 agrees that none of the Option or any interest therein will
be sold, transferred or otherwise disposed of unless and until registered under
the Securities Act of 1933, as amended (the "Act"), or similar successor law,
without first having presented to you or your counsel (i) an unqualified written
opinion of counsel experienced in securities law matters satisfactory to you
indicating that the proposed transfer will not be in violation of any of the
registration provisions of the Act or similar successor law, and the rules and
regulations promulgated thereunder, or (ii) a "no-action" letter to such effect
issued by the Securities and Exchange Commission. In any event and regardless
of when any such sale, transfer or other disposition of any Option or securities
or any interest therein may be made, DX3 will make no sale, transfer pledge or
other disposition of any of the Option or securities or any interest therein
without first having presented to you (i) an unqualified opinion of such counsel
indicating exemption from, compliance with, or qualification under all
applicable state securities or "blue sky" laws, and (ii) DX3's indemnification
of you against any liabilities, costs or expenses which might result should any
such transfer, sale or other disposition (or any action by any broker or dealer
in connection with the foregoing) violate or be alleged to violate the Act, the
rules and regulations promulgated thereunder, or any applicable federal laws or
state securities or "blue sky" laws or regulations or any court or
administrative order.
(f)
<PAGE>
(g) In the case of sales pursuant to Rule 144 of the Securities and
Exchange Commission, in addition to the matters set forth above, DX3 will
forward to you a copy of the Form 144 as filed with the Securities and Exchange
Commission, and a letter from the executing broker indicating compliance with
Rule 144. If Rule 144 is amended or if the interpretation of the Securities and
Exchange Commission thereof in effect at the time of any sale by DX3 of any of
the Option or securities has changed, DX3 will provide you with such additional
documents as you may reasonably require. DX3 understands that sales by DX3 of
any of the Option or securities made in reliance on Rule 144 could be made only
in certain limited amounts and in a specified manner, only after certain holding
periods have been met, and only when there were available specified current
public information, all in accordance with the terms and conditions of the Rule.
DX3 understands that if Rule 144 is not available, compliance with some other
exemption under the Act will be required if any of the Option or securities are
to be sold in compliance herewith but without registration under the Act.
10. NOTICES. Except as provided herein, all notices, correspondence and
-------
payments, etc., required or permitted to be given under this agreement shall be
in writing and shall be delivered personally or sent by registered or certified
mail return receipt requested (first-class, postage prepaid), to such party at
the address set forth above or at such other address as such party shall have
designated by notice duly given in the manner above provided. Notices given by
mail shall be deemed given four (4) days from the date of mailing.
11. ENTIRE AGREEMENT; COUNTERPARTS. This agreement contains the entire
--------------------------------
agreement between the parties with respect to the option. It may be executed in
any number of counterparts, each of which shall be deemed an original, but such
counterparts together constitute only one and the same instrument. For purposes
of executing this agreement, a document signed and transmitted by facsimile
machine or telecopier is to be treated as an original document.
12. INTERPRETATION. Each party has participated fully in the review
--------------
and revision of this agreement.
13. MODIFICATION. This agreement shall become effective as of the date
------------
hereof. No modification or amendment of this agreement shall be effective
unless such modification or amendment shall be evidenced in writing and signed
by the parties hereto.
14. WAIVER. The failure of either party at any time to require
------
performance by the other party of any provision hereof shall not affect in any
way the full right to require such performance at any time thereafter. Nor
shall the waiver by either party of a breach of any provision hereof be taken or
held to be a waiver of the provision itself. No waiver shall be deemed to be a
continuing waiver unless so expressly stated in writing.
15. NECESSARY ACTS. Each of the parties hereto hereby agrees, at the
---------------
request of the other party, to execute such documents and perform such other
acts as may be necessary to carry out the provisions of this agreement.
16. BINDING AGREEMENT. This agreement shall be binding upon and inure to
------------------
the benefit of the parties and their successors and assigns.
17. GOVERNING LAW. This agreement shall be governed by and construed in
--------------
accordance with the laws of the State of California.
18. CLAUSE HEADINGS. The headings and subheadings of clauses contained
----------------
herein are used for convenience and ease of reference and shall not limit the
scope or intent of the clause.
IN WITNESS WHEREOF, the parties have caused this agreement to be duly
executed as of the tenth day of June, 1998.
INTERACTIVE BUYERS NETWORK DX3, INC.
INTERNATIONAL, LTD.
By: By:
------------------------------ ---------------------------------
Robert C. McShirley, President Dennis W. McQuilliams, President
- ------------------------------ ---------------------------------
Dennis W. McQuilliams Donald E. Britton
- ------------------------------
David K. Brazier
<PAGE>
OPTION EXERCISE FORM
COMMON STOCK OF
INTERACTIVE BUYERS NETWORK INTERNATIONAL, LTD.
The undersigned hereby exercises the right to purchase _______ shares of
the Common Stock covered by the attached Option Agreement (the "Securities"),
according to the conditions thereof, and herewith makes payment in full in the
amount of $__________ for such shares.
Optionee unconditionally warrants, represents and guarantees that:
(a) The Securities are being acquired and will be taken and received for
it's private, personal investment for it's own account.
(d) DX3 fully comprehend that you are relying to a material degree on the
representations, warranties and covenants contained herein, and with such
realization authorize you to act as you may see fit in reliance thereon,
including without limitation the placement of the following legend on any stock
certificate issued, in addition to any other legends that may be imposed
thereon, and to the imposition of stop transfer orders against my securities:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), ARE "RESTRICTED
SECURITIES," AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, IS NOT REQUIRED TO BE REGISTERED
UNDER THE ACT."
(e) DX3 agrees that none of the Securities or any interest therein will
be sold, transferred or otherwise disposed of unless and until registered under
the Securities Act of 1933, as amended (the "Act"), or similar successor law,
without first having presented to you or your counsel (i) an unqualified written
opinion of counsel experienced in securities law matters satisfactory to you
indicating that the proposed transfer will not be in violation of any of the
registration provisions of the Act or similar successor law, and the rules and
regulations promulgated thereunder, or (ii) a "no-action" letter to such effect
issued by the Securities and Exchange Commission. In any event and regardless
of when any such sale, transfer or other disposition of any Securities or any
interest therein may be made, DX3 will make no sale, transfer pledge or other
disposition of any of the Securities or any interest therein without first
having presented to you (i) an unqualified opinion of such counsel indicating
exemption from, compliance with, or qualification under all applicable state
securities or "blue sky" laws, and (ii) DX3's indemnification of you against
any liabilities, costs or expenses which might result should any such transfer,
sale or other disposition (or any action by any broker or dealer in connection
with the foregoing) violate or be alleged to violate the Act, the rules and
regulations promulgated thereunder, or any applicable federal laws or state
securities or "blue sky" laws or regulations or any court or administrative
order.
(g) In the case of sales pursuant to Rule 144 of the Securities and
Exchange Commission, in addition to the matters set forth above, DX3 will
forward to you a copy of the Form 144 as filed with the Securities and Exchange
Commission, and a letter from the executing broker indicating compliance with
Rule 144. If Rule 144 is amended or if the interpretation of the Securities and
Exchange Commission thereof in effect at the time of any sale by DX3 of any of
the Securities has changed, DX3 will provide you with such additional documents
as you may reasonably require. DX3 understand that sales by me of any of the
Securities made in reliance on Rule 144 could be made only in certain limited
amounts and in a specified manner, only after certain holding periods have been
met, and only when there were available specified current public information,
all in accordance with the terms and conditions of the Rule. DX3 understands
that if Rule 144 is not available, compliance with some other exemption under
the Act will be required if any of the Securities are to be sold in compliance
herewith but without registration under the Act.
DX3, INC.
By:____________________________________
Address: ____________________________
____________________________
____________________________
Dated: ______________, _____.
EXHIBIT 17
<TABLE>
<CAPTION>
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
FOR THE YEAR FOR THE YEAR FOR THE THREE FOR THE THREE
ENDED ENDED MONTHS ENDED MONTHS ENDED
JANUARY 31, JANUARY 31, APRIL 30, APRIL 30,
1998 1999 1998 1999
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Basic:
Net income (loss) attributable
to common stockholders . . . (844,369) (1,101,062) (200,265) (333,587)
============ ============ ============= =============
Weighted average number of
common shares outstanding. . 9,192,811 10,529,147 10,804,295 11,838,164
============ ============ ============= =============
Income (loss) per common share (0.09) (0.10) (0.02) (0.03)
============ ============ ============= =============
</TABLE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
report included herein dated May 15, 1999, except for Note 9 to the financial
statements which is as of June 25, 1999, and the reference to our firm under the
caption "Experts" included in or made part of this Form 10-SB.
/S/ Lucas, Horsfall, Murphy & Pindroh, LLP
Pasadena, CA
June 29, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> JAN-31-1999 JAN-31-2000
<PERIOD-START> FEB-01-1998 FEB-01-1999
<PERIOD-END> JAN-31-1999 APR-30-1999
<CASH> 59937 784808
<SECURITIES> 0 0
<RECEIVABLES> 3590 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 63527 784808
<PP&E> 73587 103127
<DEPRECIATION> 50920 56335
<TOTAL-ASSETS> 627152 1388700
<CURRENT-LIABILITIES> 984207 952314
<BONDS> 0 0
<COMMON> 114014 122749
0 0
0 0
<OTHER-SE> 474319 311771
<TOTAL-LIABILITY-AND-EQUITY> 627152 1388700
<SALES> 61387 4060
<TOTAL-REVENUES> 0 4060
<CGS> 0 0
<TOTAL-COSTS> 1253559 337647
<OTHER-EXPENSES> 91110 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1101062) (333587)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1101062) (333587)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1101062) (333587)
<EPS-BASIC> (0.10) (0.03)
<EPS-DILUTED> 0 0
</TABLE>
